There's a $2.5m repayment on a convertible note in middle of...

There's a $2.5m repayment on a convertible note in middle of this year. Last I checked we had $0.5m in the kitty and raised $1.15m in the SPP. That's $1.5m. We'd probably want to have $1m left after paying off the note, so in 6 months we'll need additional $2m cash. I'd say DR was rounding up when he said $1m a month so I'm going to discount it to $800k a month. In 6 months we'll have $4.8m from the operational cashflow. That's "OK". On balance we'll make it and have cash to spare for capital expenditure. But there's if anything happens to the mine it's going to wipe out the cashflow for a few months, requires cash to fix it, and then we won't have enough money to pay off the $2.5m, which have priority over all the company's assets. Imagine if we have a flood or a fire event and have to pause production for 3 weeks and costs $1m to fix (on the low side). That'd kill us.

By raising additional $2.6m in the placement, we wipe out the note, save 6% interest (12% per annum), and put the company in a lot more solid footing - after paying the note we have $1.5m in cash and money coming in every month. The extra 200-250m shares out of 900m shares (I added SPP to existing shareholders shares) is around 25% dilution to new shareholders. 25% to wipe out the risk of being unable to pay the convertible note. I think that's fine. We are at a stage where the company is capital intensive and can return a lot of cashflow for each dollar invested - better than 100% returns - and we will also have $2.5m sooner to invest. We get funds at 25% and receive 100% returns, and reduce risk massively to boot. Even if you count 40% because you didn't participate, that's not bad.

The share overhang means all existing shareholders can now all participate at the same price or lower. If you want to avoid being diluted just buy in more.

That's not a bad deal.

But yes, unfortunately it's not conducive to Jesse Livermore style speculation where you never average down. In that case you should've sold on the drop from 2c to 1.6c.