mel needs cash

Many SHs are disappointed with the the (rumoured) placement.

The issues seem to be -

1) poor timing
2) suggested pricing (20c) of the placement is low
3) why not wait a couple of weeks and get the benefit (into the placement pricing) of the latest Gov't approval
4) why only raise $10M
5) what benefit is there for existing shareholders
6) are the current major shareholders to be included in the placement and getting the option of topping up their holdings

Some SHs are more accepting
- grab some easy cash in uncertain times
- that's how the system works
- management must have a plan
- arrangements for the placement must have already been underway before the gov't approval was given

The position as I see it is
- they need cash and a lot more than a placement of $10M
- MEL had cash on hand at end of 6/2012 of $12.2M according to their fourth quarter activities report
- cash burn rate is running at around $3M per quarter
- raising $10M only gives them (after costs) about nine months extra breathing space and much less if they ramp up exploration activity
- what is the planned Capex for next 18 months?
- how much of planned Capex is to be funded inhouse?
- with cash being a premium commodity why not get the timing right and maximise the opportunity to price the placement taking into account the latest Gov't approval and the current SP

One factor which may have influenced MEL could have been a reluctance to seek SH approval for the placement. That may have delayed things for too long. In the dark recesses of my mind I have a figure of 15% - ie. an increase of 15% of shares on issue can be made without shareholder approval (not sure about that, let me know or DYOR). With 337.4M shares and 6.6M options then a placement of 50M shares fits within a 15% ceiling.

Lets wait and see what detail is in the placement announcement, however, as things stand I believe SHs have been dudded and management has lost an opportunity here to
1) raise the same amount by issuing less shares
2) alternatively raise more cash by issuing the same amount of shares
3) keep faith with and include all current SHs


IMHO/DYOR