significant announcement today...

As an investor not networked in with a particular Company, the greatest risk of buying into a rising share price is that you might find yourself on the wrong side of a Capital Raising (CR) at a significant discount to your entry price…

Interestingly, many CR’s tend to follow a somewhat forced yet significant rally…at the top of which those aware of the likely strike price of the CR, or perhaps intending to affect said strike price, sell part or all of their positions to either profit from the situation, or simply finance their take-up in the CR.

This is a story that repeats over and over…most recently we can see this in RXL…it rallied hard in expectation of results which, when released, instead of rising or holding its ground (the results clearly supported higher prices), appears to have been sold-down heavily…I suggested at the time, that some of it was likely to be from those related to an upcoming CR…I was pretty much set upon for my views.

I notice today RXL are in a trading halt…and word is a placement has been set at 5.5c…almost half what the stock was trading at prior to the forced sell-down. I wonder how many shares were sold to “free up cash” by those participating?

It was with this sort of activity in mind that I sold down to a free-carry in ICG when the trading patterns appeared to shift from accumulation to net distribution around 15c on Wednesday…and why I fully exited as the selling began to gain momentum towards the end of Wednesday, and all of Thursday.

I sensed we might be looking at another RXL scenario, and that we could expect ICG was about to be targeted via on-market shenanigans, to set a low price and/or possibly finance participation in a discounted CR.

Some Companies appear to align themselves far too closely with certain brokers, typically resulting in severely discounted CR strike prices…other Companies it appears, perhaps those with significant unrealised value at hand, appear to be more aligned with the interests of shareholders.

The prices set in CR’s are not always under the full control of the Companies concerned mind you…and in many ways they can be just as much a victim of the underhanded nature of the market forces typically surrounding CR’s, particularly the pressure often bought to bear on their share prices via on-market manipulation.

So…at 15.5c, and an apparent shift to significant net distribution by obvious professionals, ICG looked for all intents and purposes to me to be following the same path.

In fact, I suspect it WAS in fact in the process of following said path, and that significant selling was also possibly underway to either finance, profit from, and/or help set the price of the pending CR…and of course, to bring the share price closer to the 5.4c average the director and possibly associated SI’s, were expecting to walk away with.

But today…the Company put a massive spanner in the CR works by effectively killing off any ideas of a cheap placement…I suspect catching many out by surprise…I know was one of them.

All of a sudden, anyone who sold (shorted even…naked?) expecting a cheap placement found themselves potentially on the wrong side of the trade.

Further, the passage in today’s announcement regarding the significance of the results, as a backdrop to comments regarding the support of long standing shareholders, and revelations of acting in the “best interests of shareholders”…more or less highlights they intend to wait for results prior to setting any prices for a CR.

Fortunately, they can do this as they have more than enough funding to carry on as usual for some times…at the very least until results are known and a CR can be put to bed.

Nothing wrong with discounted CR’s…it is the nature of the beast…but when a Company is sitting on a potential monster, undue dilution with the price so low is like a slap in the face to shareholders…and in this regard, I think it is no coincidence that the top 20 and management hold some 70% or so of the register.

In similar scenarios, where their share price has risen significantly and results are not yet known, many Companies would opt for the safety of locking in a CR even at a deep discount…just in case the results disappoint.

The fact ICG are talking this find up so much, and doing everything they can to get results out as soon as possible…yet not jumping at the chance of a cheap, albeit guaranteed CR, I think it is safe to assume they are expecting good results…and for this reason more than any, are not keen to dilute their “long standing shareholders” more than necessary.

I think the following, released today, is a significant statement for a small-cap minnow to be making given recent events…

Activity and interest in the Company over the past 7 days has been unprecedented. The recent discovery of a sulphide-bearing monzonite porphyry by the Company has confirmed the confidence placed in the Company’s management by many long standing shareholders, points to an exciting future for the Company and created enormous interest in assay results the Company looks forward to providing the market as soon as possible.

I see this as a clear flag to the market they do not intend to be dictated to regarding their upcoming CR and do not want to unduly dilute “long standing shareholders”…and by obtaining results as quickly as possible, are suggesting they are happy for the market to place a value on any CR only after results are known…ie, when all information is known.

In this regard…I keep wondering if they are in fact aware of more than we might think, but simply cannot say more due to the restraints of reporting according to JORC guidelines. For example, if they have tested the core with an XRF, and say detected significant Ag, Cu and for example As, they may be able to use the ratios of the results from porphyry clasts identified within the overlying breccias (where comparative Au content is known), as proxies for determining possible Au content of the source porphyry?

It would be a stretch on the JORC guidelines to report such a thing to the ASX, but as an in-the-field indication it is possibly enough to get a feel for what to expect.

They may also have tested for and identified Au with an XRF…but in my experience results can be a bit hit and miss for Au and reporting can be fraught with danger.

Anyway…today’s announcement is such a breath of fresh air I find it hard to believe…but there you have it, in all its glory…as released to the market!

I posted earlier today that I intended to buy back in today from a temporary exit whilst the whole CR issue was sorted, based purely on this announcement...and whilst the CR issue has still to be sorted, I took today’s announcement as an indication it will likely be set much higher, and not lower than today’s prices.

Nothing wrong with CR’s by the way…in fact they are necessary and can be good for the stock (re SIR at 75c)…but not when they are set at ridiculously low prices.

As for today’s trading in light of the announcement…well it appeared the professionals were all over this today…so I suspect I was not alone in my interpretation of events, and to view the announcement as a buy trigger. So…apart from the early retail pump that was never going to be allowed to push through 11c in the morning’s session, the rest of the day was pretty much all about capping, putting downwards pressure on the stock and squeezing out as many sellers as possible.

In fact, I suspect some shorts may also have needed to be covered today…in light of the Company’s effective warning they were not interested in giving away cheap stock. I suggest if ICG are not prepared to give cheap shares to a director, what chance do the SI’s have?

From here on I suspect we will see the usual argy-bargy as positions are taken and/or re-taken in the lead up to results…after which the nature thereof will dictate future direction.

Assuming samples were dispatched today (as stated on the 6th - “2-3 days to prepare samples”), they should arrive at the labs over the weekend. Given the importance of the results to the Company at this particular time, and comments from the Company that they intend to get results out as “soon as possible”, we can assume they will more than likely fast-track the job as a priority run.

Labs facilitate this…it costs twice as much as normal assays and sometimes even three times as much…but you can usually get results back within a few days.

All going well…we may be lucky enough to get results back sometime next week?

Regardless, I suspect it will be a very busy weekend for the Company with all manner of groups canvassing possible involvement…lots can be achieved over a weekend, so after today’s significant accumulation and from a momentum basis, it will be interesting to see if the Company has something to announce on Monday…to help set it back on the path to 20c

Cheers!