First let me say I’m a fan of OVL & it’s excellent prospects! However the announcement on 19th January "Initial 1,650m Drilling Program Planned at Topacio"was intriguing in that it provided very little new information when compared with the 7th December announcement, except that:
This implies a slight delay, with approval to proceed still required: all up no big deal, a relatively normal delay.
- The drilling date moved from “Commence early in the New Year” to “Commence in the first quarter 2017”…. With the words added: following final approvals.
However it begs the question, why make the announcement, when everything else was the same, just rehashed?
It caused me to have a closer look at their cash flow statements…. The key thing that becomes obvious is that OVL are running out of cash & will need to do some form of capital raising. So then the reason for the positive announcement becomes clear – ramp up the share price ahead of the trading halt, & the “discounted” price for the capital raise.
The important thing to note in the cash flow statements is that Newcrest are paying for the drilling – but only the drilling – not OVL’s corporate & admin running costs which amount to approx. $100k to $200k per quarter...
Cash at end 30th Jun16 = 543k
Cash at end 30th Sep16 = 1,016k
Expected cash burn QTR Sep16 = 400k
Estimated cash at end of 31st Dec16 = 616k
Assuming same cash burn rate for QTR 31st Mar17 = 400k
Estimated cash at end 31st Mar16 = 216k
!! Not much left, & from a Director’s point of view with insolvency laws, far too close to call.
IMO only, DiaYOR
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