By Cynical Bear | Thursday 16 February 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
I started writing this article on Xtract Resources (XTR) this morning and was going to comment on how sentiment was turning and Colin Bird’s straightforward approach in recent RNS’s was to be applauded and then – WHAM - a placing RNS from hell and I’ve had to rewrite the whole piece. Thanks Colin!
I had written that although the RNS’s on the Auroch debt settlement, which in essence was just turning the debt into convertible loan notes, and the alluvials deal with Nexus were not game-changers on their own, they were set out clearly and in a no-nonsense way and Colin appeared to be delivering on these small but essential steps towards generating shareholder value.
Sentiment was returning and as I was writing in the morning, the share price had reached 0.05p up from a recent low of 0.0125p.
I even wrote that Xtract could probably even get a small-ish placing away at these prices to cover working capital needs pending the DFS.
It all looked so promising.
Unfortunately, it wasn’t a small-ish placing…...and it wasn’t at those prices.
At 2.40pm this afternoon, Xtract announced that it had raised £1.88 million (before expenses) by conditionally issuing over 10 billion shares at a price of 0.0185p.
10 BILLION SHARES AT 0.0185p!
An absolute body blow for the average PI who thought that things were finally turning for the better. Funnily enough, the share price has crashed back down to a closing price of 0.0225p. The whole thing now just reeks of an elaborate pump and dump.
Why was so much needed and why couldn’t Colin have taken advantage of the higher price in the market?
Apparently the proceeds will be used:
“…..to fund the completion of the Definitive Feasibility Study, extending Environmental Impact Assessment on all alluvials within the Manica project, further consolidation within the Manica Area, and for general working capital purposes. In addition, the Company is presently reviewing a number of investment opportunities to diversify its interests.”
To fund the completion of the DFS?? It’s due by the end of the month - how much more can be spent on that?
Why do you need to do an environmental report on the alluvials? I thought the idea was for contract miners to turn up with their spades and get on with it.
In other news, Auroch has been taking advantage of the recent liquidity converting $200,000 of its convertible together with various fees at a price of 0.0132p for a mere 1.5 billion shares. Also, $110,000 of the amount raised will be used to pay off part of Auroch’s remaining convertible.
Yorkville has also taken advantage of the pump. The equity swap deal that was put in place in November 2016 has now been terminated with one final payment from Yorkville of £240,000. I estimate that Xtract would have received no more than £400,000 in total from Yorkville under this deal (rather than the more than double that anticipated) and, remember, it issued 3.5 billion shares under that deal. The remaining Yorkville shares have now also all been placed by Beaufort so that overhang has gone.
The number of shares in issue here is now totally out of control. I estimate that by the time Auroch has converted all of the debt outstanding to it, there will be around 40 billion shares in issue.
What’s the record?
With the only asset today being Manica, even if one thought that was worth £20 million, and that’s a lot more than Xtract paid for it, it puts a cap on the share price at 0.05p. Accordingly, the current share price of 0.25p feels as good as it can get for now until the Manica DFS and financing plans are set out but I wouldn’t be surprised to see it going lower as some investors may just have had enough for now and sentiment may turn negative again.
The good news though is that Xtract has some money in the bank for now, although it still has to make the Yorkville debt repayments; the bad news is that it may have lost the shareholder trust that it had spent the last few months trying to rebuild.
I hope for your sake the DFS is a belter, Colin.
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