By Nigel Somerville, the Deputy Sheriff of AIM | Saturday 17 October 2020
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.
AIM-listed John Zorbas vehicle URU Metals (URU) – the one described by Cynical Bear as being happier mining its own shareholders than anything in the ground – has updated on its Environmental Impact Assessment (EIA) at the Zebediela Project in South Africa. Bear in mind that it announced in April that it planned to spend £250,000 it hadn’t got on this back in April.
The problem back in April was (apart from Covid-19) that as at the end of March it had just $66,000 in cash, a stack of payables and was technically insolvent on the grounds that net current assets were around MINUS $1.5 million and net assets were only positive because of $2.7 million of intangibles.
Since then the company has rattled the tin, raising £200,000 at 85p per share (against a prevailing share price of £2) and a further $250,000 from a convertible death spiral on steroids – the conditions for which were varied (in favour of the loan shark) in August. The company also did a debt for equity swap for £400,000 of outstanding director fees to John Zorbas – also at 85p -but it does not take a maths genius to conclude that URU is still technically insolvent.
FY20 results released on 30 September (deadline day, never a good sign) showed that the studies needed for the EIA had been delayed due to Covid restrictions – which I have some sympathy with. But the FY results told us that specialist studies were, at last, underway. Today we are told, in effect, that specialist studies are underway and that they should be completed in time to submit the EIA by 15 January 2021.
The problem is that I reckon that URU is still technically insolvent, has told us that everything is subject to funding (including drilling…..) and it released a ramptastic corporate presentation last Wednesday. And having apparently snaffled $250,000 from death spiral loan sharks, there is yet to be a conversion: surely the modus operandum of the loan shark is to refill its coffers ASAP, which leaves me wondering if the convertible loan money has even arrived yet. It might explain why URU varied the terms in favour of the lender – allowing it to convert at 85p for an extended period rather than the 35% discount it should have been.
All this points to a pump-and-dump incoming. Meanwhile, with the shares up again, now at 305p capitalising this POS at an amazing £2.4 million as it runs of fumes it seems to me that some punters are going to be very disappointed very soon.
Tick-tock, tick-tock, it’s almost placing o’clock. How big will the discount be this time? The last one was at a discount of 57.5%!
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