Actually, increasing the authorized doesn't dilute present shareholders like a private placement -- increasing shares that are actually issued (or promised for warrants and options) is what dilutes present shareholders. They could increase the authorized to a trillion and it wouldn't affect the shares outstanding.
Think of the shares as marbles in a bowl. When they set up the company a long time ago, it was set up with a very small bowl (most mining companies have far more authorized shares). The small bowl's full now, so they're looking to move the marbles to a bigger bowl to allow for future growth. Moving to the bigger bowl doesn't mean there are more marbles, no matter how big the bowl is, but allows for new marbles to be added later.
Instead of increasing the authorized by only 10-20 million and then coming back to shareholders for another vote, and then another, they're just increasing it by over 3 times all at once, to avoid unnecessary hassle and expense in the future. The cost to increase by 3 times now is the same as the cost to increase by just 10%, so it makes sense to increase by a large number.
Currently, MMGG is right at the original ceiling of 50 million shares. They don't need to raise any more money to complete the feasibility study, which requires $3.3 million while they have $8.4 million in cash. However, in order to raise money to go to production (or for very extensive exploration drilling elsewhere), they'll need to issue more shares in an equity offering in addition to the debt financing. They won't use up all 160 million shares, but they'll need to use some, which they can't do without increasing the authorized.
Other uses for shares include employee option plans, any acquisitions, future stock splits, and to prevent a hostile takeover attempt. Without increasing the authorized, management is limited in what they can do.
Without a stock split, I don't think they'll come anywhere near using all the authorized for many, many years, if ever. They're just leaving a lot of extra room so they may not ever have to do this again. |
