It behooves all to be skeptical, especially when a company turns 180 degrees from recently stated policy, and decides to dilute by 1/3 by raising cash. One needs to come up with a believable "what happened?" or head for the hills.
I suppose one could phrase concerns as have you when you characterize the fund raising this way:
"Management gets to keep their jobs and gets to spend the $12 million as they see fit but the shareholders are forced to accept a 35% haircut on their investment-"
But, one can also see that the company's "market" value before this transaction took place was about $45 million and that the $18 million that was raised represents, assuming warrants are cashed out, approximately 30% of that $45 million market value, so in that sense not such a bad deal for the shareholder as the company can now move forward rapidly with its fairly major development plans. Again, the market value before the deal was approx. $45M and after the deal approx. $65M. MOT also gets a huge marketing boost by the successful placement by Sprott and Goodman, etc and some great press.
Like you, my initial reaction to the new issue was a little negative and consequently did not participate by purchasing any of the new offering. However, with the success of the new offering and with my positive take on events to date, I have recommenced a buy program of MTO shares.
Company management has reaffirmed that its goal of 70,000 ounce rate of production by July 2010 remains, all the moreso as a result of the new financing. The 70,000 ounces is the future milestone to which I pay attention. My last primary milestone to which I paid attention was the successful pouring of gold back in the fall.)
My recent share purchases are motivated also by short term considerations such as the possibility of posting a profit for the 2008/2009 year ending September 30/09, with quarterly profit perhaps coming as early as June/09 or, even Mar/09. As well, I am hopeful of some positive drilling results within the next few months, before the end of September/09.
Assuming a POG above $850 for the next 2 years, MTO success in meeting the 70,000 ounce production rate in July 2010 sprinkled with some decent drilling results over the interim, I can only conclude that today's $0.50 per share will look awfully inexpensive 2 years out. |
