Michael, I agree with your rationale and add some further comments.
I was initially perplexed when I first read the release, however, am ok with it after making some logical deductions:
a) The Gold markets are so unpredictable that they are taking a safe route. Raise enough funds to cover off at least 1998 prospecting and drilling so as to not impair their cash position.
b) IF the Hinoba-an does not come to fruition, then they would have impaired ability to go forward with their 1998 plans for all properties. If Hinoba does not come to fruition and they did not raise $ through such an offering, then they would be at risk in future JV negotiations, and possibly many other factors, such as satisfying Mongolia, Indonesia that they are forging ahead. While this deal looks good with costs of US40 cents per pound for the first five years (b/e with capital repayment is 56 cents), there is increasing concern with sovereign risk in this area of the hemisphere. CU prices have not been stellar, however, they have moved up from US72 cents to just under 80 cents in a short while. The article Tom Becker posted on China's economics (on the AU monitor thread) would support optimism for CU.
c) This will likely raise some C$7 million plus for IPJ. This is likely offered to a fund(s). When I talked to Sally Burton IR 8 days ago she stated "that the Funds were showing interest", possibly this issue is what she was alluding to? I am assuming the latter as posted earlier and see a factor for dilution, however, there are plusses which counter balance the negatives. This issue if consummated would raise another C$6 million by June 30, 1999.
Conclusion: On balance, this is a favourable move for IPJ and shareholders IMO.
Best regards,
Ron E
3 million shares @$2.50 with market at $2.90 is as you stated, a 14% discount and does not disturb the market place. Good reasoning Michael. Thanks |
