Looking at the cash balance of Red 5, its readily apparent that little progress has been made to develop a mine. I dare say the reason is the lack of skilled labour in the Philippines to carry out projects. Why? Well a lot of the miners in the Philippines might be experiencing a loss of staff to countries like Australia, Canada and elsewhere. They still have $30mil in the bank. A current capitalisation at $39 millio, gives a market value of just $10 mil for the gold project. Very attractive financially. The problem however is that they will need to look like they are doing something, which means spending money on exploration. It will take years for the shortage of geoscientists, plant and materials to be corrected.
So they will spend down that money on exploration, so in 2 years they will be doing another capital raising to replace lost funds, as well as extra funds to correct the shortfall caused by inflation, so say they have $20mil, then they will likely need to raise another $15-20mil, at a time when their share price is 4c. That means another 375 million shares of dilution (to raise $15mil) minimum. That will send their issued capital to over 1 billion shares. Not a compelling investment story at this time. I would come back and have another look in 18 months.
Sorry to the investors who are being lead astray by the high commodity prices and the 'promise' of attractive projects. The issue is scale. But even the large scale projects are going to struggle unless they are already in production. Commodities are going to do very well in future, partially carried by costs, partly by tight supply. The solution of course is to trade commodities for the time being, and switch back into miners at some point in future.
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Andrew Sheldon www.sheldonthinks.com
So they will spend down that money on exploration, so in 2 years they will be doing another capital raising to replace lost funds, as well as extra funds to correct the shortfall caused by inflation, so say they have $20mil, then they will likely need to raise another $15-20mil, at a time when their share price is 4c. That means another 375 million shares of dilution (to raise $15mil) minimum. That will send their issued capital to over 1 billion shares. Not a compelling investment story at this time. I would come back and have another look in 18 months.
Sorry to the investors who are being lead astray by the high commodity prices and the 'promise' of attractive projects. The issue is scale. But even the large scale projects are going to struggle unless they are already in production. Commodities are going to do very well in future, partially carried by costs, partly by tight supply. The solution of course is to trade commodities for the time being, and switch back into miners at some point in future.
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Andrew Sheldon www.sheldonthinks.com