Pelangio Expl. - could rocket for us
(in a few months)
They completed a bought deal financing today, for C$7M - it was over-subscribed. A bought deal is when the underwriters purchase the shares directly from the company and they subsequently try to find investors to buy the shares from them. With a bought deal, no shares are ever returned to the company (the underwriters have to eat the leftover shares, if there happens to be any). As a result, the underwriters show a lot of confidence (in the company) in a bought deal situation.
In addition, it is extremely unusual for an exploration company to get a bought deal, never mind an exploration company without an already established ore body. Furthermore, the deal was done at $.37, yet the closing price for Pelangio today was $.60. All of this is suggesting that both underwriters and investors have extreme confidence in Pelangio's chances here.
We should all keep in mind that initial exploration drilling is extremely risky business (especially for a 1 asset focused, 100% exploration company), no matter how good the prospects look and no matter how much confidence the market has. Pelangio will be using the funds to aggressively drill their primary targets on their Obuasi property in Ghana. I think this is why the market is so optimistic:
"Our initial focus will be on the area of the trend nearest AngloGoldAshanti's Obuasi Mine property, which has already exhibited significantpotential to host an Obuasi-style ore shoot."
Pelangio's management subscribed to 1,145,000 of the 18,919,000 total units. As mentioned, the offering was over-subscribed which means that management did not subscribe due to a shortfall. They obviously believe that something positive is likely to happen here. Management now owns 7.56% of the company's outstanding shares.
HRG owns 12,015,000 shares of Pelangio Exploration. At $.60, the current market value of our Pelangio shares is C$7.2M. If Pelangio makes a hard hit in a few months then look out (all bets are off). We could see Pelangio's share price in the $2.00 - $3.00 range, depending on the hit (Pelangio only has 107M o/s shares even with this financing). That would give our Pelangio shares a market value of C$24M - C$36M.
A BIG IF, but, if they get that big exploration hit and if they aggressively define a major 43-101 Inferred ore body over the next 12 - 24 months then it is conceivable that our Pelangio shares could be valued at $5.00 each given that there would be major speculation that AngloGold Ashanti will gobble up the property eventually. The success of this management team with Detour Lake will help to boast the share price (as the market will believe that this management can make the right moves to expand the ore body). Also, a continued strong gold price will help. A $5.00 share price for Pelangio would provide a value of C$60M for our Pelangio shares alone.
Again, I can't stress enough that this is still a relatively early stage exploration project and not a producing project, and not even an exploration project with a proven advanced stage ore body. As good as the prospects look for success right now, it could still turn out to be a complete bust.
Nonetheless, it is something we should be aware of, as it has huge potential for us.