RE: RE: RE: RE: RE: RE: RE: STATE OF LITHIUM AND R Greenhawk, I agree, I misread the financial statement. They generated revenue of $4.5 million from the preferred shares, not $3 million. They also issued warrants that will allow for 10 million more shares dilution of common stock (each preferred share includes 1/2 warrant common stock excercisable on 12/31/13 @$.45).
My point is, look what they gave up to obtain that money. Presume they issue all the preferred shares, and generate $20 million. Reading the details of the preferred stock, they promise to do the following:
Holders of the potash stream preferred shares are entitled to receive a 9% cumulative, preferential cash dividend, payable annually on the last day of January following the relevant completed fiscal year, ending December 31 of the first year of initial potash production, after which, the dividend rate will be reset such that quarterly dividends equal to total amount of net potash revenue for the quarter divided by 20,000,000, payable on the last day of the month following the quarter. Net potash revenue shall be calculated based on the quantity of potash sold and the potash sales price realized less a potash production cost of US$185.00 per tonne of potash sold. The potash stream preferred shares are not retractable, convertible or redeemable by the holder thereof. They are redeemable by the Company in certain circumstances.
Doesn't that appear to say that they'll be receiving 9% interest (dividends) on their shares indefinitely, until potash production begins? At that point, the way it reads, it gets even worse. Once potash production commences, the preferred shares will get a dividend equal to all the net potash revenue divided by 20,000,000 shares. Does that not seem to imply that the company gave up all the potential revenue from the potash sales. It seems to imply that the company has to pay $405,000 in dividends on January 31st, 2013. That obviously will be coming out of general funds. So our common shares are now going to finance the dividend until potash sales commence.
They're claiming a potash resource of 11.3 million tons in their project overview on the company webpage. If that's accurate and presuming that you can sell potash for $400/ton (I didn't look up the current price but I suspect you can get at least that much), they've sold $4.5 billion of product for $20 million of financing? If that's correct (I'm not saying I don't make mistakes so please correct them if you see them), isn't that a bit ridiculous? $4.5 billion of potential common shareholder value sold for just $20 million in immediate income just seems way out of line. If those numbers are correct, that means $45/share of lost earnings.
If there is that much mineral value in the project, why wouldn't some Chinese company walk in and buy the company? The market cap is just over $15 million, a small amount to any number of large mineral companies.
Yes, I agree totally that dilution is part of a startup enterpise. I expect more of it. I just expect it to be done in a reasonable fashion and to produce results equal to the amount given up. I'd be buying a lot more of this stock if I felt things were being handled a little more efficiently. Please show me that they haven't given the store away in the potash resource and I'll definitely start buying more of this stock sooner rather than later. I remember when I bought it the first time, held it up and down, then saw the potash debacle and decided there was no point in adding to my position for a while.
I respect all the views put forth on these posts, whether I agree with them personally or not. If I'm wrong I don't mind admitting it, as I obviously was with my numbers (20 million instead of 4.5 million). Understanding and information is what leads to good investing and reasonable returns. I seriously hope Rodinia is successful, I have a financial interest in them and prefer gains over losses.