Repost easier to read. Sorry.- positives and negatives The reason why it went down today IMHO is because there is an approx 8% dilution to raise about $3.7 million net. Typically flow through shares are done at somewhere around 30% of a premium to the SP.
This does not mean that management have done a bad job with this deal. These are trying times for junior potash companies, so IMHO the deal is a necessity and is a job well done by management given the circumstances.
EPO also has to pay back the $750,000 loan that's at 15% interest out of the proceeds of the shares.
That leaves them with about $2.9M to keep the lights on and to put towards the completion of the feasibility study.
The price of the current deal between India and Urakali is low and perhaps the market feels (correctly IMHO)that EPO(and all other SK juniors will not make any money or be able to build in the first place at $322 a ton.
The positives out of that price for EPO and the other sask juniors is that
1) The deal was without doubt done on standard and not granny.
2)The Indian fertilizer companies that are negotiating with EPO are more than likely not interested in standard.
They will want Granny as it will be easier to blend it with other chemicals at their bulk blending facilities.
Granny will also command an approx $30-40 premium to standard.
3) There is a 10% exchange rate premium to the $322(or $322 +$35 + 10%= $392.7 CAD)
Although management have done a consistently good job EPO will need a considerable cash injection soon on top of this flow through equity raise to be able to finish the feasibility study by the end of this year.
They also have to pay rent, travel, IR and various salaries and they only have $3 m or so in the kitty.
The $3m is probably only enough to last at a normal burn rate to the end of the year.
Throw in the costs of preparing the feas and they will IMHO be raising again by summers end. So the question the market could be asking today is whether that will dilute shares by another 8, 15, or 20%?