RE:why so cheap?BillyBoBob1 wrote: VITFF did a very bad financing deal that gives most of the upside in the stock to the financiers- like much of their gold production sold to them for cheap.
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Billy, the financiers bought 250 million shares at 50 cents per share, so other than royalty payments and loans at a reasonable cost, there is NO UPSIDE for the financiers unless the stock price increases to a price greater than 50 cents. Recent option grants have also been at 50 cents per share.
In retrospect, after a considerable drop in the price of gold, the financing is looking better all the time. It would be extremely difficult to get those same terms at the current gold price and instead of being a 200,000 oz/yr producer in about a year's time, we'd be looking at another lost year and surely an even lower share price than the current one.
Much of the gold production is NOT sold to the financiers for cheap! Orion has the option to purchase 25% of production at
prevailing market prices within a 10-day window, I think
, and they have an option to purchase an additional 20,000 oz at US $1,485/oz.
With the recent fall in gold prices, the decision to hedge 100,000 oz of production looks like a wise move now, although hopefully we have seen a bottom in gold prices now.and the right to sell 100k at C$1500/oz will not need to be exercised.