RE:dilution for CAPEX funding
A firm has more than one option to raise CAPEX through share dilution. They can attract institutional investors or high net worth individuals in a private placement. These are most often given at a discount or offered at market price but with a bonus of warrants at a future discount. The private placement purchasers get a special deal in return for plopping down big chunks of cash. The firm can offer a big chunk of new shares to the public with no warrants or discount price. I believe those are called base shelf offerings. Most often, there is no way one deal will raise enough to finance all of CAPEX. So a series of deals occurs, sometimes taking 1-2 years to get it all done. For firms with 1 mineral reserve, share dilution is no different than selling percentages of the mine to raise CAPEX. It has the same effect either way. For firms with multiple mineral resources, share dilution is the equivalent of selling equal percentages of all their potential mines, not just the one needing CAPEX. So that is why sometimes you see juniors preferring to sell a percentage of a given mineral reserve rather than do it all with share dilution. Some people get hung up on share dilution eroding their personal stake. Yes, that is exactly what is happening. It is how mining gets done, from exploration to discovery to development to construction to production, most will be paid for with share dilution. For those who cant handle that mentally, junior mining is not for them. What I do before buying a junior is calculate how much share dilution or percentage sale will take place to get their mine in to production. Then i divide the mineral reserve by the life of mine in years to get an annual production & gross profit EPS. Then i divide the EPS by the projected final shares outstanding. If i like the numbers i see, i am in. I know a stock with 80 million shares today might have 500 million shares outstanding by the time production commences. I'm okay with that, some people cant just stomach the idea of continually decreasing their stake in ownership. It's the end game we are all after, whether we get bought out or dilute to heaven. Some firms are like drunken sailors with share dilution, like Walbridge, while others keep a tight grip on the purse, because the mgmt are players in the game too. A mgmt with little or no skin in the game dont care about wanton share dilution, while those who do want to keep it to a minimum.