RE:How to Raise Equity Capital without Diluting ShareholdersAt first read, your spin out proposition looks quite complexe and risky to put in place. I would not vote for it. I think there are still some pieces of the puzzle you do not not fully understand yet.
Point Rousse is spun out to shareholders in the form of a new public listing.
We get 75% and Signal retains 25%.
Spinning out a part of the assets means that we will need a BOD and all the required structure to make this NewCo working. It means lot of overhead..
Point Rousse still has two years of production left in our economic reserves and perhaps another several more years converting out Indicated and Inferred ounces (about 30,000 ounces to Reserves.
These represent potential gross revenues close to $100 million at a time when the POG is very strong.
It's not because the resource are categorised as reserves that they are easy to mine. To prove my point, just take what happened with Argyle mine. A lot of things could happen with those small satellite deposits. If a qualified workforce did not succeed in getting the best of Argyle, betting all your new capital on only one small satellite deposit to finance the exploration of Tilt Cove is a big risk.
The other options are to sell which just converts the assets to cash and cash is significantly discounted by the market, as it has a habit of being frittered away as WC.....we won't see much if any sustained increase in share price as there has been no net asset gain.
Myself, I prefer hard ca$h in the situation we are in, helping in limiting dilution, than finding a solution that could increase our share price. We're in the financing mode right now, what we need is ca$h.
Another option is to shut Point Rousse down and place the mill on care and maintenance .
There will be a cost involved and if no new source of revenue is proffered, our share price will take a hit, as we have a non producing asset which is draining our Treasury.
That's the option management choosed for now. I'm not so sure it will hit our share price as the failure with Argyle has already sent us in the basement. So if we shut down the operations than it will not have a really big impact on the SP IMO.
The other downside, since management is considering this option as it wants to focus entirely on Goldboro.....which also means that we won't have any funds to explore and develop our two advanced projects including Tilt cover .
Titlt Cove is promising but it's not an "advanced project". There are targets that have been identified but a lot of drilling needs to be done. It means burning a lot of ca$h. Stog'er Tight would need a lot of ca$h too to get it going so we would have the need to go to the markets to finance the exploration of Tilt Cove anyway. I'm not saying that it does not worth it, I'm just saying that management prefers bidding on Goldboro instead (and I agree).
The spin out is the only option that would unlock the full value of Point Rousse and especially monetizing the remaining reserves , while totally focussed on our advanced gold projects.
Talk to Rob Dufour about that suggestion and crunch some hard numbers with him. It looks so simple and easy just talking about it but it might not pass the accoutant validation. But perhaps it worths a question at the next AGM. I do not think you have to convince shareholders about your spin out, I think you need to convince the management.
So we need to raise , say, $10 million in capital.
We do this by a rights issue to shareholders at a price of, say $0.15 per share.
Each common share that we own is given three rights valued at $0.05 per right and 3 rights enable you to buy a common share of NewCo for $0.15
The rights are publicly listed, so you can choose to sell them, convert them or buy more and increase your net position .
The rights issue means that each shareholder who converts the rights suffers no net dilution .
Signal gets to retain 25% so we have that asset in our Signal common shares.
Even if you present it like this, your spin out is still a sale of the assets. You're selling it to shareholders instead of selling it to another entity. It's just a more complexe way of doing it IMO. If such a scenario is proposed, I will sell you my rights so I can buy more of SGNL shares as the real deal is Goldboro.
Its a win win situation for everyone ...we will can produce the remaining Gold at Point Rouse while also following up on our recent prospective IP survey .
I see no reason why NewCo could not sustain a price of $0.35 or so, more if we can find more gold for the Baie Verte Mill, including toll processing or in situ.
You see no reason why we will not go below 35 cents? Well with the last years we got at Point-Rousse, I see plenty! Exploring and mining gold is not as easy as you seem to believe.
To do so will require a united shareholder base and a management team conducive to rewarding shareholders after being ignored for years ..
Yep, another big challenge for you: get a united base shareholders. I tried in the past by proposing a much simpler plan by merging with MAE. I noticed at that time that everybody has his own plan regarding their investment and that it's pretty tough to have them united behind one simple idea. It makes sense for some but not for others. And you know what? It's ok. We vote for a management to run the company and if we do not like the way they run it than we vote them out. That's the way it goes. And you're here since only a couple of months so you do not have the credibility it takes to, again, bash the management by saying that "a management team conducive to rewarding shareholders after being ignored for years"...
Anyway, good luck with your spin out suggestion.