Oroco Resource Corp V.OCO

A Raise in Q1 2022 is Good; Stop Complaining About Dilution

[jwall34]

With Adam hinting at a final raise in Q1 2022, I'm seeing a lot of people whine about further dilution at the current lower market prices.  I'm going to explain why I think that Oroco would be better off raising funds sooner rather than later, and that there really isn't that much of an ultimate difference in the per share buyout price between a 2$ and a 3$ raise.

For illustration, if we assume they raise $30m CAD, using the current 213 million fully diluted share count: 

If the raise occurs @ 2$ / share:

$30m / $2 = 15m shares.  15m / 213m = 7.04% dilution

If the raise occurs @ 3$ / share:

$30m / $3 = 10m shares. 10m / 213m = 4.69% dilution

7.04% - 4.69% = 2.35%

Even a 50% rise in the share price would only reduce the dilution of a $30m raise by 2.35% relative to the overall share count.  

To illustrate how little of a difference this makes, let's assume ST is bought out for $1B USD. They have 85.5% ownership but with the CAD - USD conversion we can estimate it would be worth roughly $1B CAD.

No dilution:

$1B CAD / 213M shares = $4.69 / share

10m share dilution ($3 raise):

$1B CAD / 223M shares = $4.48 / share ($0.21 / share decrease)

15m share dilution (2$ raise):

$1B CAD / 228M shares = $4.39 / share ($0.30 / share decrease) 


At a buyout of $1B USD, Raising at $2 vs $3 only decreases the ultimate per share buyout value by NINE CENTS. (yes, I understand it could go higher, but i'm being conservative for the sake of the example).

In other words, I would MUCH RATHER Oroco raise money sooner than later, ramp up to 5-6 drills sooner, and get a buyout sooner than waiting to hopefully get a higher price and risk running out of money or, worse, seeing the market turn against them and being forced to raise at an even lower price. 

Trust the process.

[Overertune]

If increase to 5-6 holes, how much more work they need to do and do you have a timeline for the buyout? 

[coppermonster]

Yep 100% agree. Get the funds you need to drill this thing out quickly without having to worry about what global economy does and where the copper price is in a few months. I rather have them dilute me by an extra 2% and unlock much more value quicker than keeping dragging along at 3 rigs and hope for a higher share price in Q2.