Argent Minerals Limited (ARD.ASX) is an IPO that is due to be listed on the ASX on the 3rd April 2008. The company plans to use the proceeds from the capital raising to fund exploration for base metals and precious metals. The company is raising $4 million before costs by issuing 20 million shares. They have also made provisions to raise another $1mil (5mil extra shares). In addition there are already 21.94 million vendor shares allocated to the seed investors and project sponsors, resulting in a post-IPO issued capital of 46.9 million shares (if $4mil raised). Assuming they enter the market at 20c (par value), that gives the stock a market value of $9.3 million.
Approximately 3 months after the IPO the company intends to offer shareholders the opportunity to participate in a 1:1 rights issue. The sweetener of a June 2011 option will mean nothing if shareholders can’t generate get earnings, but they have to pay 1c for it. I guess it will be worth 2-3c if the share price is 16c after issue. The option entitlement will help support the share price, as will any drilling.
Approximately 3 months after the IPO the company intends to offer shareholders the opportunity to participate in a 1:1 rights issue. The sweetener of a June 2011 option will mean nothing if shareholders can’t generate get earnings, but they have to pay 1c for it. I guess it will be worth 2-3c if the share price is 16c after issue. The option entitlement will help support the share price, as will any drilling.
Management & Board
One of the reasons I don't like this company is that it has only one independent director, and that independent director has little exposure to the mining industry of late. David Timms if I recall is over 70 years old, so I am in doubt as to his capacity to function as a technical consultant well beyond retirement age. I wish I could tell you his age. Most IPOs tend to include that information, but it seems to have been omitted. Was it excluded because its important or because it isn't. Its interesting to ponder why David Timms left Golden Cross Resources. Did he leave of his own volition or was he pushed....given his age.
Projects
The company is exploring the Kempfield & Sunny Corner projects prospective for silver, lead, zinc and gold, as well as the West Wyalong areas (copper/gold) farmed out by Golden Cross Resources.
I have little confidence in their Sunny Corner project. That project area, as well as Kempfield have been looked over by so many companies in decades past, I doubt they warrant much consideration. The West Wyalong project is worth some attention because there is an anomaly to test, and the presence of commercial gold grades is interesting, even if the single drilling intersection was just 2m wide.
After spending $3.25 million on these projects it will hold a 51% share. By spending an additional $1.2 million it can earn 70%.
Stock Outlook
I have little confidence in their Sunny Corner project. That project area, as well as Kempfield have been looked over by so many companies in decades past, I doubt they warrant much consideration. The West Wyalong project is worth some attention because there is an anomaly to test, and the presence of commercial gold grades is interesting, even if the single drilling intersection was just 2m wide.
After spending $3.25 million on these projects it will hold a 51% share. By spending an additional $1.2 million it can earn 70%.
Stock Outlook
I expect this stock will fall from its 20c issue price to 12c after listing. Being listed in this market is probably worth $3-4 million in itself, and they will have cash reserves of $4 million, but since they are obliged to waste money on these project areas, and might even go further, one has to downgrade their cash backing. The free option can be expected to perk the stock up a bit in 3 months, and some drilling might warrant speculative upside, though i only see that at West Wyalong. There is so much better value in the market, and I think seed investors will be dumping this stock.
My AnalysisI found very little to like about this company, but a lot to dislike about it. It stinks of nepotism, conflicts of interest, and shoddy disclosure. Why? Well David Timms is the former managing director of Golden Cross Resources (GCR) , and maybe he or a relative still is a large shareholder in Golden Cross with a vested interest in helping it to raise cash. They have disclosed the fact that there is only one independent director, so I guess that guy's concerns got dismissed in that 'democratic facade'. I think a valuation should have been performed on the exploration areas as I can't for the life of me see where the $4.5 million in implied value comes from. New shareholders I believe are about to be diluted by the old.
The vendor consideration for this issue is far too large, so my advise is don’t participate in the issue. Is there an attempt here for Golden Cross Resources to use this IPO as a means to raise cash to fund its more mature gold projects. Several years ago GCR used to proudly flaunt its capacity to use farm-in partners funds to fund exploration. I raise this point because its Canadian partner has withdrawn from its Cargo project and the share price of Golden Cross has plummeted (along with other explorers). One would do well to look at GCR's cash position.
I guess my problem with this prospectus is that it hides behind the law. Instead of revealing facts or conflicts, it just discloses disclaimers. We are used to that from banks and others. I don't think due regard is being given to new shareholders . I dont see much respect for the interest of shareholders. In lieu of the future share price, new shareholders have my sympathy.
The following disclosure by the accountants is interesting. They wanted to assure us that they are making no statement as to the value of the resources. I can appreciate their "risk sensitivity".
The vendor consideration for this issue is far too large, so my advise is don’t participate in the issue. Is there an attempt here for Golden Cross Resources to use this IPO as a means to raise cash to fund its more mature gold projects. Several years ago GCR used to proudly flaunt its capacity to use farm-in partners funds to fund exploration. I raise this point because its Canadian partner has withdrawn from its Cargo project and the share price of Golden Cross has plummeted (along with other explorers). One would do well to look at GCR's cash position.
I guess my problem with this prospectus is that it hides behind the law. Instead of revealing facts or conflicts, it just discloses disclaimers. We are used to that from banks and others. I don't think due regard is being given to new shareholders . I dont see much respect for the interest of shareholders. In lieu of the future share price, new shareholders have my sympathy.
The following disclosure by the accountants is interesting. They wanted to assure us that they are making no statement as to the value of the resources. I can appreciate their "risk sensitivity".
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