Formation Metals Grandich Update
(firmenpresse) - Formation Metals Grandich Update
Many people have been asking me what is going on with Formation Metals’ (FCO.TSX) share price, which has come off 10% since they announced their proposed $80 million equity financing three weeks ago (see their January 27, 2011 news release). As I have said before, I can’t answer individual emails but in general the answer seems pretty simple under the circumstances (at least to me): the share price has drifted off under light trading volume with the markets waiting on more finance news.
Formation isn’t saying (or can’t say) much, although I do know that senior management has been on the road non-stop marketing the financing with Byron Securities Ltd, Cormark Securities Inc (formerly Sprott Securities) and Jennings Capital in a number of different financial hubs. According to management, this road trip is going well and the financing is being well received.
The good news is it’s not like the majority of FCO’s shareholders (the institutions) all of a sudden got wind of their proposed financing and thought it was a bad idea and decided to dump shares. This is an important point. On the contrary, it is expected that these institutional investors shall take down the bulk of the financing and once it closes, they should obviously want to see their investment do well.
FCO’s average daily trading volume has been just over 60,000 shares since the financing announcement – hardly the hallmark of institutional trading. This (again, to me) is indicative of relatively light, primarily retail trading with perhaps some key investors deciding to sell now with the hopes of participating in the financing to get a warrant along with their shares. These shareholders may (and again I say may) be taking the risk of taking money off the table without being able to participate in FCO’s financing – management has yet to talk about any confirmed “President’s List”, or if individual investors will be able to participate outside of the announced brokered financing.
The consequence is proportionally more sellers than buyers resulting in the downward drifting of FCO’s share price. This doesn’t surprise me as I mentioned in my last update, “not having the price of the financing set leaves an air of uncertainty overhanging the FCO’s market and only time should tell which way the stock will move to settle on a financing price – let’s hope this is a case of short term pain for long term gain.”
The announcement of their $80 million equity financing seems to have taken the previous financing announcement on December 31 out of the limelight. Formation announced that $77.7 million in had been placed in trust for construction of the cobalt mine through the sale of tax exempt, low interest industrial bonds. Let’s not forget that since that time, working away in the background, the banks continue to do their due diligence on the cobalt project for this debt side of the financing. Pending the positive review of the due diligence process, expected within weeks now, it is expected the banks should be in a position to provide some sort of credit facility at reasonable commercial rates backing the bonds allowing Formation access to the funds. That in itself should be very well received news.
Obviously , Formation believes that indeed both the equity and the debt side of the financings will come together allowing for a spring start-up for mine construction. They announced in early January that they had signed a Letter of Intent with JDS Energy and Mining Inc. for Engineering, Procurement, and Construction Management services.
Just as an aside, I see that Formation has yet to announce the final results of their 2010 drilling on their Virgin River uranium Project, joint ventured with Cameco (as operator) and AREVA in the Athabasca Basin of Northern Saskatchewan. I suspect, based on the timing of Virgin River news in years past, that this announcement is due any day now. Uranium prices are taking off once again with surging demand out of China as some predict prices over $100/lb.
It seems we are witnessing the short term pain of an announced, but not yet done, large equity financing, with much going on in the background that remains unannounced. If management can keep its eye on the long term goal of raising the money, by whatever means needed to complete construction of their 100% owned Idaho based primary cobalt mine, then the long term gain of production and revenues can’t be far off.
Leseranfragen:
Formation Metals Inc.
Formation Metals Inc.
Head Office:
Suite 1730 - 999 West Hastings Street
Vancouver, B.C. CANADA
V6C 2W2
Tel: (604) 682-6229
Fax: (604) 682-6205
For Investor Relations, please contact:
604-682-6229, ext 6
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Datum: 18.02.2011 - 15:53 Uhr
Sprache: Deutsch
News-ID 28115
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