ATU 0.00% 0.5¢ atrum coal limited

Microsoft Word - ATU - Groundhog PFS Results...

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    Microsoft Word - ATU - Groundhog PFS Results (lodgement_mark2).docx
    “Groundhog North to be funded through non-dilutive equity sell-down (commencing H1 2015), strategic off-take financing, leasing and debt"

    ATU has remained ‘fully funded’ at a shareholder level since last November’s $18.5m private placement, and conversion of management’s partly paid shares.

    However in light of the above public statements, shareholder’s might feel a little aggrieved by the current suspension if indeed it is due to a private placement, given the communications by management over the past year was that ATU will continue to be funded via 'NON-DILUTIVE’ equity sell downs or alternative financing options.

    However, the realities are, IMO, that ATU now finds themselves in the following position:

    - maintaining a healthy market cap ($250m)
    - their story is now attractive and mature enough to attract institutional fund investors
    - the company is running low on cash after an active drilling program and independent analysis works completed (was $10m as at June end, I estimate $5m by year end)
    - ATU is actively involved in project sell down discussions with off-take/strategic partners

    The predicament here for ATU management IMO is that their bargaining position re project sell down discussions is damaged by the low cash position of the company. ie third parties will be tempted to wait before signing any agreement given ATU's cash burn works in the favour of terms and conditions third parties could extract.

    On the flip side, institutional investors who might wish to gain exposure to ATU’s story simply cant get any meaningful stock position on market due to the illiquidity caused by a tight share register. ie how can I buy 15 million shares on market without moving the market substantially?

    The answer, whilst somewhat painful to existing shareholders, and in some respects in contrast to previously communicated announcements, becomes quite obvious.

    Grant a private placement (always at a discount) to institutions that shores up the company’s balance sheet allowing management to continue third party discussions in a position of strength - ie less dilution at a project level - and ensure ATU can fully fund its multi mine development. Attracting institutional interest on the register would also be a positive sign to the market.

    If the above scenario does materialise early next week, then there are a couple of key things to look for IMO.

    1. If a placement price is circa $1.20 as alluded to on this forum, then I would expect ATU to instantly trade higher given I would take it that management would only grant a discounted placement to institutions that had promised additional on market price support.

    2. Confirmation of project sell down on favourable terms over the coming months

    While some ATU shareholders may not be happy with the dilutionary impacts of any private placement, and might raise questions on management’s credibility given past communications on non dilutionary funding options, granting a private placement as laid out above does make sense, and the biggest losers here are actually ATU management themselves given they own the bulk of the company and have contributed significant amounts of past capital themselves.

    Put in balance against the continued pleasing progress of the overall Groundhog development, the strengthened bargaining position delivered by additional institutional capital, and the share price floor this should ensure, it is likely the best current strategic option for ATU.

    ATU have 176m shares on issue on a fully diluted basis. If they announce a $15m placement at $1.20 that would be circa 9% in dilution as Tarzan alluded to.

    I suggest any aggrieved shareholders on this forum buy an additional 9% asap on relisting which will rebalance their net exposure.


    One of the most sensible & informative postings I have ever seen on Hot Copper--thank you LAGER'
    It DOES beg the question as to who are you & how come you have such sensitive & correct "assumptions" "regardless of the IMO insertion???? DWJD
 
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