Boss goes long to avoid dilution in $1.25m raising
Boss Resources (ASX:BOE) has unveiled a plan to avoid short-term trading from institutional investors, ring-fencing shares to “long only” funds.
It told its investors this morning that it would raise $1.25 million via the placement of just over 31 million shares at 4c each.
Of those shares, 18.75 million will be placed to sophisticated and institutional investors which will give an undertaking not to dispose of the shares within 12 months from the issue date.
The remaining 12.5 million shares will be placed with a “long only” institutional fund.
Small cap investors are often wary of the dilutive effect placements can have on two fronts. The addition of more shares to the pool can lower the value of all the other shares, especially if the offer price is below the current trading price.
Exacerbating this though is if an institutional trader engages in short-term trades to reap the difference between a lower offer price and a higher current share price.
BOE has undertaken to keep this activity under wraps by selecting investors who are seeking to hold onto the shares for the longer term.
The funds from the placement will be used for general working capital and to fund an upcoming drill program at its Honeymoon uranium project in South Australia.
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Honeymoon is being planned as an in-situ uranium mine, with acid injected underground to soak up and collect the uranium mineralisation.
The final ‘pregnant’ solution containing the uranium is then brought to the surface and processed.
The project has been in mothballs since 2013, but BOE is planning to give the project a new lease of life by conducting exploration within the next quarter – with the company eyeing a definitive feasibility study by the end of 2017.
At this stage, BOE is planning production to start in mid-2019 with a production target of 70-100 million tonnes per annum outlined.
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