It's time to pull the plug on Miranda Gold Corp. (MAD:TSX.V) and
salvage what we can. The company has announced an equity placement,
accompanied by a share rollback. This follows another placement in March when
it issued about 27.5 million shares, representing approximately 45% dilution.
Now it plans to raise another C$1.5 million, representing a further 28%
dilution. This continues a pattern of ongoing, massive dilution that has
helped drive the stock price down.
In 2012, Miranda had 53.6 million shares outstanding.
Now, six years later, it has 132 million with another 60 million planned (see
below), meaning if this placement completes as announced, the share count
will have exploded over 250% in six years. And it's not certain that the
company will be able to complete the placement as announced.
Messed up financing
We won't go into the painful details of the saga of the
earlier raise. Suffice it to say that when the company announced it had
closed on its C$1.5 million raise, trumpeting the participation of board
members and management, it failed to announce that the board had voted itself
and management bonuses in order to participate in the placement. So the
company did not actually raise anywhere close to C$1.5 million, and thus
needs to return to the market just six months later.
It now looks as though this new financing may not
complete as announced. Miranda initially announced the placement, within an
hour after announcing a deal with Newmont, priced
at 4 cents. The Newmont deal pushed the price up to as high as 4.5 cents, but
by the end of the day, it was quoted at 3 x 3.5, and it has slid since then.
So, less than two weeks later, the price of the offering
was slashed to 2.5 cents. But that was still an aggressive price; the stock
closed that day at 1.5 x 2 cents. Most recent trades have been at 1 1/2
cents. So there may have to be another "adjustment" in the terms.
No surprise to anyone, the company announced a 1-for-10 share consolidation
in conjunction with the offering. Typically, when there is a share
consolidation, the share price slides.
Let's sell now, before the share consolidation, and
before another change in the price of the equity financing. There seems only
further downside in the weeks ahead.
Adrian Day, London-born and a graduate of the London School of Economics,
heads the money management firm Adrian Day Asset Management, where he manages
discretionary accounts in both global and resource areas. Day is also
sub-adviser to the EuroPacific Gold Fund (EPGFX). His latest book is
"Investing in Resources: How to Profit from the Outsized Potential and
Avoid the Risks."
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Disclosure:
1) Adrian Day: I, or members of my immediate household or family, own shares
of the following companies mentioned in this article: None. I personally am,
or members of my immediate household or family are, paid by the following
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relationship with the following companies mentioned in this article: None.
Funds controlled by Adrian Day Asset Management hold shares of the following
companies mentioned in this article: Miranda Gold. I determined which
companies would be included in this article based on my research and
understanding of the sector.
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