MIRANDA Possible scenario A company with proven coal assets and mining rights and essentially debt free, with 250million tons of top grade coal, priced at R800 per ton, is worth R200 000 000 000. How can the share price be just R0.30? I suspect the following may be planned. "The Two shareholders" having a 45% share, must have confidence in the Co. (or is there another plan) to lend money to the tune of R40 000 000 for repayment in Jan 2012. Where will, a non- producing Co., without a takeoff agreement in place, get R40 m. plus interest, in the next three months? Not possible. So, to the alternative, which is to convert the loans into shares in the company. The authorized share capital is 400 000 000 shares of which 285 000 000 are issued, leaving 115 000 000 un-issued under control of the board, which is essentially "the two shareholders". R40m loan divided by 115m shares, is R0.35 each, conveniently close to the current share price of 30cents. This settles the debt but leaves them firmly in control ie 45% of 285m shares, is now effectivly 32% of the authorised capital plus 29% for the loan equals 61% of the authorised capital. The next step would be to buy out the minority shareholders at the still 30 cent share price. Now letA¢A_ATs be generous and say the buy out offer is sweetened to 45 cents. This requires additional R70.65 million, from 157 000 000 shares at 45 cents,. Total cost is 70m plus 40m plus cost of original shares say 77m, which adds up to R187 m. They now own a Co. worth R200 billion for only R187m. Share holders had assets worth R500 per share. If the cost of mine development, to production stage, were to be say R496 per share, a share price of R4 would not be unreasonable. Now the R40 m loan could be repaid by converting only 10 million shares, the balance of 105 m. shares could be offered as rights at say R3 each, raising R315 000 000 which is enough to get the coal, gold and diamond mines off the ground. I believe the Co has been negligent in not keeping the shareholders informed, the web site is out of date, no mention made of new mining rights being granted. Mis-information regarding early stage studies and feasability studies. These had already been done. Production was to begin in 2010. With coal in demand, they have not managed to get a takeoff agreement? With an agreement in place surely someone would be prepared to finance the development. It is obvious that it is in someoneA¢A_ATs interest to keep the shareholders uninformed and consequently the share price low. I believe it is not in the shareholders interest to allow this to possibly happen and there has to be a way to protect minority interests from these predatory practices.
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