ASX explorer avoids administration: share price jumps
- By: John P Sykes
Posted in: Blog, Case Studies, Exploration, Management, Publications, Strategy
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Last week’s Strictly Boardroom column on MiningNewsPremium.net, with Allan Trench, looked at a fictional mineral explorer in trouble – running out of cash and opportunities. A new Chairman had been brought in to turn the company around.
This week we look at how they did it. In brief, they avoided cost-cutting, which would have been of limited impact bearing in mind the already thin operating costs, and instead focused on revenue generation. Revenue generation for an explorer with no operating assets means capital raising, and for this, a buoyant share price is required. The explorer therefore needed to do some quick high impact exploration to get some successful results, raise the share price and then do the capital raising.
Fortunately, the company had a good short-term opportunity in a lithium sniff, which could receive some cheap and quick drilling, as well as a good long-term nickel-copper play in Western Australia’s Fraser Range. A high-risk, high-reward move would be to run a decent geophysical survey over the property, absorbing much of the rest of the company’s funds, however, any targets generated would add impetus to the share price and a justification for the capital raising, if the money could be used for drilling of these targets.
The general lesson is that in business, the biggest opportunity is usually on the revenue side, not the cost side.
The article is available to subscribers on MiningNewsPremium.net and is entitled “ASX explorer avoids administration: share price jumps“.
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