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Who's backing KCM?
Marc Hasenfuss
Posted: Wed, 29 Apr 2009
[miningmx.com] -- STRUGGLING diamond mining and exploration company Kimberley Consolidated Mining (KCM) has managed to find a dollop of much-needed fresh capital.
According to a Sens announcement released late on Tuesday, KCM had placed almost 35 million new shares with "various parties" to raise R4.3m.
MiningMx has previously pointed out that KCM - which is only undertaking limited mining activity - is facing a major financing squeeze after its much mooted Bo-Karoo mine failed to deliver the cash flows required to sustain mining and exploration activity.
At the end of the interim period to end August 2008 KCM's current liabilities exceeded its current assets by a rather worrying R14m - something that prompted executives to contemplate selling off non-core and redundant assets.
Just how far R4m in fresh capital will go - after salaries and other
administrative costs are tallied - is a key question. In the eleven months to end February 2008 KCM's operating costs topped R60m -equivalent to R5m a month.
In the interim period to end August the group's operating costs topped R57m, or R9m a month.
With mining and exploration activity scaled down markedly it seems KCM is hoping the R4m can keep the company ticking over until conditions in
the gem market improve to levels that allow the group to pursue production and exploration activity on a more meaningful scale.
Whether KCM has indeed managed to bolster cash flow by selling off assets will only be apparent when the group releases its final results towards the end of May.
Still, one has to interpret the share placement as a sign that there are a few investors that still believe KCM can deliver on its early promise.
By MiningMx's calculations the new shares were issued at a price of close to 13c/share - which represents a considerable premium over the ruling price of 7c on the JSE on Wednesday morning.
According to the Sens announcement, the shares were "issued at an average premium of 18% to the 30-day volume weighted average price of the shares on the date the various prices were agreed between KCM and the relevant parties".
There was not much additional detail on the share issue, save for the obvious fact that
the proceeds would be used for working capital.
It might have been useful for KCM to elaborate on the share issue in terms of identifying any significant investors participating in the exercise.
The share issue represents almost 8% of KCM's issued shares, which means that one cannot rule out the possibility of one or two investors building sizeable stakes in the company.
KCM followed its share issue announcement with the renewal of a cautionary announcement (first released in mid-March) around negotiations with China National Geological and Mining - a seemingly significant development that the markets seems determined to ignore. KCM's share price was unmoved at 7c at midday on Wednesday.
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