Pressure on Chrometco fund raiser

[] — JOHANNESBURG-listed listed exploration company, Chrometco has raised much needed new capital by placing 38.6 million shares with investors at 63c/share. According to reports, the investors forking out for the new shares included Sanlam and Cadiz African Harvest Asset Management.

Readers may remember that in 2005, Chrometco aimed to raise R17m to R22m in pre-listing funding. Unfortunately the company raised only R5m, which was quickly eroded away. This prompted me to question whether the company should have abandoned their listing plans as such a smidgen of cash was not sufficient to sustain capital intensive exploration efforts.

Not long after the article was published on, one of the Chrometco executives phoned in the advisory “prepare to be pleasantly surprised”.

I can’t say that I’m blown away by exploration developments at Chrometco, but I am certainly surprised that some top institutional shareholders have opted to back the small exploration outfit.

I’m no mining sector expert, but I definitely would not be flinging my hard-earned bucks at Chrometco at this juncture (my bucks, of course, having already been blown in sporadic tilts at that fuddled fluorspar operation Sallies).

Naturally, I’m happy for the investors who bought into Chrometco at the pre-listing pitch of 125c/share with the shares-for-cash issue certainly lighting a fire under the group’s share price (which closed at 91c on the JSE on May 4).

I don’t know how long R24m will go considering Chrometco’s extensive ambitions in South Africa and outside the Republic.

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According to a Stock Exchange News Service announcement, the new capital will be deployed over the Rooderand Exploration project, the acquisition of Copper/cobalt, nickel concessions in the Congo; feasibility studies on two ore concessions in the Congo; DRC Gold trading and possible acquisition of gold concessions and the development and start-up of cassiterite (Tin) mining and concentrate production.

Funds will also be mobilised for exercising a share buy-back obligation of 2 million shares at 100c/share from the Korpo Trust shareholders, the previous owners of the mineral rights on portion two of the farm Rooderand 46JQ.

Clearly, Chrometco is going to make R24m go a long way.

But I suspect that if Chrometco’s share price holds-up on the back of encouraging exploration data, the group would be wise to consider another shares-for-cash placement, perhaps this time on a grander scale.

In this light, perhaps Chrometco has an opportunity to capitalise on earlier hints at seeking out a secondary listing on the AIM board of the London Stock Exchange (LSE).