ECR Minerals (LON: ECR) shares are up 10% this morning. ECR shares have risen on the basis that they’ve issued more shares - which isn’t quite the way we normally think of things. However, the difference here is that ECR has placed them directly - not even through a brokerage - and to sophisticated investors. Which could mean that if sophisticates think there’s something valuable there then so should the rest of us. Maybe.
The announcement: ECR Minerals plc (LON: ECR), the exploration and development company focused on gold in Australia, is pleased to announce that the Company has conditionally raised £580,000 by way of a direct subscription (“Subscription”) through the issue of 331,392,844 new ordinary shares in the Company ("New Ordinary Shares"), at a price of 0.175p per New Ordinary Share. The Subscription, which generated material interest from a number of prospective investors, has been agreed with high net worth individuals and institutional investors and has been carried out directly by the Company, without payment of commissions. The funds raised will be used to advance the Company’s extensive existing assets; new potential opportunities and for working capital purposes.”
They are going to need to gain shareholder permission for this so it’s still a conditional raise - conditional on gaining that shareholder approval. Not that we think there will be much difficulty with that.
ECR Minerals share price from Google Finance
That share price drop of 50% back in May, that’s the thing that needs explaining. And as we said back then about ECR Minerals: “ECR Minerals (LON: ECR) shares have dropped 20% in London today as they make a press release. Which contains that dreaded phrasing “not been as encouraging as we would have hoped.” We have noted before around here that there's an art to reading corporate announcements, there's a special language used. The correct translation of this phrase is closer to “Ooops, we lost your money, sorry” than it is to anything else. Not that a corporate press release ever does quite put it that way but it would be refreshing if someone did occasionally. “
So, what this cash raise is for is so that they have more money to lose again. Ooops, no, sorry, so that they can recapitalise the company to pursue those wondrous opportunities.
While we obviously are employing some sarcasm there we’re also being a little unfair. This is just what hte life of a junior mining company is - testing whether particular prospects are economic or not. The whole reason for doing the testing is that some to many are not - and someone’s got to go and find out. As we also said back then about ECR: “We can hear the echoes of “Next year in Jerusalem” there.” The difference between mining and religion is that sometimes in mining it does actually happen.