Edenville Energy (LON: EDL) shares are up 34% this morning on the news that they have issued new shares to bolster the working capital position. This price movement can be seen in one of two ways. One is that this is a good deal which will lead to greater profits. The other is that this is just sheer relief that things aren't going to get worse.
For the deal is, well, it's pretty large and remarkable actually: “Q Global Commodities Group ("QGC), one of South Africa's leading independent commodity, mining, logistics and investment funds to subscribe, via its wholly-owned subsidiary AUO Commercial Brokerage LLC, in total for £879,330 and, subject to shareholder approval at the GM, become the Company's major shareholder with a 29.95% interest. Gathoni Muchai Investments Limited ("GMI"), an East Africa based mining investment group to subscribe in total for £588,670 and become a major shareholder of the Company, subject to shareholder approval at the GM, with a 20.05% interest”
So, that's 50% of the company gone for that £1.5 million. Maybe that's a fair deal - the market cap is only £1.5 million after all.
Edenville Energy share price from London Stock Exchange
It's also possible to think that the news investors were able to buy in much too cheaply. That they got a bargain price at the expense of previous shareholders. One thing that might make us think this is this earlier announcement: “As previously announced, the Company has been focused on stockpiling run of mine coal to mitigate, as far as practicable, impact from the Tanzanian rainy season. A substantial stockpile of run of mine ("ROM") coal was accumulated, but this stockpiled ROM coal has proven difficult to wash due to its moisture content. The production of washed coal is therefore expected to be reduced for as long as the rains continue, which could be for several more months.” Coal mining really isn't one of those technically nor technologically difficult things. That a company is having this sort of problem in coal mining suggests that perhaps coal mining isn't, really, their forte.
So we could, equally, see the rise in the share price as being relief that other investors now have management control. Perhaps matters will improve under this new majority ownership?
