Passport chose to raise $12.5 million instead of a larger amount because management and the Board are confident of 2 things. 1) $12.5 million will fund Passport for AT LEAST the next six months (my opinion only) and through delivery of both a PEA and an updated NI 43-101 resource report, and 2) the company believes the stock price will be comfortably above $0.25 per share after the PEA and 43-101 report is released.
However, there's a 3rd key takeaway that's incredibly important to consider. It's entirely possible that this raise will be the last dilutive event until 2014. Not only possible, but this is the company's game plan. After the PEA and 43-101 reports substantially de-risk the company, a strategic partner and/or offtake agreement is likely to follow. [Remember that Passport has an Indian Board member who will earn his pay at this stage]. An investment of $40 -$60 million, (my opinion only) could come in, but IT WILL NOT BE in the form of additonal equity capital, but instead a direct investment at the project level.
Upon achieving this project-level equity investment, Passport stock should be off to the races as that investment further de-risks the company. AND, this non-dilutive, project-level equity investment will pave the way for project-level debt financing. In short, once a strategic investment and/or offtake agreement is signed, Passport will attract greater interest from institutions and mutal funds. With a NPV of $3 billion or more (my opinion only) in the company's forthcoming PEA, (Prospect Global's PEA calculated NPV is $3.8 billion), Passport is trading at less than 2% of its prospective NPV.
Again, a lot of news to digest and I apologize for my multiple long-winded posts. I welcome comments on my thesis here.
