back to homepage

Soho Resources (SOH.V) - directors' financing and possible stock consolidation

Comment by Objective Capital , Nov 19, 2011
Click for previous reports on this company
Questions? |

Soho Resources is proposing to consolidate its stock. The ratio has not yet been set, but is not expected to exceed one new share for every eight old shares. Management has proposed this consolidation to enhance the ability of Soho to complete further equity financings to advance its advanced Tahuehueto project in Mexico. Shareholders have preapproved this proposed consolidation, but a formal decision to proceed will not be made until management holds further discussions with Soho’s key shareholders and its board of directors.

As well, the company has arranged a C$0.3m bridge loan from certain directors to provide short-term working capital. The one-year loan is unsecured and bears interest at 10 percent. The lenders will also receive a stock bonus valued at 20 percent of the value of the loan, at a deemed price of C$0.07 per share.

Objective's view:

In light of the deteriorating financial situation faced by all junior explorers, we view the proposed share consolidation as a necessary step to provide Soho better access to additional equity capital, despite its potentially dilutive impact on current shareholders.

For Soho to maintain its proposed timelines, the company will require access to increasing amounts of new capital, as evidenced by the company’s need for a short-term bridge loan.

We continue to believe the Tahuehueto project is an attractive investment if properly funded. Our previous valuation of the project and Soho Resources reflected the uncertainty of the company gaining access to sufficient capital for further development and accordingly our base-case valuation remains unchanged.

Should Soho face significant delays in completing a significant private placement to proceed with its development plan along existing timelines, a revision in our model would be warranted.

Other coverage

Other opinions

Canoel International Energy (CIL.V) - revitalisation on track; acquiring cogen plant
Apr 21, 2014 | Previous
Canoel International Energy (CIL.V) - preparing for its next stage of development
Jan 21, 2014 | Previous
Canoel International Energy (CIL.V) - building a portfolio in undervalued Italian gas
Jan 15, 2013 | Previous
Adroit Resources (ADT.V) - building Italy's antimony industry
OCIC. Nov 06, 2012
African Consolidated Resources (AFCR.L) - Andrew Cranswick discusses their new Zimbabwean gold project
OCIC. Sep 25, 2012
Helio Resource's (HRC.V) - Richard Williams presents on new PEA
OCIC. Sep 25, 2012
Great Western Minerals (GWG.V) - Gary Billingsley shares his views on the state of the Rare Earth sector
OCIC. Sep 25, 2012
Wishbone Gold (WSBN.L) - Richard Poulden discusses Wishbone Gold's strategy as a consolidator of global gold assets
OC. Sep 25, 2012
Woulfe Mining (WOF.V) - Nick Smith discusses expanding tungsten resources in South Korea
OCIC. Jun 12, 2012
Kibo Mining (KIBO.L) - updates on the progress of its new coal deal
OCIC. Jun 12, 2012
Volta Mining (VTM.AX) - David Sumich discusses their pending Gabon iron ore transaction
OCIC. Jun 12, 2012
Andiamo Exploration - Tim William's introduces their Haykota gold project in Eritrea
OCIC. Jun 12, 2012
Gentor Resources (GNT.V) - Peter Ruxton briefs investors on their copper project in Oman
OCIC. Jun 12, 2012
Peak Resources Limited (PEK.AX) - Richard Beazley provides an update on their Ngualla Rare Earth Project in Tanzania
OCIC. May 22, 2012
Kibo Mining (KIBO.L) - Louis Coetzee discusses their new coal deal
OCIC. May 22, 2012

Occasional papers