Western Mining Network could be signalling a bubble in the graphite space, if not something worse
Western Mining Network could be signalling a bubble in the graphite space, if not something worse. The company has announced a deal to buy an Indonesian graphite asset. According to documents lodged with ASX, the asset's vendor will be entitled to 50% of the outstanding shares on deal completion. In the event that the market capitalisation of WMN rises from the current $22.1 million to $100 million, the vendor will be entitled to an additional twenty percentage points of ownership in three steps. Any investor (misguidedly) buying now stands to be heavily diluted along the way. A buyer today at 28¢ a share, for example, could receive as little as a 36% capital gain in the event the market value of the company was to go up 350%. When deals like this can get any support, something is going wrong. Please say no.
John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...
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