Strike Me Lucky - Golden West Backers Take The Options
Sydney Morning Herald
Tuesday August 22, 2006
IT CERTAINLY pays to be a "sophisticated investor" from Kalgoorlie. A group of lucky backers of iron ore hopeful Golden West Resources, who subscribed to a $7.5 million placement on Friday, have nearly doubled their money already.
Golden West shares rose 40 per cent, or 63c, to $2.20 on high-volume trading yesterday. Last week the explorer issued shares at $1.20 each with an attached 1-for-4 option exercisable at just 20c. In light of its huge share price gains, Golden West yesterday received a query from the stock exchange.The only news to report was actually negative. A recent report in an industry publication had mentioned Golden West was in talks with a private Chinese steel mill, but yesterday the company said those discussions were "not proceeding".Nevertheless, the query sent Golden West shares higher and ensured last week's placement was well in the money.The capital raising - conducted by an accounting firm - was spread between about six investors, with many believed to be the company's original backers from Kalgoorlie."This is an opportunity and we took it," Golden West managing director Gary Hutchinson said of the share placement. "The market has liked it."Golden West raised the money to conduct more drilling at its Wiluna hematite prospect in Western Australia's mid-west region. Wiluna was originally labelled a gold project when the company floated about 18 months ago, but Golden West has since hit some very high-grade hematite iron ore intersections.Mr Hutchinson said there was potential to prove up to at least 150 million tonnes of iron ore and added that the same tenements might also contain uranium.Golden West's latest capital raising has certainly helped the share price and has also spurred further paper profit gains for one of the company's major investors, Dubai's Falak Holding. Falak is chaired by Abdulrahman Falaknaz, one of three partners building the multi-billion dollar Dubai Sports City complex. Falak, which has also profitably invested in long-time Australian steel hopeful Boulder Steel, bought 7 million Golden West shares at about 35c each in February, giving him a $13 million paper profit at yesterday's prices.Mr Falaknaz apparently was attracted to the company through some of Golden West's overseas connections."He's done very well, but he's a major investor," Mr Hutchinson said.Given the huge paper profits made by the "sophisticated investors" from Kalgoorlie and Mr Falaknaz, it's no surprise that those who haven't had a chance to invest wish they could have bought in at low prices."It was a pretty cheeky placement by the look of it," said a Perth broker who was not associated with last week's deal. "I would have loved to have gotten some 20c options."In fact, Golden West directors hold swags of options with exercise prices ranging between 25c and 40c, which they gained through the company's 20c a share float in 2004.Last October, when shares were trading at about 25c, the directors announced plans to issue millions of options to directors at 20c and 30c apiece. But the proposal was cancelled in late November when shares were trading at about 77c each due to the huge price variation."At that stage, we thought they were too much in the money," Mr Hutchinson said. "It would be nice to have them now, but I suppose we'll address that this year."When asked why Golden West would issue 20c options last week when shares were trading at about $1.30 - nearly twice the price as last November - Mr Hutchinson said it was simply an incentive to fill the placement.He added the identity of the "sophisticated investors" would be released once the proper paperwork was completed.
© 2006 Sydney Morning Herald
