Why Platina Resources Ltd Dropped 6% Today

Platina Resources Ltd [ASX:PGM] isn’t a little-known miner with a market cap of $32 million and plans to produce scandium, cobalt and nickel.

Scandium in particular could be a high-demand metal in the future. It’s strong and light; when used in cars and aeroplanes, scandium increases efficiency.

Today the small miner dropped 14.28%, to a low of 15 cents per share.

Why the Platina share price took a dive

PGM announced that they had raised $7.1 million in a capital raising. This represented 52.825 million shares for 13.5 cent each.

The funds will fast-track completion of their pre-feasibility study during the second quarter of 2017. It will also fully fund a definitive feasibility study by the end of 2017 at the company’s Owendale Project.

What now for Platina shares?

Capital raisings can mean different things to different investors. On the one hand, PGM is able to fund feasibility studies, which gets them one step closer to commercialisation.

On the other hand, issuing more shares dilutes existing shareholders. Thus, it also harms the company’s earnings-per-share figure. While they currently don’t generate a profit, the extra shares will entitle shareholders to a smaller portion of future profits.

For PGM, the capital raising is more of a positive than a negative. Right now, they should be focusing on generating a profit. And the best way to do that is to get their Owendale Project up and running. When that happens, potential profits might be more than enough to validate the stock’s valuation.

Regards,

Härje Ronngard,

Junior Analyst, Money Morning

PS: It’s not always easy to find growth among billion-dollar stocks. Unless they can significantly increase earnings, you’d be lucky to get double-digit returns. That’s why some investors prefer the smaller end of the market.

Small-cap stocks are a riskier investment. There is no running away from it. But they can potentially grow earnings 10-fold in a short space of time.

Small-cap specialist Sam Volkering has been on the other end of small-caps running up 1,000% or more.

So far in 2017, Sam hasn’t recommended a losing stock yet. In his advisory service, Australian Small-Cap Investigator, his top three active investments are up 304.57%, 466.04% and 1,624.49%.

To find out more, click here.

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