Yesterday, Eastern Platinum Ltd. (TSE:ELR), (PINK:ELRFF) stock jumped 11.95% up, striking a new 52-week high. On the same day, the company released the news about the arrangement of a corporate debt facility for US$100 million.
The new yearly high at $1.84 was forged on a heavy trading volume. During the session, 18.5 million shares changed hands.
ELR stock rush was almost as powerful as it was a few weeks ago, when Eastern Platinum Ltd. released record production for the quarter ended September 30, 2010.
If at that time on the day of the press release ELR stock pulled 2.55% back, this time a huge share price soar was noted.
Maybe yesterday’s stock performance reflected the accumulated investor appreciation of both news.
Although the debt facility will be utilized by Eastern Platinum Ltd. in its Phase 1 growth plan for the Eastern Limb projects and the forecasts are that the company will double its 2009 PGM production by the end of 2012, the question about the risks related to the debt still arises.[BANNER]
In its last financials, Eastern Platinum Ltd. reports no long-term debt at the end of this June. The only debts reported are those related to a provision for environmental rehabilitation, as well as finance lease obligations related to the company’s mining vehicles.
At the same time, the last financial reports present an increase in the revenues and in the total net income.
The only question is whether the new debt in such an amount and with such a term (six years) may be repaid with the amount of the reported income and may sustain the company’s operations and development.
