Bulls have been cautiously buying Royal Coal Corp. (CVE:RDA) (PINK:RKLRF) over the past week and have showed some more greedy attitude by the end of the week.
Things are getting hotter as RDA continues to go up on a weird rally. The trading volume of 1.37 million shares recorded last Friday was significantly above the average of 590 thousand.
The rally might pick up some more thrust this week since the company recently announced a new private placement. On Thursday, June 16, 2011, the company said they have arranged a debt offering worth $10 million.
Royal Coal entered into agreement with Mecuria Energy Group Limited to sell them the convertible debentures bearing a 9% annual interest. The offering should be closed around July 1.
While that is comparatively good news, the company actually had recently had some bad experience with the warrants from their past. The stock collapsed in the beginning of June after RDA said they will amend the terms of 4.3 million warrants, extending the expiry date by another 12 months.
Despite the negative reaction on the market, it seems the situation is actually not that dangerous for the current shareholders. These warrants can be converted at 50 cents per share and considering the current prices dwell bellow 20 cents, the conversion is far from reality.
These warrants are a leftover from the period Royal coal was not a reporting entity. They could provide proceeds of nearly $2 million upon full conversion.
