Traders rushed in to buy Trelawney Mining and Exploration, Inc. (CVE:TRR) (PINK:TWNNF) shares after the company completed another funding round.
TRR stock price jumped up nearly 11% on Monday carrying along a trading volume of 3.2 million, which was significantly above the average 627 thousand. Technically, this price spike marked the beginning of a possible stock price upswing, although intraday price action showed rather strong resistance around $3.40 – $3.45 per share.
The buying pressure increased after Trelawney announced to have completed a previously declared public offering. The company sold 5.52 million flow-through shares at $4.70 each and secured $25.9 million proceeds.
The cash will be used to cover exploration expenses related to their properties in Ontario. The company expects the $25 million will be enough to cover these expenses until the very end of 2012.
This was a clearly strategic fundraising as Trelawney was in a favorable position even without this last cash inflow. Their working capital topped $85.6 million during the second quarter of 2011, although this cash was also raised through sale of capital stock. This limits the extent of a favorable stock price reaction related to the current fundraising.
On top of that, a question of acceptable dilution rate is at hand. The offerings made over the last year caused the number of outstanding shares to nearly double and this last 5 million shares diluted shareholders another 4.3%.
