Nikolay Tomov
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Will the Stock of Belo Sun Mining Corp. Reach New Horizons (CVE:BSX), (PINK:VNNHF) After the Huge Financing?

by Nikolay Tomov Mar 29, 2011
"Money is not everything", somebody had said. He may be right, but in the world of business money surely means a lot. If you manage to secure the funds you need, it is much easier to fulfill your projects. You just have to be smart enough, and to use the capital in the proper way. This is, however, not such an easy task.

Belo_Sun_Minig_-_Chart_-_29_Mar_2011.pngManagers of Belo Sun Mining Corp. (CVE:BSX), (PINK:VNNHF) have made the first important step. For the time being, they have secured the money needed for the further exploration of the company's mineral properties.

On Friday, Belo Sun announced the closing of a bought deal offering for the sale of 45M shares for gross proceeds of $51.8M. The raised funds will be used for the development of the Volta Grande gold project in Brazil.

Since the news was released, the stock has gone slightly up on the TSX Venture Exchange (CVE). Yesterday, BSX gained 1.6% on a large trading volume of 2.8M shares - this beats three times the average turnover. Currently, the stock has started to advance on rising volumes, which is principally a bullish sign.

Over the last two months, BSX has bumped precisely 50% up - from $0.84 in the beginning of February to yesterday's close of $1.26. Just three weeks ago, the stock was traded even better, noting an 8-year high at $1.42 per share. Will BSX manage to climb to new horizons after the company has secured such a substantial financing?

There is no guarantee that the stock will continue to progress on the long run. Some obstacles need to be taken into account. First, the above-mentioned offering has risen the number of the company's outstanding shares from 153M to 198M. It means increasing dilution, something that stockholders are surely not going to like.

Belo_Sun_Minig_-_Logo.pngAnother consideration - the present market cap of Belo Sun is roughly $250M (198M shares * $1.26). At the same time, the net worth of the business, including the offering, is $66M. This suggests the company is probably valued too high by investors.

Finally, as we said in the beginning, it is not so important just to have the funds you need. It is of even greater significance to use them properly. The future will show how Belo Sun's managers will use the capital that they raised through the equity financing.

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