The issue of dilution is one that every Nautilus Minerals shareholder needs to get to grips with. As mentioned in another post, I am extremely reluctant to either throw "good money after bad" or to realise a loss of any kind at this point.
Some snippets of information the one or the other visitor to the forum may find useful, too:
How Shares Are Diluted
Many forces influence the price of a company's shares, but stock prices are also subject to the basic laws of supply and demand. If there are not enough shares on the market to meet demand, the price will rise. If more shares are out there than people want to buy, the price will fall. Effectively, when an existing company issues new shares of stock, it's increasing the supply. It makes the stock you own less rare or scarce, in economic terms, and therefore less valuable. So, adding shares to the market is watering down, or diluting, the value of the stock.
Effect on Dividends
Particularly for long-term investors in stocks that pay dividends, having your shares diluted is not a welcome event. When a company that distributes dividends to its shareholders issues a large amount of new stock, it can mean it will pay lower dividends to its shareholders. If the amount of the dividend is relatively constant, an issuance of new shares means the same amount of money now has to be distributed across a larger number of investors, shrinking your share of the pie. Essentially, this reduces the future earnings power of your shares, making you less money and decreasing the price of your stock.
Short- and Long-Term Price Effects
Share dilution often negatively impacts a stock's price in the short term and possibly the long term if the company is struggling to survive. Sometimes a company is issuing new stock in an effort to avoid bankruptcy, so share dilution can be a sign to investors that their investment has acquired a level of risk that didn't exist before. In other cases, dilution is not necessarily a reason to sell. Companies often have good reasons for issuing new stock. If a company doubles its number of shares to raise money for a new factory that is expected to double or triple its profits, investors should take that into account. You need to evaluate why the company is issuing new shares when you learn that a share dilution is imminent.
Negative EPS Sentiment
Earnings per share, or EPS, is one of the most important metrics that Wall Street analysts use to evaluate the future prospects of a company. It is calculated by dividing the company's latest quarterly earnings by the number of shares outstanding. Consequently, if a company announces it's going to dilute its shares by issuing new stock, the company's EPS is going to fall, creating negative EPS sentiment among analysts and traders. Much of the stock market moves on this kind of short-term sentiment. Longer-term investors may have less to fear from share dilution, but markets almost always view it as a negative sign.
http://www.dummies.com/how-to/content/what-penny-stock-investors-should-know-about-dilut.html
Less-experienced investors often don’t see the potentially detrimental effect that newly issued shares can cause. They may be proud of the 20 percent gain their stock has returned so far, not realizing that this occurred during a time when the company significantly diluted its holdings. Without that dilution, the investors’ returns may have been significantly higher, but this lost opportunity will never show up in any quantifiable way.
At this point, I am primarily worried about the mid-term impact on the share price. If I were concerned about earnings per share and firmly convinced that Nautilus Minerals will be the next Barrick in deep sea mining, I guess I had better sell my under water position now and buy a larger number of shares at a lower price later. My initial hope when I bought my shares was that the stock price would multiply by a number of times until SOP or relatively shortly thereafter. One of key reasons I am currently still holding on to my Nautilus shares is the belief that the project's key attributes could help it make headlines that go beyond anything a conventional land-based mine could hope for. Hopefully, as a consequence (initial) demand will surpass what a run-of-the-mill junior explorer could expect, and (temporarily) offset the less pleasant effects that multiple dilutions have created. If this were a normal land-based mine, I would have cut my losses and moved on a long time ago. Needless to say, this approach represents a crude speculative gamble and not a value investment of any sort.