Target value for KNL, page-2

Brett, I was at the Benchmark Batteries conference last month and spoke with Andrew at length regarding finance and a few other things. I have at times been invested in KNL and I have a lot of respect for the way the company is run; it is a very safe graphite bet.

Anyway, after myself and another fellow drilled him with questions on finance, Andrew made it quite clear that the German debt cover note is for US$40M. The board expects to gain another US$10-15 from additional debt channels. And that's it for debt. I questioned him from many angles suggesting further debt (better for shareholders) but he said KNL doesn't want to fund CAPEX with debt greater than about 65%.

I do read KNL posts often to keep a broader view of the sector and because there are knowledgeable posters here however, the talk of 100% or 90 or even 80% debt financing is nothing more than wishful thinking. I think if you focus on 35% equity issue your calculations should be a good reflection of future SP.

Andrew was quite frustrated that the SP hasn't appreciated following recent announcements - in his terms, 'the market doesn't seem to have gotten it yet' in relation to the security of Western off-takes and the German government debt coverage. I think the way its looking, calculating the issuing of the 35% equity at no more than 20c is becoming realistic.

Anyway, I'm sure the zealots will get upset at hearing debt wont be at 100% and that things wont be all they have dreamed of but, no point kidding ourselves.

All the best