busy sunday, page-11

Incognito

Errors happen, they could be the person entering the data or it could be a calculating error.

I am merely drawing your attention to that as a possibility. Apparently it escaped both of you, and is indicative of a "shoot first ask questions later" mentality.

High interest rates are characteristic of bridging finance. I'm not sure what the standard rates are, but at the time the agreements were negotiated, the timelines to production were shorter than has proved the case. I would think they thought they were only needing bridging finance. The were wrong. Is this a hanging offence? Twiggy Forrest has got errors of judgement like that and he's not been hung yet by shareholders. Surely some restraint is in order here.

GZ

FAS needs to be reported? Make sure you have a sound case there and check your facts. Of course, facts could get in the way of a your story.

REMUNERATION.
KR's salary package? His base salary is standard industry amount, of around $440k. The total amount of $676k includes that base salary plus share-based payments to related parties (as defined in AASB124) being employees of Fairstar Resources Ltd. Share based payments means not in cash.

His contract has expired and he is retained on a month to month basis see p.12. A salary review was meant to have occurred and has not yet happened.

At commencement of mine production, performance based bonuses based on key performance indicators are expected to be introduced. I think it would be difficult to introduce KPIs before that. Explain how? It is a plastic situation, you cannot nail down specifics with explorer to producer.

PROGESS OR SITTING ON THEIR HANDS?
Check the 'Review of Operations', and 'Significant Changes in the State of Affairs' as from time to time claims are made in HC that the company is sitting on their hands and not making any progress.

Is that really the case? Surely there IS progress not just on SHIP but on the other tenements as well.

ALL:
couldn't you guys be more specific about your concerns so we can nail them down properly?

For instance, nobody mentioned a AFP investigation connected with the GWR matter, it was all vague grumblings mentioning GWR but nothing specific. It is difficult to get the facts when people just sound off. However, I found this is in p.38 the report:

In the "Contingent Assets" US$3.0 million inclusive of costs and interest is listed and is being pursued due to financier's unlawful disposal of shares in Golden West Resources Ltd in 2008. "No amounts have been recovered in the year ended 30 June 2012".

FAS made a big and costly mistake on that one, but the fact they are seeking recovery is at least something. I would like more information on what kind of pursuit is going on. Civil, or criminal. Either way, it reflects at worst some inexperience and possible naivety of the board, but not the criminality some have implied from time to time.

A GOING CONCERN?

? Fairstar has entered into a non exclusive standby subscription agreement with Gurney Capital
Nominees Pty Ltd. The total facility, of which drawdowns can be made subject to certain terms
and conditions, is $15 million. A total of approximately $8.0m has been drawn down pursuant to
this facility from date of initial draw down to 30 June 2012. The Company is confident the facility
will continue to be made available as required.

? As at 28 September 2012, three loan facilities totalling $6,955,000 are due to be repaid in October
2012. These loans are secured on 21.5m shares in Golden West Resources Ltd (which as at the
date of this report was valued at approximately $4.7 million)."

OK so at the time of the loans being negotiated, it was expected the mine would be operating.
Delays have meant this is not going to happen.
Surely there is scope for renegotiating the loan. There is a shortfall in the security of approx $2 million if the loan is to be extended just to cover the outstanding loan. Further loan facilities will be needed to cover operations.

What is the outlook on this?
3 options
"The Company is confident that
(1) these facilities can be either extended,
(2) funds will be available from the Gurney Capital facility, or
(3) alternatively funds will be available from new funding facilities."

These alternatives surely indicate there are more than one approach available. It is not definite, but they are confident they can keep going. What I am not sure of is who the principal lender is on the funds due this month.

What the situation suggests is the lenders must have some understanding that they are more likely to benefit by not killing off the goose. Selling off the GWR shares is going to hurt them. They can't do that at once. Surely they are looking closely at the business case of FAS. I've posted on this aspect fairly recently.

Despite all the shock and horror, I've seen this kind of thing before on a balance sheet (on companies that survived) and you must have led a protected life if you have not. Of course it concerns all of us, but we all know that it is not yet over and I'm not going to mention what category of share this is, because everyone hates it when I do that...except to say it's not a blue chip.

DV