under promise - over deliver, page-5

Afternoon. The process is a long one and varies significantly bewteen banks. But the term sheet is just first base. It means that credit is prepared to lend the relevant amount at the relevant rate in a particular country for the relevant project ie many banks won't touch anything brownfield or in SA etc and some hate coal at the moment. So the TS sets out the basics - the interest rates, the financial ratios and covenants which must be met, how they're tested, what the various components of the facility can be used for and what must be satisfied before each drawdown. But it's always high-level.

The TS is always subject to due diligence. So in this case I'd imagine the engineering and legal reports would have been key. Credit will want proof that the mine can be built and operated for the amounts specified and will return at least what has been claimed. Most importantly, they will want legal DD on the customer contracts. They will want certainty that those contracts are with solid counterparties etc (and with entities of substance which can be sued - not shelf cos etc)and that they can't be terminated easily. The last thing a financier wants is a contract which can be terminated for a few days of non-supply etc. If I was doing it I'd be paying close attention to the force majeur clause - ie if there's a strike for 10 days can the contracts be validly terminated et? That sort of stuff would worry credit. They will also look closely at all the modelling provided by the company - and they'll test the assumptions re returns and margins. Sometimes banks also ask for step-in rights with key customers - ie the right to fix a default if the borrower hasn't done so (ie to stop the supply contract terminating).

That's why the process takes a while. There's a huge amount to do. Bear in mind too that credit guys are generally hard ar$es. They're not the charming relationship guys who get the business in. They don't care about relationships. If the economics don't stack up, or if they don't like any of the risks they don't proceed.

I suspect the complications here would be the number of banks - syndicates are always hard because you always move at the pace of the slowest member. Also, you often get banks trying to out-macho each other ie one guy wants to go hard on a particular clause and some of the others then decide they need to take a similar approach. I don't know any of the RES banks well so I can't comment but there's a real art and skill to managing the process.

If the facililties are split between senior and mezz (which they will be) that too adds to the delay.Finally, bear in mind that there will likely be a few dozen documents to prepare, review and negotiate - the funding stuff, the various securities, the DD reports and all the ancilliary crap.

So that's why my guess is March.

I know nothing that's non-public (despite lots of calls to RES) so not sure re point 3 but I can't see it falling over. The upside of a big syndicate is that if one goes a bit soft generally one of the others will pick up the piece.

I have no clue why they promised Nov. I am stunned about that.

But I am still very bullish on the project and the stock. Very frustrated watching us miss the bounce in coal, but we'll catch up. I also see the tide turning in long-term pricing which is great, and ditto supply (as some of the more marginal projects fall over or don't proceed). I am trying to follow Oblong's advice and not check the price so often. My $5 call stands. If will take a few years but I am confident it will.

Hope that clarifies things a bit.