blackrock funding, page-53

Another major step forward.

Personally I believe the main feature is that the arrangement is Non-Dilutive.

Everyone gets to retain their percentage of the pie. Astute people would see the Importance of that. How many growth companies do you see where you buy-in only to see your holding diluted to insignificance. It has happened at AVB in the past. The 20c IPO is now 9c, despite massive corporate success since.

As of 15th September 2010 BlackRock did not appear to be on the register. I conclude from that they bought in after the major SP rise from 2c, likely paying 12c (+- 2c). So they are sitting on an investment LOSS. They are hardly likely to want to again buy or swap their cash for more AVB paper, on principle. So right fom the start AVB and BlackRock have that in common. No more shares issued thanks.

So the parties sit down and discover what each other want. AVB needs $12m now to start real mining and bring in cash. They need working capital, and ideally permission to use of some of that money to Explore further. Also on the near horizon is PB with its need for major plant capital. AVB may fund some from AN, but certainly not the lot.

BlackRock is probably showing a significant loss on AVB since buy-in at say 12c three years ago. Naturally not all its investments are good, so the winners have to also (apart from commercial rates of return) have a component to offset the duds. Financially, I suggest Blackrock is well behind the eight-ball with AVB and needs to reverse that.

The deal proposed by AVB involving smelter royalties has the potential to be an absolutely brilliant earner for Blackrock. Anyone can do a rough calculation to show that. However, it is all predicated on mine construction and profitability as per projections. In fact BlackRock has entered an area of higher risk as its $12m does not require a cash repayment as such. It is not on AVB's books as debt, which naturally is a plus for AVB. It is tightly linked to successful and profitable mine construction and operation. (Hence the stated need for due diligence by BlackRock.)

I expected and predicted additional drilling would be a requirement, so that part is no surprise to me. The full Mining Licence should be in the mail soon.

It was initially puzzling that PB and future mines should be the subject of NSR to BlackRock. After all they are only financing AN to the tune of $12m.

However, the Pedra Branca NSR only ever comes to BlackRock if PB is financed and is up and running. So BR has a huge INCENTIVE to see PB operating, and therefore to finance it, and unlock its rich dividend stream for itself. If PB requires $100m say and presuming a very robust DFS, then the key for BR to unlock the stream of NSR is to facilitate mine construction through financing. That may well be simply a loan of funds at commercial rates.... again, no dilution. No placement.

Also 2%NSR... so you give Blackrock $1 from every $50 you make on copper, plus some NSR on gold/silver. In return you enable AN without dilution and open the way for easy and straightforward financing of future major Carajas copper mines.

So AVB looks after BR by offering them a brilliant return on both their past share investment and their further $12m cash investment. In return BR looks after AVB in terms of funding its future projects as well. That allows AVB to concentrate on what it does best, to the benefit of ALL.

Independent consultants engaged by AVB have run the rule over it and see the key terms as making economic sense. No hidden nasties. This is significant, and shows a thorough and cautious approach by AVB.

As I said in my last post, I will be happy to see all finance wrapped up by year's end. That would be a magnificient achievment. Lots still happening at AN I am sure... all that can be done/planned without major spend anyway.

This Proposal if consummated (and the resultant profitable mine built) will clear the way for smooth Pedra Branca funding, again through BlackRock. No dilution.

Avanco wins big time. BlackRock wins big time. That is what it is all about surely? PP