trading at a discount to cash?, page-8

Hi banksy808,

IMO it would be a poor plan to use cash on hand to drill Badondo, and I don't see management allocating funds that way.

Management will be looking at this in the context of current IO markets. Depressed IO prices may last for 12-24 months before demand increases enough to balance the supply/demand scales. It's a case of survival without diluting at these low prices for the moment IMO.

I don't believe that spending large amounts of cash on drilling a stranded target would increase the share price enough to justify then having to raise cash via a CR at low share prices because you then need more money.

SDL's EV has been completely shredded over the past 6 months, and it's had to raise funds at continually lower prices.

If SDL needs to raise more funds again in the future without having secured finance, they may only be able to raise at a price of a few cents. Shareholder value is being decimated by dilution.

I don't agree at all with westcott's comment that Badondo is far more likely to receive JV/Funding interest than Mayoko. I'm not sure what he is basing that assumption on either. SDL's Mbalam/Nabeba would have a similar IO mix to Badondo, and that project hasn't been able to find funding for 6-7 years.

Mayoko has a far lower CAPEX intensity than what Badondo (and Mbalam/Nabeba) would require. The rail and port is already in place. Also, IMO, EQX would have a far easier time of placing 1-2mt of 65%Fe product in Europe than trying to find buyers there for 15-30mt of product. The demand simply isn't there for those types of amounts. This means Mayoko could be looking at costs of $45-$50p/t including delivery.

The plan would then be to use the cash flows from Mayoko to drill and help develop Badondo, rather than having to continually raise funds every 9-12 months and dilute the crap out of the company (i.e SDL)

Good luck!