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kkw

7,325 Posts.

723

05/08/16

10:57

Post #: 18451691
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Originally posted by Kit67 ↑

Wabbs. If you are right, then they would need to pump the share price before doing a cap raising (I presume you are aluding to this by saying "after RGN1 is fixed").

The way I see it, several things are probabilities;

1. In the next few weeks - and well before the end of month, as MIN would not want any internal fallout to occur from a falling EGO share price - MIN and EGO will confirm the finalisation of the refinancing deal. Terms will be unchanged (from what we saw confirmed recently). This will be positive for the SP (which will languish between 38 and 45 cents, probably maintaining its weekly VWAP of around 41.0/41.5 cents).

2. After 31/Aug MIN will announce that they are appointing a non-executive Director to the Board. EGO will "welcome this move" (publicly), but privately be quite concerned as the current set of snouts in the trough may need to actually work for a living. IMO this will see the SP better supported, and will signal the "MIN era" of EGO (as opposed to the "Marshall era" and "King Tony era"). MIN have backers with deep pockets, so I wouldn't be too worried about whether they can afford the loan and any additional purchases: they can.

3. In early October EGO will announce that a finishing rig is being moved into place at RGN1. They have already stated that they have made an allowance for costs in the Q3 estimates, so I do not see this as a catalyst for any form of capital raising. They will commence cementing, with reperforation in late October, and we should see results by early November (at a guess). Given all the noise from EGO, MIN and others, I am more than 50% confident that the reserve estimates and pressures will be good. I see this as the catalyst for Hartleys - and the market - to re-rate EGO.

4. The tie-back to the main line is not lengthy or expensive. EGO have already said as much. So I don't see this as a catalyst for a capital raising either. The problem is that once we get to a pipeline stage, it will be too late for MIN (too expensive) to take a bigger stake in EGO. Simply owning 20% of EGO does not guarantee supply for MIN, so MIN will need to move before that point, if at all. Maybe - just maybe - the RGN1 reserve estimates will be "so good" that the Red Gully plant simply cannot handle it (there has been mention before about the plant capacity - I think it was Hartleys who mentioned it) which will then mean that EGO/MIN need to build a second plant. THIS may be the catalyst for MIN funding the new plant with an Alcoa-style supply contract (to MIN) in return.

All guess work. But MIN either needs to take full ownership prior to October, or they will have to hope and pray that RGN1 requires an additional plant.

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Kit,

Re "Maybe - just maybe - the RGN1 reserve estimates will be "so good" that the Red Gully plant simply cannot handle it"

The plant has a maximum capacity of 10. Some time ago, we were at on stage processing 9.7.
I think they are a bit lower now, but not by that much. On that basis, how can the plant handle processing from another source?

So for RGN to be of benefit, we definite need an expansion and then there is 4km of pipe line.
Any one got any rough idea about the cost? MIN could do an Alcoa that's would be a way out.

KKW

EGO Price at posting: 40.5¢ Sentiment: Hold Disclosure: Held
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