Top shelf dog stock, page-38

Morning Guys,

Well done to SJ for securing cash for BDR. Sprott have been aware of BDR for some time via the relationship between one of the Director's and Sprott's head geo. Sprott are also not stupid.

There is not enough information provided, however, to know whether this is good or bad for BDR. A "low" number of options issued at 30% above prevailing price suggests an unknown amount of potential dilution at c. 16-17c.

Sprott are usually successful at securing 1:1 or 1/2:1 options on their lending packages.

Work out the above ratio of 1:1 or 1/2:1 on US$60m relative to BDR's MC and you'll work out that there is potentially a lot of dilution involved here, even if the strike price is 30% above the prevailing SP.

In addition, whilst the interest rate looks reasonable, there are likely to be many hidden fees.

Additionally, don't think for one second that Sprott is investing alongside shareholders here with the same risk level. They are providing US$60m and will have first call on the Tucano asset if SJ and the team cannot execute their turnaround plan.

Sprott are getting:

- interest
- fees
- unknown % of company via options at an attractive price if things go well

They are also protected on the downside as

- They are the senior secured creditor
- They have invested US$60m and believe (rightly) that they can sell the asset for more if BDR go bust

Thus, for Sprott (and Sprott's investors) it is a very skewed risk-reward proposition.

It MAY turn out to be very good for BDR ordinary shareholders too ... that remains to be seen and lies in the, to-date, questionable operational performance of the management team.

Cheers
John