Ann: Cortadera Acquisition Nears Completion, page-95

Lively debate here, but not too much chat about fundamentals and funding from a quick scan. Came to this thread after seeing the VAT refund announcement a few days ago. My main observation (and the main risk I see) at the minute is that these guys are going to need every last$ they can lay their hands on. And then some.

Are we somehow all choosing to completely ignore that US$15M payment due to the underlying owner ofCortadera in July next year. That's A$19.4M.

The barrel will be near empty come July 2022 with current cash(~A$10M)

+ ENAMI income stream (AS1.5 - 2million)

+ VAT lump sum refund (A$1.8 - 2million)

- corporate expenses (A$3M/yr using the Dec Q runrate)

- drilling and assaying for the 40km drillprogramme

- consultant expenditures to cover and resourceestimate and engineering studies.
= ?

That funding gap will need to be funded either by HCH investors, or newstrategic/financial/royalty investors directly into the project(s).

And for a clue as to which of those two it will be, remember they already ran a failed strategic partner search (https://www.hotchili.net.au/wp-content/uploads/2020/05/HCH9Drilling-Underway-at-Cortadera11042019-1.pdf ) stretching over most of 2019 and into 2020. Does not bode well for finding a JV partner in time for the final SCM Carola payment. Although with the royalties space on fire, there’s a chance there for a punitive deal like the one SolGold did.

And - if any serious operator is interested in the deposit - why would they put money into HCH over the next 18 months when they couldwait and possibly be able to buy 100% of Cortadera directly from SCM Carola inAugust 2022 for US15M + a token premium after HCH misses the final optionpayment.

How this company is valued at >A$100 million with the resource it has andthe funding overhang is a bit of a mystery. Something major needs to changewith the demonstrated mineralisation for that number to make sense. Can onlyassume holders' and buyers' hopes and expectations are that it will.

The combination of depth andgrade delivered, so far, is not pointing towards the sort ofeconomically viable deposit (using asensible long-termmetal price assumptions) that will get the majors and midcap producersoutbidding each other to take control of Costa Fuego.

And here's a little Thursday quiz.How much have these guys raised (and spent), so far, to get us to thisimpending funding precipice?

Just hitting the big ones, I have(in A$ million):
Oct 2012: 35.5 raised
Jul 2013: 11.7 raised
Jun 2017: 11.3 raised
Feb 2019: 3.2 raised
Sep 2019: 12.5 raised
May 2020: 8.9 raised
Dec 2020: 25.6 raised

Fill in any gaps pls.

The sum of the above is just shythe current market cap. Not exactly an ROI commensuratewith having brought in and advanced the supposedly best copper porphyrydiscovery since Alpala.

And let's not even talk about theopportunity cost of having had this team as custodians of that capital over thelast decade.

If they find a way to make itpast July 2022, the clear winner here will be SCM Carola and the Gomez familywho, after all is said and done, will be sitting pretty on A$41 million (US$32m) of our cash.

And let's not forget that MB'sdrill company will have made a bit of margin as well over the years. And thebrokers who clipped coupons on that 100M they've raised. And CEwho's collected A$280k in salary + super over a 12 year period, plus shares andoptions along the way.

Sorry for the trip down memorylane. But every now and again, a quick look in the rear-view mirror is useful whentrying to figure out what lies ahead.

In short, Cortadera has all themakings of, best-case, being another “option” on higher LT copper, for the HCH portfolio,just like Productora is. Regardless of any synergies from joint development, bothwill need financiers who see a sustained price in the $4-5/lb range beforethey’re in-the-money and get put into production. And there aren't (m)any of those out there. Yet at least.

And A$120M is just too much topay for a (way!) OOTM money call option.

I’ve set a price alert at 2.5cents and might check back in if it hits.