Ann: Lukoil Proposal Not Proceeding, page-44

Aggott,

I have too much time on my hands, so I have decided to reply to your post!

Firstly, I note from the recently issued financial statements that the substantial shareholders as at 25 March 2021 are as follows:

...................................................Number of shares held ......% of Issued Capital
Meridian Capital..........................1,913,146,327 .....................19.17
Allan Gray Australia Pty Ltd........1,227,603,986.....................12.30
Farjoy Pty Limited ..........................515,522,060.......................5.17

They represent about 36.64% of the issued capital. I suspect, unless there is disagreement between themselves, that what they want will be the outcome regardless of what small shareholders want. Furthermore, if further equity were required by FAR, they would be the major contributors to that equity unless another major shareholder could be found. For this reason, I suspect FAR's directors have already sounded out the major holders and are pursuing their wishes.

The reason why I am responding is that I wish to show how I would pursue the funding issue:

Firstly, the reply to your email refers to requiring US$500M loan funding and further equity. That may be correct but is not the figure I think they need. If they do need US$500M loan they would have no chance.

Using FAR's 21-02-20 Presentation, I calculate the funding required over the 3 years to June 2023 as follows:

Sangomar Phase 1............Budget...........Contingence............Total
...........................................US$M................US$M.................US$M

Sangomar Phase 1 ............ 510 ...................50...................... 560 (Slide 6 of Presentation)

The Gambia..........................25....................................................25 (50% of say US$50M)

Corpor & Staff.......................20....................................................20 ( US$5.0 per year x 3.5 Years)

Total......................................555..................... 50.......................605

Less Funding:

on Hand Jan 2020 ...............100 .................................................100

Loans arranged 2020............300...................................................300 (slide 9)

Shortfall..................................155.........................50......................205

Consequently, if FAR could rearrange the original US$300 loans, there would be a definite shortfall of US$155M plus a possible additional shortfall for contingences of US$50 (which may or may not evenuate)

While it would be desirable to obtain these shortfalls by obtaining additional loans, I believe that FAR should have persued these shortfalls via equity raising.

The way I would go about it is to first recognize that selling the project for US$45M plus adjustments is not very share price enhancing. Consequently, while equity raisings are dilutive to FAR share price, shareholders who contribute their respective pro-rata capital in proportion to their existing shareholding are really no better or worse off.

I would raise the expected shortfall of US$155 via 2 or 3 seperate equity rasings over the next 2 1/2 years:

1. Say an in the money raising of US$30M immediately accompanied with in the money options expiring 6 months later that would raise an addition US$30M;

2. Then a second in the money raising of US$30M immediately accompanied with in the money options expiring 6 months later that would raise an addition US$30M;

3. Then a third in the money raising of US$30M immediately accompanied with in the money options expiring 6 months later that would raise an addition US$30M;

If the contingency amount of US$50M was required, further equity funding would be required for this amount. However, there is no guarantee this amount will eventuate. At some stage during the oil price downturn, WPL was talking of trying to pick up savings (might get lucky);

Far could still persue additional loans to the US$300M if it so desired but I wouldn't guarantee them getting them as the main bank lenders were only willing to lend a maximum of US$300M.

By raising the shortfall over 3 separate equity raisings with 3 separate in the money options issues to those that subscribed you are spreading the burden of the raise more evenly over the period. Shareholders have a incentive to subscribed to the raisings because their shares, and hence their share price would be diluted if they don't subscribed, transferring value to those who provide the new equity;

Whether the major shareholders would be interested in such a funding strategy, I don't know. Effectively, Meridian would be expected to contribute 19.17% of the raising (or about 20% of US$155M) over the next 2 1/2 years to avoid dilution;

Anyway, I expect the directors have already talked to the major shareholders who presumably want out of Senegal for them not be pursuing this type of funding strategy. Relatively speaking, I am just an ant, and will just watch from sidelines. Just thought I would put these comments up, because I have some spare time and just hope this option has already been considered.

Regards

SP