The issuing of shares to lots of entities is all a bit suss to me really. Especially when there are such generic statements made about why the shares are issued, that are then never clarified. But somehow CLZ is still in millions of dollars of debt, and has a CEO sitting on a $500k remuneration.
Let's take a look at Gold Processing Equipment Pty Ltd, just from what we can easily find publicly.
Gold Processing Equipment Pty Ltd - registered on
16/06/2020 with ASIC. We don't see specific mentions of this entity until the end of September 2020.
15/07/2020 - CLZ announces a SPP, with a whole bunch of activities relating to drilling and whatnot (nothing mentioned about purchasing a Gekko).
20/07/2020 - CLZ announces to market they've purchased a Gekko Plant. No mention of Gold Processing Equipment Pty Ltd in this announcement.
23/07/2020 - Results of meeting where billions of previously issued shares are ratified.
17/09/2020 - Annual Report makes mention that the Gekko will cost approximately $3.9 million (lucky they just did a SPP and raised exactly that). It's worth noting that the Annual Report makes no mention of Gold Processing Pty Ltd, or any debts or payments made. This is likely due to the fact the report only goes to
30 June 2020, and this deal was made in early July. Lucky them I guess.
29/09/2020 - First real mention of Gold Processing Equipment Pty Ltd. This is an interesting announcement indeed. Let's take a look:
"Classic Minerals Limited refers to the announcement of 20 July 2020 and confirms that it has entered into a contract with Gold Processing Equipment Pty Ltd for the supply of Gekko Python components for the processing of ore at Kat Gap including but not limited to jigs, spinners, crushers, hoppers, conveyors, screens and associated equipment for the proposed gravity processing circuit."
Confirmation that this brand new entity is going to sell millions of dollars of equipment to CLZ. Never mind the fact that Gekko has authorised sellers and parts dealers in Australia (in Perth). Why do business due diligence or deal with an established Gekko partner when you can just throw a cool few million at an entity that has existed for less than 3 months. I digress:"The delivery of the remainder of the plant, as detailed above is expected by the first week of November 2020, when payment of the remainder will be required. The consideration for this contract is for $3,990,800 including GST. The company intends to fund this through the SPP funds raised during August 2020 and further capital raisings as required.
The Company confirms that for the elements already delivered payment of $1.3 Million, from the funds raised from the Security Purchase Plan, has been made leaving a balance of $2.6 million. It is a condition of the contract that any of the components that are required to complete the order will be delivered only when the Company has sufficient funds."
Two very interesting statements that are made within the rest of this seemingly innocuous announcement. They've stated that they're going to use the SPP funds (that were supposed to be for something else), where they raised $3,992,938.00, to purchase this equipment for $3,990,800.00. I'll assume this is pure coincidence and there's nothing suss there. They then delivered payment of $1,300,000 to Gold Processing Equipment Pty Ltd and apparently don't have to pay anything more until the company has sufficient funds. What a nice business entity Gold Processing Equipment Pty Ltd is! They're giving CLZ free stuff, pay it when you can afford it!
Uh oh, this is where future announcements get dicey.
For the rest of 2020 we get a whole bunch of 2A announcements where billions of shares are issued to raise "working capital" and to "retire debt".
29/01/2021 - The December 2020 quarterly. Now all of a sudden Gold Processing Equipment Pty Ltd has provided a loan of $300,000.00 secured against the company's PPSR! Huh!? I thought this entity sold processing equipment. Apparently they provide loans too. I thought there was no more to pay until CLZ had money? This is brilliant; let's see the statement in the announcement:
"Gold Processing Equipment Pty Ltd provided loan facility with maturity date on 20 April 2021 with total principal outstanding of $300,000. This facility is secured against the Company’s assets under PPSR (Personal Property Securities Register) and has interest rate of 3% per month."How fascinating. In September apparently Gold Processing Equipment Pty Ltd didn't require any repayments on the Gekko, why have they now provided a
secured loan of $300,000 with a 3% per month interest rate with such a small maturation period? What's the loan secured against?
Let's move to
03/02/2021 and have a look at the 2A announcement, that includes a list of the top shareholders. Wait a minute, how in the hell does Gold Processing Equipment Pty Ltd have 54,175,000 shares in CLZ?! They must have had those issued in all of the previous 2As, where debts "were retired". How did this company end up with 54 million shares, and a 3% secured loan facility against CLZ assets? Is the Gekko paid off or not, is this money going towards paying it off? We're not sure. Why would you "retire debt" in the form of share issuances if you were going to
re-borrow that money through a loan from that company @ 3% monthly interest?
02/03/2021 - Half Yearly report. Oh yay, the loan that was due to be paid to Gold Processing Equipment Pty Ltd has been extended, aren't they nice? This extension game will be played many times to come.
26/03/2021 - This is an interesting meeting notice to read. Gold Processing Equipment is listed multiple times as having shares issued to them ratified. Spoiler alert: all shares at every meeting always get ratified. Let's have a look at what they've been issued and why:
30/12/2021 - 16,700,000 shares @ 0.001 for $16,700. The note says this was a creditor payment for work done at Kat Gap (we'll get to this later).
30/12/2021 - 200,000,000 shares @ 0.001 for $200,000. Same note as the previous line item, hmm.
18/01/2021 - 300,000,000 shares @ 0.001 for $300,000. More Kat Gap work apparently.
19/02/2021 - 416,700,000 shares @ 0.001 for $416,700. Wow, even
more work at Kat Gap.
What a doozy of an announcement for Gold Processing Equipment Pty Ltd (and others, but I can't be bothered going through them all). Over a period of 3 months they've:
Secured a 300k loan against CLZ assets
and been issued $933,400 worth of shares for apparent works at Kat Gap. What are they doing at Kat Gap? None of this pays down the Gekko "debt" or is paid against the loan (that we know of, because it is never stated clearly). We know this (now in December 2021) because the loan is
still outstanding. See: Annual Report 2021.
Let's move now to
07/05/2021 for the next meeting notice. There's a bunch of 2As issued since the last one, so there's no surprise that the meeting is only to ratify the issue of billions of more shares. Again we'll just focus on Gold Processing Equipment Pty Ltd and their shares:
28/04/2021 - 400,000,000 shares @ 0.001 for $400,000. There's an interesting note here, apparently now we have to pay for plant and equipment (could only be the Gekko, right?). The statement of this line in full is:
"Creditor Payment. The Company did not raise any funds from this issue of shares as they were issued to satisfy a payment to a creditor, for supply of plant and equipment for Kat Gap gold project."
28/04/2021 - 16,700,000 shares @ 0.001 for $16,700. This is a different line item, but it has the same note as the previous one. Plant and equipment.
Fast forwarding to
05/07/2021. Here's another meeting, this time Gold Processing Equipment Pty Ltd only gets one ratification:
17/06/2021 - 16,700,00 shares @ 0.001 for $16,700.Apparently more Plant and Equipment at Kat Gap. This $16,700 payment is relatively regular now, how interesting. Is this just paying accrued interest on the loan? It can't be surely, apparently it's Plant and Equipment!
And the last meeting I'll look at is
06/10/2021 where Gold Processing Equipment Pty Ltd is again having additional shares ratified:
22/09/2021 - 1,116,700,000 (yep 1.16 billion) shares @ 0.001 for $1,116,700. Uhh, more plant and equipment for Kat Gap mentioned as a creditor payment. How much more does Kat Gap need? Where's the Gekko? Does this pay off the Gekko? I'll assume this is for the Gekko.
So let's summarise:
- $300,000 secured loan against CLZ assets from Gold Processing Equipment Pty Ltd, which as at 01/12/2021 is not paid.
- Most of the share payments were either for "work done at Kat Gap" or "creditor payments for plant and equipment for Kat Gap".
- But, weren't Gold Processing Equipment just providing the Gekko for $3,990,800.00? What other work are they doing? Maybe it's just bad wording by management.
- $1,300,000 was already paid to them in respect to the Gekko.
- Their loan is accruing 3% interest per month.
- $2,483,500 in shares were issued to Gold Processing Equipment Pty Ltd over the period covered above.
- 504,176,923 is apparently the amount of shares that Gold Processing Equipment Pty Ltd holds (as per the 2021 Annual Report). They must have been selling a bunch on the market, good on them.
- More shares may have been issued to them that I may have missed.
It's not fully clear in the annual report if the issue of all these shares has gone to fully pay for the rest of the Gekko. The report doesn't break down the Plant and Equipment + Other Assets to that level of detail. If we are optimistic, we could assume that the circa $3,700,000 paid to Gold Processing Pty Ltd has all gone towards the Gekko, with the $300,000 loan left to pay off (secured against the Gekko); I wouldn't bet any money on it though.
For an asset that apparently only needed to be repaid when CLZ had money, Gold Processing Equipment Pty Ltd surely has gotten their fill. Almost $4,000,000 paid to them but no clear indication if CLZ actually fully owns the asset or not.
Overall, it looks like a really strange commercial arrangement to me.
As Senseeightynine mentioned, CLZ has almost $6,000,000 of debt maturing by the end of December and not enough money or assets to cover that debt. If the Gekko is included as part of the plant and equipment accrued in the Annual Report and loans are secured against that - what happens if creditors force the sale of assets? There goes ~$4m of Gekko, which is kinda a big deal when that's apparently how the company is going to process any gold they dig up. If that occurs, the next announcement we see will be a wind up notice.
DYOR, etc. etc.
(20min delay)