General discussion, page-4774

You make some good points Woody.

Objectively ........ Yes ......... FFX had 300 million shares on issue 2 years ago, and owned 100% of the 3rd largest and 3rd highest grade Lithium deposit in the world - that is true.

And some would agree that they gave it away.

The managerial problem at that point is this - how to build shareholder wealth from the base they originally had.

I suppose you are right, if we look at what was done in a purely statistical and objective light. They quadrupled the number of shares on issue, and they sold 50% (half) of the project to a Chinese corporate.

The question then is - what could they have done differently to build (better) shareholder wealth?

Two things I would have done, that they never. I'd have tried to keep the number of shares on issue at it's smallest total, perhaps to 350 million at most. Secondly, I may have gone to non-Chinese debt funding rather than a Chinese conglomerate. The problem is that debt funding requires repayment though, even in the development phase. It's a difficult problem. I will agree with you on one point, and that is, they released far too many shares, and the extreme dilution was NOT necessary, and could have been better contained.

Looking back is always problematic, but in the current Lithium environment, I would agree that FFX and Leo would have had 50 global financiers wanting to throw cash at it, without any involvement from Ganfeng at all, so they could have effectively kept 100% of the project if they wanted, if they were patient and market savvy.

I do get it though. It does look like the directors actually panicked a little, and didn't have a good understanding of the global market at the time, so they went with a Much Under-Valued (MUV) Ganfeng proposal, and sold out half the project for peanuts. Today, it's probably quite reasonably recognized that they would have got double what Ganfeng offered for half the project, so I suppose they blew it.

And so, as usual, the Chinese have done extremely well out of this agreement. They effectively got 50% of the world's 3rd largest Lithium mine for almost nothing (in real terms, when things wash out in 3 to 5 years).

But then again, Western directors and Western mentalities rarely look at any deal in long terms, whereas the Chinese, and perhaps some Africans, live via a different state of mind.

It's sad that Ganfeng had to get involved, and that FFX management had to sell 50% of the project, because there were other options to build greater shareholder wealth. It does make you wonder at times, whether directors are more concerned with shareholder wealth, or their own wealth. I suppose we should give them the benefit of the doubt, so ..... it's all the best wishes to them, and to the shareholders.

Gw