Ann: NWE: Target's Statement, page-18

Quite a few NWE shareholders posting on this thread. Not sure what they perceive as the end game in this takeover battle. Min Res already owns 80% of the Lockyer Deep discovery with NWE owning the remaining 20%. Min Res owns 20% of NWE, so in effect controls 84% of the project already. They want the bit they don't own, hence the takeover bid. That's all straight forward.

Comparing the two companies, NWE has never made a profit from what I can ascertain. Over the last 10 years they have accumulated losses of 25.6 million dollars (source Morningstar), roughly on average losing 2.5 million dollars of shareholder money annually. Last year they raised $25 million in capital and have $22 million in cash at June 30 2022. In the same time frame Min Res has accumulated profits of 3984 million dollars (source Morningstar), roughly on average 400 million a year with profit growth accelerating significantly in recent years. In May last year Min Res accessed some additional funding at borrowing rates of 8.0% and 8.5%. Interest rates have gone up since then. Chris Ellison has estimated the cost of developing the Lockyer Deep discovery at a billion dollars, of which under the current ownership NWE would need to provide $200 million. That's assuming everything goes perfectly, future drilling confirms a very large discovery, all permissions can be obtained relatively quickly and construction is straightforward and remains on budget. Let's assume for the sake of the argument I am making that all of that happens. Where is NWE going to get $200 million from? Who would lend NWE, with their track record, that sort of money? What interest rate would they be charged if they could raise the money? North of 12% I would say. The interest bill would be at least around $25 million per year, wiping out all of the current cash that NWE holds in less than a year. Highly unlikely that NWE could maintain it's 20% ownership in my view.

Perhaps they could sell half of their current ownership for cash and fund their part of the development with that cash. They would then end up with 10% ownership of a project that should make money. That's a best case scenario for NWE. The obvious question is who would have at least 100 million cash to buy NWE's 10% and also have $100+ million to fund their own share of the development costs? Whomever that person or company is they would need to be comfortable with Chris Ellison and Min Res being the majority dominant partner. Obviously Min Res could also be a buyer which would take their project ownership to 92%, so from the Min Res perspective, why not own the lot?
Min Res will not have difficulty funding it's share of the development costs. Chris Ellison also wants to act quickly and remove as many potential hold up's as possible. If the takeover fails NWE's share price will drop and delays are much more likely as funding challenges and reaching agreement issues are sure to arise. When you tease out these possibilities, it is not surprising that Chris Ellison says the transaction is a "no brainer" for NWE shareholders, even though a number of the posters on this thread do not see it that way. The cleanest way forward (in my opinion) is for Min Res to win the battle and for NWE shareholders to become shareholders of a succesful and highly profitable company which will include all of the Lockyer Deep discovery, the only issue being what is a fair price to pay? I'll leave others to speculate about that.