Really Independent Advisory(RIA) are pleased to present their review of the proposal made by Crown Hypothetical Corp (CHC)
1. Lynas Corp will receive $21M. They will also retain 35% of the Crown Deposit. This values the bid at a 55% premium to the current FRG bid.
2. The essential difference between the CHC bid and the Forge Resources(FRG) bid is that the ownership that would have been GIFTED to Mr Nicholas Curtis has been retained by Lynas Corporation. As a MINIMUM shareholders participating in this CR will retain ALL the benefits proposed by the FR bid.
3. It is expected that most CHC shareholders will be existing Lynas shareholders. Under the CHC scheme they will be significantly better off.
4. The CHC Phase 2 CR will be focus on existing Lynas Corporation shareholders. This will ensure the benefits from the development of the Crown Deposit will be retained for the benefit of Lynas shareholders as much as possible.
5. 35% of the Crown Deposit will be retained by Lynas Corporation. The 35% ownership will GUARANTEE that a friendly relationship is maintained between Lynas and CHC. The word of a director will not be required and the relationship will not diminish over time. This will also prevent the deposit being sold on without the consent of Lynas.
6. As 35% owners Lynas will retain an interest in the development. ALL research exploration, expert reports and evaluation on the Crown Deposit will be openly shared with CHC. CHC directors acknowledge that they are at a slight disadvantage to the FRG directors regarding their knowledge of these reports given that they were not paid by Lynas Corp to prepare them.
7. RIA have conducted a full review of the documentation made available to them by Lynas Corporation. They believe that a more accurate capital cost for the development of the deposit would be $400M. This is consistent with Lynas' strongly declared position in 2004. Acknowledging the announced $1B capital cost in the Lynas EM, RIA believe it is a load of rubbish. Yes capital costs could be $1B but they could also be $100M, both numbers are equally unlikely. CHC estimates are in line with the Lynas costings released in Oct 2004. Full details at http://www.miningnewspremium.net/StoryView.asp?StoryID=30170.
8. In line with FRG plans, the Excess throughput capacity at the Laverton concentrator will be provided to CHC on agreed commercial terms. CHC believe that this along with other savings provided by the use of Lynas infrastructure will provide an upfront capital cost saving of $100M. Therefore the real adjusted capital cost is closer to $300M after allowing for the $100M in costs savings.
9. RIA notes that the BDA report is based on information provided to them by Lynas. RIA is concerned that the information provided to CHC and DBA by Lynas management is incomplete, and therefore believes all those who subscribe to this offer will make an absolute killing.
10. The current $250B resource is based on the 37.7M tonne JORC resource. It is noted that Hellman & Schofield reported additional mineralisation of between 100-180M tonnes of similar grades to these resources. It is the belief of RIA that a closer approximation to the in-ground value is conservatively in excess of $1TRILLION.
11. It is proposed the Phase 2 CR will be conducted on the exact same terms as those proposed by FRG. Significant savings are expected due to the removal of related party costs.
Conclusion
On any level the purchase of 65% of the Crown Deposit for $21M is a fantastic deal. We recommend investors sell their grannies to buy shares in CHC. RIA's major concern is that Lynas management will wake up to themselves and decide to keep the deposit for future development.
Apply to this thread for shares or confidentially to: [email protected]
LYC Price at posting:
$2.40 Sentiment: Hold Disclosure: Held
(20min delay)