this could end badly, page-64

Time for a bit of conspiracy theory.

Currently the agreement is that KML issues new shares to Ansteel. This may be normal in the case of a conversion of debt to equity. What it also means is there is not a sale of GBG's interest in KML but instead a dilution. This is being done at the price of previous equity injections, which on a 50/50 arrangement is okay because valuation of KML means nothing when you have a fixed interest.

The dilution means that a transfer of a material interest can be achieved without shareholder approval or more importantly a valuation.

However, now we have a transfer of value of the project using an arbitrary price which has no real reflection of underlying value of the project. This is considering that the project is close to completing the ramp up and achieving nameplate and horefully being cash flow positive.

It would appear odd that Ansteel was so accommodative to have the deal completed at a price without a valuation, because why would they want to over pay for an investment. At the very least you would have expected that management of GBG would want to cover their arse to ensure that the transfer of the interest in KML was done at close to an independent value. So I would expect that someone, somewhere would have completed a valuation of KML. However, nothing has been disclosed to the market regarding the value of KML in relation to the proposed dilution.

It appears odd that such a significant transaction (not just value but control of management, operations and future cashflows to investors) is being completed without providing a great deal of detail.

Considering that both Ansteel and GBG would have knowledge of the value of KML and there has been a transfer of value, could it be argued that the related party transaction was completed in this way to avoid the need for a valuation of KML and ultimately the disclosure of the true value.