its not what they would like us to beleive, page-19

johnmcgee,

I wouldn't be too confident about GBG's position in the event of KML not being able to met its liabilities.

In August 2010 KML signed a secured senior syndicated debt facility that imposes conditions on KML in the event of the company breaching covenants related to its debt to equity ratio, interest cover ratio and life of loan cover ratio.

IMO should the troubles with the mine continue beyond a "reasonable" timeframe, it might be the case that Ansteel and the Chinese debt providers assess that it is pointless providing GBG with further cash life-lines, as it could be that they reach the view that the company may never be able to repay such debts.

In this event one would reasonably expect, looking at other mining failures, that this would mean the mine is not solvent and this would possibly trigger circumstances by which the Chinese banks can call in receivers and managers over the secured assets of KML (the mine and Karara tenements) and/or the appointment of an administrator for KML.

Failing a deed of company arrangement to restructure KML being voted on and implemented by KML's creditors, KML would eventually go into liquidation. I couldn't imagine a non-Chinese white knight saving the day if this ever happened.

GBG is quick to point out that it has no corporate debt. IMO under this assumption and in the absence of deeds of cross guarantee between GBG and the KLM JV, GBG will probably survive (not go bankrupt), just without Karara. Imagine what the share price would be with almost 1.5 billion shares on issue and only its non-Karara tenements and a dribble of cash.

The Chinese banks through the receivers and managers would just then be the sole and 100% beneficial owner and operator of the Karara mine.

I'm not sure how the FIRB would deal with this situation if it ever happened. Maybe there would be some hope for shareholders here, but I very much doubt it.

I don't think the Chinese would ever try and "steal" the asset this way, but if the mine turns out to be a catastrophic failure, you may see a scenario like this unfold over time.

Regards
SilentO

P.S. This is not investment advice, it is my opinion only. Do not rely on any of it. Please do your own research or seek professional advice to suit your specific investment needs before making any investment decision.