msc future, page-11

re: independent valuation MrsSmith,

I agree 100% with your post regarding MSC. If you look at some of my previous posts you will see that I have similar concerns regarding MSC's dire working capital situation.

The facts are that the company has gone into a project without sufficient working capital to get the project off the ground. In my profession I have seen this time and time again. At the end of the day in business it always comes down to working capital. Profit, potential, etc are all irrelevant.

People on here talk about the potential of Swan River, but everyone fails to realise that projects need funding and without funding everything goes out the window.

How is MSC going to possibly keep Skardon going and then build up Swan at the same time they have a serious working capital deficiency?

Management has not helped the situation by going off and investing precious funds into non-core assets such as Cominco, CCG & Diatreme.

The present situation of issuing shares like lollies cannot continue for much longer and there will come a point in time when they will be unable to raise more funds.

In my opinion they will get nowhere near full participation in the rights issue and raise around $5m. I calculated a cash burn rate of $1m per month, so I would say that coupled with the debenture redemption, the rights issue will buy them around 3months longer.

The best thing management could do is to immediately divest all non-core assets and leave MSC holding Skardon and Swan.

This whole thing is getting very close to the end game. I would say - barring some miricle, if Skardon does not start generating material cash flows within 6 months, it will be all over.

Considering that the market cap of the company is now $7m, MSC will be unable to raise any more equity in 6 months.

Ordinary shareholders will definitely receive nothing when the receivers/administrators move in. The company would probably receive $10m-$15m for Skardon, along with a further $10m for Swan and their other assets. The debenture holders will have first bite as they have a debenture over the company and the remaining financiers will not receive anything close to what they put in.

All this aside, if by magic Skardon actually did something, the value of MSC would increase significantly and they would be able to fund the ramp up of Swan.

I think however considering how long management have had to do something with this company this is a most unlikely scenario and the most likely result of all this will be the company going under within 6-12 months.

This is my opinion only, please do your own research.