Ann: New Funding Package, page-2

Not the most favourable of funding agreements by a long shot ... rounding all the figures I see...

The new loan $40M at 9% interest basically replaces the debt, but comes at a very significant cost on top of the interest with 100M options at 14,4c, will look at this below. The interest is $3.6M quarterly which will not be possible unless they expect to be significantly cash positive within 2 quarters.

$20M in new shares at 12c, of which $10M in working capital, leaves $10M cash for development. I approve of them offering the same deal to retail holders, although being overseas I can not participate and the rules for renounceable are a bit unfair I think no bookbuild so nothing there for me. Either way this is a fair discount I feel now, given the company has a lifeline to get cashflow positive.

The hidden cost of the loan is a further 100M share options at 14.4c valid for over 4 years! This seems to indicate the risk assessment of their due diligence. These options only valuable if management can in fact turn things around and make the mine work so we must assume that is the case and it goes back up at least to where it was midyear at 54c or 40c above the options price. This would price the options at $40M and if the turnaround happens it could be within a year so a 100% return for them without the interest. They are also unlikely to lose most of their money, I think they would be first in the line of major creditors should the company fail?

Interestingly if you compare this to the no options, 18% interest option (using basic annual compounding) increases the interest payment by $50M, so their risk assessment is that the options are worth this which would indicate a share price of at least 64c within 4 years.

This is not all doom and gloom, just trying to see how risky they see the financing. Compare with retail investors purchasing their options or buying in now at 14c, if it goes up 40c then that is over 300% return on investment although the risk is loose everything. The options on the other hand are risk free, they don't loose anything on the options, but can cash them in where they the best share price will be, following the price of gold.

Conclusion.
1. The financing indicates that someone who likely knows more about the operation than us has confidence that it is at least possible to turn the mine around.
2. It will take the 200Moz upgrade to get the money to pay them back.
3. The risk is still substantial, requiring the options or about $50M extra return on the $40M loan.
4. Using their risk assessment the return to balance this risk is about 100%
5. Their options vs interest comparison indicates a hoped for share price of 54c-64c.

This is all very very basic, simplified analysis, not a proper model, no future cash discount applied and lots of other significant omissions, so DYOR.

Big relief they have funding (well almost have it is not final I think I read). I need to absorb this for at the moment I have no sentiment, but I suspect that it was the funding issue that depressed the share price as much as the poor quarterly. On the other hand people scared by the suspension may just want out at any cost so the short term may plunge. If people are in favour of the 12c options this will put a bit of a base in for the price. If this occurred I would consider buying below 12c.