Thoughts on shorts, page-170

I tend to agree with you 1trader.

Say FAR need another $US50 M in the bank, on top of the $40 M they already have. This would add another 500 M shares to around 6 B shares on issue. Not a big deal if Samo hits oil, and would put FAR in a strong position if WPL and COP start to play games. Whilst I dont like the shorter getting a benefit from playing with my and your investment, calculations show it wont have a big effect in the future, and reduces risk for FAR.

I like the idea of FAR borrowing as put forward by Szaba, which would put the repayments well into the future with FAR issuing shares on a m0nth by month basis to make loan repayments, but the borrowing would likely be for a larger amount to also fund the SNE development. With the 38% IRR of SNE as declared by COP (@ $US70 pb oil) these repayments would be well covered. Whitenoise a few years back posted a message which indicated that a lender would still like to set the initial loan terms with the share price as low as possible, no different than a big player if FAR was going to raise on market.

Anyway I put forward some calculations to indicate the small dilution effect, of a $US50 M capital raise on market, so it is not something to get too excited about.


Value of a successful drill into the Gambia
CNE quote for SNE (at FID 2Q 2019), and a NPV of $US10 per barrel ($Aus 13.33) (a discounted $Aus11.99 in one years time) at $US70 oil (Oil is closer to $US80 per barrel now).
The value of the 40% stake in Samo The Gambia, assuming $US10 per barrel at FID in 4 years time (equates to $US6.83)
(0.4 x 825M) x $US6.83  = $US2.253B
$US2.253B / 0.75 = $Aus3.004B
So a successful drill in Gambia would add $Aus3,004M/5.462B = 54.9 cents per share ($Aus3,004M/6B = 50 cents per share), which when added to the 19 cents per share for SNE equates to 73.9 cents per share (or 69 cents per share for 6 B shares on issue). So the difference is 5 cents per share. With the discount being applied by the market it is less than 5 cents per share.