Ann: Sconi Project in Due Diligence Phase for NAIF funding, page-186

There has been much discussed in regards the recent announcement from NAIF as well as the delays in making public to shareholders of the ' being looked at ' BFS. Now there is the side of these arguments which suggest that we should accept these delays as par for the course in so far as the confidentiality surrounding what will obviously be a consortium of lenders. In other words a ' lead ' or principal lender and potentially a whole lot of subordinated lenders below that. In so far as the Governments interest in backing this project through NAIF . There would clearly have to be the necessary re-assurances that the financials in whichever way they are stated do in fact come up to scratch with normal expectations in the relationship of the many assets to liability ratio's that exist for purposes of satisfying solvency and going concern analysis. Through the many discussion which will surely arise. One of ' security comes to my mind. Having dealt with lenders at this level, I can tell you that while it all seems quite simple - In the more practicable application , it can become quite a debated and contentious issue among parties and all with their differing views.

So one thing I do not feel most of the holders have taken into account or perhaps overlooked is the effect of MLM's potential caveat over the Sconi tenement property.

As per the Sale Agreement of 6th September 2017 :-

• ' Metallica will obtain a caveat and mortgage over the SCONI tenements to protect its rights under the Agreement '

A quick refresher would have a caveat as a type of statutory injunction preventing the registration of particular dealings with real property. ... The word caveat means 'beware' and by lodging a caveat on real property warns anyone dealing with the property that someone has a priority interest in that property.

“Caveat” is a Latin word which means “let him or her beware.” Once a caveat has been registered against the title, anyone searching the title can see that someone else claims an interest in the land. No dealings can be registered against the title unless the caveator ( MLM ) consents to their registration. Depending on what happens now with the possible MLM board shake-up If you aren't aware you need to go over and have a look at their recent announcement of 15th October regarding ' Receipt of Section 249D Notice.

Suffice to say at this point , I wouldn't think they would be so quick to cooperate - do you ?

Another important fact is that when lending money, the banks typically want to register their mortgage interest against a property as well. This allows them to sell the property to recover their loan amount if the borrower cannot meet the repayment obligations. If there is a caveat on the property title, the bank or lenders will not be able to register their own mortgage interests on the property title. Similarly and IMO, the NAIF will also have its own concerns in regards this issue.

So in summary a caveat is a useful tool to protect a party’s interest in land. You should take caution, however, to ensure that a caveatable interest exists or else the owner of the property may seek damages or compensation if the caveat prevents them from selling their property - which i wouldn't think is not really an issue in this arrangement.

Now on the surface the caveat issue seems mute at best , however I would argue it has much more importance when reflecting into the financial's vis-a-vis the current Balance Sheet. For instance if we begin to examine the ' Non Current ' Assets , we derive a value of $18,551,000 under the classification of ' Exploration and Evaluation Assets.' as at 30th June. Of course we know that most of the increase from previous year relates directly to acquisition of the Sconi Project from MLM. So it stand to reason then , that in the event of some sort of ' Impairment ' to the business in meeting in ongoing repayments - the core assets of the business presently only stands at 18.5 million. So lets say it were to not make it to production due to the overwhelming debt burden. There would in principle be be insufficient security by way of the final payment being owed to MLM of 5 million. And History has already shown that lenders are not so much interested in Plant Processing Facilities, particularly when they have perhaps historically made losses.

As a result of this reasoning, I would argue that the Asset - be it Sconi , Flemington or others will have to be undertake a significant or a least some sort of re-valuation.. This would also go a long way to explaining what appears to be the frantic scramble to prove up more JORC resource across these assets - because you can't have the re-value in a sense with out the academic foundation to support it. So if a re-value were to occur , this would give rise to tax implications, and potential other liabilities going forward. In effect the Financial Statements of the company would need to be re-stated to reflect first the change in agreed value and second to satisfy the perhaps many different financial parties connected to the ultimate lending side. Needless to say there would be a tonne of extra accounting and auditing and tax work to be completed in regards this process , and hence the delays and perceived confidentiality surrounding the release of the BFS.

I have some additional information which may also lend support to the explanation in regards ongoing delays , however I would prefer to put them forward after I have had a good look at the all important upcoming Quarterlies......