Prospect finished the last quarter with A$ 2,973 Mio. cash and estimated regular cash outflows for the next quarter of A$ 2,650 Mio.
In addition to the estimated costs Prospect needs another A$ 1,187,210 to increase its ownership in the Arcadia Lithium Mine from 70% to 87%.
The conditional agreement to increase the ownership was made on October 3rd 2018. They could have closed the deal at that time when we had much more money. I kind of like the fact that Prospect is doing it now when we do not have any money left and also do not wait till the general meeting end of the year.
I think Prospect must have a strategy now and I really hope they got the funding somehow. There will be soon a capital rising for sure, it would have been a wonder if they could get the 163 Mio. as a kind of offtake prepayment and debt. However, now I really just want to see they start building our mine, even if it is a plan B with a smaller CAPEX and only the 1,2Mt/a for the beginning and work on from there in kind of moduls to slowly increase the tonnage as we would have some income. The twitter about the extension of the contractor camp area gives me a good feeling.
RESOLUTION 1 – ACQUISITION OF SHARES IN PROSPECT LITHIUM ZIMBABWE
RESOLUTION 2 – ISSUE OF CONSIDERATION SHARES TO FARVIC
In consideration for the transfer of shares in PLZ, the Company will issue 94,976,800 (2/3 of Farvic value at 2,5 Cent) fully paid ordinary shares to Farvic, representing a dilution to existing Prospect shareholders of 4.6%, and pay Farvic A$1,187,210 (1/3 of Farvic value at 2,5 Cent) in cash.
Currently, Prospect ‘free carries’ the other shareholders in PLZ to production, meaning that Prospect funds 100% of the project expenditure. The outcome of this transaction is that Prospect increases its share of future revenues and profits from the Arcadia Lithium Mine by 17% to 87% without an increase in expenditure (or risk).
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The above table indicates that the value of the consideration being paid by Prospect to Farvic is significantly less than the value of the asset being acquired.
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We note a technical valuation methodology generates a value per Prospect share which is significantly different from recent trading prices.
We believe this may be due to the following factors:
- Current bearish market sentiment in capital markets
- Poor market conditions in particular for junior resource companies
- Recent falls in the lithium price and lithium related companies
- Investor perceptions of country risk relating to Zimbabwe
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10.2.2 The share swap transaction incrementally simplifies the ownership structure of Arcadia, which may improve access to project financing for Arcadia.
10.2.5 If the Transaction is successful, the market capitalisation of Prospect is likely to increase, which should increase the relevance of Prospect to investment and financing markets.
RESOLUTION 3 – SHARE CONSOLIDATION
Purpose of the Consolidation:
The Company currently has a large number of Shares on issue (2,046,114,971Shares as at the date of this Explanatory Statement). The Consolidation will result in a more appropriate and effective capital structure for the Company and is intended to result in a Share price more appealing to a wider range of investors.
The share price would then be 17 Cent with only around 204,611,497 issued shares. Essentially, nothing would change for us, but might have an psychological effect on investors, as we would seem to be more worth. Another aspect is that some institutional investors and funds have some internal regulations that they are not allowed to invest in companies with a certain minimum share price, like penny stocks.
However, time will tell if this will help increasing the interest of investors and the share price.
RESOLUTION 4 – APPROVAL OF OPTION PLAN
5.1 Background
The Company has adopted an Option Plan. The Board considers that the Option Plan is an appropriate method to reward employees and directors for their performance, to provide long term incentives for participation in the Company’s future growth and motivate and generate loyalty from employees.
As long as they build our mine, they can reward certain great performance.
I am very happy to finaly see some movement and really hope we get the funding. Good luck to all.
This is my personal opinion only and it is not financial advice. Do your own research.
