WKT (ASX) Ann: Launch of Proposed Senior Secured US$40m Loan Note Issue

Originally posted by oznt: ↑

Crudely, how the company and investment banker looks at a project

*percentages and numbers for illustration purposes

Company says the Capex is $30M
Investment banker says you need a 20% cost over run budget. ($6M)

Company says the Working Capital budget is $8M
Investment bank says you need a 25% buffer in the budget ($2M)

Company says construction will be in 7 Months
Investment Bank says lets make allowances for 3 to 4 months just in case

Company forecasts first sales cash in the bank of product in 9 months
Investment Bank says make more conservative tolerances and makes allowances for 12 months.

Company allows X as a budget for potential cost overuns
Investment Bank says they want that X plus 20-50% more.

Company data and agreements state a basket price.
Investment Bank will discount this for a what if the price is not achieved for any number of reasons and they apply a discount.

It all has an impact on the Cash Flow Forecasts and this in turn affects the Total Debt Package.

The Capex wont have interest payments included, so WKT will have to borrow today, the interest payments plus the interest that will also accrue for a nominated period of time.

It all adds up, plus their will be associated Due Diligence costs and Investment Bank Fees.

Just for context, we had a DFS not a BFS. The DD we have undergone is in essence a fast tracked mini BFS, that is cheaper than a full blown BFS and faster timewise than a full blown BFS.

Company may not necessarily agree with all the risk averse assumptions and the Investment Bank may not agree with all the company data. Its all negotiated with trade offs and modeling and the Investment Bank has to be confident they have covered off everything in their Due Diligence.

The company and investment bank certainly will not want to be cash starved part way through the project if timelines or costs begin to fluctuate due to unforeseen circumstances, so they ensure enough buffers are put in place.

At the end of the day the Investment Bank will apply conservative assumptions because that's what they do to stress test projects for its robustness and financial viability to build the project and go into production.

That's why some projects will make it and some will not.

Debt Lenders will know full well how the Investment Bank works and its risk modeling and when Pareto circulate our project to their clients they know the DD has been done in accordance with their high standards and will see the Lindi Jumbo Graphite Project as a viable stress tested project that will be able to go into production with their modeling and be successful.

Imagine what a possible debt deal (if viable) will look like for other Graphite companies with much Higher Capex Costs, much Higher Working Capital requirements for not so robust projects and be able to carry the extra burden of much Higher Interest Payments etc.

Expand

As mentioned previously on this forum by many, that surplus money will come in very handy once we are in production for us to use to expand the plant and double the output. Hmmmm I wander what happens to the share price when the output doubles due to the demand from new Boas?

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(20min delay)
Last 11.0¢		Change 0.000(0.00%)		Mkt cap ! $73.83M

Open	High	Low	Value	Volume
11.0¢	11.5¢	11.0¢	$4.298K	38.64K

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