Ann: AGM Presentation, page-19

Hi Antitroll

There are many ways to finance things like this, and each type of finance will have its own risk and reward settings. Despite the obvious gap between the company's market cap today and the finance ask, you need to first understand that the two are not linked.

A company's market cap is simply shareholders' calculations of potential future cash flows available to them (i.e. after payment of opex and other non equity financiers), discounted back to today's date. The market cap does not in any way reflect the value of equity available to be put into completing the Project (being the actual construction of SCONI). Think of the Project cost as standalone.

So as at today, AUZ needs to raise $1.4bn to build the plant. AUZ could raise this money in a number of ways, the cheapest being through grants and very low interest bearing loans available from the likes of NAIF or Federal agencies. Then you have senior secured debt (a little bit more expensive), junior or mezzanine debt (more expensive again), or things like warrants and convertible notes, etc. which are initially debt like and generally more expensive again. All of these products are considered 'debt', in that whilst they may have controls such as security over AUZ which may be enforced if certain conditions are not met, provided conditions do continue to be met they are unable to exercise any control over the company (other than what has been agreed to within the loan agreements).

FInancing may also be available via pre-payment agreements, where an off-taker agrees to pay a lump sum up-front to assist in the build for some future benefit, and these are normally treated as debt as well. This is because the 'liability' created is, under normal conditions, written down once the product is delivered. Only if things go wrong will pre-payment rights start converting to equity.

In most projects, the aim is to achieve the lowest cost of capital, hence you will try to maximise the amount of financing available through the above routes.

The most important financing tool however is equity. But this is also the most 'expensive', and so it should be, as it is the 'hurt' money which gets torched first if things start going wrong.

So the question for the Project then becomes - how much equity is required in order to get access to other, cheaper forms of financing. The answer is, it depends, and will ultimately be driven by the inherent risk in the cash flows. 100% off-take agreements can be very helpful (as debt financiers get comfort that the materials will be sold), but, as in AUZ's case, the off-take did not underwrite price (only volume) and therefore debt financiers were clearly only comfortable financing a small amount of the Project (or none at all) - certainly well below AUZ's desired 50:50 debt to equity split.

AUZ therefore needs (putting aside for the moment the need to find a new off-taker) to raise a lot of equity to fund this Project in its current form. Likely more than half, given the issues pointed out above. This being > $700m!! And here is where the share price is relevant - if AUZ were to raise that money today, it would be at the expense of 40 BILLION new shares.

This helps answer your question regarding control. In essence, in this assessment, AUZ as a company retains control as it remains as the sole owner of the Project's assets (note the debt financiers don't OWN the assets, and will only have rights to do so if conditions start breaching). So technically the statement about maintaining control of the Project (at the AUZ level) could be true.

But think of the shareholder register. You will be diluted 10:1. Uh oh.

All of a sudden, IF AUZ hits is projections and pays a dividend (approximately 8 years from now, allowing for 1 year to sort this mess out, a 2 year build and a 5 year debt pay-back), it will be spread across a lot of shares. If year 8 is an average year say, delivering $200m in EBITDA, then after tax there might be roughly $140m available to shareholders. 0.3c per share. Whoop de f'n do. You're not going to be seeing your shares worth more than about 2.0c... and that's in 8 years time! So today's price of 1.7c appears to not apply a lot of discount for the (IMO now high) chance of further further delays, further dilution via CRs to fund the delays, and worst case not getting off the ground at all!

And if share price decreases further, the issues self-perpetuates... It really can get very messy.

Please be aware:
- This analysis ignores a lot of things that could happen in between, some positive (metal prices rising, improved sentiment, better off-take conditions, management resigns, etc.) and some negative (metal prices decline, relative political risk, etc.) and influence share price between now and the time (if it ever happens) of raising finance, which would impact on the level of dilution;
- Not financial advice / all IMO