Well the negative press has started again, along with negative posting as we expected it would and gave everyone the heads up it would be coming.
1. Write downs: I’m with Enoch, you don’t announce write downs when you’re going into admin, you just go into admin. It’s a tribute to the size of our asset portfolio that the company is not insolvent after a $2.8b writedown as the assets > liabilities by a ratio of at least 2 now, if not higher. Gearing is now 30%, not great sure but we knew all this in November. This was being reflected in the share price in November, when it fell from $1.60 to below $1.
2. Newcrest: NCM may not have pulled out on Martabe or not selected. Maybe they weren’t selected for the exclusivity period because of a lowball price and it’s just sour grapes, to me, by their announcement it sure sounds like it. OZL has announced it has entered exclusivity with 3 buyers for 3 individual and corresponding assets. NCM is not one, obviously there had to be losers in that process and natural pullouts in the process. Obviously NCM price indications were poor.
3. Announcement Rationale: This was the clearing of the decks of all the bad news and adheres to ASIC/ASX guidelines. It was prudent and optimistically may signal the company is adhering to ASIC/ASX requests to get all the bad news out there.
4. Administration: Always possible people but Banks have come this far and PH is now producing CASH and admin risk diminishes but not to zero. If admin is coming in two weeks than admin would be here now. It's usually very fast. In theory it would have happened in December, it’s now February and the Bridge was secured, you don’t give a bridge if you are going to go to admin as that makes no financial sense. Admin makes no sense at all for OZL but in the GFC it’s a real possibility and the OZL writedowns announced yesterday by their size and scope mean many many miners are now insolvent. Banks are now full of problem resource loans now. At the stroke of OZL’s pen.
5. Insolvency: OZL is not insolvent because of negative and poor journalism. OZL is now a cash cow as PH is now running well. Maybe Journos should check with the company on PH progress before they write their articles.
6. Preparation: Silence from OZL will be deafening as we approach end of this month. Expect no refi updates or asset sale announcements as that’s michelmore. I would prepare for the worse case like a severe bushfire, but we have since December.
7. If no asset sales: The chances of a further extension of bridge loan would be the most likely event if asset sales not completed....and all current due facilities maturities being pushed back, whilst PH works its magic over 09, or a buyout, or a chinese investment or government partial guarantee or all of the above.
8. CEO has got to go: If no asset sales then Michelmore has to step down in two weeks as he failed on all fronts. He got us in this mess in the first place and he can’t get us out. He kept spending and spending and spending all 08. We know he is a complete goose and we know he won’t resign then the board of directors have 100% failed in their fiduciary duties and HAVE to fire him. He simply has to go. He’d rather see admin than resign and that arrogance and board ineptness got us to this point, maybe at the eleventh hour, the board will revolt and fire him to save their own necks.
9. Timing: We shall see how this plays out, but not before for two weeks of silence.
10: The Magic Number: OZL EBITDA for 2009 will be > AUD$600m. That’s the Magic number for mine. PH is a cash cow now producing mother’s milk....in fact PH produces cash @ about US80c lb net of all costs. That’s ALOT of cash when the company will produce >80mt in 2009 and 2010.
That’s not too shabby is it ! Like the banks I work on facts regarding Debt service and expectant Cash flow. Maybe the journalists could ask a question like that.
I’ll still say the refi gets done. No admin (LOSE/LOSE)and no fire sale (LOSE/LOSE). Banks will just have to wait 6 months which is as long as they would have to in admin anyway, if not much longer.This way they avoid a storm of lawsuits from a thousand angles and 7 years of legal quagmire.
Prominent Hill is basically the saviour of OZL not AM (he is the cause), that’s why I bought in at 55c. Maybe I’m right maybe I’m wrong on PH. Been blindsided a lot lately and in the last year or so in all manners of life, so nothing surprises me anymore.
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