hnc - white or black knights?

Have been having a read over the circular to creditors released by FH again and my take on it is that there may positive repurcussions for shareholders on face-value atleast with HNC pursuing options to sort this ship out without resorting to mass shareholder dilution by attempting to repay exisiting creditors via OXIDE OPERATIONAL CASHFLOWS rather than cap raisings/asset sell-offs.

Extract from FH circular to creditors:

"The appointment of Receivers and Managers to the Companies by HNC has given HNC control over the operating companies for the OXIDE, SULPHIDE and EXPLORATION JOINT VENTURES [NO MENTION OF URANIUM ASSETS..?]. While the appointments are a significant change in the way in which the JVs have been handled to date, they are understood to have been done by HNC with a view
to providing for the immediate JV capital (plant improvements) and operational costs and so enhancing any potential to move the operations toward a future positive cashflow position.
Even since the appointment of the Receiver and Managers, HNC has confirmed its commitment to working with the Administrators towards an outcome for creditors of both
CMR and CMPL. We understand HNC considers the best way to achieve this is for HNC to remedy Oxide plant deficiencies and operate the plant with a view to then establishing
a positive cashflow from which debts can be paid. Given the current low metal prices, the need to “see the site rectification issues through” (estimated to take 2 months), and the very recent appointment of Receiver and Managers, we consider progressing any proposal with HNC is, realistically, likely to take some weeks".


If it does eventuate that HNC become managers [not a bad thing with them being a technically and financially capable Chinese state owned mining company) of the Browns operations it is certainly not beyond the realms of possibility that they could remedy existing negligent-driven (IMO) plant deficiencies via further debt funding (advanced by them) and draw down internally generated cash flows to repay themselves. If they can get Browns up and running as efficiently as possible it may not take that long to repay even $100m+ of eventual debt from probable healthy oxide operational cashflows 'when' metal prices rebound. They know the real prize to them is the sulphides and if they can keep this ticking along until they can access them they know they will be on a winner (hopefully we can all retain our shareholding status to benefit from this aswell).

HNC have taken over ASX listed Abra Mining Ltd and nothing untoward has occurred there (so far) and existing shareholders remain with their holdings intact. In fact, HNC appear to be going out of their way to be seen to be making a concerted effort to build shareholder value & wealth for Abra Mining Ltd's ordinary shareholder interests with HNC's Chairman, Mr Renchun He, saying in an ASX release issued in May 2008:

HNC's Chairman, Mr Renchun He, said: "The Offer provides Abra shareholders with the
opportunity to realise an attractive value now for part of their shareholding, and benefit from future
upside in respect of their remaining Abra shares. The Offer also reinforces Hunan's commitment to
assist in the development of Abra's 100%-owned lead-silver-(zinc)-copper-gold deposit located
within the Mulgul Project in central Western Australia."

HNC will undoubtedly be aware that in order to achieve acceptance from Australian authorities such as FIRB, Govt etc that they can't just come storming in with big cash taking over lucrative, currently extremely undervalued Oz mining company assets at the expense of the target company's Australian shareholders and other investors. HNC as the Australian arm of HNG look to be executing a carefully planned long-term supply securing strategy of establishing strong footholds in a number of lucrative mining projects around Australia with the significant backing of the Hunan Province Govt as a state-owned corporation.

I recall someone posting on HC last week mentioning that they intended to contact HNC directly to guage their intentions in relation to Compass Resources and it's shareholders. Someone may want to try their luck with Changmin Chen, General Manager HNC (Australia) Resources Pty Ltd. Unfortunately haven't got his direct email address but do have general contact details of HNC's parent company (HNG):