Something like SML pay back part of the loan, and LOM use the cash to effectively buy a 'placement' in SML, but without the cash actually changing hands?
In a weird kind of way, we own more than 100% of SML anyway, because the $22.7M they owe us is more than the net value of SML.
Not quite sure, but if our 40% is worth the same as our carrying amount of $4.4M, SML is only worth $11M. However, there is something about $1.6M dividend being set off the carrying amount. So $2.8M actual carrying amount implies it is worth $7M, closer to the $5,551,000 equity quoted on pg 66 of the annual report.
Suppose we set up another entity called LOM Angola, and we transferred $24,938,000 cash from LOM AU. On a consolidated basis, net zero. SML sell their non-current assets (presumably consisting of the mining and exploration leases; and plant and equipment) to LOM Angola for the book value of $22,598,000. SML then pay back the loan to LOM AU, and use part of the current assets to pay back their current liabilities. They are left with $5,551,000 in cash. They wind up, paying out the owners in accordance with their equity, so LOM AU gets $2.2M.
LOM Angola:
+$24,938,000 from LOM AU
-$22,598,000 to purchase material assets from SML
+ Material assets from SML
= Material assets from SML + $2,340,000
LOM AU
-$24,938,000 to LOM Angola
+$22,738,000 from SML loan pay out
+$2,200,000 from SML wind up
$4,472,000 off non current assets (losing the carrying amount of investment off the books)
-$22,738,000 off non current assets (loan paid out)
= $0 cash and $27.2M loss of non current asset.
Net result, write off the SML investment and loan off our asset book in return for the material assets of SML and $2.3M in working capital.
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