It is important that everyone understands the rationale that has been employed. Xstrata have been very silly by playing this as hard as they have to date and as a result now run the real risk that they may be left out in the cold.
The management have provided some additional commentary in support of their case:
As you may have noticed Excos shares were placed in a trading halt yesterday whilst we finalised matters regarding proposed material funding arrangements in connection with the Cloncurry Copper Project (CCP). The initial step of these arrangements with Sin-Tang Development Pte Ltd is now complete as described in the attached announcement. Sin-Tang may be known to you through their Joint Venture with Royal Resources Ltd at the Red Dragon Iron Ore Project in South Australia. Given their significant ties to China we expect Sin-Tang will continue to expand their involvement in the Australian resources sector.
The first stage with Sin-Tang relates to a placement of 5% of Excos issued capital at a price of A$0.30 to raise A$4.9M. Exco and Sin-Tang will now move on to negotiate a broader and much more substantial agreement, potentially encompassing both the purchase of an interest in the CCP, and the provision of debt financing for the project.
Importantly by taking this staged approach Exco has retained the ability to consider all of our strategic options, not only with Sin-Tang, but also including the possibilities with Xstrata or indeed any other party. The approach is however consistent with the Companys stated desire of selecting a definitive development option for the CCP in the coming months, ahead of finalising both the Definitive Feasibility Study and securing the relevant approvals for the project (expected later this year).
We appreciate that the positive share price appreciation of last week may have taken a little bit of shine off the 30c, but it is worth pointing out that the price was negotiated as a 15% premium to the 30-day VWAP up to 4 August 2010. The ASX price query on 5 August 2010, and our subsequent response (which referenced the discussions) may have had something to do with that. The A$4.9M will come in handy as we continue to ramp-up our exploration and resource development activities but that was not the main reason for entering into this relationship. We trust that investors will understand our rationale and recognise the big picture as we look to move forward decisively at Cloncurry.
As always please do not hesitate to contact me if you have any queries, or if you require any additional information on the Company or our projects.
We look forward to keeping you informed of developments.
Kind regards
EXS Price at posting:
32.5¢ Sentiment: ST Buy Disclosure: Held
