There's still a heap of unknowns around the agmt/commitment. And it's natural for the mkt to downgrade uncertainty.
This is what we know...Consortium get 17.5% after 50% completion of the DFS - but is this 50% spend (i.e. $49.25M) or 50% work streams? If workstreams, who decides on 50% completion? Same issue for completion (which adds the next 17.5%). 15% for positive FID is a simpler line in the sand.
There's also 'customary default provisions for a transaction of this nature'. That could mean a multitude of things, but, one would expect that any default in the DFS process would likely be only on the financial side of things (which is also discussed in the material T&C's of the co-operation agmt) - so that's an issue for the consortium, not necessarily ARL. Presumably, if the Consortium default on payment on any part of the $98.5M then they may default their ownership - as Inco/Vale did after they pulled up stumps in the early 2000's, with all ownership reverting back to HRR. But it is extremely doubtful this consortium will default on...anything really.
My view is that until the shareholders agmt is signed off and the $98.5M fully on the table, then uncertainty exists. Heck, we still have the noose of repaying the $12m if the conditions precedent aren't satisfied. That's probably enough uncertainty for the mkt to be played the way it is.
On top of that, until the DFS is completed, then the economics of the project are still relatively unconfirmed, even though the PFS completed by ARL has likely been done to a much higher std than some previous Ni junior DFS studies...in years gone by!
ARL Price at posting:
47.0¢ Sentiment: Buy Disclosure: Held
