Ann: Proposed issue of securities - KGL, page-2

This latest issue has been badly planned,unnecessary and should at least be underwritten so as to prevent the Salim Group once again
circumventing the takeover code.
With the share price down at 10 cents,, KGL is valued in the market at $60 million as against the conservative NPV of $420 million or 62 cents per share in the latest feasibility.That study was based on proven and probable reserves and a 10 year mine life.It included about 15 per cent of the inferred reserves.
Any geologist will conclude that the mine life is likely more than 20 years and the chances of significant new discoveries very high.
It also was after applying a discount rate of 8 per cent.
If the inferred reserves were included and the discount rate dropped to 4 per cent the NPV would approach $1 a share.
The Board are well aware of these numbers.At current prices the project is expected to generate $220 million cash flow a year and EBIDTA of $1.8 billion over the ten year study period.Any mining company in the world would love to have a project like this as would trading companies.
This is a tier 1 resource in a tier 1 jurisdiction!
It is very important to the continued operation of the Isa smelter and the Townsville refinery.
The project will also open a very important regional centre which has the potential to drive further exploration and development in a remote area of Australia.
But the KGL has made almost no attempt to sell the story or engage with the financial community.
They are finally appointing a financial adviser .
This should have been done 4 months ago prior to the release of the revised FS so the the adviser could have helped with the presentation.
Last July we had a 4 for 15 rights issue targeted to raise $15.1 million.
KMP Investments,the Salim family company,took up its full entitlement and was able to once again increase its holding by more than
the 3 per cent limit of the takeover code moving from 31 per cent to 35.1 per cent.
If you eliminate the top 10 shareholders the take up by small holders was less than 20 per cent.Once again the issue was not underwritten and no
attempt to place the shortfall.
Had the shortfall been placed this latest issue would have been unnecessary. But then Salim would not have increased his ownership.!
The board has been clearly told by the vast majority of shareholders they do not like these dilutive rights issues.
The Board might well ask :what are we to do?
The only answer is to publicly put part or all of the project up for sale or invite bids for the company before the Salim Group get to over 50 per cent.
I am sure the vast majority of Australian shareholders would prefer a competitive tendering of the assets as opposed to becoming locked in
minority holders.This threat is the single biggest factor as to why the share price is not much higher today.
It is abundantly clear that there is no other alternative to financing the Jervois development than to
sell down equity in the project to provide KGL with its equity share.
It is time directors looked at their decisions and acted for ALL shareholders.