cre as an fml 85 % owned subsidiary

CRE as an FML subsidiary,
Assuming, Fml end up with 85% and don?t wish to pay greenmail, here is a fictional scenario for a subsidiary. That leaves FML not that badly off.=nearly where they would be without stone

Well a shadow CRE board may reduce FML?s proportion of directors fees for one (FML BENEFIT/lost savings)

Given CRE?s cost of production was $40m higher than its income in the last 12 months, EXCLUDING CAPITAL EXPENDITURE, then, even at current prices ($1700) on producing 100k oz we?re looking at just over break even without significant intervention.

Naturally FML will look to suppliers of such things as explosives for economy of scale and discounts.

However, the difference between the discount to FML and the on billing passed to CRE could be quite different as you would naturally expect for organising the deal.(FML BENEFIT)

As with mining contracts, the contractor may prefer to discount FML operations and retain maximum pricing on CRE tenements for a number of logistical reasons, including the defined contract term of 18 months.(FML BENEFIT)

Cre has just completed its last milling run. No doubt at a minor profit if any.
Cre?s milling contract expires in end 2012 i.e. 5 more quarters away (less than 20 months if I?m correct)

5x 640kt/qtr= 3.2 MT ore remaining, if CRE can supply, then the CONTRACT IS COMPLETE-THE END

If they can?t supply 640kt every three months-stiff bicky ?that milling has gone forever.(560k last qtr 80kt lost)
FML?s plans to immediately rectify this will be delayed due to CRE?s lack of resources.(Lost opportunity to make a profit)

CRE may decide, given the gold price at the time not to seek to extend Barracks contract, OR MAY BE UNABLE TO EVEN IF IT WANTED TO.(Potential FML BENEFIT-CRE STONE ?FINANCIAL RISK)

CRE?s mill requires money to make operational and is required for security of the CRE business. The clock is ticking to get it operational and if not CRE tenements are worthless without milling capacity in 18 months.(FML BENEFIT-CRE/STONE value killer as each month passes-the toll bell rings LOUDER)

FML may also decide that environmentally, as it did on its own tenements, it may be better to clear up around 900ktons of tailings/site low grade surface ore lying about, than mine ore to replace that volume as CRE has always had supply problems. They have already indicated some of the last runs make-up before the shortfall was from this source.
That will require any other ore supplied to be .5g/ton higher grade at least to compensate on a 1 for 1 to make the contract minimum supply grade terms.

Given CRE will not be able to rely on FML?s cash resources, for operations, exploration and development will be delayed. Naturally any drilling or exploration work will be supplied by a subsidiary of FML (austminex) at current market contract rates. FML will just spend more of its cash (and any resultant profits) on its own tenements as well as further acquisitions.(FML BENEFIT)

Given CRE?s restricted cash flow, full manning and utilisation of the fish deposit may be hampered. Fml may decide given the restricted operational environment, to concentrate on near term marginal projects instead, leaving fish until later (higher grade ore), taken the tops of deeper resources for later development or even sell the fish deposits to another company to gain working cash, if it is hampered by stone in gaining more working capital.

The reality is FML will always do what they were going to, however the manner in which they do it may leave CRE positive cash flow and profit insignificant for some time, although not necessarily FML?s cash flow and profits for reasons as stated. The natural effect intentionally or not will be to delay the benefit of their efforts until CRE?s tenements are 100% owned and cash resources can then be supplied without limit.

They only tilted at CRE for the tax losses ($210m), in my opinion and a minor profit from operations until the milling contract expires.( REMEMBER IT WAS CONDITIONAL ON A TWO YEAR EXTENSION to 2012 for the milling contract) With a total of $13m tied up, secured against the tenements and assets of the company, earning interest, it?s not a bad deal.(FML BENEFIT)

They could always take control of the tenements, if CRE was unable to mill ore to meet interest payments anyway.(FML BENEFIT)

Any bonus from finds on the tenements would be soley due to a truckload of cash thrown into it as FML planned to do.(lost opportunity)

There may be a cash call on CRE shareholders with FML naturally underwriting it on commercial terms and taking its 6% underwriting fees as more shares, or even better cash if stone block.(FML BENEFIT)

Slightly inconvenient if you have to wait a year or two until STONE want their money free and there?s nothing surer than their moneys for trading or lending to directors interest free ( sedar filings)(FML BENEFIT)

Preferably when the milling contracts expired and not renewed, for whatever reason, while still not consolidated, CRE?s operational value could be rather insignificant (FML BENEFIT)

Stone probably want their next trade and their director probably wants more interest free loan money. (sedar filings)

CRE just fell into FML?s lap as a temporary distraction and interfered in other plans for the cash raised I?m sure.
mmmmm- now what was that cash really raised for again? ----- the $64m dollar question.

If I had a CRE share left I?d sell it to stone quick and laugh my socks off, head to the hills and buy fml while you can so cheap while you still can do both.

1440 sqr miles of developed under explored tenements ready to mine immediately (after CRE liquidation) for $13m max interest bearing loan and the issue of $60m worth of FML shares (-$7m to $10m worth not paid to stone and other CRE holders, not far off last years profit)

Probably buy the company shell and tax losses from the liquidator for $1 as well as major creditor and that still makes it the deal that it originally was, just $7m-$10m cheaper and some inter-company charges at a profit, to help along the way. Just a pity about the extra $10 or so million extra that could have been made with full control, or more with fml?s exploration and development skills .Still $10m minus $10m worth of assets not given to stone. Much of a muchness really, just a lot tackier.
As an FML shareholder, not much of a difference to me, or FML PROFITS (resultant Shareholder?s EQUITY), either way over the next two years.

Just a lot of lost opportunity beyond those 2yrs, but given FML?s ability to rise to the occasion, they?ll soon catch up within a year on the CRE tenements

Stone the crows-there?s none so blind as he who will not see the writing on the wall.

How many ways do you need to skin a cat?