A balanced view

This is my first post under my new identity. I was outed by the AFR (without my permission) regarding an activist position I am taking with another stock. I am an infrequent poster, but have been a holder of CSD since IPO. I sold out when it hit the dizzying heights of 30 cents and bought back in at the lows because I thought the stock and management had good potential.

I am a little perplexed, however, with the argy bargy and much of the over-enthusiasm and over-pessimism of many of the posters. Much will become clear with independent expert report, where hopefully we will begin seeing some Discounted Cash Flow forecasts for the current Mt Garnet production. This will give much better insight into the value of CSD shares, and much of the current debate will be for nothing.

Without seeing a DCF etc, I am reasonably comfortable with the 68% that SPM own of CSD and see it as a fair reflection of the capital injected by both parties. My personal opinion is that CSD will not allow SPM's share to creep above 70%, and that the cash flows from Mt Garnet will likely support additional debt that will fund expansion. Any additional capital will likely be issued to sophisticated and institutional investors, and matched by SPM, to keep their percentage fairly static. Unfortunately, Ralph was caught once before by trying to raise capital from the existing shareholder base, and I'm sure that it was only the directors, myself and very few other holders that bought shares.

Overall, since IPO, I think Ralph has steered a fairly sure and steady path and not wasted capital. Certainly, there has been significant slippage in timelines, but in the capital-constrained world of small-cap miners, where we stand now is a fairly rare place for a six year old company ... we are now owners of a large 1 mtpa mill, many tenements with proven resources, and most significantly, CASH FLOW.

To support my position for the overall fairness of the "dilution" that many are talking about, I reflect upon the capital contributed by all parties:

$16m contributed by CSD shareholders (as per 31/12/13 accounts), plus
$40m contributed by SPM for the purchase of Mt Garnet, plus
$10m as a GUESS to how much capital it took to get the mine to operating status, LESS
($16.5) debt owing to SPM, gives
----------
$50m net capital contributions

The percentage of capital from CSD = $16m / $50m = 32%.

Hmmm, a very interesting figure that matches non-SPM shareholding after the transaction. Now, as the $16m contributed by CSD shareholders, a significant share of this was by by SPM over the years. I would suggest that the 32% outcome is indeed very generous and well negotiated by Ralph et al.

We all know that the tin assets are ultimately worth a lot of money, but the mill and exploration assets are also worth far more than the bargain basement price that SPM paid. All in all, a pretty fair deal for all involved.

For those that are not as knowledgeable on valuing companies, be cautious on ultra-simplistic PE-based calculations, especially where the existing resource based is for a small number of years. The independent experts report will likely be very conservative in this regard, and some will likely think that it will undervalue CSD. Others on this thread will be equally impatient as to why the share price doesn't skyrocket. Time is what is needed. Time to prove further resources, time to bed in the mill and get good operating cash flows, time for CSD to be viewed by the market as a serious producer as opposed to an aspiring explorer that bought a cheap mill but did not have the expertise to run it.

Good luck to all, and I hope that each of us can give balance to their individual positions and not have such binary, polarised opinions.