The next test of management will be whether they can arrange the financing with minimal share dilution. Any dilution now will be compounded when Rosebys time comes. So any financial support obtained from the Finnish Govt could greatly improve longer term value.
A relatively minor dilution could be avoided if they purchased 5m shares at current low prices and held them as capital stock for future granting to the MD rather than issuing new shares when 20c is reached. But then again cash in the bank is good.
With the plant purchase its not just the immediate $100m saved but also the time saved and avoidance of the inevitable cost over-runs, delays, environmental permitting etc of building a plant from scratch. Even greater is that shareholder value would have been gutted by the terms forced on a low capitalisation co such as AOH trying to build a processing plant for a volatile commodity like copper in present financial markets.
Xstrata definitely needs a future resource like Roseby for its Mt Isa smelter. They do have other options but which are a lot more expensive to buy into. They already have the Roseby off-take rights and have made about half the expenditure required to earn an interest in the SEEP area. AOH now need an optimised DFS in place so that the maximum value is extracted if Xstrata is compelled to buy for cash the 51% of the RFP area.
AOH Price at posting:
10.8¢ Sentiment: Hold Disclosure: Held
