SDL must extend the maturity dates with Noble and the Investor Consortium which are due to mature in November and convert of the Hanlong convertible note into Sundance shares prior to the current maturity date of 31 December 2015, at minimum to be able to continue as a going concern. This is stated in black and white in their report and confirmed in the auditors statement. The raising of additional short term working capital to fund ongoing work in Africa and to fund administration expense is additional to the problem of negotiating extensions to the maturity of their debts. Below is what the company has to say about this issue in the "Going concern" section of the latest report.
Even if the company is successful in extending its debt maturities, there doesn't appear any catalyst for the share price to recover from its current levels as, at least in the short term, the FEED study for the mine has been put on hold and the company said this in their report in respect of the financing of the project:
"During the period Standard Bank together with Sundance prepared a detailed information memorandum and
financial modelling for potential financiers after considering the optimum financing structures. A number of
meetings with potential debt and equity providers in China, Europe and the Middle East were held."
The unqualified nature of this statement doesn't seem to give too much hope that any of these meetings were successful.
If something does happen between now and the end of the year, it is in my opinion more likely to be negative for existing shareholders than positive in my reading of things. Further dilution is probably the least worst outcome by Xmas. Time some people just find the bottom draw and get on with life.
Eshmun
Going concern
The financial statements have been prepared on the going concern basis, which contemplates the continuity of normal
business activity and the realisation of assets and the settlement of liabilities in the normal course of business.
At 31 December 2014, the Consolidated Entity had a net working capital deficiency of $12.4 million due mainly to the
convertibles notes with a redemption value totalling $49 million which are due for repayment in November and December
2015. For further details on the convertible notes see Note 5 to the financial statements.
The Directors believe that at the date of signing the financial statements there are reasonable grounds to believe that the
Consolidated Entity will have sufficient funds to meet their obligations as and when they fall due and are of the opinion
that the use of the going concern basis remains appropriate. The ability of the Consolidated Entity to continue as a going
concern is dependent on:
(i) Extending the maturity date of the convertible notes with Noble and the Investor Consortium which are due for
repayment in November. There is a reasonable likelihood that Sundance will be able to:
a) reach agreement with Noble to extend the maturity date of the convertible note, obtain ASX approval and
shareholder approval to extend the maturity date of the Noble convertible note and options to early 2017
prior to the maturity date of 4 November 2015; and
b) enter into the revised Investor Consortium documentation and obtain shareholder approval to extend the
maturity date of the Investor Consortium convertible note and options to early 2017 prior to the maturity date
of 4 November 2015;
(ii) The conversion of the Hanlong convertible note into Sundance shares prior to the current maturity date of
31 December 2015; and
(iii) The continued monitoring and management by the Directors of the quantum and timing of all discretionary
expenditures including exploration and development costs and wherever necessary these costs will be minimised
or deferred to suit the Consolidated Entity’s cash flow forecast or that the funding shortfall can be met through
traditional sources of equity or debt funding.
Should the Consolidated Entity be unable to achieve the matters set out above, a material uncertainty would exist as to
whether the Consolidated Entity will be able to continue as a going concern and therefore, whether it will realise its assets
and extinguish its liabilities in the normal course of business.
The financial report does not include adjustments relating to the recoverability and classification of recorded asset
amounts, or to the amounts and classification of liabilities that might be necessary should the Consolidated Entity not
continue as a going concern.
As set out in the Material Business Risk section of the Directors’ Report, securing additional funding is critical to the
development of the Project and therefore the assessment of the carrying value of the capitalised Mine Development
expenditure as at 31 December 2014. (refer Note 3).
