The more I think about it the more I am impressed by the new MD,...

The more I think about it the more I am impressed by the new MD, the conservative approach is comforting in lieu of the all guns blazing thing. I think the market will receive him well. He’s only been with us for 1 month and I'm starting to appreciate why. Already he has a good working relationship with the lenders and major shareholders. Signing Term B this week on 23Feb as well.

“Lenders demonstrate strong support for development of Corunna Downs through
Term Loan B amendments permitting use of operating cashflow to fund the project”

Before   $80M bank  +  balance is cash sweep for debt payment
Now   $60M bank  +  $20M kitty  +  balance is cash sweep for debt payment

So……………. Mar cash sweep is unchanged and operating cash flow is not $80M bank balance. The first $20M comes from reducing $80M to $60M. So $38M is a wipe out plus sheet loads more. We all know they will be “cash positive” but not “debt free” just yet. Being “cash positive” in my view is just as good only the money is sitting in a separate account. Also the $60M is a hint of the moving position versus the outstanding debt. That's big in my view and will keep shifting downwards with the outstanding debt.

Good and dandy but it also means they have loosened the shackles off the 100% debt repayment focus and cut AGO some slack to pursue growth. This is where it gets interesting apart from confidence in the MD.

-  $20M per qtr Mar-Jun-Sept = $60M but capped at $45M. So $45M potentially for CD leaves $15M at AGO’s discretion. That's only the first 3x qtrs.
-  The new deal has cost AGO $5M in shares and potentially an extra $3M in principal. So the lender is happy to have more AGO shares and refinance is available.
-  The kitty is available until 30June2018 so it can be topped up again and again to $45M if Term B is still around. After that date it goes back into cash sweep.

So……..in reality the debt will be old news by mid-2018 particularly if oppies are converted. Or, a big long shot ORRR, the opportunity that CD will be paid in instalments from operational profits, the reserve account sucks $20M per qtr for growth and cash sweep is reduced right down and Term B time extended.

The business is best positioned to strike while the iron is hot with the reserve account the MD’s play money to pursue other things whatever that may be. Let’s be honest $20M from qtrly profits is not going to cripple the place. Happy to forego a divvies plan.

That's why I sleep well at night………..