Took me awhile to get my head around the deal (or at least enough to be comfortable with my understanding) but ultimately I see us having purchased this mine for the cost of assuming the EUR35m external debt plus EUR1 with the $80m of funding via interco loans from Oaktree wiped out after we paid them EUR1 for it (so we paid EUR35,000,002). We also raised $25m at a premium to the share price (a modest one of around 13%) with those shares going into escrow for a year to help fund the working capital needs, I don't necessarily see this as a cost of purchasing the asset but a funding source.
From my perspective, this looks like Oaktree saw no other option than partnering with someone that had enough expertise to get this up and running, or risk losing their invested capital. They've clearly sunk 100s of millions into this project already and needed a rescue.
To those that are wondering if this is Oaktree using us as the fall guy/bag holder to dump a project in and run away, why on earth would they put up $25m in new capital? Oaktree don't throw good money after bad. If they saw this project as never getting off the ground, they'd wind it up, default on the debt, hand the resource to the banks and never look back without putting a further cent into it.
Yes, there's for sure risks in having operations on 2 sides of the planet and integration but this poises EQR to be the single largest western producer by a long stretch. If we're able to move this forward, there's no stopping us from acquiring further projects in the future and becoming a mid or even large cap company.
Management's exceptional technical expertise is what brought us this deal and I'm incredibly excited to see where we end up from here.
Add to My Watchlist
What is My Watchlist?
