Ann: Equity Investment Agreement Execution and Debt Drawdown, page-41

Couple of other ways to look at it depending on optimism or pessimism.

Optimistically we still have 45%, take the Mali 10% free carry as given, then it’s 40.5 LLL/49.5 GF/10 Mali.

If Mali buys in for the further 10% (off earnings, at market value which is currently US$137m x 2 = US$274m) then effectively we’re reimbursed 40.5% of that so add US$111m on top of your LLL market cap. Presuming Mali agrees with that market cap (given the GF injection was direct to LMSA it makes sense that that’s market value).

So then we’re left with that plus 36% of whatever you calculate the NPV of the mine to be.

The pessimistic case is that GF’s injection for 5% was made knowing they already owned 50%, that the money was going into an entity they’d then own 55% of, and they would need to put in half the costs anyway, so effectively they’ve got back 55% (or so, depending how soon Mali execute the free carry) and so you could argue that for LLL to give up 5% of LMSA we only got paid 45% of the US$137m investment. So effectively we sold 5% of a project we consider from the DFS to have NPV of US$2.9bn (hopefully set to increase with the new resource announcement), so worth around US$145m without factoring Mali free carry, for US$62m. To frame it another way, if the original plan of GF buying LLL had continued, they’d indirectly have owned almost 5% more of LMSA through LLL but LLL would still have equal control of the project and on LLL injecting that US$137m into LMSA it would have had to have been matched by GF at some point. So the net result is less working capital being injected into LMSA and less capital available to LLL to pay its share of costs. Of course if you run this logic you’d need to also consider how our costs will also be reduced by not owning as much of LMSA (should be baked into that NPV logic but perhaps slightly lowers the risk of needing to raise later?).

I think we sold it too cheaply by at least half, that the way we’ve sold it impacts the LLL price and the LMSA capital position and LLL’s ability to fund future costs, and that we gave up a controlling share without a premium, but in terms of worst cases I’m happy to see it funded to production, I think GF are being good partners, I think it should hopefully help the valuation of Mali’s 10% (presuming they don’t run similar logic on what it “actually” cost GF and/or ignore it), and I think 40.5% of a US$2.9bn+ project (I think likely to grow on resource announcement) at US$1.18bn or 36% + US$111m if Mali buys 10% more = US$1.16bn put us at around A$1.8bn+ value, which is a lot of upside from where we sit today.