I have adopted the motto "expect the worst and hope for the...

I have adopted the motto "expect the worst and hope for the best" in relation to MGU.

I think it is fair to say that it is a complex, somewhat convoluted agreement that combines a number of parties and concepts.

It has taken me some time to consider the announcement, but I am actually impressed subject to the risks of closure.

In reality it was always going to be a mighty task for MGU to fund their 50% given a market cap of around $12 million.

In effect they have swapped out a 50% share in hi-smelt, which was going to be near on impossible to finance, for a 15% interest in a going concern when and if funding can be secured under this proposal. This in itself turns a worthless entitlement to 50%, into a secured 15% stake in a funded project which is a big win given the position they are in.

In addition, MGU will receive A$15 million from a placement of 200 million shares. The premium to the current share price in my opinion reflects the perceived value of the sell down from 50% to 15% in Hi-smelt.

Post completion the cash backing per share will go from roughly $0.002 per share to $0.015 per share and the Company will have a funded 15% interest in Hi-smelt.

If this placement didn't occur, our best case scenario from issuing 200 million shares would have been somewhere between $2-3 million.

This money will assist in trying to develop the Buena Vista operation.

I also believe that divorcing the Hi-smelt development from the Buena Vista project will potentially make it easier to finance, and they may look to sell some or all of their interest in the project to get it funded.

Therefore I think that, if successful, this deal will bring Hi-smelt closer to fruition and fund a 15% interest for Magnum, as well as fund Magnum towards developing Buena Vista.

The risk is that the funders can raise the required funds. Whilst there must be some optimism to enter into the deal, the proof will be whether they can raise the funds.

Therefore I can understand the markets reluctance and somewhat confusion. Hopefully as things progress over the next few months the proposed transaction will gain credibility and MGU will re-rate.

Some positive developments next on Buena Vista funding would be great.