Re-reading the announcement from November, the off-take...

Re-reading the announcement from November, the off-take agreement was “binding” but the financing/pre-payment deal isn’t. It is only under an MoA, the definitive transaction documentation has yet to be drawn up and will only be signed ”subject to Glencore’s satisfaction and absolute discretion.” In other words Glencore can wriggle out of it, or more likely, push for tougher terms.

The reason the market is nervous about this deal is that Glencore has a long history of screwing clients over if it possibly can. Galan has, yet again, pushed full steam ahead with construction, despite only having a couple of months of cash left.

Much depends on whether Galan has got other offers lined up should Glencore, almost inevitably, try to re-negotiate at the last minute. Galan clearly didn’t have any alternative funding ideas last month other than pull the trigger on a disastrously dilutive placement, and it looks like it is putting itself in the same cash-strapped position again.

The latest announcement stated that Glencore‘s due diligence was still ongoing. Once DD is concluded, an offer has to be made, negotiated and documented, all of which takes time. Given Galan is running low on cash you would imagine Glencore would drag its feet to improve its negotiating position. I suspect we have a few more weeks to go before there is any announcement on the funding.

I have sold much of my position and will wait to see what the deal looks like before going back in.