I think there might be confusion as to how funding works. Up...

I think there might be confusion as to how funding works. Up front, I'll say that ultimately, it's up to the funder to decide their own terms, and if they have the money, they can do what they want (if the borrower wishes to accept their money).

However, the usual practice for funders is that they would issue an approval, subject to certain conditions being met. Think about when the bank approves your home loan. They can "unconditionally" approve it, but it's technically not unconditional when they approve it. What they really mean is that they approve it subject to the usual terms/conditions. For a home loan, a bank would give you an approval, at say 80%, but will not actually physically hand over cash until:

- you sign the loan documents and mortgage document
- you deliver them other things they needed to verify (like recent payslip, if they haven't already got it from you)
- you turn up with the 20% equity plus your costs
- etc

The key here is that it's a binding approval on the lender, but the borrower needs to satisfy certain conditions to actually draw down the money.

In our case, the lender will issue an approval, and that will allow KNL (or any company) to issue an announcement saying that finance is approved and binding, and will allow the company to then satisfy any remaining conditions. That approval is binding on the lender, provided that the company (KNL) then satisfies all the things it needs to do. That'll mean that we'll have to do things like deliver them a BFS (likely already done at that stage though), confirmation of off-takes (likely already done at that stage), confirmation of mining licence approval (likely already done at that stage), plus maybe a few other things. Further to my previous point about China, this is where it gets very important to have "bankable" buyers. If a lender is relying on an off-take agreement, then they want to know they can actually enforce it, so it will be scrutinised heavily (the only likely real way around this for the Chinese off-takes is to use a Chinese lender, or else the lender will want to see some cash collateral from the off-take purchaser).

So it is actually going to be normal process (whether for KNL, or BHP) to announce they have funding approval, and then go out and raise the balance equity they require.

For all the conspiracy theories out there, when it comes to "usual" debt deals, can I point out for everyone that the lender doesn't give two hoots what the share price is (within reason, of course). The lender says, "I'll give you $65m if you have $35m in equity in your company". Whether that's $35m made up of 350 million shares at 10 cents a share, or 35 million shares at $1 a share, does not concern the lender. The lender just wants $35m, and it's up to the borrower how they do that. In big corporate land, they've also got the potential to raise with bonds, preferential shares, or normal equity, but in our space we are just likely to be playing with normal shares. Robbo, you touched on this point with your comment "I also wonder, given the seemingly strong position of KNL and the recent oversubscribed capital raising, whether a more appropriate funding path may involve current holders first instead of last.." but what you are referring to here would be to create two classes of shares. I find it highly unlikely that will happen. At the big end of town, Rupert Murdoch uses it with his empire, but there are a lot of disgruntled shareholders there who want to unwind that structure. What is more likely to happen, particularly given the success of the recent SPP, is that any existing shareholders will get the opportunity to participate on the same terms as the instos.