Ann: March 2016 Quarterly Activities Report and Appendix 5B-VXL.AX, page-3

Not encouraging from my perspective. It seems that all the RI will do is pay off Chimaera and partially repay unsecured creditors (the balance being paid in shares at 1c, leading to further dilution). The fully subscribed RI would raise $18m and since the talk about terms for paying out unsecured creditors in equity they are clearly anticipating that less than 2/3rd ($12.3m) will be subscribed. IMO they only realistically anticipate raising Chimaera's $6.3m and the unsecured creditors then paid out in shares.

I assume that the termination payments to CD and the other are unsecured creditors (i.e the directors, KMP's and employees and also trade creditors) who would be paid out in any left over cash and shares (this is $12.3m). It appears that nothing is over for additional plant and equipment which will mean raising another $7m (debt or equity) after the RI is over before the company can get started again. The underwriting is on a conditional basis and given Pattersons form on the previous SPP (in Sept 2014) will IMO likely pull out if they deem insufficient funds are raised.

To me a far better option from the viewpoint of shareholders is to let VXL go to the wall and then attempt to repurchase it from the liquidator. That way the company would be sold on at a fire sale price and all creditors (secured and unsecured) would deal with the liquidator. Once the company is purchased from the liquidator any additional money raised would be used for needed plant and equipment + working capital. Key employees (and useful directors) could be offered a deal by the new company. This way the costs would be about $10m lower as below:

Purchase from liquidator:

Purchase price of VXL $3m (say) Repayment of creditors $12.3m
Plant and equipment $7m Plant & Equipment $7m
Working capital $3m Working capital $3m
Total $13m Total $22.3m

The purchase of the plant and equipment could be staged (or leased) so as to provide working capital during the start up phase and outstanding plant and equipment purchased (or leased) once the new VXL was cash flow positive. This is not only a lower risk but also a lower cost option. If LML could be persuaded to join a consortium then with their resources (Kookaburra gully 2.2mTonnes @ 15.1 % graphitic carbon) and Uley there would a dramatic increase in reserves.