The biggest challenge facing the board now is the appointment of the right financial adviser.
This process should have started six months ago but we are where we are.
They have started a beauty parade but they need to get the terms of reference right.I would expect they would have selected a group by the end of March.At the current share price, further dilutive issues need to be ruled out which means they need to sell down equity in the project.
As I have said before the best deal I believe would be to approach the Salim Group and offer them 50 per cent equity in the project in return for
1.Giving back and cancelling say a 200 million shares in KGL (it could keep the last 50 million shares);
2.Putting up the equity needed to support the project debt (say $120 million).Because it will own 50 per cent of the project and is responsible for funding
50 per cent it would effectively be paying $60 million for 20 per cent.And a 50 per cent direct equity interest is much better for them than an
indirect interest.
This would leave KGL as a listed company with a 50 per cent interest of the joint venture and about 600 million shares outstanding.
Its share of cash flow would be over $100 million a year or 16 cents a share.The KGL share price would rocket!
The Salim Group could probably sell the balance of its holding for 50 cents a share or more that would give it back $25 million of the equity funds
it has to contribute.
The other alternative is to put 25 per cent of the project up for sale and ask $100 million which is less than 25 per cent of the very conservative NPV
in the latest study.
The finalisation of the latest study means they should have a data room ready to go.All they need now are the right people looking and the right advisers selling
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