Originally posted by pe981
Most of what you say make sense
if NXE bod were in control and had funding options, however chain of events suggest that is not the case.
Funding package was only agreed early this year and as has been mentioned Arena aren't a charity, which is why the termination was included.
Arena waiving the 15% doesn't incentivise the Company to draw the loan, it just gives them the incentive to find other funding optionsclear.png The waiving of this fee is the most telling as it suggests that Arena are happy not to provide any further funding or are in process of rearranging whole thing (more on that later).
Early August this year the Company issued quarterly reports noting the amended tranche 2 (2A) had been drawn with other tranches due, however was vague on some of the timing under the amended facility. The cash flow forecast showed that funding was needed urgently, presumably covered by drawing tranche 2B however, out of the blue on 14/8 a new funding deal was done raising $2.4m including directors putting their hands in their pocket, no mention of Arena.
Now we have a quarterly showing they again have no money with a simple note that tranche 2B from Arena "was not received" and the Company in suspension waiting an ann about a "material funding arrangement"
This smacks of desperation and a continuous scramble to live from quarter to quarter.
The interesting thing is the current halt / suspension involves a "material" funding arrangement so would suggest to me they may have been working on something with Arena for some time and just waiting to finalise details. The only thing that makes any sense is if the "material" funding arrangement involves Arena and also explains waiving the termination fee on previous agreement. If the material funding arrangement involves other parties, what is Arena's reason to waive anything.................?? (Of course Arena may just want out of anything more to do with NXE - but I guess we will see soon enough)
"Our current Directors aren't sticking around for the fun of it, they are in it for the mega pay day an operating mine will bring"
That sounds like a rather hopeful statement - we see many Companies at this end of the market with "professional" directors who never bring any projects to light...........
We are both allowed to speculate on funding and I enjoy the discussion on all matters. It's your prerogative to remain invested in a company where you feel the Directors aren't interested in a mega pay day achievable by bringing mine production online. I would ask however that you don't confuse my assessment of their personal ambition with an assessment of their competence.
On reflection, waiving the fee probably doesn’t incentivise NXE to do anything other than take more time to meet their draw down obligations. The waiving of the fee would be an empty gesture by Arena if they already suspect there was going to be an imminent drawdown on remaining tranches. Regardless, Arena are already earning $400k p.a in interest on Tranches 1 and 2A.
In my experience a capital lender specialising in unsecured illiquid assets does not waive termination fees (in this case equivalent to $2.4M) unless they foresee a better fee being obtained from elsewhere. Arena either wants as many of the convertible notes to be in play or the underlying asset. Nothing has materially changed for Arena in terms of risk with NXE so I’m not sure why they would want to withhold funding?
It’s win-win for Arena. If NXE becomes an operator, convertible notes and related options payout big. If NXE fails (e.g. due to Director incompetence or any other reason), Arena will bail the company out and flip the asset. Arena already holds $4.1M in convertible notes in a company with a market cap of $8.5M sitting on a billion-dollar asset. I don’t believe they are going anywhere.
Anyway – the above fluff aside - what’s probably more relevant to our discussion is a key term in the original Arena funding agreement that I believe remains unchanged (see
announcement page 3). The term clearly states that the market cap of the company must be at least A$12.3 million before Tranches can be drawn down. I believe most, if not all announcements regarding funding changes to the Arena agreement have stated that there are no changes to the underlying terms - other than the termination fee waiver and splitting of Tranche 2 into 2A and 2B amounts .
On the market cap requirement alone, NXE have been unable to access the 2B Tranche (or any others) since late August. A quick review on my part seems to suggest all the feasibility drilling, test work and scoping study results were announced after the market cap fell below $12.3M.
According to the September Quarterly, Tranche 2A was drawn down in late May (although other announcements said June) and from what I can interpret from prior announcements there should be anywhere from 2 – 4 months between the release of Tranches. Furthermore, as most of you can tell, Tranche 2B alone ($1.85M) wouldn’t be enough to meet the Capex requirements.
So… a strange sequence of events indeed:
- Late May Tranche 2A is received, meaning late August would have been the earliest for Tranche 2B (thus private raise required);
- Red herring announcement on termination fee waiver - championed as some kind of win for NXE;
- Market Cap takes a dive - significant delays/ inability to access Tranche 2B in late August / September;
- Scoping Studies confirm Capex required is $5M+ more than Tranche 2B & market cap still under $12.3M at Sep Qtr.;
- The reason Tranche 2B “was not received” is because NXE fell short of the release terms to receive funds;
- NXE need to renegotiate terms of Arena funding;
- Blue horse shoe loves NXE.
I still firmly believe Arena want to provide the funding (not withhold it), and I think pe981 is right with regards to Arena being involved in the material funding negotiations underway. Interesting to see what pops up next week.
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