Ann: Razorback Project Update, page-6

I think you can read what you want to hear in today's announcement regarding delays and other potential partners, depending on whether you are glass half full or glass half empty.

What I turned my mind to when considering whether to re-evaluate MGT's prospects relative to other magnetite projects, was how will MGT fund its costs for the next six months.

Based on the March quarterly, MGT are spending approximately $750k per quarter on salaries, admin and corporate costs - therefore MGT would need approx $2,250k to get them to the end of this calendar year. With cash of $1,479k at March, this will mean that they need at least another $750k, plus whatever they have spent or will spend in recalculating resources, saline water testing, continuing to progress the mining lease or negotiating with potential investors. Therefore, probably need at least $1M but closer to $2M would be more comfortable.

In looking where that funding will come from, I think its unlikely to come from shareholders. The most likely source is the funding with C/M Capital Partners for up to $7M announced on 13 January 2025. The key point here being "up to $7M". MGT have drawn down $2.5M, leaving $4.5M available. However, this $4.5M is still subject to agreement with C/M Capital Partners.

When I went looking to get a better understanding of the arrangement with C/M Capital, I actually found the most detail in the notice for the EGM (announcement dated 31 January 2025 - pages 9-11 and page 20 and following).

I found these comments interesting on page 9 of 31 January 2025 announcement, in particular the section I have highlighted.



Therefore, back in January, it seems like MGT had few options to raise capital. Their cash balance at the end of June is likely to be less than $1M and less than the ASX requirements to demonstrate an ability to have funding for 2 quarters.

I would therefore expect to see an announcement sometime in July regarding further funding agreements with C/M Capital. If MGT are unable to get to an agreed position with C/M Capital (or get an alternative and better source of funding) and announce that prior to having to release their June quarterly, I would be very concerned about MGT's liquidity.

If there is an updated agreement with C/M Capital, then keep an eye out for the minimum conversion price for the convertible notes. When the MGT deal was announced in January 2025, MGT's share price was around 12 cents. The conversion price of the convertible notes was based on discounts to VWAP calculations and 8.0 cents (my reading is that the conversion price of the existing notes will now be 8.0 cents given recent prices). As MGT's share price is now around 8 cents, I will be curious if there will be a lower minimum conversion for future tranches and how much lower that might be. The lower the conversion price, the more shares C/M Capital can get if they want to convert the notes, and that would mean more dilution for current shareholders.

On a positive note, it is noted on page 21 of EGM announcement that "The Convertible Notes are unsecured obligations of the Company", meaning that management have not mortgaged the resource. However, the conversion of the convertible notes appears to be at the election of C/M Capital and if not converted, must be repaid within two years.