re: Ann: Sandpiper Economic Modelling Results... I'm torn on...

re: Ann: Sandpiper Economic Modelling Results... I'm torn on whether I post on this as a UCL holder or a MAK holder. My UCL hat probably holds sway. However my comments:

i. This is a positive news announcement but I find it probably more frustrating than encouraging because of the threatening tenor for the joint venture of some of MAKs comments. MAK have consistently not behaved as a good partner in this JV and they are continuing on that line in this announcement. For example looking at their financial analysis they basically end up confirming UCLs previous economic analysis they previously bagged yet continue with that negative line against UCL. They try to make some nebulous distinctions to try to avoid the charge of being hypocritical as not much has really changed materially in matters they said should have stopped UCL forecasting.

In respect of the analysis, they both use CRU data in their calculations with UCL coming up with a geared Base Case IRR of 23.6% vs MAK running an ungeared case coming up with an IRR of 18.5%, both post tax. The difference is MAK is constructing their case to try and show it's a goer, which it is, but in a manner that endeavours to paint them as the more responsible party which they have not been. Basically UCL's results are within the ranges of the scenarios that MAK presents here and the IRR's are close enough to the same allowing for UCL's being geared and MAK's not - gearing should account for the difference after allowing for the other minor adjustments MAK has put in.

The particularly frustrating aspect re financial modelling for me is in this quote from page 6:
"* Minemakers considers that the current financial model prepared by NMP is not suitable for project financing purposes
* Consequently, Minemakers has developed its own financial model independently of NMP for its own purposes. UCL has not yet approved this model being adopted by NMP, but Minemakers’ desire is for one consistent financial model to be utilised by all parties

In others words even though the project is being run by NMP, in which UCL and MAK have equal share, MAK are showing no inclination to work with NMP on the positive direction they are already following but instead are going to try and force them to change what they are doing. They are going to be doing this even though the NMP team has set things on the right course and already has generated financing interest? How is this sort of attitude going to generate harmony in the JV????

Someone needs to kick MAK management ego into a tight orifice until they actually work as part of the team

2. Timelines.
MAK criticises timelines and capacity to meet forecasts that UCL has put out yet UCL forecasts, done with NMP, have been accurate to date. UCL has been the prime driver of the project through NMP and they are intimately in tune with the detail. MAK have not demonstrated anything like this knowledge of the project and indeed have been the source of delays along the way in the JV. Again MAK should leave the team that's done the work to try to do the job instead of portraying this attitude that they are going to come in and change the way things are being done. This is not good or helpful and will be the most likely source of delays.

3. Debt/Financing
Good that MAK are finally starting to back up the confidence that UCL have portrayed about capacity to finance the project. Their behaviour on this front during the first takeover offer was very unhelpful for the JV. Hopefully this is the beginning of them starting to talk up the prospects.

4. Water.
Good to see some confirmation that the Namibian Water authority has enhanced their commitment to provide necessary fresh water for the project and thus a desal plant will not be required. Improves both the financial model and also the sense of confidence that the govt will get this project up and running. Good work NMP.


Conclusion. Frankly I do not see any reason that MAK should be trying to insert themselves into control of the JV at this stage. They have not demonstrated competence for it nor have they demonstrated any capacity for the necessary teamwork/harmony. It would be best for all parties if they operated as a shareholder which is pretty much what they have been anyway.