Been ticking over on this a bit last night, would be nice to ask...

Been ticking over on this a bit last night, would be nice to ask a few questions of AJ but only for industry types in Kal it seems.

I was hoping for an equity JV partner sale like the Galena deal, imo the least diluting and most value accreative funding model. Such a JV sale was most likely going to come from an off-take partner, incentivised to step in return for locking down the concentrate. In the case of Galena, Toho Zinc stumped up $100M for 40% of the Abbra deposit, split between purchase price and their share of JV equity injection. I'd say with Traf off-take deal being a $100M loan the odds of a JV investment partner has decreased, although I'm biased because I just don't think NST wants to dilute control.

Anyone working off $169M total funding to mine is under $40-50M, it's never well advertised by juniors but the extra contingency required of lenders (for cost over-run or longer ramp up time than aimed for in the BFS etc), working capital over ramp-up, fees/interest, corp costs add significantly to the funding requirements needed for FID. The remaining ~$120M funding is simply too big for an equity raise obviously (unless a JV project level sale comes out of left field).

The Traf $100M is 58% of the capex only, and 45% of the total funding requirements, whereas traditional Senior debt finance groups would comfortably lend up to 70% of the capex and say 60% of the total funding requirement (in tier 1 jurisdiction and high margin projects). The critical sentence in my mind remains this one

" Together with the other expressions of interest we have received from other potential financing groups, we are now confident of being able to finalise a total funding package to allow us to move ahead with development ".

The only other meaningful finance groups left are lenders at Senior Secured level, and why even mention them if not in our future?. Off-takers might lend line's of credit at subordinate junior level (for smaller amounts than $100M mind you), but that option has been taken by Traf. The traditional finance stack has senior bank/finance group sitting at the top of the tree, with off-take finance sitting below and despite yesterday's Ann saying that the $100M Traf loan was Senior and Secured against SS assets I contemplate that Senior Lender finance is the next shoe to drop. Another $100M would not be out of the question, only 58% debt against the $170M Stage 1 capex, and so long as such a Senior Debt sat above Traf they would be somewhat ambivalent as to how much equity VXR brought to the table vs Traf debt which is junior to their claims.

$200M of total debt financing ($100M off-take pre-payment finance and $100M traditional finance) would leave $20M of equity for VXR to raise on market.

"The Pre-Payment Facility contains typical conditions precedent which are required to be satisfied prior to first draw down, including final regulatory approvals, ensuring the project is fully funded, finalisation of material project agreements, formal facility agreements and project equity contribution."

The key condition would therefore be how much equity contribution Traf are requiring of VXR to lock down the $100M off-take deal? Obviously if Traf are junior to the traditional finance group yet to be announced, they want to see some protection and risk reduction by having a slice of VXR equity (skin in the game and first loss equity) as buffer protection against things going pear shaped. Would $20M VXR equity be enough? Actually, as highly geared as it would make the project I think it could be enough, $30M would do it for sure I reckon. A $20M-$30M CR equity gap for CR on market would be an outstanding outcome, as good as we could ever of expected outside a low-discount JV project sale.

I'm a little bit excited if this scenario is correct, it would be a great outcome. NAIF looks delayed or dead imo, and in any case would almost certainly only cover a small amount of infrastructure improvement such as a roads and gas power station etc. NAIF was not going to help with the equity funding gap the market is always focussed and concerned about, nice to have but how many shares issued at what price is the critical variable holding back the share price. Pity the markets are melting down right now as Plummage says. As much as juniors resource developers need a good project and good CEO, they need a lucky one lol.

Good Luck