Northern_munky,
Actually I think I've come to a conclusion. When the company enacted this loan arrangement in September 2017, the share price was close to 50 cents and marketcap much higher. I have a feeling, with the continual drop in share price and reduction in marketcap of the company, the risk of a US$10mill loan has triggered a get out clause for the lender and they're exercising that right. Just a hunch but that's really the only explanation I can give.
I am not sure it has to do with any big player shareholder as the share registry is very open and I am not sure what benefit any shareholder big or small would see in a 6 cent placement.
I think the company fully expected to profit their way out of this situation but delays in ICL and Pegasus may have played their hand. Possibly left too little too late and therefore now in this precarious position to the detriment of all shareholders. Just my theory.
Below is a summary of the conditions of the convertible note from the 2017 annual report.
Convertible note- On September 30, 2017 the Company entered a convertible note, secured by the
company’s assets, with institutional lenders to refinance the Group’s previous debt. The USD$10 million
note carries a thirty-six-month term and 13.5% annual interest rate and is convertible into ordinary
shares upon a change of control. The Borrowings have been measured at amortised cost, a gain or
loss is recognised in profit or loss when the borrowings are derecognised or impaired, and through the
amortisation process. The Company allocates interest payments over the term of the borrowings at a
constant rate on the carrying value. $5 million of the proceeds from the funding was used to pay down
the loan facility originated on December 30, 2016, which carried a shorter term, higher interest rate, and
greater warrant coverage.
Derivative liability
Under the agreement, warrants will be issued up to 20% of the borrowings, with 47 cents (adjusted to 35
cents as being the price under the December 2017 placement) exercise price, for a period of five years.
The borrowing is a hybrid instrument with liability and derivative liability components. The warrants and
convertible note option include an embedded derivative relating to the exercise price that needs to be
measured at fair value and separated with changes in value being recorded in profit or loss. Derivative
liability has been valued using a Black-Scholes option pricing model which approximates the results
that would have been achieved by using a binomial lattice Monte Carlo simulation. Pricing model inputs
include; exercise price (0.35), risk-free rate (2.1%), remaining term (convertible note – 2.25 years, warrants -
4.25 years) and volatility (88.15%).
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