You can’t sugar-coat this, the news is not good, but also not...

You can’t sugar-coat this, the news is not good, but also not terrible

As Investors I think we have to assume the worst case, ie DSO not happening, taxes etc to remain, Govt etc get extra 15% of project

But a few things to consider - many covered in the preceding posts.

We are in suspension for 2 weeks, that’s Leo’s guess at how long it’ll take to clarify some points of the new code.

By assuming a worst case, if they are capable of getting a few concessions - that’s a plus

I’ve always assumed the Government would end up with 20% (though I hoped that would not be the case)

With the extra 15%, we drop from 36% to 29.25% - 6.75% less ownership.

But they will have to pay market price, Ganfeng just paid US$137.2m for 5% - that puts 100% at $2.744b

The Gov’s extra 25% will cost at least US$686m based on that

That makes the extra $50m in taxes look insignificant.

Remember too, this is not free carried, if they took it up today they’d have to contribute to capex, of course they won’t do that, if they elect to take it up it would be after project completion however by then the market value of the project will be significantly higher. They now only have 2 years to exercise this right, so they would be up for 20% of stage 2/3 capex

At the AGM Simon said there was some doubt as to whether the Govt would take up the extra 10% because it would mean forfeiting taxes/royalties and they need that cash. So it is still doubtful if the Govt will take up the extra 20% or part of it, as I said I think we have to assume the worst case.

We all know the market hates uncertainty, we had $700m or 50% wiped off our market capitalisation with the doubt over DSO, taxes, losing 5% to Ganfeng and probably the elephant in the room - the new mining code. If you assume the worst case that uncertainty is all cleared up now.

The Ganfeng 5% is revenue neutral to us compared with their 10% placement, with 10% less SOI our earnings per share will not change.

We lose 6.75% interest in the project compensated by at least 45% of $686m (worst case)

We have to pay US$22m in extra taxes etc (our share of $50m)

IMO the 50% drop in our SP more than compensates for the above factors.

Worst case we lose 6.75%, we get compensated for that, we pay some increased taxes, miss out on DSO - which IMO would be barely profitable, and do a revenue neutral deal with Ganfeng ensuring we are fully financed.

As an investor, if I’d seen all of the above news released after our initial suspension, I’d think we’re maybe worth 30% less than before the news at the most.

IMO it’s very important to have your own estimate of a company’s worth because the market very often gets it wrong then rerates.