Good news. And for anyone complaining, if history repeats you will be able to pick up EQR at 4.5c shortly.
I base this as good news when I compare it to the deal with QIC. The first tranche of the QIC transaction would be the comparable offer. The usual: I have nothing to do with mining, this is just fun. DYOR.
EQR $8m capital raise.
$8m @$0.045
~178m shares
1for3 options @$0.0675
~60m options (raise a further $4.05m on conversion) 2.4 years (29 months) conversion date
QIC Tranche A
$12m @10% for 3 years Capitalised monthly and repaid at Maturity
$12m @ 10% capitalised monthly results in a payment due in 3 years of $16,178,182. Total interest cost of $4,178,182.
Lets not forget the $240,000 establishment fee.
$4,178,182
+
$240,000
=
$4,418,182
Lets also not forget the minor detail of the $5mil that must be held as a cash balance minimum.
So right now we are paying $4.418 million dollars to borrow $7m for 3 years. That's equivalent to a 16.5% rate.
There were also some options. These were 60million at 20% premium to the 5 day. 5c a share for the raising. 60m options at 6c for 4 years. On conversion they would raise a further $3.6m.
Given both the capital raise and the QIC A were 60m options and the conversion rate on the capital raise is at a higher rate and a shorter term the capital raise is the better deal. HOWEVER the QIC deal came with a “clause”.
QIC may elect to convert Options into shares in EQR or alternatively elect to receive a cash settlement equivalent
If QIC elect a Cash Settlement and EQR does not provide payment in cash at the time, the unpaid Cash Settlement amount will automatically convert into a senior secured loan with a 12-month maturity bearing 10% interest capitalised monthly. EQR can voluntarily repay any Cash Settlement Amount owing at any time during the 12 months.
Lets pretend EQR has done great and is $0.30 in 4 years time. QIC could elect to take a cash payment of $14.4m FROM EQR. I have to assume EQR would have better things to do with $14.4m in 4 years time. If EQR is 30c in 2.4 years when the capital raise options expire the owner converts for 6.75c going to EQR and then the owner sells the share to buyers of the stock who happily pay the going rate of 30c. QIC-> EQR $14.4m in the red. Capital Raise-> EQR $4.05m in the green.
This is not to mention that QIC were demanding a high level of oversight. Do we want EQR staff spending time meeting QICs demands and jumping through hurdles to keep the funds being released? I would prefer EQR staff focusing on tungsten.
Feel free to call me a “company stooge” and if I have skewed my understanding in a positive light it was not on purpose. I am sure if there was a better option Kevin would have taken it. I believe the board did support shareholders with this move.
