IMHO there were two elements of the initial announcement after the trading halt was precipitated by the sharp sell off :
1/. A small capital raising ( supported by friendlies ) to starve off imminent problems in order to buy time to start the second element
2/. Start the sale process for the company - the change in control wording signaled to the market that a majority stake was up for sale
The critical element was to create some sort of competitive tension in the sale process. Invariably there will be a few tyre kickers to collect competitive intelligence early in the process.
The problem with the quarterly announcement was that it signaled the there was a cash problem - any "real buyer" would not step into the breach early in the process so that they could get a feel of the amount of competition for the asset.
If competitive tension existed, the company would have announced that parties were conducting detailed due diligence - again to signal that there is interest in the asset
Depending on which HC poster you listen to, the $11m may last somewhere between 2 and 4 months (Investec loan repayment is due at end of September)
Given that there are a few long lead time items needed to optimize the plant - the recent announcement talked about 2 and 3 months, the company has a very risky decision to make as to whether to run the plant at clearly a sub optimal level based on past results, or wait until the regen kiln, better quality carbon, higher quality mill balls and small process circuit modifications can be made. The stripping process seems to have suffered from diesel fuel constraints (probably a creditor supply issue) as well as the cost of diesel issue which will be resolved via the gas installation
Whilst the company seems to have a clear measure of what needs to be done, past experience shows that it takes considerably longer than planned and costs substantially more than budgeted. As the company has previously stated these matters were outside their control so far - so one should probably brace themselves for a repeat performance
As far as the mobile mining equipment is concerned, the age, condition and maintenance standard of the fleet has very substantially impacted the ability to access reasonable grade ore. The company should reassess its financial capacity and operational capability to own, operate and maintain a fleet of this size.
Very few mining companies in Noble's initial financial position would ever attempt to be a mine constructor, exploration driller and mining fleet operator.
Whilst adding a further 2 loaders to the fleet for $400k makes sense, one would hope their selection is carefully made given the mission critical nature of loading the hopper / crusher or interim mobile crusher
Given the lack of mining progress versus plan, one must ask whether there has been a material error in the calculation of the strip ratio.....
In the next quarterly it would be nice to see the geological and mining reconciliations.
From reading the most recent announcement it seems to be that the company is aiming for an incremental improvement in mining rather than the step change needed.
Given that processing will likely to be sub optimal ahead of the changes contemplated and that mining is likely to continue on a similar incremental trajectory, I am not sure that the company's financial position or cash burn/ cash generation position will be materially different post the $11m injection. It seems like this latest injection may just be keeping the doors open as the company plays a waiting game
Meanwhile interested suitors will not rush in, knowing that without a substantial cash injection via a change in control transaction, the company's value proposition will continue to decline as it suffers from sub optimal operating results due to a cash squeeze.
I wish somebody could argue that we won't find ourselves in exactly the same bind as we were at the time of the trading halt.
The company is now on the market with any potential buyers biding their time due to the potential lack of competitive tension.
The rise in the price of gold will have little bearing on the transaction price relative to the substantial capital to rectify the plant and get the mining on track. This project's ultimate level of attractiveness relative to other gold investments relate entirely to project specific risks and rewards as "all ships are lifted equally in a raising tide".
The chances of pulling off BOTH a massive improvement in processing and mining seems extraordinarily remote.
I really hope the board critically assesses the management's past performance versus plan and either takes remedial action immediately or satisfies itself that for some clearly demonstratable reason, there is a massive improvement in execution. Playing a waiting game hoping that they can find a buyer is not a plan - it is just a hope.
NMG Price at posting:
12.0¢ Sentiment: Hold Disclosure: Held
(20min delay)