are havilah option holders crazy?, page-8

The proposed non-renounceable rights issue by itself (whether or not the listed options are exercised) will not fund the estimated total cost of the Portia mine!

The estimated Portia mine cost is currently A$35.77 million (per HAV website; 2011 HAV AGM Presentation slide 11).

Facts:
107.6 million HAV shares are currently issued
20.1 million HAVO options (50 cent exercise price)
1.6 million HAVOA options (75 cent exercise price)
10.4 unlisted options
Cash at bank/short term deposits are dwindling fast given the spate of diamond drilling and RC drilling lately.

A. Assuming no one exercises any of the unlisted or listed options, there would be 107.6 million HAV shares on issue at the time of the rights issue, on a 1 for 10 basis, there could be potentially 10.76 million more shares issued.

As such, to raise the full cost of the Portia mine of $35.77 million from the rights issue, HAV would need to issue each of the 10.76 million shares at $3.32. Doubtful.

B. If all the listed options are exercised, there would be 129.3 million HAV shares on issue at the time of the rights issue, on a 1 for 10 basis, there could be potentially 12.93 million more shares issued. Plus HAV would have raised $11.35 million from the options exercised.

As such, to raise $24.42 million ($35.77 million less $11.35 million) from the rights issue, HAV would need to issue each of the 12.93 million shares at $1.89. Unlikely, as Havilah options holders are not crazy.


HAV will need to issue all or part of the 20 million shares which were approved at the last AGM.

Even if the rights issue was undertaken at $1.00, HAV would still need to issue the 20 million shares (approved at the last AGM) to get to the $35.77 million cost of the Portia mine:

A. 10.76 million shares at $1.00 is $10.76 million. Shortfall $25.01 million. If MMG were issued the full 20 million shares at $1.25 (same price as MMG paid last year), this would make up the shortfall.

A rights issue less than $1 per HAV share and/or MMG shares issued at less than $1.25 per HAV share will still leave a shortfall that will need to be made up from somewhere.

Will the unlisted options be exercised to make up for this other shortfall? Current cash at bank/short term deposits will not.

B. 12.93 million shares at $1.00 is $12.93 million plus the option exercise proceeds of $11.35 million. Shortfall $11.49 million. If MMG were issued 9.192 million shares at $1.25 (same price as MMG paid last year), this would make up the shortfall.

I assume the rights issue will be underwritten.

Food for thought.

Cheers