There are currently (fully diluted) 3,793,104,706 shares on issue (subject to grant of the proposed performance rights). If resolution 4 is passed then Mt Kellet and its associates could aquire 3,348,843,837 shares. Now assume JARE is granted the same deal as Mt Kellet (a big assumption, but for the purpose of this excercise lets make it so), then JARE would be entitled to 3,021,401,328 shares making the total shares on issue 10,163,349,871. Now lets assume that LYC makes an average annual profit of A$100,000,000 (a huge assumption given it is currently break even) then it could declare a dividend 0f A$0.00984 per share. (Ignoring taxes, franking credits, etc). So it would take 6 years for shareholders to recover their costs at the current price of 6 cents per share. Forty years for those of us who bought at 40 cents per share. If the JARE debt is paid in full, instead of issuing shares and warrents, then the dividend will be 1.4 cents per share after the JARE debt of US$203 million is paid off, so it will still take around 6 years to recoup ones investement at the current SP. These calculations make some gross assumptions but their conclusion is clear, current shareholders are unlikely to recoup their investment in the near term. This will lead to a slide in the SP.
But is there is an alternative scenario? LYC's biggest asset is the world class Mt Weld rare earth deposit in Australia. At break even the LAMP has little more than scrap value. A take over of LYC by say Mt Kellet at say 10 to 20 cents per share would give them not only the LAMP but also Mt Weld. I would have thought that an alternative scenario to that currently proposed by the LYC Directors would be to separate corporately LAMP from Mt Weld, and perhaps IPO the LAMP in Malaysia and use the funds raised to pay down short term dept (or sell the LAMP outright to Mt Kellett or other interested parties), either way the intent is to quarrantine Mt Weld so that is not aquired by a third party for song and its ownership remains vested in the current shareholders of LYC.
I think Amanda has done a great job, for which she is very well paid. But at the end of the day, it is the shareholders in LYC that bought at much higher prices who are the big losers. Such a shame.
None of this is investment advice.
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