clarity re probable failure of retail offer

Just thought I would publicise something that I was not clear on until yesterday (because the presentation (which was done earlier) is slightly different from the offer document).


Cash Required:

MDL need US$ 146mn to fund their half of the JV

The fully under-written institutional entitlement and institutional placements (which have already been done at $6.00) bought in $136mn
They have $40mn cash
They have a $100mn stake in Teranga resources

...... the retail element of the funding is not underwritten .... assuming nothing is raised then the anticipated cash not raised is $15mn .... HOWEVER $15mn of the Retail entitlement will come from the issue of approximately 2.5mn new shares (if the money isn't raised then the shares won't be issued).


From MDL's perspective the retail entitlement cash is immaterial


From our perspective (looking on the bright side):
There is slightly less dilution than would have occurred
AND
we can buy existing shares on-market for less than the diluted new shares would have cost us (which is also less than the institutions bought in at) ... so if you're in it for the long term then this should be a great time to buy (even if the mill adds no additional value to the equation ....... we now have the guaranteed ilmenite revenue so it still adds value to the overall project).



Why the Sell Off:

1) Stock market is weak
2) Larger than expected share placement at a bad time in the market (due to increased "dedicated" rail and port costs) ..... many have sold down at least 25% of their holding just to keep the weighting the same (treating the entitlement as a free option should it have gone up)
3) Any institutions or individuals that were stagging the placement are now under water
4) End of Year adjustments / Panicked retail share holders



Control and Independence of JV Company
Both parties have 3 seats on the board and the chairman does not have the casting vote
It will employ it's own sales team (not relying on Eramet's sales force) .... but obviously if Eramet can assist they will



I'm a Holder for the long term .... the Internal Rate of Return on this development is well over 20 % .... it will throw off money for 20 years+.... good for the pension fund !