dump the br deal, page-3

"IMO, 22% is not huge, and falls within the scope of what minimal means."

HomeBrand, that's ridiculous. You're ok with a mere 22% dilution from a CR, but think that a royalty costing about 4% is "lousy"?

You're not the only one, plenty of comments have pinned the BR deal as being a brilliant arrangement for them, not so good for AVB. Let's look at that...

First, the BR deal is not debt. The NSR is not "interest". The deal is an equity arrangement. We don't have to pay the $12m back. People are looking at the revenue stream to BR of a few million a year and thinking "wow, nice if you can get it", but once you understand it is equity it comes into context. All the holders here are invested because they believe this is a multi-bagger, so what's the difference? Apart from the fact I ain't got $12m to invest :)

Second, this debate on dilution/no dilution. No more paper has been issued under the deal, so my (tiny) share of the pie is the same as it was before the BR deal was announced. But the pie has shrunk about 4%, so that's dilution if you ask me. I'm not complaining, but of course there's a cost, no matter how it is structured.

Third, the dilution is however very minimal. The alternative would be that BR were issued paper and they would have picked up something like 12% of the company. So 12% or 4% dilution - as a holder I know which one I'm happier with!

The question then is why would BR agree to that? For starters, AVB didn't offer it to them, in keeping with their minimal dilution criteria. Next, BR are getting a lower share of the company for their investment, but it's also lower risk... if expenses blow out they only get hit on the direct costs of mining... if the copper price tanks they go down linearly, unlike us holders who suffer a leveraged impact on earnings. As long as the company keeps digging up and selling the stuff they will get a revenue stream, and it will never go negative.

So, lower risk, but lower return too as they picked up about 1/3rd of what a placement would have given them. If the copper price tanks, they'll do better than they would have on a placement; if it heads for the skies they'll do worse, but they'll always do pretty good. Smart deal for them overall.

Many posters here have said fair value of the company is a SP around the 20-24c range in the short term. You realise that BR won't participate in that 3x SP rise at all under this deal, don't you? (apart from their existing share holdings). We holders get to keep that all ourselves. Hopefully that's reason to smile.

Please understand HB, I'm not having a go at you. As I said at the beginning there's been a lot along this line, it's been irking me, and today I've just not been able to let it go any longer. Quite cathartic, actually!

Now let's wait to see what happens Wednesday. That could be quite a different kettle of fish, but I'm leaning towards the bcsiles view of the world at the moment.

Cheers, Z