“We need to have the asset in one company to make it easier to get the equity and debt funding in place.”
No adequate explanation is provided of why.
The truth perhaps is that it is challenging to finance the project with the present arrangement, BUT NOT IMPOSSIBLE. Creditors can be protected by making each company liable for the others' debts. Sure we would need to have a better relationship with MAK to cope with being responsible for their debts, and sure that would make our stock more risky (and maybe we would make their stock more risky) thus requiring both stocks perhaps to trade on a slightly lower forward multiple. The hard part surely is synchronising equity capital raisings without one company suffering excessive dilution due to the other company choosing the timing to suit its own share price? I would be grateful for anyone else's thoughts on this point, especially if they know of other JVs that have successfully financed themselves with 3 JV partners. The smooth background music is presumably chosen to switch off all critical thinking?
“We certainly believe the offer is fair to both sets of shareholders in so far that both sets of shareholders will end up in the order of where they currently hold from the assets perspective, given the cash component, and the issue of shares in the combined entity at the end”
Jordinson may be speaking as a bare faced liar or he may be speaking as a project manager who does not understand dilution. (I don't doubt the smooth background music helps to sway some people that this is someone we should trust - I beg to differ on this occasion). We are being diluted out of Mehdiabad by an utterly massive amount (probably by around 80% at a guess). Sure, Jordinson will say Mehdiabad is worthless so if you divide zero by a huge amount there is no dilution, but who decided Mehdiabad was worthless? JORDINSON. Has he written any academic papers on the prospects for regime change in Iran? Does he have any specialist knowledge on this? No. Crystallising an unnecessary loss needs more justification than the Sandpiper project is challenging to finance in its existing arrangement, IMO. Some people make poor quality decisions and by luck make the right one. All the evidence I've seen is that Jordinson has probably stepped outside his circle of competence here in a) valuing Mehdiabad at zero b) deciding now is the right time to dispose of it. I fail to see how an $18m debt owed to us by Iran + a discovery fee (perhaps a further $18m) can be worthless on a two year view of a return to responsible Govt. in Iran (whatever Mr Market on his down days may think about it and notwithstanding some of the more counter-intuitive aspects of present value calculations).
Jordinson fails to provide any reason why UCL needs to purchase Wonarah even if there is an overwhelmingly good reason why we should buy Sandpiper.
The best he can say is “It will be an asset for the future”. What sort of justification is that? Mehdiabad is an asset for the future then, so why are we exchanging Mehdiabad for Wonarah? The former requires blood to be put down on the streets of Iran, regime change, (not the blood of the shareholders in the combined company) while the latter requires $35m of expenditure (money belonging to the shareholders of the combined company) to confirm it has a value. Oh I forgot, Wonarah also requires us to take a punt on whether the dry kiln process is commercial, which corresponds in a way to us having to take a punt on regime change within the time left for Iran to successfully acquire the know-how to manufacture a nuclear bomb (2 years according to the head of the UK intelligence services - the time for Iran to enter the zone of immunity at its Fordo enrichment plant is less than 6 months, I believe).
Jordinson and Ross are behaving perversely and irrationally in "80% disposing" of Mehdiabad at this time. And worse neither appear to have any specialist knowledge in Iranian, American and Israeli politics.
Purchasing Wonarah has the effect of transferring more Mehdiabad value to Mawarid since they are providing the cash to fund the offer. The Omanis have good relations with Iran. A recent interview with Princess Sayyida Tania Bint Shabib Al Said on hawksbill turtle conservation is quite a contrast with what you would get out of the wife of a regime official in Iran...
I expect she puts on hejab in Muscat, but nonetheless it is hard not to be favourably impressed? The immaculate English is really very impressive?
The Omanis will manage to work with the Iranians for sure.
So apart from enabling us to please Dr Al Barwani by giving him most of Mehdiabad for a pittance is there any other reason why we are buying Wonarah when there are few synergies with Namibia when we are voluntarily exchanging a non BFS cash drain (Mehdiabad) for a BFS cash drain (Wonarah)?
Well if we buy Wonarah, we can offer Drummond and someone else a board seat. I presume this is necessary to induce Drummond and Lawrenson to recommend the offer at lower cost than they might otherwise. There is no need for more MAK directors to be flying out to Namibia if we takeover MAK? Jordinson does that job more than adequately? Wonarah on its own does not offer stable employment to its directors? So we are being to forced to buy Wonarah to please MAK and please Dr. Al Barwani (he gets more Mehdiabad).
Jordinson and Ross do not appear to me to be acting in small shareholders interests. I will answer why regime change in Iran is very likely soon in reply to Seals recent long post shortly.
P.S.
"Moving the company forward, looking at the financing in particular, UCL have had a strategy(?) in, now we’ve been working on, for over 18 months. That strategy as been to find a cornerstone investor with the ability to assist UCL to raise the required equity to move the project forward. UCL has obviously shown in the last three months that not only have we found that partner but that the raisings we’ve done, whether it be the placement or the rights issue or the convertible loan note to support the offer, have all been done at a premium to market."
This is annoying when Mr Jordinson has written off more than our current market cap just beforehand. The price obtained is not an achievement at all. Yes, I am pleased we have an Omani investor with deep pockets to help, but not at any price. Ross and Jordinson appear to be stripping out loads of value I do not understand why. They are behaving perversely and irrationally.
UCL Price at posting:
16.0¢ Sentiment: Hold Disclosure: Held
