Seals hi, Yes, but in the oil and gas industry, JVs are usually to share exploration risk, and usually that is financed by equity only. With some debt financing planned maybe it is different? I find it difficult to take our Board's assertion at face value that Sandpiper is easier to finance with UCL in control when they are being economical with the truth (and in that video denying it completely) about the dilution on Mehdiabad.
It is possible that financing with 2 partners (MAK and UCL) is more expensive than doing it with one (UCL - ignoring Tungeni as it does not contribute initially) if the lenders force MAK and UCL to be responsible for each other's debts and that this results in both companies having to trade on a lower multiple of future cash flows thus making the equity raisings far more expensive than they need to be. However, that said, the dilution in Mehdiabad is costing us a packet if one has the view political change on a grand scale in Iran is likely soon and that it will add back the $18m write-off and give us a discovery fee (to cover the exploration risk taken) and therefore any "savings" in finance costs (for UCL) are somewhat of an illusion. What is more to the point is how one decision feather beds our directors more than the other. I suspect we are being told only part of the truth: Ross and Jordinson get a bigger salary if we take over MAK so they prefer that of course. Just as in economics you can't get rid of exchange rate volatility by using the pegged exchange rates: the volatility just goes into having volatile interest rates instead. The volatility has to go somewhere? I suspect the finance cost has to be borne somehow and if you try to cheapen it by trickery and artifice, you have to pay it in some other way e.g. through being diluted out of value on Mehdiabad? While the costs borne by us may be the same overall which ever method is used, the two methods have different benefits for our Board perhaps?
No, I haven't done any dilution calculation, but I know it is likely to be very high (so high our Board can't mention it, and even go so far as to deny it altogether using smooth background music to assist with this trickery).
Yes, I understand "market cap" was not written off: I was trying to explain how much was written off in comparison to our current market cap. It was an $18m balance sheet impairment, so if our current market cap is less than that, selling new shares at a 20% or 30% premium is not a great achievement if one expects the $18m to be written back on to the balance sheet within 2 years (as a result of complete collapse of Islamic Republic and a return to sensible business climate in Iran).
UCL Price at posting:
16.0¢ Sentiment: Hold Disclosure: Held
