If we stand back and look at what we are being offered, it is a carrot now, for a undetermined "pot of gold" in about 10 yrs time.
We hand over our only real asset for
no money.
That's no money to FMS for perhaps 10 yrs!
The carrot is, that if we agree to this deal, and transfer our asset into a unlisted new company, and hand operational control to BBIG, that we will receive a 40% minority interest in our producing PIOP mine some time in the future. The carrot is that we will not be required to contribute any equity or debt to receive our 40% interest in anything up to 10 yrs time. Sounds interesting, until you lift the lid.
The Pot of Gold, we are encouraged to accept, is that the 40% interest we eventually receive, will enable FMS to share in a Pot of Gold of profits from the producing PIOP mine.
We are encouraged that the gold will be there at the end of the rainbow, but will we see it in 7-10yrs time, and will the pot be empty or full?
When the mine eventually reaches production, what will be the returns to FMS?
Remember, BBIG manage the mine.
Remember, BBIG deduct all those various costs plus margins which will be deducted from cash flow first.
Presumably all the cashflow from PIOP mine goes to the new company PIOP Mineco. FMS will only own a
minority of 40%. That 60% controlling interest will be owned by BBIG and their colleagues the Chinese Equity Funding Party. Any distributions of profits from PIOP Mineco will need to be agreed by majority of PIOP Mineco shareholders. That isn't FMS.
Will you be around in 10yrs time to collect some of that gold?
Will you want or need it then? Or do you need it now?
How do we know the Chinese construction company will succeed in actually building the mine?
How do we know the details of the equity and debt funding to come later?
What will be the iron ore price in 7-10yrs time? Will we get any return?
What will be the exchange rates in 7-10yrs time?
Problem is, if we accept that carrot, and yearn for that pot of gold which might come way in the future, and decide to vote for this deal - then we are locked-into this process for anything up to 10 yrs time.
And during that period up to first return of cashflow, we get
no income from handing over PIOP.
From where will FMS get its funds to carry on business, and for up to 7-10 yrs?
It probably won't be Todd, because Todd will already have succeeded in locking up supply from PIOP.
And contemplate that Todd is 93% shareholder in BBIG - and it is surely from the BBIG operations that Todd will make its money - not from its investment in FMS.
We need
certainty including :
- certainty of a significant and meaningful Upfront Payment to reflect the value of handing PIOP over,
- certainty of that payment being immediately distributed to FMS shareholders
- certainty of FMS holding an ongoing interest in the integrated BBIG Project.
(20min delay)