I admit, I do have much to learn.
Everything seems to point to shares being exercisable in 18 months at $5.50. How many shares I do not know because of the below extract that confused me and made me think that each note is worth one share so 150M notes means they have away shares at input price of $1 per share exercisable at $5.50 or anytime after 60 days as said. If this is the scenario, then HAS got screwed because that is 150M shares to be dumped on the registry in 18 months for no benefit onto of interest payments.
I don't give this more than 30% probability as they said issue price is some $4.24 so 4.24/150M = 35M shares most likely to be given to Wyloo in 18 months. Again if this happened what kind of option is that, original deal looks like an option with coupon attached with prospective 30% capital gain in 3 years plus dividends of 9% p.a. equalling 58% gain in 3 years which looks excellent on paper!
I think this is where Wyloo got carried away when entering this deal, sector was looking hot, everything was pointing up and it is easy for the money managers to make these deals in hot markets because if they get it wrong, they are still safe, everyone was doing it so they will keep their job, who could foresee REE prices coming back down to earth? If they went against the trend and got it wrong, they would be ostracised.
I don't see Wyloo making and claims or demands or calling in liquidators because what they entered looks more like a 3-year option than a loan, so when it expires in 18 months the amount is converted to shares. Purchase price at $4.24 redeemable at $5.50. If it was a conventional loan redeemable in cash there would be mention of it. Combination of cash/or share redemption is crazy talk. Entering long term loan agreements would have been a better option for HAS in terms of extended maturity and interest rate would have been lower.
Like you say time will tell. If the agreement was with a bank, then definitely cash redemption would be the option, but because we are dealing with a private equity style investor, we are more likely to see this exotic speculative BS investing setup. Thats also why I think HAS got a better deal, they know the REE market better than Wyloo, so in this deal they may have expected more downside than upside and stuck a deal like this whilc touting the upside to the bag holder, which is Wyloo. These private equity funds are more like drunkard gamblers than investors, playing with other people's money on the hopes of huge gains on commission with minimal repercussion if they slaughter their client. Will they get sued? Why would they the REE sector was performing great, electrification is the future, green energy, hug a tree bla bla bla...? In the court room, it will be said that it would not be unreasonable to act in line with the masses at the time.
Anyway, I digress. Current SP of HAS is justified IMO as there is SO much uncertainty. REE prices are enjoying their hangover and NPV is optimistic as you have pointed out. Undeveloped project requires more funding than the current cap raise will provide, so another cap raise in the next 18 months may happen, ignoring probable issue of shares to Wyloo. SOI will easily double to over 300M before the project makes any cash. Whether it makes profit is questionable based on REE prices and ASIC costs, which are dynamic. Conventional debt is high for a non-profitable miner with a large project to be built/commissioned, which brings even more uncertainty. This option/loan agreement with Wyloo does come up under "borrowings" which does in fact imply repayment in cash, but as mentioned above it is much more complicated than that. Is REE market oversupplied? Many miners in the space are barely profitable so maybe yes!
HAS as a going concern is questionable given their cash burn in the last 2 years and multiple cap raise/loan issuance. Can it continue at $0.30 and below? How much more cash is needed to thump the project over the line? Is there any point even continuing operations if REE price is lower than ASIC? Who knows. But I will not be surprised if SP continues downward for the remainder of the year. Lots of risk on the table, little clarity and an out of favour commodity price.
Good luck all. There may be a silver lining to this maelstrom in the years to come.
(20min delay)