"You appear to be heavily focused on the potential negative outcomes from Wyloo as a non-holder"... assume you mean me, and yes I've been warning HC of the probable outcome for HAS shares since 2022. I do it as a matter of principle having dealt myself in the first place. My research of the RE sector brought me to Yangi, then my analysis and views of RE future pricing strongly contradicted the "world class deposit' mantra run by HAS and swallowed by the gullible market. I like to follow my strident calls against the zeitgeist to the end for the satisfaction of being right or wrong (so far as events pan out, notwithstanding there is always uncertain variables and multiple possible outcomes).
Clearly Yangi is not profitable at current prices, very few deposits are, but if prices rise enough and/or governments subsidise development and economic price floors to incubate an ex-China Re supply chain then any deposit is a candidate for development. I'm bearish that Yangi is the right deposit, in the right place or time to justify or receive government grants, let alone equity funding, but I could be wrong. Some people are optimistic if not bullish that grants/funding for Yangi will arrive in conjunction with higher prices etc and thus Yangi is a valuable asset. Investors should come to HC and test their own thesis against contrarian opinions, and be glad some odd bods like me enjoy analysis and market speculation for the sake of interest and not always financial reward...Asking the right questions.
IMO, no way will investors risk major development equity investment into a situation where HAS is cum-raise ~$150M in 18 months' time just to avoid insolvency. Equity risk investors would need confidence HAS MC, share price and ability to raise another $150M above development equity requirements is rock solid if required. With RE prices so low, WA so uncompetitively expensive, Yangi more marginal than development peers, and the RE market itself so uncertain the odds are low of the situation resolving itself with positive clarity over the next year. This is reflected in the falling share price, with EV @ 38c ~$50M (MC less cash on hand) despite having spent ~$150M on development capex to date.
The outlook could change rapidly with direct Yangi government grants and floor price offtake deals etc, in which case the share price could rise. Wyloo may decide for strategic reasons to do a sweetheart deal and swap their debt for shares at some premium that leaves shareholders with decent value left and the shares trading higher with the debt overhang removed? Like the Monte Carlo valuation of 'embedded derivative' value from the exchangeable option in the Wyloo notes, there are multiple outcomes that would see HAS shares trading higher.
Leaving aside the bull or bear arguments around probabilities assigned to multiple possible outcomes, that means HAS is trading like a call option with an expiry date of Oct'25 when the $220M loan repayment is due (maturity). Similar to this example, the closer to expiry (maturity) the option gets, the lower it's price. With 3 years until oct'25 maturity there was plenty of time for good things to happen and Yangi/NEO to rise in value making repayment of the loan easy and de-risked. Maybe NEO shares rise from $15 to $25 and the deal made HAS a profit even after Wyloo loan interest. HAS share price ws higher partly reflecting this 3 year time value (or at least 3 year loan repayment risk discount)...
With 18 months until loan maturity, the probability of NEO shares rising from $6 to $25, or even back to $15 is substantially reduced, as is the probability of the RE prices rebounding or development funding being delivered for Yangi completion. HAS share price is now reflecting the much lower probability of good things happening that are required to repay the loan given it is now due in only 18 months with a bad RE market outlook.
As Oct'25 approaches the risk of good things happening that will allow HAS to repay the loan without huge dilution reduces 'inverse exponentially', and the share price with it probably. Then again, the markets are forward looking and will try to pre-empt bad outcomes early and thus reach the end game much sooner than a nice even time decay trend.
Unfortunately, the last 18 months have seen RE prices crash, reality of Re over-supply and bottlenecks downstream not at the mine site become apparent, Yangi costs continue to rocket, better deposits get discovered and/or worked up, NEO shares lose 50% of their value and avoid any substantive tied up with HAS, Yangi miss out on recent government subsidies (eg ARU) etc. HAS shares reflect this reality, greatly exacerbated by the gamble to borrow $150M and punting on NEO shares would deliver both a profit and strategic partnerships Yangi required to sell into.... gamblers often lose. There is still 18 months that things can turn around, and thus there is still value in HAS shares for believers that a Wyloo loan crunch can be avoided (The board and friends are still believers at low enough HAS share prices).
What will Wyloo do come Oct'25? If the RE market doesn;t change, there is a very good chance Wyloo accept that Yangi is not a project they really want to be involved with, though NEO shares still look strategic and worthwhile investment at current prices. Nothing embarrassing about buying upside project exposure with convertible notes, but changing their mind when the facts change and asking for the cash back please. I have my bias, but if I was Wyloo I would not pay $150M for even 100% ownership of Yangi given a choice of all cash repaid and walk away...
If nothing changes materially for the good over the next 12 months, I expect HAs will go into a trading halt well before Oct'25 'for CR negotiations to repay the Wyloo Notes' if Wyloo gives notice it chooses not to exercise it's share exchange conversion option. Could be a very fruity situation... The Notes have a 3 year maturity, not with an open ended date, another fact. Again, the term 'maturity' doesn't need to be defined or explained to the market, it's well understood and means 'repayment due'...
Maybe try stepping outside your HAS investor bias and looking at the situation from Wyloo the lender's perspective. With HAS shares trading at $3.75 would you lend $150M to a high risk developer and agree they can repay you in shares at $5.50 (a whopping 47% premium to $3.75) in 3 years time when those HAS shares may be worth much less than $3.75 and maybe even nothing? What possible rationale can you give this thread why Wyloo would take all the risk with $150M into HAS at a massive equity premium, with no downside protection? At 27.5c in the near future probably, Wyloo would have lost 95% of their capital over 3 years...
The deal from Wyloos' perspective by your reading (a loan exchanged only for shares at $5.50 less any subsequent small dilution adjustment) would be so bad, so horribly risky and amateurish as to be an embarrassment and affront to anyone with a business degree. HAS had their desperate reasons to buy 'cheap' NEO shares after a sell-off and use that as leverage to build a 'mine-to-market business with NEO, their gamble and side of the deal is understandable. Please explain what was in the deal as you want to see it for Wyloo, if Wyloo cannot choose cash repayment at maturity??? ... realistically I don't expect a sensible reply, so maybe save face and just consider it a rhetorical question.
GLTAH
(20min delay)
