Sunday night I caught up with a friend of mine, a high ranking exec of one of our two big miners.
He has dealt with India's govt on an oil and gas deal. He travels the world and puts big deals together.
I had a chance to catch up with him and discuss couple of Co's that I'm involved with just to get his opinion based on his experience.
On the LCY's front, I have fully explained to him our dealings with NMDC and asked him for his opinion of what we can expect and how does he think the deal could be structured.
This is a summary of our chat re LCY:
Even for the big boys, Australia is a very bureaucratic country. It takes ages to get anything done BUT it pales in comparison to the bureaucracy in India.
The red tape in India is something that needs to be experienced to be believed. What takes a week to approve in Australia takes a month in India.
Signing of contracts (especially with any govt authorities) is most frustrating because the number of signatures and approvals that are necessary to authorise the deal can be staggering.
He said that after the initial pain and frustration of starting up a working relationship with them, things do ease off and you can have a good and successful relationship with them.
I told him that it's nearly a year in the making and he said that that's completely normal.
I expressed my frustration of how slow they are, bearing in mind that they "need" us, to which I got an instant reply:
They need you? Followed by a laugh.
He said, I hope that's not what you think.
It's like saying that BHP or Rio need LCY. Totally absurd.
They are happy to do business with you because you must have a good potential. As for the deal, he asked if we are giving them 50% of our company for free. I said that most shareholders are expecting a cash offer of $100M+.
Lucky, he didn't smack me over the head with a wine bottle. LOL
Anyone who's expecting $100M in CASH in this market has rocks in their head.
He said that having a business partner the size of NMDC would bring enormous benefits to LCY and make it "almost" immune to any market downturn. A bit like offering an umbrella on a rainy day. You still get wet but not drenched.
Most importantly it would make LCY, self sufficient and not reliant on external financing as well as give a huge confidence boost to the existing and any future shareholders.
In Australia more mums and dads own a share portfolio then in any other country so being able to woo them and offer them GROWTH and SECURITY that can only be achieved by having a big financial partner on your side can only be seen as positive.
He said that if he was negotiating on the NMDC's side with someone the size of LCY, he would have tried to get 40%-50% of the Co for FREE.
He would then offer them financing of the entire infrastructure, take-off agreement and a budget for any further acquisitions.
He said, that's how big Co's do business with small Co's in TOUGH times.
The prestige of having a major player as a partner carries a lot more value then the amount of cash they inject into the company.
They also bring with them their own followers as new investors.
He then added: That's the WORST case scenario. The rest depends on your management.
Guy's, that's just an opinion of an experienced exec who doesn't know any more about LCY then what I have told him on 2 separate occasions.
If that's the WORST possible scenario then things are looking good.
Let's wait and see what the actual deal is.
I am a long term holder and have a big exposure to this stock but I feel very relaxed and confident of a positive outcome.
We can't go wrong with India's largest miner on our register.
Good luck to us all and let's visualise: GREEN, GREEN, GREEN.
LCY Price at posting:
19.0¢ Sentiment: Buy Disclosure: Held
(20min delay)