kcg : a couple of questions, page-7

Hi Hilldweller,

If you look at the detail, it goes a bit like this:
1)
KCG will acquire Attfield for 10M 2c shares (or $200K on issue, or $900K on closing valuation);
2)
Attfield will acquire 51% of Oroplato for 23,162,400 2c shares (or $463,248 on issue, or $2.1M on closing valuation), thus valuing Oroplato at ~$900K (on issue), or $4.1M (on closing valuation);
3)
KCG (through Attfield) will then mop up the remaining 49%, also @2c for a further $457K (on issue), or $2.0M (on closing valuation); and
4)
Oroplato will then exercise its pre-emptive rights over the Cerro Negro Project, at a further cost to KCG of US$1.5M (or $2.0M, assuming a stable 74c exchange rate - lower, if averages higher, but higher if averages lower).

The effective cost to KCG of all this will be A$7.0M (scrip and /or debt) which is >2x the A$3.12M stated in today's ASX Release. The difference is acocunted for by the difference between the cost to:
1)
the Company (through issuing shares @2c); and
2)
the shareholders (who are now paying 9c+ as opposed to the 2c at which the new KCG shares will be issued).

That is, the difference between actual cost and opportunity cost.

Overall, the inferred (or opportunity) cost equates to an A$11+ figure, compared to the stated A$5 figure, from a gold valuation persepctive and company management persepctive.

And, that's before you go through the shareholder approval process, the isusing of a new prospectus, the underwriting of any Rights Issue /placement of shares, any associated advisory costs etc, all of which are likely to total anywhere between $1.0-$3.0M.

The effective gold related cost, therefore, is likely to be closer to A$16 (on an inferred, opportunity basis) than the currently stated A$5 (on a cost to the Company basis).

Additional fund raising and working capital costs will then follow.

With 84M shares currently on issue, plus Options, KCG will soon see its share capital expand out to 140M+ shares (before any further capital raising takes place).