KNL Strategy ticking all the FA boxes, page-4

Utrade, don't disagree with your sentiment that no deal has formally fallen over for MNS, and I thank you for your considered comment, although I will defend my view by pointing out:

a) MNS was supposed to have "binding" finance in place to see through to completion, with no DFS/PFS, and yet they had to go get another CR because that funding wasn't forthcoming. I'm pretty sure I also recall numerous posters on MNS at the time saying "this was the big one" and that they were basically set through to production. Fast forward several months, and MNS now have to go and get PFS/DFS, and timetables are being adjusted. A few months ago, no-one else was needed apart from existing MOU partners. Now all of a sudden POSCO are thrown into the mix, both as buyer and connected with finance as well. This is a fairly substantial change in strategy. While I don't disprove of the change in strategy, my point is that it's a substantial change, and is not what was first intended. I accept your point that MNS have still put it in the quarterly that their finance deal is still in place, but as a banker I can tell you that my b*llshit guage is going into the red. When you are in preliminary stages of a home loan, you (or your broker) might be dancing with a few different partners. Once you've selected the best deal, and you get a formal approval, you only have one bank preparing documents for your settlement. When you are unconditional on your house contract, well past your finance clause, and you suddenly announce that you are getting a new home loan lender right when the old home loan lender was supposed to start stumping up some loan facility cash, then it's not an optimal outcome.

b) I'll respectfully take you to task and say that I'm hardly "inaccurate". While I was general in my disregard for the other MOUs (TON and SYR), I specifically referenced and quoted the date of the MNS ASX announcement I referred to, where it's in black and white that binding finance was committed. And since that time, MNS has received no funds from them, and had to do another CR, and have also announced that they are starting the funding process with a new source. I am more than happy for you to be right and the finance deal is actually still in place, but my above reasoning indicates to me that the higher probability is that it's no longer in place. And it's the higher probability of the deal falling over that I make my judgement on, and not because I'm being "glass half empty". If every other Chinese deal in the market place was going through, then you'd have a more sound argument to say that you should be "glass half full". But not a single other chinese deal has been taken through to completion yet, so the counter argument (that the deal is likely to be no more) is more probable.

c) I would like to add to a point that you made "at the moment the Chinese holds all the cards". I completely agree with this sentiment, and in my experience, when you have a buyer and lender being not arms length, then it is a fallacy to think that you are going to get arms length sale prices for your product, while paying commercial rates on the debt** (see note below). No commercial buyer is going to "help you out" for free. You either take a lower sale price, or a higher debt cost (or some sort of profit split). Parents in Sydney might loan their kids "money for nothing" to help them out with house deposits and the like, but in commercial land, SINOMA would not be providing funding without a massive "quid pro quo". I dare say the MNS board recognised the lack of ability of SINOMA to complete, or the lack of favourable terms, and accordingly started seeking elsewhere. Good on them for doing so, because it's much better to change tack sooner rather than later. And sure, they get to announce that the old funding deal is still in place, but as I indicated above, the probability of that happening is arguably next to nil. If I was part of the last CR, I'd be asking some serious questions about why I was stumping up money for a deal that had a binding commitment for finance, and if that binding commitment wasn't all it was cracked up to be, I'd be asking some serious questions about whether you could rely on that buyer to keep up their end of the bargain.

PS Completely agree that we are all still in spec stock land, and shareholders can still get burnt in all of our companies, including KNL. I just like the fact we've taken most of the risks out, and the last few risks will be taken out soon.

** This has just as much relevance for KNL. We are going to get a great finance deal from a genuine development bank, thanks to an "in principle" guarantee from German Government, but that's not free to us either. There is a cost to us for this, which will be buried in the cost of the finance. Overall, it's well worth the cost, but my point is that we don't have it all "free" either. Our cost is also significantly mitigated by the Germans wanting to secure raw material supply of quality graphite, so part of our "quid pro quo" back is likely that we are locked up with first rights of all additional production being offered to our existing two buyers, before we can sell to anyone else. And that's fine, because I'm happy with providing that "quid pro quo".