many ways to skin a cat!

In INL's 18th March update on the Intec Recycing Project they said:

"The 28 February 2009 deadline for the execution of the A$20m Contract for Sale of the Mayfield industrial plant by the Vendor (Delta EMD Australia Pty Ltd) to INL has been allowed to pass. Discussions between the Vendor and INL are continuing, with the conditions and price of the proposed acquisition again open to negotiation, reflecting the changed market circumstances."

In addition, INL has indicated that it would require the injection of some funds into the plant to get it up and running: "The Company now enters into a near five-month due diligence period (ending 15 April 2009), which will also be used by the Company to secure the total initial capital costs of A$25-30 million for all of the site purchase, Refractory and Wastewater Units startups and working capital."

I just thought I would point out that there are many ways INL could negotiate to pay the renegotiated purchase price that could assist INL and delta coming to an agreement for the purchase. This could involve:

1. Upfront Cash Contribution (presumable sourced from some third party loan eg. bank or government);
2. Refund of Environmental Storage Bonds;
3. Unit-based mill throughput royalty capped at ? such as INL agreed to with the sale of the Hellyer assets to Base Metals;
4. Payment based on INL Market Capitalisation or share Price achieving a certain level;

1. Upfront Cash Contribution (presumable sourced from some third party loan eg. bank or government).

This is quite simple and would require INL negotiating a loan from a bank or other third party. I really don't see this as been terribly hard if the project economics are what INL has indicated. Furthermore, INL have indicated that "the underlying land value of the 8.9 hectare site has been independently estimated by one of Australia’s leading commercial real estate agencies at A$10.7-12.5 million". Consequently, you would think that INL should be able to borrow some third party funds for the project even if it cannot get the whole finance from this source;

2. Refund of Environmental Storage Bonds;

In INL's 26th Novenber 2008 announcement it indicated that "it has decided to proceed with early implementation of zinc recovery from EAF dust. At current prices, Intec’s stockpile of this feedstock contains approximately A$20 million of zinc; and the early recycling of this material would also obviate the need for the current environmental storage bonds, thereby returning approximately A$4.5 million to the Company." As part of the purchase price consideration it could negotiate that part of it be paid when INL itself receives the refund of these bonds. Delta may be willing to agree to this rather than see the deal fall through;

3. Unit-based mill throughput royalty capped at ? such as INL agreed to with the sale of the Hellyer assets to Base Metals:

As part of the sale of Hellyer assets to Base Metals INL agreed to receive payment from Base Metals which included the following:

• Processing Royalty: BSM will pay Intec a royalty of $2.50/tonne processed through the plant, up to a total payment of $5.0 million.

Consequently, INL could also agree to a royality based payment based on throughput at Newcastle.

4. Payment based on INL Market Capitalisation or share Price achieving a certain level;

Funding from exercise of Options. INL has :
674.3M Ord Shares, and
132M 31/12/09 8 cent Options;

Therefore, if INL can get the options in the money by 31/12/09 it can expect to receive A$10.6M dollars from the exercise of these options.

If the options are exercised then INL would have 806M shares outstanding giving INL a market capitalisation of at least A$64.5M using the 8 cents option exercise price;

Consequently, using a hypothetical purchase price of say A$12M, INL would need total capital of say A$17 to A$22M to get the plant up and running, say A$20M. This could be funded as follows:

Bank Loan: A$8M Intec Ramp-up etc;
Bank Loan: A$4M Delta Up front payment;

Total Bank Loan: A$12M. This would leave A$8M outstanding. INL could make payment of this outstanding amount from the following sources:
(a) Delta - Environmental Bonds Refund : A$4.5M
(b) Delta - Assign BSM Royalty: A$5.0M
(c) Delta - INL Newcastle through-put Royalty: A$5.0M

The total of these sources exceed the outstanding amounts.

Since INL agreed to similar terms when selling Hellyer to BSM, it is not unrealistic to expect similar terms to be incorportaed in the transaction with Delta.

I just though I would make this post to give some idea of how INL may achieve finance for this deal.

Regards

SP