Hi Mike R et al,
You can all bet that management have a very fluid, active and wide scoping Capital Management Program. Far, after all, is and will continue for some time, to be a substantial capital consuming entity for the near term. So the company's and management's existence depends on developing as many options as possible. At any one time, it would be the Number 1 or 2 agenda item at every board meeting.
So what are the options?
Share Equity: done plenty of that but hate doing it at these price levels and its getting a bit tired. Diluting by 15% (via normal placement) every 6-9 months is certainly not ideal. But a strategic placement to a Big Oil corporate (not COP or CNE) at a 50-100% premium is definitely a real option that would also help the competitive tension and muscle of FAR.
Project Equity: they keep saying 'no' to this but there is, at any one time, a value level at which an offer for project equity will be attractive versus share equity but is 'played' off versus their own NPV valuations. For example if someone offered them US$100m for 2%, this should more than cover their costs to Financial close and values (theoretically) the project at US$5,000m or A$6,944m (at ex rate 0.72) or A$902.7m (for their now 13% interest) or 24.4c per share ( on 3,693.6m fully paids). So, for this example only, this would be the equivalent of placing stock at 24.4c...a very tempting (I'd take it) proposition for management. Basically, if Project equity is 2 or 3 times the value of share equity...it would be negligent not to consider it. The market, I suspect, would absolutely salivate at the prospect of no further dilution before FC.
Hybrid equity: The ubiquitous private equity or resource fund specialist group quasi debt/equity instruments. These are very hard to nail down and usually have a minefield of CPs that always blow sh*t and p*ss in the face of equity holders. So I hope FAR management aren't expanding this option.
Project Debt: To early for normal commercial debt in the project at this stage (need 2P and a BFS) but it certainly helps to keep a few credit committees (if they are still alive!) on the knowledge curve. But there are a couple of non-commercial financial institutions that may be able to play a little role yet I still think its a bit early.
The THP does make it much harder for these options to develop and hard data is needed to firm up all but the basic placement route.
But my strategy would be work up the strategic placement (with JV data) and the Project equity routes and see how far I could get. Then present them to the Board as alternatives to the pain full 15% dilution every 6-9 months.
Ahhh....its so easy from my armchair ;-)
Cheers,
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