Hey Squash. Nice to hear from You over a long time
Like Your POV.
As a holder and why I raised this concern/question is not much about future SP, rather dividend yield. And I like to get better overview about ARL investors by reading opinions and learn if I miss something.
I put myself into position as owner of the KNP tenements and share opinions accordingly. Most advanced project NPV POST TAX is 5bln $AU. Consortium is funding DFS with 100mil and getting 35% of project share which is 1.75 billion $ AU POST TAX.
In order to get 35%, Im interested already in project financing. To hear out partners and their toughts/options about it early. Because I dont know my company SP in 2 years from now. Nobody ever knows. What if my SP will be 0.1 in 2 years from now ? What if no institutional investors want to buy 5b shares in order to raise 500mil ? Or how much we have to raise capital anyways ? How strong is AUD to against other currencies and vice versa. Future is uncertain and I couldnt take the risk and be responsible for my shareholders in that manner.
Consortium could say that You never going to mine because You dont have operational cashflow. Ok, thats alright. But Im offering You world class project which You never find elsewhere. Plus, You get offtake rights to supply Japanese economy with critical metals. You secure part of critical mineral supply chain.
But since Im responsible for my SH and minimizing their risks I'll need financing. If You fund 100mil DFS, Im willing to give 35% of project share which is 1.75 billion POST TAX. If You are willing to contribute enough own equity in order to get debt financing, You'll earn another 15% of project share, which is 750mil $AU.
In order to acheive that, there has to be agreement that ARL is responsible for paying back half the capital that Consortium is raising and contributing, because JV company is applying for loan. This company already has a mortgage asset with NPV of 5billion $AU.
Or part of the deal is Consortium pays ARL share of the project indirectly, which is own equity in order to get debt and without diluting SH. Because we are talking about value of 2.5 billion $AU Consortium will earn. There has to be something bigger than just - You guys give us 50% of the project, issue god knows how many billion shares to raise Your own equity and then we apply for debt.
If its so, would've made more sense to sell project and pay out 25$ a share to SH. Or look for investor how is willing to pay 2.5 billion $AU, step a side and let ARL take care of all the works from DFS to FID and financing.
Its definitely not that black and white and I definitely made mistakes because of my lack of knowledge but Yous get the point.
My honest opinion is that financing deal/agreement is more or less in place already. Cant think risking with so many uncertain future parameters. Management knows low SOI is our strength, thats what AP has pointed out countless of times.
If one requirement to earn ultimate 50% share of project was securing finance for project, then it would absolutely blow my mind if securing the finance is letting ARL to issue billions of shares and then Consortium is just applying for the loan and getting 2.5 billion share in project and at least 75% offtake right in exchange for funding 100mil DFS.
ARL Price at posting:
37.5¢ Sentiment: Buy Disclosure: Held
(20min delay)