Due Diligence Process, why, how and who
International Investment Bank. (IIB)
If you have a willing lender and willing borrower it requires Arse Preservation Due Diligence as the IIB will have shareholders they are answerable too along with investment review committees and upper managements and BoDs.
Typically they will have very little idea of the project and the resource and will have to learn it as quickly as possible. To do so they need to engage external independent consultants with professional indemnity insurances as it will take considerable time for people to get themselves across WKT as a company.
The Lender will need to ensure all the documentation and information that is being produced by the Borrower is risk assessed and the bean counters will be very much risk averse by default. This will require third parties to be engaged to undertake independent analysis of all the data being presented.
The independent analysis will involve multiple independent parties working simultaneously towards generating reports that confirm the data, the processes, the risk mitigation processes and costings etc.
Its all about identifying the risks and strategies to mitigate the risks.
If they feel something is an added risk in the project, they will be highlighted and demand solutions or relevant insurances and strategies be implemented.
These independent reports will be from specialist organisations that will also have professional indemnity insurances to cover signing off these reports as the Lender requires this to cover their arse and tick off the Due Diligence check boxes along the way.
The Lender needs the Due Diligence processes to be undertaken to cover themselves in the unlikely event everything was to turn ugly before the plant build is completed or before we get into production.
This enables the Lender to categorically state and prove they covered off their due diligence obligations and ticked all their check boxes and have third party independent reports to back each section up.
The Lender will also have their own people take the appropriate steps to meet and greet with ALL our Binding Offtake Partners, including Wogens key people.
They will also be likely to be insisting upon meeting the Mining Commission, the Mining Ministers and the Prime Minister of Tanzania for discussions and assurances of a healthy working relationship with the company and no doubt be asking the tougher questions around political stability and the mining legislation changes and future plans.
They will also be looking to meet and greet the 2 Port Authorities at the Port of Mtwarra and Port of Dar es Salaam.
(Port of Bagamoyo) is another port looking to be built with significant investment by China and Oman.
https://www.thenation.com/article/tanzania-china-bagamoyo-port/
They will also be conducting site visits and meetings with the village elders and influencers within the area.
Ultimately the Lender is looking to assess their own opinions to the associated risks with the project as we have only completed a comprehensive DFS and not a more expensive and intricate risk assessed BFS.
Having a LOW Capex and HIGH Grades with great flake size distribution gives WKT much more prospect of being able to financed off a DFS where others with HIGHER Capex and Low grades with less favourable flake size distribution will require the more expensive BFS pathway.
The Lender and the Borrower will most likely have mutually agreed on third party independent consultants to provide their findings to support what the company has said in its documentation and in turn doing so the borrower and the lender will not have very much control on these reports being written up and submitted for both parties to digest and agree or disagree.
Everything the company has done to this point will be reviewed, analysed and risk assessed from a more critical eye of a bean counter with no initial vested interest.
The lender will be looking at the overall project and all the wide variety of moving parts to the Lindi Jumbo Mining Operation, right down to the Diesel Fuel supply agreements, roads and infrastructure, wet season issues, on site equipment & maintenance, concentrate transport to the ports etc.
They will be risk assessing everything they feel could impact the project rightly or wrongly in any way to ensure their investment is secure as best as possible.
They also have their own tactics and purposes to also be risk averse that also create opportunities for themselves as the Lender to also cut more meat of the bone for themselves and create additional lending requirements and clauses that also can bump up the required level of debt that is being lent, that also bump up the pre interest payments that need to be borrowed in advance. (paying interest, on top of the interest payments being set aside).
They will be looking to understand the port clearing processes and government timelines and execution processes to have the concentrates approved for shipping, paying the relevant fees and taxes, shipping schedules, storage capacity and processing ship handling etc on the ports.
They will be scrutinising the mechanical services in the area for break downs and equipment malfunctions, timeframes for delivery of parts and services.
The list of everything they will be reviewing and scrutinising will be very long and complex and simply cant be covered off in my post, hence the few examples, but you get the idea that it all takes time.
Again its all about Arse Preservation Due Diligence and that process could be completed at any given time.
: ))
(20min delay)