strategic partner interest - high vs low, page-8

Hi All,
For those interested, I've reviewed the GBG/Ansteel deal as this has been proffered as the most likely proxy for the SDL JV we all await.

The GBG/Ansteel JV was announced 3/4/06 prior to the DFS being commenced and the JV funded this 50/50.

To earn their 50% of the Karara project (funded 70/30 debt/equity), Ansteel agreed to provide 75% of the equity component and assist GBG find its 25% if requested by GBG.

Ansteel was not obligated in regards to the JV financing but indicated their willingness to provide 100% of the debt subject to adequate security being provided.

At this time GBG raised capital at $0.37/share.

One year later Ansteel injected $39m into GBG (prior to release of DFS) to hold 13% of GBG.
GBG now have $60m in cash and a strategic partner but no DFS.
So the idea that nothing moves until the DFS is tabled doesn't hold water in the light of this example.

Later in 2007, the DFS is released and the SDL merger is rejected.

Finally, when it came to GBG's $144m equity contribution for its share of the JV in Oct 2008, GBG invoked the "please assist" clause of the original JV agreement and requested Ansteel find this money for GBG as debt.
Ansteel then negotiated an equity deal at the corporate level for another 22% of GBG at $0.85/share.
At that time, GBG was trading in the 40-50c range.

At the same time, Ansteel and GBG "agreed" for Ansteel to take 100% of the offtake of Karara. Did GBG have any choice?
De facto, Ansteel got its 100% offtake and control of any future GBG developments.

In the final wash-up, the deal was still positive for GBG shareholders so no complaints there.

Now let's look at the SDL situation:

The DFS is complete.
A JV partner is required to guarantee equity contribution and finance for the project.

Assuming the JV is completed for a 50/50 arrangement and the capex is funded 70/30 debt/equity then we can run the numbers:

Capex - $5bn
Debt - $3.5bn (JV responsible to source this)
Equity - $1.5bn (25% SDL - $375m using GBG model)

I'll guess SDL will be able to get (like GBG) a little more equity than required for the JV to allow them to pursue other projects for their new partner.
500m shares at $0.75 = $375m so let's say 600m shares issued at $0.75 to raise $450m?
This will make for 3.311 bn shares on issue and a market cap at $0.75 of $2.5bn for 40% of the Mbalam/Nabeba JV and $100m cash in the bank?
If Hanlong take the equity (or another Chinese coy) then we may well see the GBG picture replicated.
Hanlong (+ other Chinese) will have 37-38% and effective control at the corporate level.
Off take will go 100% to the Chinese and the project goes to decision to mine.
Everyone's happy, yes?
Thanks for listening.