the higher she goes...the more its worth..., page-2

t4p

I started typing the following for my own benefit and wasn't really planning to put it up here. Then I saw your post and decided what I had written might complement your thoughts - so here goes.

Here's my take on how it might work and what it might mean.

Lets start with the first statement about the $1.1bn in equity that is being raised to start off Pensador. This is clearly a capital raising and could probably best be described as being somewhat similar to a "book-build" undertaken by a major company wishing to raise a large capital sum. Essentially, at the $20 asking price, "Angolan nationals and other parties" will subscribe for shares in this newly created (or resurrected shell - it really makes no difference) company called Pensador which will be funding a range of resource projects in Angola.

So at the end of this book build, you have a company called Pensador which has 55m shares on issue and $1.1bn in the bank. The company issues a further $300m worth of shares to prominent Angolans at the nominal value of $20 per share which amounts to an additional 15m shares. They don't collect any money for these but rather it is part of the cost of getting access to "the assets transferred to Pensador". (I'm assuming these are the same assets that CVI is transferring - see next point).

CVI is then going to transfer its interest in two of its projects - Offshore licence rights and Oil refinery rights, for the issue of a further 3.5m shares. I think that this means that Pensador has made an total issue of 18.4m shares (15m to prominent Angolans and 3.4m to CVI) to get full rights to these two assets. That values the assets at $368m at the $20 Pensador value.

The numbers go a little astray there as my calculation now put us at some 73.4m shares on issue not the 68.5 indicated in the release. Not sure how that might be explained but it's not the most important aspect of this whole deal.

Next the announcement goes on to say that CVI will also have the option to subscribe to a further 800k Pensador shares at the bargain price of $15 per share. This $12m will be funded by CVI issuing 75m shares to raise about $16m (notably to 2 UK investment groups). This will leave CVi with a bit of cash for admin (and since they basically don't need to fund anything else, it should last quite some time).

Now we get on to looking at who is going to pay for all this exploration and development. The short answer is that Pensador is going to pay for most of it with their $1.1bn in cash. The announcement says that Pensador will (or it is anticipated anyway) fund the work program for JORC-ing and bringing to production Cachoeiras, as well as continued exploration on Fortitudes four other copper licences, bring the Luachisse and Nhefo alluvial diamond concession to production, construct and commision the refinery, participate in the offshore oil permits, JORC the Longonjo project, JORC the Chipindo project, explore the Ucua project, diamonds, iron ore and even secret projects.

Now all the wringing of hands and worrying about where the money is seems a little out of place in this context. CVI will be holding a share of Pensador while they fund the exploration and development of these project. When CVI's share price get's high enough, we have the option to invoke the "claw-back" provisions and get a bigger (or even complete) recovery of Pensador shares. Lets assume that CVI climbs to $5 (a long way off I know but it might get there once the diamonds are being sold and we are getting 10% of the profits, the Copper is Jorced and in production etc). At these prices under the claw-back provisions we can exchange 4 CVI shares for one Pensador share. This would mean that were we would have to issue some 294m CVI shares (4 shares for each of the 73.4m Pensador shares) to get back the entire issued capital of Pensador. Okay, this is a little artificial but I use it to illustrate how the claw back provision MIGHT work.

Lots more I could write but I don't have time given it's Friday night and I promised myself I wouldn't spend too much time writing about CVI. The clear conclusion is that there is little to be confused about if you take some time to actually read what is written and not let it be clouded by what you think is happening.

Have a great weekend everyone, I know I will as I hold a half a brick at 10c and bought another 340k this morning at 20.5c

Cheers

Badfish