Definitely hear your concerns and all mate. Thanks for sharing your thoughts.
In regards to the royalty if the debt facility is only for $70-$80million in total and the interest is say 10-11% with a royalty on top that amounts to say $75million (1.5million ounces using $50) then I see this as being equivalent to 20%+ interest per annum nett? I think another company that did a debt&royalty issue recently was Apex Minerals???
I agree with you that Xstrata has almost been knocked out cold with their debt problem which is evident by their rights issue and maybe this will lead to them either delaying the eventual deal with Nkwe or cancelling it. Obviously nothing can be discounted from this crappy environment.
I do see one saving grace for this whole project is that it is one of the last (for now) deposits that has this sort of resource. When I spoke to a couple of Nkwe relations people I also asked about the metallurgical and technical side. The Tubatse project which IGC has 15% of is defintely alot lower cost and will be the first one to be mined (Nkwe has the northern farms as well I believe). The favourable factors are: minerals close to surface which can be mined on an open pit basis, low strip ratio, flat land, favourable recovery, lower power demand for extraction, high platinum PGE grades, pretty much next to existing infrastructure. The main difficult thing they see is the power constraint which is pretty much a factor that everyone faces in South Africa.
I did say that what happens if Xstrata pulls out in the worse case scenario. The response was to look for a new partner....guess this was the only thing they could have said. The one comfort is that the project Tubatse is rated among the lowest cost quartile (although its at BFS stage so far). I guess Nkwe has to either be extremely confident that they will get a partner either being Xstrata or not. If not I see the takeover of IGC as being the fatal bullet for Nkwe longer term if they cannot repay the debt.
Also if gold goes through the roof as the world economy collapses then I believe platinum will also do very well or at least stay within a good range. This may be $1300??? Unless people see gold trading at a significant premium to platinum.
If the world economy recovers then the industrial demand for platinum will recover which could support a good price range anyway.
Obviously in the short term I guess deleveraging is still happening and hedge funds are going into extinction so volatility is evident.
I see that recently people talk of gold as being a safe haven but rarely do I see commentary that platinum is also a commodity that is used for warehousing value.
Honestly if Nkwe changes to a SCRIP offer like a 4:1 (which I really doubt) I would not mind this actually. Basing on the $60million deal of IGC Nkwe should be valued at at least $300million considering outstanding at the moment is 70cents+. The setback here is that investors will have to hold for another 2 years+ to maybe see this gain...and in this market Nkwe share price may fall to 5 cents before you may see 50cents.
Keep posting guys and good luck to all
IGC Price at posting:
22.0¢ Sentiment: None Disclosure: Held
