Further reading of the question in the Q&A no doubt has double standards attached to it.
As much as I would like to see the deal go through, but not in its current form with the strings attached to the TOP-UP clause.
The valuation for $16.34M is their own modeling that they extracted from their FAIR VALUE policy they have in place. The sale of ERMs share of the JV is based on this FAIR VALUE policy, just a slice of this cake.
Spruiked as an INTEREST FREE LOAN this sale price there should be no strings attatched and should be as such as stated and not window dressed later with added icing that can have many layers added on.
The TOP-UP is based on a 70% rise of any SP rise that may occur before the loan/sale price of $16.34M is paid back. Effectively it equates to $11.4M EXTRA for every 1c rise if it happens or $1.14M for EVERY PIP.
WHY should it be BASED ON POST EXPLORATION SUCCESS AFTER THE SALE IS APPROVED.??????
Exploration success AFTER the sale is a risk we take on as 100% owners and sorry to say but as ERM are no longer a JV partner should not have the LUXURY of this success if it happens.
This TOP -UP clause is merely a REWARD/INTEREST to ERM for their INTEREST FREE LOAN they state as being. If they want a REWARD/INTEREST then state it and cap the fee they want and drop the uncertainty attached to this clause of HOW MUCH BURDEN will be placed on EGO for this EXTRA DEBT that may/will happen. A blowout SP if it happens WILL be IMPOSSIBLE to repay in the 2 yr TIMEFRAME OF THIS DEAL.
IN this QUESTION it asks WILL IT BURDEN EGO WITH TOO MUCH DEBT, this is not answered to my liking to explain as to a simple YES/NO answer. Only a exasperating figure of their example of $3.7M for every 70% of each 50% SP rise. This does not answer the question in a TRANSPARENT MANNER. Is it $7M or can it be $70M if the SP blows out as we know it can move like a rocket from the past.?????? This TOP-UP is only a multilayers of icing on the original bare SALE CAKE.
This is an AMBIGUOS question with an AMBIGUOS answer and needs to be CL:ARIFIED better to inform SHERs exactly where they stand with it. IF ERM want INTEREST/REWARD with this GOLDEN HANDSHAKE clause then so be it, make it realistic and factual without skirting around the edges placing UNCERTAINTY to the fray that SHERs resent.
If the BIG ELEPHANT enters the room and NO CASH COMPONENT is in place that could pay this debt, THEN WHAT.?????
IF Alcoa need gas badly then WHY cant EGO and them nut out a revised contract to the Tranches in place.???
Maybe to help EGO out and being a PROVEN explorer and PRODUCER then amend the terms of this contract. Extend Tranche 1 for another year and bring in Tranche 2 into play so EGO can bring forward its drilling. Of the 8tjs/day couldn't 4tjs go to each of the Tranches., 4 for repayment of T1 and get paid for 4 in T2. Just a thought. Would be $12M in a year going to drilling sooner.
