tuesday night conspiracy theories

I had some wonderings and thoughts about the current play last night, will try and remember them again. Here goes....

Extract need some ~$1.6 billion to get this project underway by themselves.

Funding the project was the next step on the critical path (probably along with an offtake agreement).

Funding options include taking on debt from banks, issuing shares to existing shareholders, and taking on another cornerstone investor.

Taking on bank debt brings restrictive covenants, and costs for early pay back (I would think) - clearly an option, provided that the board representatives agree on this path.

Issuing shares can either be to existing shareholders at their current percentage holdings, or can be new cornerstone investors - also clearly an option provided that board representatives agree on this path.

Issuing shares to existing or new shareholders would be preferable, as there are no strings attached to the funds - although it must be said that ~$1.6 billion is almost as much as the company is currently valued - so would be a very big ask.

A combination of shares and debt seems to be a reasonable solution, as this reduces the ability of banks to have too much control over the project, and keeps debt to a minimum.

So - why is it that decisions have not been announced since the mining license was issued?

It would seem that the options are: either that some board members are not in agreement with other board members - or that existing major shareholders do not wish to invest any more money into the project - or that banks are reluctant to lend to this project.

I tend to doubt that banks are unwilling to lend to a first tier long life mine - even allowing for the mine being in Africa.

From their actions. one might infer that Kalahari wants to sell rather than develop. This might stall any action by Extract to raise funds from existing shareholders, although we would only need a majority of directors to agree to issuing shares to raise funds.

The more options that I think of the more I conclude that the board is dysfunctional, and represents the major voting blocks, rather than the interests of Extract themselves.

I think we need a board spill, and truly independent directors appointed. Board members committed to realization of shareholder value. Were that to happen, a geniune takeover would follow, based upon market valuations, rather than existing vested interests, who appear to be content to sit on their hands.