Valuing ARU, page-9

Great question.

I'm not an expert. So hopefully others can chip in.

But here are my thoughts:
- The amount of equity required is probably $500 million. (I actually expect this to be less due to the money already spent to date).
- We have about 2 billion shares on issue.
- We would raise at around $0.30 to $0.40 (the Market Cap at that price (pre raise) is about $700 million).
- $500 million at say $0.37 is about 1.3 billion new shares.
- So new Market Cap post raise would be $500m + $700m = $1.2 billion
- There would be a total of 3.3 billion shares. So 1.3b / 3.3b = 40%)
- So that means about a 40% reduction in your shareholding (assuming you don't buy any new shares in the Cap Raise).
- So if you previously owned 1.0% of ARU, you would now own 0.6% of ARU.

So the key for existing holders to reduce dilution is:
- Raise the least amount as possible (not much they can change now)
- Raise it at the highest share price as possible.

Management are aligned with this.

So then we need to look at how the Cap Raise will be structured. My quick research shows that:
- Traditional / Standard Rights Issue - "the issue price is not more than the volume weighted average market price forsecurities in that class calculated over the last 5 days on which sales in the securities were recorded before theday on which the offer is announced". So we could not use this method if we want to raise at say $0.30 - 0.40. Someone is keeping the ARU SP surpressed.
- Accelerated Entitlement Offers - Same as above.
- Share Purchase Plan - Retail component Offer Price must be at a discount to the current SP. So unless ARU can bump the SP up to about $0.50...would be hard to raise above $0.30. ARU might do the instutional part at a higher Offer Price and limit the SPP to a small percentage of the total capital raise and do it at the lower Offer Price. Not even sure if this is possible. And would take alot of work in the background. ie it is not a standard SPP.
- Placements - Typically only applies to institutions...and can raise at any Share Price. Retail miss out.

If ARU cannot push the SP above $0.50 (with the upcoming offtake and debt announcments), there is little incentive to ARU for retail to be a part of the Cap Raise. ARU would likely do a Placement at a higher Offer Price. Of course, once all this comes out, the SP will move quickly up to the Offer Price.

If you are wondering why the SP has not gone up lately, even with all the good recent news (Govt debt package, cost over run facility, Biden tarrifs, Aust Govt giving 10% rebate on opex costs, etc. etc.)...it is the institutions positioning themselves to get the largest chiunk of ARU they can. Using all their manipulation tricks.