Hi All I have read the comments about self-serving management....

Hi All
I have read the comments about self-serving management. I’m not sure it’s quite as simple, or cynical (on management’s part) as you think. In fact, I think management are trying to do the right thing here for shareholders and protect the company.
If you recall from earlier presentations, MZI has a reasonably complex and complicated capital structure. The capital raising looks to me like an attempt to simplify this.
This is my understanding:
MZI holds a US$21m convertible loan facility with RCF, which matures in 2019. The key terms are: that it can’t be repaid early; RCF receives 10% interest on the loan; and the debt converts to equity based on a complex formula which includes factors like VWAP’s/price floors and FX rates. I think the guts of it is that provided MZI doesn’t raise funds at less than 40c/share, then basically RCF would be issued 58.2m shares at 40cps in 2019.
But the US$21m loan is not relevant to today’s raising. It’s the next bit that is relevant.
RCF also put in place a US$33.5m bridging facility with MZI. Only US$25.5m of this was expected to be drawn down and that is what has transpired. If the bridge is not repaid by Dec 2015, then the bridging loan converts to largely the same terms as the US$21m convertible loan, in 2020.
There are two mechanisms for MZI to settle the bridging debt - either convert the debt into equity with RCF in 2020, or raise capital on market. MZI have worked out that provided they raise the capital at 40c or better, then it is more accretive to shareholders for them to raise the capital. I think their calculations look at things like the NPV of future interest payments between now and 2020.
So management have calculated that it is better for shareholders that MZI raise this capital at 40c or better before December 2015. The other incentive in doing so is to make sure that RCF doesn’t ultimately hold > 70% of the stock. RCF’s holding will ultimately (in 2019) be more like 35-45% if this capital raising is successful (depending to what extent they participate). I think in both these respects, MZI is trying to look after shareholder interests.
The next criticism is that 40c is too low, given the share price was 54c when MZI went into trading halt. Maybe it was, but remember, this is a $45m market cap company trying to raise something like the same number in an environment which is pretty ugly for resource companies. To do that, they had to offer a decent discount. Maybe it was too big a discount? I don’t know. I guess we’ll find out once we see the final details ie: was the raising over or under subscribed?
The end result should be a vastly simplified capital structure. The RCF $21m convertible loan will remain in place and will be converted to equity in 2019. Plus the conventional project debt of about US$50m will remain, but this is well able to be serviced by the anticipated cash flow of the business.
I guess my final observation is that if MZI is seeking to double production and get the business to an $80m plus EBITDA at some stage in the next couple of years, it needs to get its capital structure in order. If this raising is successful, I think it goes a long way to doing that.
I’m not entirely sure if I have every detail of this right, so please check for yourselves for accuracy.