wsa debt

Hi Guys

I am as frustrated as you with the performance of WSA, but I am in hope that the CEO has focused on profit now, he has stated as much. It has been exploration up until recent events but I think the scepticism of the broking community have focused Hanna's attention. Why?

Quite simply its the treatment of debt due in 2012. This is convertible bond of $200m convertible at just over $8. The analysts are treating it as debt as the shares are $5, so the company has to repay this. However if the share price is over $8 in 2012, this will convert and so there is no debt and with a market cap of $800m this affects the balance sheet huge. This is why the analysts at Wilson cannot "jump the bridge" they are all factoring the debt as is. If the team led by Julian can get the cash earnings going and the stockpile sent to BHP will do this quarter, the analysts will have a leap of faith and turn the $200m debt into equity and the whole balance sheet changes.

I have to say the behaviour of the non exec chairman Streeter has tested the best of us, but Jubilee Mines got taken out for 2.1bn and WSA has at least if not better Ni in the ground. One to tuck away for 2011 when hitting peak production, another Quoll and debt converted to equity, then the likes of Macquarie will have missed the boat again, simply as they focus on the fees they take.