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OK, so we have moved on from the 'default' statement so that is one step. I have no idea who is behind the notes but I can tell you that our Chairman (and our CEO) has extremely rich contacts. A more pertinent question would be do I want an association with those contacts?
Whether you think they would be able to raise the money is, once again, moot as the fact is that they have whether at arms length or otherwise (Ciftay for example). I refer you to the previous paragraph as an indication as to where this has likely come from. In the areas where these people operate I suspect that a great deal of the financing is based on who you know. Whilst I do not know, I suspect that your experience does not extend to the FSU.
The amount raised over the course of the company's history is, of course, relevant but you do have to consider the periods PM and PD (pre-Martin and post-Dekel). The earlier period is ancient history and the amount of money spent on defining the resource ultimately came in quite high as they could never actually do anything with it subsequent to the definition despite raising funds that were supposedly allocated to building a production facility. I think that the money spent since has not been wasted (I completely disagree about Kapan by the way but you would expect that of course).
Thanks for the reply Shakhtar and for posting your views.
I disagree Daisan. The history behind this loan doesn't mean endorsement by the lender at all. I work in finance, in mining finance. I speak to risk and credit committees and other lenders on a daily basis. The way this loan has been rolled and rolled, to me, means only one thing - it is not an arms length loan. Again, just my opinion, but I really suspect something dodgy is going on behind this loan. No lender in their right mind would give Chaarat an unsecured corporate loan at this stage. I even doubt they'd able to raise project finance (despite their assurances). So why is this rolled and increased? I mean I would understand if the lender was a small fish that has been cornered and beaten into submission, so to speak, but the amounts are not small. This can't be explained by either commercial logic, or stupidity. The only other alternative is that it is a connected party staying in on personal assurances from Martin. But that would have to be one hell of a friend! (They would have to trust Martin implicitly, not to mention being willing to co-conspire in shareholder fraud.) So instead, I suspect it is Martin's money fronted by someone. And high interest rate would help him keep that average down when eventually this loan and accrued interest are repaid with shares. Again, just my suspicions - nothing more - call me conspiracy theorist, I don't mind.
Fun Fact #2 for you:
Since 2006 Chaarat has issued shares for net proceeds (after issuing costs) of over $155m, convertible notes (net of interest and net of redemptions) of $27m and loans (net of repayments and net of interest charges) of $55m - that's just shy of $240 million of financing. YOU COULD HAVE BUILT TWO MINES WITH THAT BY NOW!
Since Martin took charge, almost $100m of new money has been raised (and I ignore roll-overs). Half is for Kapan, of course (and my opinion on this is clear - that was a waste of effort). The remaining half - that's $50m - what do they have to show for this? Some resource increase and a JV with a company that's never actually built a mining production complex? (they do some contract mining work and build some mine camps - that's about it). This is a disaster waiting to happen. In no way this business is worth $200m now!
And here is a walk back into a now distant past:
https://www.investegate.co.uk/chaarat-gold-holdings-ltd--cgh-/gnw/fundraising-of--51-6-million/20110207070000H5805/
Yes, I know, this was a different company back then, different management. But it all reads so much similar to what I am reading now, it makes me lough - I just had to post this...
I confess that this is your weakest point so far.
As was pointed out previously, nobody defaulted on a loan here and this convertible note has been increased steadily over a period of time. I would consider that an endorsement to be honest.
The fees that have been received in shares are hardly out of line with market rates for the services provided I would have said. Whether he would have done them for nothing is moot (and I am sure that you would understand the business adage of anything free has no value). I am sure that we have all done something for a price when we probably would have done it for free and vice versa!
There is no market abuse in these transactions.
Fun fact for CGH fans: Martin A (according to my fairly accurate estimate) spent approx. £18.3 million buying his current position in CGH. This translates to just over 13p per share on average.
$18m investment is a very respectable number, as far as skin in the game goes, no doubt. But the way he does it smacks of market abuse. PRA should look closely into his purchasing history.
He has become smarter, though, lately, since about a year ago. I mean why pay 33p per share in the market when you can keep that average down by charging the company all sorts of fees for what you'd have done anyway, free of charge, and then get those fees paid in shares. He got 543,888 shares in "loan commitment fees" , 34,435 shares as a "drawdown fee" for a $500k drawdown (which btw was repaid within a week by issuing shares - hmm...), 250,000 shares in "loan guarantee fees". He'll get further 200,000 shares as a fee for the the latest 2.5m drawdown (I wonder how quickly that one gets repaid, and I'm guessing by issuing shares) and circa 825,000 of shares for guaranteeing $17m loan (probably from his buddy, or, worse, from himself or his proxy - because who on earth would increase a loan by $7m to a borrower who just defaulted on the previous $10m?!! Bet you that loan will be repaid by Martin eventually)
This is all a nice new smart way of keeping that average down whilst driving the price up, maintaining his stake whilst new investors pay at 30p - 33p - 36p - 40p ... Charles Ponzi springs to mind here...
13p average is not bad (given my fair value calculations earlier), not bad at all