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Thanks
Yes it would be autonomy , but after the loss of trust and confidence , who would lend them extra money...?
Thanks Adzy ..but I did say assuming ALL which would be a 'worst case' scenario...the truth is we don't know anything yet so let's await the report...
I mean existing ones not new ones
Great post alwayswrong... but that’s also just based on what we know right now... I fear this is still the tip of the iceberg in terms of skeletons still to come out.
Always wrong
Is another option just to refinance the debt over a longer period
Adzy...excellent intuition to think of checking out the bonds trading price...very well done for that.
It's important though to keep things in perspective...even assuming ALL of the $ 350 million guarantee has been called upon under the guarantee agreement , then there would be a $ 100 million one off net deficit for 2019 ,( given that there was a
$ 250 million profit run rate in 2018) which would probably be higher in 2019 anyway...
It would of course though, increase net debt by $350million on top of the net debt of $ 2.2 billion previously reported , putting an added strain on liquidity .
Options then would have to include either selling off part or the whole of the business to a cash rich buyer, or if one can't be found, then to go for a rights issue earlier than I had predicted
All of course, speculation in ignorance of the true facts . Nothing more to be said.
One caveat though, if the book keeping errors were insignificant , then I can't see why it would take them until the end of April to sort them out...?
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They won't be sorting the reconciliation until the end of April, the RNS says that "the independent review is not expected to conclude for several weeks, with the consequence that the Company does not expect to be in a position to publish its FY2019 before the end of April 2020". So they need a few extra weeks due to extra reconciliation work in order to be in a position to form an opinion resulting in the delayed YE accounts. Pretty standard schedule considering the circumstances, certainly not a massive delay. IMO.
KOH
But there’s no way the CEO, and Shetty himself get fired with no formal explanation
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This is absolutely necessary to restore the trust and confidence in business and had to be done. And there is no nice way to do it. Shetty wasn't fired, he resigned. And he did the right thing considering the circumstances. Heads rolling is a very good sign IMO and a clear signal to the markets. The world is watching. Suggesting that "It’s not plausible to suggest this is a minor error" is nothing but speculation at this stage. I'd rather have that than never ending saga and complete lack of trust in the BOD. They do the right thing as painful as it may seem atm. IMO.
KOH
Thanks KOH...Yes you and I are seeing things alike.. and I agree with all that you have said...prudence at this stage would be there intention , so that when shares do trade again , the news won't be as bad as people had feared..
One caveat though, if the book keeping errors were insignificant , then I can't see why it would take them until the end of April to sort them out...?
KOH - I like your optimistic thinking.
But there’s no way the CEO, and Shetty himself get fired with no formal explanation if this wasn’t material in nature. It’s just not plausible to suggest this is a minor error. Doing so is nothing but wishful thinking.
Regardless it’s pointless speculating now, we’ll find out soon enough.
alwayswrong
"In the course of their work to reconcile NMC's cash balances and net debt as at 15 December 2019, the Review Advisers have identified potential discrepancies and inconsistencies in the Company's bank statements and ledger entries. The Committee and the Review Advisers are investigating these matters and seeking to determine the materiality of the discrepancies."
Nothing really to even suggest that those relate to the guarantees. Please also note the words "potential" and "materiality". It could be anything really (poor bookkeeping practices, missing backups, variety of errors & omissions due to incompetence at all levels - it happens a lot everywhere) and not necessarily material in the grand scheme of things but because the advisors know the whole world is watching they prudently felt obliged to mention the current state of affairs and the results of the reconciliation to date (just to be on the safe side).....I've seen too many discrepancies in my life to be bothered at such an early stage and before the nature and levels of materiality are known. In most of the cases the uncertainty is much more damaging than the bad news itself. My personal bet would be that they are just over-leveraged but the underlining businesses are actually doing fine. This is not some ponzi scheme, these companies do turnover billions every year, provide legitimate services and run at a profit. The NMC board is getting cleared and it's a very good sign IMO. The sooner the better. There is no nice way to do it. First step to rebuild trust and confidence done, as painful as it may seem atm. Suspension was needed too considering the circumstances, shorters won't get the opportunity to damage the SP any further. All IMO.
KOH
I think majority of the people are not getting the RNS correctly and reacting in panic. That's why suspension is better now. NMC will provide further clarification before they start trading again. Before that everything will be clear and market can make decision based on all available information from FREEH report and year end result.
Lets hope on lifting of suspension they come out with discrepancies minor. Credit financing wound down. Still profitable. And offer of 1500p on the table. I can live in hope lol
The London Stock exchange has listed a handful of separate trades all taking place at 8.07 am...
6 shares in 4 separate trades at £10.00
8 shares in 1 trade at £7.90
All trades were off book
I agree with Mrd in that the most likely scenario is that the company requested it's shares to be temporarily suspended, to protect existing shareholders, who would otherwise have panic sold at any price so as to get something from their investment rather than nothing. This would have resulted in a downward spiralling movement of the share price, in a self prophesising manner..
I repeat , that the previous anouncement re supply chain financing, by related companies of the directors of NMC, represented nothing more than a guarantee made by NMC , which should have, but wasn't disclosed as a contingent liability ....and that no request had actually been made to invoke this guarantee, based on what was said in the previous RNS release.
As such, and at this moment in time, there is no proven actual financial loss, suffered by NMC
However, as I also said early this morning, the worrying revelation is that cash can't be reconciled to the ledgers and won't be until the end of April , when it is hoped the delayed accounts will be published .
This could imply that the guarantee has in fact been called upon , but not yet accounted for , in NMC's accounts , explaining why the bank balance can't be reconciled to the books of account. ..if this is so, then the focus of the review now, is to establish just how much of the £35O million has been called upon, paid out, and not yet disclosed .. this could be where the attempts were made to thwart and frustrate the findings of the review..
Of course, this and anything else that may have alleged to have happened is pure speculation.. we will just have to wait and see..
I think that the most likely timescale for recommencing share trading is subsequent to the release of the accounts at the end of April. .
Any thoughts KOH. ?
From my experience its unusual for a company to take out loans/guarantees on behalf of other companies, and then allow other companies to use those facilities, without making it very transparent. Effectively the other companies were using NMC as the default for their investments. The fact this is only just coming to light with a thorough investigation highlights that they knew it was at best fishy. I'm no financial expert, but the commentary from the markets financial experts suggests they have been very naughty, hence the firings and 'extended' gardening leaves.
Bluelight
These are not loans, they are guarantees. Read my post yesterday at 23:54 for full explanation.
KOH
From the FT. "The review has also flagged $335m of supply chain financing arrangements entered into by the company but used by entities controlled by Mr Shetty, who had been co-chairman of the board before agreeing to step back during the investigation, and major shareholder Khalifa al-Muhairi, who resigned from the board earlier this month." Also state they are investigating discrepancies in its cash position.
Fired its CEO and suspended other senior finance members after hidden loans are discovered
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What hidden loans?
KOH
Fired its CEO and suspended other senior finance members after hidden loans are discovered. It's hardly going to open up when it is unsuspended is it. It is suspended so that it isn't bankrupted by the inundation of investors liquidating as soon as the market opens. Its a dead duck now.
Suspension is a very smart and sensible move. Hopefully it will see through the rough times caused by coronavirus and wont give the shorter further opportunity to ruin the price any further. Results wether bad or good will have just the impact it deserve when suspension is finally removed.
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I agree.
KOH
Mrrahman -
“But can't agree with adzy2k11 that so many institutions will do mistake of this level even if it's only 1% of their investment and all used new grdas.“
Have you ever worked at a large buy side house?? Trust me it’s full of posh academically smart kids who end up making these horror mistakes.
Mr Rooster, that is also my concern. There is every evidence that the Board do not know what the position really is. It is only a week since they said the results were in line with expectations but it now seems they do not know when these results will be published. With the business in such a mess just do not see how a buyer could get themselves comfortable other than buying specific assets.
Where is my
Agree with you.
But can't agree with adzy2k11 that so many institutions will do mistake of this level even if it's only 1% of their investment and all used new grdas.
I will rather wait to see the result & report rather than loosing 15% without knowing fully.
We wont know opening price till freeh report. Hopefully the rot is small. But we wont know till we know. Time to switch off. Im guessing the company cares about its market cap hence the suspension.
Suspension is a very smart and sensible move. Hopefully it will see through the rough times caused by coronavirus and wont give the shorter further opportunity to ruin the price any further. Results wether bad or good will have just the impact it deserve when suspension is finally removed.