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Funding at this mcap, even non-equity/bank and otherwise could be a struggle to get a significant amount.What the hell happened?Easy prey for a big lending premium unfortunately with the current mcap, however great the business could potentially be.Aim is ruthless with pis money and company's too at times.
Yuri.F I agree with both your recent posts. With respect to the lower grade inventories I’m wondering if, in the instance this is about lower salt levels leading to difficulties with precipitation that there might be technical solutions to this in the longer term. However this will cost time and money so the ramp up pretty much has to go with the easier option of using the higher grade feed material.
The board certainly has no credibility and lenders can be pretty ruthless when their money is at stake. I’m still thinking the only reason they won’t pull the plug is to try to recover some of their debt. There is a limit to how much good money you throw after bad at the end of the day though. Someone could get a great deal if this falls into administration and the plant can be ran without the debt burden. This is AIM so expect something pretty painful. IMHO
and then this bit from RNS:
...The re-classification of lower grade inventories that have now been determined as unsuitable for plant feed during the ramp-up period...
It's effectively writing-off assets (and consequently equity) since inventory got spoiled/useless, not sure how much of it they can salvage into alternative use value-wise. With such technological failures - productivity and cost per unit of output has material risks of going too high.
200m of additional debt financing for 5 years at 10% will take more than 120m off their low-risk optimistic NPV8
(as 20m coupons will wipe out any nearest potential positive cash-flow items away from shareholders)
not to mention what more than 50% of it will have to be refinanced - again, something off NPV
(as previous accumulated cash-flow excess won't cover full principle repayment,
but once production is self-financing and sustainable then interest on debt can be slashed down with risk)
I would say current realistic risk-adjusted startup NPV (say NPV15) might be sitting slightly above £30m - which is way below current mcap
Another red flag is about governance and they way this BoD acts - they knew very well about financing deficit (otherwise what kind of director you are if you don't know the situation within your company) before raising equity at 18p-19p range month ago, collected money and then released statement about problems crashing price by more than 60%, if they have no problems playing that dirty - what to expect next?
Good point
Oh, they will lend. Of course they will.
You just need to wait and see how high the risk premium they will want! The eventual cost may be very high when they look carefully at the track record of emergency funding calls!
We need to know the size of the problem and the cost to be able to evaluate.
Would you commit to buying a car without knowing what size car you are buying and how much you are going to pay? Nuts.
Which bank/ lender would not want to get involved with this company