Member Info for Ideas

I was going to say we'll hear the report of the provisional liquidator but will we? Botswana doesn't seem to publish its Court rulings and if the stock is delisted there'll be no RNS requirement - how would anyone know even if it is called out?!

For me the 19 November RNS was extremely misleading:

"[Cradle Arc] has entered into a BINDING term sheet with Fujax Minerals and Energy Limited ("Fujax"), whereby Fujax has conditionally agreed to provide Leboam with a US$4 million extension to its pre-existing working capital facility (the "Working Capital Facility Extension") on similar terms to the First Advance Agreement concluded in February 2017, as set out in the Company's AIM admission document published on 18 January 2018. The extension remains subject, inter alia, to completion of the requisite documentation and Fujax's final credit committee approval, expected to occur shortly, and the funds to be drawn down from the enlarged facility will be used for the group's general working capital purposes."

Yes, I see that it has the word conditional but if the term sheet was 'binding' that's an administrative formality. If it was 'binding' why didn't Cradle Arc sue Fujax for the money straight away? As the Board must have intended, the choice of words influenced investment decisions.

Deactivated is noteworthy - that's not unpaid leave...

I think this is Exchange rather than business led (FTSE rules below - in short: FTSE can unilaterally delist and you have to wait 12 months to come back on if they do).

Of itself, delisting in one sense doesn't take things any further than this morning's RNS (and that didn't take things any further itself, given Leboam has the value).

What delisting does mean is that any investment would now be in privately held shares (not-liquid) for 12 months - as you can't relist for 12 months.

Let's assume for this that any value is gone and they can't do a deal or give FTSE comfort by close Monday (pretty safe I think!). With expectations managed, this this does not automatically affect:

+ Fujax if its happy with the take off for at least 1 yr and has confirmation from the liquidator that the £4m really is enough;

+ A share sale, for example, to Sandfire who is trying to buy a copper mine at the moment in Botswana; or

+ Anyone else with a 1yr+ horizon (presumably including loan notes, etc).

None of this is rosey, and the odds only diminish, but this is my understanding of delisting.

What I would like to know is how shareholders would get any news off market.

===============

If a constituent is suspended, FTSE Russell will determine its treatment as follows:

• If a constituent is declared bankrupt without any indication of compensation to shareholders, the
last traded price will be adjusted down to zero value and it will subsequently be removed from
the index with appropriate notice (typically T+2).

• In all other cases, the constituent will continue to be included in the index for a period of up to 20
business days at its last traded price.

• If the constituent continues to be suspended at the end of that period, it will be subject to review
and a decision will be taken to either allow the constituent to remain in the index for a further
period of up to 20 business days or to remove it at zero value. In making this determination,
FTSE Russell will take into account the stated reasons for the suspension. These reasons may
include announcements made by the company regarding a pending acquisition or restructuring,
and any stated intentions regarding a date for the resumption of trading.

• If the suspension period reaches 60 business days the constituent will be removed at zero value
at the next index review, subject to the 60th business day of suspension occurring on or before
the Friday which falls four weeks prior to the index review implementation date. Where the 60th
business day of suspension occurs after such date the constituent will be reviewed for removal
at the subsequent index review.

[...]

• If a constituent has been removed from the index and trading is subsequently restored, the
constituent will only be re-considered for inclusion after a period of 12 months from its deletion.
For the purposes of index eligibility it will be treated as a new issue.

Full rules here: ftse.com/p

Sounds reasonable re: Fujax.

Interesting point here from Mining Journal today:

Van Wouw is one of the company's lenders, handing over US$2 million in October, but will find himself below other lenders after saying the loan would be "subordinate to all of Leboam's other secured obligations".

People have previously said that Kevin isn't as incentivised as might appear because his shares were free or nearly free. I don't know the ins and outs of that but US$2 million does appear to be at stake here and that is an incentive if you're accountable for recovering or losing it.

mining-journal.com/profit-amp-loss/news/1355470/cradle-arc-goes-into-administration

I could see that doing this a month before the hearing allows creditors (and shareholders) to appreciate the situation fully

hj6670 - are you saying that, were creditors to now budge then it would make sense for Fujax to lend as before (plus any to cover all this) or that this puts pressure on them to let go of the security and loan more unsecured to avoid a certain loss?

Definitely this is Cradle Arc, the holding company, and not Leboam in Botswana.

What I don't know well enough is where the assets are and how that interplays with insolvency laws for what you might want to do. For example:

1) You've run out of money at Cradle Arc and have bills that you won't be able to meet

Plausible

2) Leboam share sale with assets as a going concern (if it holds the Botswana assets)

Presumably you could do that anyway and don't benefit from going into administration?

3) Leboam asset sale - you want to extract the Botswana assets and get those into a newco before the Leboam process concludes (leave aside ethics and any legal implications)

Presumably the assets are locked up and protected in Leboam under the provisional liquidation and cannot be extracted

4) You want to protect Cradle Arc's non-Botswana assests by transferring those into a newco

Leboam's separate legal personality would mean that assets outside Leboam are out of reach for creditors of Leboam (unless contractually there are any parent company guarantees or security given). If there are parent company guarantees or security and you think you are running out of road in the Leboam liquidation then extracting those assets could make sense logistically but would not be acting in the interests of shareholders or creditors of Cradle Arc / Leboam.

Any other scenarios that people can think of?

https://smallcaps.com.au/sandfire-targets-african-foray-mod-resources-takeover-offer/

Link for the post below

I can understand that we might not have news - everything happened just before Christmas, first weeks of Jan are quiet and the credit market isn't ideal to say the least, likely not helped by the operational backstory. That said, there are buyers in the market "Australian copper producer Sandfire Resources has confirmed it has approached Botswana explorer MOD Resources about a potential takeover." 21 Jan 2019 (Mining Journal)Funding validated by an independent provisional liquidator would be win for all parties, a sale at a decent price (not £1) perhaps an alternative exit (shame, as has been the story, not to yield the full potential here though).

I think that there are good grounds for aligned interests

A poor outcome will damage Board reputations, particularly Roy (Chair) and Kevin's (CEO), and may make it hard to re-fund any repackaging of Mowana by the same team, moreso if its perceived to follow unethical behaviour, with two sets of investors already having had poor outcomes (ALO, CRA)

There were earlier comments about foul play, which may still apply, but I think and hope that the Board is fully committed and see this as a last chance to crack this for themselves also also - provisionally, there's a big win only months away and for Kevin success could unlock a world of future projects or early retirement

You wouldn't call the situation optimal but if the Board is fully committed then we have the best chance. Let's hope that they are at their most persuasive and that lenders saw the 'repairs already done' part of today's update!

Baiki - fair points!

Let's hope that they can get there in this corporate vehicle - it amounts to the same in the end as you say and just a matter of how much pain people have to endure otherwise along the way. From a creditors perspective, the RNS clearly threatens insolvency should attract some focus.

A return to mining before Christmas would be great. Insolvency before Christmas, not so much.

Agree, if they needed more money at the start, then it is unfortunate that didn't happen - £4m isn't huge in context of the opportunity but is now driving pain when there should be mining.

You'd have to hope that the RNS will catalyse bona fide funders to resolve. Unless I'm misunderstanding, what would you prefer as the holders of the US$10m secured loan notes, a) sharing (diluting) your security with Fujax Minerals (not ideal, but will drive profitable production), or b) receiving little or nothing at all?

Likewise with ZCI, you'd might think that it would be easier to agree the change and receive income from the mine within weeks than for everyone to go through an insolvency, lose production time and lose value only to start again with a longer lead and less value. The status quo seems a lose-lose for all concerned and hopefully that means that people will sense urgency and step up - not least for the workers.

Agree, there'll be a date on which it doesn't matter

Certainly for a SIPP (and it would be a v racey one - ha ha) then its not important, and would hopefully pay for a v nice cocktail on the beach

Yes, I'd expect it would pay the loan conversion. What I'm not clear on is who chooses - its its the holder and the post earlier was saying that they have until 5 December to decide then that's the scenario I was describing. If the company can just pay and control everything then presumably they have the money now (unclear what's better for them from a purely balance sheet perspective - conceptually they might want holders to convert as its an effective fund raise (i.e. not having to pay a debt)).

Don't know about it all but was curious on views

Thanks and 75% of the ~0.62p price last week gets to 0.465 which is pretty close to the RNS (I mistyped 0.48p earlier), so presumably its a rolling number (e.g. 0.53p today).

Much appreciated dropside!

Forgot to add below, as well as CLN exercise price, what do people think about the price points below?

There's some 'only way is up' sentiment and, while I hope its true, I'm interested in the wider views about how, when and what happens in between! ha ha

GLA

Agree its close timing if CLNs were exercised in a few days.

Google says that a mill reline can take up 5-6 days (generically), and by implication it suggests there's no processing during that time - YouTube: "Timelapse - The Art Of Reline"). Likewise, in the 19/11 RNS, Kevin says that the new parts "have *started* to arrive" and that the borehole "rehabilitation work [is] ongoing" to get the water supply continuous. I'm sure that it will all be fixed but I feel like the company is holding back a little until and goes to realistic expectations on timing (a published repair timeline, for example, would be helpful and #EML are a great example of transparency, even if it is helped by all good news).

Does anyone know the CLN exercise prices from public information? If all of the CLNs were all to be like the last one at 0.48p, the prospect 50% profit on current pricing could push holders to exercise (and be attractive for Kevin as debt reduces). Short term, could mean that we'd need something like a 50% increase in market cap to come from fully diluted 0.5p to back to today's prices (£1/0.0048=~+208m shares), which would dampen a buying surge a little. Arguably doesn't change what we know longer term, just makes it more of an investment than a short trade (*on those assumptions*).

As ever its not an automatic payout and that's why money can be lost and (we hope) made! Makes a lot of sense to me on a 6 month horizon. Hope the next RNS is clear and complete and by June we will all be wondering what all the fuss and uncertainty was about!

Re: the post below, you can still (when writing) buy at 4.325p so no special news, just a reporting error

For awareness, the 100,000 reported sell* is a buy.

The neighbouring 'sells' are at or around the same price, so its conceivable that they are also 'buys' - this sentence speculation but seeing the 100k misreported challenged my perception of what the websites are showing as an all sell morning. Thoughts welcome!

Date.............Time............Prc........Volume.....Buy/Sell..Bid......Ask.....Value
24-Oct-18....10:34:56....4.325....100,000....Sell*........4.30....4.40....4,325

A milestone plan or timeline would really help - not so much to put pressure but to manage expectations and be market friendly