RE: Target price 0,50 GB9 May 2023 07:58
Benefits of Transaction to Echo
This transaction fundamentally:
· Addresses the Company’s near-term funding challenges by providing near term funding, enabling the Company to walk away from the significant in-country creditors which had build up during the COVID-19 period and providing access to funding for the Santa Cruz assets.
· Provides continued exposure (both directly through the retained 5%, the contingent payments, the further 5% option and the indirect holding in the Operator) to a well funded Santa Cruz portfolio, likely with a licence extension supported by the guarantee.
· Provides the company a new platform from which to move forward with an option on a strong Columbian portfolio with its corresponding lower risk jurisdiction and a clean balance sheet whilst still receiving cash flow from its 5% position in the producing assets of Santa Cruz Sur.
Given the Company’s large creditor position which originated from the COVID-19 period where the asset was sub-economic, 100%+ per annum inflation in Argentina and Argentine currency exchange controls, which have prevented funds being withdrawn from the country without significant penalties, the raising of additional equity for an Argentine business has been challenging. Having continued to explore all means of raising required near term funding, the Directors therefore see this alternative, which addresses the Company’s near-term funding challenge whilst providing continued exposure to Santa Cruz Sur, both through the retained 5% and the equity position in the Operator, and also a pathway to revenue generating assets in Columbia, as highly attractive at this juncture.
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