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L,
For all the reasons you give makes it an absolute imperative that the company does not allow itself to fall into administration and enter the court system. The cornerstones will be fully aware of the consequences. There will be no guarantee that any of the cornerstones trying to resurrect this project, if admin was entered, that they would be able to do so. If they were actually able to buy it for the administrators.
Not withstanding that Karim is a La Mancha person and all the conspiracy theories some will foster. He is meant to be the CEO of Horizonte working solely for the benefit of ALL its shareholders. He does have to strike a balance between keeping them happy and attracting new loans and investments. If this was a greenfield site they would be looking at all the fundamentals, the opportunity, the potential and doing their in depth due diligence. The company has now done what it needs to do to lay the cards on the table. Interested parties will be pouring over these deciding whether to be part of this or not. If yes, then how much are they willing to commit. All this takes time, a lot of it. This isn’t much different than the process for the greenfield site. The difference is a change of management, a set of cornerstones that are already heavily invested and the asset of a mine that’s over half completed.
IMO the key is the amount of new loans that can be secured. There is a sweet spot for this. Too much and the company has a huge repayment burden which stifles future investment in A2 and V. Too low then the vast equity raise in this market will be disastrous for all the existing shareholders if only new investors sort. This is why the money will come, if it comes, from loans, prepay and the existing cornerstones, with only a little coming from new investors. I do not see, IMO, new investors putting in more than £50 million and for that getting any more than 20% ownership.
Https://www.thestar.com.my/news/focus/2024/03/16/germanys-green-lithium-hub-emerges
I’ve been doing something really dangerous, thinking!
The talk around a placement doesn’t actually get to the point. The obvious, is to raise pots of cash, but underlining that, it’s actually getting investors to part with their money, with the usual incentives that they will make even more money. Well most here, would admit to that. So the format is to give them something at a discount that will appreciate in value. That’s absolutely true for any new investor. So how do you persuade any new investor they will make money without losing your own shirt? You of course talk about the company’s intrinsic value against its fundamentals. Given that in all probability there will be no public placing then the company will be talking about the investment coming from the existing cornerstones and a new investor. By the time the company is in discussions than that negotiation will be about percentage company ownership for a given investment. All parties will be trying to get or keep hold of as bigger percentage as they can. Unfortunately not all shareholders have a seat at the table and are relying on the BoD to represent their interests. For the deluded with the calculators they have shown it’s not purely about dilution and share price but more about percentages. So it’s a question of how much is owned for the £x millions invested, 10, 11 or 12%. I don’t think they would care if they had 10 million shares, 100 million or one billion shares.
Https://blackrockmining.com.au/loan-approval-from-industrial-development-corporation/
I haven’t got a clue! I’m interested here for goodness sake!
It’s extremely hard to be bullish at this juncture, however, it’s inconceivable the BoD are solely out to screw us all over. If they were they could’ve easily forced this into bankruptcy before Christmas. What possible motive would they have to prolong the agony? (Rhetorical, usual suspects no answers needed, we know what you’ll say). As I see it, they are negotiating hard to get the right deal for the company. Most likely not the deal we would want. It’s not as obvious as going to the bank and asking for some loose change. They are asking for a vast amount of more money from sceptical lenders in a difficult market. This is where Karim and the rest of the negotiating team will earn every penny. They will have to persuade them that the project is worth it. Other than the CAPEX the fundamentals haven’t changed. The base case hasn’t changed. Unfortunately the NPV will be reduced by an amount. The real rub is the amount of dilution. From my delusional playing of the calculator heavy dilution doesn’t suit any of the existing shareholders.
One thing I am sure about is that someone like Karim will not have taken this role if he thought he could not solve the problems. I think he does have integrity and will have personal pride.
If I remember rightly Woolworths was brought down by a creditor calling in a debt of £75k.
This RNS is just relaying to the market that they are doing what the BoD need to do to protect the company.
Being delusional I went and got my calculator out, but that wasn’t being deluded enough so I’ve resorted to a good old spreadsheet. I wish I could replicate it here. I was somewhat surprised by the findings. I assumed a raise of £200 million evenly split between cornerstones and investor. I looked at the future value at A1 nameplate for each investor and the resulting percentage owned and sp. For the calc I assumed an NPV of £700 million. Below current % followed by raise Sp strike points, 3.625p, 20p and £1.
LM 23.09%, 24.91%, 24.59%, 23.90%
G 17.74%, 24.66%, 23.46%, 20.83%
O 10.49%, 24.32%, 21.92%, 16.67%
New 0%, 23.83%, 19.69%, 10.64%
Rest 48.68%, 2.27%, 10.34%, 27.95%
Issued shares
269,778,906
5,515,241,379
1,269,778,906
469,778,906
Sp £2.78, 12p, 55p, £1.49
From my analysis for LM it doesn’t make much difference in this what the strike sp is. The winner is the new investor, the loser the rest. The balance is as mv01 says is 20-30p.