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No question the BoD made a bad mistake with liquidity earlier in the year and being forced into a poor funding and I was heavily critical of them at the time, however Paul Blakeley has got an impeccable long term track record especially in the geographical area Jadestone operates.
It’s nonsense suggesting being Zuniga would make any difference, it more likely be a negative for the SP.
"Labour aren't stupid. They'll adapt policies to secure jobs and energy security self sufficiency. They are just trying to attract the green vote with these sound bites."
Which is exactly an unstable political environment and exactly why Repsol has walked away from Tain - both parties with their lack of any long term support have already killed the North Sea. Labour will have no need to try and make further political comprises as it will be already dead - if anything I expect they will move to be more restrictive.
The North Sea will just act as a drag on the SP while the market thinks money will get diverted there, any actual value from development via cashflow is at least 5 years away if not more and I reckon there is about a 20% chance max it ever gets developed.
"Labour have promised to honour existing NS licence's and projects when they come to power but will approve no more new ones. This will give existing players a closed shop monopoly."
Correct, Labour have formally announced the death of the North Sea. So what do you think that does to the capital expenditures and operational costs for any future fields? Service providers will no longer be investing or maintaining a presence, contractors are not going to hang around, few if any workers will enter the labour force, so the pool of experienced workers will dwindle and rates will go up. The North Sea is already a high cost basin and will lose substantial economies of scale and get worse.
They need to quickly ditch or somehow spin off the North Sea, its acting as an substantial and increasing drag on the SP as the market rightly fears the North Sea is a money pit. That's almost certainly what is driving the reaction to the announcement of the LTIP with continue focus on the North Sea.
The immediate vesting in the case of a substantial sale is just customary and nothing more - its always in management incentive plans, otherwise a sale would conflict with their interests.
Walletinvestor is just an an automated bot site - it has no actual research or knowledge of the company behind a stock it’s just supposedly a set of algorithms that look at the trading, but I doubt it is even that, rather just an engine to capture clicks, as revenue and try and suck people into subscription services - same as Wall Street bets.
Agree - timely update and strong update.
Conservatively allowing for commissioning time, maintenance periods and mining capacity next year they should mill 800,000 tonnes and so produce 45.000 ounces and free operational cashflow of $36million assuming $800 per ounce
The year after 960.000 tonnes (again allowing for downtime) and so produce 54.000 ounces and operational cashflow of $43.2million.
With potential upside from grade improvements and I think $800 per ounce is relatively conservative.
"On your theory they could buy the whole company at today's market cap, stump up the extra cash and own the lot fully funded for $250m.
La Mancha need to buy the remaining 73%, if they could do it at today's mkt cap that would be £50m x 0.73 = £36m, call it $50m. That's cheaper than buying 7% at 4:1 dilution, wow it is a bargain! Now they own 100%, so putting up the extra funding suddenly becomes a lot less painful."
La Mancha don't want to own a mining company though do they? Its not their mandate, nor do they want to be fully responsible for trying to fund the deal as $250million will be way beyond their interest in sinking into one asset. So this is not even part of their playbook.
Its highly likely the cornerstone investors here will participate, but they need to attract new money and I doubt they will have any interest in protecting the 50% of equity investors who won't pay to play.
I'm skeptical substantially more debt will be made available, I suspect the bank's will push for other solutions here, not least as 35% is only the increase in capital budget, there is also a delay in cashflow. I expect the majority of contribution by the bank's here will be through the renegotiation of terms, amendments to covenants etc, I'd be surprised if there is substantially more funds coming.
Maybe on the royalties you are right - I don't have much feel for that.
Best of luck though - I just think you are being very optimistic on the outcome and I can't think of many precedents, where as I can think of a lot of precedents for very heavy dilution and the NPVs of the underlying assets had no impact on the issuance price. The market here looks to be pricing in around a $200million equity raise with substantial dilution and I think that looks about right.
“But that's a 7% increase compared to what they have now, and cost them more than the current mkt cap to buy it. Does that make sense to you?”
The current market cap is discounting the fact that more funding is needed - so even if they bought the whole company they’d still need to solve the funding gap which would be now their problem 100%.
You seem to think there is a white knight out there willing to bail out existing equity holders, by paying way above current SP. Why would anyone do that?
The big holders will take their medicine through dilution, put in some more cash to maintain their stakes and ensure it is attractive for new money to come in.
At 80% dilution, those guys can all pro-rata invest and remain below the 30% and so maintain or slightly increase stake which then provides about 50% needed and the other 50% is probably priced attractively enough for new investors.
Assuming a $200million raise at an SP slightly lower than current SP.
“No it won't. You couldn't buy 10 million shares at the current price without spiking the market, why on earth would you be able to buy half the company?
The current price is a reflection of the free float price, dumped by PIs and small instis, less than 20% of the total. “
I’ve lost track of the number of times this mantra has been repeated with investors referring back to the NPV of the underlying asset.
If it was really the case that any new equity financing would be done with reference to the underlying asset NPV the share price would already be responding, when instead it is pricing in deep dilution. Those who will invest equity in the next round (most likely the cornerstone investors) have the power here.
Yet again a set of naive AIM investors are likely to learn a hard lesson.
“However, to say that serentiy is not factored into sp is a red herring. If bad news ocurrs in this regard the sp will get hammered regardless.”
Not convinced- O&G investors are valuing free cash flow and returns at the moment. I think removing the risk of spaffing a whole lot of cash on CAPEX in a high cost, politically contentious basin will be looked on kindly. Not to mention the BoD have hardly covered themselves in glory in the UKCS so far.
What I think could be wise is a spin off of the UKCS assets into a separate entity which I3E maintains a holding in.
"It's a factual statement. If you're going to add liabilities to create a narrative why don't you add assets too."
Most of the other assets relate to a 65% completed mine and they are balance sheet carrying values and not the price anyone would actually pay for them.
Its ludicrous looking at the value of cash in comparison to market cap when overall debt exceeds cash.
"The key takeaway from this quite comprehensive analysis is the actual funding shortfall for HZM is actually circa $50m, not $175m as they already have an existing circa $125m facility in place."
Which misses the additional working cap needed due to the delayed start and doesn't consider any additional contingency that senior funders are likely to require.
"Just get rid of it and focus on our 700 drilling locations in Canada which we are currently drilling far too slowly."
Totally agree, the UKCS is a political minefield and a higher cost end of life basin - the previous licence holders can smell the coffee, I3E should also.