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Interesting post wasa. The way I look at it all the banks' money and the cornerstones' equity is lost if they stop here. Let's say it cost $300m to complete the mine to first metal. Effectively you are paying $300m for a world class nickel mine, we know the npv's subject to nickel price. With that opportunity I see no sense in the banks and cornerstones dropping this and taking a hit of $400m say between them. That's why I believe they will press ahead. And if they look for a structure that wipes out the 50% of the shareholding that the big boys do not own that will double the equity they have to put in to satisfy the banks' demands. Greed could be their downfall. The only flaw in this argument would be if the situation with the expenditure to date is much worse than has been revealed, that a large chunk of the money spent to get this far has been wasted or lost to incompetence or worse. No doubt that issue is at the heart of the due diligence process. The sp will flounder for the next month or two, maybe three because of the uncertainty. If it ticks up towards 10p that will be because of a leak of encouraging developments, if it slides towards 6p we will know that the due diligence process is unearthing some nasties. Total conjecture of course!

I wouldn’t read much into the way the sp is jumping around. There will not be a large number of mm’s working HZM and they will not be wanting to hold more than a handful of shares overnight given the risks. So if they receive a sell order late in the day they have to make a very rapid judgement whether they can find the buyers to lay it off and if so at what price. I think that explains the dip into the 7’s. The RNS is as positive as anyone could hope. They are on top of the situation, they can stretch the cash to the end of Jan, they are working to determine what is needed to get the project over the line. All very disappointing for Mr Pub.

Personally I think it’s great news that the big players have got on top of this situation so quickly and put a really strong team in place. The mine will go forward, too much money has been sunk to pull the plug. I remain convinced that pi’s will be fairly treated in the forthcoming refinancing. Sadly it will be painful for those who cannot dip their hands in their pocket for this next round, very harsh for wasa and others I fear. Nevertheless there could still be a decent recovery in the longer term, a completed Araguaia will become an exceptionally valuable asset.

Karim Nasr and Paul Smith were appointed directors of HZM today.

ElectricLion. Just an apology for not replying to your post. Very interesting the Condor Gold solution. but very complicated! You get a somewhat bizarre situation with the deferred shares. The shareholders who subscribe to the open offer get the £0.001 new ordinary and the £19.999 deferred share. The new ordinaries will be listed but not the deferred. So you would or could sell the new ordinaries but would retain the deferred share, which appears to be stripped of all rights other than in the event of a liquidation. Nobody I have spoken to has ever seen this structure. Deferred shares are not normally issued for this purpose. The structure would not be of use in the HZM case because the Condor Gold structure only works where all shareholders participate or rather have the right to participate. I think what everyone was worrying about in the case of HZM was the scenario where ordinary shares were issued at say 8p (or less!) to cornerstones, Glencor or other institutions to the exclusion of pi's. As I mentioned in a previous post another route (for screwing the pi's) could be a subordinated convertible note. By the way that is an astonishingly generous deal for the Condor investor. 18% coupon plus 15p warrants!! I don't think I've ever seen anything so generous, I wouldn't be happy as a pi even though I could participate in the open offer. Anyhow thanks for the Condor info, interesting!

Publican. Civility clealry not your strong suit!

However it’s very clear to most your reasoning is flawed that they want to value their 52% as high as possible when they can easily acquire the other half of the company to mitigate their loss’s. If they own 50% of the company now and the banks demand $100m of new equity, say, they have to put up $50m. If they own 100% of the company they have to put up $100m. Of course I appreciate that not all of the other shareholders would subscribe to a rights issue at 20p. But can you see that acquiring the other half of the company may serve to increase their loss rather to mitigate it? And dont worry about my ego, I am very happy to admit I lost a high percentage of my investment. If I had a big ego i would boast about making 33 grand!!!

EL. When a company's stock splits, the change in the par value is offset by a corresponding change in the number of shares so the total par value remains the same. The total stockholders' equity is unaffected by the stock split and no entries are recorded. So yes, a share split reduces the par value but in the case of HZM achieves nothing , because the reduction in par value is precisely offset by the the corrsponding increase in the number of shares. So lets say they reduce the par value to 10p by a 2:1 split. They then issue new shares at 10p. But they have to issue 2 shares not one to get the same equity increase, which costs them 20p! Try AI, maybe it can explain it more clearly than I. An alternative course of action for the cornerstones would be to issue deferred subordinated convertible notes (convertible at 20p). The notes would rank ahead of the equity in a liquidation but would be subordinated to the bank debt. This would enable them to satisfy the banks because the notes become quasi equity, conversion would dilute the other shareholders to almost nothing and their risk is reduced very slightly because they rank ahead of the equity. The deferral would mean that interest is rolled up and payment of the coupon can only be made when the bank debt is discharged.

Publican. Why don't you explain how you think shares can be issued below par? If you think about it the cornerstones will want to put their hands in their pockets for the smallest amount necessary to get this project over the line. To minimise the amount they have two avenues. First is to achieve the best outcome in terms of their negotiations with the banks. Second is to obtain the maximum contribution possible from the rest of the shareholders. Wiping out the other 50% shareholders will only increase the contribution they have to make to the equity requirement. That's why I think the rights issue route will be favoured. And which is why I think you may be incorrect in thinking the cornerstones will want to "take as much as they can". And please try to make your posts civil, your denigration is unwarranted. Everybody on this BB is entitled to their opinions and I for one find many of them really interesting.

Wasa not agreeing your calc. See no relevance in the 160p. If you revalue the company simply to reflect the raise then the sp increases from 8p to around 17p. However the purpose of the raise is obviously to get the mine over the line, probably some adjustment to the NPV as you point out, plus a deduction to reflect the additional debt, then more shares on issue, my guess is that post the raise the shares trade at a modest premium to the rights, somewhere in the 25p to 30p range, not greater because this episode is going to make people nervous and some will seek to cash in on the rights recovery. All sheer conjecture!

Tony. That's exactly as I see it. A 3:1 rights underwritten by Glencor and perhaps the cornerstones at 20p might do it. There are 270m shares issued. A 3:1 rights means 810m new shares, which at 20p raises £162m, more than sufficient imo, with the banks funding the balance. I would think the vast majority of the shareholders would take up their rights. Glencor and cornerstones happy because their contribution is affordable. Banks happy. Everybody wins....sort of!

Publican. I explained my theory as to how this might play out and acknowledged this was "sheer conjecture". I agree that it is possible that administration and/or privatisation is an alternative scenario. Your response "I think it’s me that knows a hell of a lot more than you and you’ll be gone without trace soon" tells us everything we need to know about you. As they say empty vessels make the most noise.

Publican. You cannot change the par value of shares. You can do a share spilt but in this case that would not achieve anything. You might be able to issue shares at 10p not 20p but you would have double the number of shares so nothing achieved by the exercise. Most Publicans don’t understand this so you are not alone.

Pensana are not struggling to get finance for the mine, they are totally within the schedule advised. They didn’t even start discussions seriously until the beginning of August. The ground work and majority of the data required for financing would have been available long before then, (before the business plan was published and certainly before the capital raise). Just because it isnt in the public domain, doesnt mean all the details required for financing Due Diligence is available. Who posted this and when?! Clue. It rhymes with Fumbles!

IMO there is likely to be quite a long pause whilst the banks do their due diligence. Their potential loss is colossal and they will want to be (a) certain they are not throwing good money after bad and (b) very very confident that the additional funding will be sufficient to get the company to first metal. In addition there will be an ongoing negotiation between the bank and the institutions in terms of their relative contributions to the shortfall. If there is any good news it is the fact the market cap is so insignificant that there is little point in wiping out the pi's. The work involved in novating loans and assigning agreements to a newco would be colossal and given the short amount of time available I think they will just carry on with the same vehicle. I still believe that equity will be injected at par (20p) because that ascribes a pretty nominal value to the existing equity and it removes the immense difficulty of issuing shares sub par. I think pre-emption rights will be respected giving pi's the opportunity to subscribe for new shares pro rata at 20p. If all this were to happen the shares would trade in the short term at a small premium to par. All this is sheer conjecture however as a former investment banker I am guessing this is how this will play out. I expect they are all working like hell to finalise this before the shut down but it is going to be extremely tight.

We had to wait a long time for a sensible post! Tony I am sure you are correct, a series of pretty hideous mistakes were made and you can tell from the August RNS and investor presentation back in September that the CEO had no idea what was about to unfold. I don’t think the debate as to whether this is incompetence or negligent is worthless. Shareholders were misled both by the investor presentation and the RNS of 3rd August. A clear out was both warranted and inevitable. I would be surprised if some of the ambulance chasers weren’t looking at events and pondering a class action. There’s some big numbers involved here, what have the pi’s lost, $50m, maybe more?

Tony. It would be nice to think that it was something as simple as a modelling area. There is little doubt in my mind that the market was misled, both by the RNS and the investor presentation immediately preceding this fiasco. It probably makes little difference if this was the result of incompetence or negligence. Or both. What I find just as extraordinary is that here we are, more than a month on, and the market still has not been informed what went wrong. We are all just speculating. Even more bizarre the company has announced the departure of key individuals but again with no explanation of the cause. I think the shares probably should have been suspended, but then again this is the Wild West, not a properly regulated market.

I think there has been something of an overreaction to the RNS. I think there is broad acceptance that any financing of the overrun is going to need a combination of debt and equity. The banks will want to see more equity, La Mancha and Orion will want to see more debt. So I guess it’s who blinks first and no doubt this will go down to the wire. There is an asset worth saving, I don’t think this is all over yet.

China it is always nice to pay Pensana a visit and see how the old rogue is getting along. I noted that he has re-engineered his financing statement to make it look as though progress is being made. Kicking cans his specialty. And surprise, surprise, after six months of scrutiny by engineers and discussions with suppliers the revised cost of the mine came out at…can you guess…..yes $200m. Exactly. Didn’t even go up 1%. That’s a miracle. And the due diligence that started in March continues. And whilst I’m here can you please make up your mind whether I am Israeli or Chinese.

Mumbles, you were right!! Just thought I needed a little dose of China's invective to brighten up my day. Didn't have to wait long! Like stepping on a snake!

Isn’t the update on financing the same as the one they made in June? Cannot see what has changed other than the date?