RE:RE:RE:RE:RE:NML RTO@Alfredh0rg,
You are correct that NML doesn't have any bank debt, and that they have the ability to potentially raise capital through an equity raise. That being said, NML was trading a $0.04 CAD prior to the announcement of the Tata and Abaxx deals, less than 50% of its working capital at the time. Should this deal not go through NML's stock would likely go back down to that level again. If the company tried to raise $3-$6 million at $0.04 CAD, they'd be issuing an extra 75-150 million shares at least. They'd also have the banker and legal fees involved which would cut that cash raise pile down further, and we're also assuming that there would be investors who would want to buy those shares. Under that scenario you're diluting current shareholders substantially.
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Even if NML did find a willing investor in the Taconites, what type of deal do you think they could negotiate with that entity? In 2011 they got a very good deal with Tata as the market was red hot--probably the best iron ore bull market ever--and even then NML got just a 20% interest in a $50 million feasibility study. In the current market there doesn't seem to be any interest in a multi-billion dollar cap-ex iron ore play. Alderon went bankrupt, LIM is delisted and broke, Adriana I believe reverted back to the crown or is at best mothballed, Cap-Ex went broke, Advanced Explorations (remember them) went bankrupt, and even Champion (which was already in production) was only made successful after it was bought out of bankruptcy. A steel company with big pockets may choose any one of these properties to go after before looking to invest in NML. Furthermore, if they really like NML, maybe they would just wait for NML to let the claims go knowing that it was too expensive for the company to hold onto. On Monday, Arcelormittal sold essentially all of its US iron ore and steel assets for $1.4 billion--that's around 9 million tons per year in iron ore pellet production and nearl 20 million tons of steel making capabilities per year! All of those assets were sold by Arcelormittal for less than it would cost to get NML's 8 million ton per year NuTac up and running.
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Even after all that, let's assume that a steel company gave NML a favorable deal, even then, NML may just try to negotiate a 1-2% royalty on the property. Let's recall that NML had a 20% equity interest in the DSO which was eventually whittled down to 4.32% because of cap-ex creep. With the Abaxx deal NML still owns 17.8% of the Taconites--furthermore Abaxx could start generating revenue from their exchange in the near future and keep the properties in good standing. Even if Abaxx does need to do a capital raise via a stock offerring, the market is likely to view an Abaxx stock offerring much more favorably than if NML were to issue stock on its own--and this will be much less dillutive in the long run.
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Lastly, consider for a moment that the board of directors of NML (excluding the Tata directors) voted unanimously for the Abaxx deal. This means that Dean Journeaux, former NML CEO and an initial founding partner of NML in 2002, voted to approve this deal. I believe that Dean owns several million shares, and would be the most likely to oppose this, so if he thinks its a good deal then I think we should listen to him.
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Again, while I have historically been very bullish on NML, I'm also trying to look at this pragmatically. In my view the Abaxx deal is the best way to create shareholder value going forward.