some thoughts on financingAbout the financing: I have read some of the announcements, but there is not much out there about the actual deal, except the presentation that was left on the company web site, almost too casually. From the few things we knoiw it looks like a good deal, but I do want to see an announcement and details. Here are some observations:
- The USD 5M that Mr. Black paid to get his new shares are certainly part of the equity financing. As will be with the 250k share in the purchase agreement with DRAG. So the equity raise can be considered 5.25M done with 14.75M to go.
- The conversion of the DRAG and Australian debentures (5.5M CAD) is part of clearing of the company’s books prior to financing. Obligations of principal and interest payments are lifted from the company in exchange for common shares, but no new money is raised.
- Lending instruments can be very “creative”. For sure there will be at least one more tranche of cash raising from Almonty, but it will not be at 30c or 60c even. It may happen before the signing of the financing agreement or after. May be through sales of new shares, but it could also be through sale of company assets, like the Australian mine, or future production of tungsten if Almonty has a strong and trusted off-taker. the off-taker may agree to lend the remaining 15% cash when needed, in exchange for tungsten after project completion. Woulfe may have looked for a similar agreement from IMC way back.
- As the duration of the project is over two years (commissioning of the mine in 2019), it is very likely that the 85M USD loan will be given out in tranches. This is to limit the bank's risk, but also because the borrower should not have to pay interest on idle cash (could be 4-5M /year). So ideally Almonty should take only what is needed of the loan when needed. In practice all parties look at project expenses projected over duration (plus contingency), and the loan is structured accordingly in tranches, either at set times or upon meeting milestones.
- Depending on the agreement, Almonty may need to raise its matching share of capital (20%) all at once or in tranches to match the funds received from the bank.
- Pretty much looks like all parties should be on the same page in this deal, and all major stakeholders have substantial skin in the game. Almonty is getting money from a commercial bank, not some Bay Street shark. the bank will make money off the interest payments, so it really wants the company to succeed long-term and it has no hidden agenda in the failure of the project.
- It looks like Mr. Black has good advisors. I am impressed with Mr. Gutschlag from Deutsche Rohstoff.
Fiinally: Almonty is very much part of my investments. I do not have the time to participate to board discussions as before but I do drop in, and It is good to see many of the old posters are still around. Looking back it is very interesting how this company has navigated through difficult times, and is now managing to come out ahead. Could become a textbook case of a junior miner turning major producer through a commodity downturn. And as much as we may want them to do it in a couple of years, they just may not cash out and sell the company this time.