Comments on Q3 Documents Taking a read through the filed documents, a few things I noticed:
- The accounting has changed completely since the reduction to 49% in MMB, it's now not majority ownershp (subsidiary) and instead equity acconted for. So statements looks much different.
- Management does a good job of stating what has happened and crucial dates etc. November 20th is mentioned again as the current standstill, and re-negotiation date they are wrking towards. This again means expect news either this week, but most likely next week on either a) another extension and subsequent cash infusion by the Koreans and/or b) an agreement on the debt which re-opening the credit drawdowns.
- G&A is up compared to last year which suprises me, especially since salaries and wages have jumped. Seems odd seeing as they reduced 40% of staff and major big wigs. Maybe that includes substantial severance? Professional/consulting fees are way up, which is a good thing because they are clearly working through a lot of legal docs and paying to have various opinions and reports completed for the project.
- This statement is not something I am sure I fully understand, but likely a cause for people to be negative.
"Regardless of any changes in the Company’s interest in MMB, currently, under the terms of the guarantee agreement, the Company remains liable for 70% of MMB’s senior borrowings and any amounts to be funded to achieve economic completion. As at September 30, 2012, MMB had drawn $360,789 against its senior facilities (note 18(a))." ---- Not sure why a draw down to complete a mine which we reduce ownership in would stay intact at the full amount, and not be pro-rated?
MD&A:
- The Consortium has no previous operational experience at the Project. It is uncertain whether MMB will be able to obtain the services of the personnel it requires to advance the Project or to successfully manage the transition of control of MMB and the Project.
- As the Company has provided a proportionate (70%) guarantee in respect of MMB’s debt and a proportionate (70%) economic completion guarantee, the insolvency of MMB would result in the lenders calling on the guarantees, which would result in the insolvency of the Company. ----- More on the one above from the FS.
- The liquidity crisis and the cash flow management strategy adopted by MMB in response continues to have an impact on various aspects of the Project including vendor deliveries, vendor schedules, non-critical construction progress, and engineering closeout. In view of the above, the Company withdrew all previous timing guidance. Since a permanent funding solution has not yet been developed and full-scale development has not yet recommenced, no schedule can currently be committed to for the completion of and first production from any of the copper, cobalt or zinc circuits.
- The Company engaged SRK in the previous quarter to prepare an Independent Engineer’s Report evaluating the Company’s development and operating plans. In addition, SRK has been commissioned to prepare an NI 43-101 compliant technical report on the Project for the Company. A summary of the report is expected in late-November, 2012. ---- Hopefully tis is clear enough for everyone, LATE NOVEMBER. So if Jaydogg comes on here Nov 26th and says "news coming soon", then yes he is very likely correct! lol.
- The Project represents a predominantly soft-rock, underground ore-body, spread amongst seven flat-lying ore beds (or “mantos”). MMB was planning to apply a mechanized room-and-pillar mining method for most of the mining, utilizing a fleet of continuous miners, mobile roof support and mobile haulage equipment for the purpose of advance and retreat mining. However, underground, soft-rock mining presents a number of significant challenges including (but not limited to) safe and efficient ground control, geotechnical complexities aggravated by the presence of historic underground mine excavations (some filled and some unfilled), attracting and retaining suitably skilled personnel, operating specialized mining equipment and associated maintenance support. The Company and MMB have engaged SRK to evaluate potential alternative mine plans, including increasing the proportion of open pit mine workings. There is no assurance that MMB will be able to achieve the production volumes required to ensure the economic viability of the Project. ----- To me, one of the bigger disappointments. This all goes back to the design and scope changes of the project in early 2012 which I believe were never made public to shareholders. The first mention of it was when the overruns were announced, and it was very very light on details. I still think this sort of thing should be made public when it is discovered. That's pretty material news. Unless someone can prove me wrong I never heard any mention of this before April 2012, it was always "on time and on budget" etc. Anyway, this is the most detail I have seen yet.
- "With the support of the Consortium, later in the quarter MMB adopted measures to reactivate the advancement of the design, engineering and construction of the cobalt and zinc circuits of the Project" ---- Another shocker! This is pretty significant because last I heard this was on hold, so to be pushing ahead with these secondary priorities ($85mm extra est. costs) is very encouraging. Another sign that things are being resolved, slowly, but surely.
- The MMB Project Management group started evaluating plans to return the Project back to a normalized level of development in anticipation that the closing of Stage II funding by the Consortium will be confirmed.
These were the big points I saw on first pass, there is a lot of info on the 50+ pages of documents so this is a summary. I felt they were written much better than in the past, more detail and explanations. On the bright side, there's 25 million warrants outstanding, half or which expired this year - all over $1. That's roughly 7% dilution avoided if the warrants aren't converted.
SP