Woulfe Mining Corp WFEMF

Bridge loans and current situation

[74volfram]

For a mining company seeking to finance its project, a bridge loan is done to inject cash (working capital) into the company so that company does not run out of money before financing is obtained (or an acquisition is performed). Bridge loans are short term and usually more expensive than conventional financing: higher interest rate or upfront fees or equity to the lender such as convertibles or preferred shares. Bridge loans are usually paid back ASAP as a part of final financing deal. In the case of Woulfe, the bridge loans are connected to future financing and/or acquisition.  Here is the timeline with some comments:
--  January 27.   Merger proposal is announced.  As part of the merger proposal, Almonty provides Woulfe with a C$150,000 unsecured bridge loan, and up to further C$150,000 upon execution of definitive agreement which will be used for basic working capital needs. By end of January Woulfe had just completed its final feasibility and from its financial statements it was very low in cash, so the bridge loan with Almonty was negotiated as part of the LOI to provide working capital to carry the company through the merger phase.
-- February 17.  Merger proposal is terminated.  Woulfe board of directors terminates the letter agreement with Almonty. The $150,000 bridge loan provided by Almonty now becomes due on April 30, 2015. After termination of the merger LOI Woulfe is requested to pay back the 150k by April 30. This would cause insolvency or trigger a cash call probably much earlier than April 30.
-- March 5.  Dundee Resources agrees to lend Woulfe 450k through a "promissory note" (in this case another word for unsecured loan), payable on demand with 12% interest rate. As no shares of the Company are issuable in relation to the loan (according to the NR), the ownership position of Dundee will remain unchanged. the loan is to be used for "general working capital purposes and repayment of short term debt".  The new Dundee loan carries the same interest as the Almonty loan, but is for 450k, instead of 150k+150k. At the current burn rate it would payback the Almonty loan and carry Woulfe operations through May 2015.

There must be at least a thousand ways for a large insider to kill and take over an attractive junior miner like Woulfe precisely at this stage (pre-finacing with final feasibility done and short on cash). Providing a bridge loan at very favorable conditions is not the one that immediately comes to mind.  This bridge loan gives away no equity, has no fees, no deadline for repayment, is unsecured and carries a relatively low interest rate (try getting 12% on 450k credit card balance). If Dundee wanted to take over at the expense of the other shareholders they could have caused a cash call already last year and done a massive private placement or convertible deal. Not that they would not do it if they had the chance.  These are very clever business people looking for maximum gain. but by now it is getting fairly clear that they are either not entirely greedy, or they are are not being allowed to be.
So the loan conditions are good and Dundee seems to be on its best behavior so far.  But what does it say about the current situation? Steamerlane asks the right question. 
I am optimistic that this will work out reasonably well for major shareholders, and also for the small shareholders. As long as the common shares are not differentiated by "financial engineering" on the way to project financing (or acquisition, which I think is still the most likely option). So far I see no signs of that happening but shareholders need to be very vigilant until the deal is done and even afterwards.

[chizzles]

I sound like a skipping record but thanks again Volfram. It seems like many of us rely on your expertise and always look forward in your input. What is financial engineering? Also, (and I know you can't project the future), based on everything we know, what is your guess on what the endgame will be with Woulfe? What value do you think we will get for our shares? Very appreciated Volfram

[5ilverlining808]

Thanks people. It sounds like a positive, for the moment, and I will contiue to be optimistic.  Still no warm fuzzy feeling on start-up, but at least no icy chill down my spine.

[GaiusGermanicus]

At least Dundee is learning the thinigs that REALLY tick shareholders off. Backing loans the company doesn't intend to pay back with cheap stock being one of them.  That and trying to issue themselves preferred shares that no one else gets a shot at.  Making that one round of secondary offerings ONLY available to Dundee itself when they were just supposed to broker the deal and

[sage4hus]

Thank you 74Volfram. Can I add my question to chizzles if don't mind: I can see that you have in depth experiences in this field and very analytic. I have wondered what makes you interested in WOF as it is absolutely not the best exiting investment available in junior miming. I suppose there are lots of stocks whose risk/reward are a lot higher out there?