July 25 2010According to the last MD&A posted on Sedar on 15 October 2009, Cline has a $19 million convertible debenture that has to be repaid plus interest within two year of draw down. Since the cash was used to buy the New Elk coal mine and the date fo the acquisition is July 25, 2008 according to the same MD&A document, it looks like Cline would have to come up with about $10 million around or before July 25 2010 to repay the loan. That is if Matsushima decides to convert $10 million worth of the loan into shares at a price of $2/share, otherwise Cline would have to come up with the full $20 million or so.
So what is the game plan to deal with that debt? Will they try to issue more shares? They just issued $3.9 million worth of shares and Matsushima provided an additonnal load of $3 million, but that is to bring the mine back into production as I understand. If they fail to pay back the original load by July of this year, will Matsushima take over the New Elk coal mine and wipe out all CMK shareholders in the process?
There seems to be a potential for a GCE like run in this stock once they start production, but the debt situation and the lack of clear information published by management makes it more difficult to evaluate the real potential and the risks.
GLTA