Questions and answers What do we know? What do we think that we know? What do we not know?
What we know?
1. The Korean Consortium owns 30% of MMB. Baja owns 70% of MMB.
2. MMB ownes 100% of both the Boleo Project and the debt draw down..
3. MMB now has a debt draw down of US $408 million as of March 29, 2012.
4. The senior debt holders will not release another tranche of debt draw down until the cost overrun issue is resolved.
What do we think that we know?
5. The Korean Consortium either (a) is legally obligated to absorb 30% of the overrun costs or (b) will voluntarily absorb 30% of the cost overrun to protect its interests in MMB.
6. There is only a small possibility that MMB will go into default.
7. It is unlikely that the existing MMB senior debt draw down will be paid off through future refinancing, because the existing financing terms are too attractive.
What do we not know?
8. If the BOD only initially resolves part of the costs overruns by the issuance of additional subordinate debt (sufficient for capex for the next seven months), would this place the existing senior debt into a default position?
9. What if any relief can we expect from Louie Dreyfus?
10. Is Baja Mining Corp. allowed to sell a part of its 70% ownership of MMB? If it did this, would this trigger any negative repercussion related to either existing debt instruments or convenants with the Korean Consortium?
11. Does Mount Kellett still want to increase its Baja position from 19.9% to 30%?
I was taught a very long time ago to learn to ask the right questions before looking for answers. Otherwise, no matter how brilliant an answer might appear, it is useless if it is irrelevant. That is nothing new. Immanual Kant said it 250 years ago:
"A concept without a precept is empty; a precept without a concept is blind"
Cheers,
Doug.