Vert Infrastructure Ltd CRXPF

RE:The deal explained

[lmcbain]

Ok - so I read thru a bunch of posts and reread the NR and reviewed other documentation available from the company and I was still not sure why this deal was made. So then I called the company and I got an answer - it was honest and it addressed my question and the deal makes sense IMO.

Here goes with the explanation:

There is a crop to be grown / cultivated / harvested / sold and the gross value of that crop (revenue), NOT the net value (profit) is estimated at $26m. Half of that gross value has been sold for $500,000 US, that means that $13m gross was sold for $500k and that's what has raised the eyebrows of so many investors - myself included - and it should because on the surface it doesn't necessarily sound so bright.

When speaking with company I did not receive an estimate of what the NET value for that harvest is expected to be; however, I was told that essentially the cost of getting the crop to the point where it can be harvested and the general success of the crop is already known will be covered by the $500k, so the risk of producing this crop is essentially covered - that's not a bad scenario.

One thing that needs to be remembered is that the harvest from this crop is being sold, not 50% of the property, and not 50% of multiple harvests, but a single projected 120,000 pound harvest.

The way the NR was worded was a bit of double-edged sword - the $26m figure was thrown out there in the release and it sounds like a big number and it catches peoples attention (good thing - maybe??) - the problem is that it ialso amplifies why people are asking "THE" question:
"Why sell $13m for $500k??" That big number got people interested, but the big disparity between that number and what it was sold for is also what bothered people.

Here's the kicker - the company has essentially $6m in the bank and that $6m is pretty much spoken for in the company plans. The project in question that is going to go into production because of this $500k would NOT be in production otherwise. The only way it is going to into production this soon is with that $500k - otherwise a financing would be necessary and that would create additional dilution. Instead of dilution, this will generate a forseeable cash infusion that would not otherwise exist in that same time frame.

If for instance the profit margin on the NET from this harvest is 50% ,the company would generate an additional $6m in profit without divesting itself of an asset and without running any additional dilutionary financings - so this direction appears to have plenty of merit.

For so many of us who are used to seeing an investment in a mine, where the % of the asset that is sold is nearly always permanent, this is a different mind set. When the next crop is grown and harvested on that same property, this same process can be repeated or the company can decide to foot the bill themselves. It's not like gold - after you harvest the asset isn't gone, it regenerates.

Even the individual I spoke with at the company wasn't so sure he liked the deal, until we worked our way thru the overall scenario and I believe he also changed his mind - in favour of.

I like the venture that was undertaken, the company sold part of an asset (a regenerative asset) that would not have existed without the $500k and should see a healthy income stream as a result. Not a bad plan.

Salut,
Leigh McBain