Katanga Mining Ltd Ord KATFF

RE:RE:RE:RE:Glencore Onwership of KAT shares..Latest

[bigguy56]

Topdop: In your opinion, does Glencore intend to keep KAT long term; are they interested in it as a long-term investment? Everyone on this board seems to be assuming that Glencore will simply roll over the debt. Well remember, that costs Glencore money. Not too many employers do real capital budgeting and most employees are not exposed to it, but I was in one place that did it religiously and I was involved. The cost of capital at that time was about 4%. This was back in 2008. For a project to have any interest at all it had to have an IRR of about 20% over 2 or 3 years. Even though Glencore can roll over the debt cheaply, that costs them at the bank as they have to borrow it. And you would know better than anyone how these capital projects work in terms of their justification and funding processes. These processes (FEL) mostly came from Mining, which is one of the most capital-intensive processes in all of industry. Also, compare it with Vale. I was there is 2011 and worked on some Billion dollar projects. The cost of their stock at that time was $33. It went down to 2$ when commodity process fell. Mining is a dangerous business. The other possibility is that Glencore simply sells the company once these capital investments are made. Simply put, once Commissioning is complete, the value will be measurable and clear to everyone. However, the debt is clear to everyone as well. I know that in a case like this, the debt is usually considered separately from the asset itself. so any deal would be for the company, or the company along with the debt. As for the debt, I don't think that the outcome would be good for investors. Of course, Glencore is an investor as well. what happened to them happens to us... so what do you think could happen? I don't know the ownership structure like you do and am not a Corporate Finance guy either... I don't like this trend. Still somewhat exposed but it is throwaway money at this point.