RE:RP2.0 Financing from cash flow or loan?Let us analyse what Trevali already has at the moment for financing RP2.0. The only thing it has is the excess cash flow from Q4 2021. Beyond that everything else is based on assumptions. For example, $17.7 Million will come in IF common share purchase warrants are exercised which will be exercised IF these warrants come into money. Enough excess cash will be generated in 2022 and 2023 IF Zinc price remains at the current level (or even if somewhat less than the current level). Projects are not undertaken based on IFs and BUTs.
At this stage, Trevali had primarily two options: (1) Immediately tie up the full finances required for the project and proceed full-steam in its implementation, or (2) wait and watch in Q1 and Q2 2022 and, depending upon the excess cash flows generated in Q1 and Q2, take a final call on project financing in 1st half of Q3. Trevali has opted for option (2). That is why it has committed the excess cash flow from Q4 2021 to the project in the form of Early Works Program so that the project implementation is not delayed while the management is waiting and watching.
Trevali has some interesting financing proposals on the table. Having started the Early Works Program, Trevali can now wait and watch and determine and negotiate the best financing option for the project from a position of strength. This could even include expanding the Early Works Program beyond $20 Million by adding the excess cash flow generated during Q1 and Q2.
Had Trevali opted for option (1) and immediately wanted to tie up the full finances required for the project, the financing could have looked like the one that I put out in my y'days post.
So now, alongwith the Trevali Management, let us wait and watch (1) the Zinc price over Q1 and Q2 because the excess cash generation will depend on it, and (2) the share price because exercise of warrants will depend on it.