and part of the attraction for me when reviewing the differences was that the EPCM model is supposedly more flexible when it comes to financing arrangements as I explained in this extract below, from my post above.
“The treatment of project financing under each model is interesting as in the EPC model project financing is usually accomplished by substantial down payment by company to EPC contractor and the remainder of the fees issued with Irrevocable Letter of Credit (with partial payments) from company to EPC Contractor. This requires company to have all financing in place at the onset of the project so as to secure letter of credit (LC).
In the EPCM model project financing can be any combination of down payments, open accounts, and Irrevocable Letters of Credit from company to suppliers / contractors; whatever method is negotiated during contract negotiations. EPCM contractor will assist in all negotiations on company’s behalf. This allows company to have partial financing in place at the onset of the Project with the remainder available as needed, dependant on contractual requirements”
The apparent advantage of having more flexible financing arrangements under an EPCM model appears to have been lost in the current funding package, ie the capital raising should have been done much later down the track after the company had expended its already large treasury on enhancing the resource and optimising the feasibility. This together with improving sentiment in the gold sector, in normal market trading conditions should produce a rising share price (although we know the WAF share price isn’t subject to normal trading patterns). The debt funding in theory would have/can carry the project through and together with the $35 million already available would have been derisking and enhancing value into 2019 after which, if all things went well, a capital raising could have been done later at a higher price (and preferably a rights issue at that stage). This would have preserved and enhanced value for shareholders and taken advantage of the supposed flexibilty of this type of build model.
Without this advantage of the EPCM model and considering we raised so heavily at the onset of the project I would have preferred a turn key model to reduce risk. We seem to have got the worst of both worlds. Esh
WAF Price at posting:
25.0¢ Sentiment: Hold Disclosure: Held
(20min delay)
