Ann: Quarterly Activities and Cashflow Reports, page-19

Production results are much better than I expected. Agree the dilution is massive. They need money now to drill out and grow the resource IMO so they can plan forward production. A growing reaource and longer mine life will help attract investment and get the company valuation up. Did some numbers below (haven’t had time to check them all)

2.1 + 1.5 in notes (Gandel plus staff/suppliers)

3.6 million/0.0044

Convertible to 820 million shares - or pay back loans (better option for all)

Also 3.6 * (12.5% first years interest + 20% sign on fee) = $1.2 million additional debt.


Total ~ 5 million new debt - I guess this is current total debt (there’s no other loans or notes as far as I know)

Plus 3.6*12.5% ongoing in future years ($450k/annum ongoing)

If they can generate 1.5 million profit/quarter this is largely done and dusted by mid next year. The downside is if they’re performing well the notes are more likely to get converted which will both dilute equity and also put downward pressure on price.


Then 5 for 2 rights = 1 billion * 7/2 = 3.5 billion.


3.5 billion shares plus $5 million debt with a $450k per annum interest bill - debt convertible to another 900 million shares.

That will be the situation after all done and dusted. But rights issue fully subscribed would raise $10 million.

That would pay out the $5 million debt and leave $5 million working capital. (Needed for resource growth - plus ideally could fund work at nuggety too)

What’s a $6 million per annum profit company with $5 million cash in the bank worth? $40 million? With 3 years mine life and resource growth prospects should even be more.

$40 million / 3.5 billion = 1.1c per share.

It might work out ok - even for those that don’t take up the rights. Then they just need to grow the resource.

The situation is bad - but could be worse.

The high interest rate, 20% sign on fee - none of it surprises me - that’s the price of credit when desperate.

Short term, post the rights issue, share price will likely get very ugly but it could present a great buying opportunity.

Almost certain they’ll have to do a share price consolidation as part of this as well. Minimum of 1:10 would make sense.