Ann: Revenue Generation Recommences-KBL.AX, page-56

Hi Romann,


I don’t believe the current operation will generate enough free cash to meet the liabilities hence the capital raisings and note issues.

As for the plant and equipment, well there are lots of companies that have spent a fortune on plant and equipment but so what? If you don’t have a ore-body to process beyond this year or the capital to fund development of a resource, then your plant and equipment will end up as a bargain for either the creditors or someone else unless the shareholders dig in and keep it afloat.

With regard to the debt levels, unless I am missing something the way I read it as at December 2015, there is approx. $71m in debt (1/2 year report). Yes, some of this has been paid down with shares ($2.9m) and some cash flow but overall the debt levels are about the same because the company put in place a working capital facility of $3m as disclosed on 22/2/2016 and since then has issued additional notes to raise funds. At best the overall debt levels have come down by $10m

Pearse north is shallow but the grades are 1/3 of Pearse and if KBL can’t make ends meet with 3 times the grade, how will they fair when they move on to lower grade ore??

PYBAR and others are caught between a rock and a hard place, they are unsecured creditors, it’s either support the company by taking a small component of their debt as equity and strictly monitoring progress payments or insist on an action that would lead to receivership which may only yield them a small return on the amounts they are owed

What gives you so much confidence that the company will make a profit from Pearse North? Even if it were able to make a profit based on C1 costs, what about all the other costs and liabilities, do you really think that a small low grade resource will be able to meet C1 costs, corporate running expenses, bond holder repayment and still deliver 25% of all GOLD production to Quintanta @USD290 per ounce??

I am not looking at just the market cap to base my valuation, I take all the debt into consideration then I look at the potential earning stream and I figure that in the absence of knowing how the debts will be serviced and repaid then KBL is more than fully priced with an EV in excess of ~$50-60m