bacci, you're wrong

Titillating title, huh? :)

In fact, you may be well right, bacci, but I'll put this to all of you Penrice observers, and you can tell me what you think.

Ok, so debt looks overwhelming: 70% debt : 30% assets. And the lenders keep lending. Why? Irresponsible? Well, maybe they think they will get their money back. Debt to equity swap? Not necessarily.

I've just been thinking... a takeover would cost- minimum- $87.3m debt plus $7.3m market cap. $94.6m plus a takeover premium of 30% (on the market cap only), so for >100m, the suitor gets the lot. The mine, the CSG treatment, the contracts. If the CSG project works, it could resolve a bunch of issues for CSG across the world (there must be a good inventor in PSH).

$100m: Too much money? Well, as the Penrice debt has gone up, the market cap has gone down. Instead of having to pay $2.40 per share (and little debt) + premium, as the share price was in 2005, now it is 8c + premium + debt. So, the suitor (if there is one or a few) would not be paying for the company- they are paying for the debt. $100m is the price of a Qld tenement these days.

Over to you, folks! bacci, I know you have a love affair with PSH- hate is close to love. ;) I'd be interested in people's ideas. If someone wanted PSH, the SP isn't a concern now- a few cents here and there makes little difference- it's the debt that makes the difference. If PSH has a PLAN to reduce debt, the situation could become even more compelling.

I don't own PSH. I may not buy PSH (bacci, a debt for equity swap with the bank could occur, and holders would be diluted into nothing- like the worst consolidation of all). The prospect of what could occur, though, is interesting.

Over to you!