well, this is a fascinating situation, with real money to be made - or real money to be lost!?
I guess the pivoting factor is the
future price of iron ore.
imho, there are some obvious points:
1. for my money, the investment by Todd is an
investment in Infrastructure - not mining.
2. Todd is a longterm investor. They had a controlling interest in CUE Energy, sat on it for years and years, did next to nothing, SP went backwards, and then they dumped 19.9% the other day.
3. The investment s/h by Todd of 46% in RTA, and their 19.9% of FMS will certainly kill-off any t/o interest from 3rd parties. Any t/o or corporate moves will be at the pleasure of Todd.
4. without a doubt, the involvement of Todd will be the facilitator for the BBJV and PIOP to access project funding. Todd gives the whole project credibility and financial muscle. Without Todd, RTA and FMS simply be peeing-in-the-wind.
5. The BBJV is nothing without FMS' PIOP. that's a given as PIOP ore is Phase1, and RTA ore is Pahse2. PIOP ore gives the rail and port the critical mass needed to make the project viable.
6. it appears no other I/O junior has come forward with a counter-proposal like that of FMS?
7. RTA is FMS - and FMS is RTA
8. and Todd seem to have bet their short-and curlies on their investment in RTA. Imho, this is crucial to our investment in FMS.
9. Todd seems to have spent following on RTA & BBJV:
a. initial investment in BBJV
b. $27.5m secured loan drawn in full May 2012, matured in May 2014. This loan was extended to mature now in Dec 2015, which is coincidently (?) the date upon which the RTA and FMS BFS's are due to be completed.
c. Todd provided another $10m by way of a Convertible Note Facility in two Tranches A & B. These tranches can be repaid by converting into equity in RTA, or direct interests in the Balla Balla project. Importantly Todd has now converted the Tranche A facility of $5m into equity in RTA (not increased its ineptest in direct B/Balla). Todd also retains the right to replace RTA as Manager of the B/B J/V if j/v milestones are not met.
d. Todd has a Option to acquire an additional 7.5% of B/B J/V for $36.4m. I think this is an option to convert its existing loan to RTA into an additional direct interest in the B/B J/V.
e. Todd has purchased a 50% interest in the RTA Eucla project for $1.5m
f. May 2013 Todd pays $7m for 7% of BBJV to increase interest from 25% to 32%
g March 2012 Todd pays $10m for 25% in BBJV
h. March 2012 Todd pays $8m for shares in RTA (then Forge Resources) at 50c /share = 19.9% then
(
http://www.asx.com.au/asxpdf/20120319/pdf/4253fmyytf8f45.pdf)
so in summary Todd has paid:
$10m + $7m= $$17m for its 32% interest in BBJV
$8m + $5m = $13m for its equity in RTA
$27.5m loan + $10m c/note less $5m conversion= $32m approx. in loans
$1.5 for 50% of Eucla
so in total Todd has invested over $60m in RTA and its BBJV.
RTA, with the funding and backing of Todd, purchased the BB operations from Atlas Iron.
It seems to me that any development of B/B mine involved the development of a rail and port facility. I think the RTA/Todd j/v determined that the rail and port infrastructure was not viable with the throughput of the B/B output alone, but was viable when they processed the 25mtpa of ore from PIOP.
So the RTA B/B mine business case turned into an infrastructure business case of a rail and port facility to transport 3rd party ore ! ie not mining.
Ergo Todd now has a very real need to lock-up the FMS ore so that it will be put thru the BBJV infrastructure.
As above, they have invested over $60m in the RTA operations - PLUS another $4.1m for 7.6% of FMS + $1m shares on market + $750k to get to 9.9% + $5.5m to get to 19.9% of FMS.
So what's that - about $10.5m in FMS + $60m in RTS = about $70m+ invested by Todd !!!!!
imho, Todd will not remain at 19.9% of FMS - to be sure - FMS says it has sufficient funds to reach BFS. So when FMS needs further funding to get to FID and Project Funding (which will require direct funding by FMS) it will turn to Todd.
and Todd will either purchase a direct interest in PIOP, or equity in FMS.
interestingly, Todd purchased equity in RTA, instead of additional direct interest in BBJV, because it was cheaper to by equity in RTA (which holds 68% of BBJV) than pay for extra share of BBJV.
apologies for long-winded post, but I am convinced Todd is in for long haul, and with $70m at stake, it will move to secure FMS and the FMS ore.
cheers
