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Gold/Mining/Energy : Canadian Diamond Play Cafi
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To: WillP who wrote (4780)11/22/2006 6:51:59 PM
From: Bloomfield  Read Replies (1) of 16207
 
Will,

Thanks for your detailed response concerning the relative merits of debt vs equity. I always assumed equity was the way to go, but it really comes down to the IRR for each possible outcome.

If, and that's a big if, you can get top dollar to issue shares, it can make sense. On the other hand, debt would be the way to go if the level of stock dilution would be prohibitively high.

Six of one; half dozen of the other.

The main issue here is not one of debt vs equity, but the low diamond values coming out of GK. If the value doesn't come up over the next two years, De Beers may very well decide to put the project on ice. An IRR of 3.6%, or even 6%, doesn't cut it.

Thanks again for taking the time to discuss these issues.

Yours truly, B
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