John Stokes/Robert Dydo
John: In your previous post you made a claim that I did not immediately respond to because I found it very annoying. While I may not place much weight on making friends in this medium, I don't see any need to provoke enmity; especially when it may simply be a matter of misunderstanding or a carelessly expressed comment. You wrote:
The only reason that financing would be withheld is if the K government is perceived to be too high a risk.
There are several reasons why the Mizek financing might collapse, but a consideration of political risk at this point is not among them. I think we can rest assured that Standard Bank made a political risk assessment long before offering a term sheet. Moreover, I understand that Standard Bank has existing financial interests in Kazakhstan and perhaps even an institutional presence now. There are only two sets of issues that remain to be resolved, and they are not inconsequential.
The first concerns legal matters. Has Steppe acquired the requisite permits? Are there any irregularities with respect to title? In short, does the project meet all the various statutory requirements of the country in which it is operating? Bureaucracies are bureaucracies are bureaucracies.
The second concerns technical matters. Are the reserves actually there? Can the gold be recovered in the manner and at the cost suggested in the feasibility study? I'm not a geologist and my understanding of metallurgy is so insignificant as to be worth nothing. However, it should be clear that this set of issues is primarily concerned with a physical reality that doesn't recognize different political jurisdictions. Water runs down-hill whether in Moscow, Mizek, or Montreal.
If problems are encountered with any of these things, the financing could be in jeopardy. I think there is enough to be concerned about without raising the phantom of Kazakhstan politics, which is a non-issue for Standard Bank at this point.
Robert: The main point of disagreement between us remains the cause of Steppe's malaise. I will offer one more suggestion in support of my position. I think that if we gave it some thought we (I'm including other members of this thread) could come to a consensus with respect to a list of countries that are publicly perceived to be more of a political risk than Kazakhstan. I believe John Menzies has already mentioned several. I further believe that, without too much difficulty, we could identify a number of junior resources companies pursuing projects within those countries that have attracted a great deal of investor support. I'll let it go at that.
We definitely agree on the cure.
As for your 'back-of-the-envelope' calculations, I did the same thing after the K & A announcement, and I don't think that the exercise is useless. At the same time, we have to bear in mind that all of these other projects (even Mizek, to some extent) exist only as a potential. And I mean that in more ways than one. Steppe has yet to complete its own legal and technical due diligence on K&A. Documentation hasn't been submitted for regulatory approval. There is the matter of the $16 million payment over five years. And many of the same conditions hold for the Goldbelt acquisition. Of course, this is why Steppe is a speculative stock.
With respect to share dilution, it remains a concern, in my opinion. The concern would clearly diminish with the completion of Mizek financing. And it would clearly increase if that financing doesn't materialize. Perish the thought.
Regards. |
