Thursday, October 15, 2009

Ideas for a back up plan (Plan B and Plan C)

Plan B:

Firstly, I still like the idea of hooking up Finskiy and Scola. With all honesty (100% honest), like every other shareholder, I have absolutely no idea as to the status of the deal. Hopefully it's still going well - I have no reasons to believe that it's not. However, Finskiy and Scola are going to do what they feel is best for them, which is completely understandable. Hopefully they still feel the same way as they did when the original deal was announced. Regardless of how well things are going with that deal, we should ALWAYS be working on a back up (contingency) plan, simultaneously. Any well run department within any company, and any well run company, always have solid contingency plans in place.

Here is my back up plan recommendation:

To close off the US$25,000,000 prepaid gold sales financing (with the international bank) the requirement was for Century to raise C$20M via the equity markets.

Century closed off C$1,100,000 in equity financing already - money that is going towards the restart of Lamaque, with Bedard Dyke drilling, etc.

Century is expected to close off the C$5,250,000 bridge (equity) financing on October 23rd. This is money targeted for the restart of Lamaque also. Based on the NR (including the relatively quick targeted close off date), it sounds like a deal is already in place (investor, price, technical DD....), with the parties mainly having to go through the paper work and wait for the TSX-V approval.

Once the bridge (equity) financing closes, the way I am interpreting the mandate, it means we would have raised C$6,350,000 of the required C$20,000,000 equity financing, or 32%. It would mean we are only required to raise another C$13,650,000 via equity.

With the gold price now US$1,060 (and the outlook expected to be positive for a number of years into the future, as many are not expecting inflation to really flare up for another couple of years), I think the equity markets for junior companies (with advanced staged projects/near-term production) are more relaxed now, even compared to say a month ago. I think passing the US$1,000 barrier (and sustaining) has been a major catalyst. There seems to be a lot more deals being done with juniors now.

At $.20 per share, the remaining C$13,650,000 represents only 68,250,000 additional outstanding shares and only 34,125,000 warrants. Even while trying to close the deal with Finskiy and Scola, I would like Century's management to attempt to find back up investors (just in case the deal falls apart at the 11th hour). We can no longer leave it totally up to chance. The rug has been pulled out from us at the 11th hour way too many times already. It's not about a lack of trust. It's entirely about contingency planning. If we can already raise C$6,350,000 (once the bridge financing closes Oct. 23rd) then maybe we have a decent chance to find additional contingency investors.

If my back up plan comes to fruition then we will only need to have 301,500,000 shares outstanding to enable us to restart Lamaque (and expand San Juan) and only 350,000,000 Fully Diluted shares (including our current options and warrants).

Plan C is in the comment section.

5 comments:

production05 said...

Plan C:

Assuming Finskiy and Scola are increasing in staying, and also interested in increasing their shares slightly, then we could eliminate the prepaid gold sales financing portion.

With a US$1,060 gold price, there is a lot of value in eliminating the prepaid gold sales.

51,300 ounces * US$1,060 * 1.035 exchg rate = C$56,300,000

Lost revenues for 51,300 ounces is currently C$56,300,000. Eliminating the bank financing means we would no longer lose those revenues.

However, more importantly, it means we wouldn't have to worry about vital issues associated with commitment guarantees and debt covenants if there happens to be any delays during the start up period. Those are very important due to the collateral that would be pledged in a debt or prepaid gold sales financing.

Here is how Plan C would work:

We need to get to about C$45,900,000 (equivalent to the current financing plan).

1) C$6,350,000 raised effective (Oct. 23rd)

2) issue 113,000,000 shares (and half warrants) to Finskiy and Scola for C$22,600,000

3) cash in the 56,500,000 Finskiy and Scola warrants once the share price hits $.30, to raise the final C$16,950,000

C$6,350,000 + C$22,600,000 + C$16,950,000 = C$45,900,000

That would equate to the same financing amount as was announced on Sept 15th.

It would leave us with no debt obligations other than the current IQ debt. We would be able to keep the C$56.3M in revenues. We wouldn't have to deal with a bank debt, thus wouldn't have to worry about them turning into sharks if delays occur.

It would leave us with around 346,250,000 shares outstanding, increasing to 402,750,000 once the warrants are exercised. The FD share count would be 417,000,000 (including our current options and warrants).

Finskiy and Scola would own 44% of the company, but could still increase their position to 50% by purchasing shares on the open market.

Anonymous said...

Production05

I suspect the russian guys have something to do with this 5,25M pp, because they still want more shares, because of the failure with Etruscan. So i would doubt they will go down from 100M shares+50M warrants, if that's the case. But that's just what i feel, it could be totally wrong ofcourse.

Juha

allbent said...

Though I don't quite understand all of the technicalities, I think that Peggy also feels that she must always have backups in waiting. I think she always has. The elimination of the gold deal with the bank would save us a whopper!

As always, I always learn from and respect production05's postings.

production05 said...

Thanks Allbent.

Juha, there are 3 reasons I feel it is unlikely to be Finskiy (Russian) or Scola (American) that just subscribed to the FT PP:

1) Flow-through tax benefits work only for people that pay taxes in Canada. Finskiy is Russian and Scola is American. Also, other countries do not use the flow-through concept (it's a Canadian thing).

2) Finskiy and Scola wanted security for the bridge loan. That would suggest that Century is an all or nothing investment for them. The FT does not come with a pledge of security and it only represents a partial investment relative to what they were looking for.

3) The bridge financing is through Union Securities. Finskiy and Scola did not come via Union. The finder's fee was/is 2% in the Finskiy and Scola transaction, and not the standard 6-7% Union normally charges (as demonstrated with this current bridge equity financing).

rick said...

be care full century cuz the minors and the union going to make pressur on you very soon if century dont pay us right now