Nice post dato

WPX released their feasibility this morning. In these times of tight money an initial CAPEX of $2.91B is a tough sell. When we look at AAA my guess, when the numbers are in, CAPEX will be significantly less than $900 million but a lot depends on various options that affect the CAPEX such as getting the product out to port (buy or lease trucks - size of trucks etc) and optimization solar drying etc. They have made significant progress without a lot of hype (I know shareholders are upset by the downturn in price but nothing ever goes up in a straight line - if it did we'd all be retired)

Anyway AAA reserve is huge - it is proven (they can stop proving more); AAA has the water - not a problem; roads are being built; port is under way; electricity not a problem as process is mainly solar so needs can be met with diesel gensets; security is a minor issue & Ethiopian gov't is working to make sure no problems - they need this mine & don't want investors scared away; CAPEX will be easier to arrange as access to financing through development loans such as IFC, cheap labour available. Yes there is some risk because of where it is located but this risk but my opinion is this has been discounted far too much.

What's missing? An off-take agreement - to lower CAPEX required through further dilution - my view is it is coming.

Financing? It's coming & my view is it isn't an issue

Customers - not a problem

Dilution - - let's face it there will have to be some equity raised but the share price is in the dumps so I think they will hold out for as long as possible before having to go that route - hope the price is up by then. Maybe they'll consider giving existing shareholders options so we maintain our level of holding - who knows before having to go to market. My best guess at this point is they'll need to raise about $100 - $180 million but this is nowhere near the dilution that WPX shareholders are looking at.

I've been in AAA for a few years & been fortunate to have already made some coin on the swings in share price but my view is this is a bargain at these prices & it is time to accumulate and wait - I "invest" for the long run & don't play the short-term swings.

My biggest concern is an unsolicited buy-out. This project is moving along nicely and there is clearly money to be made but someone may try to steal it at bargain prices. The only saviour in this to protect the small investor is the blocs of shares held by Liberty, IFC, et al as their cost/share is considerably more than current market - I doubt they would entertain a "stink" bid to take out the company (I hope).

My thoughts - I sit, accumulate & wait.


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