PAL needs financing pretty badly and some debt will have to be renegotiated soon and particularly the fully drown credit line of 60M by July 2013. This is not the best environment to find suitable financing for the 60M to 80M PAL needs to complete Phase II til mid 2014 roughly.
PAL is a common paradox with enormous potential in reserve and good revenue but a weak financial situation aggravated by some huge mistake *gold venture*.
The Company has already invested about 320M or more in the expansion and is about to complete the Phase I of the shaft which is an important and vital milestone. The problem is that to be able to reach the 250Koz at under 300 dollars by 2015 PAL needs to go ahead with the phase II and a additional cost of over 100M for 2013 to 2014.
It will be very difficult to get good terms although I believe Phil du toit will find financing anyway. The question that all investors must ask is at what cost to pps?
We have 3 ways of looking at that...
One, the actual pps has already factored in an important part of the negative financing that will come soon and the pps will eventually trade up to around 1.45 when the financing will be announced. With an extended credit line with some new terms and interest.
Two, depending on the term of the financing PAL pps will drop in the 0.80/0.75 area and then will eventually get back to above 1.
Three, PAL is about to partner with another company who will take care of the last leg of the expansion using cash and acquire PAL under a share swap deal. Why share swap deal because PAL shareholders will not accept a cash deal making their investment at a loss instead of a share swap that will make the shares more valuable in the future.
My first choice is Stillwater in USA which has the cash needed to the expansion and can acquire PAL with a lot of positive attached. As I said it is a WIN WIN situation for both companies. This is not the only one potential.
Right now I have a limited investment in PAL and accumulate.
I believe it was back on April 1, with palladium around 765/770, was a day when PAL jumped way up. It doesn't seem like the rise in palladium price is helping the share price day to day. I am wondering if the rise in the palladium price will help with potential buyouts or financing in the immediate future. Any thoughts??
Price of palladium is always on the back side here...
Because palladium is bullish and will eventually flirt with 1000 dollars PAL will get more opportunities.
So far, it is dormant after a serious drop and many are waiting for the next move from PAL management. They have to do it fast....the credit line is fully drown at 60M and due in July and expansion needs at least another 60M for the next 10 months....The pps may go lower a bit but any news regarding a financing will boost the pps to at least BV at 1.42.
Waiting for news now but hope for a SWC PAL partnership.
First- what is China doing, if expansion is ongoing then the metals rise will make PAL an attractive takeover and provide financing. 2nd- how is Platinum doing- if price is up then palladium will rise along with it due to interchangablility in industrial applications. 3rd- market momentum- if it keeps going even though it is May, then price will get back to 1.50 or so pps. but if it is a May and go away year, no change much until September and South America ramps up for its better weather part of the year.
While you were away I have been advocating some sort of buy-out for quite a while now. Don't like it, but it was and still is the only way out that I see - the alternatives seem worse for the stockholders. Don't don't forget that any acquirer whether for cash or stock takes on more than 100M in PAL debt - that has to be figured into the price they will be willing to pay.
I agree with you a take over is the most realistic possible solution for PAL to complete the shaft by 2015 and I trust Langille the CFO at this level to realize that.
I do not think a cash transaction will be accepted by the board and PAL shareholders because it will signify a definitive loss but a share swap could be more appealing and will involve no cash but just a translation of assets from PAL to PAL/SWC.
Yes, SWC will have to assume the debt and will take the reserve too...On a day to day basis PAL mine can cover most of it and is losing about 10M to 12M now yearly.
This is why a deal based on the Book value which is the shareholders equity divided by outstanding is the best criteria for the conversion. In the book value assets as well as liabilities and debt are involved.
I came to around 0.13 to 0.14 as a fair valuation from PAL to SWC.
Because of the cash on hand that SWC has right now, 204M PAL/SWC will be able to finish the shaft and get to the 250Koz in 2015 without anymore financing! at this present production SWC will increase production of palladium by 50%!!! they are producing about 520koz right now at a higher cash cost and free of the Ford deal that take about 85% of their actual production at discount.
This is essentially why I am buying back PAL now because any financial solution reached by PAL will probably boost the pps.
If a take over like that become a possible venue then the pps may trade at 1.60/1.80 very soon specially with palladium still bullish and in definitive deficit till 2017.
We will see but I have the feeling that news will come very soon about that. Time is the essence...