"Construction Credibility"

Righty-oh,

I guess I'll eat a slice of humble pie. I did express a fairly strong POV of not being happy with PL taking on "Chinese Money" (i.e. selling 9.9% equity stake to Xinhai along with a board seat).

Spending some time at IMARC in Sydney this week. I secured a 1-1 FTF meeting with John Zhang (Board Secretary). I was determined to find out more about this "strategic placement". I wanted to know whether Xinhai was really going to be a (reliable) partner, a predator or just a passive investor. What was the specific value - the strategic value - they would bring.

I was greeted by a young man (but then I'm an old man) with a British accent (and an Oxford graduate). Color me surprised. He's also the son of the founder and major shareholder. I was very direct - because we are "peers" (as in shareholders) and the difference is simply how many shares - and I posed him a series of questions.

Saw PL later in the day ... the feedback I had to give him was "Construction Credibility". John made the decision to have Xinhai take an equity position. They are not a predator but would seek to grow their stake. He didn't see Xinhai taking an asset level ownsership stake. What they are doing is providing "patient capital" (as in not selling), taking a cornerstone stake to essentially lock in the EPC scope (obviously) but to ultimately BUILD and operate the mine. So I pushed him on the "construction credibility" tag - and no disrespect to any FLG mgmt, but they are not skilled in mine building - and he vehemently agreed that designing and building modular mines (so constructed in China and sent to the destination) is the "strategic value" Xinhai provides. He made the investment decision because he believed the market hasn't yet picked up the value the FLG holds in Pantanillo. He did not make the decision to invest based on the project being in Chile, or being heap leach (but certainly +ve attributes) but because its a "doable" project (to borrow PL's description) and that's the win for them. They build mines (all types of commodites).

So, while not being my preferred method of getting "Construction Credibility", Xinhai delivers this and at speed. JORC and EIS under FLG direction. FS and FEED with Xinhai (as I see it). Just needs to marketed positively and often. Kind of hard to argue against.

Meanwhile shares on sale still I see.