Eddycom

Good day! Can you please provide or name one example where Venezuela has entered into a 50 - 50 JV where it has applied their 50 % of the upfront investment dollars required? Just one example please!

The simple response is that Venezuela has not invested any monies in a 50 - 50 JV in the mining industry. They don't have to. As in the original 50 - 50 in the heavy oil sector and then the 70 - 30 deals they put together it is the overseas entity that invests the capital and delivers the knowledge and skills to bring the project(s) to fruition. Over time Venezuela's investment is a drawdown on annual profits. In this fashion they don't actually invest anything, they get the multinationals to do the investment and in time they participate. Sounds fair and reasonable and has worked in the past for them. What Venezuela wants to see, in my mind, is the same approach for the mining industry. The only problem is that they have screwed things up so badly that the ability to achieve such agreements, after the fact, is impeded by their inability to get out of their current commitments to GRZ and KRY. For this reason and compounded by indecision/mismanagement no progress is ever made.

As far as I'm concerned KRY does not have the ability now to go backwards and put together another deal with Venezuela. They don't have to. They have a binding operating contract and have completed their DD to be in a conforming legal position. At this stage of the game and the future need for capital to bring on development of Las Cristinas and to make up for the lost tens of millions as a result of Venezuela's delay tactics - intentional or otherwise we are faced with a gargantuan task of raising additional dilutive capital in near impossible credit markets, in a hostile Venezuelan business climate and with note holders/class action lawsuits coming out the ying-yang.

KRY's only avenue now is to wait for Venezuela response. Let's look at the best possible scenario and say: Venezuela contacts KRY after the 2nd failed RML bid for GRZ collapses late January and provides the permit - no questions, no problems - the permit arrives by courier at Cottin's office in Caracas, KRY's lawyers review and KRY provide the pr. Then what! OK, they get the note holders to settle down, get their lawyer's to put the class actions to bed. All well and good, then what? OK, KRY has to raise capital so it issues more shares, dilutes current shareholders and or sells the project to a 3rd party. KRY then becomes the Venezuelan subsidiary of a true global player - a GG or ABX perhaps? How much would they be prepared to invest to buy the asset in Hugo's backyard? USD 400 million, USD 500 million - think of a number? Some may argue it's worth more, perhaps it is under better circumstances, but look at the risk quotient . I'm a GG shareholder as well and wouldn't want to see GG making a USD 400 million investment in a two bit country when GG has projects coming onstream in Mexico!What's that worth per share USD 1.50, 1.75? OK, you get the idea! In the best possible scenario of a buyout after all the crap that has gone on in Venezuela the last 2 years would you consider that fair value? Probably not? Is that why RM is averaging down? Has he figured out that options are worth nothing on takeover if they can't be exercised at the option price?

My own opinion, for what it is worth, is that a sell-out price, a long shot at best, would be in the neigbourhood of USD 1.50 - USD 1.75 given the risks and problems associated with Hugo. OK, so shareholders don't like that so then the only other way of getting more value is to develop the site themselves, take on the extra dilution assuming Fung can pull a bunny out of the hat, take 2 years (perhaps less time if they cut some corners) and bring on the project themselves. Then what? Will Venezuela nationalize LC anyway after KRY build's it?

At this stage I would be happy with ICSID arbitration. It's simple, we don't get more dilution, don't have to raise any capital and don't have the headaches of developing it. Let Venezuela do it's thing with their new Russian friends. Let them have the headaches. Let these bastards pay for the crap shareholders have endured, for the lost value, for the tens of millions wasted on waiting and praying for a permit. Bring it on.

Best case in my mind is ICSID arbitration, sell the equipment, pay-off the note holders, pack-up shop and run the legal case on a shoe string through Freshfields. I'm prepared to wait however long it takes to get some value. Till May 28 we wait and burn yet more money in the hopes of getting a permit and raising more dilutive capital. Take your choice USD 1.00 or so on permit issuance and bail before more capital has to be raised, or wait through dilution in the hopes that KRY can bring on LC, and not get it nationalized, or wait-out a fair ICSID arbitration ruling.

Everyone makes their own decisions. I'm waiting for ICSID and a couple of years thereafter. In the meantime sometime between when hell freezes over or the permit comes I might just sell a portion of shares upon permit issuance and before more dilution. Permit price of USD 1.00 should give most holders who averaged down a nice premium.

Not very sugar coated but that's how I see it!

Cheers

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