Quarterly report came out yesterday (Aug 14). What a great deal they got on the convertible note ... borrow AUD 10mm in Feb 2012, do nothing productive with the money, then pay back AUD 17mm 15 months later! Financial alchemy! These guys are geniuses!

They ended the quarter with a whopping AUD 78k in cash, but they reduced liabilities from AUD 25.8mm to 1.5mm. So basically it seems the company is dormant, just sitting on its Paradise phosphate assets, waiting for some investors to pump more money into the project, which seems increasingly unlikely. The current market cap of about $12mm probably reflects liquidation value. Given that LGDI seems to be winding down I would not be surprised if the Paradise subsidiary is sold, allowing LGDI shareholders some modest recovery (5 to 10 cents perhaps?) while the principals (mainly Slager and Gutnick) end up with the phosphate asset at a fire sale price. Perhaps that's the best outcome for LGDI shareholders at this point. Phosphate DAP prices have been in steady decline over the past two years and there does not appear to be much need for new phosphate supply at this time, but in the longer run there will be a great need as living standards continue to rise in Asia, creating increased demand for fertilizer in that part of the world. Unfortunately that is an opportunity that is still some years off and LGDI won't be around to benefit.

I am highly suspicious of today's miracle pop in the stock.

I guess everyone saw that David Slager (Regals Mgmt) bot another 45mm shares at 5 cents each. I believe this is part of the 150mm share placement announced last month which took the share count up to 399mm, of which Slager owns 115mm or 29%, making him the largest shareholder. The next largest shareholders are Gutnik and his wife, who own or control 76mm shares, or 19%. It will be interesting to see who bought the other 105mm shares. Have they actually been sold yet?

I believe Slager is friendly with Gutnik so I don't think he will take control of the company, but presumably he will be more involved to make sure the company stops pissing away his money. The company is asking shareholders to approve an increase in the maximum number of common shares to 1.25 BILLION from the current 400mm cap. Talk about dilution. Even if they manage to issue another 850mm shares at 5 cents it will only raise $42.5mm, hardly enough to last a year at the rate this company eats through money. Even David Slager would have to think twice before tossing another $42mm into this money sink.

At least the company is staying alive for now, increasing the chances that they can find a deep pocketed partner to help them develop the mine and start shipping some rock. The alternative would be bankruptcy and a share price of zero. But seriously, with a share count of 1.25 BILLION there probably is not too much upside even in the best scenarios.

www.lgdi.net/resources/i/docs/Press%20Releases/Schedule_14A_Definitive_13022013.pdf

A rights issue is a right to buy additional shares of stock, similar to a warrant. It means further dilution of the stock in the event the rights are exercised by holders. The 150mm additional shares that they just issued takes the share count from 250mm to 400mm, and the $7.5mm isn't even enough to pay off the $10mm convertible note plus $1mm+ interest. The company will still be left with essentially no cash. I can't wait to see the Q4 10-Q. Should be entertaining. I'm also wondering who ponied up the $7.5mm. Slager? Acorn Capital? The Japanese investor that they supposedly were working on? At least they seem to be staving off bankruptcy for another month or two. Also, the Merlin Diamond stake that is owned by LGDI is theoretically worth about $10mm.

The main time you hear from Gutnick & Co. is when they release their quarterly reports. The Q4 report should be out in about a month. I'm curious to see if they have any cash left, and how they plan to repay the $10mm due on the convertible note (plus $1mm in interest due). The only thing that can save this company is a strong global economy, rising prices for crops and phosphate fertilizer, and a deep-pocketed investor that is willing to finance the development of the mine. It's a long shot, particularly given the short time frame until bankruptcy. The stock price reflects that. Maybe they can sell their stake in Merlin Diamonds in order to pay off the note, but even then they would have no cash. What happened to that $10mm from the convertible note anyway? This company burns through cash but shows little for it. I wonder if any employees are actually on site these days, yet the company keeps spending like crazy.

You have actual stock certificates? They are probably more valuable for framing purposes than for investment purposes ... kind of like Confederate money or old railroad bonds. Do they have a beautiful drawing of the imaginary benefication plant? Or perhaps Gutnick's private jet?