Palladon: Some teaser updates

Today’s update from Palladon had some interesting tidbits about future sales and where the company might get funds for paying off debt.

First, the Toronto Stock Exchange rejected the agreement between Palladon and Luxor Capital to extend the payment of the debt.

Palladon Ventures Ltd. (“Palladon” or the “Company”) (TSX-V: PLL.V) (Frankfurt: PV-1).  On December 4, 2009 Palladon announced that the Company and Luxor Capital Partners, LP (“Luxor”) had entered into a letter agreement (the “Letter Agreement”), subject to TSX Venture Exchange approval, which extended the due date of existing indebtedness, granted Palladon an option to repay the Luxor Loans (“the loans”) at a discount  on or before March 31, 2010, and restructured  the loans for a combination of debt and equity if the loans were not repaid by March 31, 2010.

The TSX Venture Exchange has notified the Company that it would not approve this Letter Agreement.  Therefore, under a new standstill agreement which expires on March 15, 2010, the Company and Luxor are reviewing all available avenues to repay or restructure the loans.

I don’t think this is something shareholders should be too worried about. If Luxor Capital did not believe that Palladon could pay off the debt, it wouldn’t have granted the extension or signed a new standstill agreement. This is mostly a procedural matter that might need some restructuring of the agreement.

The most interesting update was related to the shipment of production and positive investment interests:

Palladon CEO Dale Gilbert stated: “Our highest priority is to repay or restructure the Luxor debt in a way that maximizes value for Palladon shareholders.  We are also working very hard on developing a plan to ship iron ore and/or to upgrade our iron ore to concentrate.   The continued strengthening of iron ore prices has resulted in increased interest in Palladon and its Iron Mountain Project.  I was encouraged on my recent trip to China, where I met with numerous parties to discuss off-take agreements for iron ore and concentrate, as well as funding and possible investment in Palladon.”

There is nothing concrete here. I expected the company to pursue Chinese partners for their assets by either signing a shipment deal or getting them to invest in the company. I think in the coming months we should be clear on what management is able to deliver. So far, the new management has been making all the right decisions to increase shareholder value. Shareholders will have to be patient with this one and let management execute its plan.

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