Payment In Kind - PIK

If the Waterton deal now confered on Procon is actually a type of payment-in-kind financing, then the obligation to pay in bullion would have a substantial contorting effect of balance sheet assets and liabilities and be mismatched.

A very high depreciation rate is noted from substandard ore, and a low processing rate, a mere fraction of its rated production, is being utilitzed. Thus production is affected. Excess production is not noted in the balance sheet from the simple function that all excess production over a period of three years is subordinated to some future settlement, thus does not appear.

Waterton would have walked away when they realized they owed the full amount of 100k oz, to be determined in price at a later date, which they probably could not pay, or want to pay since they were really looking for a distressed asset. Procon is the holder of the agreement so that it remains active, until such time as the accrual of a payment in kind mezzanine capital is concluded. Waterton is conspicuously absent, but it would be in their best interests to buy as many shares as possible.

Thus all of the assets are in the liabilities column, and production is subordinated to satisfying the conditions.

The 'toggle' would have to be $1400/oz. U.S.

http://en.wikipedia.org/wiki/PIK_loan

$Gold Weekly

The gold price is but a few dollars away from a sincere breakout. The elliot wave analysis so far has held firm, and the volatility smile was inadvertently cofirmed by retesting the June bottom without traversing it.

Trade in gold bullion had transitioned from momentum based futures to derivatives based risk assets in this period:

http://scharts.co/193dEYD

-F6