Solgold Share Discussion Threads

[lowtrawler] 17/11/2020 14:01

It's now clear why our price has ticked up. The article lacks detail and doesn't reveal anything that we haven't previously discussed on this Board. Hopefully, the writer is closer to some of the key players than we are and so has based the article on something real.

RP, regarding the price that a bidder would need to pay. You have to remember that Nick still controls 20% and can likely garner support from a further 10% of investors. It makes the prospect of a successful bid without Nick's support quite difficult. If it's anyone other than BHP, probably impossible.

Personally, I don't see Nick supporting any bid South of 100p and possibly more. If BHP are the protagonist, they could potentially win favour from NCM, CGP and Blackrock but they would struggle for the last 10% without a huge premium, possibly even at a level which would bring Nick on Board.

Even if a successful price is agreed, the silent suitors could use that as a stalking horse to enter the fray at a higher price in a contested bid. In my view, any successful bid will end up over 100p and maybe substantially over.

[rougepierre] 17/11/2020 13:59

Agreed...which is why I think NM may use a JV with BHP as a bid defence...

If he tries to use the Chinese as a bid defence he is playing with fire...

AIMO as usual...

[tibszol1] 17/11/2020 13:56

Why is there so much belief that what BHP wants BhP gets! BHP is the worlds biggest miner,that is a fact, but does anyone seriously imagine that they could take on the Chinese government in a battle for Solgold because that is what they will be doing if they go head to head with Chinese interest in Solgold. Valuestone`s £5m investment is merely dipping their toes in the water to test the temperature. Previous posts opine that BHP will move for Solgold because they have to to ensure their future. Well so do the Chinese to ensure their future supply and delivery of infrastructure plans, any Chinese company involvement will merely be a front and have the full backing of Beijing and Chinese banks. Does anyone seriously imagine that BHP or any other major can compete with Chinese financial firepower that will be brought to bear on any battle for Solgold, and for all of Solgold not just Alpala.

[mknight] 17/11/2020 13:48

Just shows you that nobody thinks a takeover is going to happen anyday soon .The share price is still low and the volume as well .

Some are going to be surprised when it happens .

[swanvesta] 17/11/2020 13:45

LT/zoros, the upfront costs for this project will be huge, and if PEA estimates are at all out of whack NPV could change dramatically. There are risks in this part of the world due to seismic activity and high rainfall, water ingress + safe disposal, etc. To my mind this residual uncertainty is actually what has been holding the share price back - the elephant in the room is always something that the average person is taking for granted.

Funding providers will need to be convinced the plans are solidly workable, which the PFS goes some way to delivering, whereas I don't see that a no-commitment funding plan can mean much without that assurance.

[mknight] 17/11/2020 13:44

Thanks sirmoori

[rougepierre] 17/11/2020 13:29

Well done sirmoori...wrote my post before reading that...fascinating...!

[sirmoori] 17/11/2020 13:24

My pleasure, zoros.

[zoros1] 17/11/2020 13:21

Sirmoori - very kind thank you.
Z

[rougepierre] 17/11/2020 13:20

I still think BHP's involvement is more likely in a JV for Alpala, otherwise why the vacuum since the handcuffs came off...surely they're risking a flood of good news and a higher share price before any opening bid which others have suggested would have to be at least 50% above the share price based on past history...?

We can all get carried away with dreams of the ultimate share price I've previously stated a minimum in the range 125/200p for the exit price depending on wider market circumstances and any degree of competition. That is for now and would increase the closer we get to DFS and then production...

Certainly getting through to production should see the price very much higher than now..

Crosby Capital offered $1.15, a 21% premium to Medusa Mining's 12 month low closing price on 18 Sept; the share price spiked to $1.05 but has since fallen back to $0.82...

Endeavour offered 126.27p (13% premium) in Dec 2019; the price spiked to 129p before CEY beat them off in Feb 2020

Recent history suggests a premium of 38-54%;



However, in 2016, Seabridge Gold bought Snip Gold at a 115% premium to the 30-day VWAP;

In 2018, First Majestic took Primero over at a whopping 200% premium to the 20-day VWAP.

In 2017, Sandstorm Gold took over Mariana Resources at an 88% premium over the 20-day VWAP

Randgold shares rose 45% in the 2 months after Barrick announced their bid;

Goldcorp rose c60% by the time Newmont completed its acquisition.

One thing to note is that in several of these cases the share price appears to have been suppressed prior to the announcement of a bid.

So what to conclude:

1 That a likely bid now would come at no higher than 55p (the share price currently sits around the 20 day VWAP), unless

2 It is contested, or

3 In anticipation of a contest, it is a 'knockout bid' which would surely have to be in three figures...

So the question is, with at least two 'Tier 1s', how special is SOLG...? 200% only gives c100p...

AIMO as usual...

[pob69] 17/11/2020 13:19

Some stunning material in this new article (behind paywall - worth subscribing) SOLG $SOLG $SOLG.L #porvenir #cascabel #ecuador $CGP

Takeover battle for SolGold is 'about to begin' - In London it’s the hottest M&A story in town, with the smart money saying a take-out of Ecuador-focused SolGold is imminent. SolGold controls Alpala, one of the world’s largest and highest-grade undeveloped copper deposits.

"....we could see more Chinese involvement"

"...flurry of speculation in London that Barrick Gold was also putting a slide rule over SolGold"

"...some reckon could one day be home to half a dozen Escondidas"

"...the City understands CFO is to be replaced by a Brit".

"..The general feeling here is Mather has outmanoeuvred Cornerstone and that no EGM will take place"

"...a battle royal is brewing... although one assumes if BHP wants it, BHP gets it said one broker."

[kop202] 17/11/2020 13:18

I'm invested in Solg following a write up in Money Week weeks agoDont post as I only have have a grasps of the basics bùt.I'm an avid reader of the thread but struggle with the acronyms... could someone enlighten my darkness and spell out whatPFS....MRE and CFP mean?

[sirmoori] 17/11/2020 13:18

With apologies for the length of this cut and paste; Mining Journal article:
bid could come after publication shortly of a long-awaited prefeasibility study for Alpala which is forecast to cost up to US$2.8 billion to build, with first production slated for 2025. Returns are forecast at up to 27%.

BHP and Newcrest already have stakes of about 13% each in SolGold - the largest tenement holder in Ecuador where it owns 75 exploration concessions on the Andean copper belt.

The takeover plot thickened on Friday when the Chinese joined the fray after SolGold CEO Nick Mather announced a share placement to raise $5 million from Beijing-based Valuestone Investors, a private equity fund backed by Jiangxi Copper. What better way to ratchet up future bid tension?

Perhaps Mather will follow in the mode established by that other mining entrepreneur, Robert Friedland, and we could see more Chinese involvement in SolGold, perhaps in a JV, perhaps in close partnership providing bundles of capital (perhaps, even, via a ridiculously high offer that even Mather would find difficult to defend). After all, we know when the Chinese want something badly enough they'll pay whatever it takes to get it.

Valuestone's move followed another flurry of speculation in London that Barrick Gold was also putting a slide rule over SolGold, which is a spin out from ASX-listed DGR Global where Mather is managing director and the founder.

So, there we have it - BHP, Newcrest, Jiangxi and Barrick, all said to be circling, ready to bite Mather's hand off for properties that some reckon could one day be home to half a dozen Escondidas.

But first they must persuade Mather to sell and that won't be easy. He's holding out for top dollar, and has said SolGold is quite prepared to develop Alpala, and other assets the group controls in Ecuador, on its own.

Mather is confident lenders and offtakers will provide finance on the basis of the project's value, estimated at $4.3 billion (£3.2 billion), not on the basis of SolGold's market cap of just £700 million.

In the interim, the pugnacious Mather is not afraid to ruffle feathers. "We are setting things up to be able to do this for ourselves. Andrew Forrest set up Fortescue to do it himself. He was treated with disrespect and contempt by the majors," he told Mining Journal.

"Until recently, majors have viewed juniors as short-term custodians of major's assets. We don't view it that way; it's our asset. If they want it, they have to pay a fair price for it."

Certainly, Mather is prepared to defy the majors. He annoyed both Newcrest and BHP earlier this year when he raised $100 million via a streaming deal with Franco Nevada, rather than plumping for an equity raise. Newcrest withdrew its board representative in protest arguing the "expensive" debt deal was more pricey than equity and against shareholder interests. Mather, who owns 4.35% himself, and 9.85% indirectly through DGR, said he was against issuing "a bunch of cheap equity" and paving the way for BHP and Newcrest's to dilute small shareholders, and allowing them to gradually creep towards control of SolGold.

In an action-packed 2020, Mather also launched an unsuccessful bid for Canadian-listed Cornerstone which holds 15% of the Cascabel concession, home to Alpala. Cornerstone retaliated, raising corporate governance issues linked to board members who, historically, have had close ties with Mather; and the payment of options to non-executive directors in breach of the UK corporate governance code of best practice.

Cornerstone had threatened to call an emergency meeting to oust the entire SolGold board, but Mather has cut across them by revamping the board himself, appointing new non-execs, a new chairman, and several women who today make up 25% of the top tier of management.

Last week SolGold's Australian finance director left by mutual consent after a longish tenure and the City understands he is to be replaced by a Brit. Mather said in August he would step down from a number of other listed company boards on which he currently sits. The general feeling here is Mather has outmanoeuvred Cornerstone and that no EGM will take place.

Observers have pointed out Alpala is the largest, highest grade, deliverable copper project in a listed junior, so given the closeness of the PFS early next year, a battle royal is brewing. "It's about to begin, although one assumes if BHP wants it, BHP gets it," said one broker.

Few would disagree, although the timing is a moot point.

For Mather, a sale would be another feather in the hat of someone who has been involved in the development of 14 different resource companies, nine of which have been taken over, delivering A$5.7 billion in cash to their shareholders.

SolGold, however, could be the biggest coup Mather has pulled off to date, although how it all ends is difficult to predict.

[jackbal] 17/11/2020 13:11

Voyseys who!

Hopefully this battle is just as epic. In terms of global importance surely this must be up there....

[zoros1] 17/11/2020 13:11

sirmoori - can you cut and paste the content? I'm not a subscriber to the MJ.
Ta
Z

[goodgrief] 17/11/2020 13:09

Get some popcorn, a large coke and enjoy!

[sirmoori] 17/11/2020 13:04

Mining Journal just published: "Takeover battle for SolGold is 'about to begin"

[zoros1] 17/11/2020 12:55

Lowtrader - in that case....here's hoping so :)
GL
Z

[lefrene] 17/11/2020 12:47

RP, whilst I agree with you, in that it's unlikely a fund could dictate to what purpose their money should be put, but it's quite possible that a 'conversation' took place, or else why put up the fresh cash? The fund could have just bought $5 millions worth of Solg shares.

[dartboard1] 17/11/2020 12:44

Thanks swanvesta

[lowtrawler] 17/11/2020 12:41

Zoros. Agree that the PFS is hugely important for all the reasons you mention. From a share price perspective, it might move us by 5p. The funding package could move us by 15p or more.

[mam fach] 17/11/2020 12:37

Gut feeling this is the start of the re-rate.
How high would you like to go?

[zoros1] 17/11/2020 12:36

Lowtrader. Thanks for this. Interesting slant on it.
My view is that the CFP is a technical description of funding the project. It isn't designed to declare any interest by external parties.

Of course the PFS is based on a previous MRE but the difference is enormous. Only after a PFS is declared, can interested parties take a serious look at the implications of investing in that mine.
In addition to an MRE, a PFS also looks at information relating to geological models and mine design. Takes into account factors that may impact or interfere with the final project. That can involve community issues, geographic obstacles, permit challenges and more.
It includes detailed designs and descriptions for the mining operation, as well as cost estimates, project risks, safety issues and other important information.
Z

[mknight] 17/11/2020 12:35

Interesting UT today taking everything out to 36p . Now we are just short of 36p . Looks like more to come .

Could be a number of things ...

How high will we go ?

[lowtrawler] 17/11/2020 12:14

Zoros, the PFS will be based on the already published MRE. Investors will apply their own views of commodity pricing and discount rate. It means that the only price sensitive information in the PFS will be pattern of extraction, timing of delivery and cost to build. While it is an important milestone, it will not move the share price by a significant amount.

SOLG have said they intend to publish the conditional financing alongside the PFS. They have said they are in negotiation with the finance providers to include details as part of the conditional financing. Currently, I believe the SOLG share price expects existing shareholders to only benefit from around 1/3 of Alpala cashflows. I believe the conditional financing will demonstrate existing shareholders getting 50% or more. That could add 50% to the shareholder value of Alpala.

In order to get support from BHP / Newcrest, it is almost certain they will be involved in the financing package. It could be they each take 25% of ENSA leaving SOLG with 35% in return for funding the build and an acquisition payment on top or it could be any number of other co-operation agreements / JV's etc. This is why I believe the funding approach is more important to the share price than the PFS (but you don't get the funding approach without the PFS).

Proposing a JV or other co-operation agreement for Alpala may be sufficient for other parties to show their hand and launch a bid. Another reason why the funding approach is of importance to the share price.