Solgold Share Discussion Threads

[mknight] 31/1/2019 19:22

Most of the sells today were traders . Let's hope NM gives them a whack in the coming days .

[mknight] 31/1/2019 19:16

Sogoesit

I can see where you are coming from .

I think NM has enough news to send the share price flying . If it does go up to 50p for example then NM goes hostile the shareholders will sell, after all .55 of 36p or .55 x 50p is a major difference.

[sogoesit] 31/1/2019 18:31

This is the full LoI (I think definitive but not sure):



CGP shareholders facing a Rights Issue, or dilution in Cascabel.
A rights issue coming for them but not the defensive one they may have intended?

[sogoesit] 31/1/2019 18:30

Here is the relevant excerpt of JV LoI of September 2012:

"Following Solomon Gold's earning of its initial 65% interest, Cornerstone and Solomon Gold will enter into a joint venture and will fund their respective proportionate shares of ongoing expenditures and be subject to dilution according to a standard formula. After entering the joint venture Solomon Gold will have the option for one year to elect to earn an additional 20% interest in Cascabel by funding exploration towards the completion of a National Instrument 43-101 ("NI 43-101") bankable feasibility study ("BFS") within 18 months of making such election. The cost to Solomon Gold of the BFS is capped at US$20 million, after which the parties will contribute on a pro-rata basis. If Solomon Gold exercises its right to earn the additional 20% interest, then any amounts spent by Cornerstone prior to that exercise and post Solomon Gold earning its initial 65% interest will be reimbursed to Cornerstone by Solomon Gold at 200% of expenditures incurred. Within 90 days of completion of the BFS, subject to Stock Exchange approval, Solomon Gold shall issue to Cornerstone, at no cost to Cornerstone, ordinary (common) shares of Solomon Gold equal to 2% of the ordinary (common) shares of Solomon Gold then issued and outstanding. If Cornerstone fails to fund its proportionate share of ongoing expenditures and its interest is diluted below 10%, such interest will be converted to a 1% assignable Net Smelter Return ("NSR") on the property. Solomon Gold may purchase the NSR from Cornerstone on the following terms: half of the NSR for US$1.5 million within 90 days following completion of the BFS; and the remaining half of the NSR for US$2.0 million within 90 days following a production decision."

[sogoesit] 31/1/2019 18:19

Good point as it is my view this possible, not definite, offer is pitched not to succeed or be carried through. (If not carried through the risk to CGP shareholders is that their share price falls on presentation of financing proposals!!).

My view is NM probably putting "squeeze" on CGP in preparation for confronting them with financing proposals.
CGP, with CAD5.35m cash assets on balance sheet last reported quarter would have no room for manoeuvre if any cash called and would be in a poor position if the debt financing is on a "burdensome" footing.
CGP up 4 cents, closing the "premium".
Our shares down so market maybe not seeing the repercussions here... or seeing something I'm not seeing.

Here is "the squeeze":
"Under the current structure, following the completion of a feasibility study, Cornerstone's 'debt-carry' arrangements will conclude and thereafter it will be required to fund its pro rata share of development expenditures during the capital-intensive construction phase in the lead-up to commercial production. In such a context, in accordance with arrangements in place at the ENSA level, Cornerstone will be required to either finance the required cash calls or have its 15% ownership of ENSA diluted, giving Cornerstone shareholders even less economic exposure to the Cascabel Project.

If Cornerstone elects to maintain its 15% ownership, SolGold believes that financing the required cash calls will present significant difficulties to Cornerstone. As noted above, Cornerstone's interest in the Cascabel Project does not carry any operational rights whatsoever that could form the basis of a strong value proposition to potential future Cornerstone investors. Additionally, its economic exposure to the Cascabel Project will be burdened by the debt-carry repayment requirements described above. Issuers with minority interests in major mineral projects, such as Cornerstone's in Cascabel, typically already trade at a discount to the implied asset value, but this would be compounded by the likely need to conduct an equity financing at a valuation that is significantly dilutive to existing Cornerstone shareholders. SolGold does not expect Cornerstone to be able to finance its cash call requirements through other traditional funding structures either, since Cornerstone is not permitted to sell or even to encumber its interest in Cascabel, either directly or through a pledge of its shares of ENSA. This makes debt financing, a royalty, metal stream or other similar structure a significant challenge for Cornerstone under current arrangements."

[mknight] 31/1/2019 16:32

No one that I have read is asking the question .

Why would NM make this noise now just before the PEA . What benefit would that give SOLG could it be a rising share price and possibly permit allocated .

[mknight] 31/1/2019 16:24

Cornerstone might be more interested if the share price shot up another 33 per cent . Might this be NM,s play .would make that 20 per cent ...over 50 percent.

If you was a cornerstone shareholder that might be difficult to say no to .

Good to see Blanco and Nieve mentioned again ,must be a gold machine we have there.

[markth126] 31/1/2019 16:18

Remember NM said many multiples of current share price is what SOLG aid worth and he owns a good chunk. Have faith and relax... I've just topped up - holding too many now but it's my retirement fund !!

[shakester2] 31/1/2019 16:14

It's just tradition for mm's to mark down the company making the offer. Will soon right itself. Very shrewd move imo

[arcadian] 31/1/2019 15:58

Even though our market doesn`t seem to like this and of course it may just be traders trying to use doubt to induce selling, I would still back NM against the market as he is a seasoned warrior and shrewd with it. He sees this as beneficial to SOLG and several commentators agree.

[pob69] 31/1/2019 14:59

Intersting rebuttal from CGP $SOLG SolGold $SOLG.L (with interest to $CGP) #ecuador

Knives are out in terms of other tennements so this could get nasty;

"...Cornerstone shareholders should also be aware that the Blanca, Nieves and Rio Mira concessions that SolGold incorrectly states are 100% owned by SolGold are in fact within the 5 km area of interest of the Cascabel concession and Cornerstone's 15% carried interest (described below) applies to these concessions too. In fact, SolGold's 85% interest is conditional on it fulfilling its obligations with respect to Cornerstone's carried interest. To date, SolGold has not agreed to terms that reasonably reflect the contractual arrangements regarding this interest or other identified compliance issues."

[pob69] 31/1/2019 13:59

Further media coverage $SOLG SolGold $SOLG.L (with interest to $CGP) #ecuador

[pob69] 31/1/2019 13:56

SP Angel's comments $SOLG SolGold $SOLG.L (with interest to $CGP) #ecuador

Conclusion: Although Solgold is careful to caution that it has yet to make a formal offer to Cornerstone's shareholders it seems in our view, it would appear likely that having reached this point it will not proceed, if only to appeal directly to Cornerstone's shareholders having previously been kept at arm's length by management. On the practical level, simplification of the ownership and management of the project seems eminently sensible and exposure to the wider pipeline of projects in Solgold's portfolio may prove an added attraction to Cornerstone shareholders. We look forward to the formal offer and accompanying documentation to provide greater detail on the proposed transaction.

[pob69] 31/1/2019 13:53

National Bank of Canada comments "Impact positive" $SOLG SolGold $SOLG.L (with interest to $CGP) #ecuador

[shabadi] 31/1/2019 13:03

Sogoest

Yes - so I didn't spot that section in the offer.

So Solgold are well aware.

I suspect this offer then has been made due to that defensive 'Rights Plan' move by Cornerstone. Hoping to convince Cornerstone share holders not to ratify the rights.

[shabadi] 31/1/2019 12:26

I'm quite sure it will be though.

"While the Rights Plan is effective as of January 11, 2019, it is subject to shareholder ratification within six months of its adoption."

So it is in effect right now - but could be removed if not ratified within 6 months.

[sogoesit] 31/1/2019 11:53

shabadi - post 14793:
The "Rights Plan" has not been ratified by shareholders.

If "(ii) Cornerstone implements or attempts to implement or activate defensive tactics (such as a material change in Cornerstone's capital structure or the grant of an option (or similar right) to purchase material assets) in relation to the Offer;" SOLG may determine not to make an offer.

[arcadian] 31/1/2019 11:35

Copper now $2.78 - I hope on its way to $3+ NM trying to corner the market.

[pob69] 31/1/2019 11:04

Shore Capital's comments $SOLG SolGold $SOLG.L (with interest to $CGP) #ecuador

BHP and Newcrest due to lockin periods are not immediate white knights for Cornerstone...

[mknight] 31/1/2019 11:03

Looks like the market has not made its mind up .

I am sure solgold would have liked to pay in cash for cornerstone shares . This would have given the board strength to fight off any takeover bid .

[pob69] 31/1/2019 10:29

Coverage by Mining Journal $SOLG SolGold $SOLG.L (with interest to $CGP) #ecuador

The takeover move would see shareholders receive 0.55 SolGold shares for each Cornerstone share, which SolGold said was a 20% premium for the South America-focused explorer's shares, which last traded at C29c (US22c).

In the pitch to Cornerstone investors, SolGold called the company's management "disingenuous" in promoting its stake in Cascabel without making clear it would need to cover its share of exploration financing at some point.

"Cornerstone's communications frequently refer to the carried nature of its 15% interest ambiguously, leaving shareholders and the investing public to assume that the interest is ‘free-carried' through to the completion of a feasibility study on the Cascabel Project," SolGold said.

"This is not the case."

Cornerstone handed SolGold an initial 20% of Ecuadorian copper-gold project Cascabel with an earn-in option over four years in 2012.

The asset now has a mineral resource of 2.95 billion tonnes at 0.52% copper, with $117 million spent on exploration.

SolGold has tried to buy out Cornerstone before privately.

It said the company had asked for far too much in return, including the removal of Nick Mather as CEO and Brian Moller as chairman.

Cornerstone had also demanded 50% of the seats on the board, SolGold said.

Mather said the offer would make the Cascabel pitch simpler.

"The combined entity will have tremendous economic upside, further de-risk the ownership structure and present a simplified and highly attractive value proposition for investors," he said.

"We encourage Cornerstone shareholders to closely consider these factors and we are confident that once they do, they will recognise the potential this proposal holds and tender to our offer."

This new bid from SolGold could have been spurred on by the upcoming lifting of the block on Newcrest buying shares in Cornerstone on October 19.

Fellow SolGold shareholder BHP has an extra year to wait before buying into Cornerstone.

The current Cascabel funding arrangement sees SolGold funding all exploration despite the 85:15 ownership split for the Ecuadorian holding company, and Cornerstone's share of financing registered as a debt to SolGold.

The senior partner said this meant value to Cornerstone shareholders was limited even if the massive copper-gold project got into production because 90% of cash flow would go to paying off the debt.

"Cornerstone will therefore retain only 10% of the cash flow to which it would otherwise be entitled by virtue of its 15% Cascabel interest until SolGold has been repaid in full," SolGold said.

"In SolGold's view, this severely constrains Cornerstone's ability to finance its commitment and is likely to limit appreciation in the value of Cornerstone's interest in Cascabel during the early phases of commercial production."

SolGold's share price was flat on the news at 36.5p (US48c).

[shabadi] 31/1/2019 10:20

Thanks Sogoesit

However I should have added this to my question, apologies...

In reading the Cornerstone news - the share holders 'rights plan' adopted on 11th Jan will allow existing share holders to purchase shares at a 50% discount on a takeover.

Looks like Cornerstone were expecting this.

[mknight] 31/1/2019 10:19

NM has the upper hand in he knows what we have and likely to have in the future .

Our share price is clearly undervalued imo the question . Are we offering them the price of solg shares today at close yesterday at close or next month at close ..

[sogoesit] 31/1/2019 10:03

I don't think so...
Cornerstone closing on 30/01 0.30 CAD equivalent to 0.175 GBP
They get 0.55 of a SOLG share = 0.55 x 0.365 GBP at today's price = 0.20 GBP.
Premium = 0.20/0.175 = 1.15 = 15%

SOLG say 20% but depends on forex etc. etc.

[shabadi] 31/1/2019 09:30

Am I right in thinking that this offer is actually worth a premium of 60% to Cornerstone share holders ?