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I thought the same thing initially about it being undersold, but the thing you’ve got to remember is that AAU’s expertise is in exploration, not the actually mining. Entering into the JV has a number of benefits in that production costs may potentially be reduced (more economic plant and experience), AAU’s own overheads directly related to the mining will be reduced and we’ll have more time to dedicate to exploration activities. Plus, there’s the likelihood that Salinbas will be off the ground much earlier than without the JV. The outcome is pretty much going to be that our revenue will dramatically decrease, but our profit margins will considerably increase. My only concern is that even though margins will increase, will it actually be more profitable?
The positive is that we’re in a win win situation, which very few on the AIM get to be in. We’re already producing and at a profitable rate and we have the option to enter into a JV that is also very profitable.
That’s a good question Ash, as clearly not that easy to get the deal right in terms of balance and fairness. I hope they have received independent “expert” advice. I agree that the numbers currently appear on the soft side and I hope that when we get the full details there will be a sweetener or improvement somehow in the package. Might be wishful thinking though, but given the diverse shareholder base (not a few Institutions) it will prove more difficult to get a consensus vote. They must be aware of that hurdle.
Thanks for your kind words and for the great link to the Sandstorm presentation. Nice to see Hot Maden is developing nicely with news flow, even later this year, which I think could heighten the interest in our assets in the Hot Gold Corridor.
Evening all, haven’t posted for a while, but I’ve been keeping track. Just wondered if anyone has any thoughts on who is advising the directors on the prospective deal. Haven’t seen too many thoughts on this. Still can’t help feeling that this is being undersold, especially given the rising POG and recent grades from Tavsan.
Cheers, Ash
If I come over a bit cynical sometimes, John, it's because I have been disappointed over the years by the actions of others which I did not envisage and whereby I lost out somewhat. I guess it's all part of the learning curve through the "University of Life" but it may leave ya both skeptical and rueful at times. I've already admitted to the pessimistic take on the half full/half empty glass thing (as long as its bourbon!).
You are a "real gent" and do not give offense. I might but then I'm on the other side of the pond and that's what we do! (lol) Plasbryn has answered you exactly as I would hope - that is the measure of the guy. We go back a long way and many times over I've appreciated and trusted his counsel on these chats.
I am invested in Sandstorm and that Company has done a recent presentation which included their take on Hod Maden and Turkish goldmining. It starts at 8.45 minutes into this presentation:
https://www.sandstormgold.com/investor-centre/overview-investors/
Don't get me wrong. I am all for the JV in Salinbas even though we kiss goodbye to nearly 80% of the asset (and just what are Proccea contributing to allow them to end up with exactly the same 23.5% share as AAU?). Without it I don't see any return there in my lifetime, but the amount sacrificed by AAU shouldn't mean that RR is eaten into as well. Don't forget the effort/finance already expended at Salinbas, does the £5m payment really compensate?
I would prefer to sacrifice the $25m dollars and keep RR as it is. We are nearly debt free there, very significant cash flows literally about to finally arrive at $1600 gold after all the years of effort and patience. Tavsan development is just around the corner, for which we should not need 'influential help' to attain given we managed it quite nicely at Kiziltepe. And as soon as we reach this long awaited debt free event at RR our interest is slashed by over 50%! With Tavsan we should, under the existing JV, have 51% of 50,000 + pa production within 3 years - maybe $25m net per annum. And we are losing over 50% of that by allowing the new JV to affect RR.
I have a feeling (and it is just that, I have no evidence whatsoever) that AAU are being leaned on.
Perhaps you read this post from me on ADVFN>
Notwithstanding my preference to keep Red Rabbit as is, these four sets of objectives/commitments from the MoU RNS, would on balance probably still have me voting for it.
1.(Formidable, exploration, development and production group) - "In particular, the contemplated joint partnership between Ariana, Proccea and the new partner, will create a formidable exploration, development and production group focused on Turkey. This will combine the unique skill-sets of each Partner in a mutually beneficial and synergistic manner. We look forward to advancing the proposed MoU in to a joint venture capable of unlocking the full value of our assets in Turkey, which will also target the development of a future pipeline of high-value production projects. It is the goal of the Partners to become one of the premier gold mining companies operating in Turkey.”
2.(Salinbas brought into production) - "The Proposed Partner will then inject US$8 million of equity into the Salinbas Project via an earn-in arrangement and organise the bank finance to enable this project to be brought into production".
3. (Special dividend) - "The Board to consider distributing part of this sum as a special dividend to shareholders…"
4. (Facilitating) "Acquisition of new exploration and development projects…."
No brainer perhaps or could the terms be improved a tad?
Well, unless there is a good reason to bring them into Red Rabbit to smooth through permits, which are perhaps getting more difficult due to environmentalists say, or they foresee the potential as being much bigger than a 30,000 oz per annum mine by 2022, then on the face of it I have some sympathy with that view. But it might be to get them into the Hot Gold Corridor where the elephant is still in the room, they are demanding the R.R. sweetener.
I like the idea of the acceleration and the tasty dividend. The short term view over the longer term view. But waiting to see what transpires when the nitty gritty is released.
Indeed it should be, love to be wrong but so wish the RR JV was being left as is. Not much I can do about it though.
Nice post John. You certainly won’t /haven’t offended me. Looking forward to the flow of news in February. Should be more than entertaining.
Agree DJ. Some would think you a bit cynical there, but I agree to a point. MDV has a lot of 'skin in the game', far more than I ever did, so his enthusiasm for the deal is the major fly in the ointment to my arguments against the proposal.
I was just having a little private joke with Plasbryn, at least that is what was intended and I hope I haven't offended!
As for Brexit (well it s the weekend) then yes I'm happy. The EU was turning/ had turned into a monster and I see conciliatory tones coming from both France and Germany implying there may be about to review where the EU is/where it is going. Could be that we have sacrificed ourselves for the greater good. Maybe that's what we are like on this funny Island, if so its something to be proud of and I love this place (warts and all).
Enjoy the rest of your weekend.
Ultimately it's not about viewpoints, John. The only way this rabbit will be skinned (no pun intended) will be the way it best suits KS/MDVs' personal future. Wait and see. Meanwhile enjoy the Weekend (and yer Brexit!) Regards DJ.
Funnily there seems to be a chap called Plasbryn over on ADVFN who seems to share the same views as me...…!
I understood DD by the Conglomerate would be completed by the end of January. Then the formal Agreement is drawn up and agreed and then put to shareholders ahead of a General Meeting to ratify it at the end of February or perhaps early March at the latest. It will be interesting to see if they feel it appropriate to issue an RNS confirming a positive outcome to the D.D.That would be nice as it represents a thorough independent assessment of our Company.
Due diligence due to be completed in less than 4 weeks. Even if we don’t end up entering into a JV, we’re still in a very fortunate position. Would be nice to get a little special divi though after a few years of holding in.