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@No-Trader - I agree very complicated and to some extent we have to rely on our BOD to look after our interests and be bound by their responsibilities towards their shareholders both legally and otherwise to not enable this to happen, which is a fear some are playing on here.
Off the top of my head, am thinking that a development asset would be termed as a fixed asset and we need more progress before we can term Hav as a mining asset, but will need to check latest results published and really delve into the AIM regs which is impossible right now in terms of free time - and TBH we probably need the input of a corporate lawyer and accountant to really pin this down :-)
Notrader/Dip - I'm fairly sure that a sale of the whole 25% would require shareholder approval. A slightly smaller sale may not. An offer which the mgmt did not want to accept would not need approval for the rejection either I think.
I think the AIM 10% rule is about notification vs. approval. Shareholder approval comes in with the 75% of assets test.
I can't come up with a rationale for a further sale though - I suppose a mega offer could come in but in that case I'd expect board/mgmt to go to shareholders even if not obliged to.
Dip - I think it unclear whether the sale of the 25% would be subject to s/h approval. It would certainly represent over 10% of assets in a class test. However, AIM Rule 12 states that "A substantial transaction is one which exceeds 10% in any of the class tests ........ but excludes any transactions of a revenue nature in the ordinary course of business... "
The sale of such an asset might be considered in the ordinary course of business for a mining development and exploration company such as GGP. It probably needs a corporate lawyer to provide a definitive opinion.
Sandgrounded - "has the Havieron joint venture been put into a separate company as yet?" The JV agreement is between the 2 companies. There would be no reason to form a new entity to hold the asset.
My preferred scenario for the 5% deal is a method that would be (a) be fair to all parties, and (b) not have to ‘guess’ at any of the unknowns. This method would include a per oz premium, and only take into account indicated / reserve ounces to date.
Let’s assume MRE2 contains 2.5m indicated ounces, ultimately to be included as reserves in the updated PFS. Thus the negotiation would be based on 125,000 ounces (5%).
Now we must find a fair premium for these ounces, and of course I’m going straight to the Pretium deal as representative of recent fair market value. Our ore body is more economic as we have copper (Brucejack AISC over $900), though our ounces have a few years before they come out of the ground. The key, though, is that to date we have contributed capex for this 5%, which must be accounted for to our benefit (again, strictly for the inferred ounces in MRE2). We’re effectively selling our HGZ ounces in which we’ve already contributed to the mine build, thus I want a premium of USD 775/oz.
That’s just under $100m to GGP now, knock off the loan balance and we have a nice pot of operating costs for the next couple of years to ramp up exploration, all while HAV goes into production. Also, a bank balance to assist with debt financing for HAV.
For Newcrest, this gets them their 5% with limited capital up front, whilst being able to wax lyrical about the resource growth requiring this approach.
Going forward and as the 5% grows, we get a cash payment every resource update, though agree a hefty discount as a sweetener for NCM, say $350/oz per indicated. Depending upon the rate of proving up the tenement, this could be an additional $20m - $40m a year to GGP, over the next ten years plus (who really knows how big this thing is).
This protects the time value of NCM capital and limits up front cash, whilst satisfying our short to mid term cash needs. It ensures an additional revenue stream for us, and keeps the JV relationship health. It also keep NCM honest - this is the type of ‘fair market value’ they’ve shown in the Pretium deal.
Most importantly, it protects the markets perceived value of Havieron for both companies. The market would say ‘wow’, whilst both companies win.
Minority shareholding
If a shareholder has a minority shareholding (i.e. usually less than 50% of shares in a company that have voting rights attached) then the following legal rights will apply:
more than 25%: a shareholder with this minority shareholding can block special resolutions e.g. adopting new articles of association or changing the company’s name;
15% or more: can apply to court to object to a variation of share class rights;
10% or more: can demand a poll vote at a general meeting;
5% or more: a shareholder is able to require circulation of a written resolution and can require a general meeting to be held.
Majority shareholding
Having a majority holding of 75% or more of the shares in a company evidently puts that shareholder in a stronger position as they can pass special resolutions. In the eyes of company law, this is an important threshold to attain. With a majority of over 50% shareholding, they are able to pass ordinary resolutions such as (i) authorising the directors to allot shares (other than if there is one class of share, as this is authorised under company law), and (ii) appointing and/or removing directors.
https://www.stephens-scown.co.uk/corporate-commercial/minority-vs-majority-shareholders-do-you-know-your-rights/
Hi matty - Oh i definitely haven't said GGP are inclined to sell :-)
Just to elaborate there has been an ongoing conversation of whether NCM making a bid for our entire stake in Havieron would trigger just a shareholder notification or if we get to vote.
I won't go through it all again but I can't fathom especially at this stage how when certain class tests are applied to ascertain if Havieron represents 75% of our assets or less, that is what the 75% is in relation too, not a percentage of shareholders voting for something.
Apologies for my ‘thinking outside the box’ questions, but has the Havieron joint venture been put into a separate company as yet?
If it has and Newcrest gain 75% of the company, could they force the 25% holder to sell it to them?
I know it is unlikely, but in takeovers, isn’t 75% of all shares a major point in that process?
Dip - to your last point. Why do you think GGP would be inclined to sell? Or is it that if NCM make an offer for the remain 25% GGP will be obliged to take it to shareholders even if mgmt don't approve it?
Look at it from NCM's POV guys.
They had 12 months to push the trigger but why wait for:
- 90,000m of growth drilling which in all honesty is just going to increase the price tag
- further modelling building the case for larger resource assumptions as above with each set of results
- potentially we have hit at Zipa/HN too
- further resource growth potential from MRE's and FS before 2023
- regional assumptions from further results from more positive potential from Juri JC and Scally and neighbours such as Artemis all add to the potential price tag for the 5% when it comes to the more speculative aspects
Also were I him, I'm agreeing a one-off price tag as per the FMV process, paying it and banking another 5% away of this amazing asset and anything else in the mining lease that comes up trumps in the decades ahead.
Now if NCM do play funny buggers then IMO Shaun may as well play the roulette wheel with a 3rd party assessment - but I really don't think it comes to that.
Look at this as an opportunity to secure some/all of the funding costs for the starter mine as if we're still onboard when production starts then the route to free cash flow looks pretty clear to me - even at this stage.
There is the danger NCM make a move - but I struggle to see how Havieron can't be seen to be at least 75% of our assets given we have very little else proven up yet.........so we should see it go to a SH vote not just a notification IMO.
Hi John, I have kept out of this discussion in the main as I see it as a straightforward process. Newcrest is exercising its 5% option on the available data and with some accounting for the probable resource. Both teams have the same data and they will reach a conclusion and we will be told the result. It will be a one off transaction, and will not be revisited no matter how large the ore body grows. IMO
Tymers - is that 'simple structure' like your 'simple maths' regarding the 5% payment: "Incorrect. 175 million will Value GGP at 3.5 Billion. Simple maths peeps"
Sojourner - your point may be correct in terms of a single payment but that will obviously be determined by what is included within the calculation of FMV. IMO, such a single payment would have to take account of growth prospects, OR, as noted by an earlier poster, a single payment made based on current drill results but with a "ratchet" clause for further payments as future milestones (MRE's etc) are reached. Review of RNS 9/12/21 includes the following quote from SD: "With eight drill rigs operational, construction activities advancing and potential for significant upside for the scale and life of Havieron, there continues to be tremendous progress in the development of this world class project." IMO there is no way, given this statement, that future potential will not be accounted for in some way by the level of payment from Newcrest.
Not sure if this has been discussed 'ad infinitum' but our BOD / CEO where very savvy when they move for and got the tenement between ScallyWag and Telfer. That could have been a move worthy of a Grand Master.
"Newcrest add that to your 5%"
Chester.
if there was no future value to considered, then would the initial agreement not stated something in line with 'at a value to be determined based only upon the MRE at that date' rather than 'FMV'?
Its not a problem it is a super bonus that has come our and Newcrests way. No one but a few would have dared to have considered the good luck that the ever increasing size/quantities will bring- even me and a few to many others who has said in the past this will be huge. We believed GH and the management in their saying their focus was tier 1 + discoveries.
We will win out.
GLA
The structure of the 5% FMV is that NCM will buy it for an agreed cost and that will be the end of the matter. That is the original agreement, and I suspect NCM have gone early, rather than wait for another years growth drilling, in order to minimise the cost to their shareholders as much as possible. This is business, not mates rates.
ATB
The structure of the 5% FMV will be determined by ongoing results ie
A value is proportioned based on data known to all, we will then have milestones that will be triggered if and once reached .
Think of it like a professional Footballers contract purchase price is x with add ons for certain events, Goals Scored, International Caps etc etc
So 5% will be based on data known now and will increase with targets achieved, this ensures value will always remain relative to growth, simple structure that most in business would know.
It would be interesting to see the JV agreement. They should have known they would not have completed the discovery in a couple of years which makes it impossible to value. Did nobody envisage this problem ?
not very 'fair' for ncm to pay 5% of what weve found to date and not consider that there is likely to be more.
not very 'fair' for ggp to claim theres a lot more than whats proven to date, because no one knows
'fair' is to probably consider:
a) whats there, confirmed as fixed upfront payment
b) what they find as time progresses and considering change in costs / pog etc
surely such an arrangement can be made , and would be accepted by both companies and their shareholders?
GLA
Cant see future payments as part of the 5% whichever way I look at it. As Speedy says it would be nice but business doesn’t work like that. NCM included the clause to benefit them not us. I also think FMV means what’s fair here and now and future payments would surely go against that.
We will just argue that there could be 25moz in HAV and want due compensation. NCM will argue it’s them doing the bulk of the work and won’t want to give us a free ride on the 5%. Hope I’m wrong though I doubt it. GLA.
Hi All. I see no solution to the "future potential value" other than "pay 5% for what we have proven and negotiate a reduced % for future finds". Imagine selling 5% based on say 10mill ozs and we go on to find 50mill ozs. ATB Speedy
@starbright Good post but one thing you appear to have missed is the MRE2 coinciding with 5% FMV declaration. I fail to see how you can value HAV without doing the sums on the MRE2 (for which they have the data points and SD would insist on this action). IMO and hopefully I am right, there will be a single and big inflection point in the SP
StarB - we already know Greatland will be pushing for the future potential of Havieron to be recognised in the FMV as they have told me in an email which I shared with this board. It will be interesting to see whether than translates into the cash payment agreed by mid Feb or whether that is something to be built into future settlements as the Havieron potential becomes fully known we await with interest.
A long thread with some thoughtful contributions. @JJNorton’s original pivot point idea has merit in my view as it contemplates market perception of time, costs of extraction and risk etc. Responses were perhaps shaped more by the £100m chosen to simplify illustration than by the underlying idea.
I expect the JV partners to reach agreement on the 5% without (publicly at least!) rocking the boat that is sailing smoothly. The price* will be lower than some posters are hoping for - partly because of the “three-factors-that-are-not-permitted-to-be-mentioned-here”, and partly because future development potential will have to be “risked” one way or another. In simple terms, Fair Market Value =/= Future Market Value. It may - as I have proposed previously, and as discussed by @sydjames and @Matty56 above - be better to consider the 5% as the last instalment of the farm-in rather than as an advance on the final 25%. I am optimistic that the deal for the 5% will be a material positive for GGP’s funding position, but I am sceptical as to whether it will prove to be the near-term positive inflection point in sp that some are looking for. We may see some volatility - in price and on this board - as a result. MRE upgrades will be more important in the long run, so constitute the major area of interest in forthcoming news for investors.
The “Gated Feasibility Study to Execution” in q4 looks to me like the point at which the real excitement will start, because it is then that the project might be dressed to the nines for capital raising purposes. If so we will find out how wholesale capital providers (both debt & equity) are prepared to value the project, and I am sure that NCM will throw all it has behind this. I think their interests are best served by maximising value perception then, rather than now.
At the end of the day the only sure way for GGP to realise the “future market value” of the 25% will be to hold its interest for the long term, and it has every opportunity to do this. If (as I suspect) NCM really really want 100% then GGP will have an opportunity to exit at a premium. Q4 will present some big decisions for SD and his team, and we’ll get a better indication then of how big the prize is.
*I will be surprised to see anything other than one straightforward price as the underlying concept of FMV is at odds with the idea of agreeing a formula to adjust for future developments.