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@RA, well, maybe only 8 of the planets lining up (is Pluto still a planet? I can never keep up).
I agree that the "risk" of an early buyout is better described as a potential missed opportunity, though in the final analysis that and a "risk" can both be things that limit upside. But it certainly isn't a downside risk.
I don't agree with your view that NCM wouldn't buy out GGP entirely, though. I'm not saying they will but there's no real reason to assume they wouldn't, either.
We've just seen that it was worth it for GGP to acquire Rudall. And Rio was trying to get in there as well. That's a major trying to grab these unproven tenements. Why wouldn't NCM be glad to acquire unproven tenements? Obviously, there's some risk in doing so, but let's put that risk in perspective.
Suppose that by the end of the year we know enough to guess that GGP's share of Hav is worth 25p, and both GGP and NCM agree. So SB goes to GH and says, "Ok, but how would you feel about a buyout?" GH says, "Scal might be worth a lot. Rudall, too." SB says, "Ok, add another 10p." Now, we've got a 35p offer on the table. We're being paid 10p for Scal when, for all we know, it's not even economical to mine. Should GH take it? A 10p premium for shareholders for Scal/Rudall/everything else? A year ago, if offered 10p for everything, most shareholders would have said, "Yes!"
That 10p premium is about £400 million for NCM. Real money, sure. But it's really just a premium on Hav, with everything else tossed in. NCM market cap is around £18 billion.
@gandhi "TMT. What if NCM is bought out on the cheap"
This is not a risk I consider likely enough to factor into my thinking, but be my guest, LOL.
In your dreams 1gandhi,it's never going to happen.
Thanks TMT for your comments. So we agree that the next set of drill results could be less than good along with no finds in other tenements which may peg the price back some and effectively leave us with "what we already have". Your other "risk" relating to a early and "low" buyout of either GGP as a whole or just Havieron is (in my mind) not a risk but a missed opportunity and you have clearly recognised that by purchasing NCM you are covered for that missed opportunity.
I agree with you that if there is a buyout, then NCM will be front of the queue or will win through toll processing at Telfer for another major. I also feel that GGP will not be bought out as awhole but simply the Havieron piece - it would be too difficult to determine a sensible value for the "non-Havieron" parts of GGP and could not be justified by any potential purchaser. In my mind, whatever happens over the coming year, it would take all the planets to line up for us to be in a worse position than where we are at present.
Thanks again and ATB
RA
TMT. What if NCM is bought out on the cheap, before they get a chance to grab GGP?
I am waiting for SP to fall to 1p so I can buy another million shares...:))
@Rational
My view is that most of hydro's stated risks are short term "the market might go down for a while" risks, but not risks that affect the ultimate value of the assets and thus the long-term likely value of the shares. For instance, if Beetham sells a bunch of shares, it might tank the price temporarily, but if Hav is sold for 25p a share and we're getting a 20p / share dividend, it won't have mattered if Beetham sold. (That's just illustrative, no predictions as to what actually will happen.)
I only see two real risks here:
1. Future drilling results show Hav is not as good as we all think. In my view, the likelihood of that is getting slimmer and slimmer every six weeks.
2. No other GGP assets pan out as economical to mine. In my view, it is impossible to quantify the likelihood of that.
If both of those risks materialise, this share might really only be worth 10p or something.
There's another risk which IMO is significant enough that I've hedged against it. That is a risk that GGP is bought out too soon and significant assets are lost. It's possible GGP has assets worth £1 / share, maybe even more. But if NCM came in and offered a quarter of that, it might be hard for GH to say no. Maybe he would and it would go to 33p. I suspect a hostile attempt at 40-50p would succeed, maybe even quite a bit lower. If that happened, we might have made out like bandits, the assets might only be worth 20p or something -- but we also might have lost a truly spectacular upside. So there's a risk, in an early takeover, that we don't get to fully benefit from what GGP owns.
I don't really see NCM standing on the sidelines if someone else tries to buy GGP -- they need Hav, and if GGP's share is going to be sold, they'll want it. If there is gold at Scal, even if there's the possibility of a lot of gold there, they want it going through Telfer, and not in Rio's hands.
And, if it's an early agreed buyout, it will be NCM, of that I'm almost certain.
The same applies to the sale of Hav rather than the entire company -- it could be sold too soon, with NCM the beneficiaries.
So, I've hedged the risk somewhat on this by also buying NCM shares. If Hav, or GGP, is bought before we know full value, I expect the buyer (and beneficiary) to be NCM. If that happens, I expect to do well out of it.
hydrogen - Hes got plenty of shares otherwise. It was the warrants he planned on selling. Given hes 600% up on the shares bought in the placing which got him the warrants, banking the warrants makes good business sense. Wouldn't want to have too much tied up in one place
Too many imponderables but basics are ;
How, whatever the value of HAV is, does GGP monitise it. AND how that feeds to shareholders in the absence of any other licence bearing fruit. If special div, good, if not then imagine what the MMs will do if shareholders are trying to exit at profit
hydrogen - thanks again for your second response at 1330. Includes some further risks which I will need to add, although, my gut feel on each is that they are quite small at present but I will need to keep an eye out. I'm assuming that you also consider that the potential rewards outweigh the risks we have identified.
Regards - RA
RA's, cause, effect mitigate etc.
Newcrest are refused licences to progress the mine at Havieron?
GH leaves Greatland?
How about scorching summer temperatures stop incline?
Scallywagsfull of tomato soup not gold?
I'm sure it's all in hand. They're the experts after all.
Beetham has always said he'd be selling his warrant shares around 12p.
I think hes probably whats keeping us at this level
Thanks Hydrogen. Our posts passed in the ether so my re-post does not include your point on the strength of the relationship between GGP and Newcrest.
For what it's worth, I fully agree that the real key to our success is that the relationship remains strong and respectful; no-one wins when JV's fail. Even if it is decided that the final 30% of Hav should be sold to Newcrest in order to release GGP to pursue new fields, it would be important that the process of identifying Fair Market Value is performed in a Rational and non-confrontational way. I have seen too many really positive business opportunities/relationships fail through the "macho" bahaviours of one or both parties. That would be the time to employ an independent valuation enabling both parties to submit input as to why FMV should be high/low.
Maybe I need to add a further risk relating to the relationship failing between GGP and Newcrest. I would submit that it is relatively low at present as both GH and Sandeep do not appear to be interested in having a willy-measuring contest.
ATB - RA
Welcome. Nice to see some logical and rational thinking when it comes to the downsides./pitfalls.
Thanks for taking the time.
Thanks all for the responses. mushroomkId and thelearner, I have tried to incorporate your comments regarding takeover, COVID and Gold price. Here is the cut down post (of the original post) with the updated assessment.
We’re all probably aware of the opportunities which this share brings:
Further good news on 23rd regarding Havieron.
Rerate of target share price by brokers.
Good MRE in second half of this year.
Results of Havieron Concept Study second half of this year.
Results of Feasibility Study early 2021 (hopefully)
Results of drilling which has commenced or will commence imminently on GGPs other tenements
GGP Takeover (hostile or arranged) by Newcrest.
Purchase of Havieron rights by Newcrest leaving the remainder of GGP intact to go search on other tenements.
Anything else???
However, during this time as the share price appears to stagnate, I am starting to wonder what I might have missed with regard to the risks associated with this share? What are the potential downsides? This is not a deramp, just trying to assess what and how big are the risks to my investment.
1. Next mining results are disappointing and show no further extensions – that cannot be a risk but surely just a missed opportunity – the SP is already where it is based upon what has already been found – it cannot be unfound.
2. Cash call by GGP management – unlikely as GH has indicated that we are well funded for the next 12 months (by which time we should have received monies from Newcrest for the 5% (if they choose to take it))
3. Hostile takeover at low price – not sure how that could happen.
4. GGP agrees to sell Havieron to Newcrest at lowball – again, not sure that GH could get away with this as significant questions would be asked. Considered that GGP could easily sell remaining (30%) of Havieron to Newcrest at Fair Market Value once Resource Estimate has matured significantly. Allows GGP to move on to finding other sites which is their sweet spot.
5. MRE results show very low amounts of Gold and Copper – surely we have enough info already, Investment Journey’s youtube pres provide an initial estimate of 15p for our 30% of Havieron. Even this estimate has been uprated recently to between 17p and 35p
6. Newcrest decide not to mine Havieron – surely this could not happen, Sandeep has already said that he would start decline immediately if he could.
7. The whole process takes too long and the GGP coffers run dry – GH has already said that he would not look to dilute if this were the case
8. Resurgence of COVID – will not make Havieron go away but could slow progress
9. Price of Gold drops significantly – no sign at present, the greater the risk to stock markets will only drip POG higher – considered as low risk
In my mind, the biggest risks to my investment are covered off by numbers 1 and 7 above. I am comfortable that neither is likely to happen, however the mitigation for both is already known and again, I am comfortable with the mitiga
no problem,
ATB
pan
Cheers fella..appreciated
and for just over the 12p
Hi Schlemiel, no worries.Offer was for 1.27m near enough.
panama - At the risk of appearing invasive, how many will they take? Is it more than 500k or more than 1m? No compulsion to answer mate
I think Rational has more or less hit the pros and cons nicely there.
There are so many permutations that might affect the growth of GGP and the sp in tandem of course. I'm one to draw right back to the most workable and least 'tension-inducing' to NCM and GGP: In my opinion, the neatness and convenience of NCM owning all of Havieron could prove to be too much to resist. However, the complete acquisition of GGP seems an unnecessary leap and difficult to value.
Once the MRE and feasibility study is completed for Havieron , we have just about the most accurate value for the site we can get at that juncture. A bid for the last 25/30% by NCM would therefore relate to a firmer figure and not just speculative one and that's easier to report to shareholders together with the logic of the proposed final purchase to 100%.
This is also neater and tidier for both parties. NCM get to beaver away with the mine and is not beholding to anyone. GGP gets a payoff and can continue to use that money to explore (because that is what they enjoy doing) and set up future agreements with mining companies operating in the region and Tasmania. With this scenario, I am assuming that the other sites look like they have good potential.
That's my two-penneth for what it's worth!
Great and 'rational' post RA and good to see particularly whilst we are awaiting an uplift towards drilling results. MM's now wanting all of my shares on a dummy sell so maybe it's on it's way..
I do not think we will have a Feasibility Study by the end of this year.
NC have said they will deliver first a "Concept Study" and I am sure this was in 2nd half 2020 - for me this will be extremely interesting.
By the end of Stage 3 of JV - which is covered by spend in $US and the production of a "Pre-Feasibility Study" which will probably be an update of the Concept Study.
End of Stage 4 - This requires a spend of $20 mill US - and production of a feasibility study - GGP are liable for Feasibility Study costs in excess of $20 million US at their ownership share - if the costs of the feasibility study do exceed $20 million US.
The feasibility study is the really important one. They do not have to worry about designing a process facility - it is Telfer - they need to know how to build decline and the Block caving structures, which requires the majority of the explo drilling to be completed, and how to get the Ore to Telfer. They also need a good knowledge of the amout of resource in the ground and grades.
I think end of stage 4 and feasibility study will be in 2021 - maybe by end Q2 - but this will be a moving target.
Posted it many times - but to get full value from this share will require patience.
Things I hope for once to bring quicker rises in share price.
1. Continued excellent drilling results at HAV showing more Au/Cu in ground than anticipated.
2. Shallow mineralisation with decent grades somewhere at HAV which could be conventionally mined while building decline and block caving infrastructure
3. Excellent drilling results from other GGP targets.
Downside risks - there will always be some
Financial market crash - impacting gold price and investment - this could be negative but equally could be positive if gold price increases
Early takeover of GGP
Think you have others covered - Covid 19 2nd wave - only could potentially delay.
GLA
Rational.. I like your post but don't think NCM will takeover GGP..They have a very good partnership and I think that will continue..Buy all of HAV then yes..Then continue onto Scally and so on
Rational.....well said........it's very positive to invest whilst facing up to the risks......
Also if everyone could discuss the risks it would make this board so much more valuable.....