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The start of the decline could be used as a tool/tactic to increase spending quicker allowing NCM to gain bigger ownership sooner. They are desperate to get through the stages.
I have to agree with the comments of Welsh Falcon at 10.43
There is also a later comment saying MRE must be provided at end stage 3 - this is not in the RNS - only requirement is a PFS.
Stage 4 requires a spend of at least $20m US on a feasibility study. GGP have to pay their share in excess of $20m.
I would say NC could argue the construction of an exploration decline could be part of that feasibility study - possibly not, but there is a partnership and I am sure they will work it out.
At the same time GGP could hold up the decline by saying we do not have funding - but could say to NC if you want to build now our share of costs will have to be deducted from our share of the future profits from the mine. I am sure this will be sorted without any issue.
Maybe now those who are thinking we will have a very fast increase in share price will realise that the real gains in SP are going to take time - what can speed this up?
1. MRE being released with news there is much more gold and copper than we thought. Likley to be late 2020 IMO and be revised upwards in 2021
2. Encouraging drilling results from our other exploration areas.
3. Continued increase in Price of Gold
4. Big investor building a stake - Hedge Fund etc
Threats now - do not see many - NC are going to mine - absolutely - and going to get there quickly.
Collapse in POG would affect SP negatively.
Now I like every other shareholder would like increase in SP ASAP. But I am still sitting on my hands and expect to have to do so for quite a time yet. The day traders will quickly leave, and may come back just before results - and then be off again.
No problem with that and discussion can be good or bad .. but in the long run it is out of our hands, we are just passengers on this journey, or until something is out in front of us to vote on .. the bit that I remember is that GH said he did not want any more shareholder dilution and that raising cash would not be an issue .. I don’t think he would have any problems if he needs to .. but so much going on just now That in a few months people could be throwing money at GGP .
Take care !
Lenz, lol – actually that was a question at the end of the post “Am I overthinking this” but I removed it.
Yes, so maybe it could be viewed 'I am overthinking it' but as obviously as NCM want to push ahead with the decline then there has to be questions on funding.
If NCM decide the decline is required to assist with exploration then the cost could come out of the agreed costs for stage 3 and 4 within the JV agreement. But if they still have approx. 80km to drill, then this will take a substantial amount of money from their budgets for stage 3 (what’s left) and stage 4; and therefore they might think why should we also try to fit in the decline within this budget (when they don't own the full 70% ).
As the decline/mine was not part in the original agreement then they would have to come to an new JV agreement with GGP – and at this point it will not be a simple 70/30 split.
So for GGP it would require a cash raise and depending on which way they go - loans, placement or listing on ASX then it could (most probably) affect the share price; so to me my thoughts and questions are maybe not thinking to far ahead and are a good point for discussion on the board at the present time.
@Bamps - I alluded to this idea a good while back:
Any drilling at Scally will be done hand-in-hand with Newcrest - so financing won't be an issue. I reflect back on the shares we paid to HDD1 to our initial drilling at Hav ...
I too was shot down... in flames!
But to me the idea of a JV on drilling is a no brainer from financial and speed aspects.
Cheers StellaBob - now where's my parachute?
On the ASX/AIM/Inheritance tax point from earlier - I am happy to be corrected on this but I think there is no IHT relief for an exploration Co., only trading Cos. But DYOR.
I did a similar post recently with similar views but my thoughts on what might happen are a bit radical.
The costs for GGP of the Decline and mining could be offset for a 10-20% share of Scallywag and or Saddle Reef.
Saddle Reef would be great for NCM , the Northern end ideal for an open pit, quick to get the ore to Telfer .
Before I'm shouted down like last time, my thoughts are if Scallywag and Blackhills are left to GGP to deal with, they could be sat there for a long time. Whereas with NCM jv the drilling exploration and mining will be a lot quicker.
25-30% ownership of a vast mining area would be worth far more than the Havieron jv.
Floater you are overthinking things .. just let them get on with it, sit back and enjoy the ride !
I still believe that for NCM to extract max value from both Havieron and their physical assets that they will buy out our 30%, at some point. Imvho
@hydro - excellent thought! Going forward it would do us a great favour; not only are gold share more loved but it reduces volatility.
I would be happy with a raise to II's in Aus as long as it had a non sale period.
No point opening it up to the quick flip crowd to make 10/20%
I agree it would strengthen our hand for future dealings over Hav
Does it not depend on what class of decline it is? My understanding is that the decline is for exploration, ie to save on having to drill through 400m each time. This in my view would be at cost to Newcrest as we are not at the mining stage, which would be at the end of stage 4.
I agree with what welsh says as NCM are rushing through the stages trying to condense everything which isn’t necessarily due process.
GH said there will be no more dilution ! He reckons he can raise money if required by other means !
Sorry - £20m so $25m
WF is correct they may need to rethink...
But I can't imagine that GGP's lack of major cash will stop NCM wanting to proceed full tilt to mine... So long as we have enough $ to keep the lights on, as far as i can see it's Biswas who's 'backing slightly against the wall' to an extent. Funny thought that the potential reserve has apparently just slightly increased at Telfer!?!?
That's why my contact suggested the duel listing option to strengthen GGP's hand, with perhaps a small raise to introduce some Australian institutional investors at decent rates as this could strengthen GGP's negotiating position immensely - ie if they raised say $20m (less than 4% dilution) at a slight discount to the market price, in an Aussie IPO, would that be a problem to us long term? Or does it just in fact create a more level playing field between GGP and NCM and enabling us to continue drilling and or pay up front our share of the decline costs etc?
IMO - Institutional investors would look at this scenario favourably - buying into to fund a decline to realise 30% of a potentially Tier 1 gold asset in WA . Those chances don't come along often.
The problem here is you are trying to shoehorn an evolving situation into a plan that wasn't designed for what has happened!
Basic answer is that hey need a new plan.
A nice problem to have in that Hav is bigger than expected and NCM want to move quicker than originally expected. I'm sure that our BOD can navigate through this without too much drama!
We now know NCM want to start the decline by end of 2020 or early 2021; this has me thinking on how does starting the decline sit with the JV agreement – which doesn’t mention anything about decline/mining.
We are now in stage 3 of the JV and NCM have to spend $25m on drilling and deliver an MRE and Pre-Feasibility Study (PFS) to obtain another 20% of Hav (total 60%). So once they have produced the MRE/PFS, and although they have applied for a mining permit, then I assume they can apply for final permission for the decline?
At this point, it has to be determined if NCM have spent the $25m and completed stage 3 and can enter stage 4. Or if they have not spent $25m then NCM carry on drilling to get better results for indicated/measured MRE and use up the whole $25m. So possible scenarios:-
1. If they have not completed the $25m spend, and stage 3, but applied for, got permission and wanted to start the decline then there would be a cost implication to GGP for their share; so there would have to be some sort of agreement on the % ownership and % of cost - this could be maybe as much as 50% (if NCM have only spent half of $25m)
2. If we are in stage 4, NCM carry on drilling and complete a feasibility study and spend $20m to get the additional 10% of Hav. So if they wanted to start the decline, in this period, and if NCM have maybe only spent maybe $5m and not earned the full additional 10%, then again there would be the % ownership decision and cost implication to GGP.
As I see it, then in both scenarios they would need to work out a cost on pro rata % of both what NCM and GGP own? and at this point GGP would need to raise funds for their share of working on the decline – which could be a considerable amount and easily use up the £6m cash at hand (which is probably less now for the exp costs on other sites) and they would need to raise more funds – we know GH said they could probably raise cash on loans.
So in realistic terms, am I correct in thinking that it would be better position for GGP to have no decline until all 4 JV stages are complete and the 5% extra is agreed? therefore GGP can pay their share for mining out of the 5% ?
But what if NCM do not want the 5% so therefore pushing GGP to fund 30% of decline/mine? So we would need to borrow heavily to pump into mining for maybe 1-3 years to production without actually any revenue – the gold in the ground is gold in the ground until it can be sold.
The other option would be for NCM to make an offer for the whole of Hav – of course it would be an offer at FMV, but could this be lowball as they know GGP might be happier taking the cash because they do not want to go into debt 30% for mining costs?