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I don't see why they need to do it at all. They are 75% owners, they could mine the fields and pay a royalty. The deal smacks of cronyism.
I suppose that would cost a couple of £'m in fees.
A one for ten rights issue at 17.9 and I will take it up.
Good point Kenj
It is nice to dilute the convertible bondholders I try to do all my calc’s based on the bondholder fully redeeming the shares. Sorry I am frustrated, proably like a lot of people, we are taking the risk on this, so we want the reward. I am still voting "No" to item (2). If vote 2 fails it would be the best course of action for this company's shareholders, this is my point. They can do this another way.
I think the issue that some of us have, those of us who have been in this share for a number of years, is that these guys don't deal from the top of the deck - so to speak. Or more precisely they have got into the habit - since the rights issue - of allocating the cost for any development to Shareholders. Replacing the old convertible bonds with new convertible bonds last year is one example. It seemed unnecessary when the previous management team had replaced bank loans with Non convertible bonds earlier. The proposed sale of the stake in IRC has a funny smell to it. Going further back, the proposed purchase of another miner (can't remember the name) for around $150m which didn't really seem to deliver very much.
You are right when you point out the recent increase in the share price, and it is true that the proposed dilution is small, and in these uncertain times it is probably prudent to hold on to cash, but it would be nice if just once they proposed a corporate action where the burden did not fall on shareholders.
The dilution would be 28% to today's share total, or 26% following a 6.8% dilution if TEMI is paid for in shares before that.
The overall dilution or expansion to today's total shares in issue would be 34.8%.
3310m shares in issue would rise to 4462m.
The high sp and the low conversion price of the bonds at US $0.1350 per share, make it pretty certain that the bondholders will ask for shares, rather than take the $125m in cash. It would be an extremely good deal for them at today's share price of 21p. In 4 years time the sp could be much higher and the bond holders looking at enormous profits.
There is very little that we can do about this, as to deny them the shares would mean paying them the Jul 2024 cash price of 926m shares, if I have got my sums right. If the shares were trading at 50p by then (and I have seen far higher sp predictions on this board for much earlier) then it would cost the company £463m to settle in cash The dilution would be 28% to today's share total, or 26% if TEMI is also paid for in shares.
And another 30% dilution for the convertibles, and what is the next dilution coming ?
The dilution that would result if new shares are issued is under 7%. Not a lot when you consider the spectacular rise in POG's share price over the last couple of months.
The alternative of paying cash is likely to cost POG an extra $6.5m, removing a total of $60m of usable cash from the company. Some of this cash could be used to develop the then fully owned asset.
It could also be used to purchase refractory ore to be processed in the POX hub. Profits made from processing this refractory ore could be used to purchase more refractory ore, and the process and profits repeated. This would generate a very healthy cash flow at a time when POG's non-refractory reserves are declining, and put us in a position to pay off a sizeable chunk of our debts when they become due.
Paying the $60m in cash (which the company does not appear to have), is likely to delay development of the TEMI field and our ability to purchase refractory ore, and hence reduce our profitability. The potential gains to be made by issuing 7% of new shares, heavily outweigh the alternative of paying by cash imo.
ok so I agree that we want to purchase the rights to prospect, so we should vote “Yes” for item number (1). to approve the Related Party transaction. POG can then, either finance this through cash accumulated on B/S, or wait until the end of next year and use cash accumulated at that point.
Waiting until the end of next year is the preferred payment approach even with the £7m financing cost. This allows the company to preserve it’s current cash and use it for operations.
This doesn’t prevent them from developing the site, they have the option to buy the rights. They seem to already be developing it by putting in roads etc...As if it is a foregone conclusion.
They don’t need to have $500M at the end of 2022 to pay back debt. They can simply roll this debt over as per normal for companies. Or part roll it over at a much-reduced cost of capital. In-fact doing so would be efficient. Otherwise what would they do with the cash at this point ?
Therefore, the most sane and favourable outcome for a shareholder’s is to vote “No” to item number (2).
POG will still have the right’s; all we are talking about is the method and timing of financing.
Re the Virus. I think I've had it. No major symptoms and certainly no temperature/fever. Just a tight chest a couple of weeks ago with no cough either. Having two small sprogs I'd like to think I was first in the queue but as per usual time will tell. Love your loved ones a little more than usual right now as we know what's around the corner. Be Safe.
Good for you though Rusty, hope you stay symptom free, more chance out of hospital than in.
POG are no doubt making good money, but do they have $53.5m cash in hand?
This statement from the circular suggests otherwise, or perhaps they are bluffing.
"Under the Option, the Company may, at its election, satisfy the Exercise Price, or Reduced Exercise Price, as applicable, in cash or in ordinary shares. Any cash consideration would be
likely to be funded using balance sheet cash, new debt facilities or an equity placing."
As you say Ken two parts. The first being are we happy for the purchase and if so what are the caveats for the two proposed methods of paying for it. I shares would dilute the SP and if in cash would this weaken the company in any way if they are now apparently generating so much cash.
By the way. Anyone got the virus yet?
"Make sure you register your disgust by voting "No". If it fails to pass, they have to use cash. Dont let them push you into "paying for the party".
The vote seems to be in two parts:
(1) to approve the Related Party transaction, and
(2) to authorise the company to allot shares.
If vote (1) fails the company cannot purchase the assets at all. In this scenario we risk wasting the $13m we have paid for the option. Alternatively a second vote, if passed would lead to the assets costing $6.5m more as it would be unlikely to be completed before May 20th.
If vote (1) is passed and vote (2) fails, then the company would not be able to complete the purchase using shares. This second scenario would also delay the transaction and risk adding $6.5m to the purchase price.
The issue of new shares, would represent a fairly meagre 6.837% dilution. If we are to purchase the remaining 25% of Temi, I for one would prefer to pay for it using new shares, and retain as much cash as we can for repaying our loans, when they are due. However, like Rusty, I would like to know who we are buying this stake from. More clarity is needed, but I doubt that it will be forthcoming.
I agree that a simple statement could have been included in the RNS, stating that attendance at the meeting would be restricted due to Covid-19, and that further details were available in the circular on the company's website.
As for who owns Agestinia Trading Limited, the 25% owners of TEMI, who knows? This is a small Cyprus listed company with only two directors recorded. You would need to pay for a full report to get more information than I found (see below), and that may well only point to another obscure holding company.
"?O?S???????S ????G??????S holds the position of Director, ENW SERVICES LIMITED holds the position of Secretary. There are might be more directors and secretaries that are not currently listed in this description as the information represent a point in time in the past."
Kenj thanks for that, but it might have better to put that in the RNS which is in the public domain rather than just having it on the website. At least they are advising people NOT to go, but I do repeat I believe that should have been put out in the RNS. Question for you. Is this deal, buying 25% of something which is owned by Peter and Pavel, I am sure I read it was, but unfortunately ( or fortunately ) I have been looking after a 90 year old who was only allowed out of hospital if I could be there as there are no carers available
You were a bit quick off the mark there! It would have been best to have read the circular published on POG's website first. Extract below:
"The board takes its responsibility to safeguard the health of its shareholders, stakeholders and employees very seriously and so the following measures will be put in place for the General Meeting in response to the COVID-19 pandemic and the current measures being implemented by the Government in the United Kingdom, which may continue until after the date of the General Meeting.
The formal business of the General Meeting will only be to consider and vote upon the two resolutions set out in the notice of meeting. The holding of the meeting will be kept under review in line with Public Health England guidance. However, based on current measures implemented by the Government in the United Kingdom attendance at the meeting will be limited to two persons, which will be sufficient to make it a quorate meeting. The meeting will not be attended by other Directors of the Company and other officers and professional advisers will not be in attendance. Shareholders are actively discouraged from attending the General Meeting given the current measures being implemented by the Government in the United Kingdom. The Company is taking these precautionary measures to safeguard its shareholders', stakeholders' and employees' health and make the General Meeting as safe and efficient as possible."
Make sure you register your disgust by voting "No". If it fails to pass, they have to use cash. Dont let them push you into "paying for the party".
I guess the Company assumes that they have sufficient support to confirm the proposal and therefore they've organised it such that the formalities can be completed as soon as possible and safely within the current restrictions. Otherwise the proposal would remain unresolved for an indefinite time which is not what decisive management is about.
aBOUT MEETING. What a ridiculous RNS trying to convene a meeting for 16th April when people are dying and we are in Lockdown. Wwhat idiot gave them that advice. Mike Ashley !!!!! CRAZY !!!!!!!, WHY DIDNT THEY WAIT FOR A SIGN OF THIS GOING AWAY. The lunatics are taking over the asylum.