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Seanhunter you misunderstand the diverse book doesn't defend the share price. Volume does that.
The diverse book with people invested from different directions makes a cheap takeover almost impossible. Take time to think about it.
redknight, whilst I agree that £2bln would be drop in the ocean for BHP (even better value based on weak pound) do not forget that with that £2bln comes around $4bln+ in capital commitments. Of course, that gets paid back handsomely from year 5 onwards... but for near term accountancy figures, it's really much more than £2bln. Oz Minerals is around £6bln (if BHP up their offer to $30) so similar type of spend to SOLG (on a full project acquisition basis). Think Oz minerals might have $1bln of finance to sort and some debt but they are a producer to the tune of 2022 production guidance 127,000 - 149,000 tonnes of copper and 208,000 - 230,000 ounces gold.
Apart from the Brazilian assets they are mostly OZ based which again suits BHP. It's a terrific buy if BHP can secure the deal and it looks like it. My question is what appetite does BHP have post OZ Minerals deal and post the recent u-turn on the dirty fossil fuel business through to 2030?? Suddenly the latter is looking a great business again. Due to Putin, BHP and the glove in general become 'dual' energy focussed rather than purely or solely driven to green energy projects.
Of course BHP would like SOLG's Ecuador folio. No doubt about that. But I'm wondering whether recent events have caused them to rethink and opt for producers near term and then look at SOLG type assets in a couple of years or when they are forced to. And perhaps that's where we are now... in the swings of 'forcing' BHP's hand??? I just get the feeling that management have been treading water ticking off the expected derisking milestone but keenly awaiting BHP's move. And it's not come... so I'm genuinely floating it out there to be discussed... is OZ Minerals a better buy than SOLG?? One is around £6bln and there's a chance SOLG could be bought for £2bln although I think Mather wants the £1 so call it £2.4bln. Which would you buy??
Thank you, RK, for that info. IMO BHP has probably more available cash than most and therefore could mount an offer which would possibly have a large cash element and fewer BHP shares. Other possible bidders may not be so cash rich, even miners may not be so, primarily because of size but also focus, in which case they may offer a 100% share offer. Of course the problem with that is if shareholders come to sell, either because their share custodian doesn’t permit non LSE listed shares, or that they want/need to realise their new shareholding, then they may well find that the new company’s shares have halved in value.
As I see it, SOLG might well be pushed into a lowball sale because they are unable to raise suitable finance. This is my main worry at this time.
Frog
I don't think there is any subterfuge or clever machiavellian scheme going on.. this has been suggested at every point where the share has collapsed over the last 3-4 years..
we are holding back amazing drill results to release just before the AGM...
we must be holding back amazing drill results as part of our take over defense....
we have the best hole ever drilled... we are just not announcing it yet...
this is the sort of positive reinforcement of mad ideas simply because we are invested here, and want it to be true..
Our board are clearly not taking in part of some grand masterplan, which involves trashing the share price for the greater good! they are just inept.... and at every opportunity have refused to generate the funding, that EVERYONE knew was needed for later in the year, while the share price was in the 30s..
Redknight you say this is what happened but is this your opinion or is it FACT? If the latter where can I read about these facts?
Thank you
Well, you just don't sell into bear market lows RK.
It doesn't mean everyone is happy/satisfied/content. After all, how can they be when they are suffering on paper to the tune you mention?
It's about battening down the hatches and hoping we can emerge unscathed IMO.
Sharket if we continue on this road I reckon he won't be our ceo come December.
I have no idea...if true, it was catastrophic.
I wonder why the CFO and Corporate Finance Director left?
Just suppose for a moment there is a subterfuge going on...?
I repeat...Nick and DGR have lost £70m and CGP £35 million since April...nobody else is selling either...why are they all so quiet...?
Agreed RK.
Must say i was speaking generally when making the point and even in BHPs case, reinvesting some of their retained earnings in SOLG is going to be more efficient than printing their own equity.
Their equity is more attractive to shareholders of the target though, so it's swings and roundabouts.
Quady your diverse book will no more shield us from a hostile bid than it shields us from falling down into the mid teens.
We are extremely cheap at the moment. This changes things. We are even cheaper to a dollar buyer.
Bozi
Even at current prices, BHP has a MCap of £114 BILLION...
If they paid £2 billion for Solgold it would be less than a 2% dilution...
Since April BHP has fallen 25% and Solgold 60%...
A perfect storm...?
Fort, on August 5th our CEO said in print that he was not considering offtake agreements until the DFS is published. I don't know how many times this needs to be repeated before you stop claiming that SOLG presented an option to BHP and NCM that involved $100m from Boliden.
RK why has the board not approved a rights issue?
Where do you get this stuff from Colonel:
"So I think what happened was SOLG presented a structure to BHP and NCM among others and that structure likely resembled this.... $100m via Boliden for ENSA works and $75m for exploration/working capital etc. "
Nick would have approved a Boliden at the drop of a hat!
Barrenjoey brought a cashbox deal. BHP and NCM didn't like it.
A rights issue was suggested instead. The Board said no.
And here we are...
BHP made $32bn ASD profit
Had $32bn Operating cash flows
Paid $36bn dividends
Had $16bn debt and $17bn cash
https://www.bhp.com/-/media/Documents/Investors/Annual%20Reports/2022/bhpform20f2022
@Quady, I am having an emotional moment, for once I fully agree with you!
Right Fort, so using your own logic (or imagination), why did SOLG back down to BHP/NCM instead of just cutting them out of the equiry raise and pushing on with a smaller amount of £35-40m (5% of the share capital)?
The downside is that package would have hindered what regional exploration we could do but it would be to the betterment of the development of Alpala. As it is, we're limping along on both fronts.
There were 3 options. The sort of deal you mention, the equity or the deferral. Our management opted for the latter and it has delivered the worst possible outcome.
Not strictly true DartFrog. As a general rule, miners are cash rich due to the spritely spot prices many commodities experienced in late 2021 and Q1 2022.
They are however, quite subdued in terms of their own share prices given the softening that has occured in Q3. Those factors combined should see any M&A happen primarily in cash as acquiring firms won't want to excessively dilute to take on new projects.
addicknt, I could be wrong but think you've got the wrong assumptions there. BHP and NCM are very willing to pile more cash into SOLG for an equity slice. That's always been clear. That's been their game plan since day one. Get as much of the company on cheap equity raises makes sense for them as huge discount to the final offer price. That said, BHP did pay 45p for a wedge some moons ago.
Darryl has already told you that the funding discussions did not arrive at a conclusion due to differing opinions on the 'structure' of that finance. So I think what happened was SOLG presented a structure to BHP and NCM among others and that structure likely resembled this.... $100m via Boliden for ENSA works and $75m for exploration/working capital etc. Basically a rinse and repeat of last year. On the basis of that funding structure... I believe it was likely BHP and NCM said...we don't want that structure and if you go ahead with that we won't be putting in any cash at all. More likely they said they only way they would invest cash into the business is if they got a larger equity slice back eg, they wanted an extra 5% each or something like that fro a £50m each investment and no boliden stream.
Remember.... there was a clear reason why Mather went for the Franco stream deal and the smaller equity raise. It's called dilution. Why would Mather deliver that in 2021 and then just roll over and go with a deeply diluting equity raise in 2022? Why not just do the same again? Of course that's the preferred option and we know NCM and BHP don't like that scenario... and voila here we are with some kind of Mexican stand off with the clock ticking being used as a weapon by some it appears.
Try to look at the events that have past and you'll see the logic and thinking behind them will not have changed. Why would it?
I think what I am saying is that there are not many companies out there that have vast amounts of cash available at the present time to make a bid for Solgold even bearing in mind the low share price. Also, I accept the diverse book argument, but the current situation, low share price and the difficult and expensive borrowing dilemma, will make large share holders nervous and more likely to accept a lowball offer than they might normally do so.
I believe that it is very much up to Darrel and co to pull something out the bag to prove me wrong. I hope they do!
Frog
Its still there...scroll down to 'Corporate Structure'
https://www.solgold.com.au/about-us/
Yes Seanhunter but only a little daft.
We are not getting a bid, as the reasons are there in my last 2000 posts.
A diverse book means that a hostile bid is expensive for anyone who bids no matter what the share price is.
And nobody is going to recommend a bid which is only 50% of NPV.
So we carry on and watch the next steps.
Agreed addickt.
DF, good post and I suspect most of us are not feeling particularly enthusiastic at the moment.
Your mention of the CFO is interesting. He appeared out of thin air on exactly the same day as AS was given the heave-ho, so clearly the move had been on the cards for a while. Wouldn't we all love to know why?
But, his role is described as being interim CFO and this is not great. Investors will have been unnerved by the rapid departure of AS, although I'm certain they were given more background than we were. Anyway, the point is new investors really do not like this sort of thing. They want to know a company has a fully functioning and stable financing team, particularly a CFO who they know and trust...this is difficult when that person is only interim. The team have a big enough task on their hands persuading people to cough-up without there being a question mark surrounding the CFO.
More than anything else, it's the departures of IH and AS (less so JW), that has raised my wariness levels.