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@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.
Still a lot of posts missing
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.
Dartfrog, a very realistic assessment, but am I daft in thinking:
The low £
coupled with
The shockingly low SP
actually combine to make us a very attractive takeover target for any company sitting on billions of dollars?
Much of the recent fall has been predicated on very low volume. Beyond a bid, I'm hoping that the BoD (of whom I am not a fan) have the wherewithal to earn their bloody salaries and pull something out of the bag soon.
As for a possible bid, a think a few long termers now need to taper their expectations. We are in too much of a fix now to expect top dollar, and playing the game wrong comes at a price. I wasn't a fan of Nick but he knew what he wanted and knew what he was doing, but now all is drift and inertia.
From here, we should be grateful to get anything in the 50p - 70p range.
Frog, that's the best reasoned post I have seen for some time on here and 100% correct imo. Management are inept and blew it months ago, now they need to pick up the pieces somehow.
First of all, I have to say that I have not read the full string on this subject.
I was very disappointed that funding was not arranged earlier in the year or late last year because it would have been available relatively cheaply and could have financed Alpala to Dfs and the exploration programme. Now possible finance will be expensive if it is available at all.
I fully accept that it is easy to make such a comment after the event. My view is that if all the ducks line up, one should “go for it” rather than put it off for a better deal in the future. Things in the world change so quickly these days and by not reacting at the time we are now in a very difficult position. We are desperate for additional funding, but we don’t want to pay too much for it, but in our current situation we have laid ourselves open to a low bid from whoever, but only a company with deep pockets would be able to bid so a bidding war is not likely.
I apologise for being so negative, but this is how I feel at present . I do hope Darrel and the new CFO can pull something out of the bag and prove me wrong.
Frog
And as if by magic, they come back!
just my computer or have all posts since yesterday at 10.23 disappeared?
Genuine question (I could not get an answer about from SOLG): does anyone know what happened to the Swiss entity? Is it still there or has it been unwound? From what I remember and understood at the time, it was set up as the funnel to all big funding coming up and closely managed by Nick Mather, and if I got that right I wander 1) if this is still the case, and 2) whether this is one additional issue that the big guys have with SOLG.
Anyone?
Well it’s q4 next week… it’s been a long wait… and I’m expecting the RNS for either PFS or Porv in October. Darryl and the board must deliver something before AGM, and must be seen to be capable of hitting milestones.
They also have to address our funding path to DFS.. If they disappoint again by releasing the PFS update, without clear funding to DFS, the market will simply give another shrug of the shoulders to our news, regardless of how large an increase in NPV they attribute. If there is no funding news, then Solgs traditional spike and immediate sell off will occur.. only this spike will not get over 30p
Colonel...
BHP only has 13.5%...
We have the best portfolio in Ecuador...
If they tried a low ball bid they'd be swamped...
Sorry for the late posting...been on the Kwasi
Q, yes, the DFS is a milestone for us, but not for BHP. They'll already know that the project is feasible and of course, they don't need a BFS as they'll be funding it themselves.
In fact, your post highlights the reason why BHP wouldn't want to allow us to get to a DFS. 1) it will increase our value (hopefully) and 2) since they don't need it they could easily be thinking "we're not stumping up any more cash for SOLG just so that they can increase the value and benefit their shareholders when the study is of no value whatsoever to us"
As you know, I fundamentally disagree with you about the dilution question.
The problem as I see it addicknt is slightly different.
If BHP and NCM take part in the latest fund raise.
Then we get to DFS and the game changes.
Because as Darryl says other funding options open up and we can construct Alpala with minimal dilution.
So they need to take part to maintain their percentage, but don't want to as that gets Solgold to where it wants to be.
We will have no trouble fund raising, but will be interesting to see what form it takes.
witnessing the denouement of the power struggle between the company and BHP/NCM? Has their strategy been to fund us to the point where we know just how important the asset is and at a critical moment to then attempt to starve us of cash? When that article in AFR (I think) said BHP/NCM were not prepared to put in more cash, what did they actually mean? Were they referring to the structure of the proposed fund raise or, was it a statement of general intent?
If this is their game it strikes me it's a high risk manoeuvre. The company has proved in the past that it can raise money from other sources and even if this proved difficult, would BHP really push us towards administration? The risk of that route is that in an auction of the assets an administrator has to accept the highest offer and there's no guarantee that BHP would win, particularly with their recent track record. There's also the risk that the Ecuadorian government simply take back the assets/concessions and then parcel them out to other parties.
In the light of yesterday's site visit, it seems possible we are targeting new sources of capital in attempt to circumvent BHP's influence. If this is the case it will be fascinating to see how they react.
Of course, I could be totally mis-reading the situation and everything is sweetness and light between us and them and we are cruising towards another successful fund raise with them contributing their share. But somehow it just doesn't feel like this to me.
Tesla1, what do you man 'huge amount of cash'? Do you know how much they need to raise? Are you referring to the Capex required to DFS or the Alpala project cost to development?
SOLG raised $178m last year with minimum dilution. Would you call that 'huge amount of cash'? Mather was 2 steps ahead of the big boys when he got that raise away. I guess we'll find out soon whether he's sticking whopping their super major @rses.
I cannot believe anyone would post what you have…..
If the info not in the public domain was so great and valuable those in the know would have spoken to colleagues/friends and the price would not be dropping like a lead balloon.
The simple facts are the market is awful, they are running out of cash and potentially need to raise a huge amount of cash.
All in all not a nice ****tail of circumstances.
This could as easily go belly up and the vultures devour the carcass or they might scrape through however one thing is certain Mather got greedy and PI’s are paying the price.
He thought he was 2 steps ahead of the big boys maybe he wasn’t……
Either way the company is on a tightrope who knows if they’ll make it to the other side
Fort, there's a big difference between a confidentiality agreement /NDA and an agreement barring trading in the company's stock.
The former is understandable if unlikely to still be live now but the latter makes zero sense. Nobody is going to sign to re-lock themselves in on the basis that they had some conversations two months ago.
I suspect we're close now anyway. Insti shareholders will have been told to bring their chequebooks and their laptops to the Alpala camp today and I'm sure we'll hear about something pretty soon.
The reason the big boys are not buying in the open market right now is most likely down to the Confidentiality agreements they signed. Just because a funding discussion some months ago ended with different views from different major holders, those involved are privy to info that we are not. Many will still have hands tied imho especially if II and analyst visits are ongoing. So that's why there's no major volumes or 'abuse' of positions/knowledge.
Today we've had £285k traded. I'm sorry but for a market of near £400m, it kind of puts it into context doesn't it?
It's been like that for days and weeks now if not months. When we had large volume, it was to the upside. So that's good to remember. All the downside of late has been on very light volume showing no real conviction despite what some on here seem to suggest. If we we're tumbling down to 16p from 26p levels based upon 20m volume days... then I'd be worried indeed.
And finally - I know it sounds like like the same old rampty damply do stuff... but seriously... if ever there was a time for BHP or another to take a dart at SOLG, NOW would be it.
1. Cash pile low and shareholders away the companies solution/funding outlines
2. Many II's and Pi's would be delighted with a cash deal in this current market
3. Currency (pound woes) at present makes SOLG effectively 30% cheaper regardless of the offer price.
4. Weak BoD's, loss of CFO... all that boardroom 'apparent' jiggling around etc etc
That's the magic recipe for low ball takeovers. It's prime time for BHP.
And just imagine if you are an OZ Minerals Shareholder (sizeable one). Right now BHP's offer or possible revised offer of $30 will be a market high for some months / even years. If BHP walk away, Oz Minerals will collapse back down to $16 levels.
This is how the predators work. They present the offer and then let shareholders contemplate the share price based on a failed offer. And they do it in a very uncertain and poor market environment. 2 or 3 years later, things are looking better for the new owner/acquirer and the asset looks a steal.
The fact that BHP haven't made an offer yet might support the idea that they too are worried that if they do, then someone like Wyloo or fortescue could out bid them like on Norornt. So BHP have a chance to 'talk' with SOLG and see if they can tighten their grip on SOLG (from predators) but do so in a way that still allows SOLG to create cabs off the rank (as he says) and so they can keep their jobs and nice bonuses. At the moment, doing a deal that also pledges BoD's their jobs via voting at AGM might also look attractive to all. As if the BoD dish up anything pony, then Pi's will vote them out with force and there's loads of pi's here. Probably over 35%+ of shareholders are pi's or HNWI's (or NON II's) that's my guess.
All to play for but time not on SOLG's side with AGM resolutions due to be presented to shareholders around early NOV.. that's 5 weeks away tops.