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I agree also rcgl
rcgl, I absolutely agree with your point about it not being a binary choice and particularly your observation about being economic for others. This is what gives me confidence.
"With the recent appointment of a new CEO and MD Darryl Cuzzubbo starting on 1st December 2021, SolGold has determined to delay the release of the PFS. This will enable confirmation of various assumptions impacting the PFS, including whether what are currently considered as upside options should in fact be further evaluated and incorporated as part of the PFS base case so as to provide a more indicative and robust value of the Cascabel project. Upside options under review include earlier underground access, mine and mill optimisations, extending Cascabel Resources, hydroelectric power, among others, offering further optionality and potential for improved economics.
Subject to the determination on the above assumptions, the PFS is well progressed and SolGold anticipates that it will support management's expectations of a robust and prospective project."
My reading is, if they published today there would be the base case, which would result in NPV X, IRR Y, payback period Z and so on, and alongside that are various potential upside options which in time could result in the base case being improved to even better values than X, Y and Z. When they say "whether what are currently considered as upside options should in fact be further evaluated and incorporated as part of the PFS base case" aren't they just saying why go and seek financing based on NPV X when it may or may not ultimately be X+3%, we might as well just do that extra work now and go and seek financing with X+3% from the start (or exclude it, in which case no change and we use X but at least it's more concrete).
Also it seems like a lot of people discuss whether Cascabel is economic as a binary issue, it either is or is not economic. I don't think that's the case, doesn't it depend who is mining it? I assume there is a cut off point where it becomes un-economic for Solg to mine it, but not for BHP, because BHP will be able to raise more financing at a cheaper cost than Solg can. Someone posted an article the other day discussing how to assess feasibility studies, the point was made in that article that banks will usually require an IRR of 15% to finance a project, but the supermajors will be able to arrange financing with less than a 15% IRR.
If there is a spectrum of outcomes from not economic for anyone to mine, economic for BHP/another major to mine but not Solg, through to economic for Solg to mine, wouldn't that dictate what Solg does next. Attempt to finance production themselves or somehow sell/JV the whole thing to a major?
rcgl, that wasn't quite what they said. They've spent a year reviewing those options and have reached the point whereby they are now considering whether they should include them or not.
I found this statement to be quite ambiguous. It could mean the options are unworkable and did not deliver what they'd hoped i.e a considerable improvement in the PFS, or it could suggest they are simply reviewing the options and will mix and match those to be included.
This should definitely be a question for the agm, but the long and short of it that market didn't like it and if in fact they were on a fools errand, shareholder discontent will be understandable.
I suspect we're all slightly nervous of stating what may be an obvious truth; the company has so far failed to find an economic way to mine Cascabel and I would have preferred to see a far more robust RNS supporting the argument that it is and is in fact merely a case of which way is best to skin the cat. But as it stands at the moment, we are all in the dark.
Volume is still very low and continue to be dominated by the algo trades,....the countdown to the up and coming AGM is not making any waves so far.....interesting to see today closing UT after the big one yesterday.....my guess is another one in the blue.....
Thanks for your replies RK. Definitely a lot going on that I can't really get my head around and doubt we will ever find out what the real motivations were.
"If he has the other major holders support he doesn't NEED to launch an attack." A good point. Maybe if he hadn't said anything, BHP might have gone public and called for all directors to be put up for re-election, or NM to be put up in light of last year's voting figures, all in the name of good corporate governance. Would that have put the other major shareholders over a barrel because they might have been under pressure then to vote him off due to corporate governance concerns (especially if their proxy advisors were telling them to). Perhaps they felt that although the NM situation wasn't ideal, they didn't want the instability of an angry renegade Nick Mather on the warpath having been humiliated a second time by being booted off the board. He does control a fairly large chunk of the shares and it's probably better right now to have him in the tent peeing outwards rather than outside. Twigger going public first could have just saved the other institutional holders from having to make the decision, NM is not up for re-election, nothing concrete has been put forward by BHP so everyone just maintains the status quo for now.
I'm probably massively overthinking that!
The Chairman's response included
"The Board and Management are currently actively engaging with shareholders and other stakeholders as part of a corporate governance road show. Upon completion of these consultations the Company expects to provide an update on governance developments.
In relation to the PFS, work is ongoing. The SolGold Board will receive a briefing from the Project Committee on the PFS later this month and will update the market accordingly."
The PFS update was 23 November and we all know what has happened since.
So Berry Street were asking a legitimate question about the PFS and as we now know there is a further delay.
As to their challenge on NM's position, the Chairman himself implied to me that many investors were asking the same question. Surely BHP were one of those and he volunteered to me "Terry what do I do, put NM up and risk him being re-elected, or do I put the whole Board for re-election?'"
Its a legitimate question, but I've said that already.
In the end he did neither...
You make some very fair points rcgl and, in truth I am far more concerned about BM.
You are right that my mind changed when he issued the two astonishing Chairman's Letters. Large credible companies don't do that sort of thing, especially when there has already been more than enough criticism over the last year or two.
I don't think for a moment it would put off BHP if they have an agenda, I think instead it was designed to rally investors such as ourselves around the flag and to feel beleaguered.
But the other factor was the appointment of the CEO.
On August 16 I was told that it would only take 2/6 weeks to 'tie up the loose ends' on the top candidate.
That means interviews were over. So my reasonable conclusion is that the Nominations Committee could not agree. Its members are:
KOK (Chair), MAA, BM, NM and LT...
And the Chairman made a Freudian slip when I asked him in mid October why a CEO hadn't been appointed. His reply:
"I was talking to one of the candidates...the top candidate, only yesterday..."
Finally, you raise a very significant point when you say:
"why on earth would he launch an attack on BHP if he didn't know he could rely on the other major holders to support him at the AGM?"
Exactly that. If he has the other major holders support he doesn't NEED to launch an attack...
And the Berry Street letter was just stupid. Why give very public credence to a tinpot fund that doesn't even register 3%
Here is the core of their statement:
"In recent months, we have highlighted a number of concerns to the Management and Board, some of which have also been historically expressed publicly by investors.
Our main assertions are as follows:
• The PFS (“pre-feasibility study”) on Alpala should be published as soon as possible and without further delay. We believe this will enable the Company to raise new capital, at more favourable levels, to finance its operations going forward.
• Despite his retirement as CEO (effective April 2021), Mr N. Mather remains on the Board as a non- executive director alongside the same executive and non-executive members from his tenure. In our opinion, steps should be taken to ensure the Board has improved independence and augmented technical expertise so that it can deliver on its intentions to create better value outcomes for all stakeholders."
Part 2 to follow
HI addicknt, ok yes I take your point. They said "Upside options under review include earlier underground access, mine and mill optimisations, extending Cascabel Resources, hydroelectric power, among others." Extending Cascabel Resources I read as including as much of TAM as possible. I guess my point was though that if you had the choice of a) publish now with no further optimizations because you are under pressure to publish due to a previous delay, or b) hold off publishing for 3-6 months to include those optimizations, maybe the better choice is actually b) in the grand scheme of things. You have to make the best decision for now, not be hamstrung by the past. Given the AGM is coming up and the board have just spent months consulting with all the major shareholders, doesn't that suggest that the major shareholders are also supportive of option b)?
rcgl, just one point; you seem to imply the PFS has been delayed in order to include more results from TAM. That's not actually what the board have said. In fact, they've decided to review the revised engineering/mining plans which they've spent all year modelling. So, rather than being a good thing, it could be seen as quite the opposite; indeed, that's how the market has interpreted it.
RedKnight - I have some questions to ask you about your views on Twigger. This isn't meant as a personal attack or to start a blazing row, I'm sure our views in the main are aligned. Since you post your thoughts in detail let's discuss.
After your CG meeting with Twigger and Elodie you said "I must say that I found the Chairman and Elodie refreshingly candid," and "I was very impressed with these two Directors. Not only were they refreshingly honest and straightforward, but they were aware of the major issues, partly through their repeated occurrence during the Investor calls," and "I can tell you that I was very impressed by Twigger and Elodie and have been by all the appointments so far. The Chairman and The Board know clearly what they have to do and its just a matter of how they get there..."
Your view now seems to be that Twigger has presided over a disaster of epic proportions and must go. Since your meeting and now they have actually appointed a new CEO and continue to progress the regional targets, with Rio looking very promising. Obviously the PFS delay is disappointing, but to be honest, TAM keeps growing and clearly needs to be factored into the overall PFS, the question is when do you draw the cut off for publishing the PFS with some of TAM yet to be proved up. It seems madness to pull the trigger on that days before the CEO actually joins, rather than giving him (with all the experience he has been hired for) a chance to input on that decision himself. It's not as if the PFS is "wrong" and needs redrafting, which seemed to be the case on the previous delay, it just has the potential to be further optimized - I don't think the fact that they made poor decisions on the first attempt is reason to make another poor decision again just to flatter the timeline by a few months, if delaying to optimize is in itself the better option here.
Is it because of his decision to publicly challenge BHP, potentially antagonising them before a crucial AGM? Twigger is a seasoned investment banker with bags of experience in the resource M&A sector, surely that experience is exactly what you need heading the Solg board at this crucial time when it may be the target of corporate action? He must know what he's doing publishing letters like that. Him being up for re-election, why on earth would he launch an attack on BHP if he didn't know he could rely on the other major holders to support him at the AGM? It would be suicide otherwise.
Also, having been trying to interview candidates remotely by webcam for a junior role recently, I can't imagine how hard it must have been to make such a crucial appointment as CEO without face to face interviews. I'm not surprised it took all year.