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I haven't looked in here for quite some time as game changing news seems to be taking some time. I notice though that the old chestnut of monetizing the tax losses is still being discussed. Well its still not happened because unless you can engineer a reverse TO that doesn't fall foul of the Australian tests for such activity then it can't be done. You can't just sell the tax loss containing entity ( in this case the Mercator gold subsidiary) to someone else without losing the tax loss. And for a company in ECR's position that , in my opinion, is unlikely. Otherwise it would have happened already. For a bit of guidance on the issues try taking a look at
https://bristax.com.au/tax-articles/company-carry-forward-tax-losses/
And note particularly the "advice" it contains from the Au tax office
"the company must not enter into a scheme to get around the above tests (i.e. enter into a new business or new transactions before the change in ownership, so that the same business test would be satisfied after the change in ownership).
Taxation Ruling TR 1999/9 states that the Taxation Office will strictly apply these tests with potentially dire consequences for companies whose new owners have pruned the company’s businesses, introduced new profitable activities, restructured or made any other changes."
Buyer beware!
Morning Boffin, That's why they've engaged the services of an Australian Tax expert... to ensure that any transaction would fit the criteria (and the other party would sure as hell do rigorous DD before parting with potentially a couple of £million).
Morning Boffin
It can be done, take a look at the suggestion by daramuda on Wednesday. It would mean that they would have to sell MGA along with the tax losses, it's a possibility. Anyway, I won't steal dara's thunder, go and take a look.
Well I'm sorry but Daramuda is mistaken. You cannot just sell Mercator to another entity and keep the tax loss. It's called in Au tax law "The continuity of ownership test". If you introduce a new beneficial owner they are simply not allowed to use the tax loss held within Mercator to set against current or future taxable profits of the new owner. Nor can they rearrange the business to make it look like profits were made within Mercator. That's what the tax office "advice" I quoted is warning about. That's why it has to be an RTO type of arrangement. As far as ECR is concerned this has been investigated for over10 years right back when that crook Silver and his sidekick Patrick Harford (RIP) were running the show and it hasn't been cracked yet.
I'm not a tax expert Boffin but that's an interesting insight. There have been a number of interviews by NW where options have been discussed, I'll have another listen. I've been invested here for some time and I don't recall any predecessor engaging the services of a tax expert but that's not to say they didn't. I would imagine that any discussions would have concluded quite quickly should there not be a viable and realistic way forward, the fact that they are "progressing well" suggests there is a chance.
Like you I've been around ECR on and off for a while and was at the 2011 AGM where we got rid of Silver as chair because of all sorts of "controversial" shifting around assets . I won't bore you with the details but at the time ECR was yet again in a precarious position also partly due to the Copper Flats project being mothballed because of the collapse in the world price of copper. At that meeting in 2011 there was an Australian cousin of Harfords whos accountancy business was primarily involved with Au insolvencies which involved a large amount of "financial engineering" to make best use of the losses associated with insolvency. His view at that time was an RTO was in principle possible but finding an appropriate partner for such a weak business as ECR to take over and not be challenged by the tax authorities as a tax evasion contrivance would be difficult. When a year or two later Paul Johnson and Stephen Clayson took over they on several occasions claimed they had commissioned expertise to identify a deal but nothing ever came of it. After that I dropped out for a while and I guess from CB onwards everyone on here will be up to speed
Cheers Boffin! I suspect the tax losses back in 2011 wouldn't have been as substantial so its' a question of how much time and effort do you invest before you relinquish. We're now at a point where the potential gain is worth it, therefore the determination to find a solution increases although appreciate that this doesn't mean there is a great chance of recovery.
In from the old Themac hype days eh Boffin?
FSP for the whole company is the way forward. There is no other way forward. Then see what comes of that, and in the interim, as the sp rises on potential sale of asset, assets or company, the company can place and put more coffers in the bank.
A formal sales process is a sell-side sale process run by a public company which we are. The sales process involves qualifying, nurturing, and converting a lead. The sales process typically involves the following steps:
Prospecting for leads
Contacting prospects
Qualifying leads
Presentation
Addressing objections
Closing the sale
Follow-up
That way, we can also JV more successfully, if we have more coffers in the bank also.
Just to clarify Toffers, you are suggesting that ECR put themselves up for sale with no actual intentions of selling in order to raise the sp and raise cash? That could be pretty dangerous considering the assets and current mcap.
Toffers...."There is no other way forward"
Well we could continue to prove up the resource at multiple sites with activity at Bailieston, Tambo, Blue Mountain , Lolworth and Creswick, come up with a plan towards production, monetise the tax losses, look for a JV explore and develop our resources as well.
Or we could go with your plan and just put up a for sale sign and put the kettle on .......doesn't sound much like a sustainable plan (as all those EUA investors who bought when the SP was 20 times the current value found out to their cost).
Haven't they already suggested they have interest?
They've alluded to already having 'discussions' with other parties and neighbours, but we don't know if that pertains to sharing information, JVs, tax losses or other subjects
They've had inbound enquiries regarding Lolworth, presumably regarding a JV.
And they are moving the team to do some sampling work on the east end of Lolworth.
Intergroup Mining hold the license directly to the east of Lolworth (see my post 13/5 14:07)
Things are progressing nicely, plenty of irons in the fire, financed and a board who are putting in the hours. Some whinge about sampling but without it we don't know where to stick the drill bit, we have 900sq km to go at in lolworth. Boots will be on the ground in Tambo within the next 48hrs.