George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
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I'm with Frank, it's binding obligation to sell 5% should Newcrest choose to take it up.
I reckon looking at some historical companies that it will be done on 3rd party appraisal / EBITDA which is the most common way of doing it (by the looks of it)
Maxwell, yeah I had another look and you are correct it is up to NCM whether they take the 5%, but again after checking the agreement they have to take up that option after the PFS and within 24 months of completing phase 3
Hydro I do think you are wrong becuase the section quoted on the GGP website and copied below is very clear. The option is with Newcrest and whilst they could decline I do not believe GGP can refuse to sell. I too have done many legal documents (not picking a fight in any way) and I see the position totally in Newcrests favour
“Newcrest has the right to earn up to a 70% interest in the joint venture by completing a series of exploration and development milestones in a four-stage Farm-in. Newcrest may acquire an additional 5% interest at the end of the Farm-in Period at fair market value.”
MaxwellDtarney - That's my point. I'm stating that.
Rotherby - In your scenario would 5% of GGP produce them the same yields as 5% of a mined asset... Bearing in mind that SP doesn't always reflect earnings of a company.
Uni
The deal only relates to Havieron.
Purchasing 5% of GGP on the open market doesn't give Newcrest 5% of Havieron... Why do people keep making this comparison!!
I'm pretty certain fair market value isn't book or market value either, it's determined on factors such as maturity of asset. In my limited but learning understanding is that fair market value is done by appraisal of asset.
Lenz,
as far as I am aware, this is a contractual option to buy at fair market value.
My understanding is that if Newcrest ask "independent" parties to come up with a valuation at whatever date and that valuation is not attractive to Newcrest then they can say thank you but it's not currently something we would like to take up.
There is something to bear in mind though - for certain, no one on this board has seen the actual contract (in relation to the purchase of the additional 5% at the end of the farm-in period) In my opinion, it will not be a one off opportunity.
Actual contract may make provision for any number of years following the qualifying date?
Who knows?
According to Hydro they have been and still are!
Rotherby in my opinion you may be missing the point of FMV. Yes they could buy 5% now at open market prices but if they buy under the ‘right to buy at FMV’ clause, then FMV will take into consideration real value of resource as opposed to purely the SP. However, if you are saying they could get to 70% without using this clause, then I agree. Having been in senior positions in very big corporates my personal view is that they will want 100% as JV’s are complicated and expensive to run and of course they want to lock-in all the long-term profits.
Rotherby, what do you think would happen to the SP if someone was to try and purchase 200M shares ?
Yes, lebugue-addick. There is a difference between knowing instinctively whether an assertion like “..Blackrock just bought 10% of Newcrest…” is credible, and having to look it up to check as you did. Many people refer to this as expertise.
No they couldn’t refuse the offer if the independent FMV is conducted within the rules set out in the JV/Farm-in agreement.
Lets base values on the near current facts
at current share price 5% GGP is worth approx. £32 mill UK
if you want 5% of GGP the share price would rise so @24p i.e. approx. 50% rise on todays close we have £48 mill UK
Remember markets rule,
if NCM want 5% of Havieron then they will not pay more than the cost of what they can get 5% of GGP by buying in open market.
They have the knowledge of what Havieron is and will grow to so if they want the 5% why have they not bought 5% in the open market and informed the market that they will not bother with 5% of a bit of GGP later, this would surly save them $'s
StarBright . I would have thought GGP would have the right to refuse the offer for the 5%, if it was not acceptable .
Thats probably one of the most logical explanations of the rise and fall, but hopefully the sudden and surprise drop of news will sting their fingers with any luck!!!
Sure. The mechanics of the FMV determination - or at least the basis and ultimate responsibility for it - are likely detailed in the farm-in agreement. Have the company ever expanded on what this says?
It's usual for an independent expert like Duff & Phelps (or perhaps an specialist mining advisory firm) that is acceptable to both "sides" to be appointed. Both sides will be able to make representations during the process but the ultimate decision-authority on the valuation will reside with the independent expert. When they have given their view, NMC (not GGP) will be able to decide whether or not the transaction will proceed. The price might be too high for them!
Well done Tom - you called it brilliantly - can you do the same every day Lol!! Sadly, some good people showing frustrations that we all have with the GGP SP this year. I just keep in mind that Newcrest’s Annual Report issued today spoke highly of Red Chris, Cadia, Lihir where drilling is more advanced but still mentioned Havieron 63 times and we know our drill results have been continuous and with bigger and better grades than the aforementioned. It is just time before Newcrest will be singing about Havieron louder and longer because of this as Tier 1 mines just keep on giving. Hope our fellow investors can get back to being civil to each other whilst we all await the good news that is coming - I would hate this Board to spiral any lower as we will potentially lose quality posts from our well known Lthers if they get fed up of the back-biting and sniping!! Come on peeps, life is too short to be embroiled in the negatives - let’s just focus on ALL the positives!!
Building motorways or building mines without civil engineers neither would get started.
Both deal with geology, formations, material quantities, structural stability, drill positions,drill directions, water content, bore hole readings, geochemical soil analysis, if you want me to carry on I can.
Do we need fund manager analysis to build mines?
Well I will leave that with you but we certainly don’t need secret agents
StarBright are you a 5 or 9?.
They came through initially as sells - and now appear as buys from what I can see...
SB. I get your point that NC have the option at FMV, but that doesn’t mean that ggp can’t dispute what ‘fair’ is. FMV should not only calculate as you say but will have to offer something for the upside potential, otherwise it will be demonstrably ‘unfair’. IMO this is where the devil is in the detail. I am sure that neither party would want a public spat over this let alone a lawsuit, and NC will need to demonstrate to other juniors that they act properly. So it’s a bit more complex than you say.
I have a capital mkts background so I say this with respect.
Here we go again.....
Market doesn't even correlate with bought and sold. It takes a shedload to go up and nothing to come down. Bit of a joke really, markets are supposedly run by professionals - doesn't really look like it does it? A price clearly held constantly - probably hoping retail will run out of money and interest. Clearly someone is sat on the Bid, all of the time
UT of 15.8, where did that one come from?
GLA