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Fair comment TMT. We shall see, either way I don't see how we loose with either scenario. It's good to be in greatland.
GLA
CHAIN
@Chain, great post and thoughts. Recommended both, even though I disagree with some points.
I'll start with the big one. If NCM moves today, they do not have to buy 60%. The fact that they currently technically only one 40% is irrelevant. They jump from 40 to 70 for pennies. If they want 100%, all they will do is simply say, "We'll buy you out now (talking about Hav, not all of GGP) for a bazillion dollars" (or whatever it is they've decided to pay for the remaining 30%).
If GGP says, "That's not enough, we still own 60% of it," they'll say, rightly, "So? We're going to own 70% of it if we spend another few million dollars, and we're going to do that. So we're only talking about moving our ownership of that 30% forward a few months from when we would have had it anyway. And it's not producing, so those few months are irrelevant." And they are, so GGP won't say that.
If they want to buy 100% of Hav, they could do so now or later, the 30%/60% discussion is irrelevant to that. Several people have mentioned that, and it's understandable, but it's really not the case. NCM says they have a clear path to 75% ownership, and they do. The last 5% of that is going to be expensive, of course. But they really only have to do 25 or 30%, and they could do it now or later -- if they want to, and if they can agree a price with GGP for it. I don't expect that to happen, in part because of some of your father's other thoughts, but the 60% thing is not at all a barrier to them making a move now.
I think it'd be very interesting to see GGP start mining on top of their exploring operations, but if I was them I'd create a subsidiary and have it operate as a miner independently with little intervention from the exploration side. Let explorers explore and miners mine.
However, I'd rather see GGP sell Havieron off and get the instant gratification rather than wait years to get a mine going and get the gold out of the ground. POG is high now (risky to assume it will stay that way - better to sell now) and GGP would be better positioned to continue their explorations (i.e. Scally and Black Hills) with the extra cash in the bank to get a better arrangement with NCM or even RIO (although I'd prefer to stick with NCM due to the existing relationship, on the other hand forming a new relationship with RIO might allow us to keep our options open - whatever really. Could give Scally to NCM for drilling and BH to RIO).
If we have the cash to go it alone, then we can do 50/50 or even 40/60 on the next prospect if we make a farm-in agreement. If we can't get a good deal then we just go right ahead on our own. At the moment NCM knew we couldn't drill it out alone, hence why they are walking away from this with 70% of a massive gold mine. If GGP had the cash to go it alone, then we'd have more leverage.
I don't want to see GGP get sold to Newcrest, its like a TV show that gets cancelled after the first season on a cliffhanger! At the moment, if GH is smart (which I am sure he is), he won't sell yet.
Thanks viking, appreciated.
ATB
CHAIN
Thank you for all the positive responses.
GlA
CHAIN
and that maybe somewhere close to how GH sees providing the best return for shareholders. Minimizing expenditure, maximizing income.
All good stuff and reinforces my opinions.
To my mind, NCM and GGP have something more than a joint venture that transcends the simplistic winner takes all mantra of many on here.
GGP get an up and running processing mill within a short distance. This is great for HAV, but becomes so much more valuable if any/some/all of the other 5 targets prove viable. This with minimal CAPEX on our part. We also have a partner with all the required mining knowledge and skills that we don't have. They are also large enough to move all our targets on and develop.
NCM are getting ore (from Hav initially) of a much higher grade than their only other source in the area (Telfer, which has maybe 3 years economical life remaining). Without this, or any other resource close by, Telfer will rapidly become a big weight on their accounts. With a good JV partnership along with the only available processing mill in the area, they will become the only game in town (any other major payer will need both resourse ans well as the full CAPEX for all the infrastructure).
In short we have a symbiotic relationship that will greatly benefit both sides. To get best value for both, this needs to be nurtured not auctioned off to the highest bidder. Witness the mess Solg have got themselves into by sourcing funding outside of their partners!
THE_CHAIN - very salient points and a lot of the points are correct IMO.
NCM are a very methodical company who GH has said specialise in 'drill-outs' - sure they are going at breakneck speed on this one because of the urgency of the Telfer situation but they will still be following their methodical, approved plan and IMO will see out the farm-in and decide what to do from there.
I'll be happy to be wrong and see a big Havieron buy-out with a fat premium and perhaps a royalty attached but I'd be very, very happy for this to play out and we get full and fair value for every ounce that is discovered at Havieron.
GLA - Paddy
14 there is always one. Good luck with your investment, glad to see I'm getting some constructive responses.
Well presented and has been my thoughts all along ..if GH wants to keep GGP going and build a big company ( financially ) without the headache of thousands of employees, then this is the way to go !
THE_CHAIN. Great musings. I think some on here are getting carried away with themselves, patting backs all round. This is only the start. According to the Gold Council it takes 10-20 years to start a gold mine producing. Patience, my young Padawan.
Due diligence involves lots of expensive lawyers, mining engineers, contractors, consultants... It takes time. GH cannot rush things. One step at a time. Tick the box, move onto the next box. Trust in GH (Yoda)....
T_C -
Excellent analysis
Cont... not to be 100% owners of any project…..this they see as good business sense on a risk/reward basis. Also, 70/30 seems to be their preferred allocation of risk. Would they deviate from this ? Well perhaps if the rewards were great enough and while the GGP SP remains in this area, it has short term financial possibilities. Research shows that globally, acquisition premia tend to top out at about 50%.
Time may not be on their side as their own drilling results, couple with aggressive broker upgrades, might cost them a great deal of money. If they go early to try and get in before these results, them they have to bid for 60% while they only own 40%.
If they wait……the other 30% could be very expensive indeed. IMO these options will have been assessed and dismissed by the NCM BoD already.
For further guidance, rewatch any Biswas presentation. His mantra for every key decision is Return on Investment. He already has 70% of Hav for effectively, nothing. Why does he want to pay an arm and a leg for the other 30% and **** off the junior partner in the process with an undesired (assumption) approach.
For arguments sake, just say you are Biswas and you are still looking to improve the future of your company…….you have (say) 2billion to spend. Which then, might represent the best ROI……buy the rest of Hav or perhaps, invest in a succession of GGP discoveries…….maybe 55% of Scallwag for starters (he speculated). I would at least be keeping my powder dry until the initial Scally drilling results come through.
Lastly………the experienced GGP posters have (quite rightly given historical evidence) declared that a company HAS to be either an explorer or a miner. Black and white. Just my opinion, but I think we might be witnessing the emergence of a completely new animal…..which we might label a proxy-miner. An exploration company that is so dramatically successful in both the size and grade of it’s discoveries, that it finds it can afford to retain portions of it’s discoveries, while getting JV partners to mine them.
I wonder how the market might value this new animal, with it’s low overheads and prospects of both income AND capital appreciation ? Very highly one might argue.
It will be fascinating and hopefully very profitable watching this situation gradually develop.
In amongst the clutter, I see more discussion about a potential takeover at GGP…….by NCM.
I won’t comment on the idea of a takeover of the whole of GGP as this is currently a ridiculous concept.
As regards a takeover of Haverion alone……..FWIW, I consider this too to be extremely unlikely.
There is an incredible multiplicity of possible futures for GGP and I suppose a Hav takeover is one of them. In all of these possible futures, an higher SP and market cap mitigate in favour of GGP. To this end, we are witnessing a tactical and strategic endeavour unfold that will mitigate against any possible negatives (including a cut price takeover), by attempting to drive up both in a co-ordinated fashion. I believe that this strategy originates with Hannam and will be perpetuated by them as they (and Numis) continue to update their target share prices with regularity, as NCM come out with drilling updates.
The problem we have at the moment, is that although our share prices continues to move north in tiny increments, this is (for the greater part, Marlborough excluded) being driven by the arrival of many more small PI’s.
While to any genuine LTH a potential upside of 47% might seem impressive, it does not necessarily impress an AIM investor with multi=bagging, short term targets.
As we get more drilling data from the HGZ, Hannam will up their SP target and this should allow the SP to inch forward again. Note also, that Hannam have kept their powder dry as regards the brecchiate zone. This will have to be included at some point, although it will I think have a negative effect on the overall AISC at Telfer for Hav ore output.
Everyone would like to see the SP significantly higher, but for this to happen. GGP bill board members need to ask themselves just WHO is going to buy at 12, 15, 18 and 20p to get it there ? It is possible that the Hannam material may attract some new HNW PI’s and just perhaps, some smaller II’s. I think it is fair to say that many existing PI’s profess amazement that nobody is buying at the current ‘bargain’ price, yet few are even topping up themselves ??
My personal opinion is that if you want to see the share price move materially higher,, we need to see big II’s, pension funds, sovereign wealth funds etc., get involved.
While I appreciate that it might very occasionally happen (see SXX), and I know that capital appreciation has obvious value to all investors, the idea that these big players would invest in any company without an income stream is IMO, highly unlikely.
That is why it is so important that we do not sell the other 25% of Hav. Once it is accepted that will be paying a dividend of sorts in the future, then we might attract the sort of very LTH’s that we need to support what could yet be a stratospherically high SP. An MRE and perhaps, FTSE memberships would also be needed/helpful.
So let us return to the takeover hypotheses……..firstly, the prevalent NCM modus operandum is