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Neither DGR nor NM has sufficient cash to take part in a sizeable fund raise. They are already being diluted by the merger and their influence will be further reduced by the placing of two new CGP board members, who I think we can assume will be looking for the exit door.
How likely is it that either party will be prepared to see further dilution? We will almost certainly need some extra cash simply to get us through the review period, but there must be a question mark over whether the company will seek a large enough sum to get us through to the end of next year i,e the production of the DFS. And even then that wouldn't be enough as we have a significant requirement for general working capital and exploration.
I understand why the company mentioned funding as one of the review options, but I'm struggling to see why it would be in any of the shareholders interests.
A disposal could take at least six months to complete, so some cash will be required just to keep the lights on, but would they really go for $100m now? It doesn't seem likely to me.
Yesterday was a very weird day. I can't think of any situation that I've seen where a company effectively puts itself up for sale, particularly one which is so undervalued, and the share price actually falls. What was in the minds of those afternoon sellers? I guess many of them will have been waiting for this day to come and yet when it does arrive, they bail out. How perverse is that?
Good morning addicknt.
Maybe you are overthinking this and it may be a lot simpler.
BHP and NCM anti dilution rights end on the 27th October 2022 (I believe).
This event will happen after that date, so if BHP and NCM want to maintain their percentage of the market capitalisation of the company. Then I believe they must do this in the open market.
Maybe the recent decline in Solgolds share price is because an order is being filled for one or both.
This would explain why we have had a lot of activity off book.
Could it be this that BHP and NCM were unhappy about.
So why I have always said we will not get an offer until the diverse book changes, we now have a change.
I am however struggling to understand which way this has changed.
On one hand BHP and NCM have been diluted, and if they have been filling orders how successful have they been.
If they haven't been filling orders they remain diluted, and if they want to restore the status quo, then they can on the open market. (Good luck with that one)
So I do feel that a sale of ENSA is now a possibility, although still hard to achieve.
I however on the other hand recognise that the book is even more diverse as although the CGP buyout gives their shareholders just under 20% of the company, that this is not one shareholder and as such these shares cannot be acquired en block.
So no doubt many CGP shareholders will sell their Solgold shares when this goes through and again positions may be filled.
So I believe even more unlikely for a bid for Solgold as a whole, because the diverse book has become more diverse and makes a hostile bid all but impossible, and we still don't get a friendly bid because no one will offer the price required and they don't want the other unexplored tenements including Porvenir.
Now we come to the share capital that Solgold acquires in this deal.
We acquire a sizeable holding of Solgold shares in treasury.
These can be used for their voting rights and increase the BOD influence, or can be used to raise funds or cancelled.
I don't believe they will be cancelled as that would make the book less diverse, and I don't believe they will be used to raise funds at this stage as the chunk is sizeable.
So the most likely outcome in my mind is voting rights at this stage and maybe sold on the open market or en block when the price is higher.
So what happens now.
Well we wait and see do we get the updated PFS for Alpala and the PEA for Porvenir on time.
Does this move the share price and enable us to raise funds with treasury and no further dilution.
If this gets us to DFS, then the game changes again, because suddenly minimal dilution is a reality and we have a many options.
Interesting times.
“Don’t worry, you will be proven wrong. We will not be rolling over to BHP”
Irwins latest.. nice to have him able to comment again..
I wonder if the merged group will try and sell Cascabel and use the proceeds to go exploring across their other tenements?
I wonder what BHP and Newcrest intend to do? What's their role in all of this and did BHP point Mistsui towards Cascabel?
Either way, I believe and hope the small guys come away with some cash in their accounts for all the waiting and the torment of holding this stock
Addincknt
It’s only undervalued by posters on here. It’s value is where the market see it, funding and all.
Although yesterday makes it simpler, you still have 2 large major shareholders who have deeper pockets then everyone else and will more than likely get their way if they haven’t already.
The tweets everyone keep posting are just white noise what does everyone expect Irwin to say, we f**led up, of course not.
It’s fairly obvious they have c**led this up big time and are at the mercy of the markets now because they have left funding way to late…..
Quady,
Re:BHP anti-dilution
I could only find this, I thought I had saved it somewhere but alas can’t find it
https://www.bhp.com/news/media-centre/releases/2018/10/additional-interest-in-solgold
Atb
addicknt, they just got 15% of ENSA. I'm sure Franco or Boliden would be interested in doing 0.5% (which could be bought back with interest) for $50m. I think the days of worrying what BHP and NCM think are well over. That said, when Mather made a bid for CGP in 2020 (wasn't it) we didn't hear much from BHP/NCM. Mind you the deal looked a non starter based on CGP's reaction.
Anyway, I think monetising the asset rather than diluting the likes of Irwin and Mather is priority now and royalty stream deals is a form of monetisation. So I think that's back on the table. Possibly starting with Mitsui or including them. Mather might have agreed with CGP, that the merger deal is based on the merged company having 12 months to get DFS sorted or just 12 months to get a deal done. I have no doubts that CGP will have a private agreement with Mather on timelines. There's no way they want to be stuck with SOLG shares for another 2 years or more. No way. They want their pay day. They have waited a long time and are not getting any younger. I don't think these guys would blink at giving away 0.5%. Of course that would rattle BHP again. If the want to draw BHP out, all they need to do is keep tapping the asset. Nothing BHP can do about it. Apart from make a fair and honest bid.
Thank you Mathersfinger.
As I said in my post I am unsure of the exact date that the anti dilution deal ends. But believe it to be around about now.
Tesla1
MCAP is currently £393million.
For what we've got that is undervalued as Cascabel is worth way more than that alone
The price the market is putting on the individual share price reflects our current situation re. funding and other issues - and the current price is STILL based on relatively low volume and a lot of automated trades.
Don't confuse uncertainty and hesitancy as "market value" in the absence of true, large buyers making a move.
When the share price was 37p just a few weeks ago - was that market value?
If so, it shows you that "market value" is a meaningless concept going forward - it is merey a snapshot of the sentiment of today.
Some interesting thoughts, thanks everyone.
One comment: we have been very focussed on BHP as being the most likely bidder (me especially, and I still think they are), but what we must remember is that the review process will involve Citi having discussions with a wide range of interested parties - in fact they wouldn't be doing their job properly unless they cover every base.
When you get locked into a process like this and if a decent number of interested parties emerge as buyers, it's sometimes easy to put other options on the back-burner, particularly if you know the other options involve doing something that will probably upset some shareholders...such as another fund raise (by the way, I consider another streaming deal as being a non-starter)
It's also time consuming and tricky to attempt several different things at once; in other words, running a disposal campaign is difficult to sell to potential backers of a fund raise if they think "what's the point of us getting excited about putting money in if ultimately you're going to flog the company?" The same is true in reverse i.e talking to buyers if you're intent on raising new money. The mixed message can be difficult to sell.
So I come back to my view that a smallish fund raise will happen whilst simultaneously Citi go flat out to find a buyer...and bear in mind, their fee will be a lot bigger if they flog the company rather than raising money.
Anyway, at least we've now got something concrete to discuss!
schlemiel, spot on - I believe that is the route from here, and it is the only route that will reward us smaller shareholders without waiting for decades.
I expect no more talk about "going into production" - I've been calling out that nonsense for months.
I have next to zero faith in the BoD but they have 3 simple tasks ahead of them:
Merge quickly and painlessly
Raise a little bit of cash to survive for a few months
Sell Cascabel to the highest bidder
If we can jump through these hoops the poor bloody infantry will at last get some reward and the chance to continue our investing journey with SOLG as it further explores our Ecuador concessions.
This isn't the end, but hopefully the first big sale of our journey with many more to come.
We should have been here 4 years ago, but that's water under the bridge.
GLA
Sean
Uncertainty and hesitancy is the market value.
The figures bandied on here by certain posters are pie in the sky valuations that are nowhere near reality, maybe if the mine was in Canada, Australia etc but it isn’t.
BHP have bided their time because they can, the market has come to them if they want the company.
SOLG’s options since they were 37p have massively reduced, their fundraising options are severely limited now. The sp at 37p was heavily influenced by bid speculation and if you believe these boards still is.
IMV BHP hold all the cards, some posters just don’t want to, or can’t afford to, believe that.
There are posters on here who won’t sell for less than a £1, that’s cloud cuckoo land in todays environment.
First of all Solg need some cash, until that’s resolved the sp isn’t going anywhere north fast.
Addicknt - IMO it's because the strategic review is happening from a position of short term weakness and the concerns over cash won't go away.
We're sort of putting the CGP merger on the credit card right now and in these market conditions that will not be well received.
It's completely different from being well cashed up, pushing out a robust PFS and announcing a strategic review immediately. In that situation the reaction would be completely different.
Those who ridiculed me when we opened at 21p yesterday won't be so chipper if there's any wobble early next week.
The immediate white noise is still irrelevant. We know we need cash in the coming weeks but providing that is secured we move forward with a consolidated Cascabel. That will open up the options you're thinking of but the market isn't looking further than the end or it's nose right now, and it's all being exacerbated by PIs trading it ferociously,adding to the volatility.
As I've said Tesla1 - there is a new narrative. "SOLG is now at market value".
You keep beating that drum mate.
Bozi, I understand your position but would mention one thing: CGP are fully aware of the funding need and I'm pretty sure they wouldn't be doing this if they felt the money couldn't be raised. Either that or they know a corporate deal is already being worked on.
I'm equally sure that if they do the deal and things get bad, they'll be on the receiving end of legal action from their shareholders for gross negligence. Remember, when doing a corporate deal there is an all embracing disclosure process, so they'll have access to whatever information they ask for. This gives me comfort.
Bozi all the negative points you keep hammering away at are valid. That's why we are currently at 17p and not 37p like we were a few short weeks ago.
I'm pretty convinced you sold up recently hoping to get back in lower, but even taking you at face value, it's worth reminding you that all the current problems can be fixed and s has been pointed out CGP and the likes of Irwin would not have been up for a merger had we looked (behind the scenes) like we are going to crash and burn with no funding in a few weeks.
The only way is up from here.
This isn't the "market value" today by any means, we are just sitting in the sin bin for the dire performance of our board.
Also remember, that the AGM is fast approaching and could be as early as end of November. At this AGM, SOLG will IMHO be putting new resolutions to the vote. One of which could be to issue shares without the same presumption rights as before etc etc. In simple terms, the shareholder base changes dramatically once the CGP deal is done. NCM and BHP drop down to just over 10% each. SOLG friendlies (inc CGP) increase to nearly 45%+. That's almost a shoe-in for all resolutions assuming shareholders understand the reasoning behind them.
Suddenly the handcuffs are off and SOLG are no longer backed into a corner or being bullied by their super major shareholder.
SOLG pretty much secured all BoD's future by bagging the bulk of the votes.
Valuestone, Matsui, Boliden... loads sniffing around with interest. Darryl told you months ago... funding is not a problem. We have plenty of options. Looks to me that BHP's attempt to play hard ball may have just cost them a lot more. That will teach them. Losing to Wyloo no doubt still smarting. Lose solg to someone else and BHP shareholders are going to think Bristow is looking a bit old and tired for the future of BHP. Biswas also looking weak after getting a wyloo shoeing on GGP.
Love it.
Absolutely Addicknt - I'm not saying more money won't be raised. In fact, I'm confident they'll do even better than what our minimum expectations might be.
I'm just saying how I think the market is viewing it. For want of a better analogy, I think yesterday's news was the keyhole surgery yet the market is still consumed with where it makes the incision. As such, I think a resolution on the funding now sees a much more positive reaction that would be expected.
It could be the solution that Lunch Money has flagged from DJ Crisp.
Sean, let me tell you for the last time you are completely wrong.
I haven't sold anything. I've been a continuous holder of SolGold shares since 2013.
I just don't subscribe to the whole notion that everything I say about SolGold has to be Uber positive all of the time.
It's no more complicated than that.
Fair enough Bozi, I'll take your word for that and won't mention it again - and I apologise.
But my basic retort to all the negative things you are saying is - yes, you may be right, but we have paid the price. From the PFS release to now, we have gone from 37p to 17p. We've been punished. All the negatives are factored in. The casual buyer is not interested right now. major news allowed all the recent bargain hunters to escape with a 20% profit.
Yes, we are still in a hole. But we are in a much better position after this week to climb out of it. the Japanese interest - big news in itself - was completely drowned out by the merger news.
The days of hoping for a £1.36 or a £1 bid are behind us. LTHs need to get used to that. 50p is no longer lowball. It took us 5 years to get into this mess and we have only ourseves to blame. But there is still a huge upside to where we are. If we were just sitting at 30p I doubt you would be so concerned with the things that suddenly look life threatening at 17p.
I don't see a quick recovery, but I do see a 40p - 50p exit sometime fairly soon. Anything above that is gravy.
Colonel, can I just correct a few things in your 1212 post.
They are pre-emption rights not presumption rights.
Its Mitsui not Matsui.
Henry is CEO of BHP. Bristow is CEO of Barrick.
Sean
I think if all goes well you may well be in the right ball park.
The world is in a bit of a mess but your expectations don’t seem unreasonable.
Lots of i’s to dot and t’s to cross to get there though……….good luck
Don't dispute any of that Sean.
Japanese need copper gold and silver as they expand and cut off supplies from China
Well I certainly dispute it.
Far too much emphasis on the current share price - that can double in a week from these levels no problem. Sort some funding out, get the PFS and PEA out and we’re in the 30s and 40s . Then this talk of 50 to 70 looks silly.
As always, it depends on multiple bids/interest. But who doesn’t believe that is the case ?
No , I believe a quid and over is well within our reach.