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I was pondering over the difference between an equity raise and a royalty deal as with Franco Nevada. In Alpala's PFS a 3% government royalty was assumed. And I was thinking that adding to the total of currently 4% royalty (3% government and 1% FN) would make Alpala less attractive for potential buyers of the project.
But then I was reading on Solgold's own website the government royalty might be between 5-8% !!! It states: "In addition to the taxes outlined above, the holder of the licence must pay to the State a royalty of no less than 5% of the value of all sales and no more than 8% for the sale of gold, silver and copper (large-scale mining)."
source: https://www.solgold.com.au/ecuador/
Does anyone have more clarity regarding this or is the assumption of 3% government royalty not valid anymore?
snowman, that's my understanding as well. It explains why BHP/NCM were so opposed to the Franco deal and objected to a repeat. A business can't keep throwing away percentages of revenue.
But then Addicknt, if they are so opposed to that form of financing, then put in a decent offer and stop p----ing about?
It is September next week & we appear to have enough cash until the end of the year. Drilling has almost dried up to conserve cash.
Something has got to give in the next 2 months. We will need to raise some cash from whatever source we can, and if BHP/NM are determined to frustrate some of those efforts, it will make it even more difficult for SOLG. Not sure how this will play out but BHP need to be careful that the Chinese or another third party don’t come in and spoil their best laid plans.
Eish, couldn't agree more.
As I said a week ago or so, I don't mind BHP or NCM being against royalty deals. What I am against, is that they make that an issue but do not back it up with an alternative solution nor do they state their forward interest in Alpala or SOLG! Of course most can join the dots and read between the lines but that's besides the point. If BHP and NCM objects to royalty deals and prefers equity dilution, then they will surely also object to Franco doing $1bln finance and so on. So how exactly do BHP and NCM think SOLG should finance Alpala because it's very obvious that it cannot be done with equity raises alone.
This is why it's just a childish game and BHP and NCM (or one of them) has to stop trying to control SOLG's finance options and the direction of the business. If they continue to do so then it could be seen as a form of coercion and unduly using their position to influence a lower price Take over.
Twigger called them to account and yet here we are still apparently being bossed around by large shareholders.
So come on Henry... or Tiswas...(sic)... about time you enlightened the market on how you see ENSA progressing and being financed. If you can't put forward your ideas, then shut up and leave SOLG to get on with the business.
Someone at SOLG or Citigroup needs to show some mettle. Just tell these two to F off! Get a deal signed with boliden and off go.
The royalty deal of 1% does have an option for 0.5% to be bought back so it's nothing in grand scheme of things for BHP or NCM. And it's way way better than what could be 20% share dilution at 20p levels.
Another royalty deal is definitely not a good idea… however, it’s not BHPs asset, and Darryl needs to tell them so..
Re raising funds to restart some exploration, If our board are incapable of closing a JV with anyone, (or was this just an empty bluff?) and BHP apparently don’t want to fund us, they should offer a chunk to another supermajor.. at a significant premium…. given we have been told many times we are vulnerable, that they are circling, sniffing around, this should not be difficult…
Our board need to stop Pandering to BHP and NCM..
Cash is needed at some point, but I also think we can't keep on giving away slices of the pie.
However, my question was if the government royalty will be 5% or 3% as used in the PFS. 2% makes quite difference the if it comes off the revenue.
"Cash is needed at some point, but I also think we can't keep on giving away slices of the pie." END
Snowman, seriously... that's got to be most ridiculous thing you can say? The only way a company like SOLG can finance ENSA is through 'giving a slice of the pie'. Whether that's in form of equity or royalty or ENSA ownership ... that's up for debate. But one thing is sure, money doesn't grow on trees and you know as well as I do that SOLG's apparently plan A is to sell a chunk of the pie in exchange for cash to bring it to development and production. There is no other way. They won't get debt financing that is unsecured. No way! So it's either combo of royalty deals, CB's and some traditional secured debt or bank loans all that have high interest rates and all (as SXX found out) end up resulting in major liabilities which is dangerous ground to be treading especially when doing block cave developments.
This is my point. This is why this farce has to come to an end. The elephant in room is Alpala and so far neither SOLG, BHP or NCM seem to have made a clear case on how it should be funded. All we know is that some shareholders know how it should NOT be funded lol!
On a side note, ENSA finance / funding is always ring fenced and cannot be used for rest of regionals. Interesting one that one mmm. Instead, SOLG are seen as the 'tap' through equity to fund that part of the folio. So here's a scenario... what if you have someone like Chinese / Valuestone that want only the South folio and then BHP and NCM that only want the North folio. And some in-between that believe SOLG is 'all the folio' when it comes to funding the mother ship.
This is why CGP did not want to offload their 6.5% of ENSA to SOLG in exchange for xx SOLG shares. CGP knew that the equity/ shares would be targeted but the ENSA stake would retain and grow in value.
It's complicated, but I think we have some interested parties in the south that differ to those who have eyes on the north.
Fortissimo, my wording has been poor. I admit. I do agree with addicknt and Ortherncopper that another royalty deal is not favourable at this moment. At least not to get some working capital. But I have limited knowledge of corporate finance compared to yourself and others on this board.
You make valid points about dividing the South and the North. I would like to see regional exploration to restart to hopefully get some additional excitement in this company.
But in the end my original question was about the required government royalty for Alpala. But somehow we started discussing other things. Which is perfectly fine of course.
snowman, I think most knew what you were suggesting but the reality is, unless you are a supermajor miner, it's inevitable that you end up giving most of the cake aware to the financiers in some form or another. Royalties are not liked by the majors as it's real non risk creme of the creme stuff.
SOLG's exploration folio goes deep and requires deep pockets. They have over 60 licence blocks left all require at least $7.5m spent on them or they get handed back for zero.
SOLG don't have $430m to spend on regionals. We have $25m to spend on getting PFS2 and Porvenir PEA sorted. So dreams of doing more exploration requires either JV deals or farm outs etc or an equity raise using SOLG shares.
You are right and I am not suggesting we continue with all of the license blocks, but basically having no exploration at the moment is not what I like to see. Many discussions and this board have already been held how we should move forward with the license blocks and hopefully we get some news regarding this in the near future.