Listen to our latest Investing Matters Podcast episode 'Uncovering opportunities with investment trusts' with The AIC's Richard Stone here.
London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Paywall: Cagey Newcrest Baulks at Havieron Gold Price Tag
https://www.afr.com/companies/mining/cagey-newcrest-baulks-at-havieron-gold-price-tag-20220819-p5bb5b
Extract Australia’s biggest gold miner will snap a three-year streak of declining gold production and has surprised expectations by declining an option to buy more of Western Australia’s Havieron gold project.
Newcrest Mining vowed to raise gold production by at least 8 per cent to between 2.1 million and 2.4 million ounces of gold in the year ahead after announcing a $US872 million full-year profit.
The profit was better than the $US845 million analyst consensus published by Bloomberg but 25 per cent lower than last year on the back of lower gold production.
Newcrest has been spending heavily on growth options over the past four years to offset the fact its flagship Cadia mine in NSW has passed its peak in terms of gold production volumes.
The increased guidance for the year ahead is largely because of the recent $US2.8 billion acquisition of Canada’s Brucejack mine.
Although Brucejack has given Newcrest an immediate injection of extra gold production, the Havieron gold project in WA looms as a crucial medium-term growth project because without it Newcrest’s nearby Telfer mine would likely need to shut.
Havieron was discovered by London-listed Greatland Gold and Newcrest has acquired a 70 per cent stake in Havieron over recent years by spending $US65 million and completing a detailed feasibility study on the project.
The agreement between Greatland and Newcrest gave the latter the right to buy an extra 5 per cent of the Havieron project last month at a price to be determined by an independent valuer.
The valuer put a $US60 million price tag on that extra 5 per cent stake, giving Havieron a notional value of $US1.2 billion.
Newcrest is rapidly developing growth options to avoid a decline in its gold output by the middle of this decade.
Despite Newcrest’s strong balance sheet – it has a gearing ratio below 11 per cent and an investment grade credit rating – the company said on Friday it would not buy the 5 per cent stake at the price determined by the independent valuer.
“We’re happy with our 70 per cent stake,” said Newcrest chief executive Sandeep Biswas on Friday.
Mr Biswas said the price published by the valuer did not meet Newcrest’s investment hurdles.
“We didn’t think it would deliver the sort of returns and the sort of thinking our shareholders would expect from an owners’ mindset,” he said.
“We have got a lot of projects to allocate capital to and we have got our shareholders to think about too.”
While Newcrest said the decision was based on price, it may also be an important tactical move designed to avoid a price discovery event for Greatland Gold, which many observers believe is a logical takeover target for Newcrest.
Had Newcrest agreed to pay $US60 million for the extra 5 per cent stake in Havieron, it would have put an implied $US300 million value on Greatland’s 25 per cent stake in Havieron.
Greatland’s market capitalisation was as low as $US466 million in early July before the independent valuer handed down its verdict; aside from Havieron, Greatland has several other copper and gold targets in the province around the Telfer mine.
Newcrest has acquired stakes in some of Greatland’s other projects around Telfer and Havieron, suggesting Australia’s biggest gold miner sees value in Greatland above and beyond its stake in Havieron.
Greatland’s market capitalisation rose after the independent valuer’s verdict was published and was $US549 million at the close of Thursday’s trading session in London.
Newcrest’s decision not to take up the option to buy the extra 5 per cent effectively undermines the valuation boost Greatland received after the independent valuer put the implied $US1.2 billion price tag on the Havieron project.
Mr Biswas said on Friday that Havieron was not the only option to extend Telfer’s life; Newcrest was also studying options to extend the life of the existing open pit at Telfer.
Newcrest is the second-biggest shareholder in London listed SolGold, which is developing a prospective copper and gold project in Ecuador.
SolGold aborted an attempt to raise funds over the past month leading to the exit of chief financial officer Ayten Saridas after just 45 days in the job.
Newcrest and SolGold’s biggest shareholder, BHP, have traditionally wanted the pre-revenue company to raise cash through share issuance, but the previous management of SolGold defied their requests and instead opted for high-cost debt.
Mr Biswas reiterated on Friday that he was disappointed by that decision and expected it would not happen again.
“At that time there was also a public announcement by the company that that was a one-off and that future raisings would be more along the lines of allowing existing shareholders to be part of the fundraising activity in relation to an equity raise,” he said.
But Mr Biswas said SolGold had again sought to raise funds through methods other than share issuance over the past month.
’They chose not to do that, they went back to what happened last year and we...did not support that proposal,” he said.
Mr Biswas said he was also keen for the Papua New Guinea government to help Newcrest and Harmony Gold push ahead with the long-stalled Wafi-Golpu project.
Newcrest shareholders will receive a US20¢ final dividend, taking total dividends for the year to US27.5¢.
Barrenjoey analyst Dan Morgan predicted that Newcrest shares could rise during Friday’s trading session based on the better-than-expected profit, the solid production guidance for the year ahead and clarification from Newcrest that the Cadia mine had resumed after a recent disruption.
“Newcrest share price has underperformed peers on Cadia outage risk and a lack of FY23 [financial year 2023] guidance. We think this result could spark a relief rally,” he said in a note published shortly before Friday’s trading session.
Newcrest said on Friday that Mr Biswas’ total remuneration for the past year was $US6.22 million including bonuses, with $US1.74 million of that being fixed remuneration.
Newcrest said Mr Biswas’ fixed remuneration would rise by 2.9 per cent after October 1 as a result of a “benchmarking” process.
---End of article---
So yes its exactly what i said earlier, they wanted to push through another stream deal but it got rejected...
BHP/NCM either have to make an offer or sell... I know what is coming next...
Our board also need to clearly explain…. It is simply unacceptable for us shareholders to be getting a better understanding of what happened, from third parties ad journalists… Appealing shareholder communication again by our board
BBG I think they may be referring to the cash box as that’s what we did last year. ….. streaming (Franco) was 2020
Hooray - confirmed via the horse mouth
"But Mr Biswas said SolGold had again sought to raise funds through methods other than share issuance over the past month.
’They chose not to do that, they went back to what happened last year and we...did not support that proposal,” he said.
Well sorry NCM... if the majority of shareholders prefer the boliden deal, then you'll have to stick it up your jumper won't you!!!
Absolute joke that we are being bossed around by these two majors. They only hold 27% between! Anyone would think they hold 51%!
dbw - it's in black and white
"But Mr Biswas said SolGold had again sought to raise funds through methods other than share issuance over the past month.
Cash box is share issuance so not that and NCM and BHP got invited into that.
Orthern, I completely agree...
If we assume that Ingo and Ayten are bound by NDAs, then the media is getting this information from somewhere else and, given that AFR is Australia based, you would have to further assume it is someone in Oz, part of the company or with a communication line to someone in the company.
Because despite Darryl saying "we tested the market" and from all the things I've pieced to gather on here and on other parts of social media and boards, the following seems to be most likely:
Barrenjoey approached Solgold with a cashbox deal involving one or more new investors.
BHP and Newcrest got wind and found a way to knock that on the head. It could have been something as simple as threatening to sell some shares in the market...it wouldn't take many to push the price through 20p support...
So the Board, in defiance of bHP and NCM proposed a royalty deal, possibly with Boliden or even Jiangxi Copper...or a further tranche from FN...
Again BHP/NCM made their feelings clear and as Biswas rightly poits out the previous deal was supposed to be a 'one off'.
My guess is that IH and AS would then have proposed a rights issue to appease BHP and NCM but the 'faction' on the Board disagreed leaving an impasse and with IH and AS having nowhere to go except out...
If all that is true, and it is just hunch, it leaves SOLG either needing to do a discounted rights issue, struggle on or call BHP/NCM's bluff...
What a mess...it is simply not very clever to have one of their major shareholders calling them out in public yet again!
lunch - it's pretty clear to me and has been for a while now.
NCM and BHP want to force SOLG to do equity raise (using shares) cash box, open offer, rights issue... they don't care... hut they don't want the assets tapped, royalty deals done or anything that does not involved them filling their pockets with cheap SOLG shares.
Now... SOLG have 'tested' the market unlike last time around (so we are led to believe) so NCM and BHP did not support it. Well that's due diligence and governance done and ticked off. Now, SOLG should just get on and sort the Boliden deal and say that after much consultation and discussion with all shareholders we decided to go down the royalty route. We know some shareholders don't like this but we have to do the best for the majority of shareholders and not a select few. If the two largest shareholders want to assert undue influence then they should consider who runs the company and their minority holdings and decide whether they wish to make a full and fair offer for the business or move on.
It's really that simple as there's no way SOLG can please everyone. They have to go with the majority. So do it SOLG and stop being dictated to by these bullies.
My guess is that:
- As to why Solgold have not provided any formal announcement updates, it is probably because there is nothing to report. EG Confidential negotiations are still pending with no firm outcome.
- Funding is not an issue as NCM (and presumably BHP) is still willing to invest, but via a share issuance .
- Funding via non-share issuance is still possible (eg Franco), but Solgold decided to pay ball with the majors, for now... perhaps this a was poker play to push for a formal bid?
- As a show of good faith to the majors, Solgold have made the recent HR changes. This will allow key parties to work out terms of agreement
- The majors will be hesitant to pull the trigger on a bid on its own as it will kick off a bidding war. So I'm leaning towards the joint bid rumours.
- Due to depressed metal prices, the major may want to put in a bid soon.
- Due to reports of cash in the bank, Solgold would probably also push for Oct/Nov before pulling the trigger on plan B or C funding options. Solgold would have communicated their fair and reasonable timing expectations to the majors. Eg If Solgold has no other choice (bids) then they will have to seek non-share issuances funding options.
- Don't think any major shareholders have sold with the recent price movements due to spooked retail investors and low liquidity. I think once a bid comes in, it could move the share price more than the typical 30% premium for acquisitions. Looking at historical charts with highs of 46 pence (in 2017), if I add 30% to that, I'll place a personal target price close to 60 pence.
This is just layman's opinion only.
Thoughts/feedback?
That makes sense Fort but will it then trigger a bid...?
stocky21, very well put. A professional appraisal may I say!
Excellent posts Fortissimo & Stocky, thank you.
It’s clear no major shareholders have sold as our volume is simply pitiful.
Our board need to grow a spine and do what is best for all, it pander to BHP and NC.
I’m no fan of Mather…. But come on Nick… force something to happen.
Hi stocky. Well written.
I have said all along that a final price could be £1/2, mainly to satisfy NM and based on things he's implied in the past.
BHP got a bloody nose with Noront and has been publicly called out by the media for not buying OZ as low as $5 in the recent past.
Their M&A team and CEO need a public win...and soon...to placate what must by now be a frustrated Board of Directors..
Biswas is obviously fed up and he stated in 2021 that NCM would now hold their SOLG shares as a strategic investment. He almost certainly doesn't want to put any more cash in unless there is an early resolution, so...
NCM might accept 75p from BHP for their stake; CGP and DGR need a deal; Blackrock have stuck steadfastly to 5%; Norge and Berry Street are in it for a quick buck, so 75p might produce a done deal...
The question then is whether the Board would accept this. It would be hard to justify not accepting a bid almost 250% above the current share price and especially considering they seem to be out of funding options righty now without it impacting the SP...producing an even lower starting point for a bid...
Like you stocky I'm open to thoughts...
Fort - using the words of Ryan Giggs, that post ' makes me as hard as a totem pole.'
Meanwhile the SP continues its drift to 20p or less....
If it drops below 20p thats the lowest its been since COVID in April 2020...
The sp is drifting but the volume is pony. It's pi's getting squeezed and some leverage players no doubt. Less than £400k traded today. I could have flipped some stock today and accounted for the entire volume. Important to keep it on context.
The AFR article last week or week before said that SOLG had tried to raise cash via equity and BHP/NCM said no.
Agree with the sentiments above, this is just p*ss poor communication from SOLG.
Try and buy 500k stock in two blocks right now and see what price you are given. You'll be lucky to average near 25p. But nibble away with smaller 50k chunks over a week or so and you might get that 21p price level on 1m stock.
Dave,
Looking at the mining discovery lifecycle below (link) , one could say we're in the orphan stage.
I would like to hope that we continuing this journey to the next turning point reaching full potential.
https://www.visualcapitalist.com/visualizing-the-life-cycle-of-a-mineral-discovery/
Not quite right Fort...just bought 100k for the Mrs at 21.1132p...
Funds in reserve in case of a rights issue...