Rainbow Rare Earths Phalaborwa project shaping up to be one of the lowest cost producers globally. Watch the video here.
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When considering when or who will bid for Solgold...and at least one party will...one has to consider the mindset of prospective bidders...their rationale and determination. Because nobody is going to start the process with anything other than a determination to win.
And therein lies the rub...
For the company it is relatively easy...
What is the minimum starting bid we will consider?
What is our BATWA (best alternative to walking away)?
For bidders it is not so easy. As I have said before...only a 'knockout' bid will prevent a bidding war here, between at least two parties.
But even determining a knockout bid is not easy.
From the point of view of the bidder it has two aspects:
What is the absolute maximum we are prepared to pay?
What price do we seriously believe Solgold would feel unable to reject?
And this is why I believe Jiangxi have the upper hand.
Because Jiangxi is, to all intents and purposes, owned by the Chinese State.
Which means Solgold is prospectively strategic for at least two reasons:
1 China is seeking to dominate all 'strategic' metals (especially 'green' such as lithium, cobalt, nickel, copper, REMs and eventually tin, which is used in every soldered joint, in every electrical and electronic device)
https://www.mining.com/web/china-tightens-grip-on-copper-key-to-worlds-energy-transition/
2 With the 'Belt and Road' initiative coming under challenge (Italy has just withdrawn and a growing number of countries are resentful of the blackmail China is able to exert as they crumble under a mountain of mainly Chinese debt), China needs to grow its influence in South America.
They have previously had an armlock on Ecuadorian oil.
They have some 'strategic' stakes in Ecuadorian mining (the two Chinese-owned projects are the San Carlos-Panantza and Mirador mines. Both mines are currently owned and managed by Corriente Resources, a subsidiary of the China Railway Construction Corporation-Tongguan (CRCC-Tongguan) conglomerate. The latter is wholly owned by the Chinese State through both subsidiaries).
While there has been some resentment in the past against the Chinese, the Ecuadorian government needs some 'quick wins' in terms of generating revenue and the Chinese are renowned for building construction projects quicker than anyone else; they also would have a readymade need to take 100% of the metal production, especially copper.
China has also been rapidly growing its vast gold resources, as it seeks to trigger the demise of the dollar.
So what is the level of a 'knockout bid' that Solgold would find it hard to turn down?
Nick has always given the clue... "Asset Value not Market Value"
Which, with metals prices recovering and prospectively rising higher, is surely in the range £1/2.
In fact, I believe at £1 other bidders would not want to be drawn into an auction with an unknown upside and, in te absence of anyone else, surely the Board would have to accept.
But on
Would like to believe that but we are at 7p and going down.
30p now will make it for me.
But on what terms?
I think a likely clincher would be if the Board were able to persuade Jiangxi to sell them back most of the 90+ projects, leaving a new exploration vehicle, not short of funds, ready to seek the next Alpala...
So thats the Chinese. And indeed it may be fruitless to consider any other possible bidder. After all, why would the Chinese State invest a mere $40 million or so to acquire just over 6% of a company with a MCap currently c£235m.
It makes no sense...they don't punt in markets...it only makes sense as a strategic foothold in one of the best undeveloped copper/gold prospects on the planet...it also gets them 'inside' with enough information to determine a bid.
But wjat about the rest?
For them Solgold/Cascabel is only strategic for corporate purposes...securing resources for a future where 'green' metals are already scarce. The majors may have allowed their mining resources of, especially copper and gold, to deplete, but in the past they've always been able to rely on hoovering up Juniors who have done all the hard graft to prove up resources, but who don't have the scale or the financing capability to mine them.
There are two countries, however, where such mining is more strategic...Canada and Australia.
While neither government takes an interest in such resources for strategic reasons, seeing them more as a revenue source (hence the Australian govt supporting coal mining...), there is a strategic imperative in keeping the Chinese 'out' of their mining industries.
And beyond restoring their depleting mining resources, their is the 'big beast' factor to take account of...hence BHP's purchase of Oz; and Newmont's purchase of Newcrest...plus of course the ego factor, e.g. Andrew Forrest, Gina Rinehart etc.
But one might expect that the BHPs, Barrick, Newmont, Rio, etc would be more likely to balance a number of factors:
Depleting resources;
Complementary and synergy with existing mines;
ROC and EBITDA;
Country presence;
But especially ROC and EBITDA...
And yet Rio got itself expensively involved in one of the other major global copper prospects...Oyu Tolguei...and has continued to the bitter end, at great expense for prospectively the world's biggest block cave mine in inhospitable territory.
Surely thats an indication of how desperate the majors are, or may become...
So which majors, why and for what reason?
Lets start with BHP and Newcrest.
It seems certian to me that BHP made at least one bid approach to Solgold, culminating in their attempt to secure a deal giving them up to 70% of Cascabel.
Newcrest was first mover and, seeing the possibility of competitive tesnion, Nick Mather successfully played them off against each other, with shares sold at up to 45p.
Their continuing interest in Cascabel was clearly demonstrated when they both reacted violently to the Franco Nevada deal:
Newcrest withdrew Craig Jones from the Board (against his wishes0
And they and BHP pubnlicly excoriated Solgold for 'diluting' their resource.
If that didn't demonstrate serious intent at ultimate owenership of Cascabel, nothing would.
But now both have a strategic decision to make.
Do they write off their investment or do they follow through?
Newmont particularly have a decision to make, with Newcrest to digest and, to a lesser extent BHP have to integrate OZ Minerals.
And BHP suffered a very public bloody nose when Wyloo knocked them out of the park witb what some might say a ridiculous overpayment.
But with the Chinese in town and depleting respurces, that is the new ballgame.
Clearly the Chinese would find it difficult or even impossible to acquire mining assets in either Canada or Australia, for strategic reasons that would very probably involve the governments, but Ecuador appears to be open field and it is not only the brightest new prospect in South America (an extension of the Andean Belt riches and a far more stable government than Argentina, Venezuela or even Chile or Peru), but it is also 'open house' for bids with the Government determined to cash in on its prospective riches.
And at the end of the day, pragmatism rules, when it comes to cash.
Who is Redknight posting these messages for??
He has everyone filtered.
Maybe it’s a kind of coping mechanism like poetry?
He deals with the loss of his amg merc by vomiting mindless nonsense all day every day.
At least others had automation to make that task more efficient!
Too long to read as well.
So BHP, Newmont and indeed any of the other majors established or wanting a strategic foothold in Ecuador, have a decision to make.
Some may already have decided there is no point. Wyloo has Noront to digest, for example.
And the question for any of these majors, with the Chinese already having a foothold through Jiangxi/Valuestone (and who knows, other companies may also be in the dataroom), is what to bid and when? Or also walk away.
And that brings us back to the battle between the Chinese State and the world's big miners. The latter will have seen the rapid development of Chinese interests and acquisitions acrioss the planet, especially in Africa which, to all intents and purposes the Chinese 'own.
The majors dare not let the Chinese become the dominant force in Ecuador, nor in copper/gold markets worldwide.
Why?
Because the obvious outcome would see the Chinese gobbling up assets across the planet at prices the majors are reluctant to pay, resulting in their resources depleting and progressive damage to their bottom line...let alone credibility.
And this whole debate would be much easier if the US saw metals and minerals, especially 'green' minerals as strategic.
They already see REMs as strategic, but China already dominates and is moving that way with 'green' metals. Look at lithium. Europe is going to have to exempt battery metals from their import restrictions because itherwise their car industries will die.
So what do the majors and especially BHP and Newmont do.
For Newmont the decision may be easier. They didn't buy the Solgold stake. (Newmont is American. Barrick is Canadian. BHP is Australian)
If BHP decide not to pursue their interest, their stake is biddable unless they want to be 'spoilers'. But they can afford to ask a very high price of the Chinese (although lower from another bidder). So what sort of price assuages their regret? £1 would do it, but 50p might.
Newmont would likely accept a lower price unless they see Ecuador as strategic. Acquiring Solgold would achieve that and at a fraction of the $16.8 billion they paid for Newcrest.
But at the end of the day it all comes down to who will make the first bid and at what level?
And that, in my opinion is a major reason why the SP is where it is.
My final post examines that last point.
In my opinion the share price is where ot is mainly because of three fundamental factors:
1 There is poor liquidity. In all my stock market experience, even without Autobot expereince, the price always drifts down, partly because of lack of interest but mainly because the institutions and similar buyers simply cannot buy enough sharwes to make it worthwhile.
When one private investor can push the price up 10% by buying 829,000 shares, you know there is no liquidity.
2 The Autobots. I am now convinced of the view that at least one interested party is using AT trades to keep the price down. The trades are largely for menial numbers of shares, but when you have a succession of sell orders at slowluy descending prices you know there is something behind it.
And its too easy for them because they either close later in the day or the UT does it for them.
3 Nobody want to be the first bidder.
BHP is an obvious prospective bidder, I think Newmont is not...at the moment.
BHP got badly burned in Noront and had to limp away. Bob Sangha ran the successful Wyloo campaign. And by the way, Noront was trading at 15c in 2006; it spiked to $4 in 2008 before falling back to 70c; then spiked to $2 before falling back to 20c in 2013 and traded in the doldrums down to as low as 12c before it all kicked off in 2021, ending at $1.10.
But why would BHP or anyone want to be first bidder unless they pitch it far higher than the current SP and prepare for a battle? Almost certainly with the Chinese.
And the same goes for increasing a stake or buyingan initial declarable stake.
The purchase itself would drive the price significantly higher (the obverse of Berry Street Capital's sales) and any Holdings announcement would undoubtedly signal intent, leading also to a sharp price and pushing any starting bid even higher.
In conclusion, FOMO drives modern marlets, but people get suked in on a story by greed or ambition. Solgold has the potential to change many of our lives.
It has been a long haul and patience understandably has worn thin. The natural target for people's anger is the CEO and Board of Directors for failing to fulfil Sangha's inflated expectations.
So I believe, in the absence of a bid, the PFS3 will come early in 2024 and it will then be 'make your mind up time' for bidders, if they haven't bid before...
It's almost impressive that amidst the mindless ramblings as to why there is no bid yet, redknight fails to mention what is arguably the most compelling reason - the fact that we still haven't managed to renegotiate the IPA with the Ecuadorian government. As per the original terms of this agreement, we are around $200m short of what we agreed to spend on Cascabel exploration by the end of 2023.
Let's say a bidder is weighing up an offer of $1.5bn for Cascabel, which works out roughly 40p a share. The successful bidder would be buying the obligations in the original IPA, i.e. with the outstanding $200m liability. No major mining CEO worth their salt is going to want to have an extra 13% whacked on top of the price they're willing to pay for an asset. And that is to say nothing of the other conditions in the document which may also be subject to renegotiation, particularly as we are the ones trying to wriggle out of a commitment worth two thirds of our MCAP.
It hasn't been publicly addressed but this is invariably part of the mess that Caldwell is having to unwind to prepare the business for a sale.
It will be very interesting to see whether the Ecuadorian government goes on the offensive as the year lapses and we haven't held our side of the bargain. If they do we are in big trouble. Personally, I think that the pro-mining noise means we should be fine, and I'm hoping to see the agreement land this side of the AGM (as per SOLG's self-imposed EOY deadline).
Correction: we have spent $238m of the $400m committed. So a shortfall of $162m. Still a decent wedge.
Wouldn't that be a case of offering 40p with all debts cleared so 168m would be paid to government or committed to spend whatever
And the balance paid to solg
Doesn't seem to tricky a legal problem to me ?
Agree with previous comments, there's a lot going on behind the scenes. that we are unaware off,
Lets hope the BOD have the experience to unravel. the enigma and get a decent price for the Assets with so much at stake they are all keeping their cards close to their chests.
if you think a deal will eventually bear fruit, a superb buying opportunity under 8p imo, need to have patience of a saint though.as it could take another 1-3 years
E.T. - not a complex problem to solve, but definitely one that any bidder would want resolved before making a move. And, arguably, one that Mather and the larger holders would want resolved so that more of the proceeds went to them and not the govt.
Red, that's a lot of words, you are testing our resilience. I am sure that many of your arguments are reasonable but again there are many assumptions.
To be honest I really don't think that the majors (being the majors) are afraid of being the first bid if they intend to buy.
What I believe to be more realistic and personally I think it's quite obvious, given the specific comments made by NM and SC at different times, is that SOLG has made it clear to the majors that they do not want to entertain low bids and are rather waiting until the market/company/projects are in the right place to attract a congruous bid. Now my own assumption is that SOLG's management will push is for as long as they can to try and maximize the result hence the current pain with the share price in a negative market for juniors.
IF, and it's a big IF, SOLG were to let the possible suitors know that they will look at lower bids, I would postulate that the buyers would start to finally show their face.
If you think about it, if SOLG go around (not sure they do but again that's what I gathered from conversations with NM and SC at different times) telling everyone to come back when they are happy to talk £1+, who would ever bother to respond with a bid?
TI - that might well be the case, but we are reaching a crunch point with the Ecuadorian government who will want to see progress and a path/timeline to revenue for the country. It's at this point that discussions around price become serious and our major shareholders lower their expectations.
SM, and that is very much what I hope as well. The most likely way that SOLG can be forced to sell at a more achievable price is through the effect of external forces.
When you look at the quality of the asset, Italian...
Then you look at BHP's experience at Noront, I'm quite sure nobody will want to start at a low bid which would inevitably attract several bidders.
So if you're a major I believe you have to start with a credible bid, which I suggest would be no less than 50p.
It has to be a bid that will limit the number of counterbids.
Wyloo thought they had done that by starting at 55c when the SP had been only 12c months earlier. In that case, the Board agreed, probably mainly because Wyloo had over 40% of the shares.
But BHP came in at 75c without any previous bids or apparent share stake at all...and they still didn't get it, because Sangha clearly told Wyloo a bid at 110c would knock BHP out.
I think the people on here who think that SOLG could go for 20 or 30p are airing their worst fears. I suspect the Board will already have knocked back at least one attempt to buy the ex CGP stake because the price was too low.
On Monday 10 October 2016, Solgold announced they had turned down an offer from BHP that would ultimately have led to BHP controlling 70% of Cascabel. The following week they sold 10% of the company to Newcrest.
The shares rose to 18p having been only 3p 4 months previously.
Bob Sangha negoptiated that deal....
In June 2017, NCM paid 40p
In September 2018 BHP paid Guyana Goldfields (Scott...) 27p for a 6% stake and NCM came back 3 months later at 40p for only 1.5% of the shares.
Which shows what can happen when you get two majors seriously interested in Solgold...
Remember that Newcrest in July 2020, when the SP was 23p decided to "exsplore options" for their stake, deciding to hold on, even though the SP had almost doublerd to 42p only three months later.
And they held on as it fell back to 20p...when it bounced to 36p in June 2021... and yoyoed around to hit 40p again in April 2022...
By the time Newmont bid for them in February 2023 the SP had fallen back to 13p...
And neither BHP nor NCM have ever sold any shares, so Solgold must at least still be in BHP's strategic plans.
Of course the Board of Solgold could have no influence on the price either of them accepted now to sell any or all of their shares, but the price paid by the buyer would signal an undoubted statement of intent.
Of course the SOLG Board is concerned at the current SP...they are tajking steps to try and support it, starting with the Directors' Buys.
And I believe we will see more RNSs before the AGM. We haven't seen anything about gold prospects Rio Amarillo, nor Helipuerto or the former CGP JV in Bramaderos with Sunstone Metals.
I believe it is imperative that they complete the "turnkey" PFS3 early in 2024.
That alone will push up the SP and may be the final piece of information for prospective bidders.
And if gold and copper prices resume their march North in the meantime, that cannot harm.
But I don't rule out an anticipatory bid before then...
Whether you're worried, tired, impatient, frustrated, angry, hopeful, optimistic, positive or whatever...
THE CURRENT SP MASSIVELY UNDERVALUES SOLGOLD!!!!!!
Who does red ramp think he’s actually addressing with his essays, he has everyone filtered.
If Scott survives the AGM what will he deliver first in the new year, a capital raise or his new highly touted PFS? I'll say one thing with a high degree of confidence, there is zero chance of him producing a PFS in Q1 CY 2024.
Lord Braggart (RK) has been flooding the BB with his scenarios. It has occurred to me that the one scenario which he hasn't covered is the one where he examine whether at the age of 73+ he will still be here to witness solg being sold?
At any one time there aren't 62 people on this BB. Hence, he is clearly posting to himself. I think his mental faculties must be suspect for him, as a senior person who should be in the park feeding the birds, decides to spend his twilight years here spewing meaningless nonsense.
Eloro, sorry to disagree with you. This is a board for ALL to voice their views. If you don't like what the man (with some considerable experience, I may add!) has to say, then FILTER HIM! Many posts I do not like or enjoy, but don't filter. My belief is all need to vent their views! No harm to anybody, just some correction by others occasionally, LOL!
Trouble is Eish it’s endless! Red always talking his book.
Not much to discuss until more events/news
Eish, if I filter 62 posters, I would be posting to myself. In that case it would be pointless posting here.
To make matters worse, he posts exactly the same posts on the other BB. I don't feel the need to filter Lord Braggart or anyone else. His posts have started to make me feel sorry for him because flooding the BBs appear to be his way of coping with boredom in his senior years.