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.
An IPO would produce 'non-dilutive funding' as well as monetisation...
Looking at the corporate structure of SOLG, which includes SIX subsidiaries, any of which could be independently IPOed to 'monetise value' without incurring a taxable event...
The obvious one would be Green Rock Resources (Porvenir)
But after the Blanca Nieves results Carnegie Ridge is a real possibility as both Chical and Rio Amarillo are copper gold prospects.
Cascabel is 100% owned in ENSA which is 100% owned
Porvenir, Chillane, Cisne Loja, Timbara are part of 100% subsidiary Green Rock Resources
Blanca Nieves, Chical, Rio Amarillo are part of 100% subsidiary Carnegie Ridge
Salinas is part of 100% subsidiary Valle Rico
Cisne Victoria, Coangos, Helipuerto are part of 100% subsidiary Cruz del Sol
Bella Maria, Cana Brava, Espejo, Playa Rica, Rio Magadalena and Vetas Grandes are part of 100% subsidiary Cornerstone
Cornerstone also owns 12.5% of Bramaderos together with Sunstone Metals (87.5%). This has a 10 million ounces of gold target...
hxxps://smallcaps.com.au/sunstone-metals-sees-potential-10moz-bramaderos-project-ecuador/
I'm not sure the six subsidiaries would be suitable, but that's a moot point. How would they trade without any cash? And to get that cash they'd need to raise equity (I cant see how any of the funding structures would be available to them).
As for providing a monetization opportunity, the rush for the exit would destroy the share price.
In my opinion, the only part of the business which could be IPO'd is ENSA.
Redknight1 - actually Solgold has far more than the SIX subsidiaries you mention. 25+.
Including a fair few inherited from Cornerstone. (See Note 9 in Annual Report for full details).
I'm sure the Strategic Review will look to rationalise these.
When you do an IPO you raise cash...thats the whole point...
RK, obviously, and that's why it would be dilutive.
Redknight - what has changed that you are now supportive of IPO'ing the subsidiaries?
When we had a similar conversation last year about a spin out of the regionals you were vehemently against this method given the tax consequences it may have for PIs.
I agree with Add. Even if you IPOd the original SolGold 6 it would be quite significant dilutive.
We'd be best packaging Cascabel and Blanca up given this week's news about porphry prospectivity and then spin the rest out into one regional business with Bramaderos et al, IMO.
Oh dear addickt...
Its asn IPO...say Green Rock Resources...you're issuing shares in Green Rock, not Solgold, so its not dilutive...
But it also puts a value on Green Rock, which increases the recognised value of Solgold's total assets
Ah great news. That’s means I can sell my kitchen and the house will still retain its original value
Why didn’t I think of this sooner ?
IPO certainly viable but can be risky as you are opening the key asset up to creeping ownership.
Rio Tinto derisked Mongolian assets a few years back when they did an IPO with Oyu Tolgoi with a decent wedge of it going into the IPO traded business called Turquoise Hill. They later bought it back once project was over the early production issues.
SOLG have worked hard to get strategic partners in and to keep BHP and NNM at bay etc with reducing their interests down from combined 27% to just over 20%.
No point at all spinning ENSA out unless you get the full valuation via the IPO and that rarely happens. It's costly too.
Spinning out the regionals with 50 odd licence blocks makes perfect sense and should have been done 2 years ago. A few discoveries and the share price on the exploration spin off would probably be higher than the share price on SOLG / ENSA lol!
The market is so thick these days it woudl happily price up a potential Tier1 mine rather than price correctly an 'actual' proved up Tier1 mine.
That's the markets for you. Speculative.
Is there a special school people go to to learn to be this dozy?
If you spin something out with little or nil value, how much money do you expect you’ll raise?
RK, your appear not to have grasped this. Currently, we own 100% of the subsidiaries. If we spin them off they will need cash and that cash will have to be in the form of equity which, in turn, will be provided by new investors. We will then end up owning a diluted percentage of newco.
And '84's point is also completely valid.
Have you ever done an IPO addickt...
We own 100% of Green Rock.
Yes it would need some seedcorn to establish itself and pay the NOMAD and flotation costs but, typically you issue 15/20% of Green Rock shares to the market, lets say for £15 million which then starts tro fund the development progtamme for the projects it owns and from which the parent can be refunded all the inital costs.
It doesn't in any way dilute us as Solgold shareholders, but it puts a value on resources that the market is valuing at a negative amount at present because it is nowhere near even valuing Cascabel at the current share price.
So the three projects can be funded to develop with no cost to us, so that we can focus our spending on everything else.
Sounds like red has been reading Ponzi Schemes for Dummies
RK, yes, I have. Your thread title states 'non-dilutive funding...' I'm simply pointing out to you that it would lead to dilution, which you appear to have accepted.
You talk about issuing 15/20 % to the market, how is that not dilution? And who on earth is going to be interested in a company with zero liquidity and how does it benefit us shareholders.
In my opinion, you're barking up the wrong tree.
Well said add. I’d have left the final four words off
Let’s take this thing worth nothing and move it over here and get £15m for it 🤪🤪🤪🤪
It feels as though we are in control of our own destiny now and it's been a long time coming. With Noboa on side we should be able to determine the best partner for Ecuador and shareholders. Selling more than ENSA seems unlikely unless there is a keen bid. Bob get swinging 🙂
Addickt...its non dilutive for SOLG because its a 100% subsidiary...
Green Rock Resources might have zero liquidity until IPO funds come in but it weould be floated on the back of Porvenir, Chillanes, Cisne Loja and Timbara...
Oh and BTW I've IPOed a plc from start to finish and been GFD afterwards...I also prepared a prospective £860m IPO...
Is a better description 'diluting but value-creating'?
redknight makes his points with such confidence, and disdain for other views, that I genuinely question my understanding of what he is trying to say.
He’s trying to say that tenements we’ve spent next to nothing on will suddenly be worth £15m if they’re moved into a company and IPO’d
Cascabel is worth money because it’s been explored
The untapped assets are worth almost nothing because they haven’t. You can’t “IPO” something that’s worthless and generate worth.
It’s not the post office or aston Martin you’re offering to the public on a listing
This guy is on a level of stupidity of his own. And I say that having locked horns with Quady
RK, let's put the initial dilution argument one side. If we followed your idea, and let's be generous and say we can persuade the market that newco has a value of 50m ( currently it ascibes no value). So newco has a quote and we now only own 80%, but it has no cash. It then raises 50m for exploration. I guess you can see how we end up owning a minority holding?
So the question is, how does this derive any benefit to existing shareholders and how does it accord with the stated intention of providing us with a cash return?
How about you both being correct, potentially. Let me try and explain.
Sentiment drives SP, yes ? Value is simply number of shares x share price. OK, investing 101.
If the assets are split in, say, two ways, and this split is seen by the market as being positive ( i.e on one side, the existing discoveries can be sold as freestanding, whilst the other prospects can be kept or sold separately to another party which is interested in them, then the accrued value can be unlocked to create an overall gain in value. )
This has precedent, as anyone who watched Wall St. knows, when, during the 80s, the US stock market was crazily depressed and valuing companies at less than their asset value, so takeover and asset stripping made money for those who bought the businesses at stock market prices, split them up and sold them off in their component parts.
Gordon Gekko was not a figment of Hollywood's imagination.
A similar thing, during a commodities sector depression, could be possible.
So both views can be right. Who knows, until it has been tried ?
Blue Horseshoe loves SolGold ? (tic)
1984 - generally agree.
But capitalised expenses for the regionals are running at c$108m. A large amount of that will have been spent at Porvenir.
So potentially an IPO of Green Rock would more accurately reflect the value of the Porvenir exploration and MRE.
I think the points are that an IPO would require some capital, and also result in some dilution. redknight was arguing neither would be the case.
NMM - yes I get the idea in theory but nobody’s interested in solgold and one of the major reasons is nobody knows about it. How would spinning out even one if the partially explored properties help?
If it did, why not spin out cascabel?
The idea you can raise masses of money without dilution in a non revenue raising early exploration asset is ridiculous. When you IPO something like the post office it has a clear value. When you IPO something that’s 10 years away from revenue even if tens or hundreds of millions in expiration proves it’s worth something you’ll get nothing
It’s akin to setting up a new solgold with zero funds
Stop poking holes in his fantasy scenarios…. It must be so disheartening
Kat, what you refer to in the 80s happens all the time in the present day. Many businesses are valued less than the sum of their parts. That's where the likes of Nelson Peltz and the private equity guys get involved and buy and breakup. Sometimes fairly, sometimes through grim financial engineering.
I think you could argue that SOLG could potentially spin off its regional portfolio (which is of course worth something) to make the investment case at Cascabel clearer (though isnt this what ENSA is for?). But it certainly wouldn't be a means by which we could return cash to shareholders, and it would certainly be dilutive as per addicknt's post below.