The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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Not a very inspirational read. There's a a fair few weak and moderate words used. It also says they will sit back and take some time to evaluate lol that to me says we arnt getting the new model before the AGM.
Let's hope it's just all delay tactics because Steve is right and we can't declare 2mt as we will lose our potential cafia......I really hope your right Steve.
Also agree with Steve and Joeman, prison rules dictate the big guy gets the top bunk.
2 potential triggers, one party with the option to react to said triggers within a timeframe and some horse trading to be had.
The only muddying of the waters I could think of is if "decision to mine" becomes the trigger and we subsequently sell to a third party evidently having had no intention to mine whatsoever which would mean JV partnerships and whatever that would look like.
All imho of course and wtfdik?
Seems to me Racecourse just does not cut it on a stand alone basis. Further drilling to take place in phase 3. My expectation is that any potential sale to AA or another party will be reliant on the sum of both prospects, neither of which, with current data are economically viable on a stand alone basis. Previously I suggested 1.5MT at very low average grade for RC, I'll be pleasantly surprised if the phase 2 upgraded resource model shows something better than that.
You are right.... nothing saying AA will take up the option to buy back. All the more reason to see the 2MT and Decision to Mine clauses on the buy back as important activations..... once reached and notified AA have a short period to respond..... if they don't, we go to the open market and competition to buy our World Class opportunity.
GLA.
There maybe some reasoning to doubt if AA will be willing to make a bid to move into the region. On many occasions it has been suggested that Newcrest may be in a stronger position with operations and the technical and engineering support etc, already in NSW with the Cadia’s.
Other than that I see another investor who has no one else to blame but themselves for their own poor decisions.
Another waste of space.
I don’t buy any of it.So everyone thinks AA will bid . Doubt it . Maybe this , maybe that . Bird has sold this whole “sham” based on this imaginary deal in the pipeline . What about mentioning other potential interest in this super plot of dross . You all need to wake up and smell the coffee . Bird has given you all the bird. Taking super fees whilst a bit goes on drilling . Buys a handful of shares to excite the shareholders. Total legend .
I'm with Steve4077.... the reason for both decision to mine and 2MT being pursued is so that we can't be held in limbo under the AA buyback clause just because RC comes out at 1.99MT... Colin wants to get us in the marketplace ... or so he has said many many times.
This is all good debate though.... and if nothing else Colin's next interview might confirm more than you think. After all he likes to read the Boards.... and hates to be misrepresented.
OK, I am going to cease debating at this point. I have spent a lot of time on large-scale (multi-billion) M&As and I cannot believe AA's legal team will have created a situation in which the future negotiation advantage lies with the micro-cap partner (or if they did, they should be fired), but if the majority of the forum wants to believe that I am not going to waste any more energy on the topic. Lets see if we can get some more clarity at the AGM and resume the discussion after that.
Steve - The point of setting a 2mt threshold is to make it fair to both parties and will have been negotiated. It is high enough for AA to be pretty certain they'd be interested in reacquiring at that point, but not so high that ProspectOre would need to find tens of millions to cover explorations before they could reach target - a serious risk to a small company that never intended to mine it and whose strategy was to prove there was a beast down there and sell it on.
I'd point you again to the use of the word 'ultimately' in the sentence "If a deposit of greater than 2M tons of contained CuEq (i.e. 450Mt @ 0.45% CuEq) is ultimately identified." Take out the word 'ultimately' and you could argue that once the threshold is it reached then AA get the buy-back opportunity. But 'ultimately' is in there and I would suggest it is in there on purpose i.e. because it allows ProspectOre to continue quantifying the resource until they are ultimately ready to declare what they have identified and trigger the buy-back process.
If AA could at ‘anytime’ decide they wanted to exercise their option. It is pointless to include the one time only, ‘before 2mt is reached’ option
They had the chance but unlikely due to the complete lack of resource building news. If and when RC is over the threshold then they have missed that opportunity so now it will be at xtract discretion to build the resource as big as possible before approaching Anglo.
(Another CB quote) when asked at last AGM (I think) why not declare 1.9mt?
Steve4077: I don't think your logic works. The trigger point is simply to ensure that a good resource that they have sold on does not get out of their grasp. As for there being no point in stating an amount in the first place, ask yourself which would AA prefer: to buy a 2MT resource or a 10MT one. Clearly the larger the better. They simply buy it via a % of the in the ground value. If RC were 10MT (if only!) then XTR would either have to sell at around 20% of its true value or would not be able to announce the size of it for years while continuing to drill. Hence my earlier message about my belief that XTR can announce a resource size and continue to drill before approaching AA. That's the way I see it but I'm just a layman in these matters.
I think I am in the minority, but I believe as soon as XTR announce they have 2mt (which would have to RNS as it will plainly have a 'material effect' on the share price), then AA have the option to activate the buy-back clause.
Firstly, on the video Colin stated "If Anglo write to us and say they want to exercise their option" - that sounds like Anglo have the decision on whether to activate the buy-back.
Secondly, I cannot see any scenario where the legal team at Anglo create a contract with a buy-back clause with a clear trigger without also giving Anglo the option to react to that trigger. Otherwise, Anglo would create a situation where they can only watch while XTR makes it more and more expensive for them. If that was the case, there would be no point stating an amount in the first place.
I tend to be in agreement with stevem, I think the part that confuses is the one time only chance ‘before’ 2mt is reached.
That may be the part where Colin had mentioned and on video?? It just seems a very unlikely scenario though, as ‘before 2mt’ was reached there would not be a JORC compliant resource if xtract are still exploring.
I much preferred the guess the drill location game tbh
Stevemocal: Looks like you were thinking the along the same lines as me!
The only practical way I can see this working is that XTR decides to approach AA at some future time with a JORC but are at liberty to inform the market of the model results at any time they like. Essentially, they say that RC is believed to have X amount of Cu but they plan to continue drilling Ascot & Footrot and plan to approach AA in X months time. That way AA still get first dibs but XTR are not compelled to offer the resource the moment they reach 2MT.
'Ultimately' means at the end/finish of something and, surely, only Xtract can decide when they have finished their work estimating the resource at the Bushranger licence? An interim JORC estimate (even if crosses the 2mt threshold that will ultimately guarantee AA an opportunity to buy back), is just that... an interim resource estimate. I cannot see there being any triggering of the buy-back opportunity until Xtract decide that they are ready to offer it.
Come on Birdy... enough of the suspense now! New JORC and modelling please!
>>No-one here actually knows what's going to happen. - I don't think even Bird knows, he changes the narrative so often!
No-one here actually knows what's going to happen. As far as I see it, as a layman, it seems extremely unfair to sell some licenses to another explorer to then limit to amount of resource they can achieve. Like someone said before, we can declare we think we have more than 2mt but will that trigger the clause if it's not in a jorc?
'Ultimately' in this context seems to be used in the sense of 'at some point in the future', rather than 'the last time the resource is updated' (because how can anyone know the latter). Its just badly written.
On the video from the 'Evening with Colin Bird', Colin states: "If Anglo write to us and say they want to exercise their option and this is the value they estimate, we've got five days to accept that. If we don't accept it, we have to go to expert opinion. The expert has 60 days to say what he thinks the value is using the Valmin method, which includes a DCF model, and Enterprise Value and looks at similar sales in the last five years."
Also "If we make a decision to mine, Anglo have 10 days to make a decision on whether to trigger the same process"
I'm paraphrasing a little to remove repetition and extraneous content, but I've left the key parts verbatim. Even so, given the level of confusion and uncertainty, I agree this is a key question for the AGM
It says greater than 2mt and doesn't state a time limit.
Anglo have a time limit once we trigger the clause, doesn't say when we reach 2mt.
Maybe let's ask Colin at the AGM to give us a copy of the contract so we can all find out!!
Steve - The key word in that RNS is 'ultimately'. Releasing a JORC estimate of 2mt+ of contained Cu Eq, will only means we have crossed the threshold that guarantees AA a buy-back opportunity. It is not a declaration of the 'ultimate' resource estimate, which is still being worked on.
The buy-back clause can only be triggered by Xtract, and when they are ready to trigger it.
BTW - we should definitely seek clarification on the exact conditions and process for the AA buyback at this year's AGM.
Colin made it very clear at the 'Evening with Colin Bird' last year that as soon as we declare 2mt, Anglo have only only a few days to decide whether to activate the buyback or forgo the option. This is on video.
Here is the text from the relevant RNS:
Under the terms the Bushranger Acquisition agreement, if a deposit of greater than 2 million tons of contained Cu equivalent (e.g. 450Mt @ 0.45% Cu equivalent) is ultimately identified, Anglo may buy-back 80% of the Racecourse deposit at fair market value as determined by an Independent Expert in accordance with the JORC and Valmin Code. Anglo and ProspectOre would then provide funding pro-rata to their interests, save that ProspectOre may decide not to provide its share of funding and be diluted, ultimately retaining a 0.75% net smelter royalty (NSR). If a "Decision to Mine" is taken by ProspectOre prior to the identification of 2 million tons of contained Cu equivalent, Anglo also have an opportunity to exercise the buy-back. Anglo have a once-only opportunity to exercise the 80% buy-back whether the opportunity comes through the discovery of 2 million tons of contained Cu equivalent or a decision to mine.
https://www.lse.co.uk/rns/XTR/bushranger-copper-gold-project-australia-o7u71uhdwbdy9b9.html
Note the phrase "Anglo have a once-only opportunity to exercise the 80% buy-back"
I would rather rely on an RNS supported by Colin's public statement on video, rather than a theory which doesn't seem to be supported by any evidence beyond a recollection of something Colin said a year ago.
Steve,
At the AGM last year, Colin said that AA cannot approach us, we have to go to them. I don't believe declaring 2mt will mean we have to stop exploring and approach AA. All the clause means is we can't sell to anyone else or start mining it without given AA the chance to buy at fair market value. (Simple as that....... I think)
So let's declare 2mt, get the share price to 15p, keep drilling ascot and footrot. That gives people like myself a chance to take out so much needed money out and then we can be patient shareholders again. :)