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It is within Xtract’s control to offer AA a first right of refusal at any time. And that could be for 100% of Bushranger - plus possibly the other 3 Licences as well
I cannot convince myself of any good argument why Xtract would want to sell AA 80% rather than try and negotiate top dollar with AA for everything.
Maybe we don’t need to try and second guess the route to Decision to Mine. As with the exact wording of the buy back it keeps the BB discussion going in the lulls between RNS
> AA 80% rather than try and negotiate top dollar with AA for everything.
That doesn't make sense to me. Why would AA pay 'top dollar' premium to get an extra 20% when for a fairer price they can still get 80%?
Richardo - If AA don't acquire 100% of the EL5574 asset, then they are not fully in control in terms of development i.e. they can only go at the pace of their junior partner.
And then there is the risk that if they don't buy the lot, then XTR could potentially sell their 20% to a rival, which would not be a good place to be in.
But it isn't just the 20% for EL7754 that AA might have to pay a premium for. There are three neighbouring licences held by XTR, which are not subject to the buy back clause. We already know Bushranger is a multi-porphyry system but how far does it extend and can AA risk not picking up the neighbouring licences to find out? Imagine passing them up and they end up in a rivals hands who end up making billions that could have been theirs and processed from their single Bushranger plant... that would be a costly and embarrassing mistake.
I guess Aristotle summed it up nicely... "the whole is greater than the sum of its parts".
CB has already clarified that the buyback relates to everything at Bushranger, i.e. Racecourse, Ascot and Footrot.
Steve
I don’t think that’s quite right, assuming AA only brought 80% then the partners are required to pro rata the funding, if XTR can’t do this there WI is diluted down and they will ultimately end up with a 0.75% NSR (the power point doesn’t make it exactly clear how this works).
John
The buyback is clearly for 80% of EL 5575, CB just aspires to sell 100% of it and the other licenses.
Cheers
James
johnswan1 - It can be confusing getting to grips with what the buy-back clause relates to because the terms 'Bushranger' and Racecourse' are used interchangeably and neither provide an accurate description of an actual asset.
'Bushranger' is simple the name of the XTR exploration project located in the Lachlan Fold Belt. It consists of four exploratory licences, which includes EL7754 where the anomalies known as Raccourse, Ascot and Footrot are located (as you correctly say). The buy-back clause only applies to licence EL7754 and not the remaining three neighbouring licences. People can see the location of each licence of the four licences in the following presentation from the XTR website...
https://xtractresources.com/wp-content/uploads/Bushranger-Summary-Presentation_April-2020.pdf
Jamesiecakes - You may be right but it is difficult to say because none of us have seen the actual buy-back clause and are relying on published snippets that are paraphrased. Either way, that is nothing to indicate that XTR would be prohibited from selling on their 20%, which could see AA forced into bed with a rival. I personally don't think they'd want that and would therefore pay a fair price to acquire the lot. Time will tell.
Wasn’t disputing that, more your comment that they would have to go at the pace of the junior.
I fully agree they are likely to want 100%, but obviously they have the ability to buy 80% at fair value and then dilute XTR down with cash calls etc which could be there preferred route if XTR try to push them to much on the 20% they don’t have the option on.
Jamsie - XTR could use all sorts of delaying tactics to avoid dilution through cash calls whilst looking to offload their 20% stake... they'd have to endure junior partner pace for at least a while. Anyway, I don't see AA trying to play hardball, especially if they want the other licences. Either way, we seem to be splitting hairs as we are pretty much in agreement.
It is weird but the board always seems to circle back to discussing the buy-back clause whenever there is a lull in news! And I always seem to get sucked in!?! Can't be doing it again... wake me up when the next RNS lands! ;)
...... was it Aristotle that also said.... the sum of the hole(s) gets bigger the closer you get to 2MT?
What's to stop XTR from using the payment from the sale of the 80% to fund their 20%, it'll be built over a number years so the full amount wouldn't be payable on day one.
Don't know if it would be a good idea, but at the very least it gives them time to find a buyer for the 20%.
Thanks Steve, do we know that they have renewed the other licenses? The presentation shows they were up for renewal in June and Sep of this year.
johnswan1 - From the RNS dated 12th August 2021...
"The Company was pleased to be informed by the New South Wales licensing authority that it is proposed to renew the exploration licence covering the Racecourse deposit and adjoining prospects for a further three years until June 2024"
The focus at the time was naturally on the 'Racecourse' licence (EL7754) but they renewed them all at the same time.
How anyone can summise, that by keeping the 20%, raises will be required, when 80% will have been sold, the expenditure required, maybe 1bn, 20% of which would fall to XTR, who could then reinvest, the funds raised, at what would be sp of multiples from here, over a few years, with evential returns in the several billuons over time. All the while seeing income from Africa, what am I missing here?
Nothing much as far as I can see Captain. The ship is still on course and no sign of any icebergs of a significant size.
I'll just go and get my lifejacket, turning a bit chilly this evening.
Captainbob - That would be a significant change in strategy.
I bought in here because the strategy (re Bushranger) was to prove it up and sell it on. With the world so unpredictable at the moment, it is a strategy I think XTR needs to stick to. I would be most unhappy if XTR changed strategy at this late stage in the game and started down a very long path in search of more jam tomorrow.
Captain
No one was summarising that by keeping the 20% raises will be required, unless I have missed a post.
Clearly if/when EL 5574 is sold, then a material amount of that cash will be distributed back to shareholders. Stevemocal was suggesting that because AA would want 100% of the asset they will pay a premium for the 20% not in the buy back and other licenses (which makes sense to a degree). However my point was that as the buy has a clause that if XTR can’t fund there share of development costs there working interest in the asset is diluted and they end up with a 0.75% NSR, hence they are not going to overpay for this as they will know XTR won’t want to keep the 20% nor could they pay (as the cash would have been distributed to shareholders) so would likely end up with the 100% of El 5574 regardless. Obviously this is just speculation on my part but that’s what we are all doing anyways while we wait for actual news.
Cheers
James
....." I would be most unhappy if XTR changed strategy at this late stage in the game and started down a very long path in search of more jam tomorrow. "
I agree with this statement 100%. My concern is that we may never actually be in the loop if things get spun out here. We have been told that Colin would work towards shareholders' interests here but we won't know for sure that is the agenda here until we see evidence of that. Will the revenue from FB provide a much needed lift in the SP or will the market conclude that the cash will not be spent to the benefit of shareholders ? We just dont know. FWIW I am not one of the "SP doesn't matter" brigade.... Unless a special dividend style payment is made to shareholders the SP is all that matters.
A fair few PIs put their money here for the promised Bushranger strategy as advertised extensively by Colin. He knows that. He also knows that if things haven't gone to plan then the market will not look kindly on that. So I have no doubt we will be kept in the dark if that is unfolding. I choose to keep invested here as even if a fraction of the early assumed reward comes our way it is worth it IMHO. If Colin announced he was taking XTR into the jam sandwich business, and that lifted the SP to somewhere between 10p and 20p, I would be happy. How the SP gets its lift is irrelevant to me, but what is relevant is the belief that Colin will act in the interests of shareholders and not some fancy deal that excites the non shareholders or mining technos. Hopefully we will start to see the wood soon enough.
CB's tactic has been, in the past, to try and " kick the can down the road" to avoid giving bad news or to give himself more time to get some good news. With Bushranger I don't think this tactic will now work.
He has clearly implied its all coming to a conclusion. If the results are not good and he tries delaying tactics then the market will respond accordingly. The latest he could realistically stretch this out WITHOUT MARKET CONSQUENCES would be mid 2023 imho. Yes he could be saying "nearly there now" in 2024 but the market would have made its mind up by then.
All that said, if we dismiss all of Bushranger asset value we must have 2.5 to 3p from FB alone. Minimal down side from here against current sp value imho.
Not to sure if you could say that there would be "Minimal downside" about the consequences to CB's reputation and credibility if he's still not released any MRE / open pit study by mid 2023.
I'm confident a buy-out would have been concluded by then and at a value that sees sp above old high ..hopefully by a significant amount !
(Red Flags imho are CB advocating doing phase 3 with FB money or he wants to buy another "must have" project before Bushranger is anywhere near being sold on.)
Actually, I missed out the summise that any raise might be needed, as it won't, even if we did decide to keep the 20%.