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I think the mood of this board is that most want XTR to do the deal and sell RC on to a willing bidder ASAP. I am of a different opinion and I'll set out my reasons.
I've have just retired and although I'm not short of cash and should have a confortable retirement BR could be life changing as I have a sizable holding here. The general feeling is that RC has come in a tad shy of the 2MT we all hoped for. Ascot is obviously very useful but is only partially drilled while it appears new anomalies have been found which will not be drilled, but do implied value - i.e leaving something for the customer to explore. To me XTR is a rare beast indeed. It is self financing. Most small exploration companies are in a race to find treasure before they dilute themselves into the ground. XTR could theoretically explore until the cows come home.
Now, what with the world economy going down the toilet and the price of Cu dropping we really seem to have picked a poor time to put BR on the market. My fear is that we will sell BR for the equvilent of 10 to 15 p a share when there is clearly a lot more Cu in the license area. As we as shareholder are unlieky to find many, if any, explorers in the situation that XTR find themselves just now, doesn't it make sense to ring the neck of this chicken while the opportunity exists? Yes, it means waiting a year or so more but in the current market, owning a cash generating company that is continually finding more Cu, gold, silver & moly knowing that in time it will be a screaming buy for any large miner that wants to fight over it seems a safer place for our cash.
Personally I would be willing to wait to create that wealth. So, possibly my dream situation would be for AA to turn down the offer (or CB turns down AA's offer) and have all other miners too preoccuopied with current market issues to make an offer. The sensible thing to do then would be for XTR to continue drilling Ascot and some of the new anomalies and create a resource that demands the attention of the big miners.
I may be in a minority but my dream situation seems more preferable than selling into market chaos when the Cu price is dropping and we have unexplored sources of more Cu.
I would be interested in other opinions.
Colin Bird said in his last interview XTR have not reached the 2MT mark, but that doesn't mean we won't have 2MT when the final result are released, I've listened to the interview 4 times and I am convinced he is holding something back as he was so confident in what XTR have.
What ever anyone says there is no way this will be mined by XTR and most investors will want a return for there money.
Exciting times good luck everyone ??
Is there a link to his last interview please? Have not been following for a while, sorry.
Cygnus
As ever, CB's time scales may well start drifting to the right so we may not be selling in a depressed Cu price but fast rising rising POC. CB's own expectations are that Cu will be higher next year and we may not end up selling until Q3? POC should be much higher then.
If the sale is in Q2/ Q3 CB will be vey nearly 80. Maybe hes taking that into account and would be happy for another year or 2 if he was a younger man?
I guess the balance is time v cost v profit and maybe CB thinks we are now at the "sweet spot" re those three factors?
I agree with Cygnus in principle and with Andrew in terms of time and motivations.
>> Is there a link to his last interview please? Have not been following for a while, sorry.
Found it, not to worry, thanks
Hi Cygnus - For me, the potential saving grace will an early sale is that the AA buy-back only applies to EL5574. Although that licence is home to Racecourse, Ascot, Footrot and other yet-to-be-named anomalies, we also hold three yet-to-be-drilled neighbouring licences. If, as the evidence points to, we are sitting on a multi-porphyry system similar to Cadia (just up geological the road in the same fold), then AA (or any other buyer) is obviously going to want to acquire those licences too. And the negotiation for those licences will not be subject to any buy-back terms or any code used for valuation purposes.
Racecourse may only be worth 15p currently based on a Valmin valuation... but what price Bushranger?
It is also worth remembering that they are still making large discoveries at Cadia after 30+ years. It is therefore likely that half of us currently invested in XTR will be pushing up the copper before they finish proving up what is at Bushranger. So we obviously need to draw a line at some point and just make the sale. That point, IMO, should be when there is enough evidence to convince a AA (or other) that Bushranger is indeed another Cadiaesque discovery. And CB and the team don't need to guess when that might be because they know people in AA and I would hope are having informal conversations with them to establish just that. I am therefore hopeful the decision to put up the 'for sale' sign is an informed decision - CB certainly came across as very calm and confident in the last interview. Maybe wishful thinking on my part... time will tell.
I am also not sure the current price of copper will have to negative an impact on the valuation. This is a long term play for any buyer and all the majors know where the price of copper is going in the long term.
Agree Andrew >>>I guess the balance is time v cost v profit and maybe CB thinks we are now at the "sweet spot" re those three factors?
Hi Cygnus, it is very easy to agree with what you are saying in principle. But there is a bigger picture to consider beyond bushranger. There is a large degree of supporting evidence that will propel the value of the asset beyond simply the in ground resource value. That is how I understand it, with consideration to the statement in the audited report regarding the project being high up the value curve now. It would generally mean that any further ‘risky’ exploration phases would not necessarily increase further value up that value curve based on the cost of exploration, there will also be all the contractual obligations that would go with it. Geologists, project managers drilling crews and support staff etc. It’s not just a case of carry on drilling a few/lot more holes while we wait for something that, we have no idea on what may or may not happen. There is also the time it would take, when there will be great opportunities now, in these difficult times, to pick up some prime JV’s that fall into the criteria set out by the company as they look for growth on their production side. There will be so many more now of these small deposit owners that will find it much harder to raise funds to get their projects to final production that xtract are counting on.
The company has had a big leg up with Manica coming online, it is imperative the company can now sustain that growth going forward. The proceeds of a sale now will have greater implications in the mid to long term growth.
I, as a newbie ( post BR acquisition ) can understand this, im sure the long term holders can appreciate the need for sustained growth.
This is my take on things (and for the record I want this deal sealed at the earliest opportunity ... onwards and upwards ... !).
My understanding is that the purpose of the AA agreement, from AA's point of view, is that it gives them the uncontested opportunity to buy BR back by offering a decent/acceptable amount of cash. If XTR disputes the value offered then it goes to an independent assessment. This may recommend a higher or indeed lower price. But XTR is not compelled to go ahead with a sale to AA at this independently assessed value either.
By rejecting AA twice in this manner XTR can then take their chances on the wider open market, and I presume AA could continue their interest by participating in competitive bidding.
The general assumption is that the large miners such as AA are in dire need of copper resources to sustain their future in this area. And we are all aware how few new resources are in the pipeline.
Therefore, AA should have a very strong interest in making an attractive offer when they get their uncontested chance. Formulating an 'attractive offer' no doubt entails projecting the value of BR as a resource into the future and not shooting themselves in the foot by quibbling over week by week, month by month present movement in the spot price of copper.
If AA want to capitalise on their 'first mover' advantage they need to make it easy for XTR to accept the offer. And at the same time XTR would appreciate a simple and uncomplicated sale. However, I have no doubt that XTR is prepared to take the sale to the open market if it feels appropriate to do so. For this reason I feel XTR is in a fairly strong position.
In GLR and AFP Colin has clauses in projects which pay out "success" payments if further exploration meets certain targets. These deals are with Sandfire and FQ. They save on the exploration cost and risk but gives shareholders a chance to profit on success. Maybe he is thinking on the same lines with Ascot etc.
Thanks everyone for your consider views. Interesting thought that the other, unexplored licenses around BR may have considerable value just via their location.
Well, that livened things up a bit after ~36 hours with no messages !
Thanks everyone for your consideED views.
Doaah.
Flipper: I would like to see something similar happen at BR.
Cygnus. Of all the many deals Colin has done, these I feel are some of the best. Takes away the risk but still leaves some upside. It is what I am expecting with Ascot. But like you, I would have liked to have continued drilling.
Are those 'success' payments significant? i.e. in our real interest to draft in to an agreement? The chances are they may have been a negotiated face-saving gesture in order to settle at a lower than hoped for buyout price?
I'm a fan of 'cash on the table' over a 'hope' clause. Such a clause would not be seen as an asset, and I would suggest that the vast proportion of XTR shareholders do not measure their expected time continuing to hold their shares to be inline with any resulting 'success' payout.
Maybe the beauty in missing 2MT and basing the trigger with AA on the decision to mine, means that AA might be quicker to decide not to offer.
Then we are free to do what Cygnet suggests.
To be honest I don't mind that but I'm sure the share price will be higher by then as we will have a JORC maybe 8x or 10x the current one.... and a financial model laying out how profitable it is.
>>> AA might be quicker to decide not to offer <<<
I don't see why AA would walk away from a 25+ year copper resource without even trying.
I mentioned yesterday that I felt the 2MT scenario was possibly included in the deal to benefit XTR, not AA. Even 1MT of copper (still a lot of copper) that can be economically extracted is not to be sneezed at. And as we now know, 'Decision to mine' is a strangely named term that means 'demonstrably economical to mine'.
The "success" payments are up to $80 million. Not small payments given the majors are paying for the exploration. So say we were offered £x for RC consisting of cash and shares plus "success" payments based on the other targets, it would all add up.
Obviously just my thought but has been the way CB has structured recent deals.
Thanks for clarifying. $80m is certainly not insignificant.
Although if this was a way of the buyer paying less up front that is still to me less attractive than getting a better one off sale price.
As has been said before, a Bird in the hand is worth two in the Bushranger!
Obviously what I am saying is just a thought. But trying to put value on targets which have barely been drilled or just EM targets - but could be the next Cadia, ?
I'd rather see 20m now than 80m in the future, and it could be years in the future before it even starts to drip feed to XTR.
You would have to remain a share holder in order to benefit or at least be one at "ex divi" days so pretty much a waste of time that way.
It would work if current shareholders received bonds in the undiscovered material enabling them to free up their investment in XTR and still have an interest.
Just one thing to add here. I was under the impression if we give AA our intention to mine, then AA presuming their interested will offer a figure and we'll likely say its worth more. If a middle ground isn't met then an independent assessor will be used to decide who was closest then that figure will be used.
If that is the case then presuming AA want it. Then it's unlikely AA will offer too much to seal the deal and will base their valuation on what can be proven, not what could be. As this is what an assessor would likely base their value on.
Now I could be wrong but I can't see possibilities being given a strong value IF AA look to buy it.
Food for thought
The only advantage AA have is an agreement for first refusal, if no deal can be had, XTR are free to offer it to the open market. Of course AA know that so either they decline to make an offer or they make an offer that XTR regards as fair market value. We don't have to sell to AA.
As far "unproven" ground is concerned, it still has a value due to the likelyhood of it containing copper(and gold).
Rzez - If it comes to an independent assessment, then the valuation will use the Valmin code and whoever is furthest away from that valuation (AA or XTR) will pay for the services of the independent expert.
But remember, the buy back clause is for 80% of one licence. If AA want the other 20% too, and the other licences, then there are no rules. That means XTR can command a premium for the lot. We won’t be giving Bushranger away cheaply.
There seems to be an assumption that we can say no if we don't like the AA offer or independent valuation. Can anyone point to where that is mentioned in an RNS?
There seems to be no logical reason why we would accept an offer in that situation, when we could offer it to a wider audience instead, so why would AA create a contractual situation that benefits a tiny junior more more than them?
Also, why would talk at the AGM about the decision-to-mine being a way to force a decision by AA (either way) if we could just refuse it anyway?