Deal with GLR?22 Aug 2020 11:43
Jammer1 posted a theory on the JLP board which might actually be plausible… We’ve all expressed an interest in swapping BMR shares for JLP shares in return for the Royalty, but what if a similar deal could be done with GLR?
We already own over 24m shares in GLR, these could be sold for cash, then BMR reverses into GLR bringing cash (which can be used for exploration activities or fund Star-Zinc setup) and a Royalty that will initially pay 5% of all profits from Kabwe, and eventually 11% after JLP recovers their costs (the terms of this could potentially change). Alternatively, the Royalty could be put up for sale, and again, cash used for operational activities.
GLR’s current MC is £7m with 766m shares in issue. A 1-1 share swap would be circa 40% dilution to GLR. 2-1 would be circa 80%. Would GLR shareholders be happy with those levels of dilution? Also, Bird owns almost 9% of GLR, would he be happy with that? I’m not sure how JLP would play things regarding their 29% of BMR.
From a BMR shareholder perspective, a 1-1 would only value BMR and the Royalty at circa £3.5m and I would be more inclined to accept an offer of 2-1. I believe it will become much more difficult for micro-caps to raise funds going forward. GLR aren’t likely to see any revenues this year, meanwhile cash is burning and it won’t be long before they need to raise again. A deal like this would pretty much guarantee them getting Star-Zinc online and would give an additional long-term revenue stream from the Royalty – you can’t really put a price on that kind of security in the current global economy.
I know JLP is a much stronger business given they have cash, revenues, and profits, so many would probably prefer a share swap with JLP. I just don’t see that happening, especially as it would seem JLP want to distance themselves from BMR as much as possible. If we compare JLP’s MC of £109m to GLR’s £7m – you could easily argue that GLR has a higher chance of their SP multiplying compared to JLP. If GLR can successfully bring Star-Zinc and Kash-itu online next year, you would have to assume a major rerate of the SP. If they had the Royalty on top of that, you can see why a share swap with GLR could be very beneficial to BMR shareholders.
Obviously this is just speculation, but something to think about and gives an idea of the type of deal we would like to see happen.
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