Reasons for believing in a good result26 May 2023 08:58
As a fairly experienced investor I am aware that it can be useful to have your views challenged. Asking the 'why?' question has indeed been a good back to basics reminder that negative views can be as useful as negative ones. Echo chambers are not good, positive or negative. So, here are my thoughts\reasons for still believing in an outcome better than where we are:
1. MC\JM have skillsets that are right for this particular scenario - a sale. Both are more wired in to the finance world than the operational one.
2. There is proven interest in the assets, expressed via the NDAs and non-binding bids.
3. If, as and when we do get a hard bid, there is a good chance we'll get another with an auction ensuing.
4. NPV based valuations are multiple times current market values.
5. There is political risk, but it's not Nicaragua. It's the Biden factor. The fairly light touch, targeted actions already taken by Biden suggest that the U.S. is cautious about taking steps that might harm U.S. interests in the country. It's not clear to me why they would do any more. It's also not our problem if the assets are sold in the next few months. In other words the political risk is a consideration for the buyer not the seller. The markets have already taken a view on the financial impact of politics on the valuations of other Nic miners.
6. The price of gold is on a bull trajectory. NPV valuations were based on prices well below current levels, and gold is set to go much higher in the coming years. Bid valuations will need to reflect this trend.
7. Buying Condor on the open market is a non-starter. Free float appears to be help in some pretty firm hands based on the low volumes traded. Anyone attempting to acquire a serious % would have to pay well above current levels, likely far closer to underlying NPV valuations.
8. There are very few undeveloped gold assets for sale across the entire mining world (hence the interest in CNR). Large cap bid activity is already underway. They need to increase reserves. Mid-cap and small-cap/junior/developing assets will follow. The bigger eat the smaller. Anything of size needs to replenish its reserves.
9. The whole reason for selling the assets is because the market has consistently refused to reflect Condor's asset value in its market value. MC's $100m to $200m was just an opening gambit to whet the appetite, half its NPV modelling.
10. A lot of Condor's future value is in its potential, albeit it's being sold on the back of its proven assets.
As I suggested, it's useful to get back to basics. There's no harm in asking 'why?'. But then once asked and answered there's no point keep doubting.
11. If lowball values are the order of the day, the deal's off. In the medium to longer term we would probably (almost certainly) get a better return out of building out the mine.
Meanwhile, like everyone else, I find it a pain in the ass keep waiting for something to happen.
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