Member Info for dictumdedicto

F. Me....

Cactussing!

Now that would really hurt; the nuclear plus option.

So, 80 'teasers' out and half a dozen NDAs currently in place. It looks like no firm decisions have been made about how the cash would be distributed, although it looks like most or all will go to shareholders. Timeline could be quick or six months, as yet unknown.

I thought it was a useful video.

And all by 'onion head' and Jim 'Melon' (we didn't cover the nuclear option, did we?).

So, in summary then, as far as the negative vibe crowd are concerned, shareholders will be....

if they are lucky will only be carrotted, cucumbered or bananed...
if they are unlucky will be marrowed...
and if they very unlucky will be grapefruited or pineappled.

Glad I've got that all cleared up now.

Jeez. With all the vegetables flying around will there be enough room for the fruits?

You are of course right. Even without any assets CNR as a shell has a value. After all assets are sold and cash proceeds distributed it could be used as an AIM listed vehicle to reverse in to for a currently unlisted entity. Last year's BS had a negative retained earnings of £25.5m so I suspect the cumulative tax loss is ITRO this figure. However, we also have to bear in mind CGT will apply to the gain on assets sold when they appear within UK tax jurisdiction. I don't understand enough about the group structure and the UK/Nic DTA to interpret, or even guess, at a number for CGT. UK CT losses could be useful though.

For info, the 2021 BS has 'other receivables' line of £39.5m, representing loans to 3 Nic subsidiaries. Presumably, the assets will be sold within Nic and the cash initially repatriated against the outstanding loans, albeit I'm unclear how the assets are held within the overseas group. We also have to look at Nic CGT of which my knowledge is zero.

The deeper you go in to this the more complicated it gets. You start to think of situations where one or all group subsidiaries are sold for a mixture of loan repayment(s) and cash, thus crystallising equity gain(s) in the UK holding company. I hope there is a good international tax accountant waiting in the wings.

At the moment I'm just seeing PI type activity trading, nothing of particular interest as yet.

A question I ask myself is whether a prospective buyer of the assets would want the company as well? In other words would they buy in the market as well as negotiate on the asset? I'm not sure why they would want to. A low SP surely works to an asset buyers advantage, which makes me wonder whether there might be a bit of shorting activity around. I'm not suggesting that there is, but I am suggesting that there would not be any point in an asset only interested buying an equity stake. In theory a company buyer could have a go at, say £35m, as a cheeky offer, although in practice I think the effect in a thinly traded share would be to rocket propel the price to 40p or more almost instantly.

It's something to watch for but I'm not betting on a buyer trying for the whole company at this stage. I don't see a bidder effect on the horizon at the moment.

Be interested in other views though.

I'm hoping to avoid being 'carrotted', never mind 'Marrowed', the thought of which has my eyes on stalks....

I think the equivalent analogy would be if you had a proven vaccine and the company decided to sell its asset. I suspect your experience would have been lot better if the trial results had proven its effectiveness.

In Condor's case we have a tranche of P&P, plus other chunks of more 'in trial' like resources.

I remain optimistic, notwithstanding the volatile SP movements.

That's pretty much what' I'm expecting. I'm watching the SP daily, intra-day even, now with a view to buying a chunk outside the offer at the lowest possible price. There might just be a window at or slightly below 15p to pick more up. I think we know that even the naysayers and day traders will be in just as fast, whatever the views of the BoD are.

On a lighter note I must admit to being amused at the the creative use of the vegetable world. What with 'Onion Head' and 'Cucumbering', I am starting to wonder what the next vegetable to be enlisted will be.....

Market cap at the moment is close to £26m . A good £10m of that is represented by the land and SAG mill, valuing the P&P resources at £16m and zero for the rest of I&I, about 10p/share or $20/$21 per P&P oz. I think pretty much everyone talking down the share knows this and wants to make a killing at the lowest possible price. The non-holders would very much like to see it drop to 15p so that they can participate on the same terms. If I'm honest if it does slip another penny I'll buy on the market as well. You can't really argue at these unprecedented levels.

I'm guessing that it will hover around 16p until the results of the offer are in, at which point we'll see a bounce back to a more realistic valuation base. Any sign of the price increasing could see a bit of a buying surge as the FOMO effect kicks in. A sub-15p level is not impossible in a share as thinly traded as Condor but I doubt it would last for long. There is too much profit potential on the table.

I'm not into conspiracy theories etc. Past experience suggests that while 'cucumbering' does happen it's usually more down to competence. In Condor's case I'm not inclined to believe either, whatever the negative vibe crowd believe.

I'm not averse to another small drop before the bounce back. It would work for my agenda as well, albeit not from the same angle as non-holders.

I'll be buying in the market if it drops to 15p next week. The wheels are already in motion to take advantage.

I do believe JM is out to make a good chunk of money but I also believe the open offer is his way of saying 'you can too if you have the nous'. My guess is we'll get a decent offer. The only concern I've got is how that will be distributed once the cash is in the bank. That's another discussion altogether.

For the curious. If you multiply the BFS resources alone (896,000) by $20 (inferred average value) , convert to GBP and divide by the shares currently in issue (159m) you get to 9p - 10p/share. Adding the SAG mill and land yields about another 6p/share, aggregating 15 - 16p/share.

The open offer and loan adds a few more shares but then again it adds cash.

This really is a no-brainer BUY at these levels. It would be madness to assume that P&P would only be valued at $20 vs. $160 industry average. I can understand people moving money around between accounts and/or selling to reduce averages but fear based selling makes no sense, unless you believe the board are out to get you.....

BTW my broker says I can't transfer the corporate action to my ISA.

As a point of interest I've asked my broker if you can transfer the corporate action from a trading account to an ISA. Apparently, you can do it the other way round but I've yet to get it confirmed. Obviously, if the price does drop to 15p you will be able to buy on the open market at the offer price, which could threaten the cash raise.

I would tend to use the balance sheet as a starting point for estimating how much has been invested over the years. December last year was £46.4m. Add 2022 activity which I'm guessing (I've not been through the 2022 RNS's to work a more accurate figure out) is £7 or £8m. For arguments sake I'll go for £54m to round it off. Divide it by the current shares in issue yields about a 34p/share invested. They'll need something well north of this for the assets to avoid looking like plonkers.

Apart from the bottom-up resource value approach I've used, I'm also looking at the project NPV, and what the strike prices for the warrants and options are (top-end 48p). Using the NPV as the baseline takes you up the valuation curve, average resource values are pretty much the middle ground while approaching it from a firesale perspective (sunk costs to date etc.) marks the bottom end. Then you have the market, or what a buyer thinks he\her can get away with.

I'm still sticking with what I regard as the middle ground (mid-60s share equivalent asset value), although 50 - 70 possible bidders may think differently. Talking it up or down at the moment seems to me to be a mugs game. There's just too much none of us actually know.

A thought that has crossed my mind is if we did get a bid equivalent of , say 70p, would the share price actually move significantly towards it? I could see more than a few bailing out in the 40s, 50s and creating a spread between a cash based NAV and the market price. Now that would be interesting, wouldn't it? It doesn't seem likely but I've seen quite a few days when Condor's share has been well miss-priced. Today for example, a market price of 16-17p vs. a sunk balance sheet cost of circa 34p vs. an underlying asset cost of perhaps 65p.

A trick I think Condor has missed is in not getting a tame broker to issue a current analysis valuing the assets. Would it help negotiations, or otherwise? I tend to think the former albeit I'm sure there are negotiation based arguments the other way.

I'm going to share some of my calculations as the way the resource assets are presented are not fully clear to me and I'm quite happy to be educated on the topic. But first an initial valuation based only on the BFS resources and other known assets.

P&P
Indicated 827,000 @ $160 = $132.3m
Inferred 69,000 @ $20 = $1.4m
Converting the total to GBP gives about £109.6m
Add £9m for the land/SAG mill and £14.2m for the cash raised from exercising all unexpired options and warrants and you get about £132.8m. divide this by 244.3m fully diluted and you get to circa 54p/ asset value per share. You can argue about the validity of using average values but you have to start somewhere. CNR's could be above or below the $160 average, depending on the strength of the negotiation.

Then you have to attribute a value to all the other resources which is where I have a bit of an interpretation problem. The BFS is all open pit so I know I can add the 'total underground' resources back in. It's not BFS standard so the unit values for indicated are reduced from $160 to $30:
Indicated 194,000 @ $30 = $5.8m
Inferred 898,000 @$20 = $18m
$23.8 is around £19.5m
Divide this by 244.2m gives me another circa 8p/asset valuation per share.

So I'm now up to 62p.

Then we need to look at the 'Hi grade resource' which is where I have a lack of clarity. Is there any overlap between this and the BFS stated resources?
If there is not then you could add another valuation chunk into the calculation.
Indicated 1.088m @ $30 = $32.6m
Inferred 1.19m @ $20 = $23.8m
$56.4m is around £46.2m, which is worth about 19p/asset valuation per share.

Ignoring any other open pit stuff put the top of my (average value driven) range at 81p.

Then there is the value attributable to the softer assets (team on site, SAG mill on site, good relations, permits, positive local politics and 'ready to go' aspect). Robust negotiation can up the price as can the ability to create an auction situation. I'm also pretty sure that MC/JM will want a good return on their time and money. I've no idea how to value these but I know they add something. Downsides are the volatile U.S. position and more difficult cash raising markets.

The more I understand the more difficult it gets to come up with a number. However, looking at everything I'm pretty much back to where I started, which was an expectation of about 65p/share. However much I value up the asset base I tend to hit the 'difficult conditions' aspect which brings me back down to the mid 60s. It seems to me that anything below 50p will not get a hearing but anything above 75p is going to be really tough.

Disappointing but that's life. In the meantime it really is a strong but at current levels.

The shares in issue are 158,629,530. Dividing that by 6 equals 26,438,255. But the shares in issue will include non-UK registered shareholders, so the actual eligibility will be less than 26m, plus we have JM tranche. I agree that the way the RNS is worded suggests that 26m is the number to use but then they say that eligibility is reduced. For the 26m to be the number you have to assume that the UK eligible shareholders will pick up all the non-UK open offer entitlement. I'm not totally convinced that all the UK eligible will go for it. Then again they have upped the assumption on what they expect to raise so I might be understating the enthusiasm for the offer.

On the options\warrants front the strike price for tranches issued at the top is 48p and bottom is 22p. For full dilution the value of any offer is going to need to be above 48p. If the offer price effectively values the company above 50p/share you can assume that everything unexpired will be exercised. If they are and the rights is 100% taken up (including the open piece) I make it 244.3m fully diluted. It was a pain in the ass thing to do but I went through all the warrants/options etc. that are noted in the public domain, and took an average strike price assumption (for cash raise purposes) for the stuff that is not visible - there is about 4m or so difference which I assume is attributable to non directors/officers. For info the website says stock options are 16,059,000 (Aug 2022) and I can only get to about 11.8m.

I'm going to revisit my valuation assuming all the options\warrants etc. are exercised which pretty much suggests that the bottom end will 50p or so.

There are so many moving parts in this the asset valuation per share could be almost anything within quite a wide range.

I noticed that as well. It suggests that my fully diluted number of 239m is an over-estimate. I'll have to recalculate. At a guess it's going to be a lot closer to 200m than 240m, especially if you assume a lower than 100% take-up. It obviously won't raise the same amount, although I think the benefits of a lower shares in issue number will outweigh the benefits of the cash raise. We just need enough to get through negotiations.

Nothing on HL either. I'm also assuming a corporate action will be there are 8.00 a.m. on Tuesday.