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I could be 100% wrong here but my sense is that greed is the dominant thinking on Condor at the moment. A significant drop in price over the last week has hardly moved the dial in terms of volumes. What does seem to move the dial are price increases, at least that has been the order of the day over the past couple of months.
My interpretation is that those of us who hold are sitting tight. We all know that a bid RNS could drop any day, and that the price response will likely be dramatic. Those that are not in Condor, and have no, or limited, knowledge of the situation just see a risky junior explorer peddling gold at the end of the rainbow. Without some in-depth, and time-consuming, research they will not see the value embedded in Condor's resources. Why bother, when there are more easily digestible/understandable investments around? Thus, what I'm seeing are perhaps the effects of stop-losses crystallising when the mms drop the price, and the occasional speculative investor taking a punt on a maybe.
We are stuck. Maybe the mms will drop the price again in an attempt to attract interest, albeit I'm sceptical about whether it will have any greater effect that the last two or three times they tried it. Then again, what do they do? It's like the BoE with interest rates and inflation. When you have a hammer, everything looks like a nail...
A mm conundrum.
Nobody wants to buy at 27p and nobody wants to sell at 26p. Will dropping the price encourage buyers in a no-news environment (let's face it we all want to know what's going on), or will increasing the price get some volumes moving. If the mms do have surplus shares on hand will they want to encourage more selling, which a drop in price in a no news environment might encourage, or will they want to bring in more buyers?
It's not as obvious a call as many might think, albeit I suspect the default action will be to knock another half a penny off in the next few days.
5 trades today.
The MMs dropped the price to get some volume - it had the opposite effect. Those that are in are staying put (we all know news could drop any day) and those that are not remain sceptical, with wallets glued shut. With slow summer volumes the SP could drop another 10% and still have not much effect on current market psychology.
The real problem is that there is no new news to speak of. DD is underway and we just have to wait and see. My guess is that if we don't see anything in the next 3 or 4 weeks, it could be September or October before a hard bid drops. I could be wrong but I think the summer vacation season will likely slow things down further.
A couple more from Jesse Livermore:
'The stock market is never obvious. It is designed to fool most of the people, most of the time.'
'Men who can both be right and sit tight are uncommon.'
'It never was my thinking that made the big money for me. It always was my sitting.'
'Don't give me timing, give me time.'
Of course there are some about taking a profit, fighting the tape etc. but these seem more apposite for now.
It's just not worth checking CNRs SP on a daily basis. 7 trades today. It looks like the MMs are having trouble getting people to part with their shares. They've certainly tried with some pretty large price reductions, albeit the volumes seem to increase more when the price goes up vs. down. Gold still looks wobbly which may explain the preference to reduce the price vs. increase it. Having said that, there doesn't seem to be much of an appetite to buy from prospective investors. The ducks might be paddling furiously underwater, but nothing seems to be going on at the surface - nothing to announce.
The silly summer season is almost upon us. Holiday time, people away, eyes off the ball; fun is the order of the day. For me the least likely time for a hard bid would be August, but given the elapsed time already, anything could happen.
Current prices (mid 20s) imply not much more than a break-even valuation. In other words a zilch return for the last dozen years. I still can't see MC/JM finding this even remotely acceptable.
I've not been posting because there really isn't anything helpful to say. All we have are a few naysayers on one side and speculation on the other. The MMs don't give a toss what we think and will play the SP as they think fit.
Frustrating innnit?
'It's always darkest before dawn'. Don't let impatience, or the MMs working the SP, force you to part with your slice of the company. Anything can happen at any time. Sure, it might be September, but then it could be tomorrow.
'Money is made by sitting, not trading'
Jesse Livermore
Alas, it does look like the mms are facilitating the rinse and repeat brigade. Well, it worked once; why not again? If the hard bids are delayed much longer I suspect we'll see this again during the summer months. Then again, something has to break at some point...
Are the market makers sniffing something out? Volumes are still not off the scale, and yet the SP trend implies demand is being managed.
Discuss.
A few points on the options front.
Firstly, if I can buy at 27p and on the market I certainly wouldn’t pay 42p just to prove a point.
The BoD don’t know when a hard bid will come in. When it does the SP will re-rate. That’s when option holders will seek to exercise; essentially when it’s de-risked.
It’s been a long time since I had any options. But when I did it was to take an immediate profit, rather than hold for a longer term gain. I suspect many holders still think this way.
If insider option holders did exercise, you might find that instead of promoting confidence it causes a lot of people to point a finger of suspicion. Dammed if you don’t and dammed if you do.
Personally, I would prefer that none were exercised. At this stage, without the prospect of value add from mine development, it’s just pure dilution.
Looks to me like it’s just the mms moving the price around to stimulate trading interest. Looks like they have found a buy point for now, although I don’t see any large buyers, or sellers, coming through. As ever Condor struggles with UK AIM to generate interest, even when a large payout is in the works.
I can’t get my head around why any rational person would exercise 42p options when the market is 20s. We all know that there is risk until a hard bid is on the table, including option holders. There is zero meaning in out of the money options being unused.
Looks like another uneventful week at the moment.
Total volumes are hardly greater than the average over previous weeks. Not really enough to warrant an 8% change. I really do wonder whether there is an order to fill. It doesn't seem likely that a large shareholder would want to bail when a result can't be too far off.
ISA,
I did take advantage down at 16p - helped with a bed an ISA. It would have been crazy not to. However, I don't generally trade on a day to day basis. I'm more in the buy, hold but observe camp.
I've been examining the balance sheet of the recent annual report. A few things registered with me.
1. 3.168m of 22p options are still exercisable, most of which until July 2024. The next tranche is at 28.5p, 4.073m exercisable now if they want. After that you have 300k at 35p and the rest are 42p or higher. This spread has been influencing my thinking that the SP might track towards the upper 30s before plateauing - most are exercisable above this level.
2. Condor was owed £43.5m by its subsidiaries (24p in per share terms at current in issue).
3. Group assets 'held for sale' had a book value of £42.9m (again, roughly 24p in share terms), including holding co. This will be mostly intangible capitalised exploration costs.
Where I'm going with this is that with the costs of selling the assets, if they were sold at current share price levels (i.e. market cap) there would effectively be no return on a dozen years of investment. As a group the shareholders would just about get their money back, with many losing (I'm talking averages here).
I just don't see the company going for $60m when the NPV of the known project is over $400m and the whole thing could be worth over $1bn. The more you look at, the more MC's $100 - $200m looks on the low side, notwithstanding the political factors and always challenging environment for raising money.
I'm starting to wonder whether today's drop is more of a tree shake - large order to fill? It's out of sync with the pattern of the last few weeks. I guess we'll find out before long.
Agreed that there will be substantial dilution. But then again the market will re-price based on the view that the return on each share will be greater. Prospective values based on wish are converted to more measurable DCF projections. Cash raised is converted to hard mine asset that produces a real return. In time the market value reflects future cash flows. If the cash is invested wisely, notwithstanding immediate dilution, the return on those shares renders their value greater than the impact of the dilution. At least that's the theory. The risk is in how well, and how quickly, the company can get an operational, cash producing, mjne up and running.
The ramping\de-ramping comments don't bother me. It's really about day trading on the back of the current SP. I take a similar view to the BoD, who can't really influence any particular day's price. RNS news has to be delivered within a 'reasonable' time frame according to SE rules, so even there their influence is limited. I'm waiting for the big payout day, rather than trying to make a few quid on a trade. Albeit I'm not averse to taking advantage if an obvious opportunity appears, to buy or sell. Most of the opportunities have been on the buy side in recent months.
On the back of the comment about the delta between the NPV valuation and market valuation, I'm wondering whether there is some value in MC announcing the range of indicative bids that have already been made. MC has already intimated that he's 'working hard' to get them to firm-up, which in my mind suggests that they are 'realistic', as defined by the BoD at the beginning of the process. If they are indeed good, then I can't see an announcement doing any harm to the SP. It might even flush out a few more interested parties.
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.
There's always political risk with Central and South America, which could well be why the SP is so depressed vs. underlying valuation. Having said that those valuation averages I used were averages across all companies, not just if 'safe' locations. And they are by now a few years old, based on a world where gold was much lower.
I can find reasons for talking the valuation down as well as for talking it up. Ultimately, Condor remains a bet resting at the higher risk end of the spectrum. If it pays off we'll do pretty well out of it. If not, well... At this stage of the game an investment in Condor is substantially also a bet on the ability of MC/JM to pull it off. The fact that we have interest is probably as much down to their abilities as it is the underlying valuation of the assets. So far so good. If you don't believe they can pull it off then 50% of the reason for being in Condor has probably gone. For my part, MC is no geologist, but he does understand finance and markets. And JM has a decent track record. They both want a good pay out and those of us still in know that all too well. I still think they can get a good price, but have lost some confidence on how fast this can happen. A few months ago I thought they might push for an end- March scenario. How wrong I was. It's become obvious that it's not within their control as to how fast we get to a conclusion. Perhaps September is a more realistic outcome (groan).
I don't see a lot of point in people de-ramping or ramping up the SP. Those of us who are in are more than likely in it until the end. The only people who might take notice are the day traders who ride whichever direction the wind is blowing.
If you look up the averages paid for juniors and apply them to CNR you come up with a share price equivalent of 60 -65p. You would have to go back months into my old posts if you want to see the calculations. A 50p equivalent valuation would be pessimistic while 100p is probably on the optimistic side, although you can't completely rule out either. If, and it's still 'if', we do get a competitive bidding situation then I reckon the price will err closer to 100p than 50p.
There is no rational calculation I can do for the current share price. It's simply market makers (running blind like the rest of us) trying to make a market on Condor's consistently low volumes. And they don't care. They can simply readjust the price prior to opening should an out of hours RNS appears. Of course it would be fun if the company announced something during opening hours, although there might be a fall out with the brokers\mms involved if they are caught with their pants down.
The SP might slip back along with gold, which is now more important to it given the sale aspect. But if, or should I say 'when', we get a bounce Condor is more than likely to track upwards. Gold currently looks like it has a bit further to go.
MC\JM are unlikely to sell at would likely be a loss. If unrealistic bids are the order of the day it will probably revert to a 'build out the mine' scenario. I'm OK with either a sale or the production route, but would prefer that we get an answer sooner than later. Dragging this situation out well into the second half holds little appeal. I'm guessing most of us agree with this.
Incidentally, I'm not expecting another find-raising. My base expectation is still that we will wake up one morning to a bid RNS and a significant re-rate. Not to full bid value but within striking distance.
As for timelines, the CNR BoD can't force a hard bid so don't really control the timeline. They can perhaps persuade, encourage, maybe even incentivise in some way. But at the end of the day it's not in their control. At a guess I would imagine that 3 months after a site visit would be enough time to process information and inject into a valuation model. Whether that is enough time to get a bidder's board approval is open to question. We don't know who the prospective bidders are, what their resources are, whether they would need external financing themselves to launch a bid. When you factor these things in to the mix then it's perhaps no surprise that the process appears slow. The bidders may be working at what they consider breakneck speed. Perhaps it's not a Mexican stand-off. Maybe they are all just trying to get from a to b as fast as they can.
Gold continues to slip back. With luck it will bounce around the $1920 - $1930 zone before resuming its longer term uptrend. $1957 as I type and still looking weak.
Market reaction to MCs latest update seems muted. But then again there wasn't much new stuff in it.
Well, I've not seen anything to make me change my view that each of the prospective binding bidders are waiting for someone else to make the first move.
Meanwhile...
Gold is in the middle of a tactical correction. It would not surprise me to see it hit $1930, or even $1920 before a breather. I doubt it would stay there for long before resuming an uptrend. Then again, another U.S. regional bank failure and it's back over $2000.
I would love to have something interesting to say but I think it's all been said. I just hope that the stalling does not stretch into the need for another fund-raising, unless of course it's a big project finance exercise to build out the mine.
Well that's me back to sitting on my hands for a few more weeks, or months....