RE: Another Tweet Re: NCM Relationship22 May 2020 12:58
BHP, Newcrest relationships not 'soured', says SolGold boss ! SolGold CEO Nick Mather says the company’s US$150 million royalty funding deal Franco-Nevada was a lot less dilutive than putting out “cheap shares”. Which is of course the way some shareholders would have liked to see us go, Mather said on a Red Cloud Securities webinar this week. BHP and Newcrest Mining each hold more than 14% of SolGold, which is developing the Alpala copper-gold deposit in Ecuador. When asked if the choice of funding had soured the relationship with the two majors, Mather said he didn't think so. "I think they're probably disappointed we didn't go through this phase of funding by just pumping out cheap equity and pumping it out to them" he said. "But we're here to look after all shareholders, not just the largest ones." SolGold shares have more than doubled since March, but Mather said the company was undervalued at a market capitalisation of £521.2 million. "The gap between the market cap and the indicative project value is so great, we would not be doing all shareholders a service by continuing to fund the company on an equity-only basis" he said. "There will obviously be equity funding opportunities down the track, but we were very keen to see the Franco deal, or some of the other options we were working on at the time, come to fruition."
SolGold sold a 1% royalty for US$100 million, but Mather said raising $100 million in equity would have equated to 15% of the company. " It's clear that it makes way more sense to do the deal with Franco" he said. BHP originally proposed a joint venture over Alpala, which was rejected by SolGold. Mather remains staunchly against JVs. "Joint ventures can exhaust you and are also an extremely good way of giving away value" he said, when asked if the company would consider farming out any of its other Ecuador projects. "At a couple of billion dollars a throw, no, I'm not willing to farm it out to a larger company." SolGold also wouldn't consider de-merging Alpala from its other projects. "The problem with spinning off the arms and legs is you end up with a body with no mobility" Mather said. The plan is to find Alpala "replicas" which can be self-funded via revenue from production. Mather said SolGold's pipeline made it unique. "Not only is it a spectacular collections of projects and other exploration targets, but they're all in the same country" he said. "That gives us a massive advantage over, say, a BHP or Newcrest or someone who is exploring in theatres all over the world and they have to re-educate themselves about the geology, operating procedures, political frameworks, social frameworks, etcetera, etcetera." Mather doesn't believe attracting the $2.7 billion in funding to build Alpala will be a problem, describing the project as a "banker's dream" While there has been no indication of a hostile takeover bid from either of the major shareholders, SolGold has hired Citi as an advisor.
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