Member Info for MALBRAD

The SDX share price took off originally because it got good assets at a distressed sale price when Circle Oil went under due to cash flow problems caused by the Egyptian government not passing on gas and oil sales proceeds to producers. The rise in the share price was subsequently sustained by rising oil prices, the resumption of payments to producers by the Egyptian government and successful drilling programmers. In turn the share price has been damaged by the falling oil price despite gas being SDX's key product, country specific doubts about Egypt and Morocco, a failed deal with BP and perceived delays with part of the current drilling programme. I got out at 43p a while ago and am undecided about buying back in. My concern is not the quality of SDX's management but an issue that I picked up on thinking about one of the broker studies helpfully mentioned by s poster here. The big cash flow generated by SDX is understandably being invested in what has to be considered a large a large exploration programme in Egypt and Morocco. What raised this as a concern in my mind was the realization that many of the wells being developed have relatively short production lives such as five to seven years. I have not seen IRR calculations but one implication is that SDX has to carry on investing heavily simply to maintain its current extraction rates. Put another way, a sustained boost to the share price needs discoveries that really boost reserves substantially above likely output over the next five years, or another bargain priced acquisition.

Clearly the market was not set on fire by the latest drill results. I suspect that it will remain this way until the widely spaced sighting drills get replaced with focused drills based on a 25 metre grid. As it stands the gold may be spread over a length of several kilometers but decent grades could be confined to small pockets of use to artesian miners but not to a modern large scale opencast mining venture. Hopefully we will soon get some more focused results that will give a clearer picture and show up decent grades that can be mined on a bulk tonnage basis.

Clearly the market was not set on fire by the latest drill results. I suspect that it will remain this way until the widely spaced sighting drills get replaced with focused drills based on a 25 metre grid. As it stands the gold may be spread over a length of several kilometers but decent grades could be confined to small pockets of use to artesian miners but not to a modern large scale opencast mining venture. Hopefully we will soon get some more focused results that will give a clearer picture and show up decent grades that can be mined on a bulk tonnage basis.

The forthcoming exploration programme looks promising but with only 7 and a bit years of 1P reserves it really does have to deliver just to keep the company treading water.

I do not subscribe to the above service (it costs too much given my the size of my portfolio) but you can register to get their free offerings of articles about mining investment and podcasts. Some time ago EI ( Brent Cook and Joe Mazumbda) tipped Mariana. I cannot find a link other than registering but during an interview the day after the Sandstorm interview JM said that they had bought in at about 50 p and advised their clients to do so. He had sold all his shares in Mariana having previously held on for too long in some other take-over situations. He added that BC had sold half his shares.JM did not criticize Sandstorm and said that he liked their management. He commented that given the quality of Hot Madden it was significantly undervalued because of the country risk attached to Turkey. Commenting on Spinco JM said that he knew and respected MARL's geologist and knew a little about Argentina. He would not make a decision about whether to invest in Spinco until he knew more about their funding.

It is of course possible that Sandstorm will seek to strengthen its position by buying shares in the market whilst Mariana's share price is at a discount to the value of the offer. However, I cannot see why a rival bidder should bother to buy in the market. A bid at a higher price or with a bigger cash component would after all be unlikely to be contested by Sandstorm who might see it as a a good excuse to withdraw having underestimated the opposition to their bid. In turn this leaves us needing an explanation of why significant shareholders or their customers might be buying shares in Mariana. The most likely explanation is presumably that they see an arbitrage opportunity, particularly if they think that Sandstorm are picking up what will in due course be seen as an absolute bargain. Conversely, another perhaps less likely but just about possible scenario is that Sprott et al do not like the bid and want their collective bargaining position to be strong enough to force Sandstorm to either abandon the bid or improve the terms. If the aim was to get Sandstorm to abandon the bid then presumably this would be primarily because they expect a significant resource increase in the next few months or because they think that the price of gold will increase in the next year or so. Though not an explanation of such behavior in itself, they may also see it as protecting the value/risk profile of whatever holdings they may have in Sandstorm.

Given that management time, legal fees and due diligece required I agree with ludeck's view that this is yet another reason for Sandstorm not to embark on a bid for Mariana in the hope of encouraging another firm to make a bid. It is also necessary to consider who a rival bidder might be. Sandstorm' s first mover advantage and the adverse reaction that the bid has attracted from their shareholders are probably enough to discourage any other mining royalty stream provider from making a bid. Mining companies with the resources needed to outbid Sandstorm seem unlikely to be willing to be a 30% minority shareholder, so a bid from such a source, other than one from Lidya would presumably be linked with a deal with Lidya to either buy a 20% stake from them so that the mine becomes a joint venture, or even to buy the whole of their 70% stake so as to have total ownership. Other than that they are a large Turkish conglomerate I know nothing about Lidya, their financial position or their corporate strategy. That said it is not difficult to envisage plausible circumstances in which they would find the Sandstorm deal more attractive than buying Mariana or indeed in which selling all or part of their interest in Hot Madden would be attractive.

Lionel Green I think this is a very useful find. I commented some days ago that I thought the deal was odd from both a Sandstorm and a Mariana Resources perspective. I am impressed by the very thorough approach to the issue with its careful discussion of advantages and disadvantages from a Sandstorm perspective. My original thoughts were that either Sandstorm had already done a confidential deal with Lidya or that the bid was a not very clever attempt to flush out a rival bid. On reflection I am more convinced by the former than the latter explanation. My problem with the flushing out a bid issue is 'why bother,'. The obvious objections are that Sandstorm already have a royalty agreement and do not stand to make a vast amount from selling their relatively small shareholding. My other doubt relates to timing - why provoke a rival bid now when there is still a very significant exploration upside to come in the next few months?

Having tipped MARL in November at 69p, this week's Investors Chronicle advises readers to hold as 'a counter offer could follow.' Based presumably on the RNS and the Sandstorm share price at the time they value the offer at a little under £167m and at 110p per share. They note a rise in the share price to 82p and attribute the gap between 110p and 82p to U.K. Investors nerves about the tax treatment of a USA investment. Given the IC's date of publication the note was presumably written before the fall in Sandstorm's share price reduced the he value of the offer. There is probably some validity in the proposition that many AIM investors will not want to hold shares directly in a USA listed stock for the reason given by the IC. That said, many investors who do not share such concerns will still not want to hold shares in Sandstorm because of its unexciting diversified portfolio. I listened to the Sprott interview and agree that MARL fits the description of a company with a big gap between is PEA valuation and its market capitalisation. However, whether or not this implies that Sprott will make a rival bid or encourage somebody else to I am not sure. Given the comments about weak gold and silver prices in the next few months Sprott presumably expect some further fall in the Sandstorm share price but may none the less have spotted an arbitrage opportunity I.e. buy MARL shares as a cheap way into Sandstorm. Although I have not made a firm decision yet I must admit to being very tempted to up my shareholding in the hope that a better offer will emerge soon.

Great find WaitingforGodot. The danger for Mariana is that a fall in Sandstorm's share price will quickly be reflected in a fall in the Mariana share price. Consequently holding on for another bid is risky if one does not appear very soon.

If I have understood it correctly Sandstorm advance early stage funding to mining companies in return for royalties on future output. Consequently when they invest in a project they are in effect providing equity funding in that if the exploration project fails there will be no future royalties. The other risk that they face is of royalty incomes fluctuating with the commodity price cycle. From the viewpoint of shareholders both of these risks are reduced by having a large portfolio of royalty streams (130 from memory) covering a range of minerals that may not all respond in quite the same way to the trade cycle. Given that after the take over Mariana shareholders will own 19% of the equity in Sandstorm, the inference is that suddenly one project and two minerals will have a much larger impact than hitherto on their future royalty streams. I suspect that some Sandstorm shareholders will be uneasy in that this arguably increases the risks involved in owning their shares. Another odd feature is Sandstorm are taking on the risk of finding somebody willing to buy a 30% stake in Hot Maden and pay for it on a royalty basis, something that arguably Mariana could in principle have done itself. This leads me to two thoughts. Either Sandstorm has already done an undisclosed deal with Lidya to sell 30% of Hot Maden in return for royalty payments on future output or they have failed to do a deal and hope to get a rival bid that will force Lidya into the market. An undisclosed deal might suit Lydia in that it avoids paying up front for Mariana's stake in Hot Maden. Conversely if a deal has not been agreed and another bidder does not emerge then Sandstorm may find themselves in a weak bargaining position with Lidya or having to fund their 30% share of the cost of developing Hot Maden. On balance the first option is arguably more plausible.

I am not happy about the deal. Given their seat on the Mariana Board Sandstorm have full access to inside information. Parsons et al will do well financially but can correctly point out that the deal was negotiated by others and approved by the independent directors. The obvious question is whether Sandstorm have already agreed the key features of a royalty arrangement with Lidya and if so is it fully reflected in the offer. Put another way could Mariana have got the same deal with Lidya . Alternatively, is investing in Turkey considered such a suspect proposition that nobody else is likely to bid despite the low cost of production . With some considerable reluctance and annoyance I have sold a third of my shares in Mariana this morning . I await with interest what happens when the TSX opens and whether a hostile bid emerges in the next few days ( unfortunately I somehow doubt it). It will also be interesting to see how the TSX responds to any new information that emerges during this afternoons 'phone in.

A lot of the extra drilling since our most recent resource estimate has been infilling drilling designed primarily to increase confidence in the resource estimate by moving us to a 25m grid. Whilst this drilling will also have added to the overal resource it will not have done so pro-rate to the number of drills completed. The potentially exciting bit is the offset block to the south of the main resource and towards the old Russian mine area. There are some decent though generally lower grades starting to emerge here, though the computer graphics on the Mariana website suggest that this may be a more fragmented and hence possibly more expensive resource to mine. At this point I have no doubt that we will get a significant resource increase in due course but whether that will be equivalent to 2million ounces of gold or more we cannot tell for sure at the moment. It will also be interesting to see what impact the new resource will have on the required capital spend and the IRR. One possibility is that the capital spend will rise and the IRR will come down a bit. The other possibility is I suppose a two stage project in which the core resource is mined in the first stage and the southern resource is then mined after the core resource is exhausted. In this case a key issue for the profitability of the second stage will be the extent to which it can make use of what would otherwise be redundant facilities left over from the first stage. This point is important because it ought to make the second stage a more profitable investment than if it were a free standing mine.

Many thanks to those who have clarified the position re warrants waiting to be exercised.

Thank you all for your helpful comments. The high percentage of the shares owned by long term investors is encouraging in the sense that if a deal can be arranged they are presumably likely to back whatever fund raising is needed. Conversely if the current doubts about OPEC's ability to keep the price of oil above $50 per barrel continue and a deal cannot be done they are similarly likely to keep funding going on a care and maintenance basis until prospects improve. That said, the prospect seems to include gas as well as oil and that might give us a little more scope than oil alone.

I am a new investor in LOGP and note that the company raised money last year to clear the cost of an adverse court ruling and to provide funding for running costs until mid 2017, One interpretation of this would be that regardless of any farm in that might be negotiated the company will need some more funding soon just to keep going. Alternatively our negotiating position on any farm in deal is rather weak as we will need to raise funds to cover our share of whatever it costs to do more drilling. Lastly, in these circumstances another option would be for either Providence or whoever farms in to simply buy us out provided they can agree a deal with enough of our larger shareholders to be confident of the outcome. Any thoughts anybody?