ORM Notes4 Jun 2020 20:48
The €37m retained losses is very attractive for a number of reasons. As above this is carried against any profits arising and can be rolled forward over as many years as necessary similar as to how you can carry forward personal capital losses.
This is obviously great news for ORM is term of profit sheltering and as a negotiating position.
The retained tax losses are at corporate level, so this means that some tax will still need to be paid at local government level of where the project is located and the profits are against the corporate tax of where the company is listed.
Therefore ORM are an attractive to vendors of an asset as they offer
1. access to capital markets / funding which is holding back the project development
2. A board with both great mining experience and deal making
3. Cash of €6m ready to be deployed immediately
4. retained losses of €37m before any corporate tax to be paid. This includes any successful disposal of assets which is useful for La Zarza / Salamanca / any other project.
5. the tax free earnings positively alter the overall return of a project
Interestingly the retained losses would also make a share transaction deal much more appealing to the vendor. The majority of deals now include at least a partial share transaction - that being the issue of shares to the vendor in return for economic interest in the asset. Now ORM have cash to acquire a sizeable high impact mining asset, which may be settled in milestones etc. The company would no doubt need to go back to the market after a while to push on with the project. Now if/when ORM finalise the target, the asset will be a good one, one which is most probably cash strapped and the target company wishing to keep invested. To this end I envisage a part share transaction deal. The vendor would therefore benefit from the retained losses and via a shareholding and the fact that there would be no immediate funding requirement would mean that shareholding dilution is minimal. Two great reasons for them to take shares and keep ORM in as much cash as possible for
asset development. It also means the share transaction would take into account many positives such as cash position and available tax losses, board mining experience which should be shown in the strike price of a share transaction. This I would imagine be at a significant premium to today’s 0.6p considering €6m cash reflects 1.1p in terms of share price. Which is why it would be of interest to any ORM shareholder.
Bringing a good near/medium term high impact project could see us as follows:-
1. current cash €6m
2. Assets for disposal €3m
3. Shares issued for a new asset €2m at 1.1p
4. Cash paid to vendor for new asset €1m at 1p (around current cash level)
5. Transaction costs and overheads for 12 months €1.5m
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