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OM - listen to the podcast again, because what you quote isn't quite what he said You said: "They were approached by the COMPANY and brokers to bring their expertise to fix problems of excessive overhead and debt." (my caps) Actually, Lofgran says that NTOG were approached by "FORMER DIRECTORS and brokers in London" because they thought NTOG had the skill to sort out issues at MAGP. Those issues are it being "sub scale" and having excessive overheads, and the debt. MAGP didn't approach NTOG to ask ML to give them a helping hand. Former directors and brokers approached NTOG. I also note it was "former directors" in the plural - so unless that was a slip of the tongue it's more than just Snead. Who else might it be?

From the other board. Apparently ML will be speaking about the MAGP share acquisition. It might give some insights. --- On Today’s Podcast: http://bit.ly/VOXPOD0788 Matt Lofgran, CEO, of Nostra Terra #NTOG Plus George Frangeskides, Chairman of Alba Mineral Resources #ALBA Bonnie Hughes Mining Specialist from Northland Capital partners on Savannah Resources #SAV

NTOG couldn't wait. You need to separate the requirement to disclose a holding in a company (the 10% in MAGP) from NTOG's other obligation, which is to notify the market immediately of material acquisitions and disposals. The RNS is because of the latter. NTOG need to release an RNS when they make a material agreement and they sign the document. They've just done that with Snead, hence the RNS. The fact that they have signed an agreement to acquire his stock in 4 weeks time needs an RNS now, not in 4 weeks. It's a material purchase compared to the NTOG mcap so as with any other acquisition (e.g. a WI in a well) they need to state the cost to NTOG, in this case cash plus shares. The shares absolutely have to be disclosed (because it will require new shares to be issued). And it would have been weird if they had said "we're buying these shares for 20m shares plus an undisclosed cash sum". To give an example, if NTOG had bought £125k worth of Shell shares then they would have had to disclose that to the market because of the size of the purchase compared to the mcap of NTOG (the class test rule), but obviously they wouldn't be bound to disclose that to Shell because of the DTR rules (they would be under 3%). Two sets of rules.

I think I've twigged why there wasn't a separate substantial shareholder notification RNS from MAGP - it's because the NTOG acquisition hasn't taken place and so formally speaking Snead still owns the shares. There hasn't been a change in beneficial ownership, so no TR1 I do note that as part of the NTOG deal with Snead they immediately have the power to direct the voting on those shares though - it to tell Snead how to vote. That gives them the immediate power, even before the settlement takes place at the end of June. Why would they do that (and announce it) if they just wanted to be a passive investor? I think it's one of the clues that NTOG don't see this as a simple passive investment. I do like a good conspiracy theory!

Yes I'm pleased and yes it was a complete fluke! But am I complaining? lol

As you say, this BTL market also enable you to be exposed to the rise in housing prices whilst the rental yield covered the debt payments. Many people built up large property portfolios on that basis. That can really work in a rising market, because if you can wait a few years for the capital value of the property to increase (and while you are waiting, you're balancing the books with the rental) then you can sell the property and take whatever 30% or more capital gain on the sale. All the while never actually needing to put anything in that debt. In natural resources we've been in a massive cyclical bear market for years and years, so unlike property one thing you can say is that we're much much closer to the bottom than being anywhere near the top. If/when the bull market takes off then we sell the assets and bank a small fortune. In the meantime we need to acquire assets, make a bit of a profit, but most importantly not lose money while we wait for that bull to run. That's been the really difficult thing these last few years investing directly into AIM natural resource stocks ... they've just ground on lower and lower in SP as they keep raising equity funds at a time when everyone hates them. I'm hoping PERE will be a way to get this "opportunity optionality" whilst being paid to wait. That's the hope, anyway...

They made a 200% return over a month with that well purchase-then-sale. Opportunistic is probably a good word (the snatching of the asset from Mosman recently as a case in point - you can almost imagine the spluttering at Mosman when that happened!). If NTOG made a similar gain with its stake in MAGP then the SP will have to be well north of 0.2p, which it's not been for a year or so. In that scenario I hope no-one here would be complaining too loud!

Lotto - re how debt might feed into mcap. One way to think of this is how it affects yield (or more broadly, returns). Think of a property investment company. It might start off with a few quid to cover the office expenses, and then raise £100m at 3% debt to buy rental properties that it then gets a 5.5% yield on. That is a net 2.5% yield on a 100m portfolio (£2.5m net cash-flow per annum). So although the company didn't raise funds by equity and the net assets (assets minus liabilities) is actually zero, it's still bringing in £2.5m net cash and so you'd value the company on a PE multiple of that. The same is true here. If you can take out debt, and generate an assets that produces net cash-flow after paying the debt repayments, you're laughing. This of course is why PERE are focussing on producing (or almost producing) assets - they need to pay their way to cover the debt and thus be value accretive. You couldn't do this financing model for early-stage assets that are too far away from cash-flow (for which the standard AIM confetti blizzard approach is needed).

Ebob - good question. I know they are sensitive to being seen as a 'penny stock' - N American investors are apparently quite twitchy about this, and the wider issue of shares in issue. At the moment they have 81m shares in issue which is not that bad. Let's say (for sake of maths) they raise £3m at 3p, that would be 100m additional shares. 181m is probably close to the top end of what you might expect for a small (say) TSX-listed company, just by me eye-balling some TSX stocks I own. That number will only increase as warrants are exercise and shares are issued in part-settlement of acquisitions. We're obviously not starting with a billion shares in issue like some AIM shells, in which case I would absolutely be screaming for a consolidation. However a modest (say 4:1) consolidation might be nice to things get off to a figure of round 50m shares post-fundraise, and the SP then in double digits. Since they will have to do a general meeting anyway they might as well add on an additional resolution to approve a consolidation. Get it all out of the way right at the start of the journey. Will they do it? Dunno. I'd be in favour of a small one though, just to get this thing absolutely nailed right at the start.

Yes if they dumped that stock in the current market they'd be lucky to wash their face. Pointless for the reasons you say.

The most positive viewpoint is that NTOG think MAGP is a good play and they've been able to negotiate a decent stake for themselves by exploiting the departing CEO's desire to exit his position, thus giving them a good "in" price. And that they'll hold for a reasonable period of time. Since Snead clearly wants to sell his stock it may be better for MAGP for NTOG to be holding that, as opposed to Snead dumping his stock on the secondary market (compete with a slew of 10%, 9%, 8%, 7% etc TR1s to reinforce the overhang being worked). The worse case scenario would have been if Snead aggressively dumped his MAGP stock (for whatever personal reasons, I can't speculate) which would have been very nasty for the MAGP SP if there is a visible forced seller in the market. At least now that has been averted and the stock is in the hands of someone else. Whether that ends up being "out of the frying pan, into the fire" we shall see.

Yes cash I agree, there's execution risk here. Can they get onto the Standard List? Can they raise sufficient equity-based funding to get them going (bearing in mind most of the future acquisitions will be largely debt funded)? Can they deploy the right teams to turn those acquisitions around and add value? etc etc. The push-back against that is to look at the calibre of the management and advisory team, and DL's track record (he grew a £500m hedge fund that he then sold to RAB from a starting point of just a few million quid capital - i.e. the same plan as here). You can then make a call on how big that risk is and whether the rewards warrant it. Look at the mcap. It's tiny. We're currently trading at roughly the cash position plus a few hundred £k for the listing, which is cheaper than a lot of AIM shells. And most AIM shells are simply hype, with little by way of credible management and forward strategy. So one can invest now, when I would argue there's a discount in place because of execution risk, or one could wait until after the move to the standard list and they've proven themselves by raising some debt and acquiring one or two assets (at which point it will be re-risked compared to now). One thing you can say is that for sure you won't be able to buy PERE at 2p once its at that stage. Some people will take the risk-reward and come in now when its cheap (but it needs you to think about the risks). Some people will prefer to come in later when its de-risked somewhat and its more expensive. If you like PERE I'm not going to suggest to you which option is better as what suits me may not be right for you. As you say, let's see how this goes now.

I agree that there seems to be a certain degree of "messaging" around how this was done. NTOG released an RNS under their own ticker at 1:15pm on Friday stating that they had bought a 10% stake in MAGP. Formally speaking that is a material holding for them and as such they were obliged to inform the market without delay, which they did. That's fine, and it's right for them to issue their own RNS because it is a material transaction for NTOG (irrespective of whether there are DTR substantial shareholder disclosures to be made). As a 10% shareholder they are also required by the DTR rules to tell MAGP that they have got a substantial shareholding. It is then up to MAGP as to how they disclose that to the market - either by their own RNS, or perhaps simply by thinking that since NTOG have already done so then they don't need to. At the very least it would be good practice for MAGP to release a notification under its own RNS ticker to assist its own shareholders. Did NTOG tell MAGP directly, or did they simply release their RNS and let them find it? Formally speaking it could be argued that NTOG has informed the market of its stake and has discharged its DTR obligations, so maybe MAGP feels it doesn't have to issue an RNS. We shall see on that front next week. "Should" NTOG have waited until MAGP issued an RNS before it informed the market? No, strictly speaking. The obligation is on NTOG (as a listed company) to inform the market without delay of price-sensitive information like a major transaction. "Could" they have coordinated with MAGP if they had wanted to, in order to get back-to-back RNSes released? Oh I'm sure they "could" have, had they wanted to. That this didn't happen is probably significant. What does surprise me is that we didn't get a separate RNS from MAGP the same day - there was another 5 hours of RNS feed that day they could have used, even if it was for a quick "The Company notes the RNS released earlier today by NTOG regarding ..." sort of thing. That might be as trivial as a staff absence and being caught unawares - we shall see next week if there is an RNS on Tuesday morning. It certainly does feel like MAGP were caught on the hop though and didn't know anything about the purchase until the RNS landed at 1:15pm. If they were not informed directly by NTOG (e.g. by email) then one can see circumstances where they might have missed it at the time of release. All very interesting and you could read a lot into this, if you were so minded. The next step for me is whether there is a RNS from MAGP on Tuesday.

It'll be interesting to see if this is just NTOG picking up shares in a company they like on the cheap (possible) or else whether it's the start of some corporate wheeler-dealing. Certainly wouldn't bet against that given the past track record of NTOG. Interesting times!

No worries. Good luck to you too.

It doesn't say a proposed deal with MAGP in the RNS. It says 'The Magnolia Shares have been purchased from Steven Snead, the former CEO of Magnolia, and his family' There is no mention of any proposed deal with MAGP itself, I'm afraid you've mis-read the text.

(and that header should say WHY, not the rest of the text - flipping autocorrect filled the rest in duh-huh!)

It doesn't say a proposed deal with MAGP in the RNS. It says 'The Magnolia Shares have been purchased from Steven Snead, the former CEO of Magnolia, and his family' There is no mention of any proposed deal with MAGP itself, I'm afraid you've mis-read the text.

And perfectly valid concerns too, cash. We've all see cash shells and how they behave, execution risk is there. I've lost cash in the past on shells that failed to RTO and then delisted, so I'm very very aware of this! Fortunately a move to the SL is a different beast to a RTO and should be relatively straightforward administratively. But as I say, it's not done until its done.

cash - on average about a dozen companies a year move from AIM to the Standard List (both bits of LSE). It's relatively standard paperwork provided you've been around long enough (e.g. you need 3 years audited accounts, which PERE has). You may wonder why some Rule 15 cash shells don't do the same and instead try to stay on AIM and do an RTO. Good question. The answer is that companies on the Standard List are restricted in how many shares they can issue per annum in placings etc. It's limited to 10% of the share capital, unless they issue a prospectus. Since most AIM companies are cash-burning growth companies that need to constantly issue shares to generate cash to grow (or survive or just pay the Board...) they simply wouldn't be able to survive on the Standard List. Pembridge however will be running a private equity model, where the bulk of the money used for acquisitions going forward will come from debt, not placing-generated cash. If they do issue new shares, it'll most likely be purely to pay vendors (i.e. buying a stake in an asset for a combination of cash plus PERE equity). That's really good for us since it aligns the vendors with PERE, plus I dare say they'll be quite sticky holders of those shares (as opposed to raising the cash from a retail placing). The 10% limit on the standard list should suit PERE very well, and will certainly make me sleep better at night knowing it's impossible to wake up next morning to a 7am RNS stating they've just done a placing doubling the shares in issue! They're literally not allowed to once on the Standard List. Regarding risk of not being able to move - since they're already a LSE listed company and just moving from one bit of the exchange to another, it should be too much of a hassle. Personally I'd be gobsmacked if they can't; as I say most Rule 15 don't go down this route simply because they couldn't survive at the other end with the restrictions on share issuance. The RNS is naturally cautious (the NOMAD will require that) and it's not a done deal until its a done deal, but I really don't see this as a major hurdle. If you look at the guidelines that are published for the entry criteria for the Standard List (e.g. accounts audited to a certain standard etc) they PERE meet them, partly because most of them are AIM rules as well. Hopefully the company will give us some updates in the near future as to how they are getting on (have they submitted the paperwork to UKLA, what has been the response, etc etc). That would certainly help soothe any nerves people might have.