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I'm trying to make sense of this comment:

"In overview if the Cu price is up there isn't a huge amount of risk. The market says drill for copper so they are doing just that (actually they were waiting to pull the trigger. NM wanted to BHP & NCM said. No -wait ! In terms of dilution to SP it was logical to wait)."

Is the poster referring to the regionals? The extension of drilling at Cascabel? At what point would BHP and NCM be worried about dilution? Normally you would think they would be the ones diluting the rest of us. Is this referring to a much bigger raise as part of financing Alpala or something?

Hi Quady, I think the situation is more nuanced than just some people being 100% right and some people being 100% wrong. I freely admit that I was one of the people who did not see how the company could get around the need to abide by pre-emption rights when we were discussing bringing major new investors onboard. The cash box placing was not something I had thought of. I think others were also of the same opinion.

However, the opposing view seemed to be that Solg could just do a large placing to bring a new investor on board (like they did with Valuestone), dilute BHP and NCM, and basically completely ignore the pre-emption rights. At no point was a cash box placing mentioned by anyone here as a solution, and in reality if you look at how Solg conducted the placing they did involve the existing shareholders as well as bringing some new names onboard. So I would actually say that neither view was completely right or wrong. What actually occurred was somewhere in between the two views.

The cash box placing is very interesting because it is effectively a blatant workaround of the statutory pre-emption rights. It is legal because technically the company is not receiving cash consideration, but let's be honest, in reality they are because they are issuing shares to investors who are paying cash for them and ultimately Solg is receiving that cash. When this works in our favour like this placing, which seems to have been greeted very favourably by the market, then everyone is happy and there is much back slapping. However, pre-emption rights are there to protect existing shareholders against dilution. If this mechanism had been used against us a few times in order to keep stuffing 10% chunks of the company cheaply into the hands of insiders and diluting us all down, we would all be crying foul.

And if Solg had used a cash box placing to issue 10% to, say, Valuestone or Barrick against the wishes of BHP and NCM, I am pretty sure they would be going berserk at management and would probably be calling for the board's heads. With 26% between them I don't think they would just lie down and take substantive dilution. As I said in my previous post, I think they were fully on board with this placing.

We don't know to what extent BHP and NCM subscribed in the placing. Once we see the revised breakdown of material shareholdings we will know if they have been diluted or not. Given that management is trying to keep the major shareholders onside now, and they were involved in the allocation process, I don't see that they would have allowed BHP and NCM to be substantially diluted against their will. This placing was done with the blessing of the largest shareholders.

Yes, just to clarify, I don't think the original FNV deal was overplaying their hand. I think it was a very strong move.

I meant to keep going back to streaming finance now, instead of doing yesterday's raise, would have been overplaying their hand. As it would probably have been a step too far for Solg's major shareholders.

I don't think Solg can just keep giving away 1% here, 1% there of the entire net profits of Alpala and then expect the majors to come in and put up all the funding to develop it whilst seeing their margins being eaten away by the likes of FNV.

I was not against the first FNV deal, I think it was a good wake up call and statement of intent to the majors. However, there is a danger of overplaying your hand, as Florentino Perez just found out.

L2analyst I don't understand why you are so annoyed? The 10 projects they are looking to JV are the ones down at the bottom of the priority list. Solg doesn't have the capacity or the resources to develop those any further because they have multiple higher priority targets to focus on, including both Alpala and Porvenir. It makes sense to try to monetise the lower priority concessions through JVs but those take time. It's not like they could just flog them all off for $73m today and not do the placing. The due diligence takes time, agreements have to be negotiated and reached. And then the JV partners presumably take up the workload on those projects and start exploring/drilling/developing them while Solg sits back and enjoys a fairly low risk free carry on those projects. But those will take time to progress.

In the meantime Solg has no other revenue and is rapidly ploughing through cash on its main priority targets. It was inevitable that they would need to raise cash this year to keep progressing the priority projects, especially Porvenir. They have done a raise at a limited discount which was oversubscribed, got $70m in the bank and the SP is down by less than 2p. What was the alternative?

Hi Bubble they have to suspend trading because the placing was taking place during TSX market hours and the outcome was not known to the market. The outcome of the placing is price sensitive information so you can't allow trading to continue on the public market while some participants will have MNPI as a result of also participating in the placing.

If you were an institutional investor participating in the placing and you could see that it was not being filled and the price was going materially lower, you would be able to sell your shares on the TSX at yesterdays price knowing the SP would tank today when trading opened. Likewise if you could see that the placing was massively oversubscribed and the placing price was higher than the current market price, then you would be able to load up on TSX at yesterdays price knowing it would open at the higher placing price today. Both of which scenarios would be unfair as you would be trading using non-public price sensitive information. Hence why trading was halted.

I think that's a glitch on Google. Isn't showing as having hit that on IG or the exchange website.

By the way, the bookrunners and the issuer will agree their allocation priorities in advance, for the case of oversubscription. You would expect them to prioritise long term holders and investors who are likely to buy and hold, amongst other things. Given the 2.5 times oversubscription here you hope that most of the shares have gone into the hands of buy to hold investors and not just traders who intend to immediately sell their allocation into the market to bank a quick profit.

Guys, what percentage of the total Solg shares did you hold before the placing? And what percentage of the newly issued shares have you been allocated? How much will your Solg holding have been diluted (or not) in terms of the total outstanding number of shares after the placing?

All in all this seems very positive. I expected a raise to come. Much better to do it from 28p than 21p a few weeks back. It was oversubscribed and lots of directors loaded up which is good. And they have loads of money in the bank now for drilling which is great.

One question, if it was 2.5 oversubscribed couldn't they have done it at even less of a discount and still raised the same cash?

FTJNY what that means is that they are using the cash box structure effectively to circumvent the statutory pre-emption rules, but in doing so they are going to give the appearance of trying to stick the the industry accepted standards on pre-emption rights.

The special resolutions at the AGM would have allowed them to allocate up to 10% of market cap on a non pre-emptive basis (5% unrestricted plus 5% specific capital investment). However they were withdrawn due to lack of support. Which means that if Solg offers shares for cash consideration it has to offer them preemptively to existing shareholders.

The cash box method is a workaround where they stick a Jersey newco in between Solg and the lead manager and swap the newly issued placing shares for pref shares in the newco, so technically the new shares were not issued for cash consideration and the pre-emption rules don't apply.

Rather than completely riding roughshod over the rights of existing shareholders, they are saying they will conduct the placing on a "soft pre-emptive" basis which I take to mean the company will work with the brokers to try to allocate the placing shares vaguely in line with what existing shareholders already hold, if they have subscribed in this placing. And they will limit the size of the placing to the 10% max suggested by the industry pre-emption standards. So basically they will try not to screw over existing institutional investors.

Us retail investors get our primary bid offer, which to me is a bit useless as it's blink and you miss it and I can't subscribe anyway.

In my admittedly limited experience, a constant stream of hole by hole updates isn't necessarily the best way to release news. A lot of people who buy stocks like this do not have sufficient technical knowledge to interpret the results properly (myself included) and can only crudely identify "bonanza" grades from the rest. They also lose sight of the fact that over a 20+ hole drill campaign, not every single hole is going to be pure gold. The drilling is intended to define the resource, its extent and limits as well as its high grades.

Basically what I'm saying is that sometimes it's better for the company to aggregate results together to give a more comprehensive picture rather than fire them out piecemeal. So let's not panic over the fact we haven't seen a hole by hole account so far.

Also there are delays and restrictions at labs due to covid and high demand. You see this all over the place.

And one final thought, Q2 does not mean the very first day or Q2. It can mean any time over a 3 month period. Too many people buy stocks like this expecting results on the very first possible day of a quarter and then seem to be disappointed when they don't materialise in a week. There is still plenty of Q2 to go!

Speaking of the Chinese, don't think this has been posted yet.

https://moneyweek.com/investments/commodities/gold/603131/how-much-gold-china-owns-yuan-reserve-currency

They are hungry for copper and gold... now where can you find a shedload of both on sale today?

If NM had been asked that same question, I suspect the answer would have been something like "look, it's an ambitious target, but we are ambitious. It's what we all want and we are going to be working our hardest to achieve it. The new PFS will aim to bring production online quicker than we previously hoped." Which would not have been lying as such, just putting the classic CEO spin on it.

Keith Marshall as the straight talking mine building expert was asked the question and his response was effectively "No way!" Because he knows exactly how long these things take based on his years of experience building them.

Hi addicknt - yes I think it seems unlikely that Solg will take Alpala to production all by itself. And I'm sure another equity raise is imminent. But at least between the last substantive raise and the next one, Solg hasn't been diluted by 20% in between, isn't that what a raise for $100m instead of the FNV deal last year would have amounted to? Also with the FNV deal they are diluting Alpala but not everything else, which gave the company time to keep working on everything else and get Porvenir to the brink of an MRE. Maybe I'm thinking about this incorrectly but a substantial Solg equity raise last year would have diluted all of our shares of the whole portfolio wouldn't it?

Well, has the PFS been badly managed? You could say yes very because they were clearly being extremely over ambitious and seemed to be prioritising just getting it built quickly as the biggest block cave possible rather than trying to optimise it for cost and efficiency - see KM's comment that the old design was basically an inverted open pit. They should have got the expertise of people like KM onboard much earlier and the old management showed their inexperience there. But the management has now been changed.

On financing though, what was the alternative? What would have made our biggest shareholders the happiest? A large equity raise heavily subscribed by BHP and NCM instead of the FNV deal. And what would they all be discussing right now in terms of future funding needs that are rapidly approaching? Another substantial equity raise, heavily subscribed by BHP and NCM? What percentages of the company would those two combined be left with by the end of this year if management had done everything according to their wishes? Just because they each took 13% stakes doesn't mean Solg has to then bend over and offer itself to them, so they can keep increasing their stakes until they gain control and carve the whole lot up between them, squeezing the rest of us out for a fairly low amount. I don't think putting a few shots across their bows to let them know Solg won't come cheap was a bad strategy per se.

Sea of red across my portfolio today, but been a lot of nice green days the last couple of weeks so nothing to worry about. Just one of those days.

While I agree there are political risks operating here in Ecuador, that's all part and parcel of what got me interested in Solg in the first place. The prospect of a jurisdiction that is rich in resources but has very little history of mining due to historical opposition but which is now beginning to embrace mining just screams massive opportunity, albeit high risk for that high reward. And with a junior explorer having a dominant position in terms of licences rather than it just being the global majors dominating the scene, I'm happy to bear the political risk for such an undervalued entry point.

To be honest in the recent election, when even the left wing candidate is pro-mining and the right wing one is an ex banker and extremely pro FDI, could you ask for more? In my view if Perez supporters are going to spoil their ballots through sour grapes that their candidate didn't get through to the final round, then they are basically giving up their choice and putting their fate in the hands of everyone else who did vote properly.

I think someone said something the other day like "if Alpala was in Canada then we wouldn't be priced like this". Maybe, but if Alpala, Porvenir, Rio and all the rest were in Canada, they would not all be in the hands of a minnow like Solg and we would not be able to buy into this portfolio at this price.

Do you mean CFDs? You can go short on a CFD, or indeed spread bet. You can still trade Solg on margin on IG.

The world needs a lot of copper and Ecuador needs a lot of money. Ecuador has a lot of copper and the world has a lot of money.

Regardless of what any candidate says to get elected, those are the relevant facts.