George Frangeskides, Chairman at ALBA, explains why the Pilbara Lithium option ‘was too good to miss’. Watch the video here.
How much do Chinese companies care about the economics versus just securing copper supplies? For the majors or other western countries not only does the mine have to be profitable, it has to generate sufficient returns on their capital to pass all their screening metrics. They don't want to be barely breaking even.
Is this the case for, say, Jiangxi? Or are they just a front for the state and priority number one is to secure the resources even if they don't make much profit? Presumably if BHP were to buy Cascabel, they'd ultimately be selling most of the metals to China directly or indirectly anyway?
I honestly don't know enough about this so maybe haven't formulated the question properly but what I'm getting at is are the Chinese companies going to be our best bet because their incentives to secure the assets are different from the western mining companies?
WI on twitter: https://x.com/ItsWarrenIrwin/status/1638645942701391872?s=20
"Sold over half my SolGold shares in 2017 at 40p plus. My cost was less than 10p, so took multiples of my capital off the table. I bought real estate with the profits that has done well since then. Wish I sold all of my shares, as it has been a nightmare since then."
https://x.com/ItsWarrenIrwin/status/1651391038492413952?s=20
"It is a public company. You can sell anytime. I sold half in 2017 thankfully."
Fort: "Lets face it... Scott is not proven CEO material is he? He's done what exactly?"
"Mr. Caldwell is a mining engineer with over 30 years experience building and operating gold and base metal mines worldwide. He is the current President, Chief Executive Officer and Director of Allied Nevada Gold Corp. since September 2006 and also served as the Chief Financial Officer and Principal Accounting Officer for the company from September 2006 to April 2007. While under Mr. Caldwell’s tenure, Allied Nevada’s Hycroft gold mine was built and achieved commercial production in 2009.
From March 2003 to August 2006, Mr. Caldwell was the Executive Vice President and Chief Operating Officer and Director of Kinross Gold Corp. and oversaw the La Coipa and Maricunga gold mine operations. He also served as the Senior Vice President of Surface Operations from June 1998 to March 2002."
I'm not some Caldwell fan-boy, I would also appreciate a lot more clarity and enhanced communications, and I'm equally displeased with the SP as everyone else, given I'm about 50% down on my investment now. But come on, to dismiss Caldwell's experience with a stroke of your keyboard seems rather short sighted to me. Out of Mather, Darryl and him, he's clearly got the most relevant experience. He's also the only one who has stated in no uncertain terms on several occasions that Solgold are mine finders not mine builders.
I agree with the Italian, the stuff he's doing right now (and on the ground, in Ecuador, unlike his predecessors) is not glamourous or sexy or exciting but it's obviously the necessary work that needs to be ground out in order to sell Cascabel.
My experience of dealing with regulators and govt bodies in frontier markets is that it is a slow, inefficient and frustrating process. Often even the simplest of requests for approval take months or years, needing to be constantly re-submitted and pushed along with multiple face to face meetings to go over the same materials, with no officials willing to make a decision. I don't think we should underestimate what a big achievement agreeing the heads of terms of the exploitation agreement is, especially in the current politically unstable environment in Ecuador.
FWIW I also don't think the value of the 100m shares they own is based on the current SP, because there's no way anyone could buy that many shares in the market without materially moving the SP up... even if it was done over a period of time. The daily volume here is so low it would mean prolonged buying pressure and the price would be moving north.
If someone wants to acquire a strategic block of tens of millions of shares, they will need to pay a premium to market price.
The strategic review was a condition of CGP accepting the takeover offer. I just take it to be official conformation of a change in strategy from "try to fund and build Cascabel ourselves and hope that triggers someone to bid in the meantime" to "actively seek to sell Cascabel or the whole company and also figure out the best way of monetising the rest of the portfolio as well."
I don't think Scott has wasted this year, as I said the other day. I think he's doing what needs to be done to make Cascabel as saleable as possible and at the same time stop the rest of the company from bleeding monet while that happens.
The idea that BHP will just come in, buy Solg, rip up all plans and relationships with the govt and start again from scratch doesn't seem plausible to me. And I don't think it's BHP they are negotiating with to sell Cascabel anyway. I think the potential buyers want a shovel-ready project with all licences, plans and agreements in place so they can start construction as soon as possible. Solg has all the relationships with the govt and local authorities and I think buyers are happy to let Solg wrap those things up. I also think before anyone commits billions to fund this, they want to put a floor under it with a base case PFS that works with lower initial capex than the current proposal. As Stackhouse said in the presentation, this is the "show me" phase. Hence the need to re-do the PFS plan and get it right this time.
Also I don't see that BHP and NCM/Newmont's interests are aligned with us, unless one of them magically decides to throw a couple of billion at buying Solg. Scott has said they didn't want him as CEO, there's a reason for that, because they know he's been installed to try to sell Cascabel to the highest bidder, not to just keep developing it through more and more dilutive to equity placings funded mainly by them. So I don't see why helping them get rid of him and destabilising the company at this crucial moment is in any of our interests.
Therefore I will vote in favour of him.
Hi DM, think Fort just said what I was going to say... doesn't the "right" mine design and PFS depend on who the buyer/builder is? How much appetite have they got for planning and permitting and derisking, or how much would they rather a junior explorer/developer do for them in advance. How much capex can they raise to get started? Are they public or private or state owned? Beholden to outside shareholders or playing a longer strategic game?
Agree Fort that the plan now seems to be to produce a PFS design that more interested parties could fund rather than just limiting it to the biggest players...
Seems to be a contrarian take but I think Scott has achieved quite a lot so far, and he's the best CEO out of NM, DC and himself in terms of experience at running and selling mining companies and building and operating mines.
Securing the licence extension, agreeing the heads of terms for the exploitation licence, reducing headcount and expenses, negotiating the pipeline route, securing land purchase options etc may not be as glamourous as bonanza drill grades and announcing major investors, but they are very necessary steps. I think you underestimate how tortuously slow negotiating with local and national governments and regulators can be.
Instead of criticizing Scott for doing all this, we should be asking why previous management teams haven't already sorted this stuff out or progressed it further. Perhaps because they were wasting resources on various re-hashes of the PFS whilst drilling multiple different targets and having to keep fundraising for doing that. Perhaps shows that Solg simply had too much on its plate. A small explorer that has the largest land package in Ecuador, multiple targets to keep progressing whilst at the same time attempting to go it alone with the definition and development of a huge tier one copper prospect.
I have asked couple of times before what more could previous management have done differently, in the absence of anyone bidding for the company or for Cascabel. I guess Scott has given an answer to that, which is to have got the PFS right the first time rather than have to repeatedly re-design the mine plan.
I know everyone says that any buyer will just rip the PFS up and do their own plan but the plan has to be economic to mine and no amount of expertise will make it viable if the deposit is just too deep and too hard to mine at current metal prices or expected prices in a few years time. A decent Solg PFS at least serves as a sort of minimum floor. If Solg can produce an attractive and economically viable PFS then at least it gives a buyer some comfort they regardless of them coming up with a better plan, there is always a viable base case to fall back on.
Let's face it, Scott has experience of building and selling mines, if he thinks this is all necessary then it seems a more credible view than the previous strategy of drilling holes everywhere and producing a massively expensive PFS.
Just my opinion, I realise many will disagree.
So the new strategic adviser is a former US diplomat who used to work with Caldwell at Guyana Goldfields (which was sold to a Chinese mining company).
https://en.m.wikipedia.org/wiki/Perry_L._Holloway
Copying from when we discussed this in February:
Under the Companies Act, treasury shares are shares that have been repurchased by the company using distributable profits pursuant to a share buyback scheme.
The CGP Solg shares have not been purchased in such a manner and definitely not using distributable profits. Therefore I don't think they are considered treasury shares under the Companies Act. They will just be an asset of the CGP entity that is now a Solg subsidiary.
So Solg does still own the shares, but technically they aren't treasury shares.
Https://www.mining.com/web/copper-mine-flashes-warning-of-huge-crisis-for-world-supply/copper-mines-are-taking-longer-the-average-length-of-time-to-develop-a-new-project-is-now-over-a-decade/
https://www.spglobal.com/marketintelligence/en/news-insights/research/copper-miners-enjoy-high-profits-but-development-capital-expenditure-lag
"New primary copper mines starting up between 2019 and 2022 had an average lead time of 23 years from discovery to commercial production. "
https://www.reuters.com/markets/commodities/copper-industry-warns-looming-supply-gap-without-more-mines-2023-04-20/
"Regulatory approval for new copper mines has fallen to the lowest in a decade, according to Goldman Sachs (GS.N), an ominous harbinger as mines often take 10 to 20 years to permit and build."
The main plan is to sell Cascabel. I believe Scott stated that it has been drilled enough now, so any additional drilling there is presumably not going to affect the value much, it will just burn up cash. The process of selling Cascabel will take as long as it takes, and is not directly related to what's happening at the rest of the regionals.
We saw prior to them stopping drilling, releasing even decent drill results from the other targets wasn't really moving the dial on the SP at all. Agree with Italian that the entire mining sector is down, the froth of a couple of years ago has been replaced by doom and gloom. So I guess they have decided that keeping drilling the regionals is not going to achieve much, other than burning through yet more cash. If balances get low, they will need to come back to the market for more funding, which will just mean even more dilution for us. I'd rather they raised equity funding in a more upbeat market at a price north of 20p, rather than down here at 13/14p.
Also given that we don't know if they want to offload the regionals, spin them out into a separate entity or just sell the entire company, it's probably best not to be throwing millions at them in drilling.
Yes the whole thing is frustrating and yes I wish things were different. People are very quick to criticize the company if things don't happen immediately. In the grand scheme of things (10-20 years from discovery to mine) taking a year or so to negotiate the sale of deposit as complex and costly as Cascabel is probably par for the course, especially in a depressed market with high inflation and two-decade high rates, in a country that has been mired in political turmoil all year.
I think the previous company secretary was the general counsel, unless we hear otherwise I assume he's still employed by Solg as GC... so not sure if this will save costs. To your point add, I wouldn't have thought the GC of a small company would be that busy on other matters that he couldn't manage the co-sec role as well.
Regarding which out of UK or Aus offices would get the chop, it just feels to me like London is the one they are closing. They've lost or got rid of Fawzi, Ingo and anyone else who worked there. Half of the board including Mather and the chairman are in Aus. It was a stipulation of the takeover agreement that one of CGP's two directors be resident in Australia. They are appointing Australian corporate service providers.
As ever with Solg, the route to monetization remains as clear as mud...
According to Companies House filings, Ryan Wilson resigned as company secretary on 10 August. On the same date, James Christopher Doyle and Steven Douglas Wood were appointed as company secretaries. Both seem to be employees of an Australian corporate advisory firm: https://www.grangeconsulting.com.au/team/
Steven Wood, B.Com, CA
Steven joined Grange in 2011, where he specialises in corporate advisory, company secretarial and financial management services. Steven is a Chartered Accountant, and since joining Grange he has been involved in various private and seed capital raisings as well as successful ASX listings, whilst also providing company secretarial and financial management services to both ASX and unlisted public and private companies. Prior to joining Grange, Steven started his career in the Perth office of Pitcher Partners where he spent several years in their corporate re-structuring division. Steven is currently Company Secretary for a number of ASX listed entities.
James Doyle, B.Com, GDippAppFin
James joined Grange in 2022 and is an experienced corporate advisory and governance professional specialising in the provision of company secretary and corporate advisory services to companies across a range of sectors including resources, industrials and information technology. James has extensive experience advising on ASX Listings as well as secondary and seed capital raisings for public and private companies. James currently acts as Company Secretary for a number of ASX listed entities.
Does this mean anything? On the one hand I'd guess no, they are just outsourcing some administrative functions in Australia and shutting down the London office, as per their stated aim to reduce the number of jurisdictions they operate in. Although if they are just outsourcing admin, why not outsource the co-sec function to a UK based service provider, given the primary listing is on LSE?
On the other hand, if you want to make wilder speculations, could they be planning to arrange listing on the ASX, or otherwise raise capital in Australia? Would they transfer the primary listing to ASX, and would London be maintained? Who knows with Solg...
DM - ministry statement is here (well, their press release, which I assume is the statement):
https://www.recursosyenergia.gob.ec/ministerio-de-energia-y-minas-suscribe-acta-de-negociacion-con-solgold-previo-a-la-firma-del-contrato-de-explotacion-minera-del-proyecto-cascabel/
"Durante la vida del proyecto se estima una inversión de USD 4.882 millones."
"During the life of the project, an investment of USD 4,882 million is estimated." (Google translation)
AgArCu - if what unfolds is some sort of JV or similar arrangement with a much larger partner facilitating the financing and beginning construction (potentially leading to them buying out their Solg junior partner at some point in the future), then I agree that this is not all going to unfold any time soon.
However I thought the "fast and smart" comment was in reference to selling Cascabel. It wasn't clear to me whether their preferred option was literally selling Cascabel (ENSA) and keeping the rest, spinning it off etc, or if it was to try to sell the whole of Solg to an acquiror who gets Cascabel and everything else thrown in. I thought the point of the Bob's Bat reference was that he was trying to keep Cascabel out of the hands of BHP and NCM, by selling it to someone else.
What is your reasoning that neither of these options will not happen in the near future? Let's say, within a year, rather than putting an arbitrary 31 Dec cut-off on it. What's to stop someone like Jiangxi coming in and offering to buy Cascabel/ENSA and Solg's board recommending this as the best outcome on the basis that they have no hope of financing it themselves and remaining as a minority partner in a JV is not the best value for shareholders? Or alternatively, what is to stop an interested party tiring of the constant "two steps forward one step back" of Solg trying to develop Cascabel, and just making a bid for the whole company? That would get all the prospects into the acquiror's future pipeline to be developed by them on their timeframe and with their negotiating power facing Ecuador govt.
I'm not saying I expect either of these (sale of Cascabel or sale of Solg) to happen in the next year for any particular reason, other than I suppose that if they are going to happen they have to happen at some point. Just curious as to why you think they definitely won't happen within a year.
If you were in at 3p how have you managed to lose money and how is that Mather's fault? If you're still holding now you're up over 5x. The SP has been to 40p about 4 times since you bought in. It's your own fault if you didn't sell when you were up over 10x on multiple occasions.
Throughout the time I've held this share I've often tried to figure out what exactly could Solg management have done differently. If the ultimate goal was always to get taken over/sell Cascabel and no one was willing to make an offer, what could they have done differently...
Lots has been said about the PFS and the multiple false starts. But then again, depending on who the eventual buyer is, how important is Solg's PFS really no matter what form it took.
I keep coming back now to the CGP merger and the resultant dilution. I think when I invested there were 2-2.2bn shares issued. Now there are about 3bn. The SP now seems to reflect the dilution in terms of number of shares without much uplift for the fact the company owns 100% of Cascabel not 85%.
I wonder if the real mistake was not paying up to consolidate years ago. Everyone seems to think consolidating 100% of Cascabel was the right move, from Mather to Cuzzubo to CGP management. Maybe if Mather had been less aggressive and hubristic a few years back and hadn't launched that insulting hostile offer that was doomed to fail from the outset, we'd be in a better position today. If CGP's 15% really did make Solg a much more attractive takeover prospect then it was worth paying up for. By trying to get it on the cheap, we ended up paying up for it later on from a worse financial position at a lower SP and with much more dilution. We also failed to consolidate during the bull market post covid and now find ourselves languishing here trying to sell in unfavorable market conditions.
No research behind this post by the way, just my top of the head musings as I sit watching my kids in soft play on holiday...