Member Info for rcgl2

I didn't say that I wanted to wait 6 years, I said that we shouldn't be surprised if NM's main focus is not on jacking the SP up from 37p to 47p by next week or 55p by next Friday or whatever level people want... He has said that he wants to get to production, whether it actually happens or whether he just gets so far along that road that it boosts the takeover price to a much higher level, either is fine with me... but I'm not just gagging for the price to hit 55p so I can sell and move on.

Much of this debate seems to turn on personal circumstances... my average is something like 21p, and I'm not in a massive hurry, I can afford to wait years of it's going to end up 10x that one day.

Ladinlanx, no, if you vote on these AGM resolutions you can still deal in your shares. The CGP offer was different, you were tendering your CGP shares to be purchased if the offer was successful, so you lost control of them until it was finished and they were returned to you because the offer was unsuccessful.

Hi Red, yes I see your point on timelines. However, the company and NM have stated and been stating for some time that they are intent on taking Alpala and the rest to production... which for an explorer transitioning to a producer means quite a lot of fundraising, some dilution, and a multi-year time horizon to unlock a much bigger payday at the end of it.

At risk of sounding like I've drunk too much of the Chateau Quady, can we really complain if the company does exactly that and takes it to production rather than spend all their time pumping the SP?

Red, why do you think NM is acting nakedly for his self interest? He owns 90m shares. I assume that's more incentive than any of us has to see a SP at multiples of where it is today? Selling at 50p or selling at a quid makes a vast difference to his fortune. If you think he just wants to cash in his chips on the cheap and retire to a beach with his tens of millions, he could probably have picked up the phone at any time to BHP and sold the lot for 40p.

The interests of the other other large shareholders, BHP and NCM, are to keep the SP as low as possible because they want to buy. NM's interest is the same as all of us, to have the SP as high as possible... because he owns tens of millions of them.

"To allow the Company some headroom in relation to any further appointments to the Board, the Company is
proposing to increase the aggregate limit on fees from £400,000 to £600,000."

It's the aggregate fees, payable to all the board directors. They've just added a load of new NEDs for good governance purposes. This is not a 50% pay rise for Nick Mather himself. They've also just re-aligned the executive compensation committee and procedures to make the executive pay more results based (no more confetti options). I think the whole "voting for NM to get a pay rise" is a red herring.

What's in the ground isn't going to change based on whether Solg release an RNS today, tomorrow or next month. Whether we get bought out for 55p or £1.55 does seem likely to depend on who is running the company and what financing options they have available to them. Risking a change of management and limiting funding options at this crucial time, to allow BHP/NCM to come in and pick up the pieces cheaply, seems rather petulant just because we haven't had any drill results for a couple of weeks doesn't it?

Where do you see that Mather is getting a pay rise? The executive compensation table in the AGM circular shows his 2020 salary as just over $400k, with no options this year. For 2019 he got $425k and nearly $3m of options and incentives. I can see aggregate directors' fees are rising from £400k to £600k but I assume that's because they have added 4 new NEDs to the board, all of whom are experienced and probably don't come cheap. What am I missing, what pay rise is NM meant to be getting?

Clearly the 15% stake in ENSA (and also the 7.5% of Solgold) will be what someone would like to get their hands on. How fussed would a major or other institutional investor be about having to buy all the rest alongside the ENSA stake? I mean the rest of CGP, its employees, other licences and investments, offices, equipment, liabilities etc etc. Is that all just a minor fly in the ointment to them and they'll offload everything else because the ENSA stake is so valuable? Or is it a real pain in the neck having to acquire the whole of CGP just to get hold of the ENSA stake? And if so, enough to put someone off?

Hi Quady, yes this was my feeling hence asking the question... seems to make it hard to value CGP accurately if someone wanted to buy them out purely to get hold of 15% of Alpala...

Does anyone have any idea how long it would take CGP to pay off their debt to Solg out of their share of revenues IF they did fund their share of capex and Alpala went to production? How much income is their 15% likely to generate per year once production starts? 90% goes to paying off their liability for exploration which I think is likely to be $50-60m? I may have got that wrong off the top of my head.

If someone bought CGP now, they pay up what $200m (??) to buy CGP, then $400m share of capex next year, construction 5 years or so, clear the carried debt, how long will it take to get paid back?

Thanks for the clip, interesting. I quite like Warren Irwin in interviews, I think he's a smart guy. Don't think his bigdude twitter persona does him justice. Agree with his views on inflation.

So is it fair to say the standard model is for exploration companies to make a discovery and then sell it or get taken over, this is why he invested in CGP, it's Mather's previous MO, it's why BHP and NCM got involved in Solg... everything is dependent on a sale of the asset or the companies. NM keeps up the "going to production" line while he proves up the resource because he has to, it's the only way to keep pushing for a higher sale price. But then, as he goes through the process with Alpala, and looks at all the other potential discoveries in the portfolio, he starts to see something unexpected? The possibility of actually taking Alpala to production. Times have changed, debt is dirt cheap, streaming financiers are plentiful, Solg has an unusually promising portfolio for an explorer. Suddenly all the talk of going to production is looking like it might not be talk after all... Did Warren seem a little uneasy over his CGP position and realises there's a chance this might all end in tears for them if NM can pull off his coup?

Regarding Crossrail 2 which you mention, my reading of the news stories is that it's actually a lot of posturing in order to avoid being held responsible for yet more cost over run. The headlines were that it faces being "mothballed"... this is patently ridiculous, it has essentially already been built, the delays now are to do with finishing certain stations and commissioning the signalling equipment I believe. There is absolutely no way that Crossrail would just be boarded up and left to rot now. What Andy Byford said was that it risks being mothballed while they seek alternative governance for its completion. To me he's saying, we don't have enough cash to finish it under the current arrangements, govt needs to stump up more or we will have to down tools and leave you to pick them up and arrange for it to be completed.

The project will be completed, it's a case of who will pay for it between central goverment, TfL and the GLA... I'm sure a lot of it will be optics anyway, as the government wants it completed but wants it to appear that London is paying for it, especially as they are meant to be levelling up the rest of the country.

Govt may be tightening the belt on things like overseas aid, but no way are they going to reduce infrastructure spending... they are determined to spend their way out of this recession on infrastructure, and try to kickstart the economy. Kier and its peers should be well placed to take advantage of that spending.

Traders gonna trade, as Taylor Swift would say.

What was the market cap at the times when the share price was at 37p in the past?

Wasn't expecting that, went out over lunchtime and very pleasantly surprised by what I've just found when I looked at the SP again. Anyone know the reason? Just had a quick internet trawl but can't see much to explain it.

Still underwater, but being 22% down feels like a big gain after being over 50% down. Wasn't brave enough to double down below 50p. Realise I'm still in a way better position than those of you who bought at like £10 a few year ago.

Anyway, nice to see some positive movement in Kier now...

Zoros I assume in that situation the difference would just get arbitraged away, once it became big enough to justify the fx and trading costs to do so.

Nice video, thanks for reposting. The background blurring makes the presenter look like he's broadcasting from the afterlife.

Hi Quady - I don't think 11(a) changes the status quo. If you look at last year's AGM, resolution 10 in 2019 gave the board the same power, to issue and allot up to an additional 1/3 of the company's share capital (was passed with 85% in favour). These authorisations last to the earlier of 15 months or the next AGM. Therefore, 11a of 2020 is just renewing the power to issue up to 1/3 additional new shares that the board already has.

As I mentioned last night, poison pills are not permitted under the UK takeover code, and Solg is subject to the UK code. Therefore I don't think this power in itself can be used to scupper a hostile bid, by spewing out new shares after a bid has been announced.

Also, resolution 13 for the 2020 AGM disapplies pre-emption rights in connection with such an issue of new shares, but only in respect of 5% of the issued share capital. So if the company did issue an additional 33.33% of new shares, only a small part can be offered without pre-emption rights, the rest would have to be offered first to existing holders (BHP, NCM and everyone else) in proportion to their holdings. At least, that's my read of the resolutions anyway.

Having said that, if you look at last year's resolutions, item 12 of 2019 disapplied pre-emption rights up to a maximum of 15% of issued share capital (passed with 79% approval). So this year the company is actually reducing the amount of shares that can be allotted without pre-emption rights for existing holders. There is also the additional 5% that can be allotted without pre-emption, which is specifically for an acquisition or capital investment... which I assume to be Solg itself investing or acquiring something and paying in shares... maybe some sort of JV arrangement, who knows?

The other big difference from last year as far as I can see, which is very interesting, is resolution 11(b), which allows them to issue up to an additional 2/3 of share capital in the form of a rights issue. I don't see any such provision in last year's AGM. So they are giving themselves the power to tap existing shareholders for a pretty substantial equity raise. Could this be so that they can raise a material amount of equity to sit alongside debt and streaming finance for Alpala?

It total how do we interpret these? It looks to me as if they are giving themselves plenty of flexibility to issue quite a lot of equity over the coming year if necessary. But with the reduced allowance for disapplying pre-emption, and the large provision for a rights issue, this doesn't suggest to me that they are trying to freeze out or dilute down existing large shareholders. Perhaps more suggests they want to keep them on board and allow them to participate in more funding, but not materially increase their existing percentage holdings?

This is my quick takeaway of the AGM resolutions that relate to issuance of new shares, since this has been discussed today. The circular explains all of them so DYOR...

11(a) authorises the directors to issue and allot shares up to 1/3 of the existing share capital.

11(b) authorises the directors to issue and allot shares by way of a rights issue up to 2/3 of the existing share capital.

13 dis-applies pre-emption rights in respect of an issue or allotment of shares for cash up to 5% of the issued share capital. The directors only intend to use this power up a total of 7.5% of the share capital in a rolling 3 year period.

14 additional dis-application of pre-emption rights for another 5% of share capital, on top of the 5% in resolution 13. This one is quite interesting because it says the directors only intend to use this power in connection with a transaction that they have determined to be an acquisition or other capital investment.

Under the UK Companies Act shareholders have rights of pre-emption. If the company issues and allots new shares for cash, they must first be offered to existing shareholders in proportion to their existing holdings.

These rights can be disapplied by special resolution, which requires 75% of shareholders to agree. Two of the resolutions in this year's Solg AGM are to disapply pre-emption rights, but only up to a limited amount. The authority granted by the special resolution is only effective for a limited time, hence it is being renewed at the AGM.

As far as I know the anti-dilution right that BHP had in its subscription agreement was effectively a contractual pre-emption right as between the company and BHP. Although this has now expired, BHP would still have its statutory pre-emption rights the same as any other shareholder, as do we.

If you read the whole of the Wikipedia article that was posted earlier about shareholder rights plans, or poison pills, and look at the country specific details, you will see that they are not allowed in the UK:

United Kingdom
In the United Kingdom, poison pills are not allowed under the Takeover Panel rules. The rights of public shareholders are protected by the Panel on a case-by-case, principles-based regulatory regime.