Member Info for rcgl2

Iceberg - CGP's interest in ENSA is held through its Ecuadorean subsidiary, CESA. The ROFR and transfer restriction is binding on CGP and CESA equally. CESA is obviously not subject to Canadian law. So even if CGP itself was acquired and shares cancelled, the acquiror would still be left owning CESA, which owns 15% ENSA and is subject to the agreement with Solg.

Quady, you cannot broadly agree with everything I have said because the rest of your post directly contradicts the main point of what I just said.

ENSA is a company. It is not an "agreement". CGP owns 15% of its shares. CGP will continue to own those shares, irrespective of who owns CGP's shares. Anyone could purchase 51% of CGP shares now by just buying them up on the TSX if enough current shareholders sell their shares through the exchange.

"If CGP is sold in it's entirity, then the company that buys CGP, needs to gain the agreement of Solgold, as laid out in ENSA" - what is your source for this? Where is it stated?

Reading the board today has been making my blood boil. The misunderstanding of basic corporate and legal matters by some posters is unbelievable.

How many times can it be clearly stated: ENSA is an Ecuadorean Corporation with two shareholders. Solg owns 85% of ENSA shares, CGP owns 15% of ENSA shares.

Solg has a right of first refusal on CGP's 15% equity stake in ENSA. CGP cannot dispose of or transfer its 15% equity stake in ENSA without Solg's approval.

CGP itself is a distinct legal entity, with multiple shareholders. The shares (and therefore part ownership) of CGP change hands every day as it is a publicly listed company. If a third party were to acquire a majority or even all of CGP's shares, CGP would still remain as a distinct legal entity that owned 15% of the shares of ENSA.

The point that Solgold are making is that CGP's main asset is its 15% share of ENSA. However, it will not be able to sell that asset on the open market because Solg has right of first refusal. So the only way to monetise that asset is if Alpala goes to production, because regardless of an asset's paper value, if you can't sell it to anyone today you can't realise that value today. Going to production, though, means funding 15% of the construction costs.

CGP's counter argument is that yes, they cannot just sell their main asset (15% of ENSA shares), but there is no restriction and no right of first refusal on CGP itself. So instead of selling their 15% of ENSA, they are saying they will sell 100% of CGPs shares to a third party. Said third party would then own CGP, which itself owns 15% of ENSA. However, this would also mean that CGP's obligations under the termsheet or related agreements still apply, and the funding requirement would still become due after BFS. The new owners of CGP would be in exactly the same position as the current owners of CGP (Irwin, Chamandi, Sangha, Solg, various other institutions and PIs). CGP's rights and obligations under the termsheet would remain as they are today.

Both Solg and CGP are correct in what they have said, no one is being dishonest. They are just each highlighting the relevant bits that support their own cause.

Timid - there is a bit of a contradiction in CGP's presentation. In the debunking the myths section, they say that CGP will be able to finance its 15% share of post BFS construction costs (estimated to be c$400m) by pledging its 15% shares of ENSA. They say if Solg can raise the 85% based on BFS, then CGP should be able to raise its 15%. However, later on in their reasons to change the Solg board slide, one of their bullets says it's not credible for a junior mining company to finance a project like Alpala.

So which is it? If majors take the view that neither Solg or CGP will be able to finance Alpala, then should they not just all sit tight and wait for the whole thing to go teets up, and then they can start bidding over the smoking wreckage of Solg and CGP sometime at the end of next year when their share prices have imploded (the Sirius Minerals scenario). Why pay $90m for CGP and $1-2bn for Solg now when they are on an impossible funding path?

Or if it is realistic that Solg (and CGP) will be able to finance Alpala, then doesn't that remove one of CGP's arguments for why the Solg board needs replacing? If it is fundable as is, then everyone should sit tight, fend off bids, raise their respective finance next year and watch the value of the project head up and away.

Apologies if this is a dumb question, but I am still not totally clear what percentage of shares a potential bidder would want to achieve in order to take control of Solg in the way that they want it. The legal thresholds are 90% and you can compulsorily squeeze out the remaining 10% and take it private, or (more unlikely if hostile) you can try a scheme of arrangement in which case you need 75% acceptances in order to take the lot. However, in the scenario that you are correct Quady, and there are too many fairly substantial blocks, none of whom want to fully co-operate with any of the others (NM&Co, BHP, NCM, BR, hold out PIs) and therefore a bid would fall somewhere short of 75% acceptances, would just taking majority control (>50%) be enough for a major? Is that what they want?

Someone said the other day that if a bidder gains control, it won't be worth the other holdout shareholders to stick around and continue to own stakes in a company that BHP or NCM was controlling. Is this the case? Would the new controlling shareholder just delist the shares and make it unattractive to own? Would NM throw in the towel and say fair enough, I've lost control of the company, I'd rather just get out now so buy my shares off me? Would he hang around causing a nuisance and keeping a 20% stake in the company, hoping to be bought out for more as the value increases? Does a major want all or nothing because otherwise it's too messy? Or would BHP be ok with owning 60% of Solg and having control of it?

¯\_(?)_/¯

"Building a mine is not as complicated as people make out, thousands of mines have been built, throughout the years the process has been improved"

Literally millions of houses are built every year, and yet anyone who has had any building work done, or even tried to project manage a self build home, will know that it invariably goes over budget, over timetable and throws up all manner of unexpected problems once construction begins.

If it was literally as easy as just hiring in the right technical director, getting out the chequebook and telling them to go and hire anyone and anything they need, why isn't everyone just building goldmines? Why doesn't Amazon snap up some licences somewhere and build a mine? Why doesn't Ford or Tesco or any other random company that has no experience of building one? How come wealthy individuals and private equity funds just hiring teams to build them mines and make millions from them?

Obviously Solg could in theory do this, but you surely must admit that it's much higher risk than an experienced mining company doing it? Surely there must come a point where a JV or farm in is the sensible way to guarantee your asset gets utilised to its full potential rather than going it alone and risk ****ing the whole thing up?

Hi Grim. It's a low liquidity stock whose share price seems to lurch around quite erratically throughout the day, often seems to build through the day and then drop off a cliff at the close, or vice versa. Intraday movements don't seem to be driven by any particular news or fundamentals... If you look for spooky patterns in the SP movement, you'll convince yourself you can see them. That would be my guess.

Correlation is not causation.

I feel like a lot of posters here think that all City institutions just leak price sensitive information like sieves. The number of posts I see here along the lines of "my mate at Peel Hunt says so and so is happening on Friday" or "SP has gone up 1.2% on TSX, deal news must have leaked" etc. Seriously, do you think in 2020 it's that easy to just have MNPI chucked around the place and regulators aren't going to be onto it in a flash?

Yes, I know it must go on. I know people can and do leak and trade on MNPI. There will always be some nefarious practice. But honestly, the days of some loud mouth barrow-boy trader going down the pub after work and tipping off anyone who will listen are long gone imo.

Where I work the policies around insider lists, wall-crossing, monitoring etc are insanely strict. Private side and public side are physically separated, you can't even get into where the private side sit. The compliance training is constantly re-done every year covering every aspect of market abuse rules and the like. It's mandatory with severe punishments for not completing it.

There are a lot of suspicious activity reports and suspicious transaction/order reports submitted to the regulators all the time. When you run a large DMA business you are expected to monitor the client transactions like a hawk or the FCA will come down on you like a ton of bricks. Even if there is no wrongdoing, any trades out of the ordinary will be reported. On top of that there is all the transaction reporting that is required by the EU legislation such as MIFID. Firms have received some pretty multimillion pound fines over the last few years for failures in transaction reporting.

If there was a spike in trading on Solg immediately before an RNS or some other news was released, I personally think the FCA would be on it before you could say "going to production". They can see a lot more than you think. They are right up the backsides of all financial institutions these days. Same in the US with multiple regulators all claiming jurisdiction over the big megabanks like Citi, plus all the state and federal prosecutors constantly looking to make names for themselves by busting wrongdoing on wall street.

Maybe some of the posters here know more than I do, maybe a rumour will be true, but I honestly think if you're expecting non-public price sensitive information about Solg to leak out and find its way onto this BB before it hits the wider market then you're going to be disappointed.

Barrick probably need to be a bit conservative because they have to some degree been seen as poor performers in the past. They were hamstrung back in the day by their hedging policy, although they abandoned that. They are a new beast under Mark Bristow though, better run, offloaded some assets and reduced debt. He wants to expand into copper. Would be great if they chucked in a bid for Solg imo.

Hi Miagi - I see your point, thanks.

How many times have you invested in a company where the CEO promised there would definitely be massive dilution in a couple of years time?

Hi Miagi - the $2.7bn is the estimated construction cost though isn't it? Cornerstone's share will still need to be funded even if not by Cornerstone. If Solg takes CGP out for $3.5m, that extra $400m of cost still needs to be found at some point.

addicknt, isn't it just because the 85/15 split with CGP is a bit of a nuisance and they want it to go away? Solg is the operator, Solg is funding everything, Solg is trying to arrange the funding packages etc and it's all made that little bit mor complicated by the ENSA structure. Particularly as CGP has proven themselves not to be a particularly accommodating bedfellow. In terms of Solg's stated strategy, I guess they see spending a bit of time and money now to tie up a loose end and remove any last wrinkles as worth it in the long run.

Exactly CD. CGP just has a timing problem on their hands, short term they are running out of cash and medium term if they don't run out, they have a massive funding liability on their hands after Alpala BFS. Solg had two choices, sell up now or keep going towards production. They chose the production option and CGP want the sale option as it is their only viable option. It's as simple as that, all of the other stuff about corporate governance etc is just fluff. Their only objection to the FNV deal really is that it keeps Solg on the production route for longer and CGP can't afford to stay onboard. In and of itself FNV is not a bad deal.

The CEO of Cornerstone said that they want to replace the current board with a new board who will open up the data room to more bidders, bring in some competitive tension and push through a sale of Solg at a higher price.

Therefore if BHP and NCM both want to acquire Solg, why would they vote for a new board that will attempt to make them pay a higher price for it by bringing in other potential bidders?

Hard to second guess Blackrock's actions tbh. Blackrock are also one of the largest shareholders of each of BHP and NCM. I think they are one of Barrick's largest too. Given their sheer size, they probably have a substantial interest in every potential bidder as well as Solg itself. Other than some Chinese company none of us have ever heard of.

I don't know how they make decisions on things like takeovers of companies they're invested in, is it at a group level, regional or sector level, do the individual fund managers get to make a decision themselves for their funds? Is there an ESG or similar focused committee that can override the fund managers if necessary?

Really? Everyone with an interest in Solg is scrabbling around speculating about drilling progress, desperate to know this rather material information... And yet all along we could have just emailed Eliza and she would have just told us?

In which case I'm just gonna ask her now what date the FNV deal will be signed, what deal Nick has struck with BHP and what colour knickers she's got on today.

I've got a friend who I chat about investments with, her approach is more cavalier shall we say. I'd told her about SOLG before but when it was crashing in March I mentioned that I'd topped up and lowered my average. She just went and bought some that day, I believe at around 12p. So if this gets taken out at 55p not everyone will be disappointed, a 4.5x return in about a year without much care for what may or may not have happened in 5 years time would be pretty decent for some people!