George Frangeskides, Exec-Chair at Alba Mineral Resources, discusses grades at the Clogau Gold Mine. Watch the full video here.
Hi Lunch - agreed. The company didn't and doesn't have authority to issue any shares without applying pre-emption rights, because the special resolutions didn't pass. The cash box placing is a workaround of pre-emption rights, and would have allowed them to issue the shares to anyone on a non pre-emptive basis.
However, in reality the company respected the pre-emption group principles, and offered the cash box placing to the major shareholders in a "soft" pre-emptive way, so they were all able to participate in line with their respective holdings. It may has well have been pre-emptive, except for the little guys like us who barely had a chance to participate in the retail offer because it happened so fast and people didn't get much allocation anyway.
My reading is that he major holders were on-board with the cash box offer because they got to participate so it didn't make much difference to them. I don't think they would be happy at all if the company tried to pull off another cash box placing without their agreement and participation, for example offering 10% to a new player like Barrick. In that situation I think they would kick off, start railing against the use of the cash box, claim the company wasn't respecting the rights of shareholders, calling for EGMs and votes on the board etc... Just my guess, but can't see them being happy if they were bypassed and diluted.
Which is to say, the cash box was neat trick when the company had the major shareholders onside, I don't see it as a magic get out card that they can keep playing against the wishes of the big holders.
Bozi's approach to his investment here is better than just clinging to a hopium-fuelled belief that this will get taken over by a major for a huge premium "because that's what happens to tier 1s"
Considering the risks and the potential downsides instead of only looking at upsides and closing your eyes to negative outcomes is something we should all be doing regularly. It doesn't mean someone isn't invested or has an agenda.
Monte/Sire - good points. In fact:
Wyloo Metals head Luca Giacovazzi said: “In April this year, we were deeply concerned when the Noront Board proposed to farm out Noront’s exploration projects to BHP for only C$25m.
“Rather than consenting to such a transaction, we decided to make an offer to acquire the Company. Our fears were justified when the Noront Board completed a deeply discounted 5% placement to BHP, giving away a strategic toehold in the Company to an obvious suitor.”
I guess there are two ways of reading this. One is that the Noront board were for whatever reason beholden to BHP and seemed to be bending over backwards to hand the company to BHP at every step of the way. This is the scenario that many have feared with Solg, especially when half your board and senior execs are all former BHP employees.
The other is that the Noront board were bringing BHP in to push Wyloo into making a bid and trigger a bidding war. Which is ultimately what happened.
This all sounds quite familiar doesn't it... Solg looking to bring in JV partners on the regionals, the placing to Valuestone that you mentioned, even the Franco deal that the major holders felt was giving away value cheaply.
If the going to production plan was always just a giant charade or attempt to extract a higher takeover price and the plan was to get taken over all along (kind of what Nick Mather said via DGR the other day) then some of the steps taken were just attempts to push BHP into action but they have clearly failed. And it feels a bit like Solg is running out of runway because BHP have just patiently held back and not taken the bait. Solg now needs to raise a lot of cash to get all the various studies completed and then will have to actually fund the construction at Alpala... not good if in reality they never expected to get that far.
I would love to know who was approached in the aborted fundraise and why it failed.
The first bid for Noront was made by Wyloo, not BHP. Wyloo already controlled 37% of Noront and in May 2021 they bid 31c to acquire the rest. BHP then counter-offered with 55c and then it went back and forth until Wyloo prevailed at 110.
Obviously a good example of how the price can escalate when there are competing bidders... but, need to remember that Wyloo was already the major shareholder, started from a position of strength, and had actually begun with a pretty lowball offer of 31c.
If we are assuming BHP are going to open the bidding with Solg, they would be more analogous to Wyloo in the Noront battle rather than their own involvement. They are already a major shareholder of Solg and seem to have a pretty strong position. If BHP are playing the Wyloo role, who is going to be playing the BHP role here? Who is going to come in and counter BHP's initial bid and try to take this from them?
We all like to think loads of players want this and other majors would enter the fray, but where are they? Why haven't they bid already if that's the case? Why aren't other majors taking stakes in the business to lay down a marker, like BHP did when they came in and put themselves in pole position ahead of NCM?
Bozi I agree with your posts. Quady there was an attempted specific fund raise and it did fail. As someone already pointed out, we can infer this by the fact that we are hearing about the attempt and we have not been told that it concluded and new shares issued.
There is no "ongoing discussion" about an equity raise at specific prices with some but not other shareholders. It would be in breach of MAR. The regime around these transactions and market soundings is extremely onerous. There will be general, non-specific discussions going on as to the best methods of funding, as the company has said.
In order to gauge interest about a potential equity issue at a given price range, which is likely to be inside information, the company's advisors have to follow a very strict process to conduct market soundings. Only certain authorised persons can disclose the information and receive it. The advisors disclosing have to keep strict records, have to make calls on recorded lines, and when speaking to potential investors have to read out a fairly lengthy and prescribed script informing the other party that they are about to receive the market sounding, confirming their obligations, and asking them if they consent to receive it. Also some investors will not consent and do not want to be told because once they are wall-crossed, it will prevent them from dealing in the securities until such time as the transaction has closed or been cancelled. Depending on the regulatory regime under which you are supervised, your entire group may then be deemed to be wall-crossed.
The discloser also has an obligation to inform parties to whom it has disclosed information once that information is no longer inside information, for example if the proposed transaction is not going ahead. They must also keep extensive records of who they wall-crossed, consents to receive inside information etc that are available to the FCA.
All of which is to say, you don't just conduct ongoing dialogue about specific transactions that would have a material effect on the market price of the shares. Berry Street say "latest attempt to fundraise" which to me implies a specific attempt to raise funds, it does not just refer to Solgold's ongoing generic discussions with investors about potential solutions. The fact that Berry Street know about it, and various other sources also got wind of it, implies that the company's advisors attempted to conduct a specific equity raise, it was not completed, and the transaction is no longer going ahead.
Also I would add, various of us here are in contact with other posters away from this forum, and some posters have other sources away from this or other Solg specific discussions. It is possible to gather information beyond what has been printed in the RNS and for me at least to have confidence that when certain things are stated by posters here they are indeed likely to be accurate and not just made up out of thin are to support some ramping/derampin
My comment yesterday: "I could be completely wrong of course, but it feels like something is brewing and I don't see how we can go on with another year/18 months of the same as we've had over the last few years."
Turns out I was indeed completely wrong, and we are in fact going to go on with another year/18 months of the same as we've had over the last few years.
If a bid comes in at what we perceive to be the low end, 40-60p range, and no other counter-bids are made, then hopefully the board would recommend shareholders not to accept it on the basis that it undervalues the company. But in the absence of any higher bids, the basis on which they would say it was undervalued has to be that Solg can and will raise the financing to take Alpala to production, and also unlock significant value from the other priority targets.
So in that scenario funding seems key. They can't just say they can fund it, like they have done up to now. They will need to produce something more concrete. Which means it's an interesting moment to part company with the executive who has been in charge of the funding plans to date, at the same time Nick Mather is telling investors to "expect Solgold corporate actions" implying that it could happen soon.
It's also interesting that someone like Lisa Parks who was involved in delivering the Alpala PFS has been let go now (I am assuming it wasn't voluntary on her part based on the Linkedin post and comments). You would have thought the same team that delivered the PFS would now be working on the promised PFS upgrade which is due within a year I think, and then the DFS which is due next year.
We also have no regional drilling going on since January, and the SP has been up into the 35 and above area twice this year but on neither occasion did the company take the chance to get an equity raise for regional exploration away at what could presumably have been a pretty favourable price.
It all seems to point towards them monetising Cascabel soon, either selling it, JV'ing it or in some way splitting the company up to separate ENSA from the rest. I'm guessing that would leave the remainder fully cashed up to explore and develop the other priority targets so no need for any more fundraises in the near term.
I could be completely wrong of course, but it feels like something is brewing and I don't see how we can go on with another year/18 months of the same as we've had over the last few years.
BHP moved their primary listing to ASX and consolidated the two topcos. The shares are still listed on London, and you can still hold them in an ISA. Basically same situation as Solg having its primary listing on London and a secondary listing on TSX.
Agree we wouldn't want a cancellation of the UK listing but an ASX listing whilst maintaining the UK listing shouldn't prevent us continuing to hold in an ISA.
Interesting line from Ingo "the strategy has evolved"... What does he mean by that? The strategy is no longer to finance and build Alpala by themselves?
Hi Quady. Yes that does seem to be the case. However, the regionals still need to be drilled at some point so halting the drilling to conserve cash is only postponing the need to fund raise rather than avoiding it. Which raises the question, why delay the fund raise? What's the difference between spending your existing 40m now on studies and then raising 40m in a few quarters time to resume drilling, as opposed to raising 40m now and then drilling and progressing studies concurrently?
Given that the SP seems to range up and down between low 20s and high 30s as things stand, does it imply that they are holding off the next raise because they are expecting the SP to be materially higher, well above the top of that range, at some point in the next few quarters?
Or are they expecting the company itself to look different soon, potentially splitting up Cascabel from the rest by one means or another? And in which case are they expecting not to need the raise at all to resume drilling, because they will have the funds as a result of such an event?
People have mentioned a few times that Nick Mather might be in trouble at the next AGM or won't survive the AGM if Solg put the whole board up for re-election as promised. Watching his DGR presentation I am actually wondering if he doesn't care or in fact might stand down anyway from Solg. Seems like he firmly has his DGR hat on now, rather than his Solg hat, hence his shift of attitude from production to corporate action.
In his talking points about ways to unlock value in DGR's portfolio, if he was being consistent with his own former statements, he would have said something like "PFS upgrade soon, DFS next year, first production in 202X"... That's the line Solg is taking. But he didn't say that, said corporate action.
I'm also intrigued by the comment from Fawzi (thanks Orthern) 'exploration drilling at the regional projects was paused in January and has not been restarted as the exploration team are undertaking extensive field programmes'. What does this imply? Have they not been getting the drill results they expected from the targets they did start drilling, and are now having to go back to the drawing board in terms of modelling and deciding where to drill? Or does it mean they have had to focus on bringing some of the other licences in the portfolio further along the curve to get them "drill ready"?
Could this be why they still haven't announced any JVs for the non-priority licences, because interested parties just didn't think they were far enough progressed in terms of early exploration for them to commit to starting to drill them?
Or are these extensive field programmes happening on Cascabel or Porvenir or other priority targets to try to model the entire licences better in advance rather than have the somewhat haphazard situation they have had at Cascabel where they keep finding new areas of mineralisation beyond Alpala?
I wish they could be clearer in their communications. I don't think we have officially been told that exploration drilling has been halted across the entire portfolio. IIRC Darryl mentioned in a presentation that it had been suspended at the start of the year due to covid... There has been no real clarity on what's going on from the company, and then we get the usual vaguely cryptic answer from Fawzi about it being suspended due to field work, with no further colour.
RK - yes exactly - I don't think it implies that they are desperate to trigger a change of control a week after the meeting because nothing much would have been awarded anyway at that point. Hardly surprising if DC and AH wanted some sort of insurance against them being out of a job shortly after starting in any event (under this or the previous arrangements).
Some people keep blatantly ignoring the fact the non-execs don't participate in the new arrangements because it doesn't suit their agenda, but bear in mind they could participate in the old arrangements... so if you're worried about the board of directors trying to feather their nests, this arrangement is better.
Anyway, despite trying to provide some factual based balance, I'm not sure how I feel about these new arrangements in terms of timing and also the fact that the maximum potential comp for the CEO is massive. I may just not vote either way and see how it plays out (aka see what the big shareholders decide since their votes will carry the day anyway).
Let's try to be clear here in the interests of balance. This is my interpretation so of course could be incorrect...
Several posts here and in other groups are coming at this from the perspective that the proposal is "if the company is sold or sells off 50% of its assets, the directors get a massive payday, and therefore they are incentivised to flog off the assets on the cheap asap in order to reap a large windfall." This is not what is being proposed in my opinion.
The annual short and long term incentive schemes consist of potential for cash, options, performance related options, restricted stock units (RSUs) and performance stock units (PSUs), most of which will have a vesting schedule over a period of time in order to incentivise the employee to stay with the company. I assume these will be, for example, a grant of RSUs that vest in 1/3 chunks over a 3 year period, or such like. If the employee quits before their awards have vested, they forfeit any unvested awards.
The change of control provision means that the vesting of already granted awards is brought forward:
"In the event that the Company undergoes a change of control by way of sale of greater than 50% of the voting shares
in the Company, or 30% [NOW 50%] of the assets of the Company, or any resolution to wind-up, dissolve, or liquidate the
Company, or there is a change greater than 50% of the Company’s directors as a result of a reorganisation, all Awards
will vest early."
This doesn't mean the employees get gratuitous bonuses that they were not otherwise entitled to. It means that the awards they have already earned but which haven't vested and which they would have received anyway if they had stayed with the company, will vest immediately under a change of control.
You could see this as an incentive to sell the company or the main assets, but then again it's also protection against likely losing your job and losing the value of compensation that you have been awarded for past years but not yet received. As an example, if Solg is bought out and taken private, it would be unfair for an employee to have part of their compensation for prior years vest next year in worthless delisted or non-existent Solg stock.
These incentive schemes are designed to withhold compensation over a period of time to ensure actual performance metrics are met and also try to engender loyalty to the company, rather than just paying it all up front in cash based on some short term metric and the employee just pockets it and leaves. Therefore it isn't unreasonable to have a vesting clause for earned but not yet paid compensation in the scenario that the company potentially ceases to exist or the employees lose their jobs.
I would also reiterate the point that non-executive directors are not eligible to participate in any of these schemes, which currently includes all of the directors except Darryl.
As Bozi and others are saying, isn't Cascabel something like 95% of the value of Solg anyway? Selling off some of the lesser licenses is hardly going to trouble the scorers. Whilst I'm not averse to having a market standard compensation and incentive plan that should attract decent talent and (IF administered properly) actually incentive the executives to unlock shareholder value, I agree 30% threshold for change of control when they could effectively retain almost 70% of Cascabel was ridiculous.
I for one didn't spot that, I just skimmed over the change of control definitions thinking they would be market standard, as the board claimed the whole package was... Guess it pays to read every word!
I also agree with what Lunch and others said, optically this looks poor - again. There was plenty of time to canvass the views of major holders before they released the EGM details. In fact I assume that's the only way they can get to a point where it's worth putting it to the vote, since it only takes a few of the larger holders to make things very difficult for the company so they have to get them onside in advance. No need... especially the day after a 15% whacking to the SP!