RE: JC at MI29 Oct 2020 18:28
As I suggested a fortnight ago, Solgold’s (LON:SOLG) ‘log-jam’ might take longer to free than some hoped after the BHP lock-in ended last week. The shares initially retraced from a strong 40-42p chart resistance level going back three years, despite the promise that Solgold’s new ‘discovery’ at Porvenir will add substantially to the value it already has at Alpala.
As I see it, however, that old jam hasn’t been freed at all. It is still there in the form of the key shareholdings (Newcrest, BHP, Cornerstone, Black Rock) which would have to be ‘unlocked’ before enough are freed for anyone else to think of bidding. Otherwise, there would seem to be no hurry for any interested bidder to do anything, while Solgold shoulders the cost of further exploration drilling.
So perhaps my warning that investors would start to focus on that cost some time next year wasn’t so premature. Meanwhile, Solgold’s Nick Mather promises that the forthcoming Alpala PFS, and news of ‘conditional’ funding for Alpala, will further improve his defences.
So far, however, any share price improvement is stemming from the initial drilling success at Porvenir. More might come with news from another ‘promising’ target, closer to and possibly even larger than, Alpala or Porvenir, Rio Amarillo, where drilling is just starting.
But, as for Mather’s strategy to take his discoveries to production rather than selling them off at financing stage in order to fund further exploration, I think it is increasingly being seen by others, as well as by me, as ‘for the birds’.
So maybe things will start to happen in smoke-filled rooms behind closed doors. What I don’t think will happen is any public bidding war. More likely is a farm-in by a major to participate in funding Alpala. Such development, I think, would give a more permanent boost to the shares.
If not that, there might be a two-way pull on them during the next six months between drilling success and fears of the next fund raise. And any news would have to be pretty significant to break through that 42p level.
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