The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
I was sorry to read the RNS today but I wasn't surprised.
So, although a different industry...just wanted to share a similar situation...Shell some years ago was involved in an exploration projection in Alaska (You may remember Emma Thompson and a rather large Polar Bear camping outside Shell offices).. They obtained a licence from US government and a JV with them. The intention was to complete a 6 stage project to end up with a productive oil well. Shell spent hundreds of millions on this project and ran into all sorts of problems (similar to Prem). In the end, they only completed the first 2 stages and deem the project a partial success with a potential to go back in the future. The reason why they stopped it was because the barrel price of oil lessened and the project become untenable due to them never being able to recoup their initial outlay back. Shell have billions in the bank so could afford to walk away but Prem dont. The plugged oil well is still sitting in Alaskan waters worth a fortune...a bit like Zulu if George doesnt get his act together with rest of Prem. There needs to be serious thought/analysis of value of untapped resources in Zulu versus the cost to process it into a sellable product...at some point if This situation continues Zulu will also become untenable.
Lastly, you may wish to look at MVST ticker. They came unstuck with Chinese partner for one of their projects (a very big project that now has resulted in a lawsuit). Not saying that Canmax have done anything along these lines....but it certainly makes you cautious (well it does me anyway!)
The RNS was released yesterday because the company is legally obliged to share "Material" information with the market. Like most companies they will have Lawyers who decide what info is / is not " material".
For those of you that don't know what "material" means, its whether particular info (if shared) would affect an investors decision to buy or sell a companies stock. If the answer is yes, then the company has to share with the market. This is the whole purpose of MAR. It says on the RNS itself that the info contained within is material.
This is why GR released the RNS yesterday...he had to.
The "control issues" may be significant enough to effect the intended go live production date on the 29th Feb. As an investor its for you to decide whether this RNS release effects you're willingness to remain invested in the stock. Its purpose is to give you the opportunity to make an informed decision....
@clueless
He has to release an RNS because its material information. It will affect if people buy or sell the stock.
The fact he's released it likely means (or there is a significant risk that) it won't be running by 29th Feb...
R_hnew
Nigeria accounts for 40% of their business/income..it was by far their biggest customer base. That's why it has had such an impact.
@TT1981
You make a valid point but banks tend to reject more applications than they accept. At this stage of Prems journey there is no way any bank or institutional investor would lend them money without knowing they having a steady production income from their operations. If Prem went to a bank last year and asked for a loan, they probably would have been accepted.
Exactly.
If you went to the bank and asked for a mortgage and you weren't earning money, but were reasonably sure you may get a job in 2 weeks, the bank would reject your application. It's the same situation here.
It's important for Prem to start production asap...once that happens, the financing will fall into place.
I'm just as worried as the next person and honestly feel it is 50/50 asto whether this succeeds. However, there's as much probability of succeeding as there is failing so worth the risk (imho).
@Martini
1.) I'm sure you kept saying that there needed to be an RNS announcement for Goddard shares to be sold. Lots of us thought that they had already been sold and you used that as a defence to say they hadnt. Seems strange that it's no longer important but if what you're saying is factually correct then fair enough.
2. ) just because it often happens, doesn't mean it has on this occasion. I guess time will tell!
3.) Goddard may have accepted a small % of what they're owed to tied them over and deferred the rest untill after production. They may feel that production stage is very close, so no issue to wait.
4.) I'm neutral on that point.
@Martini
I dont think Goddard shares would have been forward sold for a couple of reasons.
1.) I recall you mentioning several times previously that there needed to be an RNS announcement in order for Goddard shares to be sold (that never happened.
2.) Pretty certain, boxes would need to be ticked interms of governance/compliance by broker, Prem and the holder of share register etc. It just isnt worth the risk.
3.) You may have a point about Zim central bank not approving Goddard being paid in shares, but likely it just didnt get approved (no conspiracy or corruption by any party)...its just it didnt get approved, hence GR is having to take this approach to make sure Goddard and others get paid in cash by having private entity buy the shares instead after Goddard return them.
Happy to stand corrected on any of the above mentioned points, but I Biztech's summation of this situation is spot on.
@Biztech
Thanks for the update. Very logical breakdown of the situation and makes sense that Goddard Shares + small amount left in Treasury have been used for this subscription RNS today.
https://youtu.be/Es9TOyTLboI?si=jtZpQZ67Fe2GQtI6
Re security for loan...you should absolutely worry about where that's coming from.
"Loans" with collateral (especially shares) can be secret ways of selling assets. A CEO of a well known cinema chain but his shares up as collateral for a loan....it then was realised he had no intention of paying said loan back and had actually effectively sold his shares at that time (without have to declare it through normal channels ) not saying GR would do that but something to be mindful of.
I cant find anything on Prem on this FCA link...which is unusual
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
Is there a Zimbabwe equivalent?
There's been atleast 5 big buys this morning which is positive.
Come on folks..the RNS wasnt exactly a surprise was it! We knew another placing was coming.
What are the rules regarding Zimbabwe government investing in Prem? Would/could they act as a private investor? Lots of countries are starting up sovereign wealth funds...be nice to see Zimbabwe follow suit.