Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
The original EA document had the extension clause written into it and we were told this at the time. Anglo decided to take up the option to extend and I think to be fair to Arc you have to let the EA run to completion before criticising anyone.
If Anglo are confident of agreeing a deal, why wouldn't they use all the time available to them to make sure everything is right.
Investors look at it differently and get anxious as the deadline approaches but both sides agreed to this timetable, so they are perfectly within their rights to use all the time allotted. At this stage neither side has done anything wrong.
I don't believe Anglo are waiting for drill results before putting forward a deal. We haven't even started drilling yet and it would take us into August before we see results. Not only that but it would be a massive risk by Anglo because if Arc get excellent drill results they could then go to the highest bidder.
Anglo have already put forward a deal without needing further drill results. Yes it was rejected but it was just an opening offer.
I believe they are putting the final touches to a deal and that is why we are seeing total silence from the company. Not one single tweet since tweet since May 8th.
News wise what is going to happen between now and the deadline that would affect the deal?
The only thing they are going to get are the results from the aerial survey.
Yes we are waiting for confirmation that drilling has started, the outcome of the scoping study and updates on Casa/Sturec but none of that is going to really affect a JV.
I am still hopeful that we will see a deal before the current EA expires.
F29, I think previously they tweeted quotes to try to boost the share price. In reality they had little or no effect so I think they have given up on that one. Hopefully they have too many other things keeping them busy now.
If they have told Anglo what they want, perhaps the current share price is no longer an issue.
If the EA is extended yet again, I would expect an RNS at the end of June, so we probably just have three weeks left before we know either way.
If a deal is getting close, with various parties involved Arc, Anglo, Kopara, Rothschilds etc and we are operating in Africa, surely it would be difficult to keep a lid on it, if a deal had been agreed.
Therefore I would be surprised if an RNS is released without a sudden spike in the share price, prior to the announcement.
Having said that, with the share price slowly falling and the share currently being about as popular as a Richard the Third on the pavement, perhaps we still have a while to wait yet.
Peggy@ I agree it is not ideal and even the rampant bulls probably thought a year ago, we would not be at these levels this close to potentially a deal.
It is what it is and some investors get nervous and sell. It all boils down to whether you believe in the management to get us a good deal, I suspect you do or you would have sold already.
I do think you are a genuine investor who is just frustrated at the length of time this has taken, not just the EA.
To my knowledge you have never been rude to another poster, despit getting a lot of stick on here.
I do hope we see something soon as the clock is ticking
I personally think Arc is not as high risk as some say. They have copper in a good jurisdiction and the landscape for copper has changed dramatically in the last year, in Arc’s favour.
They have signed an EA with a major and all looks good. The EA came with the option for Anglo to extend for a further 180 days in order for them to put forward a deal, if they so wished.
Arc received notification that Anglo wanted to take up the 180 day extension on the 6th January 2021.
During the investor call 6th May 2021, we were told that Anglo had put forward proposals but Arc had knocked them back, explaining to Anglo what Arc wanted from the proposed deal.
Now we do not know the date that Anglo put forward their proposal but to be fair to Anglo, let’s say it was the day before the IC 5th May 2021.
NvS has said that talks had been good so you would hope that a mutually accepted framework had been agreed. The sticking point is probably the price and the percentage under any JV.
You can view the EA in two ways, yes we have a major interested and they are putting together a deal but on the flipside Anglo have now held Arc in handcuffs for almost 11 months. Arc cannot talk to anyone else about a deal on anything relating to their Zambian licences.
By the expiry of the EA, around, 14th July 2021, Anglo will have had a year to scrutinize the data that Arc hold and put forward a deal. Not only that but since the IC they will have had at least two months to put forward amended proposals, having had their first one rejected.
Having said all that my concern is;
That as the EA extension is about to end Arc announce by RNS that they have agreed to a further extension to allow additional discussions, without a deal being formally proposed.
If that were to happen, I fear the worst for the share price.
Personally if Anglo does not come up with an acceptable offer by the end of the extended EA, then both sides should agree to disagree and let’s start talking to other suitors.
Well I can honestly say, this is the longest I have ever sat at an exciting crossroads.
You may well be right but under my scenario shareholders don't lose out as they still would have shares in both entities.
If both or either companies prosper, so do the shareholders, regardless of timescale.
Is it the consensus view that any deal will involve a new company being spun out of Arc?
Some of the amended or split licenses will be transferred into that new company and Anglo will then pay an agreed price per share for a percentage holding in that newco.
After the deal is completed holders of Arc shares will then hold 1 Arc share and 1 share in the newco.
This would allow Arc to still hold the remaining part of the Zaco or Zamsort licenses as well as the new stake in the Kalahari.
If this is the scenario I would expect Arc shares to be initially suspended to allow a shareholder vote on the spin off.
If anyone has lost count, it is now day 316 of the EA!
I know, I should get out more.....
I agree the lack of demand is a concern given the position Arc finds themselves in.
I have come to the conclusion that some investors want to see a deal agreed before investing. Yes they may have to pay more for the shares but by then any perceived risks will be reduced.
The sooner the drilling season starts the better.
SP Angel is our Nominated Advisor and Broker
After the 15th February 2021 Investor Call, SP Angel commented the very next day in a 575 word research note, the gist of which was
ARCM – Call reveals approach by large Chinese player, work on Anglo deal and study on Cheyeza copper mine.
They concluded: Zambia is seeing a resurgence of new interest in copper and cobalt exploration. The nation is significantly easier to work in than the DRC, has good infrastructure for mining and remains relatively unexplored in large areas. If Anglo does not offer a deal to Arc we expect the company may have other offers to turn to.
Two days later John Meyer (SP Angel) is a guest on the vox-markets podcast to promote Arc
We then had the fund raise in March 2021 which John Meyer was not very happy about after Arc had said they were fully funded until the end of 2022 in the recent IC.
It is now 12 days since the latest Investor Call where Remy explained the reasons for the fund raise and even apologised for any confusion around this, since then we have had total silence from SP Angel as far as I can see.
It does seem strange to me that our own Nominated Advisor and Broker does not even comment on the content of the IC, after writing such a lengthy note after the previous one. This may go some way to explaining why there is currently little appetite for the share despite the positive outlook for copper.
(Happy to stand corrected if there is a broker note I haven’t seen. If there is one can anyone give a summary of the comments)
During the latest IC Vassily said some of the 18 deep drill holes were in areas not drilled before, he mentioned one NW of Cheyeza. Just looking at that map there appears to be a red/orange dot in that area that may well be the target he refers to.
When the EA was signed 10 months ago today, it came with an agreed extension if Anglo wanted to negotiate a commercial transaction.
That is reasonable but it would have been ridiculous if there was an extra clause to say, if Anglo can’t make their mind up it can be extended again.
It is therefore my view that the original EA expires in two months, if Anglo have not tabled an acceptable offer by then they would have to ask Arc for a further extension.
I would hope, at that point, NvS would say no and then start talking to other potential suitors.
Anglo from the outset knew they had a further six months to deliberate and they have made the most of that. However, with only two months left they cannot be sure that Arc will allow them to delay any longer. With only two months left of the EA to run I expect Anglo to put forward a deal within the next month.
Just my view but I don’t think they will risk last minute negotiations, even if talks have been good so far.
If it is Arc’s plan to maximise the value of all the targets on both licences, surely they need to hold on to Cheyeza.
If Cheyeza is a low cost, cash generating asset that can be brought online quickly to help fund further drilling at other targets, it makes sense to do a JV or partial sale of other targets like Fwiji or Muswema and keep control of Cheyeza.
For anyone who didn't get to hear the IC, regarding demand for copper NvS mentioned the proposed investment in infrastructure by President Biden.
Specifically he said that each electric charging station requires 8kg of copper.
It is incredibly frustrating that the share price still sits at this low level.
Some will say that we still haven’t hit the big deposits. Yet Arc put out presentations saying we have multiple Tier 1 targets and on a previous interview NvS said he was on holiday when he received a phone from a contact at a major saying these were the best results to come out of Africa in years.
A year ago some of our targets may have been deemed uneconomic but with a 100% rise in the copper price, some of those may now be included in our commercial targets.
Yesterday’s CC told us that the proposed plant at Cheyeza will, at today’s copper prices, generate $55m of revenue a year, giving circa $35m free cash flow.
Cheyeza is by area our largest target and should be in production for quite a few years.
At the time of writing Arc’s market cap is circa £71m or $100m
As others have stated previously we do not own the full Zamsort licence, I believe it to be 72%. Our share of the predicted free cash flow is therefore $35m x 72% = $25.2m
If Arc was just Cheyeza, is a market cap of $100m unrealistic for a company with a potential to generate $25m free cash flow a year?
Yes they aren't yet producing that figure but that is excluding Fwiji, Muswema, Lambeta etc, thought to be our best targets
It is drilling at Fwiji/Cheyeza East I made notes at the time
F29 I agree with your assessment, the 're organising our licenses in light of a commercial transaction' was the big takeaway from the CC for me. As you say split Zamsort and we keep CE, with a JV or partial sale of part of the licence.
At least we now know a full takeover by Anglo is not going to happen.