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F79 - I feel similarly. The two most-often mentioned analogies are SOLG and GGP. Both experienced huge increases in valuation after their big deals with majors were announced. The reasons, imo, can be simply summarised:
A 180-degree change in sentiment, from derided to lauded, with resulting retail investor FOMO
De-risking of projects, allowing institutions to take positions
The actual fundamentals and related commercial opportunity being unlocked
Positive results from drilling campaign
With SOLG and GGP market caps moved from ~£20-40m to ~£400m-£1bn+ (if memory serves). Opening up huge acreage in the Copperbelt may well reveal significant copper discoveries. The journey to one or more Tier 1s will be choppy in terms of share price volatility. The increases SOLG and GGP enjoyed occurred over about 9-18 months post-signing (time for institutions to conduct DD, initial assays, retail FOMO kicking-in etc.). Upward momentum begins to feed on itself...until it doesn't. But in the long-term, fundamentals win-out for those who are patient, and should the positive expectation be crystalised.
An interesting difference regarding the Arc-AA deal is the upfront cash. I believe GGP and/or SOLG conducted fresh fund-raisings post-deals. In Arc's case, with £££s in its coffers to explore Botswana, it's less likely. But never say never.
Assuming the deal is closed as expected, be prepared for quite a ride (with some sharp retraces) as the herd arrives. It's why it pays to be clear in your head regarding a range realistic outcomes and how to react to them.
So, here are some recollections from a veteran Ortac investor...
I fancied a 'quick trade' in 2011, based on the Sturac gold prospects and was heartened by the fact that Henderson Global Investors were 11% owners. What could possibly go wrong? Plenty, as it turned out.
Needless to say, Ortac / Arc turned into rather a long-term hold. I bought in at an equivalent price of £1.60 per share (not a typo - it was well before the 1:100 switch, circa 2017, shortly after the arrival of NvS). Going against most principles of sensible investing I bought more (and more) as the price dropped, to the point where I now have 6.1m shares at an average of 4.5p across ISA and SIPP accounts.
What caused me to take these rash actions? Essentially, it was the arrival of NvS and his focus on gaining a majority stake in Zamsort. The pre-history with AA (I think they exited Africa circa 2000?) and my long-held belief in the rise in importance of copper caused me to double-down and reduce my average entry price.
NvS and Remy are (imo) first-class professionals with a clear strategy that is close to reaching a hugely important milestone. I acknowledge there might have been clearer communication, but these will have been extremely complex negotiations, dealing with sophisticated folk as well local / regional politics and malcontents, so I never expected a running commentary.
Lots of lessons learned, but for me it's been largely a question of trust: do I trust these executives to navigate Arc's transition from a minnow with some interesting territory, to a possible mid-cap, dealing eye-to-eye with the big boys? And especially at a time when copper's strategic importance could hardly be greater. The fat lady hasn't yet sung, but it's good to know that she's in the dressing room, gargling in preparation for what I hope is a truly memorable performance!
As they say on such forums...GLA
In mid-2020, Arc entered into an exclusivity agreement with AAL. At the time, AAL's market cap was ~£23bn. It is now ~£44bn. If I was a shareholder of AAL, I'd be (a) delighted with the sp performance; and (b) potentially dismayed if the management team failed to gain a meaningful commercial deal relating to one of the very few undeveloped Cu-rich territories. I can only imagine that NvS and Remy are seeking a pretty substantial valuation to release Arc's grip on a glittering prize, especially with copper's trajectory looking assured for years / decades to come.
- Copper heading higher on demand and tight supply for years / decades to come
- Peru & Chile will soon make life for majors considerably less comfortable
- Zambia will welcome majors, the capex and a fair level of taxation
- Arc has majority ownership of vast undeveloped Copperbelt acreage, comprising multiple highly promising targets
- Management have their reputations at stake as well as significant share ownership / options / warrants
- EITHER management, Rothschilds and two majors undertaking deep due diligence are all mistaken and will have much egg on face OR our little £27m company is a true anomaly, presenting outstanding asymmetric risk and considerable upside from this patently absurd (imo) level of valuation
Happy Christmas!
A very clear trend is emerging for investors, one that is intricately tied with the electrification of the world. With this trend, one commodity has proven to be indispensable, according to Pierre Lassonde, chairman emeritus of Franco-Nevada (in interview w/Kitco News).
"The greening of the world is going to be a renaissance of copper mining, and I don't think it has clued in with the governments and the environmental groups, but the intensity of copper use going forward will essentially triple. Over the next forty years, we're going to have to triple the production of copper and when you look at where we are today, and the number of deposits we have, a lot of them are on their last legs,"
F79 - I fully empathise, being in a very similar position. Value will out, the copper (however much there is) isn't going anywhere and will in great demand in the coming decade/s. Arc's fundamentals, given its tiny size, are remarkable. The management team is in talks with multiple parties, akin to a series of poker games in parallel, so I would expect there to be more time spent on meaningful talks rather than pandering to jumpy retail investors.
I see the shareholding structure as a series of concentric circles, with significant external and internal holders being the core, patiently biding their time for true value to be proven. Outer layers include many who have done minimal research plus some bad actors, some of whom have been 'at play' in recent days / weeks. It's AIM, I'm afraid and there's not a great deal long-term holders who've done their homework can do about it.
Karl-Erik has tens of millions of shares and doesn't seem too concerned, so I too will see it out.
Plenty to note regarding supply-demand, China, future strategic importance etc.
https://palisadesradio.ca/daniel-earle-copper-prices-to-reach-multiples-of-previous-highs
EeyoreWaysls - if satisfactory deal is reached (buy-out or JV) by agreed date (or after brief extension) then Arc should re-rate to multiples of current sp. If no deal is announced, sp would likely drop sharply but be heavily bought into because Arc (a) has other suitors, essentially lined-up, ready to engage in talks; and (b) the ability to self-fund future drilling via (1) cash in bank; (2) cash incoming from deals (Sturec / Casa); (3) financial engineering to build plant to generate free cash flow from Cheyeza East. In short, strap-in for a choppy ride, but there's no shortage of upside as well as scope for short-term pain and FUDsters galore if no deal reached in near-term.
Much appreciated - cheers!
For the record, my first purchase was at 1.6p which, in today's money, equates to £1.60.
And I would certainly not advise my strategy to anyone. If this comes good, it'll be due to a mix of research, trust, luck and sheer pig-headedness!
Ha, thenafone, so you're a newbie!
I bought into the Sturec story in 2011. At one point 92% down, but averaged down to 4.6p buy buying rather more than I probably should have (and with trust placed in NvS on the basis that an experienced chap in peak earnings years wouldn't be touching Ortac with a bargepole, unless...). But here I am, with 6m+ broadly split between SIPP and ISAs. No wonder my wife's refrain is: "How's Arc doing?"
MetalsTech announced overnight "bonanza grades" and that an aggressive move regarding resource expansion drilling would start soon. Good news for Arc with decent payments due as Sturec's commercial viability improves.
Great to see copper's rise, but today's call simply underscored the value of TRUST in management. We have the assets, and a world-class team in charge. I averaged-up during recent slump and am happy to let them get on with it. Exciting times.
Well worth watching Remy's contributions. Whenever I see him 'in action' I am filled with confidence - understated manner and credible (in a mining / exploring world littered with promoter BS). An experienced investment banker who - at peak earnings age - is working towards a significant payday at Arc.
In particular, the video underscores just how important it is not to sign-away assets just to get a big name on board. The real, life-changing returns come from minimising dilution of ownership. He also described Arc's territory as 'special'. We are fortunate to have him on the team.
The Casa asset took a great deal of effort to prove up, and I recall Vassilios being pretty optimistic regarding the potential for a considerably larger resource to be proven, given time and money.
But the larger story, quite rightly IMO, has been to be viewed as a pure-play copper explorer / producer. Hence the Casa & Sturec sales were the result of commercial pragmatism. But, given the quality, quantity & further potential of Casa, it was frustrating to see it sold off on 'okay, not great' terms (per NvS).
Perhaps Casa has effectively been 'parked', awaiting better conditions and circumstances? I certainly hope so, because gold has the potential to go much higher and if a big bull run takes shape, ANY large scale proven deposit, irrespective of jurisdiction, rises BIG time. Who knows, the day may come when a missed payment of $5m could prove a very good thing!
My take, FWIW:
First and foremost, I trust management to maximise shareholder value. The mining business is very tough with equally tough negotiations, especially regarding such a sizeable / valuable / strategically important set of assets. If NvS / Remy decided that a small raise was required, so be it.
I was surprised by the news, given the recent 'no raises' statement, but I trust that it was done for good reason, many of which have been speculated on in recent days. Management have a clear strategy, have engaged world class advisors, and if they need to raise some cash to take advantage of: deeper drilling to satisfy AA demands; buying an interesting asset in Botswana; increasing stake in Zamsort, then fine by me. It will have been well thought through.
I'm intrigued by the possible increase in % ownership of Zamsort. Any drilling costs needs to be paid for by stakeholders on a pro-rata basis, necessitating cash from Kopara, Arc's minority partner. I suspect an elaborate game of chess is being played, best understood only by Arc's management and advisors, not retail investors, and especially those who are vocal about non-delivery of instant gratification. Time will tell, and its a non-linear process, but I'm happy to let them get on with it.