Member Info for TakingMyTime

@DGR, I was wrong, I just checked. Scallywag is within the Havieron license and so is subject to right of first refusal through the life of the Hav JV. The other Paterson sites are only until the end of the Farm-In.

Of course, we still could end up with a Farmi-in / JV with Rio or someone else at Scal. It's just that Rio would have to pay enough to convince NCM not to exercise their right of first refusal. I don't see that happening. They'd be more likely to just buy the whole company than to overpay for Scallywag.

@DGR "Newcrest get first refusal on everything apart from Rudall"
During the farm-in period. That expires when the farm-in ends.

@ttb "It’ll be interesting if we get either of Rio’s - Deutsche or JPM"

As you mentioned, there's the possibility of a JV with Rio on Scal (or potentially one of our other holdings, Rudall comes to mind since Rio is right next door there, too). That might create issues with some conflict of interest rules. I'd think it could be manageable but maybe not worth the hassle so I'd guess they'd be looking at other options first.

I never cared that much about Swiss cheese before, but every time Paddy posts an update and I see all those holes in Havieron, I have this sudden urge to go gorge myself on the stuff.

Interesting article, thanks.

Just for fun, 232. No reason, really. Could be 280 or 180 or even 330. Too much volatility and too many variables.

Thanks, HG.

@spoon
Yeah, it's rather scary to think it could be permanently with us. I've got a lot of confidence in the pharmaceuticals industry, not necessarily in their integrity, but in their capability to come up with solutions when there's a compelling profit motive.

They are already learning a lot about treatment, I'm assuming treatments will get better and better, just like happened with HIV, is happening with cancer, etc. Mortality rates and long term effects will drop over time, I'm sure, even if there's no cure or vaccine. If it really is a permanent part of the landscape, testing will improve, too.

Re: IAG, if it's true that there's never going to be lasting immunity, I suspect we'll have flying soon, anyway. But it probably will significantly impact demand for some time if that's the case.

Ah, there's a Proactive interview this morning, that's a different one. If I think it adds anything important to our understanding of NCM re: GGP, I'll post the link here.

@TT I did see that. If that's the same video Hopefully mentioned, it was interesting but hardly surprising. Asked about NCM walking away, he's not going to say, "It's our fault, we were bad partners." Whoever is at fault, he's going to blame NCM.

I do recognise that NCM has a large measure of control here and if they don't play fair, GGP will struggle and NCM will get themselves a better deal than they maybe deserve. Is NCM going to get themselves a reputation as a good JV partner or a bad one? I'm expecting a good one.

There's two massive reasons, to me, why this JV is going forward amicably and, if ended, will be ended amicably. The first is Telfer -- NCM needs Hav for Telfer, so they either need to make the JV work or reach an agreement to buy Hav. That's one of stebol's points, and it's a huge one. The JV is a win for both parties so they'll make it work amicably.

The second is Scal. NCM wants a piece of that pie if it is as big as we think it might be.

I suppose there's a third -- NCM doesn't want to get a bad rep with other juniors. The Solgold thing actually helps us in that regard -- if they have an ugly divorce from Solgold and follow it with one from GGP, nobody will want to do JVs with them.

Missed that, will have to check it out. Things have really gone sour between them, haven't they?

@mickey "Does that apply to AIM shared Jambo?"
It's Aussie cap gains tax, they don't care what asset it is. Could be shares or a gold nugget or a collection of framed Paddy Gall diagrams, own it a year, you have a huge tax savings on any capital gains.

I don't see how that could be relevant here, though. They've delayed owning it, not brought it forward. They've made it harder to get that tax break on these. It could explain why they exercised other options early, but not why they've delayed vesting.

@Jambo "this suggests they expect a full buy out of GGP"
It could suggest that but without some Scal results it would surprise me a lot. How could they agree on a value for Scal?

I won't mind it if I'm wrong, though!

@Enrico "I don't understand all the details here but my assumptions are as follows:"
Depends on what an ESS is in Australia. Virtually certain, for instance that the UK EMI scheme is only for UK companies, even if the directors / employees are located in the UK.

Re: points 2-3, I'd say that's almost certain but there's a big "if" -- if the vesting date is the deferred tax point. But maybe that's the only way this makes sense. Wish I knew Oz tax law better.

I can't see any scenario in which CB and GH would do this if they think there is any chance of selling our share of Hav and paying a big dividend before next July.

So why would they rule that out? The only reason I can see is if they still don't expect to be able to value this by then. Maybe I'm reading too much into this but this seems like one of the most bullish signals in a while. If they expected to be able to value Hav by the end of the year, then you'd have to keep the option of selling our share open.

So, I conclude they don't expect to be able to value Hav until spring, at least. That means there is either gold in the SW, gold out at 1000m (like we heard earlier), or both. In either case, it's going to take a long time to assess the extent of this monster so they won't be selling.

Roll on 23 July.

@Enrico, good research, but are UK companies eligible for Australian ESS schemes, so is that relevant? I certainly don't know.

And I read something on deferred tax point that suggested options issued after 2016 used the exercise date, not the vesting date, as the deferred tax point. If the deferred tax point is the vesting date, why have they been selling shares to pay tax when exercising their other options?

Maybe hydro's Oz tax source will help us out. But it almost has to be for tax reasons.

And I'm virtually certain it tells us the path ahead does not include an early sale of Hav and a large dividend.

Ah, missed that, Paddy, thanks.

@Paddy "It's given them less breathing space rather than more because they haven't extended the expiry date."
I don't think this is right. It specifically says it extends "the vesting date." The original announcement said, "All options have a life of three years from the vesting date." So I would assume the expiry date is also extended.

@RA, good catch on the specific date and the Oz tax year. It's got to be tax.

Read the original announcement and it will clear up some of this. https://www.lse.co.uk/rns/GGP/grant-of-options-yu3jkribcf6yrx5.html

The share options were granted 26 September 2020, vest 12 months later, and expire 3 years after the vesting date. The vesting date is when they actually own the options (if the company were sold, they would immediately own the options). Owning the options is not owning the shares. They cannot use the options to buy the shares at the agreed price until the options vest.

The option vesting date has been moved out an additional 9 months, to approximately the end of June, 2021 (maybe start of July). That moves the option expiry date out an additional 9 months as well, to June-July 2024.

What this means for the company is that these executives don't own these options yet, they aren't vested, so they can't exercise them and buy the shares yet. That means if Hav is sold now and a dividend paid, they can't exercise these options and get the dividend. (If GGP is sold, they can exercise these options and get the payout.)

This certainly is not negative for investors. The dilution is delayed further.

There may be tax ramifications, for both the individuals and the company, on the vesting of the options, and that may be the reason they've done this. I would also say they would not likely have agreed to this if they anticipated an early dividend. If you thought Hav was going to be sold and a 15p / share dividend paid, would you take away your option to receive it on 9 million shares that are going to cost you a lot less than that? I wouldn't. They don't expect to sell Hav and pay a dividend anytime before mid 2021.

That suggests to me this:
There is unlikely to be a deal to sell GGP's share of Hav until we know more about just how big it is.

Whether that means there might be a deal in the works to acquire GGP entirely, or a purchase of our share of Hav is still on the table but not until we know more, or it means they think we are going to mine, I don't know. But I am pretty sure we aren't going to see a big dividend in the next 12 months. If that was likely, this wouldn't have happened.

@Tig "TMT - you have just given a clear exposition as to why NCM should buy out 100% of Havieron ( for around $$$1 Billion ) and get on with saving Telfer., which is what they do best. "

I'm not sure I agree. A joint venture with GGP that sends the ore to Telfer for toll processing saves Telfer mine as surely as a buyout does. As long as the ore goes to Telfer, Telfer mine is productive. As long as the ore goes to Telfer, a processing plant doesn't have to be built at Hav. The symbiosis is there whether NCM owns 100% or 90% or 75% of Hav.

There are reasons for NCM to buy the rest of Hav, but saving Telfer isn't one of them. They saved Telfer when they agreed the JV, IMO.

@WF re toll processing
I'll give you my expectations and I don't know either.

My guess is that the JV agreement specifies toll processing charges, so a formula has already been agreed, $X / ton of ore from Hav. Maybe it is $Y and NCM gets the copper, maybe $X and the copper belongs to the JV, but it's already been agreed, anyway.

There are fixed and variable costs to running any plant. Security costs are fixed. Some maintenance has to be done whether you are processing a lot or a little. That's fixed cost. Some maintenance has to be done more when you process a lot. That's variable cost. Power cost might be variable, but lighting cost might be fixed. And so on. If there's any land rental payments, that's fixed. Any payments to the Martu people might be fixed. Depreciation of the plant / equipment is fixed.

NCM will have worked out what they will charge the JV for toll processing. It will cover variable costs and a proportion (probably a fairly large proportion) of the fixed costs for the Telfer processing plant.

That means most or all of the fixed costs will no longer be attributable to processing Telfer ore, and that means the cost of processing Telfer ore will be much lower. As a result, Telfer becomes much more economical to mine, especially as POG increases. So that means the lifespan of the Telfer mine increases.

Currently the AISC for Telfer is over $1200/oz. That's been pushing the limits of economic feasibility. One broker, I forget which one, said the Hav deal would turn Telfer into a Tier 2 resource again. NCM defines Tier 2 as having AISC between $8-900. So they are expecting a $400 / oz decrease in AISC for the Telfer mine as a result of the toll processing agreement. I don't know if they are saying that based on facts and sound analysis or if they pulled a number out of their backside. But certainly, Hav appears to make all the difference for NCM at Telfer.

There truly is a symbiosis here. Telfer's processing makes Hav much more valuable. Hav makes Telfer's processing plant AND Telfer's mine much more valuable. Another reason to consider buying both companies, FWIW.

This same symbiosis will exist if GGP finds significant gold at Scal or Rudall. Even if GGP were decide to become a miner in such a case, rather than doing another JV, they could still arrange toll processing at Telfer, to the immense benefit of both companies.