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https://laws-lois.justice.gc.ca/eng/acts/c-36/page-1.html#docCont
@StrummerJones
When I researched what happens next - if the only option for the Administrators to pay off the creditors is through a sale - is that a sale would be achieved by public auction.
I quote from the 2021 accounts;
The Group delivered adjusted EBITDA of £161m, alongside
a loss before tax of £(186)m. The loss was principally driven
by adjusted items, which include the excess costs for
transportation, delivery and fulfilment costs in relation to
Covid-19,
Those adjustments are BS. The costs were/are a reality and should be included. When THG stop deluding themselves, and actually embrace reality, then trust might be reestablished. Trust would sure help the share price. Let's hope they do a better job in the 2022 accounts.
I think the issue is that the "old"business is seen to be on a contracting path (notwithstanding the temporary fillip of the PGi Connect deal), and the company was incurring losses in 2022. If the company can show the speed of contraction has reduced, and/or it is back to profitability, then the market cap of £7m is way too low.
There are seven strong statements about lack of working capital. They have made it clear they cannot function properly without it. On top of that they are still in default on the Newgen loan. Management have full control over some things, but getting more capital is not one of them. Therefore unless they can persuade someone to put in more funding, the mine cannot function properly. (= difficult decisions will have to be made )
Whatever other things they are doing well, as you have highlighted, I find it hard to agree that this is a "very positive" RNS.
"Support of suppliers has continued through the period"
I read "support" as meaning they still cannot pay their suppliers, even with the positive move in copper price.
i imagine very soon they will announce another forward sell, this time nearer $3.50. The forward sells eventually will guarantee everyone can get paid (eventually), then the pressure is released.
Presumably we have pre-emption rights
Could be helpful, or a requirement, to have a more predictable income, as part of the negotiatioins with creditors. They've already reduced costs for the same reason.
It sreems to me that TB used the high copper price previoulsy to spend heavily in proving the mine's resources. This was successful and the overall value of the mine was increased to potential invetors. He wasnt terribly good at controlling downside risks however. This has got the business into cashflow problems, whihc is the classic way that otherwise good businesses end up failing. He realised his mistake, and persuaded an experienced finance professional to come on board, even to take the plunge to relocate to the end of the earth! She is now committed to sorting it out and TB is allowing the bean counters to call the shots. To be fair, I dont think this scenario is all that unusual. Fingers crossed the potential investors and/or Newgen are convinced.
· The Loan Note will be secured by first ranking security over all assets of the Company and its material subsidiaries;
Default will mean Newgen can go to Court to obtain right to sell the assets required to pay what's due. I imagine it takes a few weeks to get Court permission.
The Court will probably take into account the risks to workers (jobs/ health and safety etc), and maybe stop Newgen just going in and grabbing random equipment. Maybe the Court will order the Company to find a buyer for the business intact and report to the Court by a certain date with progress.
But I am guessing
I cannot understand how things have got so bad so quickly. If I remember they said in the last quearter they were cashflow positive. Break-even was copper price at $2.70 or some such. This is a little odd
They could do a rights offer. RMM debt free is a very decent bet. So raising £20m from existing shareholders would be not impossible to imagine.
The assumption has to be that Newgen will not renegotiate the terms. This is a company that is barely making ends meet and interest rates are heading north. It is not an attractive exposure for Newgen.
However the long term fundamentals are good . A larger outfit could probably turn this into a nice earner. Assuming Newgen says it wants its money, the obvious thing is to find a buyer. Miners have had a good year and new opportunities in "safe" jurisdictions must be on their shopping lists. You would think it should sell for $50m minimum, whihc is still a lot more than the current market cap.
I think the BoD will resist this after all the effort that has been expended into proving this mine and getting it so close sustainability. So it's not their first option, but it is still a fairly likely outcome in the current circumstances. But you never know!
I'm not saying you are wrong, but how do you get to your >40p valuation.
@jones
IF they can solve cashflow over the next 6 months, then long term this is a very valuable asset indeed. Far more than 29p+. Nearer £1+.
It's all down to whether they can get out of the hole they've dug for themselves
MM wouldnt ever let his baby die. He could let it croak and buy the assets I suppose, but then he risks getting into a bidding war with a vulture. More likely he will finally wake up to what he has to do (make a profit) and maybe then the company will actually prosper.
Mainly they need to hang on to cash, stop buying revenue, grow organically and reduce costs.
I'm not sure any of that is in MM's bones, so we need the finance team to dictate the next couple of years.
THG didnt issue a profit warning beause it is loss making. It is a key difference between it and Boo.
I appreciate all the doom and gloom about the going concern point, but they were obliged to say it by the AIM regulations. The amount they need to raise to survive (ie pay suppliers and first tranche of debt) is a few million. There are plenty of indivdual private investors that can afford that even. It's a rounding error to the Newfoundland government if it saves jobs (esp after Hurricane Fiona). With enough to limp through the next few months, they could manage their cash properly this time. The share price would rise and then a placing would be more reasonable.
The CFO has moved to Newfoundland. She is not going to move back home after a couple of months. She will plot a path.