focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
Hi Sambo, I agree! There's no lack of incentives to roll this out asap. Besides, costs for rigs and services must be at bargain basement prices these days. A nice counter-cyclical play. And who knows, maybe we can drill and develop for way less than originally planned, and can use some of our $35m 'credit' towards ARA's share of profit (as noted in original FO term sheet).
At these volumes, it's likely Majedie AM, who have been liquidating its huge holdings all year. They've been doing it at all price points, and assume its to meet client redemptions from its funds. I'm actually impressed the SP has held up as well as it has today, considering yesterday's monster gain. Clearly lots of buyers out there!
Now, if we can just get more insight into ARA's drilling plans. Fingers crossed they're still planning for end of this year -- That'll really charge up investor interest!
...how big this is for SOLO. Monetization of this asset is next
Yes, and they would do that in the form of a loan. Could be at the same terms of their latest one, c.13%. Wouldn't do it for free. Can't do it in exchange for equity, that would invoke other clauses. That's my base case for Plan B. It's quick and easy, but depends on ARA's appetite.
Still would need approval, and kicks the drill down the road. Licenses expire in Q2 21. Best alternative is to arrange financing through Zubair and have their conglomerate drill/service it. Arrange longer-term arrangements after results.
Financing a drill still makes sense for Zubairs since it's their group of companies that will service most of the activities, so a good chunk of money circles back to them in the form of revenue anyway.
If successful, Zubair's 30% stake grows in value. If it fails, AEX defaults on the loan and they pick up AEX's remaining carcass anyway, which will still have some value. Point being, the risk to Zs is lower than at first glance. These are f'ing smart business guys, and I'm sure will look at options creatively.
Would like to hear more about financing options in the event of a failed FO. ARA/Zubairs would be the only option, but they could do it. As they own 30% of the company, it is firmly in their interest to see this thing drilled. A convertible loan would be out of the question due to ownership rules, but a straight loan is possible if there's appetite.
Talks to finance the future development would then re-open (perhaps more broadly) in the event of a big discovery.
Financing post-drill is what most here wanted anyway. Obvs up to Zubair if they're willing to put $10-15m capital at risk, and if SOLO has funds to pay their share.
The offering should be open to retail investors. It's basically free money for Institutionals. Lazy Lazy Lazy.
If the gov't were to apply rational logic to these proceedings, this farmout would have been signed by the original target date of November 2018. It didn't. Who knows what their agenda is. That said, will stop listing the many risks to the company. Today's half-year report should be enough to scare away most investors anyway.