Member Info for volmer

Roy, I hope very much indeed that all goes well with your treatment.

As you know I don't post very often, only when I have something I want to put down in writing and share. I find it helps me analyse something that way. You can see from the posts I give some thought to what I say and try not to use words carelessly. I used the word nonsense for a purpose. When this is all over I will happily to explain why. but it has nothing to do with posters on this BB.

Pharmajohn, thanks for the info - I couldn't get to the FT article. Chris Candy was referred to and now I think he has left MTL and I think Nick Candy is the shareholder.

Pharmajohn, thanks for the info - I couldn't get to the FT article. Chris Candy was referred to and now I think he has left MTL and I think Nick Candy is the shareholder.

WHERE NOW
From the outside it looks as if Mr Edwards is playing very hardball and wants the maximum for virtually nothing – maybe full debt for equity swap at a low price and then seek to buy out remaining shareholders. The RNS said “The Company has been unable to reach agreement on the continuation of the Standstill Agreement” indicating the Mr Edwards, and possibly Mr Candy, have refused to extend it.

If true, it seems Mr Candy has a choice to resist. Or little choice but to go along with this if there is a shareholders agreement that gives powers to Mr Edwards.

If this were to happen, could it/would it have to be legally imposed on the Board? I don’t know the position on this. Perhaps the two major shareholders would have to appoint new board members to do this, if Mr Bowden resists as appears to be the case.

The way I read it is that Mr Bowden wants to be fair to all shareholders. Hence the necessary comment on debt/equity swap in Q4 results.

Will Mr Bowden and his team want to continue working for the two in a private company? If not, how would this be assessed by Mr Edwards? Whatever the outcome I think shareholders could not have been better served by anyone but Mr Bowden.

If there is a difficult debt holder, will he change tack? If Mr Edwards wants his share of the minority 35% of MTL for nothing, it is 29.4% of 35% being 10.3% of the company. At 0.725p per share the market value of the company is £15m. If his goal is to get this, which is worth £1.54m for nothing, then he may have to use the lenders security and acquire the assets and then create a new company with all that it entails for staff, debtors, creditors, management and regulatory bodies. Would he be better off with the company continuing as a listed one? I suspect Mr Bowden, if he were to continue in his role, would add multiples of that value.

I wonder what I have missed!

POSSIBLE OUTCOMES
1. If the Standstill Agreement does not continue, can they exercise whatever security exists? If this security is to take ownership of the assets of the company, including the mining licence, what are the implications for the mining licence? Will the Government transfer it to new owners? This is a big question – lobbying, donations to government projects, owners being suitable and qualified to run a mine, options for the Government etc. No clear answer here, risks all around unless Mr Edwards can get a pre-agreement with the Government. But the mining licence would also be a valuable asset for the Government.
2. Liquidation of company – if Messrs Candy and Edwards approve liquidation of the company the risk is that the assets could be bought by a mining company, private equity or another investor. Then both lenders would lose their cost of the debt of between $78m and $125m plus the cost of their equity. With general investors, Baker Steel, the City and Mr Bowden there must be some excellent contacts with companies who could outbid Messrs Candy and Edwards to buy the assets for a fraction of the $200m that the assets are worth. Unless there is an unknown to me, this outcome looks unlikely. It is too risky for Messrs Candy and Edwards.
3. Another outcome is a full debt for equity swap. This may be what Mr Edwards is holding out for. At a share price of 1p it would leave existing shareholders shares diluted to around 0.25p I think. Need to the sums again.
4. Another is a partial debt/equity swap for part of the “bank” debt and rescheduling the mezzanine debt as to terms and repayment. The complication here would be what % of debt and at what price. This may be the sort of deal the company has sought.
5. Another is simple rescheduling of the debt. Impossible now!

A lot has been said over 24 hours including some valuable comments and some complete nonsense. Interesting are comments on Messrs Candy and Edwards, being that Mr Candy wanted a deal on debt while Mr Edwards did not. A similar comment was made a time ago about the deal with the banks, where Mr Edwards was reported to have held out for a long time. Can we assume Mr Edwards is the barrier to a deal on the debt?

FACTS

1. Metals Exploration has a world class management team established by Mr Bowden
2. All evidence points to Mr Bowden acting firmly and with integrity in interests of all shareholders
3. The mine has 7 years life of the original 1m oz of gold where only 15% of the acreage has been explored.
4. The ore processing plant has been described by Mr Bowden as world class
5. The company is cash/profit generative
6. Overall $200m has been invested in the operation
7. Mr Candy owns 47% of MTL and $88.8m debt being $40.4m mezzazine debt and $48.4m of ex-bank debt as at 31.12.2019
8. Mr Edwards owns 19% of MTL and $37.0m debt being $16.9m mezzazine debt and $20.1m of ex-bank debt
9. The company can only be put into liquidation by directors if 75% of shareholders approve

FACTS OR UNKNOWNS?
1. On a change of ownership the mining licence reverts to the Philippine Government. This has been said but is it fact?
2. It has been commented that the bank debt was bought at a discount. Whilst they own $68.5m between them, it may have cost between $20m and $35m being my guesses
3. It is usual for a minority shareholder participating in a major lending to have a shareholder agreement. Is there one here? If so, what powers does it give Mr Edwards?
4. The Company is seeking confirmation of the implications of the Standstill Agreement not continuing.

The upside is clear and gets repeated here in various unbalanced, enthusiastic ways. What is missing? Quite simply, two major shareholders own over 50% of the co and own all $125m debt, on which the company has been in default for more than a year. If this is not clear to some, this is why the share price is 0.725p.

If a crunch meeting took place last week on the debt, this could well be why some sales took place. Forget he conspiracy theories, get down to basics.

It might be more productive to examine again the downside risks and create a more balanced argument here, rather than risk encouraging others to invest through unbridled enthusiasm. Someone said "...D4E is not going to happen, firstly, because we really don’t need it". It's this sort of misleading nonsense comment that misses the point by a mile and can wrongly influence other potential investors.

lee, can only agree with what you say. As someone once said the share price is the one that Mr Market is offering. If you think as you and I do, and many others, then it is an opportunity. It is a time to tuck away fear and look at shares rationally, assess risks and potential.

As I have said before I think we have an exceptional, world class CEO. I don't think he made a mistake in the Q4 results RNS about the finance. Perhaps what he said was done for a purpose. There is no doubt some factual base for the comment and he chose to announce it. We know he is in negotiations with the two major shareholders about restructuring the debt. Perhaps the comment was made in this context.

What he seems to want is for the company to have a sustainable level of debt structured in such a way as to allow small capex needed on the plant, regular payment of capital and interest, commence drilling of the 85% of acreage not yet explored to upgrade resources, and quality of ore being processed, and early payment of dividends to shareholders.

This means no rush to repay debt over as short a time period as possible but building all aspects of the business. Grow early gold production to the nameplate 100,000oz pa and build a sound financial base to allow acquisition of other mines. A dividend paying company not only establishes financial credentials but allows many investment funds to buy shares in the company. This may be a goldilocks scenario but if there is one company in the market that can achieve it, this is the one IMO.

Partnership agreement may come later than expected due to coronavirus, especially if it involves a Chinese company. Perhaps two fund raises will be needed - one soon and one later this year.

Don, perhaps it was frustation. On 22 Jan he said "....these negotiations can be concluded swiftly, such that the Company's financial position becomes sustainable; allowing management to focus its efforts on improving operational performance at Runruno and to consider growth options for the Company." He wanted to get on increasing the business and its profits. If it was out of frustration, then it is good for us shareholders. It means that he is acting for the benefit of all shareholders and not just the 2 major ones.

A quick conclusion was not reached. I suspect one or both debt holders is pushing to max their benefit. I also believe the banks took a haircut in selling the debt. Otherwise it would not have taken 12 months to negotiate the sale. The banks would hhave accepted 100% immediately. Do the debt holders want to keep the debt at 100% or will they pass on some or all of any discount to shareholders.

I suspect this is at the core of the negotiations with the 2 debt holders. If push come to shove then they are in a similar position to that of the banks when they couldn't risk the government taking back the mining licences if the company were liquidated.

On this BB some time ago I read a comment that the company needs to have total sustainable debt of around $50/$60m. That means the remaining debt - however much it will be (we don't know haircut or no haircut) - needs to be repaid or converted to equity through one mechanism or another. Part of it could be repaid from net cash flow of the first 3 or 6 months of 2020 - the gold price is helping in that.

Another thought on the debt. If the banks had agreed to a new repayment schedule last year, the company needed a small equity raise in order to finance the capex and to start repaying the debt. The debt standstill was great in that it allowed the capex/maintenance costs to be funded from cash flow without a fund raise.

Overall the company had to issue some equity then or now. We are not necessarily worse off based on what we know so far. So as I see it we have negotiations going on between the company (representing us) and the 2 debt holders. Better a little frustration rather than rolling over like Mrs May last year.

The outcome may not be as good as the 2 debt holders want nor may it be as good as we want. Somewhere in between would suit all parties fine.

Many thanks, I wondered previously if Ruffer had fully sold out.

Jack2479, that's exactly how I see it. Long term prospects good. Short term no need to buy and fund raising will bring price down.

Traderace, can you tell why you say Ruffer still dumping holding. Thanks.

lee, I think they were not sales by impatient holders. For a sale of a £30,000 holding, or two of £15,000 each, you would expect it not to be an emotional decision but based on careful thought. Perhaps it's someone needing cash as I cannot see few, if any, better opportunities in the market currently. If I needed cash I would look for other sources apart from MTL. It looks to me as if this share price is being held down for some reason. Perhaps its the market makers with their own agenda. A while ago someone posted that the share has been massively de-risked by the banks selling their debt to the 2 major shareholders. That's true and I would have expected the share price to have risen to around 2.5p on that alone. Last July the company was re-negotiating its debt with the 2 banks and the share price was 2.5p. The difference now is that MTL is negotiating the payment schedule and interest rate for the debt with it's 2 major shareholders, where we are all on the same wavelength in wanting to maximise prospects for MTL, returns for shareholders and a fair return for the debt holders. You might say the share price should, therefore, be more than 2.5p. Oh, I didn't mention the fact that the gold price was $1385 on 1 July 2019 and is now $1574, some $200 higher and probably worth an extra $13m in profits for 2020. it's very easy to make a case for a share price higher than 2.5p before finalising the terms of borrowings.

I’m sure Q4 results have been there for some time. Also, I believe the later announcements are due to the refinancing issue. I expect the RNS to cover both Q4 and refinancing, otherwise Q4 would have been released by now. No cause to worry as all the legalities need to be In place before refinancing can be announced.

lee, there may be a large buyer and so there should be of this share. I do know that at the prices you have quoted people I know have been buying. I think the large buyer was the one who bought a million or more in single trades. But I see no reason to be fearful about it.

Surely, the two major shareholders have been insiders for the last year or so. They cannot buy whilst an insider. If they were to try and buy the company what would Mr Bowden do? Would he stay or go? He seems to be a very high profile mining expert with a track record second to none. I think he is a person who does not want to hide under the bush of a private company. I think at least half the value of this company is in him. Major shareholders brought him and and will not want to lose him. So I think we can forget the threat of a takeover.

I am looking forward to enjoying the ride for some time yet.

We are all very fortunate to have followed this company and .to know about it. Especially since Friday this share is a no brainer and still is, IMO.

Look at th e spread towards the close. Perhaps the supply has been turned off. Today’s trading has all the hallmarks of an RNS being finalised in the City. Or the penny had dropped after Fridays news - but that does not explain the price holding fairly tight. We will see tomorrow. Either way the price should.continue rising.

It looks as if 6m shares have been bought today so far. And the price hasn't moved.

Differentlevel, totally agree. It looks as if the share price is being held back deliberately. With all these buys there must be a supply of shares from somewhere. The narrow spread is also unusual for such a small market cap share. To me this suggests that someone is supplyiny the shares to MM's at a set price. But why?

By the way, saw in the Telegraph today that Argentine bondholders are expecting to take a 20% to 30% haircut on the debt. I wonder how much of a haircut the two banks took when selling their debt to our two major shareholders.