Bargain of the centuary!14 Sep 2024 09:16
Right, having looked closely at this deal...
GGP was:
A 30 % owner in a non producing (with no dfs and no decision to mine) mine, Havieron. With a JV with the 70% owner along with tolling rights at their processing plant at Telfer.
GGP had a prospecting 'salad' of tenements and other JV's in and around WA.
Post this deal GGP will be:
A gold producer with their full ownership in (the largely refurbished) Telfer existing mine. This with the benefit of a large stockpile of ore waiting to be processed as soon as the plant can be restarted. Positive cashflow from these operations is expected.
Havieron decline can restart at speed (with the working capital element of the placing available) with high grade ore expected in short order (which will drive the combined Tefer/Havieron AISC down to a competitive number).
GGP's prospecting 'salad' increased with the inclusion of all Telfer's ancillary holdings etc included.
And as for the cost of this deal, look carefully, it isn't the headline figure of $475m!
The placing proceeds are only $325m.
Of this, only $155.1m is the cash paid for the target assets. The remaining $169.9m is repayment of loans, working capital and transaction costs (all of which are GGP's overhead costs, some of which we had anyway). That is all!
Deferred consideration of $100m to NEM which will be afforded out of cashflow! Once commercial production at Hav starts, we pay NEM half the achieved gold price above $1,850/oz, subject a $50m annual limit and a $100m overall limit. This is over a 5 year period.
NEM get, in addition, $167.5m's worth (at the placing price) shares in the enlarged GGP. giving them a 20.4% holding. (Note that half of these shares, 10.2% are subject to a call option in favour of Wyloo at a 7.2p price for four years. Also Wyloo has a right of first refusal on the remaining NEM shares during the same four years).
So, basically we are paying $155.1m in cash plus 20.4% of the company.
The rest is loan repayments/transaction costs/working capital/deferred payments (from cashflow). A good share of these costs will go on the balance sheet as cost items which will reduce any corporate tax liabilities.
On balance, one hell of a bargain IMO.
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