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Old NEM MB
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otto on nem buying out continental... from https://incakolanews.blogspot.com/ According to my source, the board of Newmont (NEM) is meeting this week coming to decide, in an up/down yes/no manner, whether to buy out the remaining 80% of Continental Gold (CNL.to) that they do not already own. Also, my source stated that NEM is not at all happy with the current situation there and says that if NEM stays, they want full control and ownership of the project. End. Okay, the beans spilled let me first reiterate that though my source is a good one, a serious mining professional and has proven to me over the years to be a trustworthy individual, the rumour is unconfirmed and I have no second line on the information. With that said and after consideration, as long as we assume the intel is solid here’s a thought or two (after conferring with a few trusted peers, who helped crystallize ideas and added a couple of angles), done in bullet point form.
Therefore, the application Occam's Razor gets me to the call that NEM will likely bail. I have no idea how they’d do that and there are a whole range of options, from keeping the current share position for a while, not taking up their pro-rata rights on any new financing, selling in a block or piecemeal way, entertaining offers for their minority share position etc. Also, it may not effect the project in the longer-term because I’ve also picked up talk that streaming companies are interested in financing the missing capex. If true, CNL may end up getting there on its own and becoming a success, but if NEM does back out CNL is going to take a near-term share price hit, that’s a certainty. The bottom line is this: 1) I have unconfirmed intel from a reliable source. The rest of today’s piece is built on the assumption that the intel is correct. 2) I think the most likely NEM decision at this point will be to back out of CNL and Buriticá. They may do this by tabling a “take or leave it” offer to CNL that is too low. They may simply decide not to go any further. If NEM leaves then the CNL share price will take a hit, at least in the near-term and perhaps for the longer-term as well. 3) However, be clear that I may be wrong. NEM and CNL could reach an agreement, NEM buys CNL at a very high premium to this weekend’s share price, those betting on the junior today would make a handsome return in a short period of time. There’s a binary trade on offer here. And finally, for what it’s worth I will not be trading this development personally and will remain neutral CNL. I could make up a rationale for this decision that would sound perfectly reasonable, but the real reason is that I have a moral repugnance to the way CNL goes about its business and even shorting it to make money would be too vindictive on my part to be healthy. I pass this intel and analysis on an as-is basis, do with it what you will. UPDATE: Rather than re-edit I’m going to add this new information on here, as the above shows the thought process and now this helps solidify things a little more. After casting the net in a couple of specific places and reaching out to people that may know, I received a reply from a 100% solid, zero BS, ultra reliable source. This person told me that they’d been asked by a powerful private equity group in the mining sector about Buriticá this week. The PE group wanted to know their thoughts on the project and asset, their thoughts on the management (specifically CEO Sussman) and said there was an opportunity for them to get control. This goes some way to corroborating my original intel (it’s not an exact match, but if you believe this to be a coincidence then I have a bridge to sell you). It also suggests that Newmont is already shopping its 19.9% portion around. |
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