RE:RE:My Thoughts on AZXGH,
Thank you for the reply. Yes, I agree that Eric is a geo at heart. As we have discussed, this has been great for value creation in real terms, but he has not yet translated this to higher market valuations.
If Eric Owens is balking at an offer, then it's consistent with his prior decisions. I suspect he feels that he finally has a deposit with upside and is economical to mine. In a perfect world, and I'm not quite sure how he would do this, he would want to monetize the cheaper to mine near-surface deposit to fund more ambitious and expensive drilling.
In the past, he tried to buy low and sell high (with Akasaba West as the lone exception). He probably thinks the commodity sector is just starting to turn bullish again, and I suspect he really wants to conduct the 2018 drill program. He seems very reluctant to sell in a depressed sector.
One reason the market doesn't fully value AZX is likely because of a recurring theme that Alexandria has too many projects and not enough capital or talent. Unfortunately, the Murgor transaction magnified this issue. AZX has finally pursued more JV deals in these dormant properties to unlock some value to shareholders, which partially solves this problem. I think we should have done more of these types of deals in the past, and I'm not sure if these deals would have ever happened without external guidance/advice.
I'm now thinking that control of AZX, rather than just evaluating potential deals, is behind this BoD fight. As I think you are alluding to, I agree that EO seems to be in a weak position to maintain control. He does not hold many shares and the market capitalization is low for an easy takeover. The BoD has many options to realize value from these assets, and each of these paths have pros and cons to investors. It seems like EO was a little naive when thinking about the strings attached to an ES investment.
EO's best defense against the current situation would have been a higher market capitalization and a higher insider share count. Unfortunately, it's too late for that. :-) The underlying assets are too valuable, and the market valuation is too low for me not to believe someone is trying to take advantage. I don't think it's nefarious or underhanded, but genuine differences in how to best move forward to maximize shareholder value.
I suspect EO is making the case that his drilling plan is low-risk and will add even more resources to an economically viable deposit. I'm sure he also thinks, based on recent drilling results and market reaction, he has earned the credibility to pursue the 2018 program. Unfortunately for EO, his recent antics probably threw out a lot of goodwill he built up with long-term shareholders.
Other valid opinions exist, which counter EO's vision. The biggest argument against EO seems to be his activities are self-indulgent and not in the interests of shareholders. Personally, I don't agree with this assessment, but low market valuations will make it difficult for EO to make a strong case to investors about his vision. IMO, this is a more compelling case against EO: persistently low market valuation on very attractive underlying assets. This dynamic makes financing costlier to current shareholders, which erodes the final value realized after each initiative.
It's still really difficult for retail investors to figure out what the best path forward is until we get more information. Although, after the latest stunt by EO, it's difficult to imagine he will remain in control without some kind of miracle.
So, where do we stand? Answers to the following questions will hopefully clear up all of this uncertainty and allow us to move forward. Please add more if I missed any :-)
1) Does the resource estimate show 1+ million ounces and is the grade economical?
2) How many companies are interested in Alexandria's assets? (If multiple bidders exist, then it's going to be difficult for the BoD not to entertain offers IMO.)
3) Who controls AZX? If not EO, what does leadership look like? (A question I didn't think I needed to ask before Friday haha)
4) If AZX moves forward with its 2018 drilling program, then how does this get financed?
5) How will the market value AZX after these other questions are answered?
GLTA,
NP