Greed, Fear and Prime Mover StatusFor Canadian speculators in the junior gold sector, there is no higher honor than a major saying – “enough, we must acquire you and either move this asset into production or lock up the project before one of our competitors does”.
May 2016 Article Pinnacle Digest.
For those in CBGDF and for Guistra IMHO we should be dealing with the concepts of fear, greed and prime mover status in FG. Consequently, for CBGDF (and NG) it’s not just about the narrower question of the $$ that might be involved in paying for each designated oz., of gold in the ground, be they P&P, M&I or Inferred. Nor is it only about what others have paid in the past for gold projects. Note the quotation above from a 2016 article. The key words are ‘production’ and ‘lock up.’ However, for CBGDF in FG these terms mean much more than the usual potential gold sale project and such meaning should only add to the sell side potential that the NG and CBGDF project in FG holds.
Greed over potential - what do we know about French Guyana? We know it is similar in geological make up to the Birimian shield that has generated so much gold on the West African coast. However, FG is basically unexplored; therefore, the gold potential is huge (as is the potential for other minerals – google FG mineral potential). Paul Isnard is a very large permitted area (although minimal in terms of the entire potential FG gold area) but NG and CBGDF have only explored the lower portion that showed positive exploratory results before CBGDF even acquired the total area. If further infill and especially exporation results (to depth and on strike) prove to be positive then this opens the door with regard to this projects potential alone.
Fear of missing out – there is no major really in FG who is close to production (couple of small scale private companies mining). FG has been in some turmoil socially and economically but is under the tight control of France, so it is not going the route of Venezuela. Macron during pre-election talked about the need to develop FG economically. He has actually been to the NG/CBGDF project and has commented according to Guistra on the potential the Montagne D’or mine holds re., benefits to FG. He/France will be supportive of whoever should build this mine. However, potential companies I believe will have heard the empahsis from France/FG on 'build this mine!'
Prime Mover Status – Further, I suspect that it will be an unwritten requirement that whoever operates this project explores the heck out of the Paul Isnard area and potentially beyond; this is FG’s lifeline and the government - French and local realize this. This is not Nevada, the Yukon, even West Africa etc., etc., which are regions ‘swimming’ in majors and mid tiers. In other words this represents prime mining mover status within a motivated supportive country (there a few other areas that we can point to for such designation and if we can see this so should others).
So who would want such a mine/mining status in FG? NG obviously is in pole position but the owner has recently acquired approx.., 98% of all NG shares having gone private. Does he want to expand his company to such a degree (plus invariably take on an unprecedented partner in FG) or to conserve/build cash/pay down debt with his other existing and oncoming mines – aiming to come back strongly public in the future? As a recent poster indicated CBGDF can go down to an 18% dilution without really doing a thing causing increased financial pain to NG as well as partner headaches. Further, does NG hold the capacity to expand its footprint quickly in FG as might be needed/required?
Newmont has resources already in FG and IAG (CBGDF largest shareholder – through Euro Resources acquisition) still has an interest in the Camp Caiman project in FG (presently held up by the French government). Both these miners have major mines next door in Suriname and also each have approx. $1-2 bill available for purchases. They both are also burning up reserves and need to replenish through green field acquisition as well as brownfield development. As indicated above where else can they get such a huge prime mover opportunity like this in a country they already know? Further, joint ventures are becoming more common, especially where large potential/risks are involved. also, such prime mover status (coupled with greed and fear) may also bring in other majors who are not on our radar yet and might not make a move until a bid is already lodged.
Highly highly speculative – FG has huge resource potential, not just gold so why not BHP or Rio Tinto or a Chinese resource major etc. The CBGDF gold is chicken feed to them but the prime mover commodity status in FG (with such potential state backing) would be priceless. Guistra is a merchant banker with (if you believe his bio) many resource company contacts and negotiating experience’s (I also still believe - no proof - that his cousin Frank is a shareholder and we know his connections).
I hope that Guistra is going to play all these cards to convince NG of the benefits of a joint sale and then to get the best price available. Clearly, as indicated earlier the actual value of the inground ozs is only one element of the sale price in this buyout instance. Another poster has spoken of the concern of Guistra potentially being too stubborn or greedy. These are reasonable fears but if what I have outlined with my minimal knowledge of this project/area is somewhat close, Guistra can achieve a very good price (well above $1.50) through supportive argument (+ government backing?) rather than any belligerence. Again, as usual, just MHO.