Post by
RatPatrol on Dec 05, 2020 3:09pm
Dear Mr. Biswas
I'm going to offer a couple of ideas that may unlock some value for Newcrest in Ecuador.
At a minimum, you will appreciate that Cornerstone shareholders know the scene, the characters, and some of the conditions.
The Scene
1) Ecuador a few weeks ago defaulted on an $800 million bond issue. The country is bankrupt with some of their bonds now trading @ 30 cents on the dollar. There is a countrywide election about 75 days from now. The government would benefit hugely from a big mine devlopment provided it was safe, yielded royalties and jobs which led to careers, etc. All those ESG items.
2) The proposed tailings dam is a BIG issue; you only have to read about tailings dam disasters at Imperial Metals or Vale. "Measure twice and cut once " as they say in the rag trade.
3) Newcrest is NOT inside the tent like you once were 9 months ago, IMHO.
Closer Up
1) Cornerstone's 15% interest in ENSA is unimpaired, I believe. That is, there are no Net Smelter Royalties to be paid to Franco-Nevada. Cornerstone, with this interest, arguably has more control over its ownership than Newcrest.
2) BHP needs copper. Newcrest needs gold and silver (to a lesser extent).
3) BHP appears to be able to undertake the risks of development with less possible balance sheet impairment when things go wrong. Witness Rio Tinto in Mongolia.
4) There are too many owners having too many divergent interests involved in Alpala. That is a risk in itself.
A Couple Of Ideas
1) Knowing the value of CGP's 15% interest and Estimating (take note I changed the verb) the value of what SolGold shares are worth to BHP, and using Newcrest shares rather than cash compensates EVERYBODY for the variances and fudge factors (tailings being one) involved in these types of calculations.
2) A big benefit for Newcrest is that YOU can take Cornerstone's place in the ownership group. And with that deft, heft, and experience that is legendary about Newcrest, you might convert that unimpaired 15% interest into a monetary return (such as an NSR).
3) My second suggestion is to have a discussion with somebody like Peter Godsoe, formerly CEO of Bank of Nova Scotia. He was the architect behind that bank's wildly successful Latin American expansion which began 25 years ago and is still happening.
Thanks for considering.
You and Newcrest are doing amazing work.