Core Gold AGM 3) - CEO Address D - Strategic Process ii)Core Gold's strategic process is likely to produce a number of desirable alternatives.
Ordinary financing would not require a vote process, but for mergers and the like, a vote would be required. The votes of 50% to 66-2/3% of issued shares undiluted are required for shareholders to vote to a definitive bid success, and more than that would further require all remaining shareholders to also tender their shares.
It will also become clearer at that time what Titan’s manoeuvring amounts to. It doesn’t appear credible that they could obtain a substantial number of votes, as most major shareholders would clearly prefer more substantial value as well as cash to shareholders, but perhaps Titan might demand e.g. a ransom to make the vote nearly unanimous, or attempt to lever the process in some other way. On the other hand, Titan supporters might just prefer a better deal.
With the strategic process taking off, reviewing the path of Core’s stock price reveals some interesting patterns. The chart below draws on Yahoo Finance to compare Core with a few other stocks generating similar interest in the junior miner space - B2Gold, K92, and Silvercorp. With the junior mining space finally beginning to track the leaps upward in the price of gold, the price of those companies appreciated, on average, about 40% in the past 6 months. Core Gold has just gotten back to where it started, after the damage of Titan’s initial bid.
Titan’s first bid was announced February 24, 2019. The undesirability of that bid - only Australian paper to shareholders, and overvalued paper at that, plus the extreme difficulty of righting that situation through the courts, created a huge burden on Core’s public perception and stock, at a time when Core instead could have instead been beavering away at the strategic process now in place. From the time Titan’s first bid was announced, Core’s stock price had dropped from the 30 cent range to 20, or a drop of about 1/3, by the time Titan and Core finally disengaged fully July 19.
September 16 and 17, Titan announced their intention to bid a second time - and Core responded, and announced their strategic process. The price rose dramatically, from about the 18 cent range to over 25 - roughly a 40% leap up, just to start.
Titan supporters like to imagine that represents excitement over Titan. However, many writers have pointed out that if that were the case, the price would have risen to 80-90% of Titans nominal bid, but it is barely half that. Titan’s second bid doesn’t have credibility in the market, but Core’s strategic process does.
Core Gold’s stock price, having been held under water for a whole host of reasons - the unlucky old underground venture, a severe lack of capital and delays in proper debt accounting, and a manifestly unfair takeover bid, now has nothing holding it back other than a delay in market perception coming-to.
Companies bidding have shown their enthusiasm, but it takes longer for the news to take hold among investors. Core Gold, a producing gold miner in one of the very best, more prospective and commercially most desirable spots in the world, is being recognized by a swarm of bidders as a hot property, even if the market has hardly woken up to the fact.
With a desirable bid or bids designated by the board and details released, Core’s stock price is most likely to follow the traditional pattern, rising to just near the bid price value, or even over if the bid is likely to be topped or a bid contest is still in progress.
For those shareholders who believe that a good bid is likely to come in that more fairly recognizes the assets, there has been a helpful pause in the stock price and attention, allowing them relatively unfettered access to shares. The periods of serious negatives have been dissipating, and the atmosphere arising around the stock is likely to take it to another price regime more typical of producing junior miners.
A typical modest valuation of such producing assets would be US $30/ounce in the ground - which multiplies out to a price that is a number of times Core Gold’s current market cap. A valuation more similar to recent transactions (cf. Santa Barbara and Atlantic Gold) would be closer to 10 times the current level. Whichever bidders may win, at modest multiples of the current price it appears that they would be getting an incredible bargain, vs. the value of the assets.
Core Gold carries profoundly less debt now - the loans from Credipresto and Accendo were all converted to shares in the Spring, Robert Washer’s debt was converted to cash and shares, and if it’s understood properly, a good portion of the 30% short-term loan has also been paid off. That, and the price of gold, gives Core Gold substantially more cash to work with, and probably means an overall company profit is being achieved. Being able to stand well on its own also makes Core more admirable among market participants. Q3 results will be out in November.
Basically Core Gold is open for business. During this phase, of course one should not expect the details of the process to be press released. However, the market has clearly responded positively and decisively to Core’s strategic process, bouncing nearly 2 times from its low of the year, and still well below even the ballpark of what most shareholders consider reasonable pricing.
Mark Bailey expressed that the level of interest is quite exciting, and that he and board are working to keep every likely party involved and not chasing anyone away. Mark is providing good and useful leadership. The mood surrounding the company has been lifting, and continues to lift as it becomes clear that there is a good path forward. Overall the impression was that the efforts to unlock the value of Core Gold are quite sincere and are being energetically furthered.
