Valuation of the two bids - from the 2nd Bidder detailed in yesterday’s press release , vs. Titan Minerals - how much better is the 2nd bid, valuation-wise, and what is the approximate gap?
Even as non-experts, shareholders can examine the information provided and make a useful enough comparison, back of the envelope style. Your calculations may vary, but the “2nd Bidder” bid appears to be about 24 times better than Titan’s in terms of dollars, and leave all the "upside" in Core, and leaves the liquidity = cash value of North American stock market listings to existing Core gold shareholders. In terms of the whole of the company Core Gold, the 2nd bidder's bid appears like it may have a $3 higher intrinsic value per share, i.e. $3.12 vs. $0.129.
Summary of estimates here:
Titan, paper bid value, for 100% of Core Cdn 12.9 cents / share
Titan values the whole of Core Gold at Cdn $ 19.5 million
2nd bidder, cash/market value, re: 100% of Core Gold Cdn $ 3.12 / share
2nd bidder, cash.market value re: 100% of Core Gold at Cdn $ 471 million
Factor between the bids, approximately 24 times
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Titan Bid - Titan in its documents claims an effective bid of 48 cents Australian per Core Gold share, based on 20 Titan shares for 1 Core Gold share, and a Titan price at the time of 2.4 cents Australian. But there is significant doubt around whether that represents any kind of valuation.
The first doubt as to Aus 48 cents as a credible valuation, is because it plainly presumes the current Core Gold market cap in North America, as part of Titan’s new proposed market cap in Australia. That is to say, to follow Titan’s logic of adding up the two market caps to value their bid, Core Gold would be presumed to be paying for itself with its own market cap, with the whole new Titan then becoming 6.6 billion Titan shares at Aus 2.4 cents each, and leaving no shares on North American markets.
In Titan’s bid, with all the stock market listings for Core extinguished, the market cap of Core Gold would be eliminated. Core Gold’s shareholders' current market cap can’t then also be a lion’s share of Titan’s bid at the same time.
In addition, the Titan share price relied upon may well be ephemeral. It has already dropped from 2.4 cents to Aus 2.2 cents nowadays, the opposite of what you'd expect for a fair bid. The Titan share structure, with large shareholders, could likely produce any price that a few bidders want, so there is feeble assurance there:
https://simplywall.st/stocks/au/materials/asx-ttm/titan-minerals-shares/news/how-much-of-titan-minerals-limited-asxttm-do-insiders-own/
That Titan’s share price may not be something to rely on is reflected in their past
share collapses, with a 92% drop in Titan value earning a sort of “award” in 2018:
https://www.fool.com.au/2018/04/19/here-are-the-worst-performers-on-the-all-ordinaries-over-the-last-12-months/
So what is Titan really paying for 100% of Core Gold? Titan doesn’t have cash now, but promises Australian $20 million in the future, which would go into Core but would not go to shareholders. Titan's existing mining assets, such as they are, are of low value. Their cash situation is getting closer to zero, having spent much of their free cash, and borrowed for their recent $3 million underwater stake they took out last week in Core, presumably in part to affect any eventual vote on their own bid. $20 million Australian is about $19 million Canadian, and that can be bumped to a Titan bid value of $19.5 million Canadian, although that might be generous if their other assets total less than zero.
Value of what Titan is bringing to pay for 100% of Core Gold, Cdn $19.5 million
Cdn $19.5 million / 151 million Core shares = Cdn 12.9 cents per Core Gold share
Summary:
Titan, paper bid value, for 100% of Core Cdn 12.9 cents / share
Titan, paper bid value - paid only in Aus shares Cdn $19.5 million
Titan values the whole of Core Gold at Cdn $19.5 million
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2nd-bidder - Per the press release of yesterday April 1, the 2nd bidder brought to the board of Core Gold, an offer of cash from their treasury: Cdn $4 million up front, US $20 million for a 19.9% stake in Dynasty, and a US $62 million for an earn-in within 3 years for 60% total of just Dynasty Goldfields.
So in this case the market value of Core Gold is retained - the Canadian and US stock market listings remain in place: it is a true joint enterprise. The 2nd bidder would, if I understand, finance and build a plant on-site to vastly improve economics and output, and carry Core while doing so. Core Gold then retains most of its upside for shareholders, with Core remaining able to explore and
transact on its other properties, particularly Copper Duke and Linderos.
Ian Telfer offered $30 million for somewhere near a half stake in Copper Duke in 2007:
https://www.siliconinvestor.com/readmsg.aspx?msgid=31394191
In addition to Dynasty Goldfields and Copper Duke, Core has Linderos, Zaruma (underground), Jerusalem, the Portovelo plant, Copper Field and other interests. Copper Duke and Linderos have shown indications of large porphyry bodies near surface. Copper Duke shows particularly high copper grades and may become a massive copper project in its own right.
So in seeking only a portion of Dynasty, the 2nd bidder bid for roughly a 60% share of just Dynasty. Dynasty appears to be about 1/3 to 1/2 of Core Gold as a whole - we can call it 40%. Multiplying the values coming out of their bid, a 60% JV on about 40% of Core Gold’s assets is about 24% of Core Gold’s total assets. As to the US$ components of their bid, for US exchange it is about 1.33 to Canadian.
Value of what 2nd bidder brings to pay for about 24% of Core Gold = Cdn $4 million,
US $20 million, US $62 million, 4+ 1.33 x 20 + 1.33 x 62 = Cdn $113.1 million
Cdn $113 million / 151 million Core shares = Cdn 74.9 cents/share for 24% of Core
2nd bidder value per share, re: 100% of Core = 74.9 / 24% = Cdn $3.12 per Core Share
2nd bidder values Core Gold at about Cdn $113.1 million / 24% = Cdn $471 million
Summary:
2nd bidder, cash bid for 30% of Core Gold Cdn 74.9 cents / share
2nd bidder, cash bid value Cdn $113 million
2nd bidder, cash bid values 100% of Core Gold at Cdn $3.12 / share
2nd bidder, cash values 100% of Core Gold at Cdn $471 million
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Summary:
The Titan bid brings shareholders Australian paper shares with a questionable track record,
with a value of about 12.9 cents/share.
The 2nd bidder brings current treasury cash and retains existing Core Gold shares
with a bid value of about 74.9 cents/share, and only for roughly 24% of Core Gold as a whole.
With the 2nd bidder, Core Gold investors would retain their “upside” on nearly all
of Core’s properties. Investors would retain their North American stock market listings,
which are key to retaining market cap - the listings mean cash liquidity, for investors. With the 2nd bidder, all of the other Core Gold properties could continue to be explored and developed for the benefit of Core shareholders.
With the Titan bid, we read that 126 milion "performance" shares are being created to reward the Titan board, those members of Core Gold set to join the Titan board, and Canaccord. Some have said that they see a conflict of interest there.
The 2nd bidders value here seems to be $3.12 / $0.129 = 24.2x, or about 24 times better.
The 2nd bidder values the whole of Core at roughly $471 million, vs. Titan at about $19.5 million,
also a gap of about 24 times.
Overall approx. estimate:
2nd bidder, valuing all of Core, vs. Titan: 2nd bidder about 24 times higher
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