Duluth Metals Ltd DULMF

Worse case for DM shareholders

[marpincan]

This IMO would be that all obligations to Anto gets settled in shares. This could mean the issue of 700 - 800 million shares at 30 cents each. Anto would own most of DM for very cheap.

[marpincan]

If Dundas and Company do not pull a Rabbit out of the hat, then good chance that that will happen.

[Saunalot]

Either it goes to zero, or it goes to $1 in the next couple months. If anybody remembers Franconia back in 2010, they traded down to arond the same price DM is trading right now in August 2010 before being acquired by DM for about $1 before the end of that year.  The stock is now bascially an option with a good risk/reward profile.

[Nazarbaz]

marpincan: Please explain how did you get that number?

[marpincan]

Anto has sunk 220 million into the project and also DM has an outstanding loan from Anto of I think 10 million. Since DM has no money to pay Anto back and Buy Anto out of what they have spent, you have 230 million that gets converted into shares at (based on current trading) around 30 cents. This I see as worse case for the DM shareholder.

[miningfundi]

I suggest the worst case is that a third party does not acquire a piece of the project, directly or through a DM share subscription, that would fund DM's ongoing obligations, and that DM is unable to raise funds to meet its ongoing obligations, including salaries, G&A, project costs, interest payments and, eventually, long-term debt repayment. What then ...?

[marpincan]

When push comes to shove, the only currency juniors really have is new shares. As for those on the receiving end, when the junior has no money and no means of raising money, they do not have much choice other than to take shares. From what I see Duluth is very short on cash and Anto is the biggest  creditor by far so unless DM finds a 3rd party to fund them, by default Anto ends up owning

[estebancaballo]

DM would need to issue more shares, diluting existing shareholders. The reality is that they do own a valuable resource that a major is likely to want to pick up for a song at this point. All imho.

[Nazarbaz]

Anto has spent money and thats why they have 40% of TMM. Thats it. All DM owes them is 10m debt. You are confusing an option with an obligation, they are very different things.

[marpincan]

so what happens if DM can't meet its obligation?

[rocdic]

This post has been removed in accordance with Community Policy

[redmetal]

Too bad Fred Flinstone spent all of our money buying back paper at $2. He is the worst CEO of any company that I have owned. Even worse than John Greenslade. I am no longer a shareholder. 

[Nazarbaz]

Duluth will pay 10M debt in shares to Anto. But there is 4 month left and I am hoping Barkley is taking their teaser to all mid and large miners and all resource private equity's to find a buyer for DM.

[Nazarbaz]

The 220 M is strike price of an option that DM has on Anto's share. The option is currently way out of the money so it is absolutely irrelevant to the current situation. 

[marpincan]

Here is the pertinant section from the news release: The project has now moved into the "40/60 phase" whereby Duluth maintains its 60% ownership of TMM and Antofagasta owns 40% As a result, Duluth Metals assumes immediate control and operator status of the TMM Project In addition, this notice provides Duluth Metals a contractual buy-back right on the Antofagasta 40%

[marpincan]

Trying again since most of post does not show up unless you hit reply. Here is the pertinant section from the news release: The project has now moved into the "40/60 phase" whereby Duluth maintains its 60% ownership of TMM and Antofagasta owns 40% As a result, Duluth Metals assumes immediate control and operator status of the TMM Project In addition, this notice

[Nazarbaz]

As your own post shows this is an option. To get a price for TMM, note that DM for the most part is a proxy for 60% of TMM. So market price of TMM is 10/6 times EV of DM. Enterprise value of DM is around 50M$ soTMM is priced at around 80M$.  I am very disatisfied with management but they can't possibly be stupid enough to pay 220M$ for something with a market price of 4/10*80M$. marpincan

[marpincan]

Considering some of the not so smart things Dundas and company have done to date, I would say anything is possible. Again - like I said - worse case.

[rationalinvest]

Enterprise value is $80MM, don't forget the $ 30MM 7.5% debentures.  -- And yes, management will definately not exercise the buy-back option. That's why the post-Anto-option-drop conference call was so annoying, even seemingly contemplating this. And of course the latest conference call, or let us call it conference charade. And I know why: Dundas somehow really seems to think

[redmetal]

Their big fat paycheques will be coming to an end  soon.