RE:RE:RE:RE:Re: Largo marketing pieceI admit that after so long, it's tempting to think about a buyout as a means of lifting the share price to a nice level and taking your money home safely. But I think if you take emotion out of the equation, most buyouts are not a great thing for shareholders (and sometimes are downright terrible... did anybody here invest in Quadra back in the day?).
If you are the buyer, you're not going to pay above the value that you can get out of the mine yourself. You offer a price at a significant discount to the NPV, and as the purchasee, your task is to balance how much risk you offload for that discount, and whether you feel that the purchase price bump (probably averaging around 40% above a usually manipulated x-day average) is enough that you can more profitably or less riskily deploy that capital elsewhere.
In the case of Largo, we have a pretty low risk mine/process with decades of probable reserves, an easy process, and the lowest cost V mine in the world. In other words, it would be hard to find a project with less risk to potential reward, unless the price is already quite high, in which case, you're probably not going to find a buyer.
Where the risk comes in is the other properties, but they're not even priced into the stock at present. I think there will be some serious challenges developing Northern Dancer, although the tungsten price is definitely nice, it is a large deposit requiring more cashflow than we could realistically front ourselves for quite some time. Currais Novos has already been a challenging project but it contributes only pennies to the equation one way or the other. Campo Allegre is a mystery, it certainly looks good but nothing is proven. How do you value that? If you're Mr. Market (with nods to Ben Graham/Buffett) they you probably don't.
Anyway, unless the offer was really good or was a significant bump well above the usual 40% above moving average, I don't think we'd be wise to take it. All that said, would I turn down an offer above 80 cents if it came today? No. But in 1-2 years if/when we have expected cash flow and have proven results... probably not.
Incidentally, I expect such an offer would come from Glencore/Xstrata if it were to come.
My two cents. Also, congrats to Giganticus. I'm still slightly below my cost, I wish I'd been in at around 10 cents!!