TAKEOVER Are you a trader or an investor?
If you are a trader and a shareholder of AGG, then you are in a very bad mood. And if some people imagine themselves waking up one morning and seeing buyers go for 50 cents, they'd better go back to bed to pursue this great dream.
For the past few days, I have been evaluating all the options that could allow AGG to eventually build a factory to exploit the Kobada deposit. I must tell you that we can develop several scenarios, but by removing those that are unrealistic or mediocre, only one remains.
In the category of unrealistic scenarios, there are 3.
The first being that of financing by bank loan. Considering AGG's current market value of less than $ 30,000,000, one should not imagine that AGG could get a bank loan of $ 175,000,000 with a guarantee of $ 30,000,000. This is also true in the situation where you cannot borrow $ 1,000,000 for a mortgage and put a $ 250,000 house as collateral.
The second unrealistic scenario involves financing by an investment company. I'm not an expert, but I suspect that considering the high level of risk and the lack of collateral, this type of loan would have a very high interest rate and would come with a very large royalty program. At the first pitfall encountered, shareholders could lose everything.
The third scenario would be to obtain funding by entering into a royalty program with a company such as Franco-Nevada. Again, given the large loan amount required and the lack of collateral, the royalties would be so high that AGG shareholders would get next to nothing in the end.
In the category of mediocre scenarios, there are 2.
The first, it would be the takeover, the price of which would be determined by the average of the stock price for a period of time over which we would add a premium of a few cents. The trader might be happy to cash out his money quickly, while the investor would have to forgot the long-term wealth produced by the Kobada field. As I am an investor, I consider this scenario to be poor.
Finally, for this category, financing by issuance of shares. Considering the current market value, I cannot even imagine the extent of the dilution of AGG shares. Imagine a strawberry pie cut into 1,000,000,000 pieces. Perhaps the lucky ones could end up with the equivalent of a glitch.
The last scenario is in my opinion the best. This consists of considering a takeover by converting the shares of AGG by shares of the offering company. This company must have the financial capacity to quickly start construction of the plant, have a good knowledge of the geology of the Kobada permit, be in control of the laws and regulations in Mali, have a network of local suppliers and finally, already have a attractive profitability, which would allow former shareholders of AGG to immediately take advantage of the profits without having to wait for the first income generated by Kobada. Such a transaction would definitely be a win-win.
Curious, there is a company that immediately comes to mind ...