Answers (sort of)So many questions ... and we all have our own bias to come up with answers and make judgements. So I will speak just for myself when I say that: 1) whether or not Almonty has used insider information to time the merger request, or 2) what was the real reason for the January "merger interruptus", or 3) whether Dundee management has been malicious against shareholders or just incompetent, in the end these are all fairly minor issues with respect to the merger option at hand. To put it "chrisply", it is water under the bridge.
As for me again, in considering the merits of the proposed merger I would look strictly at the "what's next" business side of things: will my common shares be worth more in one year (or whatever time I have in mind) with or without this merger?
Having gotten that out of the way, I find the above issues raised repeatedly in several posts, to be still quite interesting from an analytical point of view and worth discussing. So here it goes:
1) Why was the new merger offer disclosed right after the new FS?
- Almonty did not use the new FS in its website presentation (done before merger offer).
- There are actually three relevant FS, all somewhat connected. The latest FS (#3) is probably a mix of the old Tetra Tech FS (#1) and the January AMC FS (#2).
- In January Almonty was good already with the merger based on the AMC FS
- Almonty will probably want to have its own study (FS#4 based on FS#3?) done before starting construction.
My answer: As a corporate type in a cut-throat technical business, if I was going to put 40% of my company at stake in a sale, I would make 200% sure to get all the the information available, and then some, about my acquisition target. The sequenced approach that Almonty took in gaining control of WOulfe (loan, equity, directors, CEO and merger offer) was both aggressive and smart. I would want more of that, not less, once they are in charge of my shares.
2) Why was the first merger offer turned down?
I do not know what really went on of course. I can only speculate as to what I think may have happened, based on what I have read.
- We were not quite sure if the offer was turned down by WOulfe or terminated by Almonty. Judging from the language, at the time I thought it was Woulfe that turned down the offer.
- Reading the actual clauses in the new proposal, which we now have in full, and assuming they were the same as in the first attempt: Woulfe would have had to pay a penalty for turning down the proposal in January, which did not happen.
- The SP reaction to the termination of the first merger attempt was not positive, which leads me to believe that the first merger attempt was in fact "interrupted" by Almonty.
- While Woulfe could have asked for a better valuation (which we know was not the case because they are accepting essentially the same deal now), ALmonty could have objected to terms of the off-take agreement, once they were disclosed to them in the due diligence.
- We have never been told what the actual full terms of the IMC off-take deal are. we know the off-take is for 90% at least of the mine output and we have rumors that there is a 10% discount off the going tungsten price. If this is the best discount Wesson was able to negotiate in 2012, it may have been acceptable in those good days of $400 APT. now not so much.
- Almonty's Black says it was a matter of timing only, and the merger offer was never really off the table. The guy strikes me as a fairly straight shooter. So maybe Almonty just wanted to have time to prepare for summer negotiations with IMC and /or get an alternate off-taker ready. The interview of Black is quite clear as how he wants to approach IMC.
My answer: In the end, the present merger offer is almost exactly the same as the first offer, so there is little reason to second guess Black's statement. We get 40% of the combined company, which is at the low of the range for the January merger proposal, but without the collar, which is better than the original proposal. And Almonty already has 8% of Woulfe shares (16% diluted).
3) Has Dundee willfully harmed shareholders during its management at Woulfe?
- Dundee has spent $20M+ on Woulfe, more than any single investor.
- For all that they have very little to show for it at this point to their shareholders, let alone to us. the market worth of their Woulfe shares and Almonty Shares is less than 5M and a substantial number of new shares has been printed diluting the existing Woulfe share-holders.
- I am always wary to accuse people of evil intentions and willful wrongdoings when simple incompetence may be sufficient to explain. but I agree that the last two years of Dundee management have been more bad than good for the common WOF shareholders.
- When I joined the stockhouse bb, I thought Dundee were low-key hands-off managers quietly and efficiently developing the mine in difficult market conditions, and I liked that. I started to change my mind about Dundee when Woulfe management did not publicly release the FS (#2) in January, then "terminated" the merger without explanation and stuffed the board in February, and in March finally became obvious that whatever little they were doing in Korea was not going well with the locals.
My answer: As Gaston notes, Dundee "could have made more money by playing it straight and developing the mine", and that probably was the original intention of Ned Goodman, but greed and incompetence got in the way. Which was worse at this point does not really matter. To their credit, Dundee did not smother the shareholders with one final PP last year but agreed to hand over the reins to ALmonty instead.