Sino Gold Buys into Golden China...Sino Gold now officially holds 5,882,352 of our shares placing them at a 9.5% ownership of all of our total outstanding shares.
LINK
https://www.asx.com.au/asxpdf/20070919/pdf/314m59vn3k0bzv.pdf
With the support of Baker Steel Capital (5.4% GCX ownership), Gold200 (6.1% GCX ownership), and with lock-up agreements with Peter Secker & Stephen Everett (5.3% GCX ownership) Sino Gold has by far and away become our largest shareholder, owning ~26% of all of our shares, on paper at least. At a pretty good price to, I may add.
This 26% is far below the required amount they need for a takeover, which is 90%, but what this does do is eliminate any potential suitor from coming along and making a higher bid for GCX.
This is because they to will need at least 80% support, and since Sino Gold already has 26% of our shares locked-up, and for obvious reasons won't sell them. So this potential buyer would be sunk before he even got started with a takeover offer for us.
It is true that in many takeover propositions a potential buyer will come back with a higher bid, if the first one is rejected. But to be honest, and simply going by the top of my head, I can't recall one instance when this happened when the Board of Directors accepted and approved the original bid.
Of course I do stand to be corrected here and if anyone can supply an instance in which the Board approved an offer but the shareholders later voted it down, only to have the first company come back with a higher bid, then please do so with a LINK. Because as I said before I have only known this to happen on a hostile takeover bid, or one not approved by the Board.
I have also know several instances when the first offer was rejected and a counteroffer was never initiated. As in the case of Bema Gold for Arizona Star and especially Barrick Gold when it failed in their takeover attempt of Nova Gold.
I say ESPECIALLY BARRICK because what they later did was sell their 14.8% ownership in Nova Gold causing their share price to drop from $20 to $15. Even months later Nova Gold is still down by over 10% from when this deal first got started as they were trading at ~$18 and now trade at ~$16.
LINK
https://www.gata.org/node/5005
So sure, Sino Gold may come back with a higher bid if we reject their offer to join a stronger and better financed partner, but we also have to look at what could happen if they don't.
What if they do like Barrick did instead by dumping 14.8% of their shares, or in our case 26% of our shares, on the open market? What would happen to our share price then?
Would we ever recover to the level Nova Gold has, after one full year, or do we need a mine like Nova's first, that can produce 432 million pounds of copper, 341,000 ounces of gold, and 4 million ounces of silver, annually for the first 5 years of production, and also have Teck Cominco as their partner.
Yes there is upside potential if we reject this offer, but there is also a huge downside potential as well. How much more may Sino Gold offer us if we reject them, and they decide to do so, when they know they already have us by the short and curleys?
What... 4 shares to 1 over their closing price of ~A$6.25 yesterday, giving us a share price of ~A$1.56 or ~C$1.34 compared to the original ~A$1.39 or C$1.19 with their share price close at A$6.25? Hey, I am no knocking that. This is a 13% increase over what we would get now, but is this risk worth this small reward?
Consider that with this recent run-up in Gold and this stock, since it has a producing mine, could it not rise to A$7.00 quite easily, and before this deal is done? If so, we would still get ~C$1.34. What is more we would still be bringing 2M oz of Au to their table, which they have proven has been able to get a far better price for that than we have.
On the other hand, they may not come back with a larger bid, if we reject them first time. They may in fact decide to bid elsewhere. SGA has a mine closer to production than we do, so why not there? This would mean selling our shares into a market that has already proved they don't like buying them.
Remember, Sino Gold is only into this company so far at C$0.85 a share for 5,882,352 shares, with the rest of these shares depending on the final closing of this deal. For them to sell our shares at an average price of C$0.50, meaning we might be left with a share price of C$0.40, or C$0.35, they would only lose $2M.
Maybe only C$1M, after we pay them the Break Fee of C$1M. Chicken Feed, for a company who will shortly be producing 180,000 oz of Au per year, at this higher gold price. It would only be a small tax write off for them! But what about you? So before you jump on the Band Wagon singing "Say No", just make sure you know what you are saying "NO" to.
I for one can think of a lot worst things than joining a progressive, growing, gold producing company, who's share price has doubled this past year, while ours has been chopped in half, or a third, at the knees, and has gone from a C$1.75 to C$0.60. Or at least until this merger news was known, even if it did not officially get out yet.
All I can say is that going against market sentiment is stupid! The only advice I can give anyone, when it comes to the stock market, is put your fear and pride in your pocket, and use your knoggan instead.
GB