merger numbersThe conversion is not 0.7c per share. It is 40.3% of the combined companies, which just happens to be 0.7c per share last Monday. There is little to gain arguing about the 0.7c per share as unacceptably low. The conversion ratio is determined by the relative valuation of the two companies (which can be calculated impartially according to trade standards), the need inthe hands of competent management and the desire of Almonty Partners (Black and Logan) to remain in charge of the combined companies.
A while back I figured Almonty and Woulfe to be roughly of similar value based on production, verified resources and debt. so the conversion ratio should be even (50%). However if I were Almonty I would certainly request a premium based on what they bring to the company, which is really experience in underground hard rock mining which is quite unique in the world. As a Woulfe shareholder would not mind the incentive, to a point of course. As Almonty, I would also want to maintain control of the combined companies. I think the 40.3% was arrived as a result of this reasoning.
Sangdong will be a very big mine once all the levels are open, but that is in the future potential.
Current NPV is calculated based on the bankable mining plan and attached financing at current tungsten prices (which are quite low). The value of non assessed mineral resources right now and for as long as prices keep going down is exactly zero. Same is true for the gold mine, which is only viable above 1500/oz.
The potential for future appreciation and extension of owned resources is why Almonty is investing in the Sangdong mine, that and the capability to start operations soon enough to satisfy the Koreans. which is something Wessons and Dundee were not able to do. It is probably the reason why Dundee gave up on the mine. They perhaps would have wanted to wait out the price slump but were faced with the threat of having their permits cancelled by the provincial government. So Almonty sweeps in and brings in underground mining expertise specific to Sangdong.
This period is very low in the commodity market, but still nobody knows if tit is the bottom, given the Chinese market uncertainty. Getting 40% of the likely future largest producer outside of China is not a bad deal. also given the relative track record of the two companies. The big tungsten conglomerates in China are valued in the $B range. I think A&W has a decent shot at getting there in the not too distant future and it would be a $10 stock at that point.
What's not to like. all alternatives I can come up with are more unpleasant...
To Lonade: the Almonty site is well documented and and updated. on the other hand, reading the CSE monthly report has often been an exercise in futility. I will not miss the routine.
To Gastown: I have no working relationship with Almonty. I have visited Gangwang province several times for day hikes on the mountain and I have taken interest in the Sangdong mine history because I love the area. I most certainly have no interest in keeping the price of the Woulfe stock down. As I am winding down my travel to the East, I have ran a quick check on the SP of tungsten junior companies and tungsten the day I joined (Nov. 2014) and compared it with yesterday's SP.
| | Nov.11.2014 | Jul.10.2015 | Delta ratio |
| | | | |
| Almonty | 0.66 | 0.68 | 3.03% |
| Black Heat | 0.27 | 0.20 | -25.93% |
| Carbine | 0.12 | 0.12 | 0.00% |
| North America T | 0.05 | 0.01 | -80.00% |
| Northcliff | 0.23 | 0.13 | -43.48% |
| Ormonde | 4.45 | 1.80 | -59.55% |
| Wolf Minerals | 0.27 | 0.40 | 48.15% |
| Woulfe Mining | 0.04 | 0.07 | 62.50% |
| | | | |
| Tungsten (APT) | 328.00 | 210.00 | -35.98% |
| | | | |
Of the new mines stating, Wolf MInerals has done great with financing their mine and keeping it under control. Ormonde on the other hand has done its financing very poorly, giving away ownership and teh SP has suffered.
Carbine is operating a small mine. Black Heat and Northcliff (explorations) have declined propoportional to tungsten prices more or less. North America Tungsten has cracked under price pressure.
Almonty has not done badly, with decent production under dire pricing conditions and the prospected merger no doubt. But the best performer has been Woulfe. It is obvioulsy a good property and now deserves a good team to bring it to production.