Conference Call and Additional Details - Great Deal & UpsideGreat commentary from the regular posters on the board thanks for breaking the story and continuing to follow it. I was on the conference call this morning and wanted to add a couple of points for discussion I have not seen brought up yet.
Simon referred to the lower zone as a potential "Elephant" I like that, there were questions from RBC, CIBC, Haywood, Bank of Montreal, Bank of America, Raymond James and a couple others.
Reason 1 that the story is not done:
1. Based on the news release and the conference call part of this is a done deal but I do not believe the story is definitely over yet. The done deal part is RMC exercising the ROFO with NSU's money, on the call this morning they stated RMC should have the money from NSU this morning and has already started the process of exercising the right with FCX as of today.
They were clear on the call that no other party can at this point adjust the terms of the deal NSU has completed with RMC for the loan and the share purchase, neither of these require shareholder approval so they are done.
The following was not from the call this morning, just my thoughts:
There is nothing stopping another company from making an offer for RMC after the ROFO has been exercised, management would be required to present this offer to shareholders if it happens. Any offering company would need to match NSU's offer price to RMC (offer is 2 shares NSU for 1 share RMC) and would likely need to pay the break fee to NSU and repay the NSU loan. In this scenario companies could bid against each other, even if NSU didn't end up being high bidder for RMC they would still benefit by any increase in RMC share price above $9.40 because they own 12,174,928 shares and would receive a $20 million break fee.
Reason 2 that the story is not done:
2. For long-term RMC holders who want to see Timok through to mining this deal is outstanding for you. Timok was not given away, in fact shareholders own more today than they did yesterday. The original FCX and RMC deal was that RMC would own 25% of Timok at the time of feasibility study and would not have significant spending until then.
The next deal is the LUN deal under which RMC would have owned this same 25% but would have been in a better position because of a motivated and cashed up drilling partner (LUN).
When we are acquired by NSU we as a combined company own 100% of the high grade and an additional 28% of the lower zone exploration. We also have operating cash flow and a huge amount of cash in the bank for development. Of the total pie RMC shareholders would "own" 33% of the upgraded NSU so past RMC shareholders get 33% of Timok upper zone (up from 25%), 17% of the lower zone (down from 25%) and 33% of NSU's market cap 800-900 billion (up from 0).
Finally we also gain the mining and development experience and resources to build a mine, previously we were explorers.
Couple other points:
Assuming this deal continues without any other offers I expect RMC to end up trading around $9.40 before close. I say this because from my experience when there is a public offering at a certain price a stock tends to trade at around this price. RMC effectively just completed a huge offering (19.9% of the company or 12 Million Shares) for $9.40.
Last note is that the call was very positive from both companies perspective; this is expected as they need to sell their companies to investors but I do agree it is a net positive. I was pleased that the analysts were very positive about the deal, lots of congratulations and virtual back slapping going on, fun to listen to.