RE:RE:RE:RE:RE:RE:AAB what is wrong with this company?I think historically you'd be accurate in your assessment of the business model. I.e. Buy a small position in a quality asset at a depressed price, typically through loans, private placements, etc. nuture it and await the eventual sale at a higher price assuming your thesis plays out. However, that model changed when the bottom fell out for virtually every commodity the last couple of years. The public markets are deficient for mining companies for most part, though the climate has improved since the beginning of this year.
Currently, Aberdeen is buying larger, at times controlling interests in assets (ATP and PLASA, for instance), where they can deploy their existing talent and resources to determine the outcome rather than being a smaller player. By being on the board, or within the management structure, Aberdeen can influence the company to make moves that align with the best interests of Aberdeen shareholders.
Let's utilize ATP as an example - had platinum prices recovered more quickly, managements stated goal in 2015 was to have the company produce positive cashflow, peel some of that off, while still growing the asset and working towards maximizing efficiency and developing Kalplats. Unfortunately, while operations gradually improved, platinum prices remained depressed, and I'm sure they played a large role as almost 50% shareholders in determining that continually running in an unprofitable state was wasteful. So ATP ceased operations earlier this year to focus on a more profitable re-start in early 2017. This is an excellent example of Aberdeen using it's influence to safeguard long-term shareholder value. However, had the operation proven profitable, I have little doubt management would have pulled cash out month-to-month to lessen their initial investment, and help offset G&A costs, if not putting them in a cashflow positive situation outright.
I think PLASA is very similar, and Aberdeen owns 50% currently, while LIX has the opportunity to purchase another 30% for an additional $5 million worth of LIX shares. One of the conditions, however, is that LIX must complete a positive feasibility study within two years, and until then AAB keeps 50% of PLASA. IMO It's a great deal for two reasons, on LIX's end, they are encouraged to keep their share price elevated, as they will have to dillute the company less to buy the remaining 30% from AAB. For AAB, they get 50% of the profit from PLASA and it's initial ponding project, until the FS is completed. While we don't know what that cashflow will be (if any), AAB will benefit in the near-term (next 6-12 months) from that cash, and even longer if the FS takes longer to complete. Furthermore, I believe AAB has the right to purchase a 1% NSR from Routemaster (V.RM) for $2 million dollars at any point in the next year and a half. That could also play a critical role in establishing consistent, recurring income down the road.
Now, I don't pretend to know if they will sell their stakes in PLASA and ATP outright, I would hope, as a long-term shareholder, that management takes steps to ensure they generate recurring cashflow to the tune of appx. $3-5 million a year so as to pay salaries, expenses, etc., plus continue to perform shareholder-friendly initiatives such as share buybacks or dividends. If those two projects turn out positive, then I don't think it will be a stretch to suggest that the dividends, royalties, etc. the companies pay can sustain the company, while it continues to grow it's investments. Again, all of this is JMHO. Please do your own DD.