Golden Arrow Resources Corp V.GRG

the reason

[GoldPanda1]

I think the reason SSRI are taking their time with the decision on the jv doesn't have much to do with the project or GRG. It's the export duties issue.

 

from the q4 report:

 

At December 31, 2016, we have accrued a liability totaling $67,130,000 (December 31, 2015 - $65,633,000) for export duties with no accrual for interest charges and have recorded a corresponding increase in cost of sales in the relevant period. The Federal Tax Authority has claimed that interest penalties at the prescribed rate applicable to general Argentine peso-based tax liabilities of 3% per month should be applied to the U.S. dollar export duty from the dates that each duty was accrued. The application of this rate results in a material interest claim of an amount approximately equivalent to the underlying duties that we have not accrued due to its uncertainty. In addition to our challenges on the underlying application of the export duties, we are also challenging the Federal Tax Authority’s claim for interest and the rate upon which it claims interest.

 

So they have provisions of over USD 67mn for those export duties - and close to that amount in interest that is not accrued. What do you think would happen if they lost the appeal and the court lifts the injunction? Would they put their Argentine subsidiary Mina Pirquitas LLC into the hands of the Government? And in that case, at what price could GRG get that mill from a government auction?

 

In any case, I think that SSRI are trying to put pressure on the Argentine Government in order to get a favourable decision on those export duties. I think that even if the case is lost, SSRI would still be better off exercising the JV and selling the new company instead of walking away with nothing. How can you justify spending USD 12mn on exploration for a jv and then forfeiting assets with a replacement cost of around USD 300mn? The export duties with interest should be around USD 130mn, there are also rehabilitation costs of maybe USD 70mn so that makes around USD 200mn. The big question is therefore, is the new operation worth over USD 200mn?

 

The weird thing for me is that the risk of the JV not going through seems to impact GRG's share price but not SSRI's. GRG could be better off if the contract expires as they would get that mill a lot cheaper and own 100% of the project. They have options, SSRI don't