RE:Off balance sheet assets not recognized in SD Gold takeoverWhat's mind-boggling is Newmont letting go of an entire mining camp when they have the capital and the know-how to run it. I also can't understand why Kirkland or Agnico is probably the most Canada-Centric gold miner but not doing a all share deal to take it out, I'm really puzzled?
What seems clear is that Newmont and Barrick are in divesting mode, while Chinese and Australians have been and are aquiring at rock-bottom, so to speak, prices!!(we're far from the 2011 peak!!!)
15Stanmore wrote:
Hello All,
What a great way to spend a Saturday afternoon - a glass of wine on the patio reading the 2019 Annual Report of TMAC Resources (with lots of sunscreen generously applied!)
Here is an interesting note from those financial statements:
"TMAC has unrecognized future tax benefits of federal and provincial non-capital loss carry-forwards totalling approximately $360.6 million that expire between 2033 and 2039 as well as deductible temporary differences of $163.3 million and deductible temporary mining royalties of $165.9 million." (Note 13. Income Taxes)
Having spent and then written off hundreds of thousands of dollars over the preceeding years in exploration and development costs, TMAC has accumulated significant tax shields that would allow it to avoid paying income taxes as and when profitable (ie. taxable) operations are achieved. Based on the above, the December 31, 2019 balance sheet does not reflect the $690 million in tax shields available in the future to TMAC. At the 26% statutory rate, these are worth $179 million in future income taxes avoided - TMAC can have taxable income of $690 million and pay no federal income taxes.
This means that the $227.5 million purchase price (130 million shares at $1.75) not only buys you the Company and all the sunk infrastructure costs to date, but also $179 million in avoided future taxes. Imagine paying only $48.5 million "after tax" to acquire the ownership of this attractive and promising nugget? You would think at that price a Canadian competitor to SD Gold would consider offering $81 million "after tax" to beat out the foreign takeover, which would be the equivalent to an offer of $2 per share. (Each 25 cent increase over the existing offer adds up to about $32.5 million.) Hopefully a CEO with cash to invest is also looking at the TMAC financial statements this weekend and like me shaking her head at how SD Gold could get away at such a miserable offer.
It still boggles my mind that CIBC and BMO certify that $1.75 per share is a reasonable price at which to sell the company. Go figure.
Cheers,
S.