RE:RE:RE:Shorts
Windsorman wrote: Minority shareholders cannot stop the deal.GLTA
Absolutely wrong. The transaction cannot proceed without express approval of 2/3 of all shareholders, PLUS a majority of the votes cast by the 49% of the shareholders other than Rio Tinto.
So at a bare minimum 36% (18% of the total float) or so of the non-Rio held shares must vote in favour, and if all the 49% of the share float minority voted, then at least 25% or a majority must vote in favour.
It is very much a possiblity the shareholders reject offer - as it is TD holds the price to be at the bottom of their valuation range. Sailingstone regards the offer as too low in relation to both "the wall of free cash flow" to be expected on sustainable underground production, and to the book cost paid by Rio Tinto for its existing shareholdings. Recall they paid Robert Friedland the equivalent of close to $280/share for the portion required to cement their majority control.
If Pentwater rejects the proposed agreement, and the big proxy services follow suit, and their arguments regarding value are cogent, there is a substantial likelihood the shareholders may reject the deal.
To me the biggest variables are probably not addressed in the BMO and TD opinions, which are likely based on projections put out by TRQ (on Rio's behalf) in any event. They are: forward copper and gold price assumptions, the optionality of acceleration of mining Heruga and Lift 2 HNE, and most mysterious the additional value to be attributed to the huge exploration ground and camp play that are represented by the JV ground, the ETG 100% ground, and the further TRQ licences surrounding the same. Recall that virtually all exploration of adjacent further deposit targets has been halted or limited since approximately 2006.
As early as 2002 IVN and Mongolian geologists were postulating the possibility of "halo" precious metals deposits often found in proximity to large porphyry intrusions such as OT. In 2004 ETG, for example, was recommended to follow up on indicators of a potential gold deposit on the "X grid" to the East of OT in what was to become part of the JV ground. After the Earn-in Agreement placed that ground within the JV lands, no further drilling was done on that target. ETG did preliminary work on various targets on Shivee West then ceased. During the lengthy (14 years plus!) negotiations from around 2007 with Mongolia, further exploration beyond infill of the main OT discoveries was extremely limited. It doesn't take a genius to understand that if there was suspicion or geological possibility of a large open-pittable higher grade gold target, it could have torpedoed the whole foreign investment framework, as a Mongolian nationalists would have no immediate necessity for either capital or block caving expertise, and could use cashflow from such a deposit to finance the underground buildout and delay commencement while seeking international consulting expertise equivalent to that brought to the table by Rio Tinto.
This project's ownership has been in play for 20 years because of its huge resources and potential optionality and expansion. It remains underexplored with numerous potentially valuable deposit targets IN ADDITION TO the defined resources firming development plans to date. The leverage and optionality to expand and increase nearer-term cash flow is what is potentiall6 so valuable, and the two parties that know the most about those possibilities - Rio Tinto and Mongolia, have both sought greater ownership while controlling the information flow and pace of further exploration or adjustment to the production plans.
There are many reasons to reject the bid and wait out metals prices and production from underground. The very reasons Rio Tinto seeks to further this investment in a risk-laden political jurisdiction are the same reasons minority shareholders might wish to remain just where they are. Or, show us the real money ... up the price.
cg