Duluth Metals Ltd DULMF

Buyout price would be circa $400m

[materialsgirl]

At a takeout price of $1 a share the equity cost would be $150m.  Anto is asking for about $230m to compensate then for sunk costs and loans.   Add in transaction costs etc and the final price would be about $400m for 100% ownership of the property.
This may seem cheap except that the presidents of prospective buyers are all paid based on quarterly and annual earnings.  An asset with permitting delay risks where the likely production is in the next decade does nothing to enhance bonus payouts for management of prospective acquisitors.

Teck is mentioned as a possible suitor.  I doubt it now because copper is performing just ok while its biggest commodity, coal, is experiencing very low prices.  Oil will just consume capital for the next 3 years with zero returns until then.   Only the zinc outlook is very positive.  

Of course if the price of DM is low enough there could be many takers.    $300m?  $250m?  $200m?

One quandary is that Anto only owns 40% of the asset but for now they may be looking for 60%+ of the selling price.  They will try to recover their sunk costs.

Anto has access to and knows all the details of the feasibility study.  So why did they act now?

On balance I have no opinion of what is likely to happen but the news is somewhat negative.

mat

[mtsuit]

FM share price is up since it agreed ot pay $470mm for Lumina.  It has a smaller resource just at PEA stage and it's in Argentina.  In most respects DM seems more attractive. The key risks for TMM are 1) permitting and 2) economics and complexity of an enormous underground mine.  It's easy to move 80000 tonnes per day in a spreadsheet, but hard to do it underground. ANTO

[marpincan]

Dose anyone know how may shares of DM Anto currently owns? The 10 million loan plus interest  that DM has to pay back will likely be paid back in shares (20 million shares). So based on Anto current share ownership in DM plus 20 million more shares plus owning 40% of the deposit, Anto may have DM sewed up pretty tight. With no production till 2020 or after, Anto may have not been interested

[DearBear6]

Does anyone think it would be in anto's best interest to wait until DM needs cash to survive then start buying out small chunks of DM at a time for cheap?  What is to stop anto from doing this? Other than a good pfs or competing interests trying to take DM, why wouldn't anto attempt this?

[mtsuit]

ANTO has a standstill agreement with DM so ANTO can't buy shares in the open market.  On the cc Dundas confirmed this is still in effect. ANTO has pre-emptive anti-dilution rights allowing it to participate in any placement of DM shares.  Notably, ANTO elected not to participate in the March placement at 65 cents.

[estebancaballo]

Thank you M for the informative post. What was the mood of the cc? Did Dundas sound confident or nervous?

[redmetal]

I wonder if Glencore is looking at stealing this one given there involvement with Polymet.