Alpha Minerals Inc ESOFD

takeover

[patientriskyinvestor]

Disclosure.  I am a medium term investor in AMW and FCU having bought my original position in AMW just after the announcement of the boulder field.  I have followed both AMW and FIS/FCU avidly on Stockhouseas well as elsewhere since then but am a new poster (my first post).  I have accumulated more FCU and AMW and have not sold a single share (other than conversion into DML and the subsequent sale of my DML shares).  I started to buy FIS just before the conversion due to a persistent underpricing in my calculations (fully diluted) of FIS relative to AMW.  I have held onto the FCU received in the spinout and have added more FCU, but have predominantly bought AMW because shortly after the spinout AMW seemed to be consistently underpriced (my calculations)relative to FCU (fully diluted).  Due to accumulation and appreciation my position in PLS now constitutes a very significant portion of my portfolio. 
I think that the buyout offer by FCU is highly opportunistic and frankly agree with AMW in rejecting the deal.  It is simply inadequate.  Despite FCU's and Dev's claims of a "premium", in fact if you do your math, the offer is at a discount as I will explain below. 
I and my friends have called the respective companies to find out information (more on that later) and worked out fully diluted numbers of shares and "cash" based on in the money (or close to in the money) options and warrants.   Using this and I believe that all the other properties of both FCU and AMW are worth virtually nothing (a couple of million each, just look at all the exploration co on the venture.) and any valuation is speculative froth until an actual drill is put into the ground or at least some uranium containing boulders found down-ice.  AMW and FCU are exactly that, 50-50 partners on PLS and their cash.  The rest means nothing until their is a discovery on the other properties.  The multiple I came at was 5.55 x FCU = AMW.  This is the same ratio that was confirmed last week in a report by Raymond James and i believe still remains valid. 
So as of today's closing prices the ratio was 5.393 and based asks on level II was 5.404 so closing on 5.5 5 ratio but FCU needs to stay at $1.36 and AMW get to$ 7.55 to hit that ratio.  Based on this calculation, AMW remains underpriced and in fact (I have not seen the actual offer by FCU, but if it is based on a 5.3 ratio, or if it is based on $ values at the close on Fri) they are NOT at a premium, but rather, a discount to what AMW is worth relative to FCU.
Other things to ponder.  I frankly think that the management team at AMW is better and I trust them more by their actions.  At each opportunity, the FCU team (directors and officers) has rewarded themselves with beyond generous (ie greedy) options and continues to do so.  Whereas, the team at AMW "buys" get very few options and in fact go out on the market and BUY on the market.  FCU may have a premium now, but my guess is due to liquidity but on ANY buyout that premium is irrelevant so the ratio 5.55 is justified regardless of trading prices on a daily basis.  The team at AMW is extremely strong, think who were the team at Hathor, Gunning and Ainsworth.  Then do some due diligence and look at the insider buys and see how much Gunning and the Ainsworth's have done, and compare the options each have received.  Although FCU is currently operator, and cudos to the current drilling, despite Dev's claims on the networks, I wonder who it was on the videos holding the scintillometer and actually took part in finding the first of the significant boulders.  Garrett Ainsworth.  And, wasn't it Dev who had "shook hands" and sold PLS to DML as part of the package (very little value ascribed to it and he only wanted to keep the S American asset)  and was only lucky on timing that he received the call from Ross that perhaps they were onto something.  Whoops. 
Given they are 50-50 partners, and the Canadian govt has not made any move to remove the restriction on a foreign entity owning more than 50% of an operating uranium mine in Canada, (speculation on the free trade deal with the EU aside), most of the potential and probable buyers are foreign so face that restriction, which half would you want to own?  The likely timing of any buyout would at the earliest be the end of October.  AMW becomes operator in January for the next 2 years.  No foreign partner wants to own the non-operating side, if they get 1/2 they want the 1/2 that is the operator so in fact AMW should be at a PREMIUM to FCU.  Don't forget, summer drilling stops in October and winter drilling doesn't start until Jan.

I think actually the opportunistic (my words) offer is exactly that b/c Dev is worried that he will be left out of the party for exactly that reason.  I attended the Special Meeting to approve the DML transaction and a comment that Dev made there troubled me then and is telling here.  Someone asked, if Dev would ever consider merging AMW and FCU.  He said yes, BUT ONLY IF, he and his team was in charge (Ross and his geologists).   Do you trust Dev, he said today on BNN that PLS was "never on the table" in the DML deal, yet he is quoted in an interview the day before saying that he "shook hands" on a deal where PLS was part of the deal and all FCU would retain were some properties in S. America and he was fortunate to receive a call from Ross telling him to hold off. 
I see no disclosure either that a group has formed (Dev claims a group of major AMW shareholder's came to him).  If they are major they would probably need to exceed 10% in aggregate or they are not major in my books. 
My thought, and I am a long term investor, not a day trader or speculator, stay the course and hold AMW, don't tender to FCU unless a true premium is offered (ie SIGNIFICANTLY more than 5.55x).  Operators always get paid a premium.  And even if a small premium to 5.55x is offered, given the behaviour of the boards, which company and which board would you want in charge?  I am looking for opportunities to buy MORE AMW, and based on my perception of an arb opportunity and factors at what I consider the proper ratio of 5.55.  Do your own DD and GLTA

[losecash]

You are bang on. Well said

[giz62]

The market does not care what the fair value is for both companies.  For what ever reason it has valued AMW at a discount to FCU.  This is not a buyout, nor is it FCU's obligation to correct the market imbalance with a premium.  The fact of the matter is the property is worth more combined than divided and we as shareholders will be rewarded after the consolidation.  If AMW

[ralfmalf94]

Yes, BUT AMW becomes operator in a very short period of time.  DEV is instigating this NOW because he is desperate to stay in control as operator. As yourself why? If its all about big investors wanting a value pop I call BS.  The biggest value pop will be if you consolidate after ANOTHER YEAR of drilling.  So WHY NOW. Some have alluded to him having "sold out" already,

[giz62]

If we don't consolidate now both companies will continue to trade at a discount and FCU will retain it's premium over AMW.  Almost like trying to value your house when your neighbour owns the land - and vice versa.  Let's not forget, AMW management did the same thing in consolidating RR and Northern Continental and TAS shareholders made out quite nicely.  We may all want

[ralfmalf94]

So if it continues to trade at a discount, BUY more at a discount! Sure alot can happen in 12 months thats why you don't put 100% in this. However I would have preferred they left things along. Dev is desperate not to lose control.  This fact alone is worth more than 5.3 to 1.  He wants to keep his job and appears to want to sell it quick.  AMW's comp for submitting to Dev

[tiger6301]

Excellent write up and summarize all.  I am 100% with you. I had HAT, fully support and trust the AMW team.  Althought I am holding 60% FCU & 40% AMW, I don't trust Dev at all. His behaviour is so unprofessional, no respect to other people, then you don't get respect with your share holders. PLS project is once in one's life time dream project, I am long term

[letsgetready]

I calculate the ratio of fully diluted shares of FCU to AMW to be 5.37 so 5.30 is pretty close. FCU's has 168.6 million FD shares outstanding; AMW has 31.4 million FD shares outstanding. Its the fully diluted number that counts as all options and warrants are in the money for both companies and will hence be exercised not shares. The valuation of all other assets, including cash, is not

[tiger6301]

Hi letgetready, Then don't call "takeover", it is a merge equal.  Same number of board members, and shareholders choose the management. tiger

[letsgetready]

yes its an equal merger as set out in my text..the header came from someone else's posting, which i responded to.