Lundin Gold Inc T.LUG

Pretium just got scooped-up

[BSdetector2016]

Do not sell your Lundin Gold shares. It will be Newcrest's or Barrick's gunsights.

[Pete1986]

Who could now buy out Lundin? Newcrest is out and Barrick is looking for projects in Canada.

[BSdetector2016]

With 74.4 million shares Newcrest is NOT out of Lundin Gold.

[Pete1986]

Yes, they are not out. However, they decided to buy PVG instead of LUG. 

[RatPatrol]

As well, owning a Net Smelter Royalty on LUG production plus 2 fistfuls of LUG debt, Newcrest mgmt might be calculating that Newcrest ALREADY owns the best parts of LUG. We c.....

[Pete1986]

You forgot the Lundins. They own a substantial portion of the shares and no stream / debt package. So they only benefit from share price increase.  The Lundins are key here, they will push the management and will make sure, that more value will be created.

[petersburggray]

I agree with your analysis RatPatrol and might add that Newcrest large debt/gold stream/offtake agreenent and equity holdings in LUG put Newcrest in a c ockblocking position with respect to LUG getting acquired by some other producer. I also noticed that Newcrest holdings in LUG equity as % has declined from something like 31% to about 27% which dont support thesis of Newcrest buying out LUG.

[petersburggray]

From Newcrest point of view, why buy the cow when you are already getting the milk?

[Pete1986]

And what about the Lundins? They own a part of the cow but don't get any milk :)

[Pete1986]

Newcrest did not reduce their holding in LUG, they still own about 32%.  Anyway, yes, there is no hurry for Newcrest to buyout LUG since. However, key will be the Lundin family. They are holding a pretty high percentage and they do not get any returns (no dividend yet, no shares in debt). So they won't benefit unless LUG get sold. So they will be the game changer.

[petersburggray]

Pete i thought i read somewhere Newcrest cut their equity interest to 27.5% but i see they did participate in LUGmost recent dilutive secondary so i stand corrected. Doesnt change thesis of mine to avoid this miner for now. Too much debt lots of which is structured too complicated for me to understand. Big cash balance but that cadh must go to cover huge current liabilities so one hiccup in mine

[Pete1986]

Hey Peter, well, the financing package is not that complicated. There are three different pillars, a stream, a gold prepay facility and a debt facility. The off take agreement is more ore less meaningless. Frankly speaking, I was a little surprised about the good balance sheet. The got 136 mio USD working capital, so deducting this from the long term debt, the net debt is only 380 mio USD. I did

[Pete1986]

Anyway, if gold keeps holdiing above 1850, I will buy in again huge.

[petersburggray]

I perused recent financial statement on sedar and what jumped out at me was that cash on balance sheet just barely covered current liabilities still leaving ca. $500mm in long term debt to be serviced. If production and gold price keep outperforming potentially LUG pay it off in 2 -3 years but until then imo mgmt need to focus on paring down debt pile quickly vs. agressive growth strategy. The

[Pete1986]

Well, yes, long term debt is a bit more than 500mio, but you have to take into account the working capital (current assets - current liabilities). It's 136 mio, so you can deduced that from the long term debt portion and you get a net debt of about 380 mio US.  Anyway, regarding the political risk. Yes, its higher than in Canada or the US, however, the Lundin familiy is great in builing

[petersburggray]

I am sure the Lundin familiy is excellent hobnobbing with the european elite/ spanish nobility that have been in charge in thos part of the world since the 1500s but people blockading mine are lower class indigenous who look like and vote for leaders who havemore in common with the communist with the big hat who got elected in Peru, the man who plow his field barefoot behind a team of oxen using a

[Pete1986]

Well, unless you has issues with the deposit, you can manage all other things. The locals benefit by getting jobs and getting payed much better the the average. In terms of locals, I do not see any significant risks. I also made alot money with Pretium, but sold. I don't wanna own Newcrest. And anyway, Newcrest only gets a (small) portion of the milk (stream and prepaid). Since LUG currently

[petersburggray]

For tax reasons I was going to short PVG against the box to free up buying power to leverge up and go long some other marginable silver and gold miners but decided against it so as to be conservative. PVG trading at discount to NCMGY conversion and by holding PVG i get exposure to the upside in gold plus Newcrest stealing PVG given recent exploration success so i also have exposure to potential