It's been a few weeks since we were informed that TUD will be bringing up a spinout out of TC and in that time many little things and ideas have been accumulating in my mind so why not put a few of them together and see what they look like on paper.
So starters I don't foresee a buyout "soon" and personally I think it's just a responsible way for first AMK to divert their energy into drilling Dunwell and for TUD to start drilling other than just TC, I'm all for it.
A takeover has no guarantee especially if gold was to flop. Saying that is a difficult one for me to see but you can never rule it out. Now what I see unfolding is a mix of potentially what could happen and what I personally would like to see happen. If gold can continue to remain strong even within pushes and pulls and in the next 2 years or more they can continue to increase the reserves with more of the same grade and ideally a slight increase in grade and they can avoid an opportunistic takeover (How cheap could we SEA :P)then I would be as happy as a kid in a Waffle House. In time let's see but for now these are a few things I'm thinking about.
First thing is. AMK IS the leader at the moment. Let me explain. AMK is 100% TC and the Jewel IS TC so they are the leader and what I will be using as a reference point moving forward.
Big picture is AMK MCAP/Resources = $14.63 Per OZ. That's what 1 OZ at a grade of .75 is currently worth, easy.
As an interesting sidenote, take a look at SPA I found it quite interesting. SPA sells for $9.54 OZ which is 1/3 cheaper than AMK at 14.63 BUT SPA Grade is actually 1/3 less than TC so SPA at .60 TC at .75 yet SPA has about 7.5M OZ. Just something I stumbled on while taking a break from working on my tan. Waffles are best Crispy :P
Now let's take a look at TUD. MCAP is $395M. We know that TUD portion of TC is 60% so 3 times the size of AMK so if you do $14.63 Per OZ multiplied by resources you get $240M Value. TUD also in "theory" should trade lower than AMK simply because TUD will continue to have to raise/spend money and also potentially dilute shareholders, AMK not so much. Trading Ratios will become much easier to do, let's see how the market reacts.
Now this leads me to my next point. First again let's assume AMK is "CORRECT" and TUD trades at the same value as AMK and AMK remains flat we get a TUD MCAP of $240M the next step is.
Current total TUD MCAP minus Spintout value of $240 that still leaves $129M. SO let's break that down to properties. TUD on their site mentions 2 properties other than TC. First is CROWN PROJECT and next is ESKAY NORTH PROJECT. That means you're paying $129 for 2 properties or $64.5M per property. Something that I don't know but in time will know is drilling intentions. Will they drill 1 property or 2 at the same time? It matters and does make a difference.
If let's say they are drilling 1 property at a time the question is, Is that one property worth $129M or would selling and buying two other individual companies worth less than 65M each with their own drilling program offer something extra? Push a little further would buying 3 companies with a 40M MCAP with 3 drilling programs or even 4 at 30M MCAP and have 4 drilling programs, you get the idea. The point is how much can TUD be worth when you strip TC out. Another way is take the 129M then divide that by $14.63 Per OZ and you get 8.8M OZ reserve ingoring Grade. They don't have that to my knowledge in those 2 properties but if they get 8.8M OZ then that would bring TUD Newco MCAP to what it is now.
Let's look at TUO. TUO MCAP is $32M OVER AMK but what does that extra $32M get you? About 30 properties, so about a little over 1M per property as opposed to TUD which is about $65M per property. AMK spinsout Dunwell and STNG MCAP is 11M. I just can't get around this.
So how does all this shake out? NO clue! lol but we can break it down in a few ways to see how things could progress.
1 is the simplest and ugliest of them all with TUD taking a 100M haircut. Sounds extreme sure but even just less than a few months ago when the BB was chatting about AMK FMV everyone assumes TUD the leader and that AMK must go UP to get FMV. I suggested that maybe TUD is wrong and AMK is correct and if AMK reaches TUD FMV it can do so by simply staying relatively flat and for TUD to drop down to about $1.40. At the time my Ratio trade got me 12 to 12.5 shares of AMK for 1 TUD share now 1 TUD share gets you 11 AMK shares.
This is also interesting. take $1.40 and multiply by shares outstanding and you get TUD MCAP of $250M. TC accounts for $240 that leaves $10M for their 2 properties that will be spunout. Just numbers here but how much are those 2 properties really worth? That's where the work needs to be done. :)
Now this hardly means that TUD gets slapped with a 100M beatdown. Said another way, what if their 2 properties are worth 50M and that leaves 80M to be added to TUD TC shares that would put the MCAP not at 240M but 340M and that means cost per OZ would be $20.75. If that were to happen, do you think the market would buy TUD at $21.75 OZ and ignore AMK at $14.63 OZ when you're talking about a percentage of the same OZ? I highly doubt it but can only hope for it :) If that was to happen I would expect AMK based on this example to move up 42% and at Say $20 OZ that means that's 1/4 of the average cost of $81OZ mentioned in AMK last video.
In time things are always revealed but in the short term I just can't ignore these numbers which leads me to believe TUD could lag relative to AMK, at least until the dust settles
Lots to think about but well worth the work.
Have a great weekend!