Post by
74volfram on Aug 03, 2015 2:34pm
silver platters, making hay and what to expect
Silver Platters.
Concerning Woulfe, Dundee spent 20M+ to complete the development work at Woulfe and sure enough Dundee has taken way too many shares for that. But even those too many shares are now worth 5M total, so Dundee lost 15M to get the prep work done. that was real money that left their bank account and is now gone unless somebody recovers it through SP appreciation. Dundee never serves anything to anybody on a silver platter. and one cannot seriously believe that Dundee would not have kept whatever was served here all to themselves if they could.
Making Hay.
I am sure Dundee would dearly love to profit from their involvement in this deal. That is how they make money. The circular indicates that Dundee will get a "success fee" (460k) if the merger goes through and 100k if a cancellation fee is collected. These are not unusual in financial circles (1-2% of the value of the deal finder's fees are common). Otherwise they get the same deal as all the other common shareholders of WOF and there is no indication of a future role for Dundee in the merged company. From the company's limited track record it looks like Almonty prefers to pay for development of new projects with tungsten production rather than with PP of shares and options. For instance Almonty has a Dec. 2013 MOU with its customer (off-taker) GTP to finance the "next tungsten project". The project was not specified in the MOU, but at the time it was going to be for the Ormonde mine.
https://www.bloomberg.com/article/2013-12-11/av4vj.TK8oo0.html
Almonty (again from limited track record) prefers to use shares instead to acquire new property. Share count is still smalland closely held, but they have added shares as a result of acquiring new property, which is accretive (non-dilutive) unless as the new property is a bust, so the SP has not suffered from the additional shares. So far their strategy has been to use metal for financing and equity for acquisitions, which has been a good way to preserve shareholder value.
What to expect w/respect to share price if the merger goes through.
This expectation of AII SP price drop after the merger has been played up a lot and I am sure there will be people tempted to drop their new AII shares and realize the quick 37% overnight gain (if SP stay as they are now). That is why it was important to see the institutional buyers for WOF at 6c and 6.5c step in to absorb WOF sellers in the last couple of weeks and hopefully continue over the next two.
Longer term, for APT at $300 (1-year average) Edison projects a share value for the combined (A+W) company of CAD 1.21 and 1.34 (with IMC financing and without). This would be a sizeable 50% upside over current Almonty SP, but in my opinion not realistic over one year given the current market conditions. For APT 250 (long term equilibrium before the 2011 spike) Edison projects CAD 0.84 and 0.91 respectively. These more realistic targets imply a 5-10 % increase over the current 80c AII share price, which I think is reasonable over the next year. we will know soon enough ...