Forum Topics Gold as an investment

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from GS and Market Ear. discl built positions in EVN NST and RRL (small)

12
Bear77
2 months ago

Wednesday 21st December 2022:

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Merry Christmas Strawpeople!


I'm off on another road trip with my son on Boxing Day, returning on January 2nd, then straight back to work, so not expecting to be very active on this site over the next couple of weeks. Hope everyone has a reasonably stress-free holiday period/festive season and manages to recharge the batteries ready for another interesting and no-doubt challenging new year ahead.

I'm very comfortable with my portfolios at this point, so happy to spend some time not watching the market, although I probably will check in every now and then to see how things are travelling. Most times I go away for a week or more, something positive happens, like one or two of my holdings gets a takeover offer, or gets positively re-rated by the market for some other reason. I hope the same happens this time. Plus a Santa Rally as well? Nah, too much to wish for. Sorry, Santa!

Stay smiling! Catch up with y'all next year!

Cheers!

John (Bear77)

15
Bear77
2 months ago

Monday 12th December 2022:

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Gascoyne Resources (GCY) has been suspended from trading now for 6 weeks - since November 4th - and they released this on the 6th December: Dalgaranga-Update-and-Continuation-of-Voluntary-Suspension.PDF and today (Monday 12th), they released this: New-Results-Confirm-Scale--Significance-of-Never-Never.PDF

However the BIG news today was the announcement by St Barbara (SBM) and Genesis Minerals (GMD) that they have reached an agreement to merge the two companies to create a new company called Hoover House. The name of the new company, "Hoover House", I'm guessing is because they are creating a larger gold house whose oldest mine - Gwalia - was once run by Herbert Clark Hoover (August 10, 1874 – October 20, 1964) who later became the 31st President of the USA and had a dam named after him at some point.

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Hoover Dam during construction.

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Hoover Dam a little later.


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The Hoover Dam in July 2021 (above) in the midst of a severe drought - much lower water than in prior years.

Below is what it looked like in previous years.

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Source: https://youtu.be/t-Jav4afsZ0 ["Hoover Dam Spillway Overflow Late June 1983"]

Further Reading: The Hoover Dam | The Herbert Hoover Presidential Library and Museum (archives.gov) Plain text link: https://hoover.archives.gov/hoover-dam

Herbert Hoover was an American geologist and mining engineer who had worked at several mines in Western Australia before he was appointed Mining Superintendent (manager) of the Sons of Gwalia Mine from 1 May 1898.

Hoover, who was just 23 years old, immediately initiated radical changes to cut costs. He increased working hours, introduced single-handed work, ordered shift changes to occur at the working face rather than above ground, and stopped double time on Sundays as well as bonuses for working wet ground.

He employed contract labour from the pool of European migrants willing to work for lower wages, bringing him into conflict with the Miners’ Union which had already organised a number of strikes on the WA goldfields in a bid for better pay and conditions. He is reported to have written of the migrants, whom he regarded as his allies against the powerful union:

"I have a bunch of Italians coming up ... and will put them in the mine on contract work. If they are satisfactory I will secure enough of them to hold the property in case of a general strike and ... will reduce wages."

This trend of employing migrant labour continued into the next century and, until the closure of Sons of Gwalia Mine in 1963, a large proportion of the miners were Italian and Yugoslav immigrants who gave Gwalia its unique character.

In his six months as mine manager, Hoover designed the mine manager’s house and oversaw the design of the staff and office buildings, all to be constructed on the hill overlooking the mine and the growing townsite where the workers lived. He was transferred to China in November 1898 before the majority of the buildings (including the mine manager's house) were completed.

In China, Hoover was chief engineer for the Chinese Bureau of Mines and general manager for the Chinese Engineering and Mining Corporation, but he maintained his confidence in the potential of the Western Australian goldfields:

“The ore reserves already opened in many West Australian mines are not inconsiderable, and will insure a life of several years… Western Australia is a country of surprises; it may do more than this, but it can conservatively be expected to do so much.”

- The West Australian, 6 February 1899, reported from Herbert Hoover’s comments in the Engineering and Mining Journal of New York

In 1901 Hoover was made a partner in Bewick Moreing & Co, the British-based mining engineering company that owned the controlling interest in the Sons of Gwalia Mine, taking on responsibility for a number of Australian operations and investments. Bewick Moreing & Co, which by 1904 was among the most important players in the Western Australian gold mining industry, would eventually manage 20 mines which accounted for almost 37% of the gold produced in WA and employed nearly 20% of the state’s miners (source: jstor.org).

Herbert Hoover was later elected the 31st president of the United States of America, serving from 4 March 1929 to 4 March 1933. He died on 20 October 1964.

Source: Hoover takes the lead » Gwalia Ghost Town & Museum Plain text link: https://www.gwalia.org.au/about/history-of-gwalia/herbert-hoover.aspx

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Here's the relevant announcements made by both SBM and GMD about their merger today:


12-Dec-2022: GMD-Merger-of-St-Barbara-and-Genesis-to-form-Hoover-House.PDF

Presentation: Creating a leading Australian gold house

Reporting-on-Dacian-Projects.PDF

Here's the first page of the joint company announcement.

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Source: GMD-Merger-of-St-Barbara-and-Genesis-to-form-Hoover-House.PDF

It's important to note that Hoover House is going to be 100% Leonora assets. They are proposing to spin all of the other SBM assets out into a new company to be called Phoenician Metals.

The short version is...

  1. GMD is raising A$275 million via placements to AustralianSuper (A$164m commitment, with scale-back of up to A$39m in the event of take-up by other investors), A$75m from Resource Capital Funds VII L.P. (RCF VII), and A$36m from other institutional investors including Paradice Investment Management, Australian Capital Equity (Kerry Stokes and his son Ryan Stokes), and Eley Griffiths Group, which is all conditional on the Scheme and Demerger becoming effective, and other conditions. The placement ($275m capital raising) will be done at $1.20/share, a slight premium to GMD's last traded price (which was $1.195), but a 2.7% discount to the 10 day VWAP of DCN.
  2. GMD shareholders (including the new shareholders due to the placement/capital raising by GMD) will be issued 2.0338 new fully paid ordinary shares in St Barbara for each Genesis share held representing a nil premium to respective 30-day VWAPs (volume weighted average prices of both companies).
  3. Part of that cash raised by GMD is going to be used to extinguish SBM's debt in Canada (owed by their subsidiary, Atlantic Gold, which is their Nova Scotia arm in Canada)
  4. Everything other than the Leonora assets (situated in the goldfields of WA north of Kalgoorlie) are going to be spun out into a new company, to be called Phoenician Metals, which will have no debt, and own the Moose River assets in Nova Scotia, the Simberi assets in PNG, and some cash, plus some shares in other gold miners and a royalty (details below).
  5. St Barbara - who will be known as Hoover House - will retain 20% of Phoenician Metals, so Hoover House will be Phoenician's cornerstone investor (and will also be able to block any takeover attempts - of Phoenician - if they want to - because of that 20% blocking stake).
  6. After the spin-out of Phoenician Metals, St Barbara will then only have the Leonora assets (plus their 20% of Phoenician), and St Barbara will become Hoover House (name change, and code change too I expect).
  7. The Saracen team (Raleigh Finlayson and Tony Kiernan) who formed and ran Genesis Minerals (GMD) after Saracen merged with Northern Star (NST) will then run Hoover House - Raleigh will be the MD and Tony will be the Chairman of Hoover House.
  8. Some of the current St Barbara management will run Phoenician Metals - with their board comprising of 3 of the current SBM directors - David Moroney (who they proposed to be the Non-Executive Chair of Phoenician), Stef Loader and Dan Lougher. It's worth noting that Dan Lougher has only JUST been given the MD job at SBM (replacing Craig Jetson who has now left) and now Dan is already stepping back into a Director role of Phoenician Metals, which is the spin off of SBM's "non-core" (i.e. non-Leonora) assets. Andrew Strelein will be Managing Director of Phoenician Metals. Andrew is currently the  Chief Development Officer at St Barbara. More info on him below. The SBM CFO, Lucas Welsh, will become the CFO of Phoenician.


Here are the main slides - the most important stuff (in my opinion) but please read the entire presentation for proper context and all of the important disclaimers:

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Note that they exclude Australia's three largest gold miners (NCM, NST & EVN) from those tables above, as they are only comparing "Hoover House" to their "peer group" of mid-cap gold miners, not the large cap (ASX100) gold producers.

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I'll talk a little bit more about this one (above) further down - the Mt Morgans' Gold Mill is a major asset that Genesis are bringing to the table here. Notice the much higher annual ore processing capacity of Mt Morgans (2.9Mtpa) compared to SBM's existing Leonora Mill (1.4Mtpa).

The next one is a very broad outline of their plans for Hoover House (HH) to become a 300 thousand ounces of gold per annum (300Kozpa) gold producer within the next few years. They are not being too specific on the timeline/timeframe however.


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Here's further details on the CR:


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And here's the "big sell" slides - to close the deal - convince us (you, me, the insto's, the analysts, everybody really) that everybody wins here. There are NO losers!


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OK, that's Hoover House, but all SBM shareholders (including the new ones that were previously Genesis shareholders if I'm reading all of this correctly) will get given shares in Phoenician Metals (1 PM share for every SBM share held), so what's the deal with Phoenician? Why would we keep those Phoenician Metals (PM) shares?


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OK, here's the timetable they've laid out today for all of the above - the placement, the "merger" of SBM & GMD, the spin off (demerger) of Phoenician etc.


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And here's the best summary slide - the Pro-Forma Snapshot - the one that shows how the new companies (Hoover House and Phoenician Metals) stack up against the existing companies (St Barbara and Genesis) that are going to merge to form the new companies.


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You may notice that the A$137m of debt that SBM carries currently will be reduced to just A$50m, and will reside with HH, because Phoenician is going to be debt free. This overall debt reduction is because proceeds of the $275m CR (@ $1.20/share) that Genesis is proposing is going to be used to retire that debt, including all of the Canadian debt. So Genesis are bringing bugger all to the table in terms of gold Reserves (second to last row above) and not much in the way of gold Resources either (final row), but they are bringing in the Dacian (Mt Morgans) gold mill which has a huge 2.9 Mtpa capacity compared to SBM's Leonora mill which only has 1.4 Mtpa capacity at this point. They will expand it over the coming years but as of right now it can only process 1.4 million tonnes of ore per annum, so Mt Morgans' 2.9 Mtpa is a big asset to be bringing to the table, and the other one is all of that cash. Genesis might not have much gold, but they have the mill, they have no debt, they have more cash than SBM, and they are raising another $275m for which they have already received firm commitments. And all from Insto's. No participation in the CR is available for ordinary retail investors.

Interestingly, even leaving aside the CR/placement, GMD are going to own more of HH than SBM are - around 40.6% vs. 37.8%, as shown above (with the other 21.6% accounted for by the CR), so that is likely why the MD and the Chairman of Genesis (Raleigh Finlayson and Tony Kiernan) are going to be the MD and the Chairman of Hoover House, relegating the SBM guys to run Phoenician Metals.


It's a very interesting "merger" this one...


Disclosure: I hold SBM shares in all of my major RL (real life) portfolios, and here on SM in my virtual portfolio. I do not hold any Genesis (GMD) shares.

Oh, one last thing...

Today was NOT a good day for the gold sector, with the possible exception of the announcements by SBM and GMD which didn't move their share prices because they were both in trading halts all day... but have a gander at this watchlist from last Thursday. I screenshotted it and started preparing a post and then fell asleep instead.

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There were a few days like that last week, with plenty of green on the screen across the gold sector, but unfortunately, today was not one of the good ones. I do still think the gold sector recovery is definitely "on" however. One poor day does not signal the positive run has ended. It can't end yet. It was only just getting started!!

10

Stuey727
2 months ago

Okay, so the logic of the merger seems something like.


SBM is struggling for cash for needed capital investment, but has plenty of gold reserves.

GMD has a large mill and cash, but not much in the way of gold reserves.

GMD doesn't want to get involved in Atlantic and Simberi, which will soon require large capex's that SBM has no way of funding with it's share price where it is and as things currently stand.


Hence, merging the two solves optimises the reserves/mill situation at Leonora, and Phoenician will essentially carry the rest of SBM forward.


It all seems logical I guess. I'm pretty sure GMD is getting a good deal, but am not convinced that SBM is at this share price. It feels like a bit of a forced sale, though seems like the new company will be split pretty evenly between SBM and GMD without any value being attached to Phoenician. So perhaps an okay deal on a market cap basis due to Phoenician. I guess the question is whether SBM was undervalued....


9

Bear77
2 months ago

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Got it in one @Stuey727 - well summarised.

7

Bear77
2 months ago

Wednesday 14-Dec-2022 (late evening): So, St Barbara (SBM) came out of their trading halt today (Wednesday) and closed up +9 cents (or +13.85%) at $0.74 and Genesis Minerals (GMD) did the same and closed up +15 cents (or +12.55%) at $1.345. They (GMD) have today announced that they have already completed that $275m CR with the issue of approximately 229.2 million new Genesis shares at $1.20/share (being a slight premium to their $1.195 SP just before they went into the trading halt and made the announcement of the proposed merger and CR) to AustralianSuper (minimum of $125m worth), Resource Capital Funds VII L.P. ($75m), and other institutional investors including Paradice, ACE (Kerry and Ryan Stokes) and Eley Griffiths.  That was quick!

Based on today's SP movements (for both companies), the market seems to agree with the companies' claim that this is a "win-win" deal.

I tend to agree. I think it's a good thing overall and it's going to result in a positive re-rating of SBM's assets more rapidly than I had expected last week. My position was that SBM was undervalued, and I think this is going to get their assets revalued higher, but more quickly.

It's definitely an interesting "merger" (as I said on Monday evening), and what will also be interesting is how much selling pressure there is on Phoenician Metals shares when they list. I think there could possibly be a significant number of PM shareholders who would prefer to exit and just retain exposure to HH and the Leonora assets, even though HH will itself own 20% of PM.

On the whole, I think it's definitely positive, however I also think it's pretty clear that Raleigh Finlayson and his mates at Genesis are getting the better deal than the current board and management at St Barbara are getting, but it's still positive for SBM shareholders, so I'm happy with it so far.

P.S. I think it's fair to assume that while SBM is definitely being removed from the S&P/ASX200 Index next week (being replaced by MND), the company that SBM will become, Hoover House, has a reasonable chance of being put back into that ASX200 index at the next rebalance, if everything goes to schedule. Phoenician Metals, not so much, but they may do better than many expect, given a few years and a dedicated management team that is not focused on Leonora at all. My prediction that SBM would sell Simberi has now been shot down in flames of course. Phoenician might sell Simberi, but it now sounds like they want to keep it and expand it, and as part of PM (absent the Leonora assets) that does make more sense than it did with Simberi being the third (and weakest) production centre for the "old" St Barbara.

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5
Bear77
2 months ago

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The only announcement regarded as price sensitive (or market sensitive) was this one from SBM: SP-DJI-Announces-December-2022-Quarterly-Rebalance.PDF

...which says that S&P are taking St Barbara (SBM) out of their ASX200 index and replacing them with Monadelphous (MND) - swings and roundabouts - I hold both companies.

They are also taking Lendlease Group (LLC) out of the ASX50 index, and putting in Pilbara Minerals (PLS). They also taking a bunch of companies (8) out of their "ASX All Technology" Index, but not adding ANY new ones in to replace them.

Despite being dumped from the ASX200 Index as from Monday December 19th (two weeks from tomorrow), SBM's share price rose another +10.4% on Friday, after a +3.3% rise on Thursday and an +18.6% rise during November, which included a +13% rise on the 9th, a +10.7% rise on the 11th and a +9.1% rise on the 24th. Since the end of October, the SBM SP has risen +35.3% from 51c/share to 69c/share, and they've still got plenty of rising left in them, IMO. They were trading at 5x their current levels in mid-2020, and they got up to $5/share in July 2018. I doubt if we'll see $5/share in the next couple of years, but they're worth a lot more than 69c (where they closed on Friday). They've had plenty of issues recently, but they own a LOT of high grade gold (still under the ground) and they've just got a new CEO & MD (Dan Lougher, fresh from running Western Areas up until the $1.3 billion acquisition of WSA by IGO which was completed in June this year) and the vast majority of their issues have been temporary, not structural.

Interesting that St Barbara (SBM) also announced on Friday that First Sentier Investors (FSI) had increased their SBM stake (on 30-Nov-2022) from 6.63% to 10.05%. Meanwhile, State Street Corporation (SSC) decreased their exposure to SBM on the same day from 8.07% down to 5.33%.

I have previously noted that FSI is controlled by Mitsubishi UFJ Financial Group (MUFG). It turns out that MUFG also hold a stake in Morgan Stanley (MS) - of at least 21% - and they (MUFG) have a JV with MS as well. See here: https://www.morganstanley.com/press-releases/mitsubishi-ufj-financial-group-to-invest-9-billion-in-morgan-stanley_6962

and here: https://www.mufgms.jp/structure/index_en.html

and here: https://www.euromoney.com/article/b1b93pw5zhy62d/mufg-and-morgan-stanley-inside-the-special-relationship

and here: https://www.morganstanley.com/press-releases/morgan-stanley-and-mitsubishi-ufj-trust-and-banking-corporation-

and here: https://www.morganstanley.com/about-us/history/ [scroll down to the 2008-2013 section]


Here's a list of trading names and subsidiaries of MUFJ FG/MUFG:

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You'll see that Morgan Stanley is there - a few names above the FIRST SENTIER INVESTORS group at the end there.

That list is from this notice from MUFG about them now becoming a substantial shareholder (Sub) of Westgold (WGX) on 29-Nov-2022 with 7.61%: Becoming-a-substantial-holder-from-MUFG.PDF

That list ("Annexure A") is four pages long and goes from page 4 to page 7 (inclusive). Details of their "lending" agreements (lending of securities, i.e. often for the purposes of short selling) starts on page 67 of that announcement.

FSI (First Sentier Investments, which is also controlled by MUFG) upped their WGX stake on 30-Nov-2022 from 7.61% to 9.6%. Interestingly, the MUFG "Becoming a Sub" announcement on Friday (link above) was for the 29-Nov-2022 and simply mirrored the FSI announcement released to the ASX on Thursday that said they had become a WGX Sub on 29-Nov with 7.61%. The MUFG announcements are being released one trading day behind the FSI announcements. So we should expect one from MUFG on Monday (tomorrow) saying that they've increased their WGX position from 7.61% to 9.6% - to mirror the FSI announcement on Friday. Because FSI is considered a controlled entity of MUFG, MUFG have to lodge mirror notices whenever FSI lodge one (or on the following trading day in this case).

MS also lodged a Becoming-a-substantial-holder-from-MS.PDF notice on Friday for WGX saying that they became a "Sub" with 5.86% of WGX on 29-Nov-2022. Not sure if that is part of the 7.61% held by FSI (and MUFG) on the 29th, but I'm reasonably confident that there was a short position building (between those three - MUFG, FSI and MS) last week.

Even more interesting is that WGX was the Aussie gold sector's best performer on Friday (02-Dec), rising another +12.58%. Short squeeze anyone?

There was also a notice on Friday to say that FSI had also become a Sub for Evolution Mining (EVN) on 30-Nov-2022 with a 5.13% stake. EVN was one of the few producers that actually underperformed the physical gold ETFs on Friday, only rising +0.7%. However they still beat the ASX200 Index, which fell by -0.7%.

I don't know for sure that FSI are definitely shorting these goldies. I know that MUFG (who own FSI) are involved in shorting, but they do go long as well. Here's the notice from FSI concerning EVN: Becoming-a-substantial-holder-from-FSI.PDF

The world's largest funds manager (with the most funds under management, currently around US$8 Trillion, with a "T") - BlackRock Group - lodged a Ceasing-to-be-a-substantial-holder-from-BlackRock.PDF for EVN on Friday after they dropped below 5% of EVN on November 30th. That announcement is interesting reading - well it was for me anyway - as it details all of their trading in EVN (Australia's third largest pure-play gold producer, behind NCM & NST) from mid-April this year through until the end of November - and there are 48 pages full of trades for that period, so they were certainly active. Annexure C that runs from page 52 to 54 (the last three pages of the announcement) list details of their "Securities Lending Agreements", so it seems that BlackRock aren't opposed to a little shorting themselves on occasion, despite being very involved in materials ETFs and managed funds - with a particular focus on mining companies.

BlackRock sold a huge chunk of their EVN shares on 30-Nov-2022 at $2.69/share (when they dropped below 5% so ceased being a "Sub" for EVN). EVN closed on Friday (Dec 2nd) at $2.88, being up +2c (or +0.7%) on the day, but they had risen +17c (or +6.32%) on Thursday, so they're heading in the right direction. I'm sure BlackRock have NOT sold out of EVN completely - because they hold shares in all of the major gold miners - they have just slipped below that 5% "Sub" level for the time being.

The following links are interesting if you want to know more about BlackRock - the world's largest fund manager:

Short Positions for BlackRock Inc. (whalewisdom.com)

All Stocks Held By BlackRock Inc. (holdingschannel.com)

Direct lending – Institutional | BlackRock - note that this one shows that they are so big that they even loan money to businesses - so this one is not about loaning shares/securities, it's about loaning money. And we're talking about significant sums of money here too.

Investment Management, Risk & Advisory Services | BlackRock

That last one is BlackRock's Australian website and it details a little of how Larry Fink is steering BlackRock down the ethical investing road nowadays, mostly by excluding fossil fuels and other non-renewable energy companies from BlackRock's discretionary managed funds, and by creating new ethical ETFs or so-called "green ETFs", but also by proxy voting at AGMs and at other company meetings and by siding with other shareholder groups that are agitating for change at Board level with some companies that won't change the way they do things when a significant percentage of their shareholders want to see that change.

BlackRock own iShares by the way who have a fair number of ETFs available on the ASX. But they also run managed accounts and invest a lot of money on behalf of HNWI's (High-Net-Worth Individuals). Because of all of that, they end up being Subs (substantial shareholders) of quite a few companies, and so the way they vote at company meetings tends to make a difference to outcomes.

I don't want to get into a debate about "ethical investing" here. It's very subjective - meaning different things to different people, and it's really based on personal beliefs and values. However, regardless of your opinion on the matter, it is "a thing". The move to green exists, whether it's misguided or the right thing to do, no matter, it's a thing, it's on, so it will affect valuations. It will affect share prices. Less demand generally means a lower price. That can sometimes present opportunities for those with an opposing view, as we have seen with thermal/energy coal companies in recent times. It might mean you can buy a highly profitable company churning out heaps of free-cash-flow at a bargain price. Or it could mean your investment slowly fades away to nothing, suffering the death of a thousand cuts.

I personally prefer to avoid thermal/energy coal companies, and I also avoid companies that are involved in tobacco products or betting - including sports betting, owning gambling machines or gambling establishments, or who design and build gaming machines, because I am aware of the damage that problem gambling causes in Australia, which has more sports betting and other gambling ads on during sporting events and other prime time viewing than any other country in the world - at least that's what I read recently, and it rings true. And there is also investment risk associated with such companies, including potential legislative risk, meaning laws could be enacted that make a significant difference to their profitability and/or business model.

However, I like a drink, and I will invest occasionally in companies that produce or sell alcohol, and others may well view that as a contradiction since alcohol also causes a great deal of misery when it is misused and abused. There are likely a lot more alcoholics than there are problem gamblers, and we could have an interesting discussion on which is worse, but this is not the forum for that, in my opinion, so I'll leave it there. Suffice to say, we all have our own personal views, and there's nothing wrong with that, as long as we're not trying to force our views onto other people. It's not so much a case of right and wrong as it is a case of everyone being at a different point on a spectrum. Meaning of spectrum of opinion and personal views and choices. And there's room for everybody.

But my point is that regardless of where you sit on the spectrum (or even if you reject the premise of the spectrum altogether), ignoring the changes that are occurring is akin to putting your head in the sand. You don't have to agree with anything. You don't have to take a position at all. Just be aware that there is a shift among some people, a growing number of people, who are looking to invest in a way that they personally consider to be more "ethical" than either the way they had invested previously, or the way previous generations may have invested. And that will mean different things to different people. But it is happening, and it will change certain things, including the demand for certain companies, and therefore the share price of those companies is likely to be affected, sooner or later. And the sort of activism that a company like BlackRock is now engaging in, and planning to engage in, and they are a BIG player - being the world's largest funds manager, is going to get attention, and other fundies are likely to do likewise (follow suit), not all certainly, but some, and it will affect various company Boards every now and then, particularly those larger companies where there isn't a large amount of insider ownership. And proxy voting advisors are going to have more and more clout, particularly at AGMs when directors come up for re-election. Many fund managers will change their portfolios and strategies because there will be a perception of demand from a significant group of investors for that change. So - they will change in response to perceived demand.

There are a few high profile critics of proxy advisers already, like Gerry Harvey, Solomon Lew and Rob Scott; basically the boss of any company that gets one or two strikes on their remuneration reports are likely to get a bit upset about proxy advisers. But they do serve a useful purpose.

Further Reading on proxy advisers:

Proxy adviser crackdown could censor activism on issues like executive pay, gender diversity and climate change - ABC News [08-June-2021]

Proxy advisers fight back over criticism of their work | IR Magazine [10-June-2019]

The Influence of Proxy Advisors – Egan Associates [10-July-2020]

Consequences for Rio Tinto over Juukan Gorge catastrophe are the new norm - ABC News [14-Sep-2020]

Meet the woman heading $1 trillion investor group ACSI unseating corporate Australia's main men for their 'misdeeds' - ABC News [21-Dec-2020]

Superannuation fund investors are reinventing capitalism and their proxy advisers are under fire - ABC News [04-Jan-2022]

The importance of proxy advisers - Nick Maclean | Livewire (livewiremarkets.com) [14-Feb-2022]


Again, doesn't matter if you love them or hate them. They exist. They do have an impact. It's good to be aware of that.


In other news across the gold sector last week (Friday in particular), Pantoro (PNR) announced an SPP back on October 20th - and in this November 11th letter to shareholders - Letter-to-Shareholders--SPP-Booklet.PDF that they were seeking to raise $5m at 14.5c/share via this SPP - on top of the $28.5m they raised from the placement in October. On Friday (2nd Dec) they announced the Results-of-Share-Purchase-Plan.PDF which disclosed that shareholders had only applied for a total of 6,006,976 new PNR shares, meaning they had raised a total of $871K from the SPP (less than $1m of the $5m they were hoping to raise). This is hardly surprising when you consider that their share price has traded below that 14.5cps offer price for almost all of the offer period, only closing above 14c on a single day (14.5c close on Nov 14th). Why would you apply for shares in an SPP when you could buy them on-market at lower prices?

PNR closed on Friday at 12.5 cents/share, being -13.8% below that 14.5 cents/share SPP and October share placement price.

De Grey Mining (DEG) also raised capital recently, and were a tad more successful - they raised the capital at a lesser discount (to their share price at the time of their original announcement in October), and finished the period with a significantly higher share price. DEG raised $130m at $1/share via a fully underwritten institutional placement in early October and launched an SPP (that was not underwritten) targeting an additional $20m (again, at $1/share). On November 10th they announced: Completion-of-Share-Purchase-Plan(DEG).PDF and disclosed that while they had received applications that exceeded their $20m SPP target, they had chosen to undertake a scale back of applications for new shares as they had indicated (in their SPP documents and announcements) they may do - at their discretion.

In this case DEG had stated that this discretion would take into account, amongst other factors, the number of participating Eligible Shareholders, the size of an Eligible Shareholder’s shareholding at the Record Date and the number of New Shares applied for.

This is part of a pattern that I'm seeing where boards are sick and tired of a number of shareholders holding just one or a very small number of shares with the express intention of having the opportunity to participate in SPPs, etc. It obviously costs more than it is worth to cater for shareholders who hold just one share (unless you're Berkshire Hathaway I suppose).

So in this case, with DEG's SPP, of the 1,700 valid SPP applications there were in excess of 450 applications via Custodians of the nominee shareholders, and many of these applicants held what is regarded as an unmarketable shareholding (less than 500 shares), with a significant number of applicants holding just one (1) share. The company discretion used through its allocation policy included reducing applicants with less than a marketable parcel to a maximum allocation of just $500 worth of shares (taking them up to what is considered a "marketable parcel") and applicants with multiple applications, or in multiple names, being rejected where those total applications exceeded $30,000.

Consequently, the outcome of the DEG SPP was that the company accepted applications totalling $18.7M with the corresponding number of shares (18,746,001) being issued on 11th November.

So they could have raised the $20m, but they chose instead to look after their serious shareholders by scaling back those shareholders who were clearly not serious enough to hold at least 500 DEG shares, and also by scaling back those who put in multiple applications (some in different names) trying to game the system to get more than the stated maximum of $30K worth of new shares at $1/share. Not sure how they detected the different names thing, but that's what they've told us.

Those people who hold just one share and do participate in these SPPs often just sell their shares at market prices as soon as they get them, or soon after, which doesn't help other shareholders as it creates unwanted volatility (a sudden influx of sellers trying to make a quick buck). In this case, DEG closed on Friday at $1.325, and during the week in which those new shares were allocated (11th to 17th November) their SP ranged from as low as $1.18 to as high as $1.365, which isn't a bad return for shares that cost $1 each.

I'm generally in favour of companies being proactive in exercising their discretionary rights in relation to looking after serious shareholders during an SPP by either excluding or scaling back those who only hold 1 or not many shares at all.

Now while DEG had a far more successful SPP than PNR did, and PNR do already produce gold, and DEG do not, DEG is a MUCH BIGGER company than PNR, with a lot more shareholders, and a lot more followers (due mostly to the gold that they've discovered that is still under the ground and the gold that many believe they are yet to discover, based on their success so far).

PNR's market cap is currently $204.28 million (with an "M") and DEG's market capitalisation is around 10 x that at $2.02 billion (with a "B").

And now going way down the scale, to a company that currently has a m/cap of just $18 million. Yep, the ASX currently list the market capitalisation of Yandal Resources (YRL) at $18.14 million. YRL was the worst performer across the gold sector on Friday, falling -8.7% (or -1 cent from 11.5 cents/share to 10.5 cents/share). They released this: Change-in-substantial-holding---Datt-Capital.PDF showing that Datt Capital have reduced their shareholding in YRL from 9.4% down to 5.2% due in part to various capital raisings (placements) that YRL has made (that Datt Capital did not participate in, hence their position being diluted) and also due to on-market sales of YRL shares by Datt between February and May this year.

Yandal raised $5m in early October at 12c/share via a $2.3m placement and an underwritten 1-for-5.15 Non-Renounceable Rights Issue that raised $2.7m, although the underwriters were saddled with $1m of that $2.7m, as explained here: Rights-Issue-for-Shares-and-Free-Options-Results-of-Offer.PDF

There was 1 free attaching new option for every 2 new shares issued, with the options having an exercise price of 24 cents and an expiry date of 31 October 2024.

From Friday's 10.5c/share close, we'd have to see the YRL SP rise +133% from here (so more than double) before those options would be "in the money". Stranger things have happened of course, but equally, YRL could easily go to zero. Plenty of risk in an $18m explorer with zero income (other than from issuing more shares) that is burning through around $1m/quarter ($1.077m cashburn in the September 2022 quarter). They either need to find something that is either very large or very high grade, or else they are going to just keep mining shareholders' wallets until they can't any more, and then they'll be gone, along with the majority of explorers over the years.

Datt Capital is clearly not seeing YRL as a great place to keep adding more of their investment dollars. Unfortunately, when you own 9.4% of a company that is so tiny with such a massive lack of liquidity, it is VERY, VERY hard to exit without crashing the share price. Datt are well on their way, clearly, having already moved from 9.4% down to 5.2%, and I expect to see a "ceasing to be..." notice from them shortly as they slide under 5%, and then they will not be required to update the market any further, unless they get back above 5% again - and I would highly doubt that will happen once they drop below 5% - as they clearly have an exit strategy - of sorts...

That's probably enough for tonight. Only the diehards would have managed to stay awake to the end of this post I reckon. I'm struggling myself at this point, but it's now 2:42am, so I guess that might have something to do with it.

I did start this, went and did something else for a couple of hours and then came back to it. But I'm back to work tomorrow, and it's getting busy leading up to Christmas, and with some warmer weather (hommus and other fresh dip sales are increasing, and tzatziki is always popular), so I expect I'll be reasonably quiet online during the week. In which case, have a great week everybody. Until next weekend!

May your dreams be free of screams (wow! - that got dark quickly), the things you do work out best for you, and let there be more green on our screens.

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Bear77
2 months ago

Monday 05-Dec-2022:

St Barbara (SBM): Change-in-substantial-holding-from-MUFG.PDF [from 6.63% to 10.05% on Nov 30th] plus Change-in-substantial-holding-from-MS.PDF [from 5.09% to 8.50% on Nov 30th] SBM closed down half a cent or -0.72%)

Westgold Resources (WGX): Change-in-substantial-holding-from-MUFG (for WGX).PDF [from 7.61% to 9.60% on Nov 30th] plus Change-in-substantial-holding-from-MS (for WGX).PDF [from 5.86% to 7.85% on Nov 30th] WGX closed down -2c or -2.35%.

Yeah, it's ON!

WGX also announced this today: Westgold-Achieves-Quarter-Million-Ounce-Milestone-at-Fortnum.PDF

Highlights from that announcement (click on the link above for the full announcement):

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This is an addition to my forum post in this thread that I posted in the middle of last night - and will appear in the "Gold" forum thread directly below that post - so read that one for some context.


Disclosure: I do not hold WGX (have done previously). I do hold SBM shares. WGX is looking interesting, particularly with what looks like a decent shorter build-up. They MIGHT be going long, but I doubt it...

5

Bear77
2 months ago

Also today (Monday 5th December 2022): From Evolution Mining (EVN): Becoming-a-substantial-holder-from-MUFG (EVN).PDF

On the 30th Nov, MUFG went over 5% and finished the day at 5.13% of EVN. Looks like they were buying a lot of what BlackRock were selling.

That announcement is, believe it or not, 254 pages long, and 246 of those pages are just the trades that MUFG and their subsidiary companies (and the list of those is itself 4 pages long) made between August 1st and November 30th this year in EVN. 246 pages of trades and it only covers 4 months and one company. Busy little vegemites aren't they!?!!

8

edgescape
2 months ago

Just have to say it that it was a pretty good day to be in Gold versus everything else.

Sentiment starting to change?

Pity that I have only 2 gold miners in real life now and yet I did not add to my NST holding even at the lows this year.

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