I am with you Robbo on this one. This has all the hallmarks of a repeat AVB play where every announcement was sold into before the inevitable undervalued takeover bid.
People have been questioning why would Jiangxi do such a deal and give away 50% of their profit for no capital outlay. If people cast their minds back to a presentation that MC did in Singapore last year they may recall that Mark mentioned there were a number of processing plants around the world that were being built that had not secured product. I believe that Jiangxi may have been one of them for their 3rd circuit.
If the best product in the world suddenly becomes available and there is a pack fighting for it, how do you rise above the pack to secure it? By offering a deal too good to be true. Jiangxi says, now that we are bed fellows go away and start drilling because we want you to supply the balance of the product once the converter is fully operational. The supplier goes away thinking they have secured the deal of a lifetime and embarks on an ambitious drilling program thinking they have secured fantastic margins.
Anyone here old enough to remember Victor Kiamm who famously said that he was so impressed with the product that he bought the company when referring to his Remminton Shaver.The reality here is that Jiangxi have given away nothing to secure the product and with their major shareholder good buddy can control the share price until approvals are in place for the fines circuit and drilling has firmed up additional reserves. Then they can make a low ball offer for the company and retain 100% of the converter profits whilst selling any surplus product at a good margin. Who ends up getting the best deal now?
Some people were lamenting the possibility of having Galaxy on our share register. They may well turn out to be our saviour in securing a fair price with what’s to come. One thing is for sure. Anyone buying at the current levels will do well when the takeover eventually comes. I feel yet another top up coming my way. I just hope Mrs Chezd doesn’t realise I have raided her travel fund.
