Like you i still have doubts.That is only natural.When i have however a local Chinese citizen with elderly parents still there back home telling me what must be beyond public knowledge in China,it makes me wonder if this is a real attempt to break the mold.Not said,but there is a bit of a backlash against such incompetence by SOE's failed overseas investment there and the humiliation it brings to such a proud nation.Look at Stone's success to date.
I believe it is as i see it only because i have a great respect for the Chinese and understand how you can become part of the extended family without even knowing this and what this means.If you've ever had a forever non trusting employer and then an employer who trusts without question,you see the start and the end of this transition.You earn this and it may take years.
This approach has been as much to the Board,the company management as a whole,as it has been to shareholders.TO ME THE ASSETS ARE SECONDARY although certainly not unimportant to Shandong.
FML have proven they can make low grade resources pay.That endears respect,especially from another miner who technically knows how hard this is.FML have done it in a high waged and expensive,environmentally hardening country in the middle of a mineral boom against escalating costs.Technically FML have synergy with Shandong in their area of expertise and nothing endears respect more than making something with next to nothing against the odds. Very Chinese.Technically,we're family already.
They have their deals planned for FML to grow,i have no doubt.They will now have the Board and managerial people on the ground to MAKE IT WORK AND PAY in an Australian environment.
Shandong have picked a company that will not let them down as they thru FML acquire and injest other businesses,with higher grade ore,better/larger plant but far poorer technical and management skills. They have invested in a proven operational model. No different than i have. I know it hacks plenty here off ,but they have bought McFocus to scale up what exists,just like McDonalds now FML have proven they can transfer their skills to acquired entities such as CRE.They passed their test with every adversity thrown at them -----"until the end of the year to prove itself and opportunities are expected to present themselves then"Well they have,or the first one has.
Shandongs ability to buy anything beyond 51% in itself would probably require FIRB approval and i doubt that would be given personally.That brings in real sovereignty issues for Australia.Just as 51% opens the floodgates for bank approval for loans from China,for big acquisitions and specialist plant.
DYOR+DYODD this will be the first upfront approach by a Chinese SOE that does not involve taking the upfront advantage(minimum cost)for maximum initial gain.They also see their half of FML larger than the whole of themselves in China in the future and the START of a very profitable overseas expansion model,for use in many other places(countries),no doubt.I don't see any FIRB issues with FML then taking out 100% foreign owned interests and ensuring a 49% interest is then available thru the Australian sharemarket - DO YOU? I can see $227m opening up to a $1bn purchase for starters. There are plenty of plants mining transitional ore that could benefit from an FML upgrade and 4% yield increase and associated dramatic reduction in costs. Easiest money made is what you save. You don't need to look far to see the potential targets. For that they need FML to SHINE LIKE NO OTHER,to convince other Govt's to allow them to grow there too. To prove how good a Global Corporate Citizen they can be. Environmentally aware as Shandongs letter to FML stated,there would be no lessening of environmental concern and see FML managing to best practice. Very important,if American investment is on the Horizon for them,North or South.Where most of the undiscovered more politically stable gold will be found in coming years. They don't just want or need us 49ers,they WANT AND NEED US HAPPY and FINANCIALLY REWARDED as a showcase for bigger and better things to come for Shandong elsewhere. When is the last time you owned shares in a foreign GOVT all but GUARANTEED mining business with unlimited financing that HAD TO MAKE GOOD,to make the majority owner look good AS QUICK AS POSSIBLE by the way for those very same reasons? See the upside-I CERTAINLY DO?
DT - another rabbit left of field - out of the hat. Forgive my initial ignorance.Lighting the fuse on a fireworks display is unnerving,it might just go POP instead.
FML Price at posting:
3.7¢ Sentiment: Buy Disclosure: Held
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