Your comment on corporate friction between TLG Board and Smedvig is spot on. Let me elaborate. I have attended TLG AGMs in person for several years now. I have posted commentary on those meetings in the past for those who were not able to attend. Smedvig became a shareholder as part of a consortium that included Pelmer Securities and Kamberg for a total of Australian $ 10 million at $ 0.28 per share with free long dated options expiring in December 2018 with an exercise price of $ 0.45. The consortium was advised by Pallinghurst, Brian Gilbertson's private equity vehicle. Pallinghurst had worked with Smedvig before on the Jubilee Mines takeover in 2007, making a very tidy profit. At every AGM after Smedvig became shareholders they voted against any resolution that increased TLG's ability to raise capital automatically. They also voted against several remuneration packages. The option structure was not TLG's idea, but it was part of a deal with the Smedvig consortium to support TLG's development financing needs in the near term. Smedvig did not exercise those options, they became virtually worthless as they approached the exercise date. I should know as this resulted in a very large financial loss at the time for me. I had assumed, wrongly, that Smedvig and its co investors would exercise their very large option holding to secure a dominant holding in TLG. I have thought about this long and hard over the years and my only conclusion is that there may have been an attempt to secure that position at a lower price that the exercise price. Pallinghurst promised funding over the years that never materialised, eventually securing a board seat for 12 months on the back of their declared 4% holding and Smedvig's holding. I was very unhappy about the Pallinghurst Board appointment for all the obvious reasons of a wolf at the table. Pallinghurst went on to fund Nouveau Monde in Canada gaining effective control of the company after the last capital raising in Canada.
I understand from TLG Smedvig decided to sell out of some their most profitable investments following a review late last year, TLG was one of those projects. TLG was given no advance warning. Smedvig confirmed their action in a telephone call following the Goldman Sachs announcement after the market closed on Monday 18 January. The Smedvig website modus operandi postings show that in fact Smedvig is an early supportive investor offering a short term leg up to emerging companies like TLG. TLG has now progressed well beyond that point as demonstrated by the corporate activity of the last 2 months. Let me explain. The $ 25 million institutional capital raising to fund the Pilot Plant ($ 22million) plus $ 3 million working capital was twice oversubscribed at $ 50 million, clearly many institutions would have been scaled back quite hard. We have just seen the SPP oversubscribed more than 5 times at over $ 53 million. TLG is rewarding many of its smaller shareholders by accepting $ 30 million with similar heavy scale back. The Goldman Sachs block trade went through pre market yesterday with an additional 5.872 million shares traded in open market at an average price of $ 1.64 according to my calculations for a total on the day of $ 47 million. An additional 2.5 million shares have been traded today as I type this note for a total of $ 4 million, average price $ 1.613. This means that in the last few weeks firm market interest in TLG amounted to in excess $ 150 million. This is pretty much TLG's market capitalisation some 6 months ago. In my opinion TLG is now in different league and is very likely to be included in the ASX 300 index when it next resets in March 2021.
My conclusion is that TLG came very close to being absorbed by private equity. We all dodged a bullet then. I am pleased as current share price strength has more than covered those earlier losses and vindicated my conviction investment in TLG. TLG is now not only funded for what it had originally planned and budgeted for, but is also in a position to accelerate the program and to demonstrate the true extent of the Vitangi deposit for the next step change to 100,000 tons per annum by mid decade.The share price despite all of this is still well over 10% above the SPP offer price.
On this basis I continue to hold, but please do your own research.
TLG Price at posting:
$1.62 Sentiment: None Disclosure: Held
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