Tropicana, page-84

It's never a good idea to overpay for an asset no matter how good it is. The idea is to add value for shareholders, not destroy it. If the deal was accretive the share price would be trading above the TERP....it's not & barely holding at the CP price. That says it all. Deals can't be valued on a hypothetical price in the future- that's nothing but hearsay. Yes I think macro conditions are supportive of an increase in the price of metals but there's no guarantee. Ultimately it comes down to resource & the cost to extract it. What you pay should reflect that taking into account synergies that might be available (none here for RRL). Plain and simple they overpaid by an order of $150-200 million which is massive for a company of RRL's market cap.

McPhillamys should have been the catalyst that would have been the "game changer" for RRL. If it goes ahead, the value destruction of this deal will drag on any re-ratings going forward because it's so bad. This deal doesn't come close to replacing McPhillamys if that doesn't get approval- it was severely value destructive unless the gold price increases to US2050-2100oz.. Those pundits that say this deal is ok because it delivers certain cash flow are nuts simply because of the price they now have to pay for those cash flows (buying $100 cash flows for $100 in perpetuity doesn't cut it, does it? And that's what has happened here. If it could have been funded with debt-then ok...that's a neutral outcome but not using heavily discounted equity. It's so basic and yet seems to escape the Board and the senior management). This is business 101 stuff. Cash flow is great but not if you pay through the nose for it- that's fools gold and needs to recognised for it. And that's what you have here. RRL was primed with value adding possibilities at a cheap price. Now it still has those possibilities at no longer a cheap price. The value on offer has been destroyed. This is nothing but a very badly executed exercise in empire building and the price for that is at the cost of shareholders. and heavily. Do not make the mistake of looking for a silver lining in this purchase....it's "company changing" alright but unfortunately not for the right reasons.