“It would be good to read comments from ozpolarbear see what he makes of this.” - @Milanese68
Hi Mil,
One of the most confusing announcements
I’ve ever read but I’ll try to mention both sides of the story here. It is hard to call some aspects purely positive or negative but I’ve tried to call it as I see it.
I’ll probably make more sense in my conclusion than in the rest of my comment.
1/ WGX Background
Firstly a disclosure. I’m a shareholder in WGX too and was a little surprised to see my WGX shares up by a healthy % this morning. It all makes sense now. My TON share are worth much more than WGX; so ideally I’d like TON to get a better deal.
From memory, WGX was originally part of MLX which was a very diversified miner, and MLX’s gold assets was spun off into WGX. Also I think Cook from MLX was associated in some way with Aziana which had a massive 1000-2000% spike 1-2 years back and that company is in some way associated with one of Hotcopper favourites Brainchip.
WGX’s main focus is gold. So this deal makes good sense for them as it allows them to get value out of their lithium assets, and they would want to focus mainly on gold considering that was the main reason they were spun off from MLX
I’m not following WGX in full detail (so apologies if there are some mistakes) but being a hardcore gold bug, I’m often in and out of several gold stocks. WGX has a lot of gold and as can be seen, their market cap is more than half a billion dollars. So, anyone seriously following ASX gold companies has unquestionably heard of WGX. I’m assuming our major shareholder Minjar Gold also would know a thing or two about them.
2/ Dilution (Negative)
Obviously massive negative at first glance – 1/3
rd of the company is going off
3/ No JORC (Negative)
@jackarooz has passed a great comment earlier as always, and is a must read.
https://hotcopper.com.au/threads/an...ton-minerals.3929861/page-31?post_id=29841182
The part I found most relevant is that at first glance, this announcement makes no sense as we seem to be giving away
a 3rd of our company for some exploration assets.
As Jack mentioned, it makes no sense why we would be doing this, and if there was a JORC or something, it would make more sense. TON has had enough experience having fabulous assets as an explorer and should know from 1
st hand experience how difficult it is to move from explorer to producer.
4/ Lithium – hot sector (Positive)
As we all know Lithium is a very hot sector at present.
It might have its ups and downs but IMO, the battery story is here to stay and it will keep bouncing up. I was reading an article yesterday that a company’s share price jumped 500% just by mentioning that it is going into blockchain. Some crazy rises can come about if market likes the story and if the company is in a hot sector. We TONners clearly know that fundamentals are just one part of the picture and at the end of the day, the market also wants a story.
5/ What we are getting (Not sure how positive)
Regretably, I’m not as familiar (yet) with lithium as some other commodities but I’ve heard of Mt. Marion. It seems we are
getting some exploration assets – Location 53 and location 59 which apparently have some exploration potential.
It also appears that we are getting
royalty and % of sales from 2 other different projects. I’m really not sure at present of their stage of development but it looks like we could be getting some revenue. Might make sense for TONners to do some due diligence of their own into these lithium assets.
6/ Diversification of commodities (mixed)
We have what are IMO the best combination of graphite assets in the world for our ridiculously low market cap of some 60-70 million AUD. Diversification into lithium is surely positive, but I’m not sure how good the assets are and whether they are worth 1/3
rd of our company.
If they are worth, then it would surely attract attention in the battery sector.
7/ Nicanda JV (Not sure)
I’m not really sure but I’ve been wondering today if this announcement is in some ways related to the Nicanda JV. IMO, Ancuabe is far more suited for flame retardants while Nicanda is far more suited for batteries.
TON has already mentioned that they are looking to go the JV route with Nicanda and maybe our lithium assets might also come into play? Not sure but just putting this thought out there just in case.
8/ Recent rise (could be positive)
IMO, the recent rise over the last couple of days might not just be because of the DFS, and today’s announcement could have something to do with it.
The big boys always know a thing or two earlier and it is ideally quite unlikely that TON would have kept rising if this news was so negative.
9/ Happening at peak for TON and lithium (negative)
There is one argument that this deal is happening when lithium has peaked. This is very valid.
At the same time, this deal has also happened when TON has peaked and is at a one year high. I’d still say this is negative for TON because from WGX point of view, they seem to be selling out at peak and still getting 1/3
rd of our company.
It just seems that TON was in negotiations to give a 1/3rd share and I’m not sure the 30 million valuation has made much of a difference.
10/ Management done well on operational front (Positive)
Management has done very well to move Ancuabe towards completion of DFS. Though at first glance, this announcement makes little sense, IMO, this could be a fit in some bigger picture.
I find it almost impossible to believe that management would have gone and done something which makes so little sense as of now.
10/ Management has not paid attention to share price (Negative)
While ticking boxes on operational front, one just got the impression all year that share price was not given importance. Based on last year, I seriously hope that this is now another such case.
11/ WGX non - executive director (Positive)
IMO, it is positive that we would be having a fresh set of eyes to look at TON.
12/ WGX shareholders getting TON shares and not WGX (Mixed)
@Names little raised a very good point that one of WGX major shareholders could be behind this
https://hotcopper.com.au/threads/an...ton-minerals.3929861/page-38?post_id=29841749
As NL said, it does not make sense that WGX has the option to appoint director and the shareholders will be getting TON shares. NL has raised several other interesting thoughts today which are definitely worth a read.
13/ New instos on board (Positive)
We’d definitely be getting some
new insto eyes at least looking into TON. Some insto holders of WGX would automatically become TONners. So this could be very positive.
14/ Nothing finalized (positive)
This is just an option at present for which we are paying $10,000
Nothing has happened. TON still has to do their
due diligence within the next 2 months. TON still has to get
shareholder approval. Note that Minjar / Shandong would be substantially diluting themselves if we go ahead with this. There have been many thoughts expressed before that Shandong would like to eventually takeover TON and I believed it too but if they are willing to dilute themselves here, there must be a good reason. Also as TON mentioned, they will be having a
meeting and giving an explanatory memo in time to come. I’m assuming this meeting is in addition to next month’s meeting already fixed.
15/ Conclusion
A very
bizarre announcement at first glance but
could be a game changer if there is more to this story.
At first glance, we are giving away
1/3rd of our company for “some” unknown lithium assets.
The good news is that
nothing has been fixed and this is just an option at this stage and if TON does not go ahead, then nothing is lost besides the $10,000 option fee which I’m assuming TON has already paid / soon to pay.
Like many, I’m a little surprised at first glance but am hoping that more information would be released in time. This could end up being a positive too, and recent share price could have something to do with this.
Ideally, like many TONners, I think we should be focusing on our graphite. We focused on Nicanda in TON 1.0 and Ancuabe in TON 2.0 and I sincerely hope there are some good reasons for this latest abrupt change of plans.
I’m not so concerned about the 8.5 c share price but more about the 1/3
rd of our company. To put things into perspective, our share price was around 8.5 just a few days ago.
Several lithium stocks have been on fire and several stocks have had sharp rises with just the mention of lithium. One does not know and it could end up being very positive as
few to none of the other lithium newbies have outstanding complementary battery commodities like us.
I don’t think anyone can make a thorough analysis based on the very little information available. Best not to let this spoil your coming days. Don’t let this announcement play on your minds in the coming days as it is too difficult to analyse it properly with current info.
Let us hope that PC has something up his sleeve and next week will reveal more once we open on Wednesday. As of now, I simply find it hard believe that this is all there is to it and share price continued to rise recently despite this announcement which was to come.
Hope everyone has a very merry Christmas and a great 2018 ahead.
Cheers