An interesting snippet from a Barry Fitzgerald article on livewiremarkets..
https://www.livewiremarkets.com/wires/rare-earths-juniors-fire-up-on-news-of-iluka-s-1-2b-refinery
DGO-De Grey:
Last week’s item on DGO Gold (ASX
GO), which highlighted the discount in the stock to its equity interests – including a 14.4% stake in De Grey (DEG), was prescient, in part anyway.What was missing was the $308 million agreed scrip takeover bid for DGO that followed a couple of days later from Gold Road (ASX:GOR).But what the heck, what was a $2.80 stock when written up last week is now valued by the Gold Road scrip offer at $3.55 a share, an implied gain of 27% if you don’t mind.As suggested last week, the 14.4% stake in De Grey is a handy springboard for a takeover bid for the $1.7 billion company, owner of the 6.8 million ounce Hemi gold discovery in the Pilbara.That De Grey shares have not taken off in response to the Gold Road move means the market rates an immediate move by Gold Road on its ultimate quarry is unlikely.Afterall, Gold Road – a 50% partner in the Gruyere gold mine joint venture with Gold Fields - has a lesser market cap of $1.3 billion.But Gold Road has bought itself a seat at the table should De Grey become a takeover target as most suspect it eventually will. And it could well engineer a joint approach at Hemi as it did with its Gruyere discovery when it brought in Gold Fields as a partner.Hemi is a new-style of mineralisation (intrusive-related) for the Pilbara and more drilling on De Grey’s ground is widely-tipped to carry the regional resource to more than 10Moz, if not 20Moz, over time, not including the couple of million ounces De Grey has in shear-hosted deposits.The scale and location means Hemi would fit nicely in the portfolio of any of the big gold producers. But surprise, surprise, none of them had bothered to suss out whether control of DGO’s stake was for sale through a scrip takeover bid (to avoid a tax bill for DGO’s backers), just as Gold Road has done.Maybe it is simply a case of the big producers being petulant on the issue of a junior, like De Grey was in late 2019, finding Hemi and not them. Whatever the case, it has been a nice bit of footwork by Gold Road MD Duncan Gibbs to make the DGO-De Grey play.Payday for three amigos:Gold Road’s agreed bid for DGO – on the basis a higher offer does not emerge – represents a $100 million pay day for three former Eastern states’ stockbrokers with 50 year-plus histories in the game.The three are Tom “Black Cat” Klinger from McIntosh stockbroking glory days, equities dealer extraordinaire Bruce Parncutt, also from McIntosh, and Peter Woodford of JB Were resources dealing fame.Now all in their 70s or 80s, the three amigos collectively hold about 30% of DGO and were there on day one when veteran geologist of Jundee/Bronzewing fame, Ed Eshuys, came on board as executive chairman of what was then Drummond Gold.Along with the three amigos, Eshuys devised a dual strategy of DGO investing in juniors with promising exploration and an open share register by taking up a substantial position on the register by way of placements, as well as exploring on its own account.In a piece of sweet timing, DGO’s first investment was a $5m placement in De Grey at 20c a share in May 2018 – more than a year ahead of the Hemi discovery being made. But the subsequent surge in the value of the DGO’s stake – increased over time – also created a problem.It was the so-called holding company discount where the value of the investments is more than the market cap.The three amigos and Eshuys no doubt thought that after 50 years in the game, they would be able to remove the discount. But they couldn’t, with the acceptance of the Gold Road bid acknowledging defeat on that point.So when Gold Road made its takeover bid approach at a premium, there was an acknowledgement that here was a way to close the discount and move on. Apart from anything else, the three amigos aren’t getting any younger.
(20min delay)