Thanks for posting that Kippax. I noticed that article yesterday morning, and I was curious to read more, but as it was behind a paywall, I could only read the headline. But your post handily patches the holes and provides the key details from the article.
Reading over the above, the inference from the article seems to be that the funds from the sale of the mansion will be employed to close off the deal they entered into with Thomoson last year.
Let's take a step back for a moment so as to review the payment terms of the deal with Warwick Gold as per the announcement of December last year ('Sale of Texas Project', released 06/12/22).
The Consideration to be paid to Thomson will be approximately A$3.5M, payable as follows:
o A$50,000 within 5 Business Days of the date of the Agreement;
o A$150,000 on Completion;
o 1% Net Smelter Royalty (“NSR”) on any of the following ore or minerals extractedfrom the Tenements - silver, gold, zinc and copper contained in current Thomson published Mineral Resource Estimates for Twin Hills, Mt Gunyan and Silver Spur and material on the Heap Leach Pads at the Texas Site; and
o An amount equal to the Existing Bonds (“Bond Amount”)(~A$3.3 million), which shall be paid by WGH to Thomson by WGH paying 50% of the Net Operating Margin for the processing of minerals at the Texas Site into an account nominated by TMZ on a monthly basis until the full Bond Amount has been paid to TMZ.
During the period prior to Completion of the transaction, WGH shall be entitled to undertake activities leading to a restart of the processing plant and the processing of the material on the Heap Leach Pads, at its sole cost.
Completion is subject to the following Conditions Precedent and will occur 5 Business Daysafter the satisfaction (or waiver) of the Conditions Precedent of:
o Receiving the Minister’s indicative approval of the transfer of the Tenements to WGH;and
o All necessary approvals are in place for WGH to operate at the Texas Site for the purposes of its planned processing of the materials on the heap leach pads,with the Conditions Precedent to be satisfied or waived on or before 31 December 2023...
In light of the news clip posted above, it is the last line that is perhaps of most interest.
The deadline of 31st of December isn't all that far off, and that small detail does add some weight to the suggestion in the article that purpose of the liquidation of the mansion is so that Warwick Gold are able to meet their obligations to Thomson before the end of year cut off date.
If this is correct, and Thomson soon wind up with the $3.3 million that was owed to them from the Texas deal, that would not be a trifling matter for this company.
Keep in mind that the market cap of Thomson at the time of the trading suspension back in March was just shy of $5 million, and there it has been frozen ever since.
In light of this, the significance of having an extra $3.3 million in the kitty can't be underestimated. There is nothing like having a pile of cash in the bank to help put a floor on the share price of a company.
The true worth of mineral assets located deep underground and expensive to extract is always going to be the subject of speculation and debate, but at the end of day, a dollar's a dollar.
If TMZ gets out of its trading suspension funk, which seems likely, having $3.3 million in the bank should thus limit the share price downside. It is hard to see the value of the company falling below the cash balance of the company, or at least not for long...
...unless the company does something silly, like initiating a mammoth capital raising at a rock-bottom price.
I'm going to return to that earlier comment by the poster who was gunning for a '...1 for 1 pro rata at same as placement price, even 2 or 3 for 1...' at the placement price (or, in other words, 0.001c)
If that came to pass, the end result there would be a company with a billion extra, or -heaven forbid- two or three billion extra shares outstanding.
A silver focused company issuing billions of shares outstanding at 0.001c? I am getting a strange sense of deja vu just now...
The year I am taken back to is 2015, when the mining boom had turned to bust, and the share prices of mineral exploration ventures were falling through the floor. Most couldn't find support for love or money.
One such a company, Silvermines, looked to be on deaths-door. Burning through cash and with a share price sitting at 0.001, it looked like they were completely out of options.
However, the MD of the company at the time, a certain Charles Straw, had one last card to play.
Charles Straw peppered the SVL announcement with a cleverly crafted spiel, calculated to catch the attention of a certain passionate sub-set of investors:
...It is SVL's view that at present, financial assets and more particularly US equities are in a bubble. Furthermore, it remains the company' belief that precious metals, and more particular Silver, will eventually outperform equities and other assets...'
It is curious to observe, that since 2015, the Nasdaq has risen by some 200%, and even the pedestrian Dow Jones is up by 100%. So if US equities were indeed in a bubble back in then, then you would have to assume that they are in even more of a bubble today.
Either that, or Charles Straw was just talking bollocks.
But his carefully-crafted spiel had the desired effect, all the same: silver-bugs got the message, and they rushed into Silvermines, happy to gobble up the flood of 'chicken feed' 0.001c shares being issued, thereby providing the company with sufficient funds to purchase the Bowdens Project, and ultimately saving the company.
The reason I mention this, is because it does strike me that the Thomson management would surely be familiar with all of the above. After all, Thomson cut a deal with Silvermines in 2020, and SVL is still a major holder in this company.
So I can't help but wonder if the TMZ management might be planning to replicate the 2015 SVL strategy, and are using Hotcopper to soften-up investors for such an eventuality in advance.
Of course, the idea that directors of listed companies would employ Hotcopper for such ignoble purposes is just completly crazy, so perish the thought.
However, on the off chance that the management of this company are seriously contemplating aping that 2015 move by Silvermines, I feel bound to offer up a word of warning.
2023 is not 2015, and Silvermines is not Thomson. I can think of three significant difference between Silvermines eight years ago and Thomson today.
1. Firstly, Bowdens, the core asset of Silvermines, is a top-tier silver asset. Nothing that Thomson controls comes close. (yes it is true that the Harry Smith gold project is worth something, but probably really not all that much).
2. Charles Straw cleverly played the 'silver card' in 2015, however, it isn't often realised that this was just one wing of the Silvermines strategy at the time.
The other wing is not quite so well known: It was an online strategy involving SOE, and it basically involved paying Google to make sure that 'Silvermines' was the first result that came up when someone searched this term, or something comparable.
This is largely why Silvermines today has a much larger market cap than any other listed Australian silver play. International investors interested in investing in a silver mining company have no trouble finding SVL, Google basically leads them by the nose.
This has given Silvermines a major edge over its peers on the ASX, and needless to say, this is obviously not a tail-wind that Thomson will enjoy if they were to try and copy the 2015 Silvermines strategy.
3. Last, and certainly not least, Thomson today counts Lind as a major holders. Lind are unfortunately short-term opportunists, who will sell off as soon as they can make a quick buck. Obviously, this is not something Silvermines had to contend with in the middling years of last decade.
If the total shares outstanding of a company blows out to an extra billion, it puts huge downward pressure on its share price. But on top of that, Thomson would also have to contend with Lind dumping shares.
Late last decade, the TMZ share price never went anywhere, because their major shareholder at the time, Variscan, would dump shares whenever the stock price started to head north.
Back then, Thomson had just over 120 million shares outstanding. If the share price couldn't gain any traction back then, I'd hate to think what will happen if the total number of shares outstanding were to jump by billion or more at the same time as you have Lind looking to dispose of their substantial position in the company.
In my experience as investor, the surest way to lose money on the stockmarket is by buying shares in a small miner with billions of shares outstanding.
Before I wind up, it is worth reviewing just how well Silvermines has performed since 2015. Corporate types who follow the mining exploration space seem to perceive SVL as a kind of success story, a small company that managed to escape from a downward spiral. But is this really warranted?
Not long after Silvermines completed their rights issue in 2015, they announced a 100 for 1 share consolidation: it was inevitable given that they had billions of shares outstanding and a share price of just 0.001.
At time of writing, the Silvermines share price sits at 0.170: Thus, in pre-consolidation terms, the share price hasn't even risen by one pip. Since 2015, Silvermines has been outperformed by even the pedestrian Dow Jones index. This is despite the fact that Silvermines has come a long way since 2015, and indeed, today it is on the verge of becoming a producer.
And keep in mind, Silvermines is seen as a rare success story, an example of a bombed-out exploration stock that somehow managed to escape the tug of the event horizon.
Sound corporate stewardship behoves careful management of the number of shares in a listed entity. When the management of a company allow the number of shares to explode, it seldom ends well.
As seems to be suggested in that article, Thomson may soon have another $3 million sitting in its bank account. If this turns out to be so, then there should be absolutely no reason for the company to engage in a highly-dilutive capital raising.
(20min delay)