(sorry for the long post, it just kind of went off. From 1 line to 2,3.)
Thanks for posting this info.
I'm a bit concerned here on a few fronts.
I first heard about all this ADN stuff after it's massive move last year. It looked a bit pricey at 30-40 cents.
Then it came down and I Iooked into the story more. I then found that this MEP stock had 25% of the bloody thing!
Wow, what a gift!
Ok, I started buying 6-7 months ago and doing more research here and there. I think I may have come across the above farm-in deal and didn't think much of it.
Looks standard to me.
Now after reading up on the ADN /MEP SA story for months and watching all the JM interviews, I'm a bit concerned.
I know everyone here seems to love Andrew and MEP's board but, I own a bit of the company and this GW JV announcement isn't right to me.
Let's back up. I'll give Andrew credit as him or his team found Prominent Hill 20 years ago and OZL (Oxiana at the time, got it)
Maybe OZL thinks MEP will repeat that or there's some goodwill between old mates. I don't know.
I did take a look at the 20 year MEP stock chart. 30c to 10C with many, many CRs along the way plus healthy salaries.
(How does Andrew only own 1M shares of MEP after 20 years? A bunch of close to in the money options that haven't been cashed. He's not even in the Top 20??)
Remove the ADN premium and MEP is a 4-5 cent stock?
The part that's got me is Andrew/MEP (I don't know how they got the GW leases but, I'd say they got them looking for gold or copper as that seems to be their MO) has had the GW and Camel Lake leases for 14 years. He would have looked at the drilling that was done in the 60/70s.
That was enough for him to hire JM to do more drilling and do a maiden resource. That was a smart thing!
Then as I understand, JM says we got this really valuable HIGH GRADE kaolin and it also has this thing called halloysite.
At the time and even today standard kaolin isn't valuable. The story goes that James wanted to mine this stuff 12 years ago.
(HIGH GRADE kaolin and halloysite did have valuable markets)
Andrew said thank for the drilling, bye.
*Maybe Andrew want to hear the words gold or copper?
I think this was a bad management decision.
I'm not sure we can even say, in hindsight Andrew was right.
I dig up the drilling results from then and it was all there to see.
But, let's give him a pass anyway.
So, lets travel to 2018.
I don't know the who, what, where but, ADN with James in toe comes to Andrew and says here's a deal for you. Zero risk.
ADN at the time was a empty shell. There was a couple crap gold leases but, nothing.
I think it's MC was around 5M.
MEP signed the above deal.
*At the time I think or assume Andrew was focused on other stuff? Who knows? They got $70k and 49% to 25% of something.
My question is,
-Why didn't Andrew try and get a better deal?
-Did he UPDATE himself on the HIGH GRADE kaolin and halloysite market?
-What was the timeline from the approach to the signing?
-Did he ask himself, why the same person in 10 years who's a expert in the field wants to mine this stuff?
-What did ADN/JM know that he didn't.
*They were a tiny shell and willing to throw 6M at this!!
**As investors, we looks for bits of info here and there and place our bets, we are OUTSIDERS and most investments on the ASX are a crap shoot.
Better than the pokies but, got to love the "free games!"
The managers of these ASX companies "are the insiders and educated in their field."
They are supposed to know better or more than us and more importantly look out for their shareholders.
IMO, Andrew screwed up here.
James has been saying and showing results of how valuable HIGH GRADE kaolin and halloysite is.
As a manager of a public company and GEO himself, you should know your assets. Right?
At the very least, he should of got a independent 3rd party to review the leases and the current market before saying yes.
(Much like he has in hiring Argonaut to review MEP 25% holding, which really is a waste of money IMO.)
Then, maybe try and get a better deal? Read the deal. It's a bit of a joke. He gave away 75% of the project for $70K !!
I like many have seen many farm outs deals but, you make the other side work for it a bit.
At 51% the light bulb should have gone off and there would be some solid drilling data/value and a SS to see what's what.
Then at that point, maybe MEP and ADN go 50/50 on drilling (only costing MEP $1.5M) ??
Then ADN has to pay MEP $5M or wait for a PFS and pay x% of the NPV. or something.
There are a 100 ways that deal could have got better for MEP holders.
Now, after reading the farm-in contract in the context of the last 6 months. You realise how much Andrew left on the table.
It's as clear as black and white that ADN is 100% in control.
-Their MC is 8 times bigger than MEPs (Even worse is MEP's MC was 7 times bigger than ADN at the time of the signing.)
-ADN's cash is almost equal to MEP whole MC !
-They have legal and majority control of the asset.
(I read the MEP boards and ADN boards and both set of holders think they have the upper hand. IMO, It's not even close if you actually read the deal.)
I mean seriously.
Then, re-read the release he wrote above.
Pretend your JM or the ADN board, your GW offer just went down 10% -if there was even one on the table.
The best thing Andrew can do is be respectful and thankful.
*I'd release a statement that was crystal clear to MEP holders and ADN mgmt. saying that MEP is very happy with it's 25% in the JV and fully plan on supporting it's obligations to the JV. Period.
(Sure you can negotiate with ADN but, at the end of the day it's 100% up to AND to buy and at what price. If you get a offer reject or accept.)
To have little public jabs like this after you've screwed up so badly for MEP holders is unprofessional IMO.
ADN has done the hard work, spent the money and followed the agreement MEP signed.
Even with Mt.Hope. Now Andrew knows this stuff has value, why didn't MEP grab Mt.Hope?
OR if the relationship was strong. Maybe ADN offers to put in the JV? How knows?
How does know how valuable MH is, is JM not Andrew.
IMO, Andrew hasn't helped MEP SH's in the last 20 year and the good deal that MEP currently have were OZL is doing the heavy lifting on the QLD assets could be goodwill still left over from Prominent Hill?
I looked at 3 time-lines of MEP in the last 20 years. Andrew has acquired and let go of 14 assets and none have improved shareholder value. Only the GW asset which MEP should have got better terms if he understood or did research on the HIGH GRADE kaolin and halloysite. Not assuming it would be a low-end DSO kaolin OP. Which is what I believe he did, maybe someone should ask him?
As investors you always invest in management first and then the assets. Well, for me there's a first. I'm reversing it and hoping for the best.
When I bought MEP 7 months ago everyone on these boards was saying how clever Andrew was. At the time and looking at it, it did seem that way but, one just needs to look at the FACTS the past 15 years and see how he's handling this now.
I think ADN is way over valued compared to MEP but, I'm now started to think the arbitrage that's existed the past year is the market discounting MEP mgmt. not the assets.
As I said before, I hope Andrew doesn't screw this up. (Happy to lead the angry mob if he does.)
The GW JV and the 50/50 Nano JV could provide incredible shareholder returns to MEP, more than ADN IMO.
I'm expecting some blow-back from long term holders who believe in AW, that's fine. My wife and girlfriends don't like me either.
But as a new holder discovering these facts (which I should have did 7 months ago) tells me I'm in love with MEPs assets including it's QLD assets, not mgmt.
GLTAHs
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