Hi All,As a long term holder and contributor on this forum, I...

Hi All,

As a long term holder and contributor on this forum, I apologise for not responding earlier but the start of my week is always very busy and a pre-open announcement on a Monday morning is not a good fit for me. Apologies also to @Countrywriter for my comment related to an offer of 40cps.I read the announcement as soon as it was released and paraphrased the content in my previous post, to give an idea of the approximate value of the deal that was just announced.

Can I also say here that the detailed, considered and well-presented posts on this forum over the last few days, some by many who have not posted before, are well received and underscore the long standing ‘common sense’ posts that have largely been the core of discussion on this forum over the years.So, thank you.

Here are my musings for what they are worth.There are so many things to cover here that I really don’t even know where to start!

Personal context

For longer term holders or readers, you will be aware that I have held BRB since 2013.I have followed the BRB journey reasonably closely ever since, particularly after the Bombora discovery. I have contributed and shared my research when I could or when I thought it important.

I have been guilty of overexuberance and displaying a confirmational bias, particularly in the early days of discovery.I have attended many roadshows, both in Sydney and Melbourne and have met and spoken to Tom many times over the years. I have had no communication whatsoever with the new(ish) board.

I hold a reasonable number of shares, but I am not in the top twenty holders.

About five years back I set up my own SMSF, primarily to back my research and confidence in the Lake Roe project and to try and do better than my Industry Super Fund.I balanced my portfolio, but Breaker was my biggest holding.Unfortunately, I adopted a buy and hold attitude for the first few years and added on weakness.Sometime later, I started to trade announcements and try to read between the lines, anticipating capital raisings etc. I did this reasonably well, all the time building my position.

The necessary conversion of the partly paid shares I held when they were called, raised my average buy price considerably and so, to be clear, an indicative offer of 40 cps doesn’t meet my long-term plans of building wealth for my retirement, that is nobody's problem but mine and something i will have to reconcile with myself should the current offer succeed.I will not be selling my shares and will wait for compulsory acquisition, if that should ever eventuate.

The merit of the offer

So much has been said already and I have no intention of repeating it all here.To be clear, I don’t think this is a fair or reasonable offer but then, when did fairness or reason ever enter the world of business or markets?

Apart from a few details, the two bidder’s statements regarding the takeovers of AOP and BRB are very similar.One of the main differences that struck me was the percentage where the offer becomes binding. For the AOP takeover the figure was 90%, which is the trigger for compulsory acquisition of the remaining shares ... nice and neat, mission accomplished.The figure for the BRB offer however is just 50.1%. I’m not sure how this figure will give a clear outcome and suggests to me a messy and uncertain road ahead.

Some have mentioned that the Breaker board have just rolled over and recommended the Ramelius’ offer without commissioning an independent valuation, but reading through the announcements of the three offers AOP received, it doesn’t appear they sought an independent valuation either.

This site is a good read.It explains many of the processes and laws involved in takeovers in easy-to-understand terms.:

https://www.ashurst.com/en/news-and-insights/legal-updates/takeovers-in-australia/

Other possible suitors?

The synergies of Lakes Roe and Rebecca to Ramelius makesense and for that reason alone I honestly can’t see another company entering abidding war to give Breaker shareholders a better deal than the one currentlyon offer.

There are only two companies I could come up with that mightbe interested.

Northern Star (NST) operates the Carasue Dam mine ~60kms tothe north of Bombora and has a mill with a processing capacity of around4mtpa.This idea is cut short however by two thoughts.Firstly, NST have been rationalising their operations and divesting projects over the last year or so.Secondly, I would think the Crusader Templar project operated by Nexus Minerals (NXM) just to the north of Carasue dam would be a better fit for NST, especially given both companies previous relationship. NXM is just about to release a Maiden Resource Estimate (MRE)

Silver Lake Resources (SLR) operates Karonie ~40kms to thesouth of Bombora and Randalls, the latter having a processing capacity of1.2mtpa.Given Randalls processes material from SLR’s surrounding projects, you would think the mill is running at full capacity.

Apparent failings of the board

This is not a new phenomenon with Breaker.Many promises have not been delivered on over the years for various reasons.However, the rhetoric from Sam and Peter since the sale of Manna belies the decision to ‘endorse’ the offer made by Ramelius.Clearly this takeover has been in play for some weeks.You don’t put that announcement together over the weekend and may explain the apparent lack of action by Breaker on any front for the past couple of months.

I believe that the decision by our board to unanimously recommend the offer is appalling.An implied value of ~$130m less the cash from Manna gives us an EV of ~$60m.Where have the directors demonstrated they have acted in the best interests of its shareholders and have carried out any of the core responsibilities of being a company director?

Provisions under the Corporations Act

I had this idea which I thoughtcould materialise and so I spent some time exploring it.I was just re-reading the announcements and see I completely missed one on Monday.Did I mention the start of the week is very busy for me?I now understand what the comments about Tom not being happy refers to …

For a laugh you can read the following text or to save time, skip to the next heading

A few years back, I posted about the appointment of Peter Cook as non-executive chairman and the strategic reasons why this occurred. It related to section 250U under the Corporations Act here: https://hotcopper.com.au/posts/55217277/single

As a result of this move, Tom was now safe from the second-strike rule and could continue in his new role as Managing Director without fear of being removed, should a second strike occur.A good move at the time but, it didn’t play out that way in the end …

We will probably never know the real reasons for Tom’s departure, its merit or otherwise, or the deals that were done between major shareholders or in the boardroom.However, that action showed an understanding of ‘the rules’ and the acumen to use them to advantage when necessary.

I mention this as @jdpc35 mentions in a previous post whether Tom has been engaged before or during this recent corporate activity here: https://hotcopper.com.au/posts/66871455/single

Under section 249D of the Corporations Act, any board can be spilled by a person or persons who hold five percent of the capital on issue. Tom and Helen hold just under eight percent of the shares on issue and therefore can act alone to cause a spill if they are not happy with this deal.

A section 249D notice forces the company to call a general meeting to vote on resolutions proposed in the notice.There are specific steps and timeframes involved that exceed the current offer period so I’m not sure how that might affect the takeover, but it could well put a spanner in the works.The other question is how likely it is to succeed given that a majority vote is required to carry the resolution(s)?

Editing note: I should also mention here that section 203D of the Act also applies and is important in the process should Tom wish to go down that path.

For a plain English explanation of how this works you can read it here:

https://www.mondaq.com/australia/shareholders/838078/board-spills-and-shareholder-activism--getting-the-notice-right

Some other things

Top 20 Holders

Someone asked about this, so I thought I’d include it here. At one stage, Breaker used to have a recent Top 20 one their website but when I checked it is no longer there. This one is from the last Annual Report which was released late October 2022.Given the report refers to the previous financial year, the data could be as old as 30^th June 2022.

Just a note about the unlisted options.Around half of these have recently expired or been converted.Breaker also has a ‘nil cash conversion policy’ for option conversion – the number of shares issued being the difference between the over laying share price less the strike price.

Ularring project

Given the overdue results I thought I would check the DMPWA website. Results for co-funded drilling made under EIS funding are made publicly available once the report has been filed (unlike the data gained from company funded drilling that remains confidential for many years). The only report I can find listed for Ularring goes back to 2016 which I have previously posted.It was worth a shot. So for whatever reason, results have not been received and released yet.

Bid Implementation Agreement (BIA)

First time I’ve read one of these.In section 4.4 on P.p.10 there is reference to a compensating amount to be paid to RMS if BRB is in breach of the agreement … the amount is $A950.000 only if 50.1% of the SOI have not been acquired

What happens from here?

I see these as possibilities:

1.RMS does not reach 50.1% and the offer is withdrawn.Settlement of the promised shares does not occur, and we are back to where we were last Friday which probably includes our share price as well with likely further falls to follow.

Probably the most unlikely result as RMS already has two North American holders on board and those selling their shares now are likely selling to RMS, inching them closer to the target.

Odds 66/1

2.RMS obtains between 50.1-89.9% of the shares but cannot enact compulsory acquisition.

At this stage, probably the most likely outcome. What an ugly mess that would be and given the form of our board, I’d have no confidence in how they could make this outcome work.Furthermore, the $70m can’t be accessed by RMS.

Odds 2/1

3.Tom successfully gets the votes he needs to carry his 249D notice, the board is replaced and I’m guessing a decision to progress the project ourselves follows utilising our existing cash.

Odds 16/1

4.A more attractive offer is made by another company.The Gold Road (GOR) offer for AOP appeared on the third day following the RMS announcement, which for us would mean on offer today.Wishful thinking.

Odds 100/1

5.Somehow RMS manages to enact compulsory acquisition, most likely through a revised offer. Breaker holders are issued RMS shares on whatever ratio and the RMS management bring the Lake Roe project into production to the benefit of all holders.Positive option and preferable to long drawn-out complicated arrangements.

Odds 8/1

All the best,
Perdy