I initially read the news of the announcement on the NST thread. After reading the news, I quickly took a look at the PIO Share Price, as I figured it must have resulted in a massive gain. I was very surprised to see that it had gone up on only marginally.
Surely if it was such a good deal for PIO the SP would have risen much more.
I went back to the NST thread, and one of the shareholders reckons it was a "cracker" of a deal for NST and a "cheap acquisition". I also own some NST and I tend to agree.
I also own some TAM, who reached a similar agreement with NST.
The basis of the JV between NST and TAM were as follows:
- 25% of the project for $20 Million
- Acquire an additional 35%, after the funding the project into production (60% in total)
So TAM received $20 Million, + Project Cost and will retain 40%
To PIO received $500k + Project Cost and will retain 25%
Now I will admit, I know very little about PIO, but looking at the above, I can only make the following conclusions:
- TAM got a great deal or PIO got screwed
- TAM's project was much better than PIO's (But still, it should have all been relative)
- PIO were desperate and practically gave their project away
I agree that 25% of a working mine that costs you nothing, is better than owning 100% of non-producing land. But $500,000 to only retain a 25% share. I think you guys got the raw end of the deal, which is what the SP is also saying.
The $20 Million that TAM got, cleared all of their debt and gave them enough working capital to see them through to production whilst continuing to drill other areas that they own 100%. The $500k sounds like it might only cover administration costs for PIO.
You never know though, the company may have been struggling, in which case 25% + $500k is better than going bust.
