It was a bit of a shock to see this one sprung after the bell on...

It was a bit of a shock to see this one sprung after the bell on Friday. Happy Christmas TONners. Initial reactions -
1 wtf? It is a diversion and dispersal of effort from TON's core business. Why? The company attempted to diversify before and that didn't work out too well.
2 But perhaps everything else is progressing to plan and management can commit time to examine this.
3 This must have been instigated by Shandong Tianye, or at the very least with their full concurrence. It is my belief that nothing happens without Messrs. Ji's say so. Is there some obscure master plan?
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30% of the company for what? After extensive searching (much of it fruitless) I think management will need to be very diligent in their due diligence and in outlining the business case in the explanatory notes to the motion at the forthcoming GM.
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Buldania project - LTR Liontown Resources Ltd
Mining leases to the north of Eyre Highway around 40km east of Norseman. Promising rock chip samples; drilling commenced late 2017 so any mine or revenue is some years away. However all on the same lease so 100% of private royalties accrue to TON - eventually.
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Location 53/59 exploration rights to Lithium + related metals (beryllium, caesium, niobium, rubidium, tantalum, tin)
Announcement states exploration targets have been identified on both locations. I've been unable to find any reference to these in WGX Westgold Resources Ltd announcements, Google searches, or WA Dept of Mines web site. I had heard that Western Mining Corporation (now defunct) prospected the ground way back.
So unknown if these rights could be a dud or a bonanza. My hunch is the Mount Marion mine was cherry picked as the best prospect in the area so any others may not be as good, although availability of exploration leases could be a factor.
Mount Marion mine
Operated by Reed Industrial Minerals, a JV between Mineral Resources (MIN) 43.1%, Jiangxi Ganfeng Lithium (offtake partner) 43.1% and Neometals (previously Reed Resources) 13.8%.
In July 2017 was operating at annualised production of 474,000 tpa, targeted production 400,000 tpa of 6% spodumene concentrate in 2018 @ US$841/tonne (AUS$1,090).
There is no quantification of lithium royalty income in Westgold's annual report of 20/10/2017 (or indeed quarterly activities dated 30/10/17), although the assets are mentioned. It is possible RIM is not yet mining in the Location 53 area - see diagram
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(06/07/2016 MIN announcement)
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In the diagram, the rectangle at top is the mining area leased from Westgold / Location 53, so royalties would be payable on only that part. A generous guesstimate is 20% of total mine area and it is not known when that area will be mined. My calculation of eventual royalty is
400,000tpa x AUS$2 . . . .x 20% . . . . . . . = $160,000
400,000tpa x AUS$1,090 x 20% x 1.5% = $1,308,000
Total $1,468,000pa. Not a good return on $30M given the risks.
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PC is no mug so there has to be more to this, not yet disclosed to us mugs. Long term the Buldania royalties may come good and Loc 53/59 may be a bonanza, but 30%+ of TON is a huge risk at this stage of our development.
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As previously mentioned I'm pondering whether this is part of some grand plan by Shandong Tianye. Do they only get Chinese foreign exchange approval if they diversify into lithium? I believe ST will always act in ST's best interests, and not necessarily that of shareholders'. Following the rights issue they'd have to acquire 25,517,863 shares to return to 23%, and huge numbers more to maintain 23% if this deal goes ahead, and more to creep to 26% in March. So it would not hurt their interests if the SP were lower...
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Just my thoughts and I don't pretend to be any great analyst. Apologies if I've repeated anything posted earlier and if anyone knows of any related mining research links please share them.
I have made the assumption ST are backing this but @alspalladium and @Captain Morgan I'm intrigued by your comments.
Good luck to all, happy new year and we'll see what tomorrow brings.