business mirror

  1. 104 Posts.
    Just sent to Business Mirror:

    "Dear Business Mirror,

    Given your strapline of “A broader look at today’s business”, I hope you are interested in the whole story behind this offer.

    http://businessmirror.com.ph/home/top-news/31108-dmci-to-take-majority-stake-in-acoje-project-in-zambales

    When the company first advised its shareholders that there was a potential offer they told us:

    “With the closing mid-market share price on 26 July 2012 of 13.75 pence (A$0.207), and a net asset value of 28.0 pence per share (A$0.42), the company believes any offer would need to be at a significant premium in order to recognise the full value of the company's assets and significant technological expertise.
    The Company has US$30 million in cash, another US$11 million receivable over the next 5 months and is presently finalising the Bankable Feasibility Study on its Acoje project. The Company's Update and Quarterly Activities report released to the market on 26 July 2012 contains a full summary of the status of its assets and projects.”
    And now the board is recommending the miserly sum of 19p. Why?
    Digging into the offer further there is this in section 3:
    “The Joint Offerors believe that the Company’s current business plan involves considerable risk. The acid tank leaching technology proposed for the Acoje ore body is highly capital intensive and the Joint Offerors believe that it is not yet adequately proven on a commercial scale. In addition to the cash generated from the sale of non-core assets, the Joint Offerors believe that ENK will need to raise new capital. Any additional equity capital raising may be dilutive to shareholders and debt financing, if available, may be costly and impose restrictions on financing and operating activities.

    The Joint Offerors intend to investigate a lower risk strategy with the management of ENK which involves continuing direct shipping ore (“DSO”) operations until such time as they are satisfied that acid tank leaching is proven commercially viable and a technology partner is found. This plan is expected to reduce operating losses and significantly reduce the operating and financial risks associated with the development of Acoje.”

    So what they are saying is, before the Bankable Feasibility Study (BFS), which all shareholders have paid a significant price for, is even complete, a faction of major shareholders, including DMCI have decided that it is too risky to adopt Acid Tank Leaching (ATL). What they want to do instead to just dig up huge chunks of the Philippines, that are over 98% worthless dirt with less than 2% Nickel, and dump this in large ships and sail it off to China – contrary to the new Philippines Mining policy which seeks to have much more of the value adding processing done in the Philippines. The project that has been underway for years and has used up a great deal of shareholders’ money (a lot of the 28p NAV is intangibles associated with the capitalisation of some of this expenditure) will be scrapped, just as it is about to achieve the keep step of demonstrating the true value (and risks with what needs to be done to mitigating them) of the assets (NPV of the ATL project is expected to be approximately £1 per share – ie more than enough to raise the additional finance required). Yes this would be a world first for the Philippines, and being first with anything is a bit more risky than letting someone else beat you to it, but we are not talking about landing rovers on Mars here and Rob Gregory and his team are the best there is – nobody knows more about this than them.

    What is really sad is that DMCI are focused on the dwindling short term cash flow they were getting from DSO and not the bigger picture. DSO has its own risks, the main one is here with them right now and that is that the Nickel price has already slumped to a level where DSO is barely economical. The world is moving into a position of significant Nickel over supply and prices may well drop further leading to a complete shutdown of all operations. DSO is also highly sensitive to transportation costs, and with oil prices rising again, it does not take a rocket scientist to work out that DCMI’s strategy is fundamentally flawed and will mean that rather than having a world leading low cost, highly value adding facility in the Philippines, which could comfortably ride out even the worst dips in Nickel price, the Philippines will see its valuable natural resources squandered, whilst ENK shareholders see all the money time and effort that has been put in to making the Acoje project the envy of all other Nickel producers squandered as well.

    I am a long term ENK shareholder and I have discussed this with other shareholders and we are all in total agreement that DMCI’s offer of 19p is derisory and we will not accept it. Furthermore their strategy for Acoje is bad for everyone. DMCI should back off and withdraw the offer totally and allow Rob Gregory and his team to deliver the world class project that Acoje could and should be for the Philippines and for ALL ENK shareholders. At the very least the BFS should be published (due at end Sept) before any decision is made regarding the true risks and benefits associated with ATL, and these need to be compared to the true risks and benefits of pursuing DSO. Only then can the true value of the company be derived and only then can a fair offer be made."


    I am trying to get more articles done exposing what is gone on done in UK and in Oz as publicity is our best weapon. If any of you have ideas or contacts that could help spread the message that this in not a fair offer and will not be accepted then please go for it, time is against us as I would expect brokers to start contacting shareholders next week with the offer. Only by all minor shareholders standing up against the bully boy tactics that are being employed here can we get either an improved offer or better still our company back in the the hands of people that just want to deliver on its potential and not play games in order to rip off the minor shareholders.
 
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