PURE SPECULATION: Robin Bromby | October 12, 2009 Article from:...

PURE SPECULATION: Robin Bromby | October 12, 2009
Article from: The Australian

Gateway to nowhere.

WHAT a mess at Gateway Mining (GML). And not just at board meetings.

The hostile takeover by Citigold Corp (CTO) closed on Friday, October 2. As of the previous day, CTO had acquired 26.6 per cent -- which is not too flash considering the company owned 15 per cent of Gateway before it started. Yet, within the space of the last 24 hours of the offer being open, the acceptances leapt to 48.76 per cent. The extraordinary thing is that most of the last-minute panic came from long-term shareholders, with some big parcels held by Asian interests switching.

The main grouch among shareholders was the poor liquidity of Gateway stock (not to mention years of waiting and precious little in the way of getting anywhere near being a miner) and some of those seemingly rusted-on supporters might have seen the benefit of owning the more liquid CTO.

But, in doing so, they did themselves out of quite a sum of money. The two-for-five offer from CTO meant that, on the day they quit when Gateway was at 7.3c, they handed over five shares (worth 36.5c) of GML for two of CTO (worth 32c). Bad enough, but had they hung on until the following Tuesday, when GML hit 10c, the value of those five shares they had surrendered was now 50c.

So what will happen with Gateway's partners Minotaur Exploration (MEP) and Mitsubishi coming up with anything big with present drilling on Gateway's ground in NSW? With nearly 49 per cent held by CTO and another 18 per cent held by interests associated with one director, that's only about 34 per cent of the stock available for trading, something which would exaggerate any price gain. But if the drilling is a dud, you would have to wonder how hard it would be to offload GML paper -- something that recent buyers might like to think about.

Meanwhile, CTO has told Gateway it does not want to be involved in running its new part-acquisition. In that case, it might be an idea for the Gateway board to find a way to pull in the one direction and settle differences, something it conspicuously hasn't been doing of late.

The Australian implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional advice. The writer owns shares in Rio Tinto.

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