Ian hits the nail on the head: 'bizarre share buyback'
WAYNE McCrae, executive chairman at aspiring copper miner CuDeco, yesterday published a thumping 125-page shareholder letter, of which 105 pages were detailed results from some 900 holes drilled.
While Insider tends to lean towards companies that give more information (rather than less) to investors, surely that is overkill.
Hopefully, in these days of technology, CuDeco saved a lot of trees and money by disseminating its letter via the website and email, rather than mailing hard copies around to its more than 8000 shareholders (although Ahmed Fahour's Australia Post would probably wish otherwise). The Wilgar structure, which is exciting McCrae enough to bombard investors, is a promising gold/silver/uranium/tellurium/molybdenum/rare earths/kitchen sink structure within CuDeco's much larger Rocklands copper project, near Mount Isa. Oddly enough, the promotion of Wilgar comes exactly a year after McCrae published a copper resource estimate for Rocklands, which disappointed the market so much CuDeco shares were halved to $2.40.
The stock has recovered much of its lost ground, and is now around $3.40, but the pricing is obscured by a swag of shares placed to China Oceanwide Holdings, with more yet to come, and a bizarre share buyback that appears designed to appease unhappy investors.
China Oceanwide spent $82 million for an initial 12.7 per cent holding in CuDeco, and a board seat.
CuDeco's buyback of 12.5 million shares, though, cuts back on the number of shares that Oceanwide can legally buy because it reduces the capital base. As of yesterday, CuDeco had already spent $21.3 million picking up 6.7 million shares.
Insider is still trying to figure out why a company apparently on the cusp of spending big money to develop a new mine wants to spend $40 million or so buying back stock, given that its only income at the moment is from selling stock. Still, it seems to be working, given that the stock has traded in a tight band, rarely straying outside the $3 to $3.50 band since March.
