Dr Quinton Hennigh, extremely well known and respected Geologist, has become very excited about WRM's early stage data on the Last Chance project, which is in close proximity of 50Moz of different gold deposits including the Pogo deposit. He was so excited by preliminary data that he has become an advisor for WRM and bought a generous holding on market, while showing Hidetoshi Takaoka (the geologist who was instrumental in the discovery of the world class Pogo 10Moz Mine in Alaska) the data to which Quinton recounted as saying
"wow this is bigger than Pogo... The numbers are higher etc... So he was quite excited about this too...".In respect to the story for WRM a chance of becoming the next Pogo, the geology and the findings thus far, I will lead you to this incredibly in depth report by the Hedgeless Horseman, a very well known mining investor in the exploration space, as this thread is primarily regarding the AUL -> WRM arbitrage opportunity to leverage WRM going into its exploration season: https://www.thehedgelesshorseman.com/white-rock-minerals/white-rock-minerals-1-world-class-gold-target-2-advanced-assets-for-us23-m/
The Arbitrage Play of the Next Pogo Deposit? The AUL/WRM Merger Play:In early February WhiteRock Minerals (WRM) acquired Austar Gold (AUL) in a share for share transaction with the terms 0.78 WRM shares for every 1 AUL share. This news has seemingly been received with open arms by WRM holders, as they now have world class southern hemisphere tenements to explore resulting in year round newsflow alongside their Alaska exploration season spanning May - August each year. Although after years of promised shareholder value being unlocked by AUL management falling through, AUL holders are quite sour at the premise, who could blame them.
Although this has created an arbitrage opportunity:Currently 1 share of AUL is trading at 35.5c with 1 share of WRM trading at 60c. Meaning if you buy $10,000 of AUL now, simply wait until June/July if the deal is finalised, your $10K AUL at 35.5c = 28,169 shares now turn into 21,871 WRM shares (0.78 WRM for every 1 AUL) which at its currently traded 60c = $13,183. In other words, AUL shares off the back of disgruntled shareholders who don't want to simply wait to June/July for the merger to finalise, is trading at a 31% discount to the WRM bid.
Although WRM are leading into potentially its most transformational exploration program to date, supported by world class Geologist Quinton Hennigh who has talked through the nearology/early data with Hidetoshi Takaoka who thinks the very early stage data looks like a "bigger pogo". If Matt Gill does secure the three drill rigs for this season as alluded to in most recent Proactive Investors interview, the newsflow and excitement leading up to the results will show in the share price. Pair this with a likely inflationary period appreciating the precious metal prices, I think a WRM share price in June/July of 75c-80c to be more likely.
This means that $10K AUL, turns into 21,871 WRM shares at 75-80c = $16,500-$17,500 (65-75% upside on simply the deal going through and excitement leading up to a potentially transformative drill program for WRM)So why the discount? Are AUL holders concerned the deal will be pulled from underneath them? I strongly disagree with this sentiment as a reason for the current 30% discount to WRM bid, supported by the following:
- In order for the transaction to go through, an AUL Shareholder vote must go through alongside other court hearing formalities. Why will AUL shareholders say yes to the deal?
- Crescat Capital own 9% of AUL as per last AR, they also own 13% of WRM, its in their best interest to nab a cheap yet world class southern hemisphere package for year round newsflow. With Quinton Hennigh calling the acquisition a "Fantastic move, brilliant move, fully endorse it, that gives them something they can work on year round"
- Paul McNally, new AUL chairman as of Feb 3rd, owns 8.1% of AUL as per last AR, who is working closely with Matt Gill, WRM CEO, who has been a SHARED DIRECTOR BETWEEN THE COMPANIES for some time. I believe that this 17% of AUL SOI will vote in favor for the acquisition, reinforced by the following quote by Matt Gill in most recent Proactive Investors video:
- “I was on site earlier this week, working with the team, with the Austar chairman so we are already working as if that’s going to happen, both parties are very motivated”
- Furthermore, AUL only have ~$300k cash in the bank, and WRM are working on the ground with Austar chairman who owns 8.1% of the voting registry, as if its a done deal? Major shareholders wont want to vote against the deal only to face mass dilution to unlock AUL tenement value via exploration. Why not use WRM cash to unlock the value on their tenements without dilution, gain exposure to this transformative Alaska exploration season and bury the hatchet?
For these reasons, I strongly see this deal passing the required shareholder vote formalities and that this 31% discount is an unfounded, pure arbitrage play. I wont say this deal is 100% risk free of falling through, although I would put it at sub 5%. For an upside pay off of 65%, I will play that any day of the week. Then hold my WRM shares for exploration to prove up what I hope to be the next Pogo Deposit. Thats all from me, here is the link to the interview that I have mentioned many times throughout this thread:
https://youtu.be/_0hjuo9EE-YNot financial advice. Please DYOR, always speak to professional advisors before trading.
