As mentioned in the last post a Compulsory acquisition bid for the remaining shares of Strategic Minerals was made last Friday for $0.50 a share. We were anticipating an opportunistic bid and true to form we got one! I have spent the past couple of months analysing the market and looking at what Strategic Minerals has and have a pretty good idea of what a reasonable and fair offer might look like. I encourage new visitors of this thread to have a look at my last post and the contained valuation report.
At this point it is important to note that only one valuation or target statement associated with past and present Strategic takeover attempts has complied with the Valmin code (industry standard for valuing resource assets). This was the 2014 Ravengate valuation. The two associated with the 2017/2018 attempt failed to meet industry standards. The present Mining One Consultants valuation also appears highly questionable in that it conveniently uses only two past transactions in calculating an appropriate "average" EV per oz to apply. We thought both the sample size and project choice for the AMC Consulting Target statement in 2018 were poor! Mining One's in our opinion looks even worse. We will let the relevant authorities decide.
If I was to sum up this sad and sorry state of affairs in a brief comparison it would be as follows. As mentioned the 2014 Target Statement met the Valmin code standard. It used a comprehensive sample of transactions Australia wide to arrive at an average EV per oz. If we compare Friday's offer with that of 2014's it looks as follows:
2014 Offer: (excluding non-resource tenements for simplicity)
2014 Offer made in today's terms:$0.035 x 15 (Capital consolidation) or $0.525 @ 55.1m shares for a value of $28.92m
Global Resource:848,000
Gold Price:A$1,393/0z
EV per oz offered:$34.10/oz (A$28.92m divided by 848,000 oz or 2.44% of the spot price at the time (A$34.10 divided by A$1,393.oz)
2020 Offer: (excluding non-resource tenements for simplicity)
2020 Offer made:$0.50 @ 96.5m shares for a value of $48.25m
Global Resource:1.995 Moz (135% more gold)
Gold Price:A$2,680/oz (92.4% higher)
EV per oz offered:A$24.19/oz ($48.25m divided by 1.995 Moz) or just 71% of the A$34.10 per oz offered in 2014 when the gold price was half what it is today and the deposit was much smaller and not as well defined.
Implied Value using QGold's own 2014 valuation methodology:EV per oz: 2.44% of A$2,680 or A$65.39/oz @ 1.994 Moz for A$140.45m or$1.35 per share(170% premium to the $0.50 offer price).
Again note the gold resource today is much larger, better defined and as a result has much stronger development prospects than it did in 2014. Something to consider when assessing the offer price of $0.50 a share. Also note the last trade in the shares was $0.70.
Stay tuned.
