On 25th May this year, the Chairman of a $1bn market cap, global mining company decided to join the Board of a tiny, junior resources explorer. Ross Smyth-Kirk, Chairman of Kingsgate, joined as a non-executive director of Argent.
Ross Smyth-Kirk is a smart, wealthy and well connected guy (former Chairman of Australian Jockey Club) who I am sure has better things to do than sit on Boards of junior exploration companies. Interestingly, Mr Smyth-Kirk only sits on the Boards of 2 publicly listed companies (at least that I am aware of) - Kingsgate ($1bn market cap) and Argent (at the time roughly $20m market cap).
So why did he join?
Kingsgate is in acquisition mode - and silver seems to be a priority for them. Kingsgate recently acquired over 70% of Laguna Resources - a small explorer focusing on silver in northern Chile (the Arqueros project).
Kingsgate is also trying to "derisk" on both a geographic basis (spread the political risk) and a project basis. Currently they have the Chatree gold mine in Thailand, the Challenger Gold Mine in South Australia and Laguna in Chile.
Kingsgate are big bulls on precious metals and are in aggressive expansion mode. Smyth-Kirk is the "spy" on ARD's board to get the inside run on production costs and the ability to extend the resource definition.
For Kingsgate (or any mid tied producer), Argent is a cheap entry point into a significant silver JORC resource in a stable democracy.
If Kingsgate assumes a long term $30-35 per ounce silver price, then they could pay up to $100m for ARD without pausing for breath (75c per ARD share).
It's a bargain for them at 30cents.
ARD Price at posting:
27.0¢ Sentiment: Buy Disclosure: Held
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