Thought I might drum up some discussion given how close we are...

Thought I might drum up some discussion given how close we are to the sale.

I strongly encourage all SHs to do their own research and this is not some sort of vague disclaimer to indemnify myself.

Key Risks
Let’s get the bleeding obvious out of the way first:

• An agreement to formally execute has not been formally signed
• Receiving the ~$19.5m (assuming BG has lent $500K over the past 12 months to be deducted from the sale price).

Likelihood of Sale
IMO mine the sale is going through for the following:

• This deal has been 2 years in the making which BG has been supporting the whole time AR CEO is from BG
• They have been loaning AR the money for ~12 months
• Repayment of any loans deducted from sale price. If the sale does not go through BG has done its own money
• No further dilution since the issue of 43m shares.

Timing of Sale
IMO  the deal may get done any day now for the following:

• 2 years in the making with BG Jian Li also CEO of AR so would be completely up to speed
• All the paperwork is likely done, probably with respective lawyers etc. Refer to post by cgljacgc https://hotcopper.com.au/threads/ann-mining-leases-granted-m09-166-and-m09-168.4127431/
• The quickness in the ML approval is some supporting evidence they are not stuffing around

True Value of AHN
I suspect most holders/spectators are only looking at the headline $20m sale. What many may not have valued in is the value of the potential tax treatment.  

Refer to 30/6/2017 annual report it’s all there in black and white. Few items that caught my eye:

• ~$7.5m deferred exploration (read the accompanying notes)
• ~$3.5m operating loss (read the accompanying notes)
• We are now in 2018 so the deferred exploration and operating losses would have increased. In total we might be close to $12m by the time the sale is done.
• In summary, assuming a dividend payout, only ~$7.5m potentially attracts 30% company tax and the SH then pays the difference on marginal tax rates. My own calcs suggests a very big franking credit and the tax payable at highest marginal rate is small.

If the above materializes it is worth more than holding shares for 12mths.
Note I am not offering tax advice and nor am I qualified in any way shape or form, this is just my own opinion. Go seek your own tax advice on this matter.  Welcome anyone who has expertise in this area to weigh in.

Future Valuation
My number is quite high and is partially driven by the tax treatment. Obviously pure speculation by me from here.  IMO there are two parts to the valuation of buying today:

• Value of the special dividend after tax
• Future value of the company (this is always the difficult part)

The future value is at least a shell company with a clean registry + $2m cash so lets assume $2.5c which gives it a ~$5.4mc.

The future royalties and potential dividend payouts is what makes this most compelling. We are supposed to ignore the production targets suggested in the last announcement, but the royalty each year could be anything between $6 to $8m per year (for a number of years) or equivalent to 2.7c to 3.6c per share before operating expenses, retention of some cash for working capitial etc.

As the intention is to remain as an “exploration” company I suspect the plan is to distribute all future royalties back to shareholders (note we have small registry of 217m shares).  The directors (excluding BG) and family probably hold more than 40m from what I can tell.  My gut tells me they want the cash down the track rather than pour money in a new venture.

GLTAH (hope the sale announcement is dropped soon)
SB