The announcement at the end of last week regarding the drilling...

The announcement at the end of last week regarding the drilling at Elsienora hints at a shift in focus for Silvermines. With uncertainty surrounding the core Bowdens project, the company appears to be reorienting its focus towards the non-core assets controlled by the company.

Silvermines doesn't really have much else besides Bowdens. The Tuena gold project, of which Elsienora is part, is the only other project that the company controls. That doesn’t mean, however, that Silvermines is devoid of other promising assets.

Silvermines also holds a significant stake in another newly-minted silver-focused company, though you’d be forgiven if you didn't realise this.

The specifics of this investment aren’t even mentioned in the company’s most recent Annual Report ('Annual Report to Shareholders,' 30/09/24). Buried under the generic heading of 'Financial Assets' in Note 8 on page 60, the details are left curiously vague.

So, what is this mysterious 'Financial Asset'? It is the newest silver contender to affect the ASX, although in truth it is a company that has been listed for over a decade that's recently undergone a makeover.

Late last year, a group of newly self-appointed directors proposed a resolution to rename the company once known as 'Thomson Resources' to the unabashed 'Silver Metals Group.'

This development is directly relevant to shareholders in this company, as Silvermines is the second-largest shareholder in this rebranded silver player, as is evident from a quick glance at the last annual report that was released by Thomson, in October of last year:
Silvermines is thus a major holder in the re-branded entity, Silver Metals Group.

I suspect the fact that Silvermines is a major holder in this new Silvermines 'mini-me' might be a surprise to many holders in SVL.

The story of how Silvermines came to hold a stake in Thomson/Silver Metals Group is a bit convoluted, and goes back some way, however the critical deal was sealed back in 2020. In November of that year, Silvermines sold their Webbs and Conrad projects to Thomson in exchange for 75 million shares in TMZ, in addition to cash and some options in the company ('Sale of Webbs and Conrad Silver/Polymetallic Projects', TMZ announcement 12/11/2020)

The acquisition of Silvermines legacy Webbs and Conrad projects heralded the start of a new strategy by Thomson, the aim of which was to mop up a collection of silver assets in northern NSW and southern Queensland. The purchase of Webbs and Conrad was followed up by the purchase of the Texas silver project just across the border in Queensland.

The Texas acquisition was where the plan came unstuck, however. A blow-out in the liabilities attached to that project resulted in Thomson shares being placed into an extended share suspension in the early months of 2023.

Fast forward to October 2024, and a new crop of Thomson directors, headed by a certain Michael Povey, had quietly taken charge of the company while the stock was stuck in a deep freeze. That same month, they released an announcement that flagged the placement of over five billion shares, following on from a share consolidation and the renaming of the company to 'Silver Metals Group'.

A silver focused company issuing billions of shares outstanding, followed up by a share consolidation? That might evoke some feelings of deja vu on the part of some long-standing Silvermines holders.

Cast your mind back to 2015, when the Australian mining boom had turned to bust, and the share prices of mineral exploration ventures were falling through the floor. Most couldn't find support for love or money.

Silvermines was one such a friendless company. Burning through cash and with a share price sitting at 0.001, it looked like they were completely out of options.

However, the MD of the company at the time, a certain Charles Straw, had one last card to play.

Charles Straw peppered the SVL announcements with a cleverly crafted spiel, calculated to catch the attention of a certain passionate sub-set of investors: '...It is SVL's view that at present, financial assets and more particularly US equities are in a bubble. Furthermore, it remains the company' belief that precious metals, and more particular Silver, will eventually outperform equities and other assets...'

It is curious to observe, that since 2015, the Nasdaq has risen by some 300%, and even the pedestrian Dow Jones is up by 100%. So if US equities were indeed in a bubble back in then, then you would have to assume that they are in even more of a bubble today.

Either that, or Charles Straw was just talking bollocks.

But his carefully-crafted spiel had the desired effect: silver-aficionados got the message, and they rushed into Silvermines, happy to gobble up the flood of 'chicken feed' 0.001c shares being issued, thereby providing the company with sufficient funds to purchase the Bowdens Project, and ultimately saving the company.

The reason I mention this, is because the management of this new Silver Metals Group are well acquainted with all of the above.

One of the new directors of Silver Metals Group is Kevin Lynn, who was the Company Secretary of Silvermines in 2007, when the company first listed on the ASX.

But there is also another director closely connected to a figure with a strong historical association with Silvermines. The current Chairman of SMG, Michael Povey, is a business partner of none-other-than Charles Straw, the former Silvermines managing director, who orchestrated the capital raising and restructure of the company back in 2015, which provided it with the funds to purchase Bowdens.

Thus, the 'transformation' that is being effected at the company that was formerly known as Thomson has been taken straight from the playbook of Silvermines.

Now, I can't see how it is in the interest of Silvermines shareholders to have a new 'silver imposter' floating around, attempting to steal their thunder, which does seem to largely be the point of the change of name from Thomson to Silver Metals Group.

There is, however, a far more palpable reason why Silvermines shareholders should be casting a wary eye on the corporate maneuvering currently unfolding at Silver Metals Group.

After the directors of SMG received approval for the vote to change the company name and consolidate its shares at the end of last year, they followed up with an announcement, at the very start of the new year, that the company was holding an extraordinary general meeting, which mooted the issuance of a large volume of shares to a range of parties, with most of the proposed shares being issued either to the new directors of Silver Metals Group, and some 25 million being issued to the largest holder in the company, Lind, to ensure that the directors can count on their support.

Now, the timing of this vote might strike you as rather incommodious: After all, in Australia much of the population are in 'holiday mode' in January, and it can be reasonable to assume that many shareholders wouldn't even be paying attention to the recently mooted EGM, especially given that the company has been in a trading suspension for almost two years.

And personally, as a longstanding shareholder, I do wonder why the trading halt has dragged on for so long. I recall I asked the former MD of Thomson, Eoin Rothery, in around March last year if the company would be initiating a capital raising in the near future, thereby allowing it to resume trading. He answered in the affirmative, saying that he expected that to transpire within a few weeks.

Shortly after I received that response, Rothery was booted out of the company by the new directors. So I have wondered, if the former MD was confident that the trading halt would be lifted back in March last year, why is it that the share price is still suspended in early 2025?

I have long suspected that there is some deliberation in this. Essentially, I think that Povey and the posse of new directors have been playing for time, in the hope that the shareholders lose interest and stop paying attention.

If that was the tactic, then it certainly seems to be working.

Last year, when the new directors held a vote, proposing the appointment of the new directors, the name change and the share consolidation, hardly any shareholders voted. There were no more that 178 million votes cast on each resolution, and keep in mind that most of that would have been from the largest holder, Lind, who held 106 millions shares in the company (see the shareholder list, above).

But when I analysed the voting results ('Results of Annual General Meeting 2024, SMG announcement 02/12/24') I noticed something else.

It was clear that the second largest holder, Silvermines, didn't vote on the proposed resolutions!

To give an example, on the resolution to consolidate the company shares, there were 148,071,616 votes in favour, and 28,499,694 against. As mentioned above, the largest holder Lind, held 106 millions shares, while Silvermines, the second largest holder, owned 52 million shares.

As we know, with Lind backing the directors, Lind would have voted for the above resolution, so it is evident that Silvermines didn't vote either for, or against that resolution. Given the voting pattern did not vary significantly on the resolutions, it is reasonable to assume that Silvermines didn't vote for any of the proposed resolutions late last year. I can't see how it makes any sense for Silvermines not to participate in that vote: if you are the second largest shareholder, why wouldn't you be looking after your own interests?

I'm thus assuming that Silvermines were blindsided, and weren't even aware that the vote at Thomson - now Silver Metals- was even taking place.

As the old saying goes, take care of the pennies to make pounds, and likewise, responsible corporate management necessitates keeping an eye on all company assets, not just the most central ones.

But prudent corporate oversight aside, there is another good reason for the management to be paying close attention to the goings-on at Silver Metals Group: The assets controlled by that company have the potential to become quite valuable.

One of Thomson's signature projects, the Webbs silver project, was first brought to the attention of the Australian market in 2007, with the IPO of Silvermines. Webbs was the most notable asset controlled by the company when it first listed.

In late 2010, on the eve of the US dollar silver peak, Silvermines was sitting on a market cap of around 18-19 million dollars. Of course, a dollar fifteen years ago had more purchasing power than its 2025 equivalent.

That Webbs project was pretty much all SVL had going for it at the time. That's not true for Silver Metals Group today. SMG control not only the Webbs project, but also its nearby, and similarly-endowed 'silver sister' project, Conrad.

One other asset of note is the small but potentially valuable Harry Smith gold project. In early 2023, Eoin Rothery though the project was economically viable, back when the USD gold price was $2000. With gold having risen above the $2,700 mark, and the Australian dollar weaker against the greenback, you'd have to assume this would certainly be the case now.

And it is telling that the newly-appointed directors seem to be quite keen on these assets.

All of the 14 of the resolution that are up for vote at the EGM next week concern the issuance of shares to various parties, many of whom are closely affiliated with the directors of Silver Metals Group, particularly the Chairman, Michael Povey. Notably, few of these parties are existing shareholders in the company.

This share issuance would significantly dilute the positions of current shareholders in Silver Metals Group. To put the dilution into perspective: as of now, the company has 81,350,300 shares on issue. This followed on from the passing of a resolution to rename the company from Thomson and consolidate its shares, reducing the total from 976 million to 81 million. If the proposed issuance is approved, the share count would balloon from 81 million to 836,211,720 shares. This would drastically reduce the value of Silvermines’ investment in SMG, more or less rendering it a write-off.

As the second largest shareholder in Silver Metals Group, Silvermines have a lot of clout, and not just on account of the large number of votes they control. Another tool they have at their disposal is the section 249D.

For those who are unfamiliar, holders who control more than 5% of the votes in a company can initiate a corporate manoeuvre known as a section 249D, which necessitates that a general meeting be held in which the shareholders vote on replacing the directors.

In this instance, such an action has a good chance of success, as the current directors don't own any shares in SMG, and are relying on the backing of the largest holder, Lind. However, 80% of the shares in the stock are held by small holders, few of whom would have much sympathy with the new directors.

The clock is ticking, however, and the deadline for the EGM voting is less than a week away, on the first of February. If the 14 resolutions end up being passed, the directors will gain a controlling stake in the new company, at the expense of Silvermines and the other long-term holders.

In closing, I would be appreciative if shareholders of Silvermines could bring the matter outlined above to the attention of the management, either via email or social media. As mentioned, the proposed resolutions, if passed, will result in significant dilution of all existing shareholders' positions, which is clearly not in Silvermines' best interest. Yet, I get the impression that the Silvermines management may not even be aware that the Silver Metals Group EGM is taking place.

Given the uncertainty around Bowdens, it is surely more critical than ever for the leadership to stay vigilant and pay close attention to the company’s non-core assets.