If you take a look at the Pattersons report on ESG - they have valued ESG at $1/share. That valuation already factors in the upside from the drilling program over the next 12 months.
Pattersons have placed a value of 55c/share on the upside in the drilling program - that is a pretty substantial proportion of their $1 valuation of ESG.
We all would have liked to see a $1.50 to $2.00 per share sale of ESG. But with the ESG share price sitting at 80c that was not going to happen. The only way ESG is going to hit those sort of levels in the short term is via a takeover and HGO will participate in any upside from a takeover.
When the dust settles and we think clearly about the metrics of this transaction, it is a pretty good deal for HGO. The price achieved is well above the average price achieved in recent CSM deals in Australia (95c/GJ), they continue to hold an option on the upside in the ESG share price from a takeover and they have locked in a price that is 25% above the current market price for ESG.
HGO Price at posting:
23.0¢ Sentiment: Buy Disclosure: Held
