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That is an excellent summary Joe! Thank you.

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wingedwarrior

6,508 Posts.

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10/03/16

22:36

Post #: 17243343
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Originally posted by joewolf ↑

These are the points you or others make that I dont think allows the true value to be reached:

1. The only known value we have is the share Price. If its undervalued as you state then that gap between what is considered fair value and share price is as a result of ... I suggest its because of a few possible factors - credibility of management of company , Knowledge of the asset , Marketing of the company, maybe some negative or uncertainty that clouds the value , or just lack of funds to develop company ...
2. As a minority holder I cannot access the fair value but my representatives ( the directors ) have a duty to the shareholders so surely they should be addressing this issue. There is the AMP China fund where the larger holders have forced management to narrow the gap between underlying value and share price or to find a way to get the shareholders a value closer to the underlying value - I think the final review date is July this year - They have just returned a significant amount of capital.
3. Imagine if the previous board of directors had not locked in the Alcoa pricing where would we be today. The good cash flow at present in no way reflects the ability of this board as they did not negotiate the Alcoa deal.
4. I don't know how you can predict the end of the year as we don't have anything in the mix that will change the current situation. We don't have the money to drill anything more. A farmin will logically at these prices cause a significantly higher dilution as we have too much debt.
5. When there is such a substantial difference in underlying value to share price it is common for companies to buy back shares but we don't even have the money for that.
6. How did the acquisition of the ERM JV stake improve the chances of unlocking the underlying value for the shareholders?
7. I think that common sense makes the realisation of shareholder value even harder as most would today include dividends and would suggest that the cost of capital is higher than the overdraft rate and as its the riskier capital it should be higher. I dont think this is a logical process or measurement for an explorer - you should either make a huge amount or lose most of it

In the case of EGO I think they said they would unlock shareholder value ... This implied that we were beyond the explorer stage - I , in hindsight, think that was incorrect - getting to tranche 2 funds did not allow us to carry out our exploration from the flow of those funds and the purchase of the ERM JV stake put too much debt on the books.
They cannot unlock it if there is not a market for the shares and having done what they said would bridge the gap in share trading ( consolidation) it has not made the market any better. Again I believe the plan is flawed. However what is the alternative plan ... that is what gets me unhappy with the status quo because we could just plod along for a few more years and achieve nothing if we don't find a funding solution. I personally think that they should ask for cancellation of the purchase of the ERM JV stake and do a rights issue for $10 million. If ERM wont reverse that we should rather get ERM to convert the debt to shares at current market price and then do the rights issue with ERM being asked to limit its holding to no more than 45% - theoretically they would end up with around 42%. Or they should find a buyer for the company that will allow minorities to stay invested.

I do acknowledge they did a great job on the plant to get it to proper working order and I do support the RGN well which should create a bankable asset going forward. I do think they are more conservative with our money than the previous management.

The gap for me is that this lack of unlocking the value really is - my opinion - the inability of management to present a compelling case for EGO. We the shareholders have inadvertently voted in everything ( a lot of us tried to vote the consolidation down ) they asked for and yet its achieved very little if anything.
PS do your graph of EGO against XAO but from march 18 to today a very different view thats why I hate graphs.

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That is an excellent summary Joe! Thank you.

EGO Price at posting: 34.5¢ Sentiment: Hold Disclosure: Held
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0 Great analysis

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