Morning All
Whichever way this goes, the SP will have to rise. Let me lay it out for you, and I have a question at the end:
Mount Celia Update
Mount Celia resource upgrade results are due any day now. They have been held back for some time, but, it's clear the results are better given recent announcements (see my Mount Celia thread), and the media mentions in May/June 2019 that NMDC intend to put $10M extra in to Mount Celia (LCY's flagship project). See Business Standard Article May 19 2019, quote:
"Amitava Mukherjee, Director (Finance), NMDC, said the Indian iron ore miner currently holds 76 per cent in Legacy Iron Ore Limited,a Perth-based Australian exploration company focused on development of iron ore, gold and base metal deposits. Mukherjee also said they have plans to invest AUD 10 million (Australian Dollar) in Legacy's gold project to take it up to the next level."
So, a news release relating to Mount Celia will increase the EV above the current $287M EV, and will see a re-rate of the SP - of many multiples given the current deflated SP.
NMDC attempted buy-out
The only way that NMDC can acquire in accordance with the Corps Act etc is via a takeover bid. In doing so, there is no way that this will get through FIRB approval (a requirement in this instance, given the nature of NMDC) and Takeovers Panel objections unless they get 90% of REMAINING (ie. NMDC votes excluded) shareholders to accept the takeover bid. This will require an acceptable buyout price. So, all this chatter of delisting for a ridiculous price is not possible (especially given the number of resources delistings that have been overturned by the Takeover Panel of late). What this all means is that, if NMDC's intent is to delist, they will need to - from today - watch what they do in the leadup to any proposed buy-back, as the whole thing will be nullified if they are in any way coercive or operating in a way regarded as 'unacceptable circumstances' by the Panel. Further, all NMDC Directors (in their capacity as LCY Directors) will be subject to Corps Act actions personally if there is any unconscionable behaviour in breach of those obligations. As a State backed Indian mining entity, ain't none of them want to go there - and the transaction will fall over immediately.
As this is the only mechanism available for delisting (takeover offer with 90% non-NMDC holder approval), LCY will not be able to cap raise or further dilute at this stage (as this will impact their ultimate aim/process) and so NMDC [if it intends to acquire] will have to finalise a small operating costs loan facility for LCY before delisting. Further, their premature announcement of the $10M plan to invest in Mount Celia will work against them if they try to delist for any lowball offer (and again, current holders could reject that). So, the most important question for NMDC right now is, what is the offer price that will secure them 90% acceptance from non-NMDC holders. Because, if they don't hit that number, they cannot delist.
Now, some may be super bullish on the projects (like I am) but, there is no doubt a fair price in the middle that we would all accept. Given that, if NMDC intend to acquire they will likely enact before Xmas, we will likely see a Bidder's Statement shortly (given the lag time for approval/delisting)
So, my question is, without being ridiculous - what would be the commercial offer you would accept in the Bidder's Statement for a clean buy-out of your shares? Now, we know that the Mount Celia project puts an upper value on the SP of a theoretical 18c, but, that is the project value including all risks, issues, dilutions, troubles, project delays, price fluctuations etc etc. It's the top-end pie-in-the-sky pricing if nothing went wrong. But, realistically, an offer would clear our books - with no forward risks, in 1 day.
So, what price would you tick yes for on a commercial basis on a takeover offer?
For me, I would take anything above 2.5c per share, which only values the remaining 22% of LCY at a measily $8.066M AUD. Which, for the resource, is COMPLETELY a bargain for NMDC, and well within what they would be willing to offer - given their forward plans and past investment.
So, would you tick yes for 2.5c-3c/share?
Happy to outline Takeover Panel cases, further info on process, historical SP aggregates (which will inform NMDC's decision for an offer price - given they have controlled the company since 2011) or any other information that you would help you. Management are in a good position to delist at the moment, at the right price - and it is in their interest to do it ASAP, before the market runs the ruler more thoroughly over Mt Celia.
So, in my view, there is a reasoned basis for this being a multibagger - whatever the course the company takes from here. We have all picked many baggers over the years I am sure, but this to me seems like the best I have seen since 2017, as whatever the forward plan (takeover or not) - there will uplifting forces come to bear on the SP in the short term.
Now, you can take the above - or leave it. DYOR. But, I am backing this, because I can't see a downside that NMDC will not have to remedy with further assistance. The resource is good, and we have a sophisticated, state backed, mining corporation trying to advance the LCY projects, in the near term.
I will continue to acquire, and it is a Strong Buy in my view.
GLTAH
Expand
