Monday, December 7, 2009

I have an interesting backup idea

Again, to be clear, I am fully expecting our deal with Finskiy and Scola to close. Also, again, I wouldn't discount the possibility of extra good news to company the closing.

Nonetheless, I always like to look out for backup plan possibilities.

Peggy should try striking up a conversation with Gold Hawk, to discuss either backup strategies or future partnership possibilities. Gold Hawk was almost completely destroyed recently. However, they managed to retain a 15% stake in a near-term operating mine in Peru (Chinese now own the other 85%, and will be funding 100% of the remaining start up costs). Gold Hawk also managed to come of the situation with $15M in cash and no remaining debt.

Gold Hawk recently did a major share rollback, of 25 to 1. They are trading now for $.035, but will likely go to $.88 when the rollback takes effect on December 18, 2009. They will have only 13,071,391 shares outstanding after the rollback.

To stress again, I fully believe that Finskiy and Scola will close off the financing deal with us. They are definitely my first choice. I think Century's share price will be unlimited in the future, with them being the face of Century and with their plan growth strategies. However, Gold Hawk would be a really good backup plan for us, if something should go wrong with the Finskiy and Scola closing. Peggy should talk to them.

I think Century offers excellent possibilities to Gold Hawk shareholders to recover a decent portion of their losses, if a merger were to happen. Century is now trading at $.24. Gold Hawk should be trading at $.88, after rollback. That's a 3.65 ratio. If Century offered 3.65 Century shares for each Gold Hawk share then Century would only have to issue 47.5M new shares in a merger situation with Gold Hawk. Century currently has 226M shares outstanding so a merger with Gold Hawk would only bring the combined outstanding shares up to 273.5M.

Century could then use Gold Hawk's $15M cash plus 1M cash from its current cash position in order to arrive at the $16M cash required to close the deal with the "major international bank" (to access the US$33M).

Thus, we would still end up with $49M (+) in financing to restart Lamaque. Our outstanding share count would only be 273.5M instead of 330.1M (with Finskiy and Scola). In addition, we wouldn't have to issue the 52.5M new warrants. As a result, our FD share count would be in the 285M area as opposed to 393M area.

Century would represent a compelling opportunity for Gold Hawk's shareholders to recover loses, due to the significant upside potential.

Let's say that our financing deal does not close with both Finskiy & Scola and the bank. A merger with Gold Hawk would still be a good idea. The $15M from Gold Hawk plus Century's cash and cash flow over the next 90 days could all go towards paying off Century's debt and net liabilities. It would leave Century completely debt free and net liabilities free. We would get to keep 100% of Lamaque and San Juan. It would finally free up the value of San Juan (as a profitable operating gold mine). It would then allow Century to go out and seek only about $25M in financing to restart Lamaque (on our own sweet terms and our own timing), without being disadvantaged by debt burdens. Century would also have the option of selling the 15% operating stake in the property that comes with Gold Hawk (in order to provide some of the financing).

No comments: