I have had the fortitude of being in CMM since November 2009 (we were trading at 16 cents at the time), before the investments of Maxim Finskiy and Fran Scola. I have followed the company diligently since then and looking back and thinking about what is going on now this is my interpretation of what has lead us to this point.
When the big financing was done by Finskiy and Scola at 20 cents with warrants at 30 cents in December 2009, they relaunched the company. This company was in dire straights and it was their cash injection that permitted CMM to get Lamaque up and running again. I remember in the first conference call by Peggy, Fran Scola came on and talked for a few minutes. He described how he and Finskiy had searched the planet, looking at over 100 companies and CMM was the one that stood tall against all others for them to build a mid tier gold producers. There was brave talk of gettting CMM to first 300k ounces of gold per year, then 500k ounces. They would get CMM to that level of production by growing both organically and by acquisition. Their SP was to be their currency when doing their M&A activities.
Now fast forward to July 2010: We have a share price that is still hovering around 50 cents because of: delays in start up at Lamaque, the CTO, the CMM history and possibly Peggy Kent and her reputation as well. There was no way to use the CMM SP/MC as a currency to do any M&A activities.
Peggy Kent retires for family reasons in July, yet the SP barely moves. So the PK excuse is now gone. The CTO is also dealt with as every financial report since then has been on time, actually they even followed the TSX guidelines, so that is not the reason for our low share price. However, delays were still ongoing at Lamaque and the reputation of CMM was hurting even more.
What were Finskiy/Scola to do? They have big plans. They are very bullish gold and want to build a mid tier gold producer asap but the CMM vehicle is just not cooperating. Probably sometime in September, there is a meeting of these guys and their advisers to start analysing the situation and come up with a plan to achieve their ambitions.
I believe this plan was to create a new company: White Tiger Gold. This new company would not have the baggage that CMM has. The sharefloat would be much more tightly held preventing a run on the stock and enabling the boys behind it to have a bran new vehicle to go after their ambitions. They still like the assets in CMM, but the history of the company and the shareholder base were complicating their march towards their goal.
With their recent 44-101, they will now be able to raise serious money, probably north of $250M to make a cash deal for CMM shares that they do not already own/control. I would not be surprised to see a PP done at $4 to institutions that will be promised a growth story in the gold space backed by very strong hands. 80M shares would then yield $320M dollars, enough to convince the CMM sharesholders to yield their shares. Max and Fran will simply take new shares in WTG for their CMM shares. You would then have WTG with about 250M shares at $4 for a MC of $1B. With the CMM assets in there, that MC makes more sense then their current MC and current assets. From here, I believe they will get a listing on the LSE and be able to market these assets in a way that was just not possible with the history of CMM.
I believe that the assets of CMM are counted on very hard for the plans of this new company and that we should be paid a fair penny for it. Russians have a reputation of being shrewd and tough negotiators but I wonder how this possible take over will play out. I cannot imagine them giving us their best offer first. A first offer may come in between $0.90 and $1.00 to see how we react.
If we hold our ground and I believe their is enough shareholders big and small who realize the value of CMM at this very important juncture to do this, then we may be able to get them to pay us a more fair value around $1.20-$1.30. I think at this level, they would secure the shares they need to get control of CMM. I know that I would take that offer.
There certainly is reasons to be excited about the next few weeks. Will they announce a bid this week, before PDAC so we can all discuss it at the show or will they wait at the last possible moment, Tuesday March 8th after the market closes?
Exciting times are coming...
Glorieux
PS: I have no insider knowledge and any forward looking statement is pure conjecture on my part.
PPS: These next few weeks may become acromonious were some call out Finskiy and Scola as predators or worse if negotiations get ugle. My view is that if it was not for their injection of money in CMM in the first place, none of us would have made money on this deal. I want to negotiate the best deal possible but I will remain respectful and hope we can all remain so. For those that think the deal is not fair, you may consider buying shares in WTG. I believe there will be good money to be made there. FWR shareholders who took Cliff's paper did very well by doing so.
6 comments:
Exciting times indeed. Without CMM, WTG is not very attractive. CMM is the critical piece they need to give White Tiger substance. It's definitely worth the wait for us to go for a fair value here.
RE
Hi Glorieux,
Of course I respect all of your views.
The only small item I partly disagree with is Finskiy and Scola being our only open to fund the company back then.
I am aware that Peggy had other options on the table (even what I would view as better options, in at least 1 or 2 cases). The problem in selecting one of the other options meant that Peggy had to give up control of management. I believe that was not her preference. Also, it`s possible that she really thought she could make it work with the Russians, hence her reason to choosing this option.
It is certainly not Finskiy`s and Scola`s fault for Century going in this direction.
What might be their fault though is not only keeping McNutt as the key person to drive the start up at Lamaque, but actually promoting him to be the Operations person for the entire company. What they should have done instead was recognized immediately that he needed help and then gone out and gotten an industry expert to help out (even on a 1 year contract and even if they had to pay top dollars).
I wouldn't expect a cash offer for CMM shares unless there is a Polyrus connection.
Even without Finskiy's and Scola's shares and warrants, including those recently transferred, there are still 300 million shares and warrants held by others. Even if the offer is only $1.00, $300 million is an awful lot of money to raise in a PP for the purpose of making a takeover offer that may not succeed. Cash offers come from companies with free cash - otherwise they offer shares.
WTG hasn't filed a 44-101, but have merely filed notice that they intend to be qualified to file a short form prospectus. I think the intent is more likely that is to raise capital after a potential acquisition of CMM. They certainly won't have the cash before March 8.
BTW, I can confirm that there were other options for Peggy other than teaming up with the Russians, but they allowed her to continue running the show for a little while.
Under what circumstances will a serious second contender steps in to add some spices to the broth? I really hope one turns up as I believe it will aid us retailers. Anyone?
Hi Glorieux,
Like Production05, I also respect your views. However, as both Production and Carib pointed out, Peggy Kent had other options to save CMM form bankruptcy. So I am not sure how much gratitude Finskiy and Scola deserve for getting us here. But HERE we are; so where do we go from here? Of course, both Finskiy and Scola already made a significant return on their original investment.
However, I am more concerned with the emerging pattern of their business practices. It looks as if they broke their pledge to Peggy to keep her in the picture. They also ignored the rules on Canadian content of the BoD (as Production05 pointed out in his post on Stockhouse). By the way, WTG has no Canadians on its BoD (as far as I can tell) even though it's a TSX listed company. But I am willing to reserve judgement until I see the fairness of their offer (if any).
Carib,
What about if they issue part cash and part stock for Century? Isn't Gold Wheaton in the process of getting taken over by Franco Nevada for something like 40% cash/60% stock? What's your opinion on mixed takeover deals?
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