I recognize some may not prefer this option, but I personally would select this option over what WTG has presented to us.
CMM has roughly 408 million shares outstanding.
ITG (Integra Gold - next door to us, major Chinese company as influential shareholder) has roughly 37 million shares outstanding
Total = 435 million
CMM = $.66 share price
ITG = $.69 share price
I would like to see Integra Gold make an offer for a business combination with CMM, valuing each company at $.69 per share (1 share for 1 share exchange, accross the board, both companies). As part of the offer, the Chinese company can be issued 50 million new shares @ $69 per share. This would provide an injection of $34.5 million in new capital.
$13.5 million breaks the WTG deal
$4.0 million pays back the bridge loan
$17.0 million recapitalizes Lamaque
The Chinese company can then call a special meeting of the shareholders (after the business combination with ITG) and together we put 4 new directors in place and gain back control of the BoD (we may have to leave Finskiy`s 3 directors in place until Lamaque reaches the pre-determined operating targets - 75,000 annualized ounces and sub $500 cash cost per oz, then it`s based on percentage of shares they own).
A business combination with ITG leaves the combined CMM-ITG company with 495 shares outstanding, significant upside still intact, $17 million to move Lamaque forward and regain control of the BoD with a reputable major Chinese International company at the helm to finally realize our potential.
I really like how this Chinese company has transformed ITG. I think they can do the same for CMM.
Just to add one more thought. It might have to be a controlling interest situation (greater than 50%) if Finskiy doesn`t want to sell his shares. It might be difficult for the Chinese / Integra Gold to get 66.67% if Finskiy and friends and some others don`t want to give up their shares at the beginning. Nonetheless, even a takeover of 50% - 64% by someone other than Finskiy teams can get us back on track.
5 comments:
Hey Production,
First off, I'd like to say thanks for all your insight... learned lots from you.
One issue with your suggestion: In a business combination, you need approval of 2/3 of the votes.
No way the Russian approve of this as they would lose control of CMM and because they wouldn't see any immediate monetary gains... whereas if this was a cash offer (from someone with deep pockets), they may say yes and then use the cash for other projects.
Cheers,
Uall
Hi Uall,
Yeah, I thought of that afterwords. I just added a note to the bottom of my post (just prior to you posting).
I like a $1,00 cash idea also. But, it never hurts to have as many options.
It wouldn`t be difficult for a company to get 50% plus 1 share control with this company via a takeover bid process. There is value in owning 50% - 60% of this company even if Finskiy doesn`t want to give up his shares. You get control of the BoD. You can declare dividends once the company reaches that stage.
We definitely appreciate your brainstorming of options.
"There is value in owning 50% - 60% of this company even if Finskiy doesn`t want to give up his shares."
Agreed. The problem with that is the bidder would be stuck in bed with Finskiy (who would still have enough power in CMM to cause a nuisance). Plus, the float for CMM would further decrease to 10% of outstanding shares.
Hey guys,
One thing that may scare off major miners from a hostile bid is Finskiy's large position. However, I firmly believe Finskiy will sell CMM at the right price. The major miners need to understand:
Finskiy's interest pre- and post-transaction (the numbers are approximate, so please don't jump all over me if they are off by a few percentage points):
Pre-transaction:
40% ownership of CMM
80% ownership of WTG
Post-transaction:
(0.61 * .4) + (.39 * .8) =
55.6% ownership of combined corporation
Basically, Finskiy gains 15.6% ownership of CMM but to do that, he loses a portion of his WTG ownership (which didn't cost him much... but they do have lots of cash in WTG). 15.6% of CMM at the current fully diluted market cap of $329mm is ~50mm (the reason he's not making a killing off this deal is because had to offer 2.5 to 1 rather than 4 to 1).
~50mm is a lot of money to us, but probably not too much to the Russians.
What I'm trying to say here is that Finskiy made this bid knowing full well that he's not going to massively benefit from this transaction. There is a possibility that he's doing this to put CMM in play and is willing to sell out to a competing bidder at the right price (~$1.30/share in cash). In that scenario, he books a $100mm+ gain right away (not to mention that he also gets a break fee), and he could spend that cash elsewhere to develop WTG.
Conclusion: this bid may be very encouraging for a white knight to come in. We need to get in contact with the major miners or deep pocketed investors and explain.
Cheers,
Uall
The markets are not taking this Merger Talk lightly, both CMM and WTG shares are dropping in price fast and entering negative territory. To offer CMM share holders 0.4 WTG for every 1 CMM stock is a mindless attack on our intelligence. Shame on them, we are a lot smarter than that. Offer us a fair value or it’s NO on the voting table.
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