I’m going to gather up some thoughts here re this frustrating stock as I’m sensing some excitement for the first time in a long while. We faithful Rox holders finally might make some good money if this is handled well:
1. Teena is a great asset. In fact, when the results of the first drill hole were announced in 2013, Rox’s MD helpfully commented: “This is a new discovery, potentially the most significant zinc discovery in Australia since CRA found … Century … in the early 1990’s” http://www.asx.com.au/asxpdf/20130805/pdf/42hh9klbl30jrd.pdf
The problem was that few believed him, and the share price under-performed, particularly as the zinc price slumped in 2015.
2. Subsequent drilling supported that it was in fact, a world class asset. After all it’s only a few km from Macarthur River, in perhaps the best part of the world for this kind of discovery.
The resource statement just stated the obvious. However it was good that management spelled it out as the market had materially undervalued the story. Let's not forget there is the significant Myrtle discovery in the block, too.
3. Since the start of 2016 the zinc price has increased about 60% (having been smashed in 2015). However Rox’s share price has lagged badly, so it’s good that management want to help shareholders to participate in zinc’s renaissance.
However this has to be handled cleverly for us to get the most out of the opportunity. (Unrelated to now, I remember how cheaply MIM was taken-over; a disaster for its shareholders).
4. The corporate world has finally woken up to Rox's great zinc assets. There’s more than one who wants a dance! I don’t know if today’s further trading halt relates to a new offer ie from a 3rd party, or a revised offer from IMI or Mandini, or a response from Teck. We’ll see. And there could be more, after this J
That said, I would expect Teck to wait for the last moment before deciding whether to pre-empt, although they might act earlier if they were planning to pre-empt but were worried that a bidding war could drive prices too high before they locked on with one matching bid.
5. A deal is now certain; the question becomes one of what consideration we should seek (if suitable offers can be teased out) eg: *sell the zinc assets and give us much-needed cash for exploration; *put the assets into another vehicle; or *do both ie. transfer the assets for some cash and some shares (and, if so, what mix of each).
We shareholders will get to vote on this, because of the scale of the asset sale.
There are pros and cons around each, depending on specifics of the competing proposals. Let’s see what management can uncover.
6. Rox’s directors would be well aware of their duties to get the best deal for shareholders, so I don’t expect they’ll just lock themselves onto the first offer. They'll know they can’t rule out other possibly superior proposals.
We also can expect balanced and thorough explanations of the alternatives before we vote. We of course can ask for more information, or challenge recommendations, if we’re not convinced.
If management recommends the IMI proposal for acceptance (thankfully, they haven't yet, as I read it) I think we are owed a far more convincing explanation about why we should like it than what has been given so far. There is much I don’t like about that proposal, which I don't feel matches the quality of the asset. In fairness, however, it is early days and things are likely to change very quickly with such a prized asset now effectively up for auction.
Good luck Rox shareholders. Let’s get some serious cash so we can properly drill up that very exciting nickel province that we discovered!
(20min delay)
