Gents,
I am back here. I really have many thoughts to share why I decided to buy back, not sure if I will manage to write all in one go, particularly as I am writing this threat using my mobile.
First, if I thought Cradle was a good investment before, not much has changed, and my entry price reflects the additional level of risk that I am willing to bear. Most of the project has been de risked, although we still need to hear about finance and off taking, and that is why buying at a high discount to what Tremont paid so far (20 cents a share) makes sense to me.
I see this law as a high tax on the mineral resources of Tanzania, that ultimately will be the reinvested back in their local economy. So instead of sharing the profits of the mining activity with rich PE firms and others, we will also feed more mouths. A profit sharing scheme, that will not stop mining activity in the country, but definitely willing have a short term impact on the GDP.
A point that I want to raise here is the high stakes chess match between Tremont and Management (founder shareholders). I believe that a lot of game theory could be drawn here since the departure of Grant, and the final pull off by Tremont.
It is clear that Tremont wants Cradle so badly, and that they were not afraid of pissing off shareholders to take all the mining for them, and first one to recognize this was Grant, so he decided to bail out. Then management had to put Middlemas in the top job to negotiate with Tremont a better deal for the management. Middlemas got the most he could, a 65% premium to the 20 cents a share entry point of Tremont. So what does not make sense now, or make all the sense is the lack of knowledge of Tremont of this law being discussed, since if I was the Tremont partner in charge of CXX and I would buy Cradle with all this sovereign risk, I would be fired for sure. Could Tremont perfectly matched the release of the takeover scheme with the passing of the law, to be able to not have to pay the big premium negotiated by Middlemas? Once the dust settles, don't you think that Tremont will make another offer, but at low valuation, perhaps at 20 cents? Would management be forced to accept this lower offer or risk not getting anything as Tremont will not provide cash to keep the project going forward? They have cash for another quarter, but will need cash for the last quarter of the year.
This is just my interpretation of the facts. Don't take this as financial advice or a suggestion to buy CXX shares. DYOR
CXX Price at posting:
12.0¢ Sentiment: Hold Disclosure: Held
