Hi CB,
Orbis Gold (OBS) is a good case example for WAF IMO.
Below is OBS's share price chart between August 2008 and Feb 2014.
View attachment 1086442
After establishing their portfolio of exploration assets in BF the share price of the company spiked about 80cents on the company's Bantou and Nabanga prospects. This also coincided with a time in 2010/2011 that gold in West Africa was flavour of the month and was attracting market attention (from memory). West African gold had a big fall from grace after that period and currently only the potential "goer" projects are attracting any sort of real share price action or market attention. I think the ice cream flavour after West African gold passed onto iron ore and West African gold companies were heavily dumped.
Luckily for OBS despite the falling sentiment they made a new discovery at Natougou which proved to be the "company maker" discovery.
The Natougou discovery was largely overlooked by the market just like Sanbrado has been and the share price faded to sub 20cent levels just before they put out their first resource estimate in mid-2013.
OBS then put out their first scoping study in Oct 2013. By March 2014 the company still had $10 million in the kitty from money raised (at 33cents through clients of Bell Porter and Clarus Securities) but was desperately working to upgrade the scoping study as it was becoming clear that the resource had room to grow (sound familiar?). In August 2014 they announced an expanded resource estimate and in presentations of that time declared cash at ~$5 million (as of June 30, 2014)
On 23 September 2014 with cash depleting rapidly OBS announced that a strategic investor (Greenstone) would subscribe for US$20M at A$42cents per share before costs at a 12% premium to the 3 month VWAP. The subscription deed also contained certain future cooperation rights in favour of Greenstone.
A notice of meeting was sent out to approve the US$20 million CR to Greenstone but before the meeting could be held an unsolicited take-over was launched for OBS by SEMAFO (on 13 Oct 2014) at between 62cents and 65cents per share. The last closing price the day before the offer was 42cents, the same as the CR price.
The very next day in a desperate attempt to counter the take-over offer OBS released their second scoping study. The company at that stage was advised shareholders to take no action and indicating that the offer was to low.
On 17 Oct 2014 the shareholder meeting to consider the Greenstone CR was deferred to give shareholders a chance to consider the offer.
On 28 Oct 2014 OBS announced that the subscription and cooperation deed with Greenstone had been terminated and was to be replaced by a non-renounceable share offer to existing shareholders to raise A$20M at A$60cents per share.
At the time I was very supportive of this idea. ie going it alone and telling SEMAFO to get nicked even though the risk was that if the SEMAFO TO failed the share price could revert to lower levels again.
To cut a long story short the vote for the 60cent rights issue was put to the AGM and approved by shareholders and the company also engaged independent advisors to look at debt funding options but eventually SEMAFO lifted its offer to 71.3cents and gained the support of some major shareholders which was disappointing to me but in hindsight with what the price of gold did after that was probably a good thing as going it alone would have still been a struggle with sentiment for gold sliding badly between 2014 and the end of 2015.
What gives me confidence here is the quality of the resource and the fact that Richard's outcome is aligned to the average shareholders. He has a lot of sink in the game and unless he can figure out a way to stop himself getting diluted he will be diluted along with the rest of the shareholders.
The Directors of OBS did everything they could to try and maximise value but in the end if shareholders are happy with the offer there is little they can do. The people who recognised the value emerging at Natougou when the company was in an orphan stage and who bought the shares sub-20cents and held did pretty well.
Comparing the value of OBS in 2014 to the value of WAF in 2018 is a difficult comparison but would be a useful exercise. Anyone prepared to try.
P.S.
SEMAFO released a positive FS for Natougou in Feb 2016 (see below) and as of April this year the mine known as Boungou is 91% complete. That's 4 years from take-over to mine. I wonder if OBS could have done better going it alone and how much extra was really in it for OBS shareholders considering the NPV, Capex and risks? What is WAF worth in comparison?
https://www.semafo.com/English/news...y-Study-and-Funding-for-Natougou/default.aspx
Payback Period of 1.5 Years, 48% IRR After-tax at $1,100/oz Gold
To Host Conference Call Today at 11:00 am EST
MONTREAL, QUEBEC -- (Marketwired) -- 02/25/16 -- SEMAFO Inc. (TSX:SMF)(OMX:SMF) announces the results of a positive feasibility study for its Natougou gold project, located 320 kilometers east of Ouagadougou in Burkina Faso. The Corporation also announces it has entered into a commitment letter with Macquarie Bank Limited to amend its existing credit facility ("Facility"). All amounts are in US dollars unless otherwise stated. All figures are on a 100% ownership basis.
Natougou Feasibility Study Highlights
- During the first three years
- Average annual production of more than 226,000 ounces
- Average total cash cost1 of $283/oz and all-in sustaining cost2 of $374/oz
- Average head grade of 5.72 g/t at a gold recovery rate of 93.8%
- Production of some 1.2 million ounces at total cash cost of $408/oz and a gold recovery rate of 92.9% over a projected mine life ("LOM") in excess of 7 years
- LOM all-in sustaining cost of $518/oz including capitalized stripping and sustaining capital expenditures
- Maiden open pit mineral reserves of 9.6 million tonnes at a grade of 4.15 g/t Au for 1,276,000 ounces of contained gold
- Initial capital expenditures: $219 million, which includes $42 million in pre-stripping expenditures and an $18-million contingency
- Project economics (base case at $1,100/oz):
- After-tax 5% NPV: $262 million
- After-tax IRR: 48%
- Payback period: 1.5 years
- Targeted construction start-up: year-end 2016
- Expected first gold pour: second half of 2018 with first year of full production in 2019
(20min delay)
