I agree with you that MOD is at risk of a TO, however I think this is relatively low. Given the current SP, any successful offer from these prices would, however, ensure current investors are short changed. Even if a premium of 100% was offered, I would consider this as falling short of my expectations.
A hostile TO is unlikely though, as MOD management have tied up enough of the share structure in "friendly hands":
Management 14%
MTR 12.5% + 40m Options
LIM 6.7%
In addition, Australian Super own 9% and are likely to be passive, however, a portfolio manager may happily accept a windfall gain that any TO offers.
We know that T3 is going to require material capital and a portion of this will need to be equity. In addition, we know that during the development phase of any project a Company's shares enter an "orphan phase" where the SP languishes.
Thus, IMO, it is important for MOD management to focus the limited capital (A$17m) available on the "best-bang-for-their-buck". At present that is "drill baby, drill".
Providing proof to the market that there is a huge Cu-Ag endowment on their tenements is the best way for management to increase the MC/ EV of MOD (via SP appreciation) which in turn subsequently:
(a) Reduces the risk of a materially low ball TO occuring
(b) Reduces dilution for current shareholders when/ if T3 funding is required as equity is raised at a higher price.
Given that I hold 1.4% of MOD, it may be time to make these views known to management, so at least they are getting feedback on one particular opinion.
Cheers
John
MOD Price at posting:
49.0¢ Sentiment: None Disclosure: Held
