I have a feeling that the SP hasnt moved as much as you would expect for a few reasons......my first impression of the financing package is that it is a great deal for Glencore, a very good deal for shareholders, and a very bad deal for anyone else that has interest in the base metals coming out of the ground.
Life of mine off take (especially in the Cobar where deposits run deep) is worth a lot to the likes of Glencore. While they own assets they have built their trading business on the back of marketing agreements. This one only costs them $3mm with a relatively small loan package for what is potentially a world class mine ... this is a GREAT deal for them.
Its also a very good deal for shareholders given that there is very little dilution and ample funds to get us where we want to go. The only issue being that a life of mine off take agreement takes away our sex appeal to strategic interests. Life of mine offtake is very valuable and I will be waiting to see the details of how things get priced.
Which leads to YT..... I can only assume that their involvement with the company years ago may have started with Sn but they are a very large company and I am sure they have interest in the Pb, Zn and Cu. This package shuts them out of future production and shows the shrewdness with which Glencore cuts deals. YT in my mind really only has two choices on the back of this financing announcement because the rest of the shareholders are most likely to vote in favor of whats on the table..... I know I plan to as long as off take pricing is fair.
1) If YT wants whats coming out of the ground then they have to make a move to take control of the company. Its clear from last weeks announcement that YTC can not entertain anymore offers until after the vote to approve the Glencore package which all things the same will definitely get approved. As I stated in an earlier post I was surprised that YT didn't have a similar offer on the table a long time ago as the BFS was completed last year and their was plenty of time and they certainly had the inside track on any funding opportunities
which leads to scenario #2
2) Based on the fact that they didn't put a competitive package up similar to Glencore's then one has to draw the reasonable conclusion that they are more passive on the business than we thought and are not after the Pb, Zn, and Cu. This leaves them with having to take a backseat in the running of the business and having less and less influence. I dont think it makes sense for them to stay involved under that scenario (unless they want to buy the metal from Glencore at a premium) so the only other choice is to sell their stake. I think we all know what happens to the stock price if that many shares hit the market which is why I think we haven't gotten the bounce in SP we would expect.
Any serious players, and I would imagine Glencore would be included here, would just wait and see what YT is going to do. If they sell then there will be a great opportunity to pick up a nice block of cheap stock. (I am sure this was Glencore's rationale behind the life of mine offtake and offering more money than we needed-- Secure general shareholder approval and try to force YT out of the company. Then buying their stake when it comes to market.
In any case, I find it extremely hard to believe that YT has no interest in the base metals since Yunnan Copper Corp is buying high grade DSO from Sandfire. I would think if Yunnan Tin didnt have an interest in the base metals then certainly Yunnan Copper would and they would find a way to facilitate such a deal. Being as close to the metal as YT is/was and to lose it to Glencore looks very poorly on the YT management unless they truly have no interest in it. They have had plenty of time to be proactive on this and now they seemed to have lost a great opportunity......will they be able to recover??
Stay tuned.
All IMHO
YTC Price at posting:
31.5¢ Sentiment: None Disclosure: Held
