Hi Baakie,
If the SP does get to $1 (which I doubt) then it will be a very good bargain.
In absolute terms I don't think OGC did over pay for Romarco. The question is more relative; i.e. how undervalued was OGC at the time?
This chart shows that OGC picked an opportune time to make their move as the Romarco SP was at a 5 year low and their project was largely derisked. You'd never be able to make a predatory acquisition of Romarco without offering a premium to the SP at the time; OGC selected well, IMO - i.e.
(1) Fully funded and US$254m in cash and investments
(2) Construction and mining started
(3) Near term production by Q4 2016
(4) Lots of exploration upside to increase the 4m oz resource both below the reserve / resource outline and also regionally
View attachment 99671
OGC's strategy is a good one IMO. That is moving up the production curve whilst moving down the cost curve.
With an expansionary portfolio:
(1) McCraes gold / tungsten project
(2) Blackwater deep underground project
(3) Waihi acquisition
(4) Romarco acquisition / merger
(5) Strategic investment in the Carlin Trend (Nevada)
The production profile will increase to c. 540k oz in 2017 into [hopefully] a rising gold price.
It is the miners that have exhibited a strategy to increase their business portfolio at this cyclical low that are being rewarded - e.g. NST, MLX, EVN.
OGC is pursuing this same strategy with the addition of geographic diversity and lowering the cost profile. Having a main listing in Australia but operations in NZ, Philippines and [soon] the US may be retarding the SP currently as Aussie investors say prefer domestic producers.
The SP may not reflect it [yet] but the strategy will be rewarded at some point during the next, and inevitable, up cycle in gold.
Cheers
John
