A lot of interests in this one and some strong buying today despite a nasty sell off in resources across the board. Seems to be a bit of debate around the place regarding whether IGO will or wont buy out MRX. Therefore, I thought we should review the situation one last time before Tuesday.
MRX: $16.5 mil cash in bank $24 mil tax credits 575 mil MRX shares outstanding / IGO holding 108 mil leaving 467 mil MRX
$16.5 mil will buy 165 mil MRX @10c IGO now will need to buy 302 mil MRX@10c or spend $32 mil
If IGO use $10 mil in cash/dept then they would only need to issue $22mil worth in script, which at current prices would equal 17.2 mil new shares in IGO. In other words management would not be diluting IGO excessively and would subsequently retain shareholder value. I would expect a brief sell off in IGO but in the long run the takeover would only be a positive. IMO IGO’s team are probably the best going around and if they see value then I believe them.
Oh and $24 mil tax credits. *********************************************************************
A few quotes from Chris Bonwick recently regarding IGO’s stake in MRX (post MRX cr#ppy BFS):
“I visited Mt.Isa district for several days….My conclusion was that the exploration upside was far better than our work had indicated”
“We were very pleased to read that Matrix is confident about the metallurgical side of the project because that was probably our greatest concern before we purchased our stake”
Chris Bonwick also said at the recent RIU conference that criticism of his company over the deal had similarities to the reaction when Independence bought the Long nickel project from WMC in 2002. That operation has since generated free cash flow of $60 million, and Bonwick believes Matrix projects have the potential to spin off $20-40 million in cash for 6-8 years.
$30 mil a year for 7 years should add roughly $150 mil (conservative figure from my head) to IGO’s current market cap for an issue of 17 mil share. Seems like good value to me.
So will IGO do it come Tuesday? Was the ‘spectacular’ MRX announcement yesterday to raise the price before Tuesday? What is going on behind close doors and will Chris Bonwick get his Easter egg hunt a bit late this year?
IF anyone has any answers it would be much appreciated. I bought in weeks ago at lower prices in anticipation of the main event and its just starting to get interesting.
All the best to holders of both companies LSM
MRX Price at posting:
0.0¢ Sentiment: ST Buy Disclosure: Held
