Could NCM still shaft us
Posted: Fri Aug 19, 2022 12:27 am
Please find below a document I created a number of weeks ago. In hindsight it may have been good to raise for discussion then, but did not want to scaremonger, and did not think it to be very likely. However, given the news on the 5% tonight, I thought I'd raise now for discussion.
Is there a possibility that NCM could still shaft us?
In my opinion there are 3 statements from historic RNS’s that bring up cause for concern. If NCM do not act in good faith, these statements could be exploited to effectively take over the whole of Havieron for a pittance (their take of FMV for the remaining 30%).
Clauses
Initial JV RNS – Greatland Gold Signs US$65m Farm-In Agreement with Newcrest to Advance Havieron
12th March 2019
1. The Pre-Feasibility Study and Feasibility Study for any project on the Tenement Blocks will consider the potential for the toll processing of ore from that project (JV Project) at the Telfer Gold Mine. If the Feasibility Study determines that toll processing at the Telfer Gold Mine is the preferred method for refining Minerals from the JV Project, then, subject to certain conditions and agreement of final tolling terms, the JV Project developed by the Joint Venture will toll process its ore at the Telfer Gold Mine processing facilities.
Updated JV RNS - Greatland Signs Two Joint Venture Agreements and Secures Funding for Havieron
30th November 2020
2. The Joint Venture Management Committee will be comprised of a maximum of five representatives. As at Establishment Date, Newcrest shall be entitled to appoint three representatives and Greatland shall be entitled to appoint two representatives to the Management Committee.
3. Following the delivery of a Feasibility Study, the Management Committee will meet to consider a Decision to Mine. A unanimous vote by the Management Committee is required to approve a Decision to Mine. If a Decision to Mine is not approved by a unanimous vote, then the party who voted in favour shall have an option to purchase the non-approving party's interest at fair market value.
Concerns
a. In Clause 1 (above): The clause states that it will consider if the preferred method for the processing of ore will be at Telfer. This will be determined in the Feasibility Study.
b. In Clause 3 (above): The decision to mine will be made based upon a unanimous decision by the Management Committee (comprising of three NCM & two Greatland representatives (Clause 2 above).
c. In Clause 3 (above): Following the delivery of “a” Feasibility Study, the Management Committee will meet to consider a Decision to Mine.
d. In Clause 3 (above): if a Decision to Mine is not approved by a unanimous vote, then the party who voted in favour shall have an option to purchase the non-approving party's interest at fair market value.
Risk:
In (concern c above) it states that the DTM will be based upon the provision of “a” Feasibility Study (not a mutually proposed or agreed Feasibility Study).
What if NCM create “a” Feasibility Study:
• Which does not align with Greatlands thinking. E.g.
o Proposing a delay in the processing of the ore
o Reduced scope (less than SD’s 3Mtpa)
o More expensive deployment
o Non-processing of ore at Telfer
In (concern b above) the RNS states “The decision to mine will be made based upon a unanimous decision by the Management Committee (comprising of three NCM & two Greatland representatives (clause 2 above).”
Greatland may legitimately (in their eyes) not “approve the decision to mine”. As I see the clauses in the RNS’s written, this would provide NCM with the option to purchase the non-approving party's interest at fair market value (concern d above).
• Given the fact that NCM appear to be:
o Reluctant to increase the MRE from the PFS
o Refuse to acknowledge Greatland’s MRE2
o Have refused to acknowledge the presence of Nickel
o Insisting that the resource is tapering at depth
o Have yet to take up the additional 5% option for $60M
Could they decline this stating this is well in excess of their considered FMV
o Refused to acknowledge SD’s offer to purchase the 5% option back from them (at an significantly inflated price)
o The shorts are still increasing; are they aware of this potential scenario
One can conclude that NCM are deliberately ensuing that the value of Havieron is kept low.
If the above allows NCM to purchase the non-approving party's (in this case Greatlands) interest at fair market value, and they have already dismissed the Independent Valuers assessment of FMV. NCM could make an extremely low offer for Greatland’s remaining 30%, neither SD, or us PI’s, will have a say on it, as NCM will have followed all clauses set out in the agreed contracts.
Conclusion: Yes
Caveats:
1. If MRE2 released by NCM is greater than or equal to GGP’s MRE2 (ie. >6.5M Oz Gold eq)
2. NCM agree to take up additional 5% option
3. GGP announce full funding prior to BFS (with or without the 5% option money).
Is there a possibility that NCM could still shaft us?
In my opinion there are 3 statements from historic RNS’s that bring up cause for concern. If NCM do not act in good faith, these statements could be exploited to effectively take over the whole of Havieron for a pittance (their take of FMV for the remaining 30%).
Clauses
Initial JV RNS – Greatland Gold Signs US$65m Farm-In Agreement with Newcrest to Advance Havieron
12th March 2019
1. The Pre-Feasibility Study and Feasibility Study for any project on the Tenement Blocks will consider the potential for the toll processing of ore from that project (JV Project) at the Telfer Gold Mine. If the Feasibility Study determines that toll processing at the Telfer Gold Mine is the preferred method for refining Minerals from the JV Project, then, subject to certain conditions and agreement of final tolling terms, the JV Project developed by the Joint Venture will toll process its ore at the Telfer Gold Mine processing facilities.
Updated JV RNS - Greatland Signs Two Joint Venture Agreements and Secures Funding for Havieron
30th November 2020
2. The Joint Venture Management Committee will be comprised of a maximum of five representatives. As at Establishment Date, Newcrest shall be entitled to appoint three representatives and Greatland shall be entitled to appoint two representatives to the Management Committee.
3. Following the delivery of a Feasibility Study, the Management Committee will meet to consider a Decision to Mine. A unanimous vote by the Management Committee is required to approve a Decision to Mine. If a Decision to Mine is not approved by a unanimous vote, then the party who voted in favour shall have an option to purchase the non-approving party's interest at fair market value.
Concerns
a. In Clause 1 (above): The clause states that it will consider if the preferred method for the processing of ore will be at Telfer. This will be determined in the Feasibility Study.
b. In Clause 3 (above): The decision to mine will be made based upon a unanimous decision by the Management Committee (comprising of three NCM & two Greatland representatives (Clause 2 above).
c. In Clause 3 (above): Following the delivery of “a” Feasibility Study, the Management Committee will meet to consider a Decision to Mine.
d. In Clause 3 (above): if a Decision to Mine is not approved by a unanimous vote, then the party who voted in favour shall have an option to purchase the non-approving party's interest at fair market value.
Risk:
In (concern c above) it states that the DTM will be based upon the provision of “a” Feasibility Study (not a mutually proposed or agreed Feasibility Study).
What if NCM create “a” Feasibility Study:
• Which does not align with Greatlands thinking. E.g.
o Proposing a delay in the processing of the ore
o Reduced scope (less than SD’s 3Mtpa)
o More expensive deployment
o Non-processing of ore at Telfer
In (concern b above) the RNS states “The decision to mine will be made based upon a unanimous decision by the Management Committee (comprising of three NCM & two Greatland representatives (clause 2 above).”
Greatland may legitimately (in their eyes) not “approve the decision to mine”. As I see the clauses in the RNS’s written, this would provide NCM with the option to purchase the non-approving party's interest at fair market value (concern d above).
• Given the fact that NCM appear to be:
o Reluctant to increase the MRE from the PFS
o Refuse to acknowledge Greatland’s MRE2
o Have refused to acknowledge the presence of Nickel
o Insisting that the resource is tapering at depth
o Have yet to take up the additional 5% option for $60M
Could they decline this stating this is well in excess of their considered FMV
o Refused to acknowledge SD’s offer to purchase the 5% option back from them (at an significantly inflated price)
o The shorts are still increasing; are they aware of this potential scenario
One can conclude that NCM are deliberately ensuing that the value of Havieron is kept low.
If the above allows NCM to purchase the non-approving party's (in this case Greatlands) interest at fair market value, and they have already dismissed the Independent Valuers assessment of FMV. NCM could make an extremely low offer for Greatland’s remaining 30%, neither SD, or us PI’s, will have a say on it, as NCM will have followed all clauses set out in the agreed contracts.
Conclusion: Yes
Caveats:
1. If MRE2 released by NCM is greater than or equal to GGP’s MRE2 (ie. >6.5M Oz Gold eq)
2. NCM agree to take up additional 5% option
3. GGP announce full funding prior to BFS (with or without the 5% option money).