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Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 12:01 pm
by RationalAssessor
There has been some discussion on LSE recently about whether SD should be releasing an MRE or possibly even a FS.
Significant downward pressure on the SP has led to folks wondering how SD might be able to shore it up and an uplift in MRE could achieve this. It's also been suggested that he is required to update the market with any material changes which might affect the SP and he is therefore obliged to release a revised MRE. This would incorporate a large number of drill results which were not included in the last MRE which was based upon drill results to the end of 2021.

SD has suggested to shareholders at the last town hall that, it may not be in best interests of GGP to release anything which might bolster the value of Havieron as that, in turn, might hinder GGP's case/value if they were to be presented with an opportunity to purchase some/all of the remaining 70% of Havieron from NCM or Newmont once their takeover discussions had concluded. He has also stated that he prefers to align his reporting to that of the manager of the JV (ie NCM) - to do otherwise could divide the two JV parties.

Is SD obliged however to update shareholders?

The disclosure rules may be found in this document - "Disclosure Guidance and Transparency Rules sourcebook" Specifically section 2. I would recommend readers familiarise themselves with the content as it is clear to me that SD is not obliged to update the market if it might influence ongoing negotiations.

https://www.handbook.fca.org.uk/handbook/DTR.pdf

Below are a couple of screenshots from section 2 of the handbook.

As far as I'm concerned, I have faith that GGP is in good hands and that SD and his BoD will advise the market on any developments/improvements in MREs at a time which is appropriate and when it will not be to the detriment of the company. Although I do recognise that this approach could cause the SP to wallow in the interim.

Re: Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 12:08 pm
by _J_C_
Great research and excellent post. Thank you!

Re: Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 12:10 pm
by Costa
That will shut a few up! Great work RA.

Who was that clown on LsE spreading his own version of the rules to users of the board ?

Re: Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 2:24 pm
by DipSard
Thank you RA, that really does help clarify how GGP is able to make the decision legally to withhold information from shareholders publicly if appropriate for such matters as affecting outcomes that might seriously affect the future of the company. I'd like to add some thoughts and opinion I hold around GGP not choosing to issue an independent MRE at this time too from posts I've made previously ...

Let's explore the semantics of Shaun keeping information back from shareholders... we're in a JV where the majority owner has the control of MRE and Feasibility Study releases for the most part so is GGP withholding these? I'd argue Newcrest is as they strategise against Newmont's bid keeping their own needs paramount. The Option Exercise required GGP to submit a valuation in accordance to the Valmin Code so Shaun smartly had an MRE built to do so and of course used the excuse that as it was a 'material update' to release publicly. Valmin Code valuations are usually kept non-public I think as part of a bid or price determination process, although they can be public on occasion - as there don't seem to be many floating around to review.

Shaun has said GGP are already acting as sole owners in the event they may become so post Newmont/Newcrest bid outcomes playing out and stated that the team could release a DFS 'in weeks'. The team have been reviewing drafts from Newcrest they could base theirs from of course, he also said that they wouldn't wait for ever and could press the issue if needed. Well, you can surely bet that the team have also been keeping their modelling up to date since the last GGP MRE as drill data comes in so they can also create an updated MRE in a very short period of time. If the need to publish one urgently comes up, I am sure they will do so in the event of a bid for GGP or Havieron etc. and if it makes sense to publicly release an updated MRE.

MRE's would surely form the foundation and baseline for any exercise for building a price determination for Havieron which is why GGP issued an independent MRE keeping in alignment with Newcrest methodologies and metrics to avoid any issues when Newcrest later issued one (and in fact GGP were within 1% of their assumptions) up to the data cut off date previously utilised for the Option Exercise. This enabled GGP to take a baseline of $228m based on the conservative PFS with outdated drill data up to $1.2BN USD despite the asset price deck and other restrictions placed on them.

Not knowing whether you might need to defend valuation as a potential seller if Newmont attempt to buy the remainder of Havieron or alternatively down-value as a potential buyer is why it really makes sense to hold fire for now. Why have a public record which veers on being conservative or looking for maximum upside published until you know what strategy you need to employ? Holding fire, seeing if Newmont acquire Newcrest and then treat Havieron as a core asset or look to divest is surely the best play short term IMO as otherwise you show your hand too early and may have damaged your negotiating strategy.

Shaun himself has plenty of experience in M&A as a CFO so would have been involved in every facet of planning strategy around how to make an offer or divest assets and he also has decades of experience at his disposal from Gaines, Barnaba and Wilson who've held some of the most senior positions in the entire industry at Fortescue, BHP etc. and sit or sat on boards such as the Reserve Bank of Australia. They know a few things about strategy you'd assume.

Re: Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 6:24 pm
by JungleBabbler
Hallelujah.

Re: Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 7:53 pm
by CanisLycaon
IMHO, it's not a complex issue, whatsoever!

The answer to "Should SD issue a further MRE?", is very simple...

'Yes', if he feels that it's in the best interest of the company, or 'No', if he feels that it's not!

Shareholders should not be informed of every minutae of what's happening, and, in this case, it could well be some form of negotiation, or other discussions with other parties, and/or part of a future negotiation. The last thing that anyone in any negotiation wants, is a stream of shareholders, often inexperienced in business, sticking their oar in!

Basically, you either trust the MD to do his job, in the best interests of the company & shareholders, or you don't.

If you don't, as a shareholder, then you have every right to complain to the MD and/or the Board.

Re: Should SD Issue a further MRE?

Posted: Thu Mar 30, 2023 8:23 pm
by Bottle Rocket - Liam
CanisLycaon wrote: Thu Mar 30, 2023 7:53 pm IMHO, it's not a complex issue, whatsoever!

The answer to "Should SD issue a further MRE?", is very simple...

'Yes', if he feels that it's in the best interest of the company, or 'No', if he feels that it's not!

Shareholders should not be informed of every minutae of what's happening, and, in this case, it could well be some form of negotiation, or other discussions with other parties, and/or part of a future negotiation. The last thing that anyone in any negotiation wants, is a stream of shareholders, often inexperienced in business, sticking their oar in!

Basically, you either trust the MD to do his job, in the best interests of the company & shareholders, or you don't.

If you don't, as a shareholder, then you have every right to complain to the MD and/or the Board.
I like that. and, I agree with you 100%.