This past week I had the chance to speak with Rick Rule of Sprott Asset Management regarding Sprott’s plans for a $900-million hostile takeover bid for two metal trusts. One in which current shareholders of the trust would receive an immediate upside to their current unit price.
Luckily for these shareholders, it's getting a lot of press, making them aware of a real opportunity to vote for change that will increase each owner’s net worth and improve the future of their current holdings.
A lesser known story is going on in the junior space, where in today's market, take-overs and acquisitions don't get much press outside of the actual PR's the companies put out themselves .
This is unfortunate, because unlike the shareholders in the Sprott acquisition, many of these smaller companies may not even be aware of how they can vote for an increase in value. Today, an urgent situation has arisen for Coastal Gold shareholders (COD) – one in which every vote counts.
If shareholders don't act, I fear that the management of COD is about to accept an outrageous offer from Sulliden Mining (SMC) that provides less value than the current trading price and moves current COD shares to a team that does not have a track record of success in the industry.
Worst of all, I fear that this may be a push by a single group of shareholders, who aren't looking out for anyone else but themselves.
Forbes Manhattan is a shareholder in both companies. Their founder, Stan Bharti, is also the chairman of Sulliden Mining. Now, none of this would be a problem in today's current environment, if it weren't for the fact that Coastal Gold shareholders received a superior offer last week that management rejected…
Under the current agreement with SMC, COD shareholders are about to receive about $0.0225 per share. FF's offer represents $0.06 per share, which is a 167% premium to the SMC's offer! The total value of Sulliden's offer being $3,807,618 as opposed to the total implied value of First Mining's offer which is $10,153,649.
As of May 4th, COD traded for 3 cents, making the SMC offer less than the current value, at the very least independent shareholders of COD should be highly suspicious of the acceptance of SMC's offer and the rejection of FF's.
Comparing the two companies, SMC and FF, COD shareholders would be in a far superior position as FF shareholders.
- FF currently has 18 projects.
- $7 million cash in the bank.
- Management is has an enormous track record of success, with Chairman Keith Neumeyer taking two small companies to over a billion-dollar market cap.
- The major shareholders of FF boast the who's who in the resource sector, including Sprott Asset Management, Rick Rule, Haywood Securities, and Keith Neumeyer's other company, First Majestic Silver (AG).
- First Mining Finance is more liquid, trades for a higher price, and when it comes to dollar volume, FF traded more than 3x the dollar volume on April 6th, compared to all SMC dollar volume from April 6 through May 1st!
Coastal Gold shareholders, in my opinion, should reject the Sulliden Mining offer and accept the superior offer by First Mining Finance (FF).
In my opinion, COD shareholders are about to be screwed. The rejecting of FF's offer by management and the acceptance of SMC's offer -- where there is a close relationship between management and board members of the two companies – is, at the very least, suspect of current COD management not doing everything ethical to deliver the best value to their shareholders.
COD shareholders should strongly consider voting against the Sulliden transaction at the meeting of COD shareholders scheduled for May 6, 2015. COD shareholders who haven't voted already must do so by 10:00 a.m. (Toronto time) on May 4, 2015. COD shareholders who have already voted can change their votes at any time before 5:00 p.m. (Toronto time) on May 5, 2015.
This work is based on SEC filings, current events, interviews, corporate press releases and what we’ve learned as financial journalists. It may contain errors and you shouldn’t make any investment decision based solely on what you read here. It’s your money and your responsibility. The information herein is not intended to be personal legal or investment advice and may not be appropriate or applicable for all readers. If personal advice is needed, the services of a qualified legal, investment or tax professional should be sought.