|A small listco, Dragon Group International (market cap: S$10 million), will dramatically become the largest gold play on SGX if it completes a reverse takeover of a gold mining company valued at S$500 million.
Dragon Group, which is 41%-owned by ASTI Holdings, entered into a non-binding term sheet on 19 Oct 2017 to acquire 100% of Coeur Gold Armenia.
The latter indirectly owns mining exploration rights for gold and other minerals such as silver, antimony and copper in Armenia which has a long history of gold mining (and shares borders with Turkey).
The issue price is 20 cents per share, which is considerably higher than the recent stock price of 2.7 cents.
The mineral deposits of the mines are not a figment of the imagination: A JORC report was recently completed by CSA Global, which is recognised by the Singapore Exchange as an independent party.
The JORC report - totalling 416 pages -- will be submitted to the SGX in due course, said George Richmond, the vendor, in a recent interview with NextInsight during a visit to Singapore.
|Armenia: Quick facts
1. Population: 3.1m. Landlocked country bordering Turkey to the west.
2. Area: 29,743 sq km (41X the size of Singapore)
3. Mining sector is one of the largest contributors to GDP and exports. In 2016, the mineral industry made up 17.9% of total industrial production.
4. Mining of metal ores accounted for around 98% of the production value in this sector.
Coeur holds 80% stakes in Vayk Gold and Vardani Zartong, which in turn own mining exploration rights in Azatek Mine and Sofi Bina Mine, respectively, in Armenia.
By spring 2018 (ie March), the mines are expected to start production -- without needing a massive capital raising through the RTO, said Mr Richmond.
"The most important thing is, this mine is fully ready, it's a shovel-ready operation," he said.
A multi-billion dollar mining company listed in London will operate the Armenian mines, take delivery of the ore and pay Coeur Gold Armenia accordingly.
The unnamed listco already has a processing plant in Armenia, which has spare capacity to process ore from Coeur's mine, said Mr Richmond.
With cashflow from the sale of the ore, and possibly loans, Coeur plans to build a processing plant of its own in future.
The cashflow is expected to be significant as the cost of production in Armenia is one of the lowest in the world due to established supporting infrastructure near mines, such as transport networks and electrical supply.
Asked why Coeur sought a listing in Singapore, Mr Richmond said, among other things, Singapore will be a springboard for Coeur to participate in gold mining in countries such as Malaysia and Indonesia.
In addition, Coeur is attracted by Singapore's aspiration to be Asia's gold trading hub.
In selecting a vehicle to inject Coeur into, Mr Richmond wanted management in place which would oversee and expand the business.
For that reason, a service agreement has been written into the term sheet stipulating that Dato’ Michael Loh (photo), the chairman of Dragon Group, would serve as the Executive Chairman and CEO of the company for a minimum of 5 years from the completion date of the RTO.
|Over the past 4 years, Coeur had been the subject of RTO attempts by Singapore listcos Albedo and Asia Pacific Strategic Investments.
Asked about the non-success, Mr Richmond said appointed advisers negotiated the deals and made decisions. He himself and the adviser to the current RTO attempt were not actively involved, unlike this time around.
It will take 6-9 months before the outcome of this third exercise is known but here's what's different this time:
1. There's a JORC report;
2. Mining operations would be in the hands of an experienced and large London listco;
3. There's cashflow from the sale of ore to the London listco;
4. Dragon Group's management would directly oversee the mining business while retaining its existing high growth new energy and transport (NEAT) business that is driving the electrification revolution. DGI will continue to explore and remain very active in M&A to enlarge and enhance shareholder value.