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@BenjaminCox Look if Rio is serious about what it said there is not a long term for $NXE, there are very few assets that work for niche businesses for them, and they have to be running the ruler over this one.
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@cole119 @BenjaminCox I caught that last week, but neglected to post it. In a nutshell, RIO opened a Ventures arm, looking to spend approx $2 Billion annually for quality projects.http://www.reuters.com/article/us-rio-tinto-ventures-idUSKBN16S206 So that works out to Approx 2.6B CAD, which puts a possible $NXE /Arrow takeout at approx $7.50 CAD. Agreed the next step is forked but Management has and will continue to push "taking it to production unless someone can offer better than we can do ourselves". They have to maintain that mindset, otherwise if they pull a Fission and publicly open the door to suitors - they've lost the first option completely.
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@BenjaminCox The thing is Rio is not stupid, and they have no problem putting a $5 ticket price on $NXE if they like it, it might get bid up, but no one can bid against them if they decide to do something, a 60% premium, and a strong cash bid will bring the merger arb guys out in force..
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@BenjaminCox I know that this is a long horizon, but I would bet that $NXE is not a traded stock 1 year from today, I give them less then 90% odds of making it. https://www.linkedin.com/pulse/20141201153443-73481638-does-resource-size-matter-for-junior-projects
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@BenjaminCox The big guy can posture, and scream, and push buttons, but at some point the evil hedgies come to the table, and you can't go back from them taking 20-40% of a company in an Arb position. If I was $NXE management I would be making sure I have backup bidders, and spending hours/days with the teams of all the bidders, because when the first one pulls the trigger the dance starts.
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@BenjaminCox Rio Tinto already owns 100% of other Canadian assets, I doubt that Canada would mind them, they are a good commonwealth company.
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@BenjaminCox Read my linkedin article, it is key to this debate, https://www.linkedin.com/pulse/20141201153443-73481638-does-resource-size-matter-for-junior-projects I know for the technical traders this is all hogwash, but I can assure you that the team that is doing the bidding for Rio is less then 8 people and the chance of a leak is less then 10%. The company is not going to get warned either, just no point/value added.
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@BenjaminCox Back to my day job...
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@cole119 @BenjaminCox I am confident this is already the case for $NXE, that Leigh and Co have multiple parties lined up, have trusted input on this. I love your 90% figure, I was thinking more like 95% ;)
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@BenjaminCox A cash bid will freeze those other bidders, the only way they can get into the game is to lead with pre approval, and company support. The Arbs will force the timely deal, once the game is on, and the government will just hamper those types of bidders.
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@BenjaminCox BTW, I don't have any inside contacts in Rio in the U business, and I don't know of any inside information in $NXE, just in case I am right.
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@Goldfinger @BenjaminCox Interesting topic Benjamin, and what about the institutional investors who trade $NXE? Do you think they are aware of such a possibility? Doesn't have to be a leak for someone to consider a possibility and get in front of it.
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@BenjaminCox @Goldfinger of course they can get in front of it, heck that is what the big guy is doing, they however want the highest number possible, and they rightly are talking up their book.
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@BenjaminCox @nobshere you taking over or under
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@cole119 Me neither - just input from some of the smartest guys with decent skin in the game. @BenjaminCox
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@BenjaminCox I am sick of giving @tommy bottles, so it would be nice to win one
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@BenjaminCox Mind you I am winning some nice ones from NYC bankers.. so all is good
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@BenjaminCox I have high belief that Peter owes me one :-), but betting on USA permitting is like shooting ducks in a barrel. (Fish you can miss)... Betting on $NXE getting taken out in less then 18 months is an easy bet.
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@DanO @BenjaminCox It is financing indeed. Wondering who's going to give 'em money. Meanwhile they will rent a couple of augers and hand drill the subsurface and let the world know. Results will anyway be made available AFTER financing done. Good luck speculators.
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@nobshere @BenjaminCox over One major quake along st andreas fault (over due) and say sayonara to those dreams !!
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@HighROI Cameco not in a position to make a full cash offer IMO. As @BenjaminCox says a cash offer would freeze any other bidders and Rio one of the few able to do so.
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@BenjaminCox @highroi Rio by making a cash bid upfront for $NXE, they kill the bidding process and they know that.
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@Quantum @BenjaminCox are you able to explain why a cash offer which kill the bidding process? $nxe #index
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@BenjaminCox Happy to in the index, but the only reason I am talking about $NXE is to move high quality content to the index for @Tommy.
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@BenjaminCox :-)
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@Quantum well @BenjaminCox you are now up to bat
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@BenjaminCox @quantum who else has $800m USD of cash or $1b of cash on the books to play with, who can pass the Canadian government bidder list in less then 90 days? The thing is a cash bid with a decent trigger time at a 30% premium to market will remove the other bidders, as they can't put it together and will have to counter with a paper premium.
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@BenjaminCox The hedgies who come in and arb the stock will give a 3-5% premium to cash to ok paper, and a 10% premium to non-liquid paper (under $5m/d ADV in a normal market).
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@HighROI @BenjaminCox I highly doubt a 30% premium to market here will cut it as an offer for $NXE.
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@Quantum @BenjaminCox so the idea is a cash offer, which no one else can make, will mean that any other offer using paper would have to be substantially higher than the cash offer to make up for the paper to cash discount. Any other bidder would not want to offer a bid at substantially higher than Rios bid because of shareholder revolt or they just don't see the asset as being worth that much?
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@BenjaminCox Why, if at a 30% premium, gets 30% of the stock into the hands of arbs, all they have to do is go weak if no other bidders play and they get it, or if another bid offers 40% in stock, they just have to match $NXE. With due respect to Allan, lots of stuff like $KAM have been taken out by majors in this down market. Most quality assets go on the start of the uptick, it is the junk that gets the top of the market
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@BenjaminCox @fl if the bid is hostile/not solicited, the company is not going to be free to slice/dice, if they want to go down that road they have to get a friendly bid.
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@BenjaminCox I am lazy.. #forthewin
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@BenjaminCox Just ask anyone, I am the definition of low energy
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@lukejackson Interesting thanks @BenjaminCox @HighROI @fl
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@fl @BenjaminCox No doubt. Obviously much more common in the sale of a project vs sale of a company.
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@BenjaminCox @Goldfinger not to be a bear, but it would not take $2b to shake the $NXE tree...
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@Goldfinger @BenjaminCox using round numbers, not trying to split hairs here.
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@BenjaminCox @Allan someone offered me 18 months, I will take those odds first, waiting to see if that can be closed as a bet, 12 months including closing time might be tight.
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@BenjaminCox If $NXE sells a cheap foothold, they will upset some of the instu base, who will rightly see it as a loss of a clean take over premium.
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@BenjaminCox Hate to say it, but I am talking real $ vs CDN Peso..
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@BenjaminCox @rocketRed hate to say it, but tier one assets command a 20% premium on take out +++
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@BenjaminCox If you like U, and Rio clearly likes U, then they will pay 2x for the best vs the second best asset.
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@BenjaminCox Got to get back on the phone/other work, so cya, but I will pop back in and respond to the debate, but not real time all day.
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@BenjaminCox So the offer from you is 12 months from today without a public bid, but they don't have to close it, got to see what your Hombre was offering yesterday, but let me mull this :-).
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@cole119 Thx @BenjaminCox you input is always appreciated. $NXE
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@teevee @BenjaminCox, I can't believe that NXE would do what FCU did with CGN, giving someone a cheap foothold. All one need do is look at what a cheap foothold did for Selwyn Resources shareholders-they ended up with nothing, and that is exactly where I believe the FCU-CGN deal will take FCU shareholders.
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@ocotilloredux I agree entirely @benjaminCox . The Chinese are not good stewards of reliable data and what they do provide is often fraught with errors. But I look at previous parallels to understand China supply going forward. In my mind what is happening there is no different than a modern day gold rush where people swarm the deposits for easy near surface pickings. You got to ask yourself, what nation can sustain an annual production rate of 4.5-5.0 MT of mined zinc for the long haul? I don't think they fully understand the concept of sustaining capital and the need to apply capital to go deeper once the easy stuff is gone. We saw a somewhat similar analogy with the collapse of communism. When demand collapsed in mother Russia, the miners found themselves with no market to feed so shipped everything off to western markets, not because it was profitable, but because they needed the cash flow. But supply quickly dwindled when the need for positive cash flow to sustain the mine became a fact of life. What China has is cheap labour. I highly doubt they have the world class orebodies to sustain an annual production rate over 4 MT though. ~zinc
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@ocotilloredux I agree entirely @benjaminCox . The Chinese are not good stewards of reliable data and what they do provide is often fraught with errors. But I look at previous parallels to understand China supply going forward. In my mind what is happening there is no different than a modern day gold rush where people swarm the deposits for easy near surface pickings. You got to ask yourself, what nation can sustain an annual production rate of 4.5-5.0 MT of mined zinc for the long haul? I don't think they fully understand the concept of sustaining capital and the need to apply capital to go deeper once the easy stuff is gone. We saw a somewhat similar analogy with the collapse of communism. When demand collapsed in mother Russia, the miners found themselves with no market to feed so shipped everything off to western markets, not because it was profitable, but because they needed the cash flow. But supply quickly dwindled when the need for positive cash flow to sustain the mine became a fact of life. What China has is cheap labour. I highly doubt they have the world class orebodies to sustain an annual production rate over 4 MT though.
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