Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?

[grandmasterG]

Some TauRx news today:

 

https://www.newswire.ca/news-releases/taurx-reveals-study-results-that-offers-new-hope-for-treatment-of-patients-with-dementia-882883302.html

 

Really hope they can sell this before too long.

 

on the Q1 CC they repeated that they are in talks with interested parties that want to buy (part of) their stake in TauRx, news like this should increase interest in the company, and make it easier to sell it for a high price

[bskptkl]

10:05 AM Haywood crossed 24,000 of the Ds

10:06 AM Haywood crossed 50,000 of the Bs

 

NCIB?

[sculpin]

Also, Sinclair/Earlston buying continues...  On June 11th they added 20,400 DC.A and 2,200 DC.PR.B.  Total shares bought by SInclair in the past three weeks:

 

DC.A: 1,226,000

DC.PR.B: 102,200

DC.PR.D: 32,600

 

Total value of insider buying in the past month including Jonathan Goodman's 1.5M share DC.A purchase a few weeks back is about $5.4M.

[doc75]

Another trickle of news regarding TauRx:

 

http://www.koreaherald.com/view.php?ud=20200615000885

 

Here's an mazing stat from the article:

 

"The clinical trial failure rate for Alzheimer’s disease treatments is said to be 99.6 percent. Between 2002 and 2012, among 413 drugs that set out to treat the disease, only Namenda had been given the green light to proceed with clinical tests."

[grandmasterG]

Dundee PM now firmly above $ 8, the money from the exercised warrants probably coming in soon, market still not realizing they'll then have $ 2.4 per share in cash

[gfp]

Dundee PM now firmly above $ 8, the money from the exercised warrants probably coming in soon, market still not realizing they'll then have $ 2.4 per share in cash

 

Why wouldn't warrant holders wait until near expiration in May 2021 to exercise warrants?

[sculpin]

 

 

Top Insider Buys and Sells Past Week

 

Filing

Date Transaction

Date Insider Name Ownership

Type Securities Nature of transaction Volume or Value Price

Jun 23/20 Jun 23/20 Sinclair, Alistair Murray Indirect Ownership Subordinate Voting Shares Class A 10 - Acquisition in the public market 47,600 $1.31

Jun 22/20 Jun 22/20 Sinclair, Alistair Murray Control or Direction Subordinate Voting Shares Class A 10 - Acquisition in the public market 46,400 $1.30

Jun 19/20 Jun 19/20 Sinclair, Alistair Murray Control or Direction Subordinate Voting Shares Class A 10 - Acquisition in the public market 50,800 $1.29

Jun 17/20 Jun 17/20 Sinclair, Alistair Murray Control or Direction Subordinate Voting Shares Class A 10 - Acquisition in the public market 3,700 $1.25

Jun 15/20 Jun 15/20 Sinclair, Alistair Murray Control or Direction Preferred Shares Cumulative Floating Rate First Preference Shares, Series 3 10 - Acquisition in the public market 1,000 $15.50

Jun 15/20 Jun 15/20 Sinclair, Alistair Murray Control or Direction Subordinate Voting Shares Class A 10 - Acquisition in the public market 13,000 $1.21

Jun 12/20 Jun 12/20 Sinclair, Alistair Murray Control or Direction Subordinate Voting Shares Class A 10 - Acquisition in the public market 16,000 $1.23

Jun 11/20 Jun 11/20 Sinclair, Alistair Murray Control or Direction Preferred Shares 5-Year Rate Reset First Pref. Shares, Series 2 10 - Acquisition in the public market 2,200 $15.70

Jun 11/20 Jun 11/20 Sinclair, Alistair Murray Control or Direction Subordinate Voting Shares Class A 10 - Acquisition in the public market 20,400 $1.23

Jun 10/20 Jun 10/20 Sinclair, Alistair Murray Control or Direction Preferred Shares 5-Year Rate Reset First Pref. Shares, Series 2 10 - Acquisition in the public market 17,800 $15.82

 

[sculpin]

 

 

Research Note - Dundee Precious Metals Inc. (DPM:TSX,$9.09|BUY $13.00 TRGT) FROM STRENGTH TO STRENGTH

 

 

We have revised our model and target price following our conversation with DPM on Friday, July 03. DPM is a stable and solid performing mid-tier producer. It generates cashflow from stable, low risk jurisdictions. And with its recent additions to the TSX composite index it has the requisite liquidity that represents a company having a significant re-rating potential. Moreover, its return of cash to shareholders, through a quarterly dividend of US$0.02/share and share repurchase program, is attractive to investors. DPM is backed by solid low-cost production which is growing and a cost structure that is declining. Q1 saw stellar production of 73 Koz Au and 9.4 Mlbs copper at a low AISC of $593/oz. Free cash flow is expected to be around $140 M to $180 M per year in the next three years. DPM remains on track to meet it production and cost guidance for 2020 at all of its operations. We maintain our BUY rating and have revised our 12-month target price to C$13.00/share (from C$9.50/share).

 

 

 

We spoke with the Company to gauge its general working conditions during COVID-19, the Company’s full year guidance and its Q2/19 expectations. DPM’s production is progressing well and is largely uninterrupted. Chelopech and Ada Tepe mines in Bulgaria continue to operate fully and in line with guidance. Tsumeb, the smelter in Namibia, is also operating in line with guidance albeit with reduced staff in certain areas, as government mandated.

 

 

 

Q1 Result Review: In Q1 DPM reported a record revenue of $152M (+9% Q/Q from $140M) and generated $77.5M in EBITDA (+41% Q/Q from $55M). Free cash flow came in at $49.2M (+315% Q/Q from $11.8M). In Q1/20 DPM’s consolidated gold production of 73.0 Koz and copper production of 9.4 Mlbs were achieved at an impressive cash cost of $511/oz and an AISC of $593/oz net of byproduct. Lower production costs, higher realized metal prices and lower sustaining and growth capital, as well as a solid production profile, contributed to an impressive AISC. Tsumeb processed 65 Kt also beat our estimate (MPI est. 55 Kt), at a cost of $357/t. The Company ended first quarter debt free, with $13.6M cash in hand and an undrawn portion of RCF of $175M. It expects to fully settle its prepaid forward gold sale of 20.97 Koz in 2020.

 

 

 

Valuation: We maintain our BUY rating and have revised our 12-month target price to C$13.00/share (from C$9.50/share). Our valuation is now based on a 1.3x NAV (from a 1.0x NA) and is based on a long-term gold and copper price of $1,550/oz and $2.75/lbs. DPM is currently trading at 0.9x our NAV estimate. Our NAV multiple is based on DPM’s strong track record of delivering on expectations since it declared commercial at Ada Tepe and completed ramping up in Q2/19 and transitioned from a single asset to multi asset gold producer.

 

 

 

DPM is trading at a valuation below to inline with other mid to large-cap producers. Its 2020E P/CFPS of 4.5x and 2021E P/CFPS of 3.7x reflects a significant discount to peers that are trading at 2020E P/CFPS of 7.2x and 2021E P/CFPS of 5.2x. For the rest of the year we expect DPM to continue to close that gap. With large capital investment ending, focus has turned to production optimization and cash flow generation. Its recently instituted quarterly dividend of US$0.02/share reflects its cash flow generating potential. 

 

 

 

We are modeling an annual production of 272 Koz of gold and 37Mlbs of copper at an AISC of $717/oz, net of byproduct. For Q2/20 we expect a consolidated gold production of 67.75 Koz (40.67 Koz for Chelopech and 27.07 Koz for Ada Tepe) and 9.35Mlbs of copper, at an AISC of ~US$700/oz Au produced.

 

 

 

2020 Production Guidance: For FY20 consolidated gold production is expected to be between 257 Koz and 299 Koz. Copper production guidance is between 35 Mlbs to 40 Mlbs. The guidance for the Tsumeb smelter processed concentrate is 230 Kt to 265 Kt. DPM is guiding for 2020 AISC to be between US$700 and US$780/oz sold, net of byproduct.

 

E: [email protected]

 

www.mpartners.ca

 

70 York Street Suite 1500

 

Toronto, ON Canada M5J 1S9

[sbalsam]

Bskptkl - I have the going-forward yield for the Ds as 6.8% (at a $15.75 price) based on the current t-bill rate. Does that match your assessment?

Steve

[SafetyinNumbers]

If anyone is looking for another pref to get into, I think the GMP.PR.B is interesting. It resets at 289bp over and yields 9.7% at the current payout but that will drop to 8.7% in April 2021, if the 5 yr yield stays down here. Can also choose to convert to floater (GMP.PR.C) if one thinks inflation may come sooner rather than later.

 

I think it's just mispriced because no one has taken a look since they sold their investment bank to Stifel. Now it's just a bag of cash with a clearing business that breaks even and a one third stake in Richardson GMP, which is an independent wealth manager that should have less volatile earnings stream than the old investment bank. Also, they are supposed to buy the rest of the Richardson GMP business for stock. That will triple the equity backing the preferred so it seems like the credit will just get better.

 

If I were them I would do an SIB on the preferred like Dundee did but I'm sure they think of the preferred as cheap capital.

[SafetyinNumbers]

If anyone is looking for another pref to get into, I think the GMP.PR.B is interesting. It resets at 289bp over and yields 9.7% at the current payout but that will drop to 8.7% in April 2021, if the 5 yr yield stays down here. Can also choose to convert to floater (GMP.PR.C) if one thinks inflation may come sooner rather than later.

 

I think it's just mispriced because no one has taken a look since they sold their investment bank to Stifel. Now it's just a bag of cash with a clearing business that breaks even and a one third stake in Richardson GMP, which is an independent wealth manager that should have less volatile earnings stream than the old investment bank. Also, they are supposed to buy the rest of the Richardson GMP business for stock. That will triple the equity backing the preferred so it seems like the credit will just get better.

 

If I were them I would do an SIB on the preferred like Dundee did but I'm sure they think of the preferred as cheap capital.

 

GMP just suspended their preferred dividend for what looks like a technical reason / incompetence but I don’t know for sure. Essentially, they need to have a shareholder meeting to reduce the stated capital and from what I can tell they haven’t had their 2019 AGM yet so it should be by year end.

 

Anyway, another bad idea in a string of bad ideas from me. Apologies.

 

[sculpin]

If anyone is looking for another pref to get into, I think the GMP.PR.B is interesting. It resets at 289bp over and yields 9.7% at the current payout but that will drop to 8.7% in April 2021, if the 5 yr yield stays down here. Can also choose to convert to floater (GMP.PR.C) if one thinks inflation may come sooner rather than later.

 

I think it's just mispriced because no one has taken a look since they sold their investment bank to Stifel. Now it's just a bag of cash with a clearing business that breaks even and a one third stake in Richardson GMP, which is an independent wealth manager that should have less volatile earnings stream than the old investment bank. Also, they are supposed to buy the rest of the Richardson GMP business for stock. That will triple the equity backing the preferred so it seems like the credit will just get better.

 

If I were them I would do an SIB on the preferred like Dundee did but I'm sure they think of the preferred as cheap capital.

 

GMP just suspended their preferred dividend for what looks like a technical reason / incompetence but I don’t know for sure. Essentially, they need to have a shareholder meeting to reduce the stated capital and from what I can tell they haven’t had their 2019 AGM yet so it should be by year end.

 

Anyway, another bad idea in a string of bad ideas from me. Apologies.

 

Most likely only a bad idea in the short term. If one can use price weakness to add to the GMP prefs at lower levels on this news, when the dividend is restored later this year, will turn out to be an even better idea.

[SafetyinNumbers]

If anyone is looking for another pref to get into, I think the GMP.PR.B is interesting. It resets at 289bp over and yields 9.7% at the current payout but that will drop to 8.7% in April 2021, if the 5 yr yield stays down here. Can also choose to convert to floater (GMP.PR.C) if one thinks inflation may come sooner rather than later.

 

I think it's just mispriced because no one has taken a look since they sold their investment bank to Stifel. Now it's just a bag of cash with a clearing business that breaks even and a one third stake in Richardson GMP, which is an independent wealth manager that should have less volatile earnings stream than the old investment bank. Also, they are supposed to buy the rest of the Richardson GMP business for stock. That will triple the equity backing the preferred so it seems like the credit will just get better.

 

If I were them I would do an SIB on the preferred like Dundee did but I'm sure they think of the preferred as cheap capital.

 

GMP just suspended their preferred dividend for what looks like a technical reason / incompetence but I don’t know for sure. Essentially, they need to have a shareholder meeting to reduce the stated capital and from what I can tell they haven’t had their 2019 AGM yet so it should be by year end.

 

Anyway, another bad idea in a string of bad ideas from me. Apologies.

 

Most likely only a bad idea in the short term. If one can use price weakness to add to the GMP prefs at lower levels on this news, when the dividend is restored later this year, will turn out to be an even better idea.

 

I didn’t expect holders to react rationally.

[sculpin]

http://prefblog.com/

 

GMP To Suspend Preferred Share Dividends

 

July 31st, 2020

 

GMP Capital Inc. has announced:

 

DIVIDENDS

 

The Company’s net working capital as at June 30, 2020 was $122.8 million. While this level of liquidity is sufficient to pay dividends, under Section 38(3) of the Business Corporations Act (Ontario), the Company’s governing corporate statute, the Company cannot pay a dividend if there are reasonable grounds for believing that the net realizable value of the Company’s assets would be less than the aggregate of its liabilities and its legal stated capital of all classes of shares (common and preferred).

 

Due to the current level of stated capital of the Company’s outstanding common and preferred shares, the Board of Directors has reasonable grounds to believe that this test would not be satisfied as at September 30, 2020, the date on which its quarterly preferred share dividend would normally be paid. As such the Company is suspending the dividends on its preferred shares. At its next meeting of common shareholders, the Company intends to seek the approval of its common shareholders to reduce the stated capital of the common shares to allow the Company to resume paying dividends, including accrued, unpaid dividends on the preferred shares.

 

Dividends on the outstanding preferred shares are cumulative and will continue to accrue in accordance with the rights, privileges, restrictions and conditions associated with each series of preferred shares.

 

Affected issues are GMP.PR.B and GMP.PR.C.

 

These issues have been on Review-Developing at DBRS for a long time, due to uncertainty regarding the proposed deal with Richardson GMP. It looks like the uncertainty became a lot more uncertain!

 

Of particular interest is the following quote (emphasis added):

 

At its next meeting of common shareholders, the Company intends to seek the approval of its common shareholders to reduce the stated capital of the common shares to allow the Company to resume paying dividends, including accrued, unpaid dividends on the preferred shares.

So there’s no indication as to how much of a reduction in stated capital the company will seek. A sharp reduction in stated capital at Aimia allowed the company to resume dividends on the common and to execute a Substantial Issuer Bid for that common, neither of which was good for the preferred shareholders.

 

Thanks to Assiduous Reader DR for bring this to my attention!

 

 

[SharperDingaan]

Good catch.

 

SD

[sculpin]

Globe says insiders buying at Dundee Corp.

 

2020-08-10 08:51 ET - In the News

Shares issued 99,977,865

DC.A Close 2020-08-07 C$ 1.42

 

Also In the News (C:DPM) Dundee Precious Metals Inc

The Globe and Mail reports in its Saturday, Aug. 8, edition that on May 13, Dundee Corp. ($1.42) raised $151.8-million in gross proceeds via the sale of 23.9 million Dundee Precious Metals ($9.80) shares. The Globe's guest columnist Ted Dixon writes in the Who Is Buying and Selling column that Dundee is sitting on a cash pile available to support what chief executive officer Jonathan Goodman has said is the firm's strategic focus on the junior mining sector. Mr. Goodman and Dundee Corp. director Murray Sinclair are literally buying into the junior mining pivot. Since May 19, Mr. Goodman has spent $2-million buying Dundee Corp. shares at an average price of $1.23.

[SharperDingaan]

GMP vs DPM pretty much tells you everything.

 

SD

 

 

[SafetyinNumbers]

That was quite the head fake from GMP on the dividends. Now bid up on the original thesis that the credit spreads are two wide and significantly more equity will be issued to take in RGMP.

 

If anyone is looking for another pref to get into, I think the GMP.PR.B is interesting. It resets at 289bp over and yields 9.7% at the current payout but that will drop to 8.7% in April 2021, if the 5 yr yield stays down here. Can also choose to convert to floater (GMP.PR.C) if one thinks inflation may come sooner rather than later.

 

I think it's just mispriced because no one has taken a look since they sold their investment bank to Stifel. Now it's just a bag of cash with a clearing business that breaks even and a one third stake in Richardson GMP, which is an independent wealth manager that should have less volatile earnings stream than the old investment bank. Also, they are supposed to buy the rest of the Richardson GMP business for stock. That will triple the equity backing the preferred so it seems like the credit will just get better.

 

If I were them I would do an SIB on the preferred like Dundee did but I'm sure they think of the preferred as cheap capital.

 

GMP just suspended their preferred dividend for what looks like a technical reason / incompetence but I don’t know for sure. Essentially, they need to have a shareholder meeting to reduce the stated capital and from what I can tell they haven’t had their 2019 AGM yet so it should be by year end.

 

Anyway, another bad idea in a string of bad ideas from me. Apologies.

 

Most likely only a bad idea in the short term. If one can use price weakness to add to the GMP prefs at lower levels on this news, when the dividend is restored later this year, will turn out to be an even better idea.

 

I didn’t expect holders to react rationally.

[deleuze68]

Dundee increased their offer for the Series 2 Prefs to $19.50, a fixed price, plus will take up as many shares as are tendered, so no prorationing. As an added bonus they will also pay a prorated dividend of 26 cents. So $19.76 with an expecting closing of September 10th. Trading at 19.30 now, so an annualized return of around 40%. Not too shabby.

[doc75]

Unexpected news (see below).

 

Dundee should have over $100m cash even after the pref B buyout.  The DPM warrants have a strike of $8 and expire in May 2021. DPM is currently trading just shy of $10 and has held over $8.50 since July.  So why the rush to lower the strike to $7.60?  I would've thought many warrant holders already exercised and cashed-out when DPM broke $10, but I guess not.

 

- de-risking due to political uncertainty viz. US election? price of gold impact?

- tax impacts?

- extra capital to launch a SIB for the remaining B prefs /  D prefs / common?

 

The recent AGM presentation does mention return of excess capital via  SIB/NCIB/Dividend "when appropriate":

http://dundeecorp.com/pdf/DC%202020%20AGM%20presentation%20FINAL.pdf

 

 

There's roughly $80m in preferred remaining ($30m B and $50m D) and the market cap is around $140m.  They'll have at least $120m in cash by end of October.  It'll be interesting to see what they do.  Maybe they just want maximum flexibility into end-of-year, given the potential for market shocks.

 

------------------------

 

Dundee Corporation Announces Temporary Discount Exercise Price for Its Warrants Issued to Purchase Shares of Dundee Precious Metals Inc.

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR RELEASE PUBLICATION, DISTRIBUTION OR DISSEMINATION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES.

TORONTO, Oct. 20, 2020 (GLOBE NEWSWIRE) -- Dundee Corporation (TSX: DC.A) (“Dundee”) announces notice to holders of the warrants (“Warrants”) to acquire shares of Dundee Precious Metals Inc. (“Dundee Precious”) issued in connection with the secondary sale of shares of Dundee Precious on May 13 th , 2020, an opportunity to exercise their Warrants at the discount exercise price of $7.60 during the period specified below.

 

Any warrant holder may elect to exercise their Warrants at the discounted exercise price of $7.60 during the period commencing on October 20, 2020 and ending at the prescribed time on October 27, 2020 (the “Discounted Exercise Expiry Time”). Warrants exercised after the Discounted Exercise Expiry Time and prior to expiration on May 13, 2021 may be exercised at the original exercise price of $8.00, subject to adjustment in accordance with the provisions of the warrant indenture between Dundee Resources Limited, a wholly owned subsidiary of Dundee and Computershare Trust Company of Canada, dated May 13, 2020, as amended by the First Amending Agreement dated October 20, 2020 (the “Warrant Indenture”).

 

Support F rom Existing Holders

 

Dundee has secured the commitment of institutional investors, holding approximately 25% of the currently issued and outstanding Warrants to exercise their Warrants on or prior to the Discounted Exercise Expiry Time at the discounted exercise price of $7.60 for total consideration of approximately $22.4 million.

 

Exercise Details & Benefits

 

In accordance with the terms of the Warrant Indenture, Dundee has provided the registered holder of warrants with notice of the discount exercise price.  Dundee’s Board of Directors has approved the discount exercise price applicable to the warrants during the period outlined above.

 

Dundee intends to issue a press release on October 28, 2020 confirming the total consideration received for warrants exercised during the early exercise period.

 

“Our offer to accelerate the exercise of the Dundee Precious warrants provides us with an opportunity to improve our financial position, strengthen our balance sheet and enhance our strategic flexibility in a timely manner,” said Jonathan Goodman, President and CEO. “In today’s environment of continued macroeconomic and geopolitical uncertainty, which is exacerbated by the ongoing COVID-19 pandemic, our management team and board of directors believe this is a prudent measure to take at this time.”

[petec]

Very odd.

 

They should have included a put right.

[doc75]

The discounted warrants brought in $60m cash. Approximately 1/3 of warrants remain outstanding.  They now have $140m cash at corporate, pretty much exactly the market cap at today's price. 

 

----------------------------

 

TORONTO, Oct. 28, 2020 (GLOBE NEWSWIRE) -- Dundee Corporation (TSX: DC.A) (“Dundee” or the “Company”) is pleased to announce the successful completion of its early warrant exercise program, as described in the press release dated October 20, 2020. A total of 7,819,900 unlisted warrants (“Warrants”) to acquire shares of Dundee Precious Metals Inc. (“Dundee Precious”) have been exercised to-date, of which 7,452,400 Warrants were exercised at the discounted exercise price of $7.60, providing aggregate proceeds of $59,578,240 to Dundee. A total of 4,130,100 Warrants remain issued and outstanding.

 

With these proceeds from the early warrant exercise program, the Company currently has approximately $140 million in cash at the corporate level. It is anticipated that the Company will not have taxes payable in connection with the proceeds of exercised Warrants.

 

“The receipt of these funds improves our financial position, strengthens our balance sheet and enhances our strategic flexibility,” said Jonathan Goodman, President and CEO.

 

“With today’s economic, geopolitical and market uncertainty including the ongoing effects of the COVID – 19 pandemic, our management team and board of directors support this prudent step,” said Bob Sellars, Executive Vice President and Chief Financial Officer.

 

The remaining outstanding Warrants may be exercised prior to expiration on May 13, 2021, at the original exercise price of $8.00, subject to adjustment in accordance with the provisions of the warrant indenture between Dundee Resources Limited, a wholly owned subsidiary of Dundee and Computershare Trust Company of Canada, dated May 13, 2020, as amended by the First Amending Agreement dated October 20, 2020 (the “Warrant Indenture”).

[Guest brisbane]

The discounted warrants brought in $60m cash. Approximately 1/3 of warrants remain outstanding.  They now have $140m cash at corporate, pretty much exactly the market cap at today's price. 

 

 

What's your point?

[doc75]

The discounted warrants brought in $60m cash. Approximately 1/3 of warrants remain outstanding.  They now have $140m cash at corporate, pretty much exactly the market cap at today's price. 

 

 

What's your point?

 

Just reporting the facts, ma'am. 

 

There is some possibility that an SIB for the common is in the works, so the relative sizes of the cash pile and market cap is of interest.

[Guest brisbane]

The discounted warrants brought in $60m cash. Approximately 1/3 of warrants remain outstanding.  They now have $140m cash at corporate, pretty much exactly the market cap at today's price. 

 

 

What's your point?

 

Just reporting the facts, ma'am. 

 

There is some possibility that an SIB for the common is in the works, so the relative sizes of the cash pile and market cap is of interest.

 

That might have some relevance if the company had no debt or prefs, and didn’t burn cash. But...