AGM - Allegiance Mining

[d_crome]

Wow - why do I feel like somebody has just walked in during the end of "Return of the Jedi" and asked - "Ok, so who's that bloke with the helmet and the cape? Is he a good guy? This might be worth watching..."

In a simplistic term - go read the previous 1000 or so posts and you'll understand what AGM is.

 

[ithatheekret]

Well I have read many , but I haven't found anything in regards to initial decline development . If the decline has commenced .... have they taken drill samples to measure the life of the mine .

You see I have looked through quite a few reports and have not seen a trace of other metals in any form mentioned . This is unheard of to me , there's usually platinum or palladium , gold , silver or copper to be found anywhere that nickel shows up . The gradings I've seen don't match any of the major players although they're in the West mostly . This is Tassie though I know , but the results to date have me perplexed , I've never heard of a nickel find without other traces in it .

I can remember CRA starting this project off and thought they walked away from it due to the findings of the grades , the only thing I see as a positive is the vast size of the low grade deposit . So far I have a count of 3.83Mt with an average grade of 1.42% nickel , on current prices that should give the company around $28-$31M per year . That's where I got the $1.16 - $1.23 a share from , but noted the ZFX offer was at a miserable $1.00 , whilst it is obviously predatory , what have they spotted that is unknown to me , was the real query .

 

[d_crome]

I'd suggest firstly to listen to some of the Boardroom Radio interviews with the AGM board members - THR is very thorough in these discussions.

Basically, as AGM stands it is a very high quality (potentially highest on the planet) Ni mine called Avebury - it's solely a Ni operation. That said however, other pockets have been discovered within their lot, which indicates they have only struck the tip of the ice burg as far as it goes. Their continued exploration in the tentatment they recently acquired that was ZFX's) has also indicated other trace metals as you've stated.

What makes AGM interesting is the cost/lb of Ni is extremely low and yet the quality is quite high. This makes them quite profitable regardless of PON. Jinchan (the large Chinese Stainless Steel manufacturer) has realized this source of Ni and signed a 100% offtake agreement - guaranteeing a buyer for every ounce of Ni that AGM mine. They also hold an approximate 10% stake of the company.

So why the ZFX takeover? Why the SP drop from the mid year high of 1.18 with NO takeover bid - AGM dropped the ball in regards to commissioning their milling facility onsite - it was due 5 months ago and is as yet, still in construction. This slip hurt AGM massively - the PON collapse effectively crushed AGM till they began producing a refined product.

Enter ZFX - they see a bargain in AGM. Guaranteed buyer, mine is approximately 1 to 2 months away and continued drilling exploration indicates that they are sitting on considerably more Ni that initially thought. This is why most think the ZFX bid is extremely low - most believe this stock to be a $1.50 - $2.00 when in production, hence it all boils down to a holders or traders mentality.

Myself - I'm more than willing to wait the next few months out and let AGM raise to their true market value rather than accept an extremely low ball initial bid.

 

[ithatheekret]

Ah ..... now I get it , so that's why the Chinese wanted in .

Well thanks for that . No worries , btw , I entered for the mob , smelt D) something and ZFX won't get the vote . $1.50 -$2.00 , yeah , I can see it if the mines life gets extended , which I'm expecting by what I've read on the matter , my numbers come in about $2.80 , but I want to see drill results ASAP on the first cutting areas . The better the results the better the valuation , but I'd sell the news and buy the dips , cough , cough , cough .


PS.. I was taken back by the lack of outlay needed to get underway , I think they've got away on the cheap , I hadn't really discounted that until noting it .



THE ABOVE IS NOT INVESTMENT ADVICE

 

[d_crome]

ithatheekret - your valuation seems to mirror those of other brokers reviews (which can be located on the Allegiance Web site).

Interestingly - below is an excerpt from the ABN-AMRO broker summary issued on the announcement of the ZFX bid:

"ZFX has stated its offer is high in relation to recent transactions. At A$1.00 AGM is
valued at A$770m. The most recent nickel transaction is Xstrata’s bid for Jubilee,
pricing JBM at A$2.9bn. Last year JBM produced 8,633t of Ni in concentrate,
admittedly down from around 12,000tpa previously. We expect AGM to produce
8,500tpa Ni in conc, compared with 12,000tpa for JBM, a relative value of A$2.0bn or
A$2.66 per AGM share. In terms of resources, JBM has reported 216,000t of
contained Ni in ’high grade’, compared with the 131,000t in AGM’s Avebury resource,
a relative value of A$2.28 per AGM share. That doesn’t make AGM look expensive in
our view; comparatively - back of the envelope - it looks cheap."

 

[nioka]

With Allegiance shareholders holding out on the ZFX offer, those that have accepted will recieve only 90c per share. The opportunistic sub value offer was also a little sneaky in the two tier price offer. I doubt that Zinifex counted on getting the support of the directors and that they hoped to collect a fair sized holding at 90c. As it stands now they will get just .01% of AGM. They have now made the offer unconditional and will pay the 90c within 5 days to those who were foolish enough to accept the offer.
I guess ZFX will make another move shortly although they seem to be having trouble with their own SP at the moment and will have a lot of unhappy shareholders. I hope Allegience are working overtime to bring the plant into production early.

 

[d_crome]

Nioka - I've got my fingers crossed as well - hopefully the mill is due to start production any day now such that the AGM management can focus on what they do best - exploration. With a continuous income generated via their Avebury operation and Jinchan, AGM's future looks very bright indeed.

To be honest - I'm actually glad the ZFX hostile bid was made, it not only shook the AGM management tree (who have already let a previous deadline slip, drastically impacting the SP at the time) in to ensuring they're on the ball, but it also puts AGM back on the map as far as investors are concerned, generating interest in the company, and ultimately, generating interest in the SP.

As to how long can AGM remain an independent operation is still a very large unknown. Jubilee has already been taken over, AGM now on the same path - ZFX could potentially be a target given their recent SP collapse. That said, I'm quite certain that ZFX will bid to $1.20 - a bid which will draw maybe 20% of the share volume, mainly day traders and insto's, but the core of AGM holders are more than knowledgeable in regards to what they hold a stake in. My gut says ZFX will indeed "Nickle Off" as the AGM board has stated - but I don't think this will be the end of the takeover - a bigger consortium will potentially walk in and up the ante.

Even if they don't, and ZFX fail in their bid - I feel the AGM SP will continue to rise as the management continue to explore and express to the market the continued growth in value of their project site.

Again - my 2 cents - by no means am I a financial ad visor and by no means should you take my word on anything. DYOR!

 

[ithatheekret]

d_chrome would you accept the $1.20 if offered ?

Personally I wouldn't and by no means am I trying to push persuasion here , but I would like to see this project managed by those who have actually realised the value , no matter how slack the development team is . The backlog in testing has been a pain for many miners , so onsite analysis is now considered a must for many projects . So I see a few of star boxes ticked already .

I don't care if the mill isn't running until next year frankly , that's when I see the true resumption in the nickel price . The share price would suffer , but I would be happy to pick them up at a lower price , evil I know , but that's greed for you ..........

Thank you for your assistance here too , I know it's painful filling in the gaps for someone who should be upto date , but I was trying to cheat a little on my research time , as forex has taken up quite a lot of it .

 

[d_crome]

Not a problem mate.

I wouldn't sell for anything short of $2 - granted I've been a holder for 18 months (and really should have gotten in 3 years ago when an old friend put me onto them) - however I feel $1.20 is really far too low for everything that AGM has going for it.

And I can completely agree - the AGM team who have worked hard on this product for the past 10 years, only to see somebody attempt to pip them at the finish line and take all their rewards, on a professional level that would be the one thing I'd be fighting tooth and nail to ensure didn't happen.

I can see your point though - ultimately we're all here to make a $ - I'm considering selling a portion of my holdings now and re-entering should the ZFX deal fall to the wayside, however I'll have to do my research before I make that decision.

 

[DionM]

So is AGMs 'support' of $1 not really a real support level, but only due to the ZFX offer? If ZFX pulls their offer, would AGM sink like everything else has in recent times?

 

[nioka]

So is AGMs 'support' of $1 not really a real support level, but only due to the ZFX offer? If ZFX pulls their offer, would AGM sink like everything else has in recent times?

The Zinifex offer can only be calculated at 90c at this stage. The fundamentals have not changed for AGM. It does not matter to me if the immediate price drops as I have no intention of selling rather if it drops I will buy more. AGM is getting very close to producing and will have one of the lowest costs of production for nickel and will make money when a lot of others are going down. AGM is a better haven for funds because of this than Zinifex. Had I been a ZFX holder I would already have swapped for AGM before this. AGM should not need to borrow again and will soon have a solid income stream.
Had AGM not been worth more than $1 the directors would have agreed to the offer.

 

[treefrog]

The Zinifex offer can only be calculated at 90c at this stage. The fundamentals have not changed for AGM. It does not matter to me if the immediate price drops as I have no intention of selling rather if it drops I will buy more. AGM is getting very close to producing and will have one of the lowest costs of production for nickel and will make money when a lot of others are going down. AGM is a better haven for funds because of this than Zinifex. Had I been a ZFX holder I would already have swapped for AGM before this. AGM should not need to borrow again and will soon have a solid income stream.
Had AGM not been worth more than $1 the directors would have agreed to the offer.

ZFX must be rubbing their hands over current market - you will see more and more rats deserting AGM and taking the 90c ZFX offers for no other reason than it is the best deal they will get this year.
As my bean counter rammed home to me many years ago - you do not pay cash for future "potential" when buying a business - goodwill yes but potential no
how can you possibly say the fundamentals have not changed - the market is in freefall because fundamentals have changed and continue to change hour by hour - perhaps you mean the published Co. fundamentals
understandable that LT holders want to put blinkers on in the current market

 

[porkpie324]

If I were to still hold AGM I would be pretty nervous right now, if ZFX decide not to renew thier offer AGM shares will suffer the same as other nickel stocks. But on the other hand if ZFX extends the offer or infact offers more then that alone speaks volumes for the whole nickel sector.porkpie

 

[nioka]

ZFX must be rubbing their hands over current market - you will see more and more rats deserting AGM and taking the 90c ZFX offers for no other reason than it is the best deal they will get this year.
As my bean counter rammed home to me many years ago - you do not pay cash for future "potential" when buying a business - goodwill yes but potential no
how can you possibly say the fundamentals have not changed - the market is in freefall because fundamentals have changed and continue to change hour by hour - perhaps you mean the published Co. fundamentals
understandable that LT holders want to put blinkers on in the current market

ZFX holders are not rubbing their hands together they are wringing their hands in dismay at the falling ZFX SP.
My bean counter told me the same message as yours but he was wrong. I'll buy potential any day providing I can satisfy myself it can be reached. That is why I have been a holder of AGM for some time with my first purchase at 35c. I saw the potential, read my early posts. I saw the potential of SMY at 37c and I have watched AGM follow a similar path. This weeks market is just a hiccup. (unless you are using borrowed money of course.)
Long term holders don't wear blinkers, they just look well ahead.

 

[DionM]

I will admit that I am tempted to bail out of AGM at market rates.

As both a ZFX and AGM holder I have had both positive and negative out of this announcement. As I hold more of ZFX than AGM it has been very 1 sided.

As someone wrote, the fundamentals of AGM have not changed. Which means that we could suffer a drop should ZFX change their mind for the worse and AGM could drop like the rest of the market. I am tempted to sell now and rebuy if the price drops - lord knows I have missed that opportunity so many times before.

 

[treefrog]

ZFX holders are not rubbing their hands together they are wringing their hands in dismay at the falling ZFX SP.
My bean counter told me the same message as yours but he was wrong. I'll buy potential any day providing I can satisfy myself it can be reached. That is why I have been a holder of AGM for some time with my first purchase at 35c. I saw the potential, read my early posts. I saw the potential of SMY at 37c and I have watched AGM follow a similar path. This weeks market is just a hiccup. (unless you are using borrowed money of course.)
Long term holders don't wear blinkers, they just look well ahead.

nioka - you have a penchant for misquoting - I did not say ZFX holders I said and meant ZFX. ZFX is the company, those making the move on AGM

 

[nioka]

nioka - you have a penchant for misquoting - I did not say ZFX holders I said and meant ZFX. ZFX is the company, those making the move on AGM

Realised what you said , I was comparing the "holders" to the "company". The company may be happy with ZFX SP too.

 

[mexican]

ZFX must be rubbing their hands over current market - you will see more and more rats deserting AGM and taking the 90c ZFX offers for no other reason than it is the best deal they will get this year.
As my bean counter rammed home to me many years ago - you do not pay cash for future "potential" when buying a business - goodwill yes but potential no
how can you possibly say the fundamentals have not changed - the market is in freefall because fundamentals have changed and continue to change hour by hour - perhaps you mean the published Co. fundamentals
understandable that LT holders want to put blinkers on in the current market

Everything is in Black and White with AGM. The only thing that might have potential is Melba Flats deposit being as big as Voisey and Norslik.
I think you would agree ZFX find AGM more than a "potential".

 

[nikkothescorpio]

I was stopped out of my 20,000 AGM's today - and am not that worried about it - though will follow to see what happens.

With the way the current market is playing out who knows if ZFX will hang in with their bid - and well as if it needed any reinforcement - CASH IS KING.

So the option of re-entering AGM or something else with more perceived upside is not a bad break to catch.

AGM's a good company for sure but if ZFX pulls the plug or starts wavering look for a mini- RIO type retracement.

 

[DionM]

Well we all know ZFX made their offer now $1 flat, regardless of what they get.

I see there are still big at-market orders sitting on the ASX.

After doing some thinking, I've got a strong feeling there might just be another offer out there.

1. Why did ZFX suddenly change their offer to a flat $1? Why not go that the first time? Perhaps they are worried about a competing offer?

2. Jinchaun are still quite coy.

3. If you read behind the lines with the recent statement by AGM (and as backed-up by ZFXs letter) AGM have not given any valuations ... perhaps they are wanting to force out this other bidder?

4. ZFX are quite forceful in their latest letter and have been very keen to acquire as much as possible as fast as possible - to try and beat a competing offer?

It's all very strange. I'll probably re-evaluate my position in early Feb - leaving me enough time if necessary to bail for the ZFX offer if things don't continue to look rosy.