AVO - Avoca Resources

[explod]

I think holders will find this mix to be a good result. Uppermost is the duel listing with the Canadian exposure. Sentiment towards gold stocks still greater than in Aussie yet.

One of my favs., but not holding at the moment.

 

[Sean K]

After reading the merger Ann the bitterness in my mouth just got worse.

If you read the advantages to both companies...it would appear Anatolia absolutely rake it in - reduced sovereign risk, reduced single mine risk, exposure to Avocas technical expertise.

And what do we AVO holders get? Why not flip the situation around? Increased sovereign risk, a single mine - lots of risk...and a 9% premium to our closing sp...which finished DOWN 4% today?!?!!!

Anybody else feeling a little done over here? Management must be getting some sweet kickbacks for this disaster...

I agree on the surface of it JTLP. I am a bit skeptical about why they harp on about the 'merger of equals' tag, when clearly they are not.

 

[Logique]

So it wasn't the full takeover and 30% margin you might have been hoping for, too bad. Alright sell down your holdings then if you're so pessimistic. You're not breaking my heart, and I'll be waiting.

What I read in the merger proposal - is that Turkey has corporate tax of only 20%, excellent infrastructure and long-term reduced electric costs. VAT exemptions & recoverable against gold exports. And no super profits tax! ANO is a low cost producer, and Turkey is one of the largest under-explored mineral belts in the world, in which ANO has an early-mover advantage. Turkish GDP 2010 growth estimate is 5.2%.

Anatolia has bigger reserves of gold, plus big resources of silver and copper.

ANO Total resources: (Au -gold, Ag -silver, Cu -copper)
Copler - 6.04 Moz Au; 16.20 Moz Ag - first gold pour in Q4 2010
Karakartal - 709 Koz Au; 389 Koz Cu
Cevizlidere - 1.57 Moz Au; 3.73 Moz Cu

AVO Total resources: (Au -gold)
Higginsville - 1.57 Moz Au
South Kalgoorlie - 4.51 Moz Au
Frogs Leg (49%) - 569 Koz Au

Other benefits to Avoca holders:
- greater access to global capital markets through enhanced scale and diversity
- increased exposure to North American investor base and TSX listing - currently seem more bullish gold over there.
- anticipated improved trading liquidity
- potential valuation uplift through combined companies increased scale

 

[JTLP]

Logique why are you so defensive of the merger pal? It's quite apparent that AVO are getting the short straw - down 7.5% today whilst other goldies are down by about 2.5%. Is this push down to make the deal look better? Who knows.

An article in Fairfax today had Rohan Williams, head honcho at AVO, come out and defend the bid...saying all the positives. There was an analyst in there who mentioned that he did not think the deal would get off the ground in its current form...guess we will find out soon enough. Sorry no links as travelling and on zi iPhone

Some more food for thought -
1. Pala have majority holding in both - convenient merger?
2. Mr Castro sits on both companies boards. Convenient?
3. Anatolia won't have to raise a dime and just mooch off AVO's profits to bring there mine into full operation.


Explain to me why a company with various producing mines and on the right path would want to merge with a non-producer with 1 mine and high political and sovereign risk?

No offense intended but if you can clearly explain why then I'll see more clearly...because right now I feel like AVO holders are getting the Joan Collins special.

 

[Logique]

Just a bit grumpy this morning JTLP that's all. Surprise anns will do that to you.

It's going to take the vote of 75% of AVO holders at the meeting in December, and 50% of ANO-TSX holders when they meet, so I want it to be a considered decision all round. Bouncing opinions around helps.

Yes Avoca are more advanced producers, but ANO are saying they will pour gold in Q4 2010. Does that invalidate the long term value built into the merger.

You keep saying that Turkey has sovereign risk. I'll need to study on that before I'm convinced of the extent of the risk - seems to be plenty of companies in there (including Eldorado of recent ASX-AND fame.) I wanted to point out that recent federal politics has introduced an element of sovereign risk in Australia, eg the proposed MRRT minerals tax.

ANO-TSX fell more than 8% last night, so they're not too keen across the pond either, so far anyway. Perhaps they think it's Avoca that's getting the better deal . Might be a challenge to get enough shareholder votes anywhere.

 

[Logique]

Interesting comments from Argonaut Securities. But read the entire article for balance. My bolds.

On Friday, ANO-TSX regained most of what it lost on Thursday (+6.8%).

http://www.brisbanetimes.com.au/business/avoca-defends-merger-20100909-1539t.html
Avoca defends merger
Barry FitzGerald
September 10, 2010
AVOCA Resources chief Rohan Williams has a job ahead of him in persuading the local market of the merits of the group's agreed $US2 billion ($A2.2 billion) merger with Canada's Turkey gold specialist, Anatolia Minerals.

The merger continues the theme of consolidation in the gold sector in response to near record prices for the metal but received a lukewarm response in the Australian market.....................

Argonaut Securities analyst Troy Irvin said the merger deal would ''battle to get off the ground in its current form''.

''With Avoca now in play, better value proposals may emerge. One potential player is Eldorado Gold, the recently spurned suitor of Andean, which is active in Turkey and armed with arguably highly priced paper,'' Mr Irvin said......................

On the bid's merits, Mr Williams said it had to be realised that the Copler mine was probably going to make about $US120 million to $US130 million a year when in full production. ''It is going to be very profitable and I think it will become a lot bigger than it currently is, and Avoca shareholders are getting in on the ground floor,'' he said.

The combined group is expected to have total production next calendar year of 437,000 ounces at a cash cost of $US403 an ounce.

''Then in four years we are going to be an 800,000-a-year producer, making us a very significant mid-tier gold producer. And I think Avoca shareholders will benefit dramatically from that,'' Mr Williams said.

 

[JTLP]

There was an article in the AFR today about the deal between Avoca and Anatolia.

Basically it was saying how the deal is an absolute stinker for AVO - and many analysts/brokers had been flooded with complaints from shareholders and that the deal only required a backlash of 25% to fail. Would make me happy to see it fail

There was also a mention of El Dorado possibly making a bid due to their presence in Turkey.

I have a little theory on the merger:
- It was never about equals - it was all about the break fee. Most likely this deal won't get off the ground due to Avoca shareholder's unwillingness. Avoca are forced to cough up the $10M; Anatolia get a sweet capital gain - put it towards there mine/construction and everybody walks away...Avoca a little poorer but a little wiser for trying to pull the rug from underneath its shareholders.

 

[Sharkymon]

I hope I haven't jinxed Avoca - a couple of days after my first post all this merger of equals kerfuffle happens
Although the price did take a bit of a dip (I guess that could have gone either way form the initial market reaction), it seems to have recovered.

I can see the logic in both the for and against arguments from the previous few posts and I admit I was surprised that this "equal" merger was happening with a company yet to enter production.
My other thought was that there may be some upside given the uncertainty surrounding our resources rent tax and the potential exposure to other metals.

Like Logique, I have a soft spot for AVO as I've held it since their pre production days and I'm also adopting a wait and see approcach. I guess the ride wasn't over after all, so I'm strapping myself in for more ..

 

[Logique]

Hi Sharkymon, no way to know how AVO shareholders will vote in mid-December, the 75% min. vote required is a healthy majority. Over in Canada, Anatolia shareholders are happy campers, the sp is back where it was a week ago (7.52).

Actually JTLP and others might be doing us a favour if they talk the merger down, it might help us extract a better deal

Heard the news item below overnight, and while I don't pretend to any real knowledge of Turkish politics, it did touch some good bases, as bolded.

Turkey approves constitutional changes
http://news.ninemsn.com.au/article.aspx?id=7960300

Mon Sep 13 2010 By Hande Culpan

Turkish Prime Minister Recep Tayyip Erdogan on Monday celebrated a spectacular victory in a referendum on constitutional changes that analysts said strengthened his Islamist-rooted party's chances of winning a third straight term in elections next year.....
..."The result...indicates that the AKP remains the dominant party," in EU-candidate Turkey, said Wolgango Piccoli, an analyst with the risk consultancy group Eurasia in a note to investors.

"The comfortable margin of the "yes" vote is market positive as it indicates that the AKP has good prospects of winning a third term at the general elections due by July 2011," he added. The result sent the Istanbul stock exchange rallying by 1,297 points on opening to hit an all-time record high of 61,905 points on increased prospects of continuing political stability under a fresh AKP government after the 2011 elections....

....The AKP...argues that the changes to the constitution, the legacy of the 1980 military coup, would raise democratic standards and draw Turkey closer to its goal of EU membership.

In his victory speech Sunday night, Erdogan welcomed the referendum outcome as a "turning point" for Turkish democracy and announced that he would start work on a brand new constitution after next year's elections.

 

[Logique]

Just a couple of updated charts. Looks like both Anatolia and Avoca shareholders are grumpy about the proposed merger, with the result that both companies share prices now look technically oversold. Hasn't changed any of my views, it's just the market in operation.

 

[JTLP]

Just a couple of updated charts. Looks like both Anatolia and Avoca shareholders are grumpy about the proposed merger, with the result that both companies share prices now look technically oversold. Hasn't changed any of my views, it's just the market in operation.

Dear Avoca Board,

Surely the shareholders have spoken in volumes by the consistent slide of the SP since the merger announcement. Please pay the $10M break fee, let Anatolia continue on their merry way and AVO can regain it's former glory and go from strength to strength.

Sincerely,

An angry JTLP

In all serious...this is beyond a joke. How can the board possibly let this one go through now? The amount of negative publicity and press...corporate fat cats need to have some respect IMO.

Anatolia have been sliding as well...but why? The deal far outweighs benefits in their favour than it does for ours!!!

 

[Logique]

Yes a frustrating state of affairs for holders on both sides of the pond. Must be a bit of pressure on both boards now.

 

[JTLP]

Did anybody go to the AGM or read the presentation that was made at the AGM?

Quite laughable how they are trying to sell this merger...the presentation shows the contribution to mining ore that both companies will give...AVO dominates all charts...so why do I want this crappy Anatolia?

Oh that's right - they've got 1 mine. We've got 3. Easier to concentrate all your energy on 1.

I will be voting NO to the merger.