Continuum (CNU.v) vs Fortuna (FVI.v) arbitrage opportunity

A gift for value hunters

Here's an interesting way to get hold of shares of Fortuna Silver at a discount to present PPS, and may appeal to those people looking at FVI.v as a long-term value play.

As this PR dated August 14th announced, FVI.v is buying out Continuum Resources (CNU.v), its minority partner at the San José silver project in Mexico. FVI.v is emitting 7m new shares to absorb the 124m or so CNU.v shares out. When you get the calculator out that works out at 0.05642772 shares of FVI.v for every CNU.v.

In this update PR published this week, FVI.v stated that the deal is going ahead as planned and is due concluded by the end of the year. All this offers up the chance of a decent arbitrage trade, as this table makes clear.

The CNU / FVI arbitrage
CNU.v Share price	Equiv. FVI.v Price	New FVI at 92.33m S/O
0.02	0.35	0.38
0.025	0.44	0.48
0.03	0.53	0.58
0.035	0.62	0.67
0.04	0.71	0.77
0.045	0.80	0.86
0.05	0.89	0.96
0.055	0.97	1.05
0.06	1.06	1.15

The first column is a range of prices for CNU.v (for example, right now it's trading at $0.035 and yesterday it traded at $0.03). The second column is the equivalent price of FVI.v today using the 0.05642772 multiplier. The third column is the one that gives us the longer term arbitrage, as it assumes the deal is done and Fortuna's shares outstanding (S/O) moves from the present 85.33m to the 92.33m it will have once the new 7m shares are put into the mix.

All this shows that there's plenty of chance to buy FVI.v at a discount by entering through CNU.v. Consider that right now FVI.v is trading at $0.70 and CNU.v is trading at $0.035. This means you can get a 70c stock for a 67c equivalent (and if you can snag a few CNU.v at 3c you're getting FVI.v for a real bargain arbitrage of 58c).

This kind of trade is most useful for people thinking of a longer term position in FVI.v, of course. DYODD, dudes.