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5/11/17

A great deal for Continental Gold (CNL.to)

Today's news out of Continental Gold (CNL.to) that Newmont is taking a 19.9% equity position in the company is a strongly positive event. Reasons:

  • Obviously, the premium of the ticket price to recent market price is eye-catching.
  • Securing the capex needed to get to production day one. Positive.
  • The fact that the technical team is now a JV with NEM people, plus NEM gets a seat on the board, will alleviate the corporate risk seen by many in the sector towards CNL to date (with one major exception, Don Gray was a great appointment). Positive.
  • For a company of its size, it's a cheap way for NEM to get a foothold and become the obvious eventual owner if and when Buriticá works as a mine, once it's all up and running in 2020 or whenever. Nice risk/reward equation for the big boy.
  • And we should also commend CNL for being able to keep this gig quiet, there was no reflection of the advanced nature of this deal in recent share price action. For a company with a previous reputation of being a leaky boat (your author eye-witness), Ari Sussman and his team should be commended.

CNL won't trade up at C$4.00 immediately, but we should get a big pop when it opens (my guess is +30%). Also, I could get catty and mention that I managed to sell my position in CNL earlier in the year for a higher price than NEM's $4 purchase. Meow meow and unfair on all sides. The real message is that CNL should be congratulated by one and all for today's deal. It's now time to build the mine and make it work. IKN applauds you, Ari Sussman.

PS: Red Kite further on board is good too, of course.

UPDATE 11am: CNL just dinged +30% on the day. Good shot.