Castlemaine Goldfields takeover by LionGold Corp of Singapore

LionGold Corp has offered to takeover Castlemaine Goldfields via an all scrip (share) takeover.

It is offering 2 LionGold Corp shares for every 9 Castlemaine shares.

Besides that, LionGold Corp has entered into a Subscription Agreement to subscribe for 11.4% of the enlarged number of shares after the subscription.

Usually I feel that once a party enters into a Subscription Agreement which is not subjected to any precedent conditions, it is more likely that the takeover will happen, as the acquirer has some skin in the game, thus more committed to the cause.

If we price up the deal using Merger Arbitrage Manager,

(there are some limitations as this is a cross border takeover and MA Manager has yet to implement the capability of including FX rates in the deals.. this shall be taken into account for the development of a new version of MA Manager)

It is assumed in this case the FX rates for SGD:AUD is 0.772. The deal should take roughly 3 months to pay out date.

There is a 11% spread to be earned. Usually in a cross-border deal, there is more premium in it unless it is a very big deal where Merger Arb traders around the world would jump on it.

Very possibly though it might be hard to get borrow in the LionGold Corp stock in Singapore, which might explain the massive premium.

The deal is conditional upon 50.1% acceptance, which is a reasonable and not high level. This is not a scheme of implementation thus does not require shareholders to vote.

Adding to portfolio.

Argentina expropriates YPF from Repsol

In an unrelated matter, it is amazing that Argentina has taken the course of expropriating YPF from Repsol. Given that it could have done a takeover via the equity market at fair market value (or excercise certain rights given the government still holds the "golden shares"). Expropriating assets leaves such a negative sentiment that I believe would turn investors away from Argentina. Probably this will benefit Brazil, Mexico and other Latin America countries.

I guess there must be a correlation between rising commodity prices and risk of expropriation. Argentina has been a net importer of oil and has been a huge strain on their fiscal numbers and YPF has been showing declining numbers in production despite political pressures to increase investments to increase production.

One must wonder if Argentina is going to default if it does not appropriate assets. I do not have the numbers at hand but to take such drastic measures, one can either be trying to assert/show their "leftist/reformist" ways or seriously cash-strapped.

SouthGobi an opportunity or exit?

SouthGobi has been hit by 2 news.


Firstly, its auditors Deloitte & Touche LLP has resigned as auditors on its "own initiative". The statement itself does raise a huge question mark on if anything fishy is going on in SouthGobi.


Secondly, the more worrying part, the Mongolian government is seeking a temporary halt of exploration and mining licenses for the company’s flagship Ovoot Tolgoi coal mine, SouthGobi said, following Aluminum Corp. of China’s bid for control of SouthGobi. 


In my view, China has a great need for coal. Mongolia has coal. Despite China having loads of coal, the bottleneck of their railway infrastructure will not be solved instantaneously, other factors as well of course but I'll spare the details. China will exert its political will on Mongolia. Mongolia still depends on China and if I am not wrong, according to the statistics in 2011, Mongolia has overtaken Australia as the number 1 Coal exporter to China.


Mongolia still has to build on their infrastructure to access, if I am not wrong, Vladivostok for port access to export their coal. So for now, they have to rely on China. Although it seems like Russia is increasingly interested in mining assets in Mongolia. 


From an article I read online,


"A ton of coking coal from Australia costs about USD 185, while a ton from Mongolia costs USD 62. China imports coking coal from Mongolia through the Sehee border point."


China will continue to secure coal from Mongolia.


I believe this is a buy opportunity.

Vanilla cash deals... 444.HK and NCI.AX

444.HK offer price is 2.12. Last traded 2.10 . NCI.AX offer price is 1.84. Current price is 1.80 Will update this post with the screenshots from Merger Arbitrage Manager.

444.HK using Merger Arbitrage Manager.

NCI.AX using Merger Arbitrage Manager