There is nothing as fickle as the market they say and this saying certainly applied to Pathfinder Minerals yesterday ref the RNS put out HERE. We were left scratching our heads as to whether we received a different RNS to the rest of the market given the reaction to its contents. Looking at the volume on the day it seems that there were quite a few short termers (and some long term holders who have finally given up) that had been expecting the licence resolution to be resolved by end 2019. We believe these sellers will come to regret that action.
We are as frustrated as everyone else (and with good reason holding just under 30m shares) but we feel it appropriate to clarify a number of misconceptions and also ill judged criticisms of the Board. Firstly, the BoD cannot force Pathfinder Mozambique shareholders to immediately sell their shares. What has happened since we got involved near 2 years ago is that AFG have (a) got the buy in of the Veloso’s to the sale and (b) brought a funding and development partner to the table – this is meaningful and REAL progress. Issues in the Moz courts ref recognising the ruling are out of the BoD’s hands and they cannot force this either.
What we can say is that reading carefully between the lines in the RNS are the following key points:
- Continued discussions to try and unlock the remaining element to this long running puzzle have been taking placing and continue – “As announced on 24 October 2019, a period of meetings took place in both South Africa and Mozambique in that month between members of the Board, its representatives and various key stakeholders involved in the process of working to secure a resolution of the issues surrounding the Company’s previous interest in the Licence. Since then, two further rounds of meetings have been undertaken by Board representatives in Mozambique and South Africa to intensify the progress and further meetings are planned for this month” That shows a willingness all round to resolve this, particularly on the Veloso’s part.
- The all important “funding partner” remains in the mix and is “continuing with its due diligence”. To be in a position to, hopefully, close this deal and progress the asset is a long way from where we were just 6 months ago.
- This statement re now exploring “other funding avenues” we will leave for shareholders to read between the lines. If there are other avenues then this implies potentially multiple interested parties in the final resolution structure – “the Board has determined it in the interests of the Company to extend this agreement for a further three months on a non-exclusive basis. This allows the Board to explore other funding avenues unilaterally and to pursue other commercial opportunities where there is a clear synergy with the Board’s expertise and the Company’s natural resource focus.”
- If there had been a deterioration in expectations of a resolution, this statement most certainly would not have been put out by CEO John Taylor or sanctioned by the Nomad – “I continue to be encouraged by the progress made since our last update which reflects the considerable efforts of my fellow directors in relentlessly pursuing a successful outcome to the recovery of an interest in the Licence” and “The Board’s focus remains firmly on a successful resolution of the long-running dispute over the Licence and consideration of wider opportunities will not detract from that priority.”
I caution all shareholders to be VERY, VERY careful of certain postings on bulletin boards (in particular one that goes by the moniker “Riddler” and also “Helpful” on the LSE Board aka Stephen Lundy of Bespoke Capital Solutions and who is anything but “helpful” as his posts on Red Rock Res and Attis Oil & Gas illustrate for anyone that followed him) and social media forums where, sadly, less than honest and transparent intentions are at play and that are at a 180 degree opposition to your interests.
The RNS put out yesterday makes plain the following facts – ALL Pathfinder Mozambique shareholders are now engaged in the resolution process – a very important nuance that it seems the market missed – previously only the Veloso’s were engaged (holding 50%). Secondly, there is a funding partner at the table that is real and has the capability operationally and financially to close this deal. Finally, the penultimate para makes clear (and that we are most certainly 100% behind) – minimisation of dilution going forward for PFP is paramount in assessing other opportunities.
For the stock to be now valued as a de facto shell when the company is the closest it has ever been to resolution just shows the irrationality of the “market” aka other investors. Given that if the deal concludes, AFG have committed to take their £1m success fee at approx 3p per share, the CEO continues to take a good proportion of his salary at 2.75p per share (the last raise price) and options for him are at this same level, the incentivisation of key individuals and parties here requires a material restoration of equity value. That expectation remains intact per John Taylor’s sign off and AFG’s conversion commitment. Given this and the market now valuing the “optionality” of a deal conclusion at almost nil – in complete contrast to the reality of the RNS – we believe the stock price is now wildly dislocated from reality.
DISCLAIMER & RISK WARNING
Align Research & a director of Align Research own shares in Pathfinder Minerals and are bound to Align Research’s company dealing policy ensuring open and adequate disclosure. Full details can be found on our website here (“Legals”).