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SolGold update

Pursuant to his comments earlier this week, John Cornford provides an update on his view of SolGold.

Just to add to my thoughts 9th December on Solgold’s 17th December AGM, and the dangers of an increase in its authorised share capital. 

If Nick Mather is charged with risking diluting shareholder value by funding further exploration through expanding Solgold’s share numbers too much, he has an answer. It is that exploration success at Alpala has already delivered a $4.2bn NPV by spending a total there of only some $200m so far, and maybe $300m by the time it can be financed in a year’s time.

The counter to that, of course, is that Solgold’s market cap (now about $950m) has nowhere near kept pace with that NPV. On the other hand, it is now some three times the total Solgold has spent on exploration at all its properties. Up to last September that was $245m, and by mid 2021 will be around $320m.

So, the argument remains. If the value investors will place on Solgold’s exploration results can be guaranteed to increase more rapidly than its shares in issue, then Mather will be right. 

But even if that happens, the share price increase might be slower than it would be if (e.g.) Alpala is ‘monetised’ in some form (to limit dilution) earlier than the eight years or so before it will deliver cash if Solgold retains it.

The issue might not come up at the AGM. But it is bound to loom in some investors’ minds.

John Cornford: John is semi-retired after 40 years in City research of one sort or another covering most sectors, and an earlier career in the MoD and management consulting. As well as institutional research he has also long taken an interest in research for private investors, editing the long established and top performing Investors Stockmarket Weekly in the ‘90s, and later Small Cap Shares. In the noughties he worked for seven years with Hardman and published his own research for institutions via his FourSquare Research. He believes it is scandalous that the FCA’s misplaced rules have denied quality research to private investors - leaving them at the mercy of bucket shops and tipsters.