Wednesday, May 20, 2015

Chidliak Royalty Part II

The issue with the Royalty and South32 is still in the courts.
Currently it is in adjourned status...that means that the ability to deal with the issue has been deferred or delayed to another date. It looks like the South32 demerger from BHP has to happen first and then dealing with the fallout of the royalty will happen.
South32 will become independent of BHP and then there could room to settle the royalty between the 3 entities. With South32 in transition, it is not quite independent...but BHP may still not be at the liberty to make arbitrary decisions..such as the royalty.

This will eventually get worked out and there is a strong possibility that Peregrine Diamonds will retain back the royalty and dissolve it altogether.

The problem is that Peregrine Diamonds is actively looking at raising more money for the Chidliak project. Possible partners would be a consideration.

Whether it is Chai Tai Fook taking a 20% stake in the project or the companies shares or Zijin mining doing an stake similar to the Ivanhoe deal.

Other alternatives would be Dominion diamonds taking over 20%, 49%, 51% of the project up to Feasibility and/or construction. De Beers might still be interested in taking another run at a deal with Chidliak.

Safe to say, there are various alternatives here and some might serious considerations and some might be irrelevant.

Point is, the royalty does play part in any of these negotations. If you were a suitor looking to invest in Chidliak, wouldn't you want a full % and not be tainted with a royalty. If there were a royalty..you may ask for more concessions in the deal.

I don't believe the market will get any word of a financing or partnership at any time up until the royalty issue has been resolved.

The South32 demerger (no matter how irrelevant and far away from Nunavut) may indirectly cause financing/partnership plans from being delayed.

Peregrine Diamonds does have significant money in the bank right now, but it is looking at aggressive longer term plans that involve more money and that time does tend to run faster when you are burning through money and haven't raised any additional money.

These 2 issues (royalty/financing) have now been intertwined and the market and shareholders are strictly in a waiting mode.

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