Hi EZ,
As always thank you for your posts. Instead of referring to the Cerro and AMC privateco deal as a “merger” I think we should look at it as legally being an “asset sale”. The old “Cerro” bought the ADL from AMC privateco. They paid for it with 6.65 billion old “Cerro” shares. As I understand it, there is an old “Cerro” certificate with a restrictive legend on it sitting in the coffers of AMC privateco. It has the old 9-digit alphanumeric Cerro CUSIP # on it.
Subsequent to that there was a name change, issuance of a new CUSIP # (since Cerro and Auryn start with different letters of the alphabet and CUSIPs are alphanumeric), rollback, etc. It’s the same corporate vehicle as the old Cerro but it just has a different CUSIP identification #. So now picture a cert in AMC privateco’s coffers with the new name (Auryn Mining Corporation) and new Cusip # for 66.5 million shares (post-rollback). If we refer to it as “AMC” or “AMC publico” we need to keep in mind the “C” refers to “Corporation” and not “Chile” as in the past. It’s not immediately clear if the TA physically cut a new cert or not. This could all be by journal entry.
The various “participant” clearing firms (that own the NSCC division of the DTCC) need to be polled to see how many of the 66.5 million shares they deserve on a 1-for-100 basis on a specific “settlement date”. We will no doubt be forewarned about that date. The TA will either cut them a cert or journal entry the proper amount. The clearing firms only need one omnibus cert for all of their Medinah shareholders. Typically there has to be a cut off date at which Medinah stops trading and the accounts get credited with AUMC shares so that liquidity isn’t impaired.
If AUMC is trading well north of $1 the old Medinah shareholders might get treated a whole lot better than before when it comes to accepting certs, etc. At this point in time AUMC may or may not be trading on the OTCQB or OTCQX. I wouldn’t be surprised if Western Troy’s TSX.V listing is somehow involved but who knows with all of these “Masglas’s” and “Masglas Peru” running around. There are handy linkages between the TSX.V and the various bolsas (stock exchanges) in Lima and Santiago. Foreign investors like dealing in familiar environs and I would assume that Maurizio’s “berry patch” is stronger in S. America versus NA.
In essence, the nominal owner of the ADL i.e. privately held “Auryn Mining Chile, SPA” went public. The “reverse split” or “rollback” or “share consolidation” was not your typical “reverse split” which usually has a negative connotation to it. This is because the old “Cerro” with 350 million shares o/s ALREADY OWNED 5% of the asset. The transitional form of Cerro had to have 7 billion shares temporarily o/s in order to make the math work. All but 350 million of them remain “restricted” today. There never was an iteration of Cerro with 7 billion free trading shares issued and outstanding. This does not represent “dilution”. All Cerro and Medinah shareholders still own the same tiny percentage of the ADL Mining District. The past corporate governance miscues of Medinah did lead to genuine dilution.
A different way to think of this is that our individual tiny percentages of the ADL got “repackaged”. Medinah with 3 billion shares o/s and corporate governance issues up the cazoo was never “promotable” to the investment community even when it was just a simple “holding company” with no overhead. The new streamlined vehicle is very promotable especially with guys like Dick Sillitoe and Hochschild as part of the team. Unfortunately, since Cerro was not fully reporting to the SEC under Sections 13 or 15(d) of the 1934 Securities Exchange Act the restriction period is the full 12 months instead of the 6 months for “reporting issuers”.
I think what everybody is trying to figure out is will the share price of AUMC crater when those restricted shares become unrestricted. IMO, absolutely not because Maurizio et al hold about 75% of AUMC’s 70 million shares. Although they will be technically free of a restrictive legend and “unrestricted” they still remain under the partial restrictions of Rule 144 because they are technically “control” shares. These can only be sold in quarterly dribs and drabs after the “affiliate”/“control person” of AUMC files a Form 144 warning us that they are about to release a drib or a drab i.e. a maximum of 1% of the number of shares o/s on a quarterly basis. I agree with Kevin, I doubt we ever see those shares in the public market. “Control persons” desiring liquidity arrange tender offers.
As far as the likelihood of the Medinah shareholders dumping shares once the restriction lapses if you study the share price performance and volume numbers over the last 10 years the average Medinah or Cerro shareholders needs about a 5-8 “bagger” from today’s prices to get back to even. If most of these guys were into taking their losses and gaining a write off they’d have done it by now. They’ve had plenty of liquidity to sell into over the years. Now you have a JV with Hochschild on the books which should provide steady news flow for a long time. Maurizio has never had anything to “promote” nor did he have many promotional bullets. In the development phase of an asset like the ADL, very large amounts of money are going to need to be raised either through JVs or a variety of other means. The share price of AUMC will become the “corporate currency” sitting in your back pocket while at the bargaining table. The incentive to promote as well as the ability to promote have never been present in Medinah’s past. There has never been a corporate entity that was “promotable”. Technically, our hope should be that with good news flow we have pretty much clear sailing until we hit breakeven points for our weary colleagues. We humans are just lousy at taking losses.
On a sidenote, if “CDCHD” is trading tomorrow morning then figure on Sept. 12 or so for being the change over date to “AUMC” i.e. the 20-day lifespan of “CDCHD” referred to “trading days” and not calendar days. The OTC MarketPlace appends a “D” to the 4 letter trading symbol to indicate a “new” entity formed by some type of “corporate action”.
