Excellon Resources - Otis Gold

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#1 Tue, Feb 25, 2020 - 12:58pm
silverseeker
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Excellon Resources - Otis Gold

Excellon Resources link

One of Eric Sprott's many Silver holdings; they announced intention to acquire Otis Gold; another example of the Primary Silver Miners needing to seek out Gold resources.

This looks good in the context of much higher gold prices; relative to market cap of the combined company... worth monitoring given the present price action. They have a corporate slide deck detailing the proposed transaction at:

Slide Deck Link

Edited by: silverseeker on Feb 25, 2020 - 1:08pm

killing the banker Ponzi one ounce at a time

Sat, Feb 29, 2020 - 2:37pm
ArgentumHawk
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At first glance, it looks

At first glance, it looks like a good transaction. In my view, the key to this transaction is:

1) Not just that this is a primary silver miner diversifying into gold, but that Excellon (as per the slides you linked) will be moving from approx. 50% precious metals / 50% base metals exposure to 90% precious metals / 10% base metals exposure. This is a huge transformation, and will allow them to leverage the precious metals bull market that we are (hopefully) in the early innings of. I think the fact that they had so much base metals exposure is one of the reasons Excellon's share price has lagged some of it's peers in the last few months.

2) Geographical diversification into the mining friendly district of Idaho reduces geopolitical risk.

3) The proposed listing on the NYSE. This will increase the exposure to this company, improve its profile, and will improve liquidity. This in itself might be enough to bump the share price a bit higher.

That said, corporate finance / mergers and acquisitions are not my forte, so it's hard for me to tell if they are paying a fair price here. The slides say Excellon is paying a premium of 47% and 55% based on the spot and 20-day VWAP of Otis Gold shares on the TSX-V. How does the volume weighted average price work? I'm asking this, as since the date of this announcement (Monday, Feb 24th, 2020) to the close of trading on Friday Feb 28th, 2020, Otis shares have fallen by 12% (on TSX-V) and Excellon shares are down 23.44% (Toronto exchange). It appears a major shareholder (Eric Sprott) seems to approve and Sprott lending are providing some sort of bridge loan, and because Eric Sprott is no dummy, I assume this transaction makes sense.

All of the mining shares have been ravaged this week, and I suspect this is from some big players trying to raise cash and/or from general panic. My average price of Excellon shares is about $0.92, so I am down big time! I remember this sort of thing happening in 2008 though, and since gold/silver are supposed to be a safe haven, it made no sense at all, which is when I swooped in and made a huge bet (and ending up making a lot of cash). I suspect I'll be a buyer of the mining shares next week. Silver and gold prices dropped at the end of the week, but not by 20% - 40% as some of the junior mining shares I own have. This defies logic. Many of the companies I own shares in are silver focused, so they might have been hit harder than some of the gold focused plays? If this is the case, I suppose it makes some sense due to the fact that silver went down to almost 6-months lows and gold is still well above its 6-month low.

I just checked the gold/silver ratio - it's approx. 95! Ridiculous! I think it's time to buy a few more silver mining shares and add some more physical silver.

Mon, Mar 2, 2020 - 10:12am ArgentumHawk
silverseeker
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Tactical day trading versus investing in mining...

Argentum, your posted concerns and questions echo my own experience and observations. Since we are viewed as 'bag holders' by the professional sector traders whom play the miners as a momo-day trade; you just have to take a long view if you choose to hold any shares at all in the sector. Over several year time frames, if you dollar cost average into a position when the day traders are killing the share price; there's a fair chance at multiples returns when the sector bounces...

Having said that; the professionals have also KILLED many junior mining companies with their predatory short selling; causing huge stock share dilution while the juniors are starved of capital. Present question is what will occur in 2020 as this nCov event unfolds, and will Precious Metals finally overcome the manipulation paradigm of the last decade? If so, shares in juniors like Excellon are going many multiples higher; but the cash you deploy into these has to be non-core and patience is required!

killing the banker Ponzi one ounce at a time

Wed, Mar 4, 2020 - 8:23am silverseeker
ArgentumHawk
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I think the mining shares

I think the mining shares will eventually overcome the manipulation we've been seeing in the past number of years. All it will take is a little more interest in the sector and demand will outstrip supply (even with the day traders pumping and dumping the shares of mining companies). The interest WILL come either when precious metals prices continue to rise and/or when many of the mid-large producers start to report some big profits as a result of rising metals prices. From there, investors will start looking for under priced stocks in the sector that have yet to jump as much as the mid-larger players, and I think at that point, money will begin trickling down into the jr. exploration and development companies (with a resulting bump in the share prices). That said, big moves often happen quickly, and as you mentioned, dollar cost averaging is a good way to make sure you don't miss the boat. Always best to buy in stages (with non core cash) and avoid panicking if the price of a stock takes a big haircut (unless the haircut is warranted and based on fundamentals).

I'm going to keep chipping away at Excellon in very small increments - have a limit order in today for another 1500 shares. Hoping to get a few more shares at these discounted prices.

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