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North American Palladium Ltd. Message Board

  • profi_times profi_times Feb 27, 2013 4:11 PM Flag

    Earnings Call transcript - Buyout?

    From the transcript of the Earnings Call (last page):
    I mean, there is a funding requirement that we're interested in. There's certainly been a lot of activity. I mean, I'm in week 5 here. So there are a lot of interests from a lot of different markets in terms of the company and the metal. So we think that the markets are completely open to us. But in terms of providing precise number, I guess I'm not willing to go there at this point in time.

    What is interesting: So there are a lot of interests from a lot of different markets in terms of the company and the metal...
    Of course there's a lot of interest in the metal given its recent price increase, supply/demand fundamentals etc... But what about the interest in the company???
    No analyst has commented on this... What does this sentence mean? Do I read between the lines that one or more companies are about to take over PAL for a penny? Maybe a joint-venture?

    I honestly hope not. That would mean the board gives away PAL for a penny on the dollar in my opinion.
    A joint venture would be nice, whereby the "other company" takes a stake in PAL, provides funding for development and in turn gets part of the Pd sales...
    Thoughts? :-)

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    • Profi_times,

      Seriously, where do you see any buy-out in these comment it is beyond me? Profi_times I thought you had more financial intelligence than that even if you put this under a question.

      But of course, I really would like that a bunch of people like you believe in that for one more day or two it will work very well for my trading! then let's believe in it ☺

      Languille (the eel in French l'anguille) was just telling shareholders that financing is coming but the Board of directors was evaluating the best financing available to get the money for the Phase I of LDI shaft without harming too much the shareholders(really do not know how?).

      If you remember the last F10 it is a shelf registration for $300M which means it is highly probable that financing will be deducted from this...2/13/2013 F10/A last.

      "North American Palladium Ltd. (“NAP” or the “Company”) may offer and issue from time to time common shares (the “Common Shares”), debt securities (the “Debt Securities”), warrants to purchase Common Shares and warrants to purchase Debt Securities (together, the “Warrants”), and subscription receipts (“Subscription Receipts”) (all of the foregoing, collectively, the “Securities”) or any combination thereof up to an aggregate initial offering price of US$300,000,000 during the 25-month period that this prospectus, including any amendments thereto, remains effective..."

      I can tell you right away that no matter how careful the board will be and what financing will be agreed, it will cost with some % loss in pps, dilution by increased outstanding and warrants at least for few weeks perhaps.
      But, if it is used to complete the LDI Phase I shaft by Q3/2013, then it is perfectly fine and should not be a catastrophe but another opportunity to buy. ☺

      Now, if you look at the board history etc will see that it is time to reshuffle the "team" and it is exactly what PAL intends to do and probably with the release of a new CEO.
      This is a matter of shareholders approval and it is as simple as that.

      Good luck,

      • 1 Reply to bigblue904034
      • 1) PAL has done extremely stupid things with the gold division and wasted lots of shareholders money.
        2) PAL needs money in order to devlop its mine, which - according to management and many analysts - is a world-class palladium mine.
        3) PAL is running out of possibilities to raise capital: outright bank loans are highly unlikely, as they have already guaranteed other loans using their working capital.
        They have of course the option to dilute shareholders even more, and will likely do so. Maybe they will do a "Bernanke": print shares (money) to infinity, until the value of such prints becomes less and less effective (read: more dilutive).
        4) PAL has no CEO. This creates uncertainty.
        5) PAL has written down the gold division to almost 0, when compared to the money invested.

        For the above reasons, PAL is Cheap. In some way it's justifiable (given the mistakes of management and uncertainty), but in my opinion, PAL is TOO cheap. And in my opinion, there are many other players out there who DO have the capital and who think exactly the same.
        Think about it like this: PAL has invested like 250M in just 2.5-3 years time. It's market cap yesterday was only 250M, which is equal to the amount that has been invested to expand the mines.
        So based on the market cap, you would only pay for the expansion itself, and get all the properties for free. And yes, there's 100M in debt, but for a company that has the capital, that shouldn't be any problem.

        Think of it like a property (PAL). Your neighbour once had a very nice house (PAL: Pd. mine), and decided to upgrade it with a swimming pool, home cinema etc (PAL: Mine expansion), and he uses 250 (PAL: 250M). The house carries debt of 100 (PAL: 100M).
        You know your neighbour will get a divorce soon, and he needs the money. Wouldn't you go to your neighbour and say: I give you 350 (PAL: 350M) and the property is mine? You basically pay for the upgrades (PAL: Mine expansion), and get the house+land for 100 (PAL: 100M) net...Total price would be 350 (market price + debt) (PAL: 350M).
        Fix up the house a bit (PAL: Management+Balance Sheet), get rid of the debt, and the house is suddenly worth 600 (PAL: 600M). You can list it for sale again, and wait until someone bites. As you don't need the money, you can wait a long time, and still get a very nice return on your money. Or you can decide to rent out the house (PAL: mine the Pd.), get cash flow, upgrade it even more (jacuzzi, sauna, extra bathrooms,...) (PAL: exploration, add properties,...) and make it even more valuable.

        If you can buy something below cost price, you will most likely get a decent return if you have the time to wait. It's as simple as that.

        Either it's you (not me) who has little financial intelligence, or you are blind.

        When they say "there are a lot of interests from a lot of different markets in terms of the company and the metal", then that could of course mean "supporting" the company by providing funds (participate in equity financings, giving loans,...) OR it could mean that the "interests in terms of the COMPANY" are pointing to something more (buyout, joint-venture,...).
        Not ruling out any of both, as they are both distinct possibilities. Time will tell, but given the cheapness of PAL, I read between the lines that something is going on behind the scenes.
        With regards to the "Board" to decide, that also leaves both options open (financing or Sale), but since PAL's financing possibilities are rather limited to share issuance, I don't think the board needs to think that much about it as they would have to do about a $3 takeover offer.

    • To be serious: profi_times has taken the time to study the earnings call transcript and found an important indication that the company is looking for a buyout. Our thanks should go to profi_times for doing the due diligence that makes SOME of these posts on Yahoo a valuable resource!

      • 1 Reply to tristrem
      • I appreciate profitimes' posts. This particular issue was brought up the same day as the CC, though (I believe Bell posted it). I also thought it was interesting when I heard it on the CC, but found it difficult to interpret if the "variety of alternatives" or "interest in the company" included a legitimate buy-out proposal. It could be just various financing alternatives, or could have included low-ball buy-out bids. Certainly, the last couple hours of trading today makes one re-consider the possibility of a decent bid. Once again, there is plenty of room for interpretation and speculation.

    • One possibility would be that another company actually buys shares in PAL (usually at a premium), and end up owning say 10-20%.

    • Nathan Littlewood - Crédit Suisse AG, Research Division
      You can be vague, if you want. Have you got a range in mind? And are you willing to talk about the types of solutions that you might be looking at?

      David C. Langille - Chief Financial Officer
      Well we've had a variety of people approach the company with different alternatives. Having said that, obviously, very cautious of shareholder value and dilutive effects, but we are looking at a variety of alternatives and the board will have to consider those.

      -- Well we've had a variety of people approach the company with different alternatives.
      we are looking at a variety of alternatives and the board will have to consider those.


    • I wouldn't have any problem selling my shares for, say, $3.50 to a company that wants to buy me out.

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