The Big Question on this subject is how much, if any, will the award be? It's not uncommon for the ICSID to award 25% to 50% of the claimants' original requests.
So, it's a gamble for Doug. If GRZ ends up heading for a $500 million award and VZ is willing to settle for anything more than that, not settling is a mistake.
New filing today. Ijf anyone wants to guess what it means, have at it.
(replace the three instances of "DOT" in the URL with a period.
Doug has said he intends on passing as much value of any ICSID award onto the share holders.
Aside from handling the award in the best way from a tax standpoint, what else can be done to maximize value?
How about a tender offer for shareholders from a particular date?
Or a one-time ex-dividend?
Or a buyback of as much of the float as possible? Even a smallish award could accomplish this.
Or taking the company private and liquidating it at book value. This will be difficult if there is payment schedule over a period of time which will probably be the case IF there is an award ;)
Ultimately, shareholder value will go up with the stock price which the company doesn't have much control of. The stock price will only go up if there are buyers of the stock.
I saw the article. On the surface, it does seem like good news for GRZ, however, unless GRZ or VZ sues in the US court system, the SCOTUS ruling has no jurisdiction. GRZ is technically a Canadian company. NML Capital is presumably an American company.
Perhaps GRZ could file suit in the US (or can they?) against some US companies that hold VZ assets but it's not clear the cited case above will provide precedent with GRZ v. VZ. Any new suit might have to be tried from square one.
That's good news. I was guestimating taxes would be 25%. Another poster thought 30%. So 15% is a nice surprise, especially coming from the only person who would know.
The next question based on Doug's statement is: How would the "pay out" to share holders he mentioned be carried out. The pay out doesn't sound like the share price going up in the free market. That only comes from demand from buyers of the stock and there's no guarantee that will happen or to what degree. The company has no control over that.
Thanks for giving us that info, Marsha.
One option I'd like to see considered is liquidation of the company. I definitely don't want to see a mine built and don't want anything to do with VZ.
The good thing about liquidation is the stock price should be somewhere near book value and thus any discount should be very limited.
However, most consquential ICSID awards have structured payouts and are spread out over years, with interest. That makes liquidation more difficult unless some third party steps in and pays off the shareholders a discounted sum and then takes ownership of the settlement. If that's even possible.
If there is an award.
e_scott, not everyone here is as smart as the next guy. Everyone is speculating. This could be a formality as I and others have suggested as one possibility. If that's true, why not register all of the shares?
They could fully intend to sell the shares as soon as the shares are registered. We don't know. That's why we have a discussion board.
thevet, that makes sense if that is Steelhead's intent, but this isn't on the news wires, nor on the company's web site. If they want to keep the price capped, being silent about the registration to sell doesn't make much sense.
Good conversation on this topic.
First, Steelhead only registered those shares for sale. I don't know if that means they MUST sell or necessarily WILL sell.
Merely registering those shares for sale could benefit Steelhead somehow.
While you could be right, and they're taking money off the table, they've had a lot of time to do it. Why wait until the 11th hour?
Unless they've lined up a buyer, they might be selling on the open market and the share price could very well plunge to $1.75 regardless of the ICSID case.
Not only do we not know the "why", but we don't know the 'how" or "how much", either.
Heck, the ICSID case could conclude before they sell those shares.
No idea why, but that is 15% of the total shares outstanding. Selling ANY shares when you're expecting a possibly large award doesn't make sense. Unless they're not expecting that award.
Even if the share price goes up 10 cents, they make over $1 million.
Steelhead is Big Money. It's important to watch Big Money when investing and this is bothersome.
I don't know how they can possibly sell 11 million shares on the open market when only a few thousand shares trade daily. They wouldn't be able to do it. So a private, direct sale makes more sense.
So we go back to why....maybe they won't actually sell. Maybe it is some formality for a reason we don't know. Maybe they are starting a new fund or a new company and are moving these shares into it.
Maybe GRZ management made a direct offer to buy those shares for their personal holdings.
The filing did say GRZ will not get any proceeds from the sale.
For tax reasons? I don't pretend to know what's in the corporate tax code to guess how this could be related to taxes but maybe just registering the shares to be sold gives them something.
In the company's latest filing, it looks like Steelhead intends to sell 11.7 million shares of its GRZ stock. Hopefully this is a private, pre-planned sale, or better yet, a move of shares from one of their funds to another.
"Securities to be offered by the Selling Shareholder: 11,707,979 Class A Common Shares of the Company held by the Selling Shareholder. The Securities explicitly do not include (i) any outstanding Class A Common Shares or (ii) Class A Common Shares that may be issued to the Selling Shareholder upon the conversion of the Company’s Modified Notes that are covered by the Company’s registration statement filed with the SEC on Form F-3, file number 333-186851.
Terms of the Offering: The Selling Shareholder will determine when and how it will sell the Securities offered in this prospectus.
OTCQB Symbol for Class A Common Shares GDRZF
TSXV Symbol for Class A Common Shares GRZ.V
Use of Proceeds: We will not receive proceeds from the resale of the Securities by the Selling Shareholder"
Details are in the link below, on pages 11 and 21 ("Selling Shareholder)
(In the URL, replace the two instances where you see the word "DOT" with periods)
This is a quote from the company's news release on September 28, 2010, during the arbitration process:
"Gold Reserve seeks compensation for all of its losses caused by Venezuela’s breaches of the BIT, including the full value of its investments in the Brisas Project and in Choco 5 prior to Venezuela’s breaches of the BIT, and other related damage."
So losses and damages ARE included in the case.
Camerotton, one other thing to add from your post about the valuation....
While most of the valuations seem to be roughly inline, VZ must have some claim to the value of the property and the resources within it.
In other words, it's doubtful that when GRZ was in control of the property, they could have put it up for sale and walked away with $1.9B.
GRZ was not the owner and so a serious discount has to be applied in order to come up with some reasonable amount GRZ is entitled to as the property's concessionaire.
There had to have been something contractually that gave VZ legal entitlement to a percentage of what was mined.
Camerotton, I didn't realized the details of the suit were available. I assumed it was part of the secretive nature of the case.
I can offer some input on the interest. If the Occidental vs. Ecuador case can be used, awarding interest is common. The tribunal explained in the award statement that in previous cases, there has been precedence to add interest into the award, and in a majority of the cases, the rough formula used was the 6-month libor rate compounded monthly over the period. In our case, it would probably be September 2009.
That award statement is several hundred pages, but very interesting and thoughtful. Even skimming through it is worthwhile.
If GRZ wins, I'm guessing as an award they'd get most, if not all, of what put into or lost on the project.
I can't see the tribunal giving much monetarily, if anything, for the potential unrealized profits GRZ would have earned had they been able to actually mine.
Those profits weren't expropriated. They are still in the ground.
knowledge, I read your post again and pulled a quote you made:
"unless the Chinese step in to bail out Venezuela before the award is announced, GRZ will get the restitution of the mine, which is actually its primary request in its ICSID claim."
Is this even a possibility? Does GRZ actually want the mine back, and is that something they are specifically suing for?
If GRZ is not seeking control of the mine as restitution, can the ICSID force VZ to honor the contract they signed instead of giving a financial award?
I can see this as a possibility, with the tribunal facing the possibility of awarding an unprecedented monetary figure, but wary of doing so, and avoids this by giving GRZ rights to the property back.
I think along with this scenario, some financial component needs to be added to make up for what GRZ actually lost. Then little or nothing being given for the unrealized profits from the lost mine.
This is what I remember, concerning debt at the end of 2012:
"The Company restructured approximately $101.3 million of its $102.3 million total Notes for $33.8 million in cash, $42.2 million in equity (representing 12,412,501 common shares at $3.40 per share), $25.3 million in new two-year Modified Notes (5.5% yield and convertible into common shares under certain circumstances at $4.00 per share) and a Contingent Value Right (“CVR”) to be distributed pro-ratato the participating Note holders totaling 5.468% of any award or settlement of the Company’s ICSID arbitration."
Thanks for taking a stab at it.
It looks like Mr. Market has priced in an award of approximately $500mm with your numbers.
I think if GRZ is victorious, $500mm is probably a safe award. VZ could probably live with that, but will still probably do what they can to delay.