The mining data may be difficult to value, but it is the reason GRZ got to the table with the MOU. GRZ always kept their Brisas data in house but all of the Cristinas data produced by Placer was available to everyone. Doug and the team did a lot of design work on a combined Brisas/Cristinas mine only to be pushed out at the finish line by Crystallex. There is a story there, but I doubt it will ever become public.
It seems that the Crystallex shareholders might get up to 40 cents a share .... providing Vz pays in full and nobody else gets their hands on any settlement money first.. The company is still effectively bankrupt and the common shareholders only have 12% of the company and absolutely no leverage with their financiers or their management. A very sad state of affairs for the shareholders in Crystallex.
The market seems to be unfazed by this placement. Most "bought deals" done in Canada are sold short by the promoters for as long as the market hold up above the deal price. Hold periods are easily circumvented by the robber barons of the TSE.. That being the case, it seems that whoever is buying this placement intends to hold the shares until the payoff comes. I can see the need for extra cash if Venezuela is going to move quickly on the JV. People will have to be hired, equipment ordered etc. and they will need cash in hand to get that done quickly.
Hmmm ... "certain arm’s length investors" sounds like a sweetener deal to me. Not necessarily a bad thing as it gives GRZ some spare cash as a buffer while the JV is being settled.
You are absolutely correct georgev. These negotiations are clearly at at crucial juncture and Doug does not want to make public announcements that may upset or unsettle any of the parties and put the deal at risk. Politicians can make outlandish statements and get away with them but company officials cannot. What is clear is that Venezuela have to be far more responsible in dealing with foreign investment than they were under Chavez if they are going to survive. Because of this there is a big incentive for them to make it work. The bankers need some assurance that there is someone guiding the building of the mine who has the information and ability to get the job done so their money is protected. Doug and his board have built a successful mine from scratch before and I think they can do it again.
I recall discussing this topic some years ago. A lot of water has flowed under the bridge since then but he was very committed into maximizing the shareholders actual tax paid return. GRZ does have tax losses which may be able to be applied and I assume they will be credited where ever possible. Depending on your location and the account you hold the shares in, paying the award to shareholders as a special dividend may be the best. Others would prefer a long term capital gain, if they don't get a tax break on the dividend. Designating the payout as a return of capital could be best for some stock holders but this will all be a matter to discuss when there in money in GRZ's bank account to be distributed.
nrschevy, I've seen this before on the pinks, and while I had absolutely no intention of reducing my GRZ holding it was clear that the market makers were going for the jugular, letting it run up until the buyers thinned out and then running it down with short selling and progressively lower 100 share sells.. I didn't think they would get it back to as far as they did, but I didn't want to lose any of my stock either so as soon as I saw a $0.75 US profit I took it. I also think Doug got a good deal but until financing is firm the market is going to remain uncertain. An announcement of a decent financing deal will immediately bring the share price back to new highs and there will be a very small window to buy in when that occurs.
agtavy. Don't take too much notice of the quoted prices. The GDFZF market makers are manipulating the price with 100 share trades and there is significant short term short selling by the market makers. This is typical of the pink sheets. They won't even post bid ask or size on the US market but they are still trading.
I make no apologies, I sold 10k at $7.90. The robber barons on the pink sheets won't even post bid ask figures for GDRZF so you have the extrapolate back from the Canadian book. They always arbitrage the difference so the prices don't vary much. There is a seller in the $5.10 to $5.20 range on the US market which looks to me to be a reasonable buy point. By the way I bought back the 10k I sold earlier a few minutes ago for $5.15 so I am flat with my GRZ holdings but made a few extra dollars for beer money.
There is likely to be some gut wrenching volatility and all the "quick buck" traders will be trying to shake shares loose with every trick in the book. Remember their computers can beat you to the trade every time and they cancel more orders then they fill just to create confusion and panic selling (and buying). Play it cool until a proper market price is established.
Good question agtavy. It seems that there is no immediate proposal to shut down the company. Why would they? 45% of Brisas and Cristinas is a bigger deal than 100% of Brisas alone, and having the government as the other partner should help with permitting, duty, taxes etc. I would suspect that GRZ could act in a consultative role and then it put itself up for sale once the details of the JV are ironed out. There are a few majors who would be prepared to take on the role as operator of the combined mine considering the huge reserves, providing they could depend on Venezuelan cooperation.
SPOKANE, Wash.--(BUSINESS WIRE)--Feb. 29, 2016-- Gold Reserve Inc. (TSX.V: GRZ) (OTCQB: GDRZF) (“Gold Reserve” or the “Company”) announces that it has entered into a Memorandum of Understanding (the “MOU”) with the Bolivarian Republic of Venezuela (“Venezuela”) that contemplates settlement, including payment and resolution, of the arbitral award (the “Award”) granted in favor of the Company by the International Centre for Settlement of Investment Disputes in respect of the Brisas Project, the transfer of the related technical mining data previously compiled by the Company, as well as the development of the Brisas and the adjacent Cristinas gold-copper project, which will be combined into one project (the "Brisas-Cristinas Project") by the Company and Venezuela.....
.... The Brisas and Cristinas properties, together with the technical data with respect to the Brisas project owned by Gold Reserve, would be transferred to a Venezuelan mixed company, which is expected to be beneficially owned 55% by Venezuela and 45% by Gold Reserve. The Company is also expected to be engaged under a technical assistance agreement to provide procurement, engineering and construction services for the project. The parties would also seek, subject to the approval of the National Executive Branch of the Venezuelan government, the creation of a Special Economic Zone providing the establishment of a special customs framework for the mixed company and other tax and economic benefits.......
..... After settlement of all of the Company's obligations, substantially all of the net proceeds of the payment related to the Award and technical mining data is expected to be distributed to our shareholders.”
So the shareholders get the money they would have under the ICSID award plus the company gets back 45% of Brisas & Las Cristinas.
It seems Doug managed a coup!
Of course there is still the rider that the JV requires "the successful negotiation and execution of definitive agreement
Give him a chance to catch his breath; I think he would be pretty busy right now, and there is no way he could tell us anything in advance of the official release. I suspect that with the bond payment coming up last Friday, Vz didn't have the cash to pay it and GRZ as well and they had run out of delaying tactics which left them no room to maneuver..
In other words The old adage applies. When you have them by the gonads, their hearts and minds are sure to follow.....
"not an official Government statement" ? No of course not, but the point is that the opposition are just as committed on this issue of restoring international confidence and honoring contracts as Maduro now is.. It makes the deal more certain even if the government does change.
Quote from Leopoldo López (jailed opposition leader)
"To this end, we must restore global confidence in Venezuela as a nation that respects the law, human rights and its obligations to others. We must rebuild burned bridges with some of the world’s most respected institutions, including the World Bank, the Organization of American States and the Inter-American Court of Human Rights — not to mention dozens of countries in this hemisphere and elsewhere. Our practice of aligning primarily with the pariah states of the world must end.
Furthermore, we must demonstrate that we will stand by our agreements with other nations, foreign investors and anyone else who does business with us. The practices of arbitrarily seizing assets, reneging on agreements and withholding promised payments have turned Venezuela into the world’s most unreliable partner; changing this reality and this perception must be a top priority."
I am heartened that the present Venezuelan government and the opposition both see the need for this major reform and Maduro seems to be making this GRZ deal his poster child for this reform. . To read the Washington Post piece just do a search for the heading of this post.
It cost $300 million to generate and years of time. The value to Venezuela is more than that in the time saved. The cost to produce it again would be far more than $300 m and even with the best of intentions would take several years. Venezuela doesn't have years; it needs a believable route to generate dollars that doesn't depend on oil revenues, and it needs it quickly. I don't believe that anything like full production could be achieved in 6 months, but a quick and dirty operation to start limited production of metal while the major pits are being developed should be possible within a year if the government cooperates and the finance can be sourced.
It seems that Crystallex is left out in the cold. When a company commences an ICSID action they have to give up all claims to the actual property. ICSID awards do not and cannot of themselves include return of the property. They are restricted to purely monetary damages. The fact that GRZ apparently have regained the concessions is entirely divorced from the ICSID award, but clearly some "horse trading" has occurred. GRZ had the box seat here in that they had a firm and enforceable award granted by the ICSID and they have the mining data which allows a quick restart of mining. GRZ also has much of the fairly extensive La Cristinas data which was mainly developed by Placer Dome way back in history. Crystallex only drilled a few more holes to verify the Placer results at La Cristinas. Also Crystallex is not in a position either financially or as an organization to get a mine operating quickly. Mind you, it will take GRZ some effort, but I hope the deal allows them to involve capable partners who can help. One thing is certain. Venezuela needs the cash gold will generate so regardless of who is in power they will be committed to getting production started ASAP.