Suspect a deal in the making between Lumina Copper (V.LCC) and Cascadero Copper (V.CCD).
On Friday both companies issued Taca Taca claim press releases. Was it a coincidence? Or was it coordinated?
On Friday both companies attracted some buying. Noticeably V.CCD which has attracted steadily increasing buying over the last few days when usually there is little or no volume. The V.LCC shareprice was supported strongly after a recent sharp decline. That makes two purported coincidences.
Moreover, the bid price of SML.V which owns one-fifth of V.CCD has also advanced.
That's now three coincidences.
V.CCD neighbours V.LCC. V.CCD is a shareholder/partner in 3x as much land as V.LCC that is directly adjacent to V.LCC.
V.LCC currently has a market cap of $364m.
V.CCD currently has a market cap of $19.5m.
V.CCD has just completed a drilling programme on land adjacent to V.LCC and assays are expected soon. If V.CCD drill results are anything like V.LCC's then the market cap of V.CCD should conservatively be 3x the market cap of V.LCC (because V.LCC can only drill in to approx. one third of its own claim).
What incentives are there that these two companies might make a deal?
V.LCC's strategy is one that V.LCC's board has executed/proven before. Lumina proves a resource, maximises the exploration value, and then sells it (allows it to be taken over).
So why hasn't V.LCC already sold its claim? Their board is on a fast track for a takeover. There must be an obstruction since the proven resource is exceptional. The most likely reason is that potential suitors cannot build a mine on Lumina's claim as it currently stands. Therefore LCC.V needs to make a deal with an adjacent claim to make the building of a mine feasible.
Why V.CCD? The other adjacent claims belong to BHP and Teck. Who would you rather make a deal with? The company that is easiest to make a deal with is the smallest company or smallest partnership. After all the suitors of V.LCC are most likely to be BHP or Teck and they are likely to know exactly what V.LCC has got and what is and what is not possible. Both would be hard to bargain with.
However, if a deal is made with V.CCD then V.LCC won't have to bargain so hard. It will have exactly what is required and all any potential suitor will need to do is decide on a price and sign along the dotted line.Moreover, V.CCD is not currently a potential suitor to V.LCC. It might be at some point in the future but not currently.
And how would V.CCD benefit? Methinks mostly, through the publicity generated and investors attracted to V.CCD.
I suspect that V.LCC will make some kind of deal with V.CCD and as soon as that deal is made I also suspect that V.LCC will be taken over. I wouldn't be surprised if a suitor isn't already sitting on V.LCC's shoulder waiting for the deal to be made.
So, if the market cap of V.CCD should theoretically be 3x as much as the market cap of V.LCC what would be a logical shareprice for V.CCD?
V.CCD is currently at 0.155. If V.CCD has 3x the market cap of V.LCC then V.CCD's shareprice should be at around $8.68.
But there's more. V.CCD also has a claim a little further north that is not adjacent to V.LCC's claim. That is likely to turn the 3x in to 4x and a shareprice of $11.57.
And if we look at V.LCC's best shareprice which was double the current price that would result in V.CCD at $23.14 per share.
That is a potential increase of 150x the current shareprice for CCD.V.
Is this fantasy or is this real potential? I don't think that this is fantasy because the coincidences are compelling. But as always, do your own research and makeup your own mind.
Then there is the issue of what price V.LCC? Normally if a company makes a deal it might drag down the shareprice. But in this case the fact that V.LCC makes it possible for a suitor to take it over I would expect the shareprice to move higher, much higher, and fast. Where to. The highest high that it has had so far was just over $16 dollars per share. On good news it should at least challenge $16 dollars per share therefore I think the prospective takeover price for V.LCC will minimally be $16 per share. However, V.LCC has very loyal shareholders. I've seen them in action. They are highly motivated and work like an army of mercenaries. They will throw themselves through the $16 threshold.