Categories: Precious Metals
Topics: General Precious Metals

Mawson Gold (TSX: MAW)(OTC: MWSNF) Executive Chairman Michael Hudson on Plans to Restructure to Unlock Value

 

Gerardo Del Real: This is Gerardo Del Real with Resource Stock Digest. Joining me today is the executive chairman of Mawson Gold, Mr. Michael Hudson. Mike, how are you today?

Michael Hudson: Good morning from down under Gerardo.

Gerardo Del Real: Well, let's get right into it. We've had a lot of questions come in in regards to Mawson's latest announcement. Now we know, and we've talked about this many, many times, that the sum of the Mawson parts, in my opinion, were always very, very undervalued. And so Mawson just announced a restructuring plan to split into three separate companies. So we're separating four assets into three companies, and I wanted you to provide the context and then the motivation for the restructuring plan, and then we'll dig into some of the details here in just a bit.

Michael Hudson: Yeah, sure. Gerardo. It looks complicated, but if we can strip it down, it is relatively simple. So the four assets that Mawson management has created over the last few years together, what we believe worth less as one than the parts. And I think if you see the reaction that the market's given to this, the market sees that also. And there's a hell of a lot of value in built, we believe, to come. So the four assets are of course the million ounce inferred resource PEA stage gold cobalt project in Finland, Rajapalot. And that project had a PEA done on it, which articulated basically that more resources need to be found. So that needs drilling. We need to add a minimum, another half a million ounces there. And then rule of thumb, our economics of course, will look a lot better because the CapEx should stay similar and the NPV will increase dramatically.

So that's the key aim for Rajapalot. Let's get there, drill. We've done a lot of work reviewing and getting different eyes on that project this year, and there's a strong belief that there's step out potential, so low hanging resource fruit, if that makes sense. So that's asset number one. Asset number two is Southern Cross. Southern Cross is listed on the ASX, of course, it's got one of the most exciting discoveries in the space, and Mawson owns 51% of it today. It was spun out of course of Mawson in May last year, and listed on the ASX down under, and that's putting out hit rates of gold that are pretty much hard to beat globally and some of the widest and highest grade intersections that you'll see in the space today, so very exciting. And that 51% is worth somewhere around 75 million Australian, about 65 to 70 million Canadian dollars, and that position is escrowed by the ASX until May 16th, 2024.

Then the other two assets, the Sweden uranium assets, we've staked almost 23 million pounds of historic and 43-101 resources that are literally every hard rock conventional uranium resource in Sweden. The opportunity to mine uranium in Sweden or explore doesn't exist today, but the government is talking very positively about changing that. They've just removed a 30 plus year ban on building new nuclear power plants. They're 45% ingrained with nuclear power supplying their needs, and with nuclear, and hydro, and biomass, their carbon footprint is very low. The whole energy security argument has changed dramatically in Europe, of course, with what's going on up there. So basically we've got all the conventional hard rock uranium resources staked, ready and waiting, and a massive option on that legislative change should and if it happens.

And then the fourth asset is a Sweden gold discovery. We hit 1.8 meters at 28 grams there, and in a small program, the first ever program on that asset, it's expandable and in the shadow of the head frame of millions and millions of ounces, that's called Skellefteå Au Discovery, or Skellefteå Discovery, I should say. They're the four assets. Together, they're hidden in Mawson. At any one point over the last 18 months, Mawson has traded at a discount to its Southern Cross shares, and everything else is worth essentially zero, or seen as a liability. So we've been working hard to work out how to unpack that, but they're the four assets, I think. I'll put it back to you now to direct where you'd like to go.

Gerardo Del Real: Excellent. So let me put myself in a shareholder's position here and ask if I am a current shareholder of Mawson Gold, and I actually appreciate the exposure to all four of these assets and want to continue to have exposure to these four assets, what do I as said shareholder do?

Michael Hudson: Well, perhaps I can articulate what Mawson's management and board thinks is a very good plan. If you're a Mawson shareholder, and let's say you've got a hundred thousand shares in Mawson, what we are going to do, and we'll just carry that a hundred thousand shares, because it's a round number. What we're going to do is spin out the Finnish asset. Now that is being spun out into a new vinco, which is in a special vehicle. It's just been set up, it's called Springtide Acquisition Corp. It is got almost zero capital, just a little bit of capital to pay for a few financials to set it up and to start this transaction. And we're selling Finland into that company for $6,500,000 that Mawson will receive back. Springtide will raise 15 million, eight and a half will stay with Springtide.

So the EV on that will be six and a half million, which we think is very the lower end of the range. There's no doubt about that. But the key here is that every Mawson shareholder will have the pro-rata right to fund that company on a 20 to one basis. So then if you've got a hundred thousand shares, you'll have 5,000 shares you can buy at $1 each into that new company. That will create an exceptionally tight, very well-funded company that we believe should trade higher in any half decent market with what is a very well-developed project that we've developed up there. It's a little reverse engineering you've got to pay to play if you like, but the project needed funding at any rate, in whatever structure it has, and this way we're giving Mawson shareholders the exclusive right to fund it. So we're selling it to ourselves essentially as shareholders. So that's stage number one. The key point is that Finland needed to be drilled this winter.

We've gone through all the work, we've worked out, it has some low hanging resource fruit as we discussed, and the window is January to April. If we didn't get that drilling done, then we'd be waiting again until 2025, that same period. So we need to get that funded, and we also wanted to fund that separately to the Southern Cross shares. Now, if we had the Southern Cross Assets, Sunday Creek and Rajapalot in the same company, and we raised money in that one company and we spent it on Finland and didn't spend it on the Sunday Creek asset, it would make no sense, because the Sunday Creek asset is clearly globally significant. The Finnish asset's very good, but it doesn't rank as high as the Sunday Creek project. So we didn't want to dilute that Sunday Creek project by raising capital to spend in Finland. So that's why we've gone and put it into a separate special vehicle that Mawson shareholders have the exclusive right to fund. And if every shareholder takes up their pro-rata, right, that $15 million is done.

Gerardo Del Real: Excellent. Let's get into what I assume is the main event per se, just because of how special that discovery at Sunday Creek is, the Southern Cross shares, how will those be distributed?

Michael Hudson: Or how will they be dealt with? And that they will be distributed. And I should just stand back and say that Finnish spin out needs shareholder approval. So the documentation is just being collated and being sent within the next day or so. So shareholders will receive all the information. They get to vote on that transaction and need 66.66 approval from shareholders who vote. The Southern Cross shares will Mawson, the original Mawson, will remain with the Southern Cross shares and the uranium and the Swedish Gold. After May 16 when the company can do something with those shares. It's stated its intention that it will in specie distribute those shares to Mawson shareholders. Now, the record date hasn't been set. The ratio will determine how much Mawson holds at the time and how much it contributes if Southern Cross raises capital or Southern Cross doesn't raise capital. And that's a separate discussion for Southern Cross.

But Mawson today owns about 93 million shares, and it's got about just sub 300 million shares on issue. So approximately it will be about a one to three distribution as it stands today. So for every hundred thousand shares, let's use that same number. You'll get approximately 30,000 Southern Cross shares distributed to you as a Mawson shareholder. So if you pay to play in Newco, you'll have Newco shares pro-rata on the same holding basis as you do in Mawson today, you'll get your pro-rata distribution of Southern Cross, and then you'll be left with the uranium plus gold in Sweden with your original holding of a hundred thousand shares still. Then that is a massive option on legislative change up there in Sweden. And in the meanwhile, we've got this gold asset that we will explore in a low cost manner. Mawson will have six and a half million bucks in the bank as flexibility to explore that and or the uranium projects when things and if things change up there.

Gerardo Del Real: Let's touch a little bit more on the opportunity on the uranium side. We clearly are in a bull market that I think is on the verge of really, really taking off and accelerating. Can you speak a bit to the potential scale of the uranium assets in Sweden? Because again, I know that it's subject to the implementation of the regulatory changes, there's a lot of momentum for that. Let's assume, I'm an optimist by nature, you know this about me by now, Mike. Let's assume that that happens as everyone hopes that it does. How valuable can those uranium assets in Sweden be for Mawson shareholders?

Michael Hudson: Extremely. I think is the simple answer. There's seven historic resources. There's literally hundreds, and hundreds, and hundreds, and hundreds of holes that the government drilled in the '80s during the last energy crisis, and they found all these deposits. They were drilled essentially like postage stamps, so very detailed drilling, but each deposit is open and can be made a lot larger. So what we need to do is find the most socially acceptable project and technically the better project or the better projects, and then select one or two of those and drill those out to make any one of those assets sufficient scale. And I'd use a rule of thumb about 20 million pounds for one asset alone, and that would create an exceptionally high value opportunity for Finland to be self-sufficient in its energy supply chain, or at least help it get to that point. Because as I said, they're 45 to 50% nuclear today, none of which is that uranium is sourced from within country. And we've got a great start, because we've got every conventional resource state waiting for that potential change.

Gerardo Del Real: Any clarity on a potential timeline for those changes?

Michael Hudson: Well, the minister just came out over the last three or four weeks and stated it was going to happen, but we know politics and how things can be said and not occur, or the timeframes can be a little opaque. So really we don't have a huge view to where that's going, but the momentum is in our favor in terms of everything that's been stated there by the current government. So I'd hope to see something by mid next year, but let's see where it all goes. And everybody can Google ‘Sweden minister uranium comments’ and just see where that's all heading.

Gerardo Del Real: Excellent. So in the meantime, we have the spinco, obviously subject to approval. We have Southern Cross shares, we have gold, we have maybe uranium next year, and you're also de-listing from the TSX, and we'll be applying to list on the TSX-V. Is that correct?

Michael Hudson: That's correct, Gerardo, and just the distribution of Southern Cross shares after the escrow period also needs a plan of arrangement and a shareholder vote at the time. So that's just the other process that we need to go through. I should say that Mawson is 70 to 80% institutional and high net worth. We've nearly transacted our whole float over the last year, and it's been bought for the Southern Cross position essentially. And that's what we're trying to do here is protect that position.

And also we believe Finland has huge opportunity, but it just needed to be funded separately, and that's what we're doing. The Southern Cross shareholding was always going to be distributed to shareholders initially and due to some complications. When we listed, we chose to keep the shares in Mawson until the end of that escrow period, which gave Southern Cross a very great start to life. It made Southern Cross a very tight structure, but as that escrow winds down, that 51% holding will become a burden in the Australian market rather than an advantage. So it's solving that issue too, where it will unlock that value of that block and give shareholders a direct holding.

Gerardo Del Real: Excellent. Mike, I want to thank you as always for the time. I appreciate you coming on and explaining the restructuring and what shareholders are advised to do. Anything else that you'd like to add to that?

Michael Hudson: No, Gerardo, thank you. It's been a bit longer than we normally speak, 15 minutes or so to explain that, but three companies for one, and it's quite an exciting moment for Mawson shareholders.

Gerardo Del Real: Thanks again, Mike. Chat soon.

Michael Hudson: Thanks Gerardo.

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