2020-10-13

Update on Southern Arc Arbitrage

I posted about this at teh end of August: Arbitrage on the Ark, Lands in Japan
I looked at the value of these shares last week, and by my count it was 96 cents per share, or a 37 percent discount to the share price on Monday. This does not include warrants on Japan Gold and values the rump SA assets at zero. I used SA's fully diluted share count for my calculations. Tethyan is being acquired by Adriatic Metals (ADT.AX), I valued the SA holding at 23 cents per share last week. Rise Gold (RYES and RISE.CA) is worth 12 cents. The rest is Japan Gold, which I estimate at 61 cents per share.
Southern Arc announced it will not spin out the warrants on Japan Gold because of tax considerations for U.S. investors. This doesn't change the value of the spin-outs as I calculated them. They probably will spin those shares out later if/when they move into the money.

Based on current share prices of the pieces, I value the spinout at 96 cents. I'm assuming the rump value of SA is zero for the purpose of this exercise. SA currently trades at 88 cents per share. That's not a large enough margin of safety for me, but I am still holding a position in SA bought at lower prices.

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