This is a quick update.
As many of you are aware, one of the companies in my Top Three Picks for 2020—Coral Gold Resources (CLH.V)—just got taken out by a bigger fish, one Nomad Royalty Company (NSR.T).
When I first featured Coral Gold back in January of 2020, the stock was trading at roughly $0.44.
Based on its most recent close at $1.09, we’re looking at a potential gain of 149%, or more if you caught the lows back in mid-March of this year.
Here’s the acquisition headline:
August 24 news: Nomad Royalty Company to Acquire Coral Gold, Marking the Start of its Sector Consolidation Strategy
Quoting from the August 24th press release:
Pursuant to the Transaction, Coral shareholders will be entitled to receive, for each Coral share held, consideration consisting of C$0.05 in cash and 0.80 of a unit of Nomad, as described below.
The consideration payable to Coral shareholders by Nomad represents total value of approximately C$1.21 per Coral share, based on the closing price of C$1.37 of Nomad common shares on the TSX on August 21, 2020 and including the C$0.06 estimated value per Coral share of the one-half common share purchase warrant included in each Unit. Based on Nomad’s and Coral’s August 21, 2020 closing prices on the TSX and TSX Venture Exchange respectively, the Transaction represents a premium of approximately 45% to Coral shareholders.
So, the transaction is valued at roughly $1.21 and Coral Gold common shares are currently trading at $1.09. There could be an arbitrage opportunity here, especially if Nomad rallies from current trading levels.
If you’re unfamiliar with Nomad, I cover the company, as a client, over at Equity Guru. My most recent Nomad coverage was just yesterday…
Nomad Royalty (NSR.T) continues to execute on the acquisition front, pays US$45.8M for Coral Gold (CLH.V)
The question many of you are asking is, “should I sell my Coral Gold into this recent strength, or hold on and take the Nomad paper (common shares and warrants)”.
I’m biased. You need to conduct your own due diligence, but from where I sit, I’m happy to take the Nomad paper. That’s my plan for the Coral Gold shares I control.
To assist you with your Nomad due diligence, my maiden Equity Guru article might help bring you up to speed…
NOMAD Royalty Co (NSR.TO) makes a shining debut on the TSX
Adding an element of enticement to the acquisition news, Nomad dropped the following headline today (August 26th, 2020):
Nomad Royalty Company Unveils Dividend Policy and Declares Inaugural Quarterly Dividend
Vincent Metcalfe, Nomad’s CEO re the initiation of this annual dividend:
“Launching the dividend policy enables Nomad to differentiate itself by joining a group of companies that are committed to returning capital to shareholders. We are very happy to achieve this objective and look to build on this initial dividend level“.
Joseph de la Plante, Nomad’s CIO:
“The annual dividend of C$0.02 per common share represents a 2.2% yield for investors who participated in our initial financing only a few months ago, and represents, based on our last closing price of C$1.30 on the Toronto Stock Exchange, a significant yield of 1.5%, which will position Nomad as a leading dividend payer in our sector“.
Of course, there’s always a possibility that another royalty company will swoop in and challenge Nomad’s current offer. But this is a friendly deal.
There it is.
Full disclosure: Highballer does not have a marketing relationship with either Coral Gold or Nomad Royalty. Nomad Royalty is an Equity Guru marketing client where Greg Nolan’s role is Senior Resource Writer. We own shares in Coral Gold and plan to accept Nomad units (shares and warrants) when this transaction settles.Disclaimer - Legal Notice
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