Galahad wants to liquidate
Article Date: Sep 14 2007Mining investor Galahad Gold wants to go into liquidation and return cash to its shareholders.
AIM-quoted Galahad, whose backers include investment veteran Jim Slater, wants to drop its original plan for a ‘substantial return of capital’ to investors and instead proposes to liquidate itself altogether and distribute the proceeds. The company, which has been selling significant assets during the year and made nearly £78 million when the French AREVA group bought Namibian uranium play UraMin, says it has cash or ‘cash equivalents’ of almost £165 million against an AIM value of £124 million, and cites an estimated net asset value of 18p a share, 2p above today’s price.
Headed by Canadian ex-stockbroker Ian Watson, Galahad claims an annualised return of 69.4 per cent on its investments between June 2003 and 31 August 2007 and warns its directors now believe investments in the mining sector ‘are unlikely to deliver’ such attractive returns from now on. Therefore, the company wants to reorganise its share capital to allow shareholders to elect to receive the majority of their return as a dividend before the liquidation begins, with the liquidator distributing any additional liquidation proceeds later on.
The company, which says it has been advised a dividend distributed in liquidation would be treated as a capital return for tax purposes, wants to hold a special shareholders’ meeting on 26 November to reorganise the capital and pay the dividend. The plan is then to appoint a liquidator in early December and have an interim liquidation distribution on 7 January.
One implication is that Watson, Slater and colleagues do not think the present turmoil in credit markets portends a further dramatic rise in the gold price. With Galahad shares at 16.25p, 60 per cent up on Growth Company Investor's recommendation in January, the proposals stand a good chance of going through.
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