Bottom-Fish Comment - July 16, 2012: Bottom-Fish Strategy for Sennen Resources Inc
Sennen Resources Inc was listed as a low priority bottom-fish buy in the $0.10-$0.19 range on July 13, 2012 based on the possibly misguided premise that CEO Ian Rozier might eventually put to productive use the $13 million remaining from the 2007 sale of its Australian coal assets for AUD $25 million. In 2010 Sennen announced a deal to acquire Spanish mineral assets on terms I dismissed as not overly good for Sennen. The deal was scrapped in January 2012 after Sennen encountered too many archeological problems with the project areas. A sign that management might start to care a little more about Sennen's future occurred in February 2011 when Sennen announced it would acquire a CNSX listed company called Chelsea Minerals Corp for 11,644,760 shares on the basis of 1 Sennen for 2.5 Chelsea shares. Chelsea was a shell company which in 2010 had done a private palcement of 20 million units at $0.05, half of which went to pay back accrued debt owed to insiders. Associates of Rozier subsequently joined the board and emerged as major Chelsea shareholders. In January 2011 Chelsea optioned 60% of ther Hope Bay Oro gold project from North Arrow Minerals, and less than a month later Sennen announced it would acquire Chelsea in order to use its treasury to fund the Oro option. My hope was that with the friendly Chelsea shareholders now owning Sennen, the will would emerge to make a go of this junior. However, on July 16, 2012 Liberty Silver Corp announced what appears to be a hostile takeover bid for Sennen, offering 0.28 Liberty shares for each Sennen share, effectively offering $0.20 per share, roughly Sennen's cash break up value. Liberty Silver is run by a group of Toronto investment bankers whose flagship is the Trinity silver project in Nevada. The Liberty Silver group, clearly unimpressed by Sennen's management team and its flagship project, hopes minority shareholders switch horses by tendering their shares. What they perhaps overlook is that Sennen has hidden structure that could support Ian Rozier, though one has to wonder if this cash breakup value based outcome is the best they can expect. Or perhaps Ian Rozier will finally do something productive on Sennen's behalf.