Panthera Resources PLC (LON:PAT), the gold exploration and development company, saw its surge after Galactic Gold Mines signed up to advance the Bhukia joint venture project.
Galactic, which is planning to start off the process of seeking a listing on the Bombay Stock Exchange as Galaxy Gold next year, is to pay US$1.25mln for a 10% stake in Panthera’s wholly-owned subsidiary, Indo Gold (IGL).
READ: Panthera Resources soars on ‘significant’ gold results
It will have the opportunity to increase its equity stake in IGL to 22% by providing ongoing support and services to the Bhukia joint venture product in Rajasthan, India.
Galaxy is described as an Indian company with Australian management. Its principal investor is Hunch Ventures and Investments, an Indian venture capital group with strong government, corporate and institutional connections to the mining industry in India.
Galaxy will actually make its investment in IGL in two stages; the first stage will reduce Panthera’s stake in IGL to 95% in return for US$500,000; to save you doing the arithmetic, Panthera extrapolated that, if Galaxy's 5% stake is worth US$500,000, Panthera’s 95% stake is worth US$9.5mln.
The second stage will see Galaxy pay US$750,000 for a 5% stake, which implies a valuation of US$13.5mln for Panthera’s remaining 90% stake.
Somewhat pointedly, Panthera observed that its current valuation is around £880,000.
Market makers took the hint – somewhat – and marked up Panthera’s shares by 150% to 3.2p, from 1.3p overnight, giving it a market capitalisation of £2.3mln.
That is still somewhat short - about US$11.6mln short, in fact -of the implied valuation of Panthera’s 90% stake in IGL but that may say more about the business of mining in India than it does about the arithmetical abilities of market makers.
In a note to clients, analysts at RFC Ambrian reiterated a ‘speculative buy’ on the stock and said: “The process towards the grant of the PL over the project has been protracted, but the partnership announced today give renewed hope that this issue is once again moving forward towards a successful conclusion.”