Dragon Mountain Gold (DMG) today made an announcement that they were selling off their only asset, the Lixian Gold Project for a consideration of $175 million. Whilst Dragon Mountain Gold does not own 100% of the project being sold they estimate that of the $175 million that their share of the proceeds will be $150 million. DMG currently has a market capitilisation of about $93 million. It makes you left wondering, what's the catch? Investment opportunities like this do exist even, this one to the tune of $57 million.
Following the news the share price opened at $0.47 before racing to an intraday high of $0.495. Surprisingly, the stock only finished up $0.02 to $0.41. I think that this can be explained by the fact that there was a few insiders on this one that have made a quick buck and sold into the early strength today to take profits. After all, the stock has increased from about $0.29 late last month.
Whilst there is a few hurdles that remain such as approval from shareholders, Chinese government and Australian FIRB (a little strange considering the asset is in China) these hurdles seem like a formality.
DMG has hinted at completing a return of capital to shareholders. Superannuation Funds will be hoping it is a tax effective structure whereby a chunk of the return of capital is a fully franked dividend.
I expect the share price to appreciate as we lead up to the key dates.
