SMALL CAP MOVERS: SolGold takeover bid spells £24m payday for co-founder

Depending on where you source your data, the failure rate for small-caps is 60 to 80 per cent, which is why investing in the sector is high risk and requires nerves of steel, unlimited patience and a portfolio approach.

No company director that lists a business on AIM or Aquis sets out to fail; however, few take into account that the business plan set out in the PowerPoint delivered to would-be backers tends to go out of the window in the first 18 months of trading.

There are many reasons for this. But I am going to simplify matters by paraphrasing Prime Minister Harold Macmillan’s famous quote: it is down to ‘events, dear boy, events’.

It aptly summarises unpredictable global happenings (wars, economics, crises) and the real challenge for leaders, overriding carefully laid plans and well-written presentations.

So, against that rather gloomy backdrop, it is uplifting to see a success story. SolGold is a company Proactive has followed for more than a decade, from first discovery through to the development of a world-class copper porphyry project in Ecuador.

An improved indicative bid of £812million from a Chinese bidder looks likely to be accepted if all the ducks line up properly.

SolGold looks set to back a £812million takeover offer from a Chinese bidder

Whether this fully compensates investors for the capital sunk into the ground at the Cascabel Project is unclear. I have not done the maths.

However, the take-out provides a modicum of vindication for the taciturn Nick Mather, founder, former boss and now non-executive.

He is sitting on 84.3 million shares, which means he will walk away with at least £23.6 million, before taking into account other incentives such as share options.

Turning to the wider small-cap market, the AIM All Share fell into a pre-Christmas slumber, remaining almost static week on week at 752.65. The FTSE 100, by contrast, crept around 0.7 per cent higher.

Premier African Minerals was the week’s biggest casualty, dropping 51 per cent amid funding worries and the fact it is coming back to investors for more cash just weeks after banking £500,000 of interim support.

A delve into the latest update does not make easy reading and repeating the highlights (or is it lowlights?) would simply compound the misery for those holding the stock, and for management trying to make the best of a poor situation.

Onto matters more uplifting. Eco Atlantic’s shares gushed 72 per cent higher after investors digested what it called a ‘transformational’ strategic partnership with Navitas Petroleum.

The deal gives the larger group options to farm into two of Eco’s key offshore blocks and potentially take stakes across the rest of its Atlantic portfolio.

Bargain hunters were out in force vacuuming up stock in junior oiler Empyrean, which appears to have been buoyed by the tone and substance of its latest update (interim results) amid a legal fallout with one of its partners. The shares ended the week 45 per cent higher.

1Spatial continued the end-of-term buyout boom we have seen at this end of the market. The high-tech mapping company has agreed to be bought by VertiGIS for £87 million. While the shares shot up 42 per cent on Friday to 66p, they are still some way south of the 73p offer price.

There was one deal that did not get off the ground: ACG Metals’ approach for Anglo Asian Mining, with the former unable to find enough upside in the deal.

Boss Artem Volynets said in a Proactive interview that ACG is not looking to be a one-asset business.

He and the team have ambitions of turning the company into a $3-$5 billion multi-asset critical metals giant.

Volynets was a senior leader at Rusal, where he helped build an international aluminium giant, and is now trying to repeat that successful roll-up strategy.

Finally, there was an odd reaction to some encouraging news from Scancell, with the shares barely flickering.

The company updated the market with more supportive data from a trial of its drug for people with hard-to-treat melanoma, a common skin cancer.

Panmure Liberum said it hopped on a call after the latest stats drop and left the conversation extremely heartened by the feedback.

Scancell gave a broad-brush overview of plans for its lead asset iSCIB1+, which is being readied for a phase III trial. This is the final hurdle before approval, although it tends to be a clinically arduous and expensive process, particularly for smaller research and development firms.

That stage, however, is also when interest from big pharma tends to crystallise into investment, with deep-pocketed blue-chips often picking up the bill to push a promising drug towards sign-off.

Deals tend to come in the form of licensing agreements where upfront and milestone payments are agreed, and in certain cases these can prove transformational.

Panmure, in its note, was not getting too carried away but told clients: ‘Significant value is building, with the potential to crystallise in the near term if a partnership is concluded.’

The broker is a buyer of the stock up to 32p. The current price is less than a third of that target.

For all the market’s breaking small- and mid-cap news, hurry over to www.proactiveinvestors.co.uk