Friday, February 25, 2011

Tantulum & Niobium - Australian-American Mining (AIW)

After reading about the EU 14 critical mineral raw materials report and posting about it the other day I've become really interested in these materials.  It's resulted in me casting my eye over some of the ASX listed companies with an exposure to each of them.

One of the companies that has caught my attention is Australian-American Mining Corporation Limited (AIW).  I will firstly state that the company is focusing on it's uranium assets in the US.  This isn't a bad thing - the outlook for uranium in my opinion is very good and I'm almost on the verge of calling myself a uranium bull.  Having said this, it is the specialty metals project in Arizona that has the potential for lithium, tantulum, niobium and rubidium which has piqued my interest.

The company has a lot going for it including an excellent cash backing of $7.127 million which means there will be no capital raisings and share dilution any time soon.  They are also holding 3 million shares of Forge Resources (FRG) worth $4.08 million.  That's a total of over $11 million in enterprise value (EV) not including all of their uranium, gold or rare earths projects - all this for a market cap of $23 million.

Anyway, back to the specialy metals project.  The project acquired in November last year was done so via cash and scrip (shares).  The cash amount was a nominal $25,000 whilst the scrip component was 3,000,000 shares.  I always like to hear that the seller of a project is to receive stock.  Why?  This confirms that they still want some skin in the game and to have exposure of upside to the project indirectly by holding stock.  AIW believes that the project has the potential to be of a large scale and with significant grades.  They have also been able to access a large database of previous work which will help in targeting key areas.

AIW is intending to list on the TSX in March this year which is significant news.  North American investors will value the projects of this company much higher than their Australian counterparts and this could result in a rerating of 8 - 10 times!  I expect a nice appreciation in the share price in the lead up to this listing.  If experience is anything, Prima Biomed (PRR) and it's listing on the NASDAQ was one test case (recommended at $0.125 in October, see post)

AIW shares spiked $0.009 to $0.073 today on very good volume of 9.2 million units.  The market is awaiting drilling results on it's Apex uranium project so trading suggests this will be announced soon or there is some other newsflow around the corner.

Resource Generation (RES) Broker Report

  • RBC Capital Markets has commenced coverage of Resource Generation (RES) with an Outperform
  • Report dated 22/02/2011
  • Price target $1
  • RES last trade: $0.725 (25/02/2011)
  • Research link


Thursday, February 24, 2011

EU List of Critical Raw Materials

As an investor that focuses mainly on the small to mid cap resources part of the market I am quite often using a top down approach to finding stocks to invest in.  This involves seeking the latest trends that may result in demand in a particular resource increasing or supplies decreasing possibly due to disruptions to mines etc.  A recent example of this includes the focus on oil stocks as a result of the current Middle East crisis, however I do prefer trying to discover which will be the next obscure hot metal!

One list that I have been working from lately is the Europa 14 critical mineral raw materials list which lists minerals and metals which are considered critical especially from a supply shortage perspective.

Whilst the report has been out for some time it is a good starting point for research purposes.  Rare earths has been well covered so I am hoping to take a look at a few companies with an exposure to the other metals listed in the report share this with you soon.

Southern Boulder Mines Research Report

  • Arrowhead Business & Investment Decisions has completed a Due Diligence and Valuation Report on Southern Boulder Mines (STB)
  • Fair share value bracket: $6.25 - $29.95 
  • STB last trade: $4.77 (24/02/2011)
  • Research link

Wednesday, February 23, 2011

Cbio Limited Research Report

  • has issued a research report on Cbio Limited (CBZ) with a Spec Buy
  • Price target $1.47
  • PIR last trade: $0.59 (23/02/2011)
  • Research link

Sunday, February 20, 2011

Advanced ASX Shell Plays

This is my final post exploring some of the shell plays listed on the ASX.  In my earlier posts I took a look at those companies that are still a little unloved and well away from volumes being traded that mean anything.  These next three shells that I take a look at today are what I would say are in the developed stage and possibly known to you for the reason that they are attracting interest and have seen some excellent gains from their lows already.

This company is probably as advanced as a shell can be.  The market capitilisation is a staggering $17 million which means the share price is a bit overcooked considering no project has yet been acquired.  The company has confirmed it's direction and advised the market it is specifically looking at coking coal projects in Mongolia.  They currently have a team of geologists assessing licenses so a project may not be too far away.  C @ Limited last traded at $0.037 after coming up from lows of just under a $0.01 in August last year.  If anything, this goes to show that if you get in early there can be excellent gains to be made in shell companies.  This stock was once unloved too - in August last year it went days without trading and when it did the volume was maybe 100,000 - 300,000 units.

This is another company that has already had strong share price gains with the share price appreciating from $0.002 in August to the current price of $0.011 giving the company a market cap of $12 million.
SLT has raised funds a few times last year to keep itself going whilst it searches for new opportunities.  There has been no indication as to which direction the company is headed.  The company appointed new directors in September who have experience in backdoor listings.

ROB has been on the radar of quite a few traders recently.  It has had a couple of share price breakouts resulting in share price queries (or speeding tickets) from the ASX.  The company has given the standard response - we know nothing!  The share price was seriously overbought when it hit $0.03 and it has since backed off to $0.016.  The company used to operate stockbroking and wealth management businesses and provide corporate advisory services all of which have now been sold.  Considering these businesses are all market related I would imagine that the board would have very good contacts in the industry which is a positive.  After all, and from my experience in the industry, everyone knows everyone.

Tuesday, February 15, 2011

Early Stage ASX Shell Plays (part 2)

Let's continue our look at some of the ASX shell plays that are still in their infant stage with very little volumes being traded...

This is probably the most riskiest of the shell plays that I am going to mention however one of the more different cases.  The company is teetering on the edge with cash to the tune of $249,000 (Quarterly Report 30/11) and has had to minimise all expenditures to survive.  The company has two geothermal projects in South Australia however due to the poor sentiment towards the sector and subsequent lack of funding the company has found itself in a position whereby it needs to branch out into other commodities to survive.  Management are hoping by acquiring a project that is in a more 'sexy' sector that they will be able to raise funds.  The company has stated:

"An alternative is to diversify Geothermal Resources exploration base into other commodities that have more immediate appeal and for which capital can be raised. This uses the Company’s exploration skills and could provide shareholders with more immediate returns whilst waiting for an improvement in the geothermal exploration investment climate.  Directors are monitoring other investment opportunities, particularly in the precious and rare earth metals sector, and may act to secure a suitable opportunity if it presents itself."

Considering that the company has very little cash something is going to happen sooner rather than later, whether it be administration or a hot new project.  GHT last traded at $0.09.

I like this prospect.  This is one of the more cashed up shells around with about $4.3million on hand so there is less pressure on management to vend in a project anytime soon.  From my research it seems that an Iron Ore project will be the most likely kind of project to be acquired by the company.  The company has been looking for a project for some time now (almost a year) so things are slow going however they nearly acquired an Iron Ore project in Spain.  Negotiations for this Spanish project are unlikely to result in an outcome.  NAE has an excellent MD in Gary Fietz who worked at BHP Billiton (BHP) in their Iron Ore division for 21 years.  NAE last traded at $0.09.

I believe that this company is about to move out of the early stage shell play category with the share price having mini breakouts every so often and trading volumes picking up.  The stock price is becoming quite volatile also.  There is good value here with the market capitilisation at $5 million and the company having $2.5 million on hand.  Recently the company sold it's US oil well projects for $11.3 million which helped the company extinguish outstanding debts.  What I find exciting is that the company's financier has allowed them to maintain a $40 million line of credit facility for future acquisitions!  AVD last traded at $0.026.

Unusally this company is maintaining it's internet marketing business whilst deciding a resources project might be a good way to 'diversify'.  I am unsure what experice the management have in the resources sector and the tenement applications made tend to lack any detail or substance in the announcements made to the ASX.  TVN last traded at $0.011

Monday, February 14, 2011

Papillon Resources Broker Report

  • Foster Stockbroking has issued a research report on Papillon Resources (PIR)
  • Price target $0.80
  • PIR last trade: $0.78 (09/02/2011)
  • Research link

Sunday, February 13, 2011

Early Stage ASX Shell Plays (part 1)

Following up on my Introduction to ASX listed shell plays post it is time to explore a few of these plays that are in the very early stages with almost no interest and volumes traded.  These are the plays that will take some time but offer higher returns for those that are patient!

I originally posted about this company in September and not much share price action has happened since, which goes to show that they are all not winners and early stage plays can be a long haul.  The company has a market cap of about $2 million with about $1.3 million in cash on hand.  Tony Pitt was appointed to the board in June last year and was looking at vending in commercial real estate assets and as a result almost pulled off a merger with Becton Property Group (BEC).  The deal subsequently fell apart and Tony Pitt left the company but retained his shareholding.  Since this the company has reinstated its plans to seek a new business for the company.  I think this was a good turn of events as real estate is not entirely interesting in comparison to resources projects.  It is interesting to note that Ian Murie serves on the board and is also tied up with Acuvax Limited (ACU), a company I recently posted about that has a high chance of backdoor listing a resources project.  OLE last trades at $0.003.

Freshtel is a company that had business in VOIP technology.  The company has been restructuring for the better part of a year now and this has included selling off their UK VOIP assets which were running at a loss.  The company has some debt and in November stated that it had sufficient royalty income to maintain the shell.  It is currently capped at $2million but only has just under $180,000 in the bank.  It is a bit worrying that they failed to lodge their quarterly on time and were suspended as a result (only to lodge soon thereafter).  We havent been given any hints as to what may be vended into the shell however we do know that they 'continue to investigate and search for an appropriate business to back into the listed shell and thus give shareholders an improved future with Freshtel'  Things arent moving too quickly at Freshtel and the stock last traded at $0.003.

This company is as pure as a shell play can be.  The company has no debt, no business and is sitting on cash.  The company used to invest in companies listed on the exchange in India however suffered from the share price always being under the value of the securities in it's portfolio.  The company decided to liquidate it's portfolio and return capital to the shareholders.  It held on to some cash until it's register was raided, a meeting convened and the new shareholder nominating it's own directors and then taking control of the company.  I've covered this company before so you can read up further here.
This particular company is one of my preferred picks because with the cash it has on hand there is very limited downside.  The net tangible asset backing is $0.0614 per share whilst it's shares traded at $0.044 so there is some good value here.  The new directors also have good experience with shell companies.  The last update (which I recommend you read) provided by the company was on 30/11/2010.

Saturday, February 12, 2011

Shaw River Resources Research Report

  • Hartleys has issued a research report on Shaw River Resources with a 'Speculative Buy'
  • Price target $0.38
  • SRR last trade: $0.205 (11/02/2011)
  • Research report extract link

Introduction to ASX listed shell plays!

Investing in shell plays has always been a favourite past time of mine however this kind of investing has become a lot more popular recently.  Reading the online forums there is many discussions on which stock will be the next to fly on announcement of a new resources project acquisition.  Frequently I read and are amused at coments such as 'it will be the next ten bagger!'  Having said that, there is good money to be made and a couple of different strategies to be deployed.  It's taken me a while to collate the information as some of the obscure plays are really hard to find but I'm happy to share my research with each of you!

It must be stressed that this kind of investing is extremely risky.  I don't want anyone to be under any illusions, do not go and put your life savings on the stocks I am going to mention.

In my opinion there is two ways of investing in shell companies.  Firstly there is the patient, slowly accumulate at low prices and sit tight method.  This method involves considerable time sitting and waiting.  After taking a position it may take months and months for something to happen.  It is characterised by a stock that is unloved, very rarely trades (even for days) and has little to no interest.  The stock is usually under a cent per share and nobody posts anything about the stock on online forums such as HotCopper.  This kind of investing has the potential for much greater rewards if it comes good as there is much higher share price appreciation.

The other method in my opinion is to get on the stocks that have been shells for sometime but are starting to fire up.  This is characterised by increasing volume, interest in the stock and especially comments online.  The advantage of this method is that something is going to happen sooner for the company however you may have already missed a bit of the run up in the share price. 

It's all a bit of a time versus money type decision.

So stay tuned over the next couple of days as I release the results of trawling through all those company quarterly reports for that elusive comment 'we are evaluating numerous projects, possibly in the resources sector locally and abroad to deliver shareholder value'!!

Tuesday, February 8, 2011

Earth Heat Resources Valuation Report

  • Arrowhead Business & Investments Decisions has issued a due diligence and valuation report on Earth Heat Resources (EHR)
  • Report dated 07/02/2011
  • Valuation: $0.364-$0.964
  • EHR last trade: $0.081 (08/02/2011)
  • Report link

Monday, February 7, 2011

Gunson Resources Research Report

  • Resources Capital has issued a research report on Gunson Resources (GUN)
  • Report dated 04/02/2011
  • Valuation: $0.70
  • GUN last trade: $0.23 (07/02/2011)
  • Research report link
It appears that a few more brokers are realising the shortage of minerals sand, especially zircon and the resulting good outlook for zircon prices.  This has culminated in Gunson Resources being covered soon after Base Resources (BSE) recently.

Gunson Resources shares increased $0.03 to $0.20 following the issue of the above research report.  This bodes well considering the company is completing a Share Purchase Plan at $0.20 and will result in more funds in the kitty should the market price hold firm.

Friday, February 4, 2011

Base Resources Research Report

Euroz, a well respected firm released a broker report this week on Base Resources (BSE).

Those that have been following my blog will know that I am bullish on mineral sands and have mentioned this company, Gunson Resources (GUN) and a few others recently.

The report commenced coverage with a valuation of $0.76 (well below today's closing price of $0.43) and long term $1 share price.

Euroz believes that the Kwale project has potential revenue of US$160-180m p.a. generating EBITDA of $80-$100m once in full production.

I personally believe that the market is starting to cotton on to the potential of mineral sands companies and that every portfolio should have some exposure.