Tuesday, November 8, 2011

Dragon Mountain Gold - Return of Capital?

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.


  1. I found the deposits with Rachel Zhou is 2003 and was side shifted because I had a different view of how Lixian project should progress technically. Little work done on the Jinshan property.

    The price is well below the true value and Gardner bailing out because he can not raise money to further fund the project.

    I believe the sale should be stopped by shareholders and get proper Board management. I may place an injunction on the deal to stop it.

    Stuart J. Bromley
    CIC Group

  2. As a shareholder you are entitled to a share in the company's profits or earnings. Paying a dividend is one way to reward shareholders. For many investors a key criteria in selecting shares, is whether a company pays dividends and the size of those dividends.

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