Friday, December 4, 2015

IT Vend in Candidate

Winmar Resources (WFE) is an Iron Ore explorer with it's flagship project being the Hamersley Iron project in Western Australia.

As we all know, Iron Ore prices have suffered a sustained downturn with little sight of a rebound.

Unfortunately for resources firms like WFE, their projects have become unviable and/or funds are not easy raise from capital markets.

WFE have admitted that their project in this current low Iron Ore price environment is not economic.  The company has placed all exploration on hold and is currently conserving cash.  With this in mind, the company is a prime shell candidate for a Reverse Takeover (RTO), an all too frequent occurrence in this environment.

So what makes WFE a good play?  Obviously, there are the factors I mentioned above but there's also been a hint or two as well.

Recently at the AGM the chairman openly admitted they are looking at potential vend ins which includes a short list of Information Technology acquisitions.  After this meeting it appears that a few Daytraders got a wind of this.  They started buying $0.005 and then $0.006 the following day.

The stock has retreated to more compelling levels at $0.004.  At this level the stock has a market capitalisation of about $1.7million.  It is debt free and the books showed $290,000 cash on hand at end of last quarter.  This gives the company a low enterprise value (EV) of ~$1.4million.

The board are yet to engage an expert firm to assist with a vend in.  I mean the likes of Otsana (assisted RYG) or more recently GTT Ventures (FCN).  Coming from a resources focus I don't know if the board have the smarts to pull off a deal so I am interested to see if they do appoint a firm to help.  This is the only negative I have identified.

WFE last traded at $0.004.


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