Afriag critical 4 week period.

A critical four week period coming up for Afriag. The swap component of the Yorkville Advisors deal is due to be started after David Lenigas has asked for it to be resumed.

The Share Price has started to rise off the expected bottom of .35p over the last week.

Now to the more important bits…..

I’ve said before about a deal for Afriag SA in Zambia. Well I’ve heard it’s a deal with Illovo Sugar to shift approx. 100 containers a week of refined sugar product.

There is also rumours circulating that a reverse takeover of Afriag SA is on the cards. David and Paul are certainly looking at a re-organisation of the existing structure of AFRIAG:LON and AFRIAG SA. The most likely of rumours I am hearing is that AFRIAG has finalised a £1m raising of capital at .6 to .8. This along with a further 10% of AFRIAG shares will buy a controlling interest of AFRIAG SA for AFRIAG:LON.

Again the assumption is that this will happen in the next 2 weeks  before the release of year end 2013 results. Which must for bloody hells sake come out in the next month.

AFRIAG is still on course to make a profit this year in excess of £1m , most of which will be used to “professionalise” AFRIAG SA to AIM standards (AIM standards is said with a certain amount of cynicism).

All in All the current .45 SP and MCAP of 5M is a very low price. If we assume a 20% dilution with 70% control of AFRIAG SA then an MCAP of 20M (the fair price) would give an SP of around 1.8p which is fair value for the next 3-6 month period with and allowing for strong growth potential going forward.

The rise of the miners.

Interesting mining tweet today from mining.com concerning a Canadian Junior, Aston Bay who is in talks with a major (10bn+) miner for a JV and confirms my thoughts of things going forward.

It was kicked off a couple of weeks ago, when one of the big four majors made the comment that it had finished cost cutting and delaying production and would start the treadmill up again and investing….

Along with a spate of potential mergers in other industries and a pick up likely in India, China and the US going forward, we are starting to see the turn in the cycle.

So what does this mean for investors in miners on AIM ? Well I’ve been very honest and I only have one active miner/explorer in my PF atm (I am not including OXS as I see this as a pure litigation play). Miners have been out of favour for a while particularly gold miners with PI’s selling into any good news and little liquidity or new money with any good news = a falling SP.

If majors are on the prowl again this will surely start to pick up, but not as a sector en-mass there is still too little leaving the masters table for that. Not for Gold plays imho. I cannot see a single gold centric AIM explorer with grades good enough to attract the majors or even the midfield companies.

Instead it will be the large deposits or more valuable commodities that will attract the eye of investors, particularly cash strapped ones, world class resources or where the target has an uncomplicated large % holding of the play in question…. Read copper, zinc, lead, possibly silver, lithium, heavy minerals etc.

Small explorers with good news and quality plays that fit the bill will likely see large rises over the summer and into the autumn, I won’t mention any names but with a bit of research miners might actual pay off for once……

Oxus Gold – The wait is very very nearly over.

Oxus gold has been involved in a long, multi-year arbitration battle with the Uzbek government concerning the alleged illegal forced removal of Oxus Gold from its major gold licenses.

The BOD of Oxus have to be congratulated for the way that they have behaved and acted during this process. After last year’s drawdown facility with Darwin, many feared constant dilution whilst the BOD received hefty wages as the expense of shareholder dilution.

The truth is that Oxus has used less than half of the allocated drawdown facility, always seeking to minimise dilution. Now there might be a selfish aspect to this in that the BOD’s own shareholdings would be diluted and so a win will mean less. But it nether the less indicates strongly that the BOD have both a high level of confidence and a high level of shareholder responsibility.

The final hearing of the OXUS v Uzbekistan arbitration was held in Paris earlier this spring and lasted several days. Average times for such arbitration cases to go from this final hearing stage for the 3 strong arbitration panel to come to its initial decision is approx. 2-3 months over the past year.

It is an indication that perhaps a decision is coming very very soon.

In conjunction with this, the Uzbek defence as presented by White & Case seems to be one of its a rogue outfit operating outside of the Uzbek legal framework, granting the licenses in the first place with bribery taking place for Oxus to get the licenses.  The defence of White & Case is one of denial that Oxus owned the licenses legally in the first place and that a mixture of ineptitude and incompetence has caused the current situation.

As well as the defence outlined above the Uzbek’s have a second fall back strategy of offering Oxus $150m which has been raised through the sale and confiscation of Gulnara’s assets. The President of Uzbekistan has laid all the blame on his Daughter for finding the Uzbek Government in its current predicament and she must pay the price according to the presidents tribal supporters. In a bid to further reduce any possible payment, the Uzbekistan Government has blamed the current detention of Said Ashurov on a dysfunctional regional government and promised to look into the matter of his detention, i.e if an offer is made to Oxus it will include Said’s freedom.

It is not yet clear whether the offer will be made prior to the announcement of the judgement or within a few weeks after the judgement, this approach seems to be the modus operandi of White & Case for the last 12 months.

Remember the likely timeline is final hearing,  judgement announcement, award announcement and costs announcement.

Gulf Keystone (GKP) the end of schizophrenia

I noticed a few people might be disappointed with the recent GKP RNS. However for me it was the start of a new birth, focus and direction.

When companies move from explorers to producers it can be a painful and traumatic experience, the whole company needs to change and not only find and define assets but also to reduce costs, make a profit and manage what in most cases is a massive increase in workforce and size.

The same transformation occurs when a company moves from AIM to a main listing, gone are the days of appeasing private investors, when the company moved forward and saw the share price increase by selling a dream that everybody will be a million. Welcome the days of spreadsheets, price earning ratio’s and broker notes that determine when the Institutional investors will decide to invest. Again this can be a painful experience as shares move from Private investors to pension fund managers.

Rather than selling a dream, they need to sell a company using real figures, where the analysis can produce a report which will then go before an investment committee before a sector or industry head gives the green light for an investment to take place. Such committee’s are not impressed with maybe’s and dreams.

GKP is moving along this journey and is trying to perform multiple transformations at the same time, unfortunately this has put it in some pretty ugly positions as the share price shows. The company hasn’t helped itself by not knowing quite which way to face either. I spoke to somebody close to the company today and the reply I got was that this RNS “shows the door that Gulf Keystone is now facing and about to walk though”, this will be finalised when we get the news that Todd Kozel will step down in a few weeks time.

At last the schizophrenic nature of the company will be removed, gone will be dreams and in will be professionalism.

This won’t make some private investors happy and I can already hear the screams through this keyboard. Gone will be the details of exactly what happens at the company. The SH 7 update is a perfect example of this, before Private investors complain, do you think BP would give a blow by blow account of exactly why a drill failed ?...The answer is NO.  They wouldn’t. The main market would only care that it failed, it doesn’t sit there dreaming of finding another 1bn barrels of oil. Indeed the market cares about the revenue and profit over the coming 2 years or so. With that in mind GKP duly updated the market on potential profit figures. We come to the next charge which is why didn’t GKP try and estimate BOPD flow rates for SH 7 rather than just saying it’s a significant producer. Quite simply again no company gives out flow rates which are not 100% certain on the main listing, for AIM they do it all the time. If GKP issued a flow rate which was too high or too low, people would complain. Again would you expect BP to issue flow rates before it was certain ?

I am sure many will view the RNS as being poor or negative, however I say without hesitation that those people do not understand the transformation journey that or the door way that GKP is about to step through. Ignore such people, focus on the profits, bottom line figures and the amount of oil connected to the PF terminals. 

As an investor you need to decide whether you’re a dreamer or a hard nosed money maker, thankfully GKP have now made the choice for themselves.