#OXS – must be there now.

 

The news is out, #OXS have cancelled a facility with Darwin to provide funding each month. Just to remind folks OXUS GOLD have no other assets except an arbitration case worth something between $500m to just over $1bn.

Company guidance in RNS was that a judgement should come in 2014. Now about to enter the 2^nd month of 2015. The company have taken the decision that they do not wish to continue having access to a funding facility.

This can only mean that they expect a decision very shortly. AIM companies are not to known to shy away from dilution if it means the wages are still paid.

A question though, “If you were the CEO of a company with a sizable holding and you thought the arbitration was going to be unsuccessful, would you try to get as much money as possible into the company or would you say, no you don’t want any more money thanks”.

Or to re-phrase the question “If you were the CEO of a company with a sizeable holding and you thought the arbitration was going to be success, would you try and limit dilution as much as possible”.

It is still my belief that Ms Stern has submitted, or will submit a pointless minority decision and that OXUS will or have won. Remember OXUS will get the decision 1 week prior to it going public.

Finally if Darwin thought for any second that the arbitration was unsuccessful, they would be selling their holding hand over fist atm and the SP would be markedly down…..it isn’t.

Happy for anybody to make a reasoned argument which isn’t positive for the RNS.

Risk and Enjoy.

#SAV – in the Savannah bee house

Well as promised I have just had a wide ranging chat with David about Savannah and a variety of things.

Firstly impressions, David does come across as a high integrity, focused, straight Aussie. Happy, friendly and relaxed. I’ve used the term bee house as that is exactly the impression I get about Savannah. It has its queen bee and an army of workers who know exactly what they are doing, where they are going and how to get there. Along the way it produces honey (Market Cap value) from the very best flowers(resources). Seriously though the work that is going on at the company is mind blowing,the attention to detail, the planning, from the population and social studies in Mozambique to support any planned development, to the detailed analyse of drill targets in Oman.

Moving on to general aspects.  David confirms the company is well funded. I do get the feeling that funding is a little prickly, however it’s done. In the distant future (my opinion), David has confirmed that funding will be looked at with a variety of options, but they haven’t started examining them yet as its too far way. We talked about the appointment of Pedro Couto as the new minster in charge of mining in Mozambique, how the ministry has been very friendly and is very impressed with how Savannah is conducting itself and how its progressing projects.

We touched on the share price and how it’s lower now than at the start of 2013 and discussed reasons for this. One of the reasons as mentioned by David is that the Savannah broker has mentioned short selling on #SAV stock, which did push the SP down. (This surprised me as #SAV is a small stock..) I won’t go into this too much, nor my thoughts on the subject, but it has evidently stopped.

Big plans in place for 2015.

Starting in Oman.

Very heavy news flow for the next 6-8 weeks. I raised that 56m @6.2%  copper was one of the best I’d ever seen,  David backed this and mentioned that it was  the best he had heard of as well. He fully expects this to be repeated when drilling starts very shortly. This is really quite an achievement considering his past experience in copper production and shows the high commercial achievability of the project.

Savannah are looking to expand the block 5 JORC as quickly as possible with the new drilling with high grade copper intersect, higher than the average for the current JORC.

The potential for Oman and the current licenses are vast.

Moving on the Mozambique.

The aim this year is to continue to grow the Mozambique JORC, David talked about making it the same size as Base’s JORC but with a higher % of THM. The JORC should increase by around 400%.

They could have gone with a higher JORC in December with a lower %THM cut off, but decided against that, wanting only very high grade, near surface, dry deposits in the JORC.

Lots of preparatory work going on in Mozambique during the wet season to keep the teams busy before further exploration work and expanding the JORC takes place in Q2.

Final thoughts.

I did express disappointment about the JORC release on the 31^st of December 1.5 hours before the bell closed… David responded that it was unfortunate and understood this, the reasoning behind it is that he had promised to shareholders in RNS’s that it would be 2014 and he tried his very best to keep his promise. Although not happy about the timing, imho it at least shows a level of integrity and that blood and guts will be spent adhering to any timeframes in RNS’s going forward.

Savannah will keep showing the rest of the exploration sector on AIM the right, professional way of conducting a company in 2015, it will see a major ramp up of resource values and sizes and we will see Savannah starting its journey from an early stage company to value that really lies just below the surface.

It’s a journey that I will take part in and I can easily promise that as I held shares at the end of 2013 and 2014 I will also hold them at the end of 2015. Short term, medium term and long term, the company can only add value from this point onwards.

#xxx - 3 multi hundred million jorc's......MCAP less than 5m.

I've watched, I've waited, I've been a good boy now I am going buy.
The biggest share holder of a company with a multi hundred million dollar gold JORC that is currently being upgraded.

A multi-hundred million dollar copper JORC, which is currently being upgraded.

A multi-hundred million dollar Heavy Minerals JORC comprising Titanium Oxide, Ilmenite and Rutile, which is due to be enlarged over the next few months.

Over £1.5m cash in the bank.

All for an MCAP of less than £5m all achieved in the first 18 months of the companies life. I've been waiting to top up and although this isn't my main top up, I certainly intend on buying half a million shares on Monday morning to add to my current holding, the price is simple just to low.

In my last blog i said about wanting to talk to David, We have both tried several times, but when i was free, David was in Italy, when he tried ringing from Italy I was travelling, but i will try again this week coming.

Once this has been done my intention is a more significant blog update.

Still the chance to buy at this level is really just a bit to strong to resist a very quick bounce back to 4p before any news seems to be on the cards.

Savannah the truth is out.

It certainly wasn’t received well initially by the market, but then I am not sure what entered David’s head to release the information on a half day of trading between Christmas and New Year.

But whats done is done and we know need to look at the info in more detail.

I know many wanted a much bigger resource than this to be defined, however we need to think about the strategy that Savannah has undertaken. Its picked a few shallow strip holes near to roads and infrastructure, its concentrated on higher grades of HM. It’s taken the view that smaller and cheaper is better and either more profitable and or easier to sell.

This is a strategy I completely endorse in the current climate, there are plenty of high cost high profit projects currently shelved. Low cost, straight to profit operations are much more in style and will likely receive funding.

We have to remember that we could easily times the current JORC by 5 or 10 if we SAV wanted to and given a bit of work, particularly with some of the larger strandlines. It could be that David wants to farm out the license piecemeal, or that he want to see Savannah as a producer.

Regardless of all this, we have learnt for more from this Maiden JORC than we have seen before.

Extraction is to be dry i.e JCB digging shallow, dumping in trucks before going to a centralised processing unit, no crushing needed, no engineering of pit walls, no underground plans, nice cheap and simple, with extraction and therefore profit starting at day 1 from surface.

Extraction costs are $1.5 per tonne, processing and production costs are $50 a tonne for HM concentrate.

In total my calculations give profit (underline profit) of $97m for these small simple initial pits. This takes into account CAPEX etc. If we times the area or JORC by 10 we get nearly $1bn profit from this license all easy low cost hanging fruit.

Production could take place within 3-6 months of Environmental sign off and DEA. Initial capex would be around $8-10m and would add $50m to Mcap.

I think we need to understand that David does things his way, with is not the AIM way. He’s earnt the right to do this by creating mid-sized mining companies from nothing in the past.

I’ve not mentioned anything about Oman yet, I think it’s an amazing setup, but not for this blog today.

Happy new year all and enjoy.

#OXS OXUS GOLD , Risk ?

Thought I would right this at the start of 2015, NYE was a hell of a ride for ARMS, even though I was only there for 1 hour, two trades with a 100% profit and a 20% profit.

ARMS can teach us a few things, not all arbitration results have a suspension period, 300-400-500% rises can easily happen on AIM (even in just half a day). MM’s can play the good old auction trick(something they played on ARMS to freeze out most buyers until the SP had doubled). All this on just a $173m award win.

So back to OXUS, I noticed something was afoot yesterday when I at 9am I put an order in for a small top up of 200k shares from some of my arms profit. Broker said “NO” £2k max at 2.14….I then tried my second broker who said he could go to ISDX and get £2k at 2.2 but that was the most he could get.

It became very obvious that stock was very very tight…and that any upward pressure would result in a sharp upward correction. Which unsurprisingly is what happened when it rose very quickly on small volume, to smash intraday highs and closing highs over the last 12 months.

So what do we know, don’t know and can address?

I’ve taken a little flak in the past for concentrating on mm and L2 behaviour on OXS, as “it’s all irrelevant until the result is announced”. This isn’t something I subscribe to. As per above and as per my posting on the forums on the 30^th this was something easily anticipated, if not to quite this degree.

So our mass seller (probably the distressed RAB) stopped offloading, preventing the only real source of shares to the market. What we also saw was larger and larger bids 500k- 1M even on the bid seeking any shares. We don’t know why they stopped selling though.

We have the BOD saying that they expected the result end of 2014, we don’t know when exactly the result will be.

We have a BOD who extended the drawdown arrangement by 6 months to cover the decision, an extension that only has 2 months left on it.

We have ARMS, that proves that arbitration decisions can come at any time and where I have no doubt that people who made a lot of money in ARMS due to the decision will be looking for similar plays, such as OXS. The profit in ARMS would be enough to buy every single share on OXS, we don’t know how much of this money will flow into OXS though.

So where does this leave us?

Well ARMS received 100% of the money they sought which for OXUS would be $400-1.2bn.

There won’t be many shares available even before a result until at least 4p so further rapid rises are very much on the cards.

It could be that RAB have stopped selling, not because they have run out of shares, but because they have been advised otherwise.

What I do hope is that any new holders have a little bit of patience, as although a decision could come on Friday or next week, it might take a little longer than that. Arms with considerable debt and cash problems and a win against somebody where getting payment will be difficult, rose to 50% of the arbitration result. For OXUS that would give 40-50p.

The auctioning trick by the MMS close of play on the 31^st was very telling, buying anything worthwhile can be difficult sometimes I wouldn't be surprised to see an auction first thing Friday.

Good Luck and Happy New Year.

BUY-HOLD-HOPE  

#SAV Savannah Resources – one year on.

Savannah Resources has managed a fantastic 12 months. Just over 12 months ago Savannah had finished its first scout drilling on its only license area, but with no results. It had a good BOD and shares in ALO but everything else was pure potential.

I have already written 3 blogs on SAV and am very conscious that I don’t want to keep repeating my thoughts.

Well we have drilled nearly 200 holes now, only weeks away from a JORC resource estimate for Mozambique, having confirmed 2 indicated resources areas and 2 more strong possibilities in the strandlines and the southern zone. The geology has firmed up, the understanding of the alluvial deposition. Grades have been getting better and better, good depths, all shallow at surface.

The Oman has been added giving us a tremendous mid-tier low cost copper potential in a established part of the middle-east. We have multiple license areas and multiple projects.

An expanded team has been put in place, we have or will have soon, multiple JORC’s.

This is against a background of explorers in AIM where underachieving has been the norm, where exploration has added very little value to most stocks.

So where does this leave us. Well grades in the JORC zones look to be around 4 to 4.5% on average which is very good news. Importantly it’s obvious that Mozambique is a low cost surface strip scenario, drag down the channels, layering at depth, transport to a centralised processing area, concentrate sludge from dry extraction and take along the railway that’s a few hundred yards away to port and to customer’s ships.

There really isn’t anything that can go wrong with it. A small pilot plant can be produced or higher cost multiple extraction sites.

I’ve put the latest diagram alongside a diagram I produced nearly 12 months ago and tbh the areas are very consistent. David’s plans are running perfectly to schedule.

I would be more than happy for the JORC to be delayed now until the first half of January. From next week onwards, volume falls of a cliff, we have sellers cashing in money for Christmas, combined with folks who like to sell up over the Christmas period to hedge against anything bad happening.

Private Investors are more concerned with family matters and the busy holiday period and so are less likely to research etc. It is truth be told, a very bad time to release news.

This might be a difficult thing for short term traders hoping that SAV bounces back, but for anybody who is prepared to wait a few weeks a delay in news is essential.

Going forward I would really like to have a chat with David if time allows to discuss how the company will move forward next year, plans for the company and a view on how 2014 has gone.

Keep in your minds the fantastic job that David has done, the journey at breakneck speed that Savannah is currently on, the potential of the resources and the overall risk strategy. Combine that with David’s track record and I hope most will see that Savannah Resources is not like most AIM (waste a fortune) explorers.

Savannah Resources SAV – Lifting the veil of uncertainty.

Well I’ve been waiting to do an updated blog on SAV for a few weeks now, but wanted the uncertainty to slip away before commenting. I also wanted confirmation that Bergen has been cancelled and what it had been replaced with. (Before going further I still have the 4p shares I brought a while ago, but haven’t brought any since then, nor sold any.)

Today has finally provided that with a few updates from Savannah. Savannah resources has swapped from a Bergen monthly facility to a large share placement. From December onwards this will be much better, however the price to get the placing away at 4.45p has caused a decent pullback from the 6p highs (currently around 20% down from there).

It did become rather obvious this week that shares where flooding the market and being offload, no doubt some of the placing shares being pre-sold into the high.

I do have a feeling that the Private Investor market was played to some degree to enable a spike to “get the placing away” more easily. We will have more pain to come when we approach the 8^th of December and the meeting that will approve the second bunch of shares (15m).

However once this has been done from, mid December onwards, the company should start to see a very strong revival in its share price upto the 10-12p that the money, licenses and news justifies.

A placing was always going to happen with the cancellation of Bergen, SAV is committed to spending over $2m in Oman over the next 24 months as a bare minimum, as well as this we have further exploration of Mozambique, JORC and economic assessment and the administration and wage costs to cover. We also have the initial block payment for new Block 4 in Oman. All in All my thoughts before the placing was that SAV needs approx. $4-5m over the next 24 months. Based on this, the current placing should see SAV through to around June next year.

Mozambique.

We are approaching the 2^nd week in December which is when the results should be released for the final 3^rd drill. This includes the anticipated higher value strandlines.

www.icebergshares.blogspot.com/.../savannah-resources-sav-excellence.html

I have talked a lot about the strandlines etc in various posts, blogs and tweets, including above so will not mention too much here. I still believe firmly that the Heavy Minerals are part of a multi-billion resource with outstanding world class potential.

Once the results are known a JORC possibly in the week before Christmas is very possible, else David might deem it better timing to wait until after the new year, personally I would prefer him to wait until the 7-8^th of Jan to maximise market potential.

After this time I am hoping that SAV discuss a final round of drilling and economic scoping study for delivery March-April time. This would open the door for a partial sale to a Big Player to take Mozambique forward and fill the coffers with enough money to get Oman into the production stage.

 

Oman.

The latest acquisition in Oman, does take Savannah Resources into the top league for Oman mining. For those that have followed SAV since David took over and changed the name, the strategy has been widely discussed by David. It’s to become a mid-sized 1bn+ MCAP value copper producer with an interest in other metals. Mozambique arose due to a once in a lifetime opportunity and was the catalyst that split SAV and ALO, with David wanting to take advantage of the heavy mineral prospects to give a quick boost to a copper producer.

SAV is now the majority owner of licenses in this part of the most prolific Geological copper zone in the Oman. Zone 4 gives it several more potential mining prospects and an old copper smelter. It also gives it Silver, Zinc and Gold metals alongside the copper.

The plan has always been to have one, possible two, central processing areas, with several satellite open pit mines to produce cheap, near surface copper ore which can then be trucked to the processing sites. Due to David’s pedigree most can see SAV having up to 10 or so open pit producing mines by 2018 and maybe 2 or 3 by 2016. Money is readily available due to project partners and the Oman contacts.

To sum up.

SAV is not your day dreaming commodity explorer, drilling deep holes, moving from prospect to prospect looking for the next big drill grades to pay big salaries from diluted raised monies from suffering investors.

It’s owned and run by managers and directors who have a proven track record in delivery results and creating companies. It doesn’t blow its on trumpet or talk up in anticipation of placings. It doesn’t pay it’s directors even enough money to buy a pint down the local pub.

It will be, over the course of this decade, the fast growing mining company on AIM, in my opinion. It needs to be fed cash (which the BOD is trying to limit), but is essential in meeting the fast paced strategy. The proving up and partial selling of Mozambique next year will mean the end of the dilutions.

The placing shares will be fed into the market pretty quickly, or kept for 6-12 months, both scenarios will occur.

The best thing about the current deal and today’s news  though is the removal of uncertainty that has now been lifted and the market can start to price in the excellence that Savannah is both delivering and will deliver in the future.

It would have been worse if the Bergen deal were cancelled, but no money raised, or if only 200-400k were raised. Thankfully yet again David has shown that he is both flexible and intelligent in the way he runs SAV.

Rose explanation

I spoke a few words about Rose on my last blog which seemed to have hit a few nerves.

Above we have the break even thresholds for US shale, San Juan Mancos is in this and is the 4th cheapest at $53 a barrel break even.
This is break even, which is not the same as extraction costs, capex costs etc, as this includes taxes, interest etc.
These break even costs are for the whole mancos region with none conventional wells with laterals. Its quite possible that Rose will come in cheaper, but quite simply we don't know and nobody does until we have at least drilled a couple of holes and got some good figures.

This is where we get the differences. I know that in a previous blog i mentioned that Rose BOD had mentioned a cost of $18-20. Personally i think this was likely to be a pure extraction cost and it could be a mis-quote or the BOD just not clarifying exactly.
Regardless of this we are left with uncertainty and this is what the market doesn't like, it will prescribe the worst case which is the area average of $50-55.
This is why the price of oil currently at $77 is important, but isn't as important as the direction of the price of oil.
When i made the comments yesterday its important to note that i only gave a price that I would have to be silly not to buy at.
This wasnt a prediction, just a wish.

Rose still has an amazing business model, its copying multi billion companies, with good acreage, excellent personal, tight strategy, good revenue raising. All at an early stage. Lots of good news to come, Spuding of Mancos etc.
However we need the pressure value of falling oil prices to release the SP. It will happen, but we will also have a lag between it happening and the SP responding.

Round up of #ECR #HER #SAV #ROSE #UKOG #OXS

Quick round up.

Not had time to post or say much recently so have taken a quick 30 mins to catch up on a few things. Overall for me its still a waiting game to investing, happy to keep a nice cash pile to take advantage of seriously silly prices.

#ECR still waiting on the administrators, Paul and Stephen have had a couple of years to plan and arrange something, question is have they ?

I have brought a few of these at .19, current MCAP of around 6m would indicate that Mercator has not been priced in, given the advancement of Itogon. A very safe buy for 3 months, looking for a .30 or so sell.

#HER no Oz minerals update yet for Guam, but they still on track for production come 12 months time. Patricia still on a wake up list. Again at .24 to buy it’s a safe 3 month target of .35, 6 month of .5 and 12 month of 1.3 or so. Again I have a few of these at .29

#SAV I won’t make any friends by saying that JORC is likely end of Jan and not Dec. Equally I do not believe that Bergen have finished with SAV yet. I do still have a very clear target of 8p by end of jan and 12-14p with a clear path to production of Oman. Again I still have a holding in SAV which I brought at just over 4p.

#Rose, this is really struggling at the moment. Average cost per barrel of production is paradox and mandos is likely to be around $45-50. With the current price in the high 70’s rather than above $100 we have seen any potential profit halved. This however isn’t Roses main problem, its main problem is the concern that  the price will fall further to maybe $60-65 in which case the economic case for extraction becomes difficult to make. When the oil price increases above $85 we will see a sustained increase in rose imho. A second play for rose will be the spudding of the mancos drill which could well see a healthy rise in the SP. Currently not in rose, but would be at sub 2.50 or when mancos looks ready to be drilled.

#UKOG, no surprise to see it back at .5. Enough said really.

#OXS Waiting game must be nearly over now. Win or lose we will know soon.

Horse Hill Investors beware

Horse Hill Investors beware

I think most people will know that I am not a fan of Horse Hill and the way that it has been discussed by David Lenigas. I haven’t been for months and wrote a piece back in August that I never actually put up on the site. I don’t like writing negative pieces on companies, but do feel that Horse Hill is perhaps one of the biggest injustices on AIM this year.

Lets start with Geology. Despite a few people not believing me, I did study both the Portland and Kimmeridge formations with an onsite geological study maybe 20 years ago. I have held kimmeridge clay that contains oil in my hands.

Now lets have a quick visual practical. If we take a sponge, put it in a bucket of water, then place the sponge on a piece of wood at an angle.

The water will quickly flow out of the sponge down the wood. After a little while the sponge will stop flowing water  and will just sit on the wood. If we poke the sponge it will be wet as it still contains water, even though all the free flowing water has disappeared.

The same applies to the Horse Hill potential oil layers, if we think of oil instead of water and the oil bearing rock layers as being sponges. Most of the oil a long time ago migrated out of the zones, however the zones still contain lots of oil. The problem is that the oil that’s left is stuck in the zone(sponge) and is not readily free flowing. If we poke the sponge with our fingers, it does get wet and in the same way if you drill into the oil soaked zones you will get oil shows, a very small portion of which will be moveable.

This is very well known. It’s always possible that the zones contain very large pockets that just happened to have a store of accessible oil or gas, but trying to find such pockets is still very very difficult particularly without newer 3D methods. 2D is notoriously bad at finding such targets (see FOGL and Scotia).

I do think that investors need to understand why UKOG and the associated rabble of companies attached to it have partaken in Horse Hill. In my opinion finding oil is not one of the primary reasons. Inflating a share price with wild talk about massive oil finds is a major reason, the ability to raise money is a reason, exposure is a reason and the longer term goals of the drill are a reason. Finding oil or gas would again in my opinion be a nice to have if we are lucky enough.

Many will remember David coming onto Twitter, ramping his poor little heart out, only to hit investors with a share placing, once the SP had gone up.

Many will also have just experienced the useful “leak” that talked in detail about a commercial oil discovery, which gathered in investors, spiked the share price and might, just might have enabled a few people to sell out at the top of the spike because they  knew the word “commercial was not actually in the release”.

Longer term drill reasons:  This was mentioned above, its important for investors to understand what I think these are. As many protestors at Horse Hill have known and also as the planning permission clearly hints at, Horse Hill is an exploratory drill aimed at assessed oil and gas porosity with a view to fracking. Obviously the Horse Hill consortium will flatly deny this, as will many gullible Private investors, but the geological reasons stand out a country mile. With lateral drilling alone Horse Hill might be commercially economical. With simple water pumping it might be or it might need the full fracking works. None of the above though will be allowed so close to such populated areas next to one of Europe’s busiest airports.

 

Target Reservoir Oil	OOIP Upside Potential (MMSTB)	OOIP Mean (MMSTB)	Prospective Resources Mean (MMSTB )
Upper Portland Sandstone	116	57	17
Lower Portland Sandstone	284	147	44
Corallian Sandstone	67	33	10
Greater Oolite Limestone	204	104	16
Total Oil	671	341	87
Target Reservoir Gas	OGIP Upside Potential (Bcf)	OGIP Mean (Bcf)	Prospective Resources Mean (Bcf)
Triassic Sandstone	456	234	164

(Taken from UKOG RNS)

So despite the above table taken from UKOG own data, this drilled showed 3.1 for the upper Portland, Water wet nothingness for the lower Portland target,  0 for Corallian and 0 for the greater Oolite, giving a total mean oil of 3.1, against even the lower target of 87 (lets not mention the higher 671 target, which was scary fantasy).

If we assume even a very generous 10% recovery that gives total reserves of just 300k, if we look at other similar plays then 2-3% is probably more likely giving just 100,000 barrels worth. Compared to the similar drills and nodding donkeys we would be looking at maybe 10-15 BOPD. Which by the way,  isn’t even coming to the surface at the moment  and almost certainly wouldn’t be economical with unconventional extraction.

A few final points.

UKOG and the Horse hill consortium are not the only ones to partake in exploration for the sake of doing something rather than actually exploring with a realistic aim of finding and extracting a resource. Its very common in gold exploration business for this to happen.

Horse hill only has a few days left on its exploration license so the management will be well aware of what the Gas plays contain even now. Remember that no logs will be ran on non-conventional targets.

And finally a prediction.

This will be spun out massively, rather pathetic rumours of a missed target to the south (which will keep things going a bit, despite never getting planning permission for a new drill, even if they did it would take a year or two in the UK). Any offshoot drilling should be forgotten about as there simply isn’t time on the license to do this.

New targets will be “discovered” with major potential…much like these existing targets with possible upside potential of 600m barrels of oil(in reality being a meagre 3m, which is never going to economical). New drills in exciting new areas will be discussed.

But most of all in 2 years time Horsehill will be seen as the cynical attempt it was to fool investors into putting money into an impossible pipe dream.

If you have lost or will lose money then I hope you learn from it, if you made money then your very lucky, if you made money selling whilst telling everyone how great it was then…

BTW I haven’t actually read, listened to any blogs etc on Horsehill, nor really read the forums, having obtained my info from RNS’s, tweets  el al  so sorry if this steps on anyone’s toes.

Herencia #HER– past, present and future….

Herencia #HER– past, present and future….

I’ve got quite a history with my investments into Herencia. I well remember the Mike Bohm times when Herencia was 2p a share and folks talked about PCD’s and potential share prices of 20p.

At the time Herencia was full of possibilities, it had the excellent Patricia prospect, the silvery caps of Doris. The mystery of Guam with its shallow IOCG and copper gold elephants. We had Nyrstar one of the largest zinc players on the board, each drill was adding more new veins.

Then came the delays, the snowballing, the costs and wages, new prospects such as Picachos that were going to take a little while to get traction, new CEO and the prospects of a good 18 months of dilutions….

Herencia suffered from a CEO who imho didn’t really care about or understand the role of private investors on AIM.

So where are we now..

Firstly we need to separate those that have been invested for a while and those that are looking at Herencia as a new investment. For those current investors, it’s been hard, the SP has been diluted and has fallen down to a range of around .4. The news on the 1^st has hit it again taking it down to .27 to .29. I really do feel for those investors.

However for new investors the possibility of buying into a vastly undervalued company at a price below the BOD and below the placing is starting to ring profit alarms…

Herencia has, with Patricia, the highest, most secure JORC it’s possible to obtain, (Measured being the highest and inferred the lowest). In the higher categories of measured and indicated combined there is total of 4m tonnes of resource with 3.2-5% zinc, 1 to 1.8% lead and 70 to 98g/t of silver. Given current prices we still get £ hundreds of millions of resources. This has been taken to an advanced stage with a completed DFS and mine design, economic assessments are positive and its believed the project is only awaiting a recovery in the zinc and metal prices before production starts. For the purposes of this document a valuation of £15m seems fair, using a very heavy discount to NPV. Its important to note here that the geo-phys indicates that the resource has much more potential to come, with a likely total conservative commodity value of well in excess of £2bn once fully explored.

Added to this we have Guam, where Herencia have convinced a large, cash rich (just over $500m cash in hand) copper giant to invest into Guam. They are committed to spending $3m over the first period for 50%, given this a fair value of $6m seems reasonable. Existing drilling of Guam has delivered an IOCG but the wild cat drlling has uncovered copper, gold, moly  at depth, with 2g/t of gold from one drill. Considering the wild cat nature over such a large area, it was quite amazing that such gold and moly where found by random. Given this it’s hardly a surprize that Oz minerals have agreed to invest and explore and it’s highly likely imho that a very gold, moly rich PCD is situated in Guam with a greater total tonnage than SOLG.

Finally we have the Picachos copper project, again very advanced with a MOU to produce 1m tonnes a year of ore to be processed through a local plant. This isn’t a huge amount roughly 3000t a day given 50 down days. But would require minimal capex to pay for the simple extraction, crush and transport components. A capex of around 10m sounds reasonable. Income @2% copper(copper/silver equiv) would be 60t of copper per day, with a price pre mill, post costs of $1500 a tonne giving 90k a day.(approx. 40m a year) The economics of the project would mean a very quick pay back of initial capex and also allow Herencia to self fund Patricia in 2-3 years time.

It really does seem to be a very good strategy the BOD have embarked on. With first deliveries of copper ore to the mill plant in 12-14 months time, It’s not too long away either for the stock market.

Picachos is largely derisked re mining permits and environment permits due to the existing on site unapproved mining and the extensive mining operations in the local area.

As well as the above the Paguanta license area which hosts Patricia, also has shown evidence of a significant PCD with 2-3% copper, gold and silver. Where over the summer a number of interesting JV parties took viewings and expectation is high that a JV might well take place.

Funding is always a problem for an explorer, 10 months ago Herencia raised 1.8m, now it’s just raised 2.4m. This will go towards considerable development and exploration, however expectation is that funding will last now until around June time. Herencia has announced that it is in advanced funding for development of the production at Picachos. Funding will likely be majority debt with dilution minimal and restricted to around a 10% convertible. This will restrict further share issues and the current share issue is expected to be the last of the major dilutions thanks to the revenue coming on stream in 12-15 months time.

I have heard the rumours that the share issue was done now due to bad news from Guam, however this makes no sense at all. Most placings either happen after good news, if the company wants to raise capital cheaply or before good news, so that they can take part in cheap shares and grow the company’s market cap. The Herencia BOD would not issue shares, take part in the issue, just to see the SP drop on bad news and have their reputation ruined with the placing makers.

I personally think Guam has come in very favourably and the BOD want to use this as a spring board with any thoughts of dilution kicked well into the long grass. I can’t stress how strong the likelihood is that Oz minerals will further develop Guam on some very good results.

Looking at the trades it seems to be that a few shorts have been closed at around the .28 mark. AIM ain’t pretty at times like this.

So should you invest ?

Herencia has been well and truly pummelled by the markets for the factors already discussed, however as mentioned by Graeme over the last few months the Zinc market has started to turn and Patricia’s time is getting close, dilutions look to be over, a plan for a significant revenue stream which most explorers would kill for is firm and being progressed. The significant assets of Herencia could turn it into a mid tier miner over the next 2-4 years.

News flow is very strong over the next 2 months.

For new investors getting it at .28 or around this looks to be very risk free.  A rise to .4 or .5 would not see a great deal of selling from private investors, making a 75-100% return short term likely.

If folks are happy to wait for 8-10 weeks then they get the benefit of the funding to production announcement for Picachos which could see .7 to .9 with supporting news flow.

Existing shareholders will need to grin and bare it with an average of .5 to .7 and would be ill advised to sell at such a low point. Dilutions are horrible things, but can provide fantastic advantages for new investors and for existing investors to average down. This is unmistakably one of those opportunities.

O Man, Savvy investors to benefit…..

O Man, Savvy investors to benefit…..

Quick blog entry from me tonight to cover some MASSIVE news re Savannah Resources (sav).

The now well leaked RFC report into the sphere of the private investors has thrown up some interesting thoughts and views as to the potential of SAV.

We now have a window of understanding in that SAV are planning on being the number 1 private company mining copper and other metals in Oman. The plan of trucking ore to a central very large depot makes amazing sense in a country with record low petrol and energy prices. A central processing plant capable of 500K a year is 10 times the size in my previous blog and really shows that Savannah is serious about being a mid tier copper producer (mid tier is 1bn to 2.5bn Mcap).

The advance nature of this plan and the signing of new projects over the next few weeks seems to be pretty certain.

The plans for the Mozambique heavy mineral project also seem to be solidifying in that this is really just a cash generating project for Savannah. The plan is to prove it and then sell it.

I have mentioned that it was suggested to me by a 3^rd party that Russians were interested in mineral mining in Mozambique and where looking for potential deposits and Savannah Resources was mentioned in-particular. Well a certain Early Bird thought he might ask David Archer about this and his response was a very interesting “There are Russians in Mozambique in mineral sands. I dont believe in coincidences...”

Money wise the RFC report seems to suggest very strongly that  SAV no longer has plans to use the monthly Bergen facility and have allowed it to lapse but remain on tap. SAV had over 2m in the bank and has been approached to provide a private placement worth 6m if it needs it and has approx. 2m give or take a bit in liquid assets attached to its ALO shares. On top of this it has possible funding from Mozambique sale of 50-80m (my estimate).

Savannah Resources is on a major trajectory to the high table of AIM miners, with possibly the best, most comprehensive strategy I have seen this decade. That the strategy has been put in place by a BoD with a track record of creating large companies from nothing is not a surprise. Whilst experiencing the tightest fiscal squeeze for a generation for junior miners, SAV is having money thrown at it (and turning it down). Confidence is one thing, this is starting to look like a popstar strut to me.

Lots of news to come, much of it company changing this year until Christmas and this month. News that Bergen dilution is no more means no more easy shares for the market makers.

Buy and don’t look back.

Savannah Resources (SAV) - excellence delivered...

Savannah Resources (SAV) – excellence delivered…

Savannah resources has been a favourite of mine since last autumn and quite a bit has happened in that time. I had decided that I would try and put a blog together once the results are in mid September.

With that in mind I started a bit of research since my summer holidays are almost over and I need to get back to the grindstone of earning money.

That research proved to be a little more extensive than I wanted and so this blog was born really before I wanted to write one. So now it will have to be a case of a pre news flow blog and a post news flow blog after hopefully talking to David.

Let’s talk about what Savannah has been up to over the last 6 months.

It has entered into a majority ownership of a very nice little Copper mine in the Oman. This looks to contain a good 30000-50000 tonnes of copper, in a pretty high grade open pit strip operation, with low capex and tonnage costs, under the current JORC. There is without doubt scope to expand this resource and it looks like a low risk, bankable operation probably aiming for total resources of 100k tonnes of copper at a mill rate of 50K tonnes of 2% rock a year over 20 years. This should give approx. 1000 tonnes a year as a bare minimum with expansion to 2000 t/yr quite easily.

With regards to the Oman project although the JORC grading is at 2% and this has been used to calculate the tonnage above, considerably higher values of 6%> have been found with significant lengths of 50+m. It’s my belief that Savannah is continuing to explore these higher value targets for early production targets. Again a through mill rate of 50k t/yr as mentioned above would if these targets are confirmed generate 3000 t /yr of copper expanding quickly to 6000 t/yr quickly on a low capex. Generating income of 15-30m a year with an approx 2 year pay back on initial capex, giving a conservative valuation of 60m Mcap.

News is expected in September as to Oman exploration on these higher targets, increasing the JORC figure and potential economic analyst.

Moving on to the Mozambique operations. I am assuming that anybody reading this has read though the RNS’s and has a basic understanding of the prospect.

To help with the exploration to date I’ve used the latest exploration map and added any features that I think are missing.

Savannah invested in this license less than 12 months ago, in that time they have undertaken 2 drill campaigns with over 100 drills, they have performed XRF and detailed electro-analyst of the results to determine Heavy Mineral values and Oxide percentages. Metalurgy results have been produced. Ground and Airbourne magnetics have been shown to provide good results of Heavy Mineral finds and have been rolled out extensive across the license area.

To remind people, the license area has extensive train and road access, as well as electricity grid and water availability. The Mozambique government have asked Savannah to explore quickly as they are keen for mining to be undertaken so permits etc are a formality. The licenses next door are owned by Rio Tinto who have a target of 7-12 bn tonnes at 3-4.5% in Mozambique.

Figure 1.

So far Savannah have identified 2 major dune systems to the SE and NW with multiple targets in each area, measuring many km’s in length.  Total Heavy Mineral(THM) results indicate widespread values of around 3% as high as 5% in places. Results indicate that the extraction process is relatively cheap and easy due to low slimes content and the deposit looks to be from surface to 25m(down to 50-75m in places) allowing easy strip extraction.

Figure 1 shows how well drilled the license area is thanks to the 100+ 2^nd drill program which will be reporting in the next 2 weeks. These drills results will give a very good understanding of how much tonnage the license area is likely to contain.

The Magnetic surveys have also done an admirable job identifying strandlines that have not been picked up yet by investors. These strandlines are massively undervalued in my opinion. Again I have put an example strandline on to figure 1 which was released as a taster by Savannah. A few points that maybe people don’t understand.

The strandlines seem to be on the edge of the dune systems and so are extra to the found exploration areas. 

They follow the contour of the upland dune systems as they go down into the river valley. They would have acted as high grade depositors channels of the Heavy Mineral sediments as the alluvial deposits built up over time, this is against the more general uniform alluvial deposits of the dune systems. It is my opinion that THM could be in the region of 8-15% in these strandlines. With some strandlines being multi km in length they would provide fantastic opportunity for high grade start up mining. These sites are currently being investigated.

Savannah resources have now mobilised a team to perform detail JORC drilling which is getting under way as we speak with the aim of defining a high quality JORC.

Savannah resources have also contracted a world leading heavy mineral consultancy firm to provide the economic component to the project, detailing potential uses of extracted Heavy mineral products and looking at details so that a DFS and PEA can be produced a break neck speed once the JORC is completed. Again its important to remember that 12 months ago this was pretty much virgin exploration territory, demonstrating the speed at which the Savannah train is travelling.

What to expect.

Well I’ve performed some initial calculations, using what I hope are very conservative assumptions detailed below.

1 sqm = 2 tonne

Only the top 25m is economical (not true but gives a low ball figure).

Only 10 strandlines are economical.

So giving the above I get a 2bn tonne resource…

At 2% THM I get 43.5m tonnes of THM, at 5% Just over 108m tonnes.

It’s clear from figures like this that Savannah is likely to have a resource valued at well over £1bn even using very conservative figures…

A large 10% strandline mined could be worth $150m over a 3 year period just by itself.

So where does that leave us.

Savannah has a current Share Price of 4p and a Market Cap of 6.6m. Savannah has 3 main assets 21% of Alecto Minerals(ALO) currently worth approx. 1.5m. Oman and the Mozambique project. If we assume the Oman project is worth 1.5m, then it has lots of potential upside as it approaches production and economic studies and starts to reach it net worth of at least 20m…

That leaves Mozambique which must be worth 3.5m……Yep that’s right, we have a project that is being progressed quicker than any other project on the AIM, its being progressed by a team that has created 100’s of millions of Market cap value for other companies. It has a project size that is measure in Billions and is entering a good value market.

Buy outs in the Heavy mineral arena are currently active as the market leaders seek to squash and buy up any new entrants to ensure they control supply.

The next few months, with September in particular, will likely see a fresh and large news flow. In the past the main criticism I have of David has been a lack of understanding of how demanding AIM is. He’s use to the more research/patience ASX. AIM needs good news flow something he seems to be delivering. I have also been critical of the length of time taken to get samples to the lab and thank goodness David now transports via plane rather than via sea.

Another major problem recently has been the poorly received Bergen funding. Savannah is certainly well funded now, but Bergen have been selling into the market and forcing the price down. In a low liquidity market it has dragged the SP down from 6-7p to the current 4p.

I have been reliably informed that Bergen’s holding is now below 1.5% having fallen by nearly 80% this means that the biggest break on the Share price is about to be release and will certainly have no effect on a moderate news flow.

With the news flow we will see the size of the Heavy mineral deposit, the likely THM results and the first detailed picture of the license area. We will see how economical the copper project is.

The 1.5m value for Oman and 3.5m for Mozambique will likely be blown out of the water in the next few weeks…

Bacanora(BCN) - Ending the drought

Firstly I should say I am still on my hols and will be for a few more weeks, so it takes something special for me to write anything now.

That something special is the first new mining company to float on AIM for 3 years...
Bacanora has been on my radar for a few years now, I've greatly admired the ability of BCN to find good sites to fund them and to advance them with minimal dilution.
It has two great projects in the Magdalena Borate project and the Sonara Lithium project.

Both Projects are in Mexico, both in the more stable northern aspects of Mexico with easy access to the worlds largest market. Both projects are advanced and have been advanced on minimal spend.
As per the BCN CEO "We're looking now to do the feasibility on both of the projects," Mr Orr-Erwing said. "We hope to be offering Borate by 2015 and Lithium in 2017."

The borate project is highly advanced with plans to produce $25m of borate per year starting in 2015 with an initial capex spend of 7.25m.
This is important, firstly it provides much needed money, secondly it demonstrates that the borate project is highly economic and with larger processing could be raking in $100m a year pretty easily, thirdly it demonstrates that BCN is capable of taking a project through to production.

Then we have the well known lithium desposit, i won't go into too much detail here as its well known. But with a potential $20-30bn of resources, a pilot that has confirmed the ability to produce battery grade lithium and at very low costs. BCN quite possibly has the largest lowest cost resource of lithium in the world.

Internals. 45% of all the shares are held by 3 long term investors. Another 20% are held my other longer term investors. That leaves around 20-30m in free float.
Of that 20-30m many will be in the hands of longer term investors, however despite this 7m shares traded hands today, maybe as many as 50% of all the tradable shares. In London BCN shares rose quickly and 3 times bounced of 80p. This is either a very very quick support level or its the level that somebody is wanting to load up at.

The AIM market makers shown strong signs of pushing the bid up, pulling in any issue shares and raising the ask with any string of buys. All of this points to strong rise next week.
Longer term BCN should reach parity of NPV discount to REM, maybe over 3-4 weeks for the lithium project.
There is also the expectation of news during this period. A jagged rise to 3-4p is certainly possible.

So a special case to break the drought on AIM and its taken a truly extraordinary company to do it. For many investors it will take them by surprise.....

Afriag Update.

Its interesting how things tend to pan, since I wrote my last piece on AFRIAG about an interesting 4 weeks, we did indeed have an interesting 4 weeks. We had the announcement of a new 100% owned division called Afriag Marketing. We had the cancellation of YA funding deal and a direct placing.

What has gone before with Afriag has been all about creating foundations and supports. We are now entering the next phase which is phase 1 of value.

Phase 1 of value will happen over the next 4 weeks again in my opinion, we have the first true trading update on Afriag SA which AFRIAG have committed to delivering, this will include the new important Mozambique contract and will be enough to give us the first clues as to how profitable Afriag SA should be. I am confident Afriag SA will be on course for 1m profit by the end of the year. BTW isn’t that it will make 1m in 2014, but that by Dec 2014 it will be creating at least £100k a month profit.

I am also expecting news on new contracts and new truck expansion. This will be the first official 6 month detailed trading update form Afriag SA do not underestimate it !

Over the 4 week time period we also have the official creation of Afriag Marketing. Now Lenigas and Strang are two of the busiest Directors in the small cap world, why on earth would they create a new small cap company that pays them no wages…..Its very clear that there is a detailed plan for this company and both men can see pretty quick, maybe even immediate business for it. Expect it to be launched with much publicity and lots of noise from David.

Now we can have a bit of fun.

We have Polemos, which has Lenigas and Strang on its BOD, which in June when Afriag raised its money and announced the creation of a new company, also raised money and has the investment line of “There are no restrictions in the type of investment that the Company might make nor on the type of opportunity that may be considered”.

We have Afriag Asia (thanks Phil who has been researching it). Set up by various funds and from my understanding, owned from the British Virgin Islands. Mr Lenigas is no stranger to working with, buying or dealing in the BVI, Just ask REM and some of its holdings companies.

We have Viking Fisheries that I have been told are expanding in this Asia and the middle east and might have discussed with some interesting South African’s.

Make no mistake David wants Afriag to be a large global player in an industry worth hundreds of billions.