The living market. Learning from #FOGL

I thought I would put a bit of a blog together about this fine racehorse. I’ve been investing in FOGL for a few years on and off and it’s interesting how it has developed and how as an investor we need to realise that the market has developed at the same time.

The first time round back in 2012 when we had the first round of drilling for FOGL we saw the share price rise massively to £1, this was reached around the time of first spud, optimism was a high and it wasn’t until the September well results came in that the SP dropped from the 90p mark down to the low 60’s. The following Scotia well was a failure and the price then stagnated around the 30p mark.

This time round the market learnt and developed. Buyers saw a low risk opportunity, they brought in the mid 20’s sold pre spud or on spud news and the SP has pulled back to a lower level (equivalent back in 2012 to the SP falling back to the 60’s during the drill…..)

For people not yet invested it gives us quite a few possibilities. We can take advantage of this learning market, sit back and take a lower risk position by buying in now that the Share price has fallen due to the sell on spud crew. My recommendation would be to invest a portion of it now, if drill 1 fails, you have the ability to average down on what would most likely be a massive over re-action if the drill isn’t a success, (maybe 20p). With plenty of upside on the potential of future drills. If the drill succeeds you can ride the wave and pocket some very nice profit, leaving a portion in to ride the rest of the drills.

I hear from Macy’s blog that FOGL will need to raise money and this is very correct. However the targets have been chosen in my opinion to allow a window of opportunity for this probably between the results of drill 2 and the spud of drill 4. It makes no sense to fund pre potential and likely good resource news before the results of drill 2 but equally makes lots of sense not to risk waiting before the more risky wildcat drills in the southern license area.

The risk of dilution then at this time, must be pretty minimal. A window of opportunity has developed for more canny investors…. Live and Learn and have a bit of fun along the way.

Happy Halloween Afren Holders.

I wasn’t going to say much about Afren, but it was a really interesting set of events this morning from a market psychological point of view.

Let’s get things straight, Afren had a silly leak. It happened outside of working hours. It happens and lots of different companies fall for it. Indeed you can download software which will search a website for any files that do not have permissions and simply haven’t been linked to yet. It is not illegal to go to a publically accessible website and look at a file which isn’t linked to yet is accessible to the public. So a bit of a mistake but nothing too bad.

Now on to the actual news event..The RNS!

In light of the Company's current liquidity position and in order to preserve cash while the review of the Company's capital structure and funding alternatives is completed, the Board has decided, at the expiration of the 30 day grace period, not to pay US$15m of interest which was due on 1 February 2015 under its 2016 Notes.  While such non-payment will result in a default under the 2016 Notes, this will not result in an immediate obligation to repay such 2016 Notes or any cross-default under its 2019 Notes or 2020 Notes or its other debt facilities.

This makes two important points. The board has decided to default on its bond. This is not good news. However this could be for several reasons. It could be that the RCF deferral was dependent on stopping bond payments. It could be the company has simply decided to call the bluff of the bondholders and are saying, so what if I default. IMHO this reduces the pressure of the bond holders as it shows their scare stories of administration and calling in collateral are simply not going to happen at least in the short term.

For me the last sentence is the most important…A default in the 2016 bonds, does not trigger any kind of automatic default or consequences elsewhere in the business or its debt profile. This leaves the 2016 bond holders rather toothless.

The Company has received assurances from the ad hoc committee (which members hold in aggregate approximately 55% of the principal face amount of the 2016 Notes and 44% of the total principal face amount of the 2016 Notes, 2019 Notes and 2020 Notes) that the committee has no current intention to take enforcement action with respect to the 2016 Notes held by its members as a result of the failure to make payment of interest due under the 2016 Notes, in the hope and expectation that agreement can shortly be reached with the Company and its key stakeholders on the terms of a consensual restructuring that would preserve the Group and its business as a going concern for the benefit of all stakeholders.

The bond committee is not made up of the majority of  2019 and 2020 note holders….this is important. Any deal will pay off the 2016 bond holders and the RCF. Even then the adhoc committee is barely 50% of all the holders. This again weakens the hand of the bondholders.

Again of most importance is the last part of the sentence where the bondholders have no intention of enforcement actions because it hopes a deal can be made for the benefit of ALL stakeholders. This indicates that there will be a benefit to Share Holders as they are a major stakeholder. This is NOT what the bondholders have been saying up to this point. It now becomes very very unlikely that shareholders will be “wiped out” to quote a certain news article.

The Company is continuing constructive discussions with the advisers to, and members of, the ad hoc committee of its largest bond holders, the coordinating committee of the lenders under its US$300m Ebok debt facility and its other lenders regarding the immediate liquidity and funding needs of the business.  It is expected that any agreement with the Company's bond holders and debt providers regarding the provision of interim and longer term funding and a broader consensual restructuring is likely to result in economic terms associated with the new funding and/or the issue of new equity which will substantially dilute the interests of the Company's current shareholders.  

So there will be substantial dilution….Yes we have always known that. Nobody invests $300-500m in a company with a Market Cap of less than £100m without there being substantial dilution. The substantial dilution was always the reason why the Share Price fell from 100p to the sub 10p. The question is how much dilution is going to happen? For Afren to maintain its stock market listing 25% of the company must be in public hands. So a realistic assumption is that we will end up with 75% of the company in the hands of the a third party and 25% with the current shareholders….

Given this the real question is what is an Afren, with no debt due before 2019, with 40-50K BOPD output and with a capital injection of $300-500m for 75% of the company actually worth….

Personally I would put a minimum price of 1bn on the above, this would give the current shareholders a share worth approx. 250m or 20p or so a share. Of course the dilution could be lower than this and a firm case could be made for the company being worth considerably more….But this is far above the current trading price.

While the Company is also having discussions with its other stakeholders and third party investors regarding interim funding and recapitalising the Company, the Board believes that an agreement between the Company's creditors presents the most likely solution to the immediate issues facing the business.  There can be no certainty that an agreement will be reached.

Code for any third party investors need to get their act together and put in a firm bid pronto.!

For investors the RNS doesn’t make particularly good reading, particularly for those people who have had their heads in the sand with talk of £1 a share. However in reality it actually reduces the risk of a total wipe out of shareholder value and anybody below 20p is likely to see a profit if they hold over the short term and probably a much better profit longer term.

Dilution was always going to happen.

For those that believed the vultures and scum who came on the board at 7.00am until 8.00am talking about 2p, sell straight away etc and sold for sub 6p only to see the SP rise above 7p 30 mins later, then I hope you learnt an important lesson.

Do your research, stick to your plans unless something material happens and remember share trading is unfortunately dominated by crooks, greedy liars and people you would never listen to if they came knocking at your door, so don’t listen to them they are simply dressed up to scare you!

Afren and the 3 little pigs.

“'Little pigs, little pigs let me come in' said the wolf, 'not by the hair of my chinny chin chin….' Cried the 3 little pigs.”

Well an interesting weekend for Afren holders, let’s just recap quickly.

Afren said they had short term liquidity problems due to the low oil price and needed help to survive.

Seplat offered a rumoured $200m to help them out in return for control of the $2bn assets….They were told to go away.

The Bond holders then offered an extension of 30 days for some interest due, this was not an act of kindness, but had more to do with the fact that they needed some time to put a bid together with the other bondholders and gave them time to plant various scare stories in the media about how bad things were for Afren..(nothing like a cheap fire sale).

Last week the bond holders put an offer into Afren to give them $300m in return for the company leaving the shareholders with nothing..The Afren BOD then asked its major shareholders what they thought about the bid and the answer was an unsurprising…..NO

Finally this weekend we have Fosun making a $500m offer, with something for shareholders and a continued market listing….

Afren have said maybe, let’s wait another 30 days and see what else materialises for its £2bn of assets and £800m or so of debt…

For the bondholders, the only hope of them walking away with everything was a knockout punch into submission, scaring away any potential bidders. They could then invest a bit of money and maybe, in 12 months time, float the company without any debt for around £2bn maybe £2.5bn.

Well thankfully the 3 little pigs on the Afren board have turned round and said no to the big bad wolfs. Afren is made of stone, the bond holders cannot blow the house down and instead we the shareholders can continue to live in what is a valuable desirable house.

It’s really too late for the bondholders to come back from this imho. They have two simple choices, either increase their bid so that the shareholders are not asked to carry the entire can at their own greedy benefit or start negotiations with the potential bidders to ensure they can get as little a haircut as possible and maybe some nice warrants to make them happy.

For Afren the bids we have had so far have all been highly opportunistic, value adding bids from the likes of Chevron could well be waiting in the wings. As an investor it’s possible to see a bid for as much as $1bn for a substantial stake in the company, this would allow the company to cover all its debts due in 2015 and 2016, give it all the money it needs to raise production, restructure the company and make all payments until 2017.

In the shorter term, a preferred bidder could come along and grant a loan to Afren for say $100m to cover a few months of negotiations and to get the bond holders off their backs.

Afren now have so many options, the most important thing was getting rid of the wolf and calling their bluff…

Well done Afren BOD

JP Morgan and Afren

Many think that a certain decomposing dead body smell is coming from the remains of Afren. This has largely come about through the stories and leaks with a source from JP Morgan.

I fully admit it wasn’t until pretty recently that I first started to invest in Afren, mainly as I saw a nice trading opportunity. I had heard and knew the rumours about massive dilutions, the company on the ropes needing massive cash injections. It’s fair to say I saw the risk, but also a short term gain.

After my third trade I researched Afren a little more to see what potential it had as a longer term recovery stock, which is where it became more interesting….see the first blog here http://icebergshares.blogspot.co.uk/2015/02/gkp-v-afren.html

As an investor and somebody who is generally very sceptical about how the financial industry works. My mind started to churn in its slow ponderous way as to what angle J P Morgan was playing….Everything seemed to be coming from J P Morgan. Their meddling started awhile back but intensified with a news article on the 28^th of January.

“The company, which operates in Nigeria and Iraq, needs the money to meet funding requirements that are higher than its market capitalization, analyst Zafar Nazim wrote in a note to clients.”

http://www.bloomberg.com/news/articles/2015-01-28/afren-may-need-to-raise-450-million-for-funding-jpmorgan-says

This was further reinforced on the 27/02 when Julie Miecamp and Luca Casiraghi again released a Bloomberg article painting Afren in the worst possible light.

“Ashmore Group Plc, JPMorgan Asset Management and Pacific Investment Management Co. are among creditors offering to provide Afren with the cash it needs to avoid a possible default as soon as Friday, said the person, who asked not to be identified because the talks are private.”

http://www.bloomberg.com/news/articles/2015-02-26/ashmore-pimco-said-to-seek-control-of-afren-in-creditor-talks-i6mfn9l1

Afren themselves admitted in January that they suffered from liquidity issues caused by the very low Oil price (at the time below $50) but refused to really expand on how severe the problems were. They did request an extra month to make a $50m bond payment so we know this was a real issue.

However the actual amount needed has remained a mystery.

We have confirmation then that JP Morgan are a Bond Holder….Would the bond holders like to see Afren in as much trouble, to take over as much of a valuable company as possible ? If the bond holders are offered warrants at a % of a 5-10 day share price, would they like the price as low as possible ?

Um….it’s worth thinking about.

So let’s dig a little deeper, Mr Zafar Nazim JP Morgan business analyst. Has he made some good calls in the past or has he maybe pushed a certain angle?….

In 2012 we had an interesting story, which (it will come as no surprised to learn) concerned a large company which was struggling to refinance its bonds, which were held by JP Morgan….

“In a footnote in its 2011 financial statements last week, DIFCI said it sold one of its discontinued businesses held-for-sale after the financial year ended to a 'related party.' It did not name the business…This sale could only be of SmartStream given the magnitude of impairment,' JP Morgan analyst Zafar Nazim said in the note, adding that other businesses held for-sale by DIFCI had minimal associated goodwill balances”

http://www.tradearabia.com/news/BANK_217072.html

It all seems very sensible until we get.

“No deal has been made yet. It is in the middle of the process," Mohammad Al Shaibani told Reuters on Friday on the sidelines of a business forum.

"I think that more than one entity is looking at it, among them are some of the Dubai government-related companies. They are showing a keen interest in this process," he said. JP Morgan had said in a research note earlier this month that, based on a footnote in its 2011 financial statement, DIFCI has likely sold SmartStream to Dubai or the ICD, resulting in a $68.8 million (Dh252.7 million) impairment provision”

http://gulfnews.com/business/investment/difc-investments-still-working-to-sell-software-firm-smartstream-1.1025092

So just over 2 weeks later we find out that Mr Nazim had been telling porkies and was very wrong about the current state of the company. I wonder whether JP Morgan gained from this in anyway?

So back to Afren, we have a series of JP Morgan related stories spreading doom and gloom around Afren. Certainly one of the credited people from JP Morgan has a less than perfect record about getting his facts right. We have a conflict of interest where JP Morgan is a key decision maker in the bond holders and yet it’s telling its clients to sell and itself will benefit from a low SP.


More eagle eyed investors will also have noticed that JP Morgan has been the major player on both sides of the L2 order book for Afren, sometimes being on both sides at the same time, a practice which is generally frown upon due to its ability to force price movements.


Is all of this coincidence?

We have an Oil price which is materially higher than it was when Afren made its RNS statement.  It’s declined one takeover offer and had a deadline today, which has been and gone without an RNS statement saying it had defaulted.

Now  I am not saying that everything is rosy, Afren certainly needs some money, does it need the $450m (or changed to $350m a few weeks later) that JP Morgan claims ? probably not in my opinion. Do I trust JP Morgan to be telling me the truth…probably not.

Its always worth digging a bit with these things and never, never trusting the investment banks. As soon as it suits them it will be BUY BUY BUY 100p target. Pay attention to the oil price and consider whether you might want to take a bit of a risk.

If you smell something around Afren consider it might not be Afren’s decomposing corpse, but might be the layers of sh*t being sprayed by certain bold holders. A quick thunderstorm of news might well wash it all away.

GKP v AFREN.

Having invested in both in the past, currently I am in Afren and not GKP, but have been thinking for a while about the GKP bond raising that happened just over a year ago..

For those not familiar with it, GKP were fast running out of money and had to issue bonds to meet short term liquidity requirements and for 12-18 months of further exploration. It was very much a do or die for GKP with a real chance of it defaulting on its existing bonds, if no new money was found.

Fast forward 12 months and Afren finds itself in a very similar situation. It has a few advantages, much higher oil production, larger range of assets and income from oil sales. But to be fair we are in a more hostile environment for oil producers now than 12 months ago, with lower revenues and vastly squeezed margins. At the time GKP was valued at the £1bn mark, currently Afren has a Market Cap of £100m.

Now I appreciate that it’s difficult to compare two companies like this, so to be honest I am not going to even try. However one fact does stand out, Afren is producing around $100m dollars of oil a month where as GKP was around $25m.

I think the main consideration is that this is quite a normal predicament for these kinds of resource asset heavy companies. They generally work out OK for shareholders.

Both companies are sitting in good positions for existing and immediate new shareholders, GKP has decided, to sell up. It’s done it nice and early before cash flow makes it seem like a bargain bucket selection. The share price has responded appropriately and you can almost guarantee that any price paid will be a minimum of 50% above the shares closing price today in my opinion.

Equally with AFREN, the selling by the risk averse institutions has created an opportunity for those prepared to take a little risk to make a nice return of 150-300% if decisions pan out how they should.

#BCN – We don’t want David.

#BCN – We don’t want David.

Thankfully its now fully in the open, Bacanora and Rem are not on each other Christmas card lists.

Or I should say Colin and David. My understanding is that Colin’s relationship with Kiran is pretty good.

But lets go back awhile, when BCN first listed on AIM, many will know I was a firm supporter of them, I admire the company greatly and really do prize their professionalism. As always I spent time researching, trying to talk to the BOD, the Nomad, advisers, asking questions about the admission document etc.

After a few email contacts it became very evident that some of the comments being made by David were not consistent with those coming from the BCN corner and that a rift and frustration with David could be seen back then. I certainly won’t say who I spoke to nor who said what, due to strict confidentiality in correspondence but I came to disbelieve David and have never invested in a David company since. I also believe he mislead the market and continues to do so over AFRIAG but that’s another blog….

Since then, thanks to the likes of Doc, David has been seen to have lied on various occasions, particularly when it suits him to ramp his companies or boost his ego.

So back to the latest move, David trying to force himself on BCN, there is a name for people who try to force themselves on others but…..Anyway the question is, is this a good thing?

Well if we look at the share prices of the two companies we can see that they are both down, pretty similar amounts and similar in general to the market. So there certainly hasn’t been any kind of “Dave” effect in that region, nor a poor effect from BCN.

Has Dave managed to attract any big hitters or investors into the project…..No

If Dave is on the board will he be able to do much…..No he wont be able to vote on any REM related happenings due to clear conflict of interest.

So why would BCN want him on board ? A question I find it difficult to answer, David is good at attracting smallish investment into companies (i.e less than 10m), but has not got a good track record when things get serious. Will the large players pay more attention to the “worlds largest lithium deposit”? No quite the reverse they will look at David’s role in companies dating from Lonhro to now, his success and failure, his censorship by the nomads (and his firing of the ones that do this) and they will run a mile.

BCN asked REM to be an investor in the project, BCN to maintain working control and REM to provide the funding. The contracts were drawn up to reflect this, BCN remains in total control. All was happy until David became greedy and wanted to up his stake. He didn’t want to pay BCN a fair share and instead went down the route of buying BCN stock. This deprived BCN of money it needed to progress the projects. BCN’s response was to seek money from the same source as David on AIM. Since this time David has sat on the side, complaining about how slow BCN are, spending large sums of money on his own surveys and reports. Duplicating the efforts of BCN.

BCN’s response to all this has been simple. We will concentrate on the projects were we have the most control and REM have no control…. Essentially David has been such a pain in the arse that its screwed up REM’s share of the projects. No surprise there then. He’s signed contracts that have restricted REMs control, pissed of his partner and now is looking for a way to get what he wants.

The problem is that this isn’t going to get David what he wants, its’ all about his ego. All it will do is make Colin more determined to only advance the BCN projects. The largest lithium project in the world is not going to be all mined straight away, it will be extracted piece by piece over many years, so why would BCN not start with the areas they will get the most profit from…..

Quite a few investors have complained at the lack of news coming out of BCN, however BCN is really just entering the high diligence state of the project, this is the point where it’s important that they don’t just produce crap (pay attention David), but they produce top quality, unassailable reports to attract both funding and partners. Many many explorers fail at this stage and it really differentiates the bad companies from the more professional ones.

BCN does not need more exposure, it doesn’t need better PR, it doesn’t need a board member with the utter contempt of smaller private investors. It needs time, less distractions and a bit more money to progress a world class resource in the way it needs progressing. If they get this the SP will respond in time or when the market recovers.

If David is voted onto the board, you will get leaks, pumps and dumps, a lot more dilution and a company that will become a leper to the “real” world outside AIM and the cowboy “funders” will be the only partners.

#votenotodave. Let’s keep what little decency there is on AIM.

OXS PART 2 After the cataclysm.

OXS PART 2 After the cataclysm.

Sorry folks forgot this bit when I was writing !

Forgot to add an important point, a few folks will think “just a short term rise, it will fall back when the PI’s sell on RNS !”.

Normally this might be true however if a large award is made, it will certainly be a ground breaking, if not world record award from Uncitral. It will be a major financial news story in many countries, appearing in countless national newspapers, Bloomberg etc.

This exposure will almost certainly guarantee interest from many bespoke funds, investors and arbitration specialist investors who wait for a de-risk event before investing.

Us AIM PI’s will very quickly become very small fish in a very big pond, make sure you maximise how much they have to pay to eat you up !

Oxus Gold #OXS Known unknowns and unknown unknowns

Many will known that I’ve been a following for awhile in OXS, the advantage of buying back in the autumn  or prior this is that you could have picked these up at 2p or so. For those that have, a little de-risking is certainly going to happen when the SP hits 4p (or around this figure).

We saw a sharp rise last week when in the matter of an hour or so the MM’s raised the Bid 2.7p to 4p. Volume kicked off and the SP is now in the high 3p range. Quite a few new investors have climbed on board and unknowns and rumours abound in the chat forums.

In past Blogs such as http://icebergshares.blogspot.co.uk/2015/02/oxs-whats-being-arbitrated-over.html I have mentioned briefly about what’s at stake.

Why the rise ?

Well we know they  got rid of Darwin…..Note, they got rid of Darwin, not the other way round, there is no way that Darwin could back out of the contract they signed and it would be legal madness to try and force Oxus to backout for the sake of a single monthly drawn down. The most likely scenario is that OXUS simply didn’t need an extra month’s money, said they wouldn’t be using it and so asked Darwin if they wouldn’t mind closing a month early. Darwin obliged as they can’t force OXUS to draw down money.

Its my opinion that on Thursday a very large 5-8m order was placed, this was filled by a mixture of RAB shares and open market shares. With the Uncrossing trades at the end of the day simply the MM’s tallying up with each other (or passing on the RAB shares).

Known Unknowns

We know that RAB are selling, we know they have been doing this for many years, not a breakneck speed but steadily, with a view to de-risk. We know that the Manager of the RAB fund has brought over 1m shares and has not sold them, he continues to hold. We don’t known how many shares RAB have left, nor do we know RAB’s intentions for the convertible loan note.

We know that somebody has been buying the RAB shares when they come on the market (and It’s been pretty clear its not private investors). This was more notable in November but is still there imho).

We know that the panel are due to make a decision any time at the moment. We also know that Pierre Tercier hired a new arbitration assistant at the beginning of January to help him with his arbitration commitments, we also know that his only real arbitration commitment is OXUS. It is currently unknown as to the exact date of any judgement.

 

Unknown Unknowns

 

This is a bit of a fun bit, we have lots of rumours circulating on the Internet. These are all Unknown Unknowns because we haven’t yet had any real evidence for them.

Firstly, The judgement has been communicated to the two parties, however public disclosure needs to be agreed before any official announcement can be made.

Secondly, the award has been moved to Washington, this imo would be impossible, the case will only be concluded in Paris, I can’t see any Uncitral precedent that allows for the case to move to Washington, nor does the BIT agreement allow it imho. However similar cases have within days of a large judgement applied to the Washington courts for the forced selling of assets. It would be a natural move and I wouldn’t be surprised to hear that this has taken place in the release of any RNS.

Thirdly, a last minute settlement by the Uzbeks to the order of $350m.

Lastly that a takeover bid for OXUS GOLD is to be announced in the coming days in the region of 15-20p.

Known Knowns

This is a big case, it’s a potential record breaker for Uncitral and has the potential to be the largest pay out at the Paris Uncitral courts.

It will be a reputation/career maker or breaker and its significant that although Lamm (Whites best international arbitration lawyer) is leading the advisers, she is not the official representative of Uzbekistan, this has been passed to a much younger more inexperienced employee who will be talking and arguing directly to the arbitration panel.

When I received correspondence from Tim Hart this week, he ignored by mentioning of the Oxus Case. Tim is not shy about coming forward concerning his past successes, so this might be telling.

Finally only 2 cases that I can find have every had more than 8m spent on them by the claimant, funded by a professional funder, gone the distance and failed. It really is unusual for a case to fail at this stage now.

Good Luck and hopefully my next blog can talk about how Oxus will spend the multi hundred million award they have just received.

#ROSE quick update

#ROSE quick update

 Sorry for grammatical mistakes, my fingers are frozen, but I want to get this out.

Today’s RNS has been woefully misunderstand by the market, so I thought I would put up a quick Blog on the subject.

Bad news re Paradox but not totally unexpected. It would have been great to have utilised the paradox hole and this was always the plan for the company to meet its aim of production in H1. That the hole is not sufficiently usable is a pain.

The copper project, is a none issue in my opinion. ROSE is not a commodity explorer or miner and all of these assets should be offloaded over the coming 24 months.

Now on to the all important Mancos drill. This was a less than 50% COS and to be honest I want very hopefully that it would hit enough oil reserve to be economical vertically. For me it was all about the lateral drilling and I just wanted to see sufficient vertical pay zone to allow for that. There was always the chance (20% or so) that it would be economical vertically as a few holes are in that region.

I spent a great deal of time studying the Mancos and Paradox geology and existing drills over the summer. If we compare the findings from the hole to the existing high calibre/high producing drills in that area we get a similar arrange and size of pay zones to the Rose drill.

The BOD have clearly stated that they will be producing in H1 (I am hearing May), initial thoughts as mentioned above, are that this would be from Paradox, however given that Paradox is no, it must mean they know they will see production from Mancos. There isn’t time to drill a second hole, so this must be from the existing Mancos drill. There is no doubt that the hole has flowed.

So what are we looking at ? This is only my opinion but my estimate is that this hole is around 2000 bopd when laterally drilled and 250-300 bopd from the vertical.

I might be proven wrong, but this is the figure I get from similar Mancos drills. So will ROSE be producing 2000 bopd by end of H1 ? very possibly. With further drills likely an MCAP of £150-200m would be supported, given current oil prices.

Rose has suffered from the fall in oil price and rightly so, it could have been a total bust if the Mancos drill wasn’t so successful and could have fallen to .5 to .8p. It hasn’t and with the stabilisation of the oil price now is the time to buy into ROSE.

#OXS Whats being arbitrated over……

#OXS Whats being arbitrated over……

I thought folks might like to actually see what Oxus Gold says has been stolen from them by the Uzbeks. A figure of between $500m and $1.2Bn is massive for a gold explorer/miner isn’t it?

Well we have two license areas being arbitrated over, Amantaytau and Khandiza.

Amantaytau.

This is a large mining open pit operation. Situated next door(40km) from the world’s largest open pit gold mine. Back in 2011 it was only recently started, producing 50,0000 oz’s a year, The plan was to increase this to around 300,000 by 2015. Current gold price over this time of 1200-1300, average costs per oz where around $200-250, giving $1000 a profit per oz, so 50m a year profit, rising to 300m a year now.

Total reserves of 2.5m oz rising to 7m with the then current increased exploration program, with an estimated 24m oz of gold and 480m oz of silver contained in the site in recoverable state. The world’s 10^th largest goldmine is 29m oz’s, so you can see the global scale of Amantaytau.

All before it was seized by the Uzbeks, when they realised that the price of gold had shot through the roof.

On the picture taken in 2014, you can see the large vehicle depot, with many diggers, dump trucks etc (when you zoom in) and the very large processing centre.

Amantaytau is a fully functioning operating and highly profitable mine, with massive world class gold reserves, Oxus spent over $80m on the site. Amantaytau (AGF) should be pretty easy for a minimal value and I can’t believe that even Tim Hart has given it a very low valuation.

Khandiza

This was at the feasibility stage and is a multi commodity resource. With a JORC of 1m tonnes of zinc, 500,000 tonnes of lead, 125,000 tonnes of copper, 62m oz of silver and 176,000 oz of gold.

Current price of zinc alone is $2000 per tonne so $2bn.

Grades were generally very very high and highly profitable.

Total potential resources in Khandiza where around 5m tonnes of zinc, over 2m tonnes of lead.

Analyst of the 2014 picture seems to show small scale mining has started in Khandiza, which is very surprising, or maybe not….

Estimates for Khandiza by OXUS for the arbitration range from $72m to $588m depending on how they want to value it.

There is little doubt that Khandiza, if mined would provide an mcap of $1bn to any company.

With both of these two resources, it’s clear to see just how world class and huge they were. Nothing really on AIM at the moment compares and it’s certainly not a silly inflated award being sought in the arbitration. It’s also difficult to see how the Uzbeks could value both resources together at a value that wouldn’t endow OXUS will a multiple multi-bagger from its current level.

#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