Birds of a feather, let us flock together, share your portfolio ideas

Seems like I have a tendency to buy a bit to quickly, should let the bid come to me instead of bidding up the price.

Big news day for my portfolio HOG out of a trading halt, cap raise for 15m 10k for us plebs.

EXS went into a trading halt and went out of it, sold its main project to Xstrata for 175m, expects to have 220m cash post settlement with its current MC after coming out of the TH 250m with a 100m franked dividend to be paid from profits, I topped up at an average of 0.73. Has a low cost gold mine 60koz net PA but low reserves. A royalty payment and additional tenemants to explore.

To do this I sold out of BTA was in at 1.47 out partially at 1.31, will look to top up once I transfer over to macquarie.

Out of ZGL completely to fund above purchase in at 0.365 out at 0.585. Will look to reenter on a dip.

suhm said:

EXS went into a trading halt and went out of it, sold its main project to Xstrata for 175m, expects to have 220m cash post settlement with its current MC after coming out of the TH 250m with a 100m franked dividend to be paid from profits, I topped up at an average of 0.73. Has a low cost gold mine 60koz net PA but low reserves. A royalty payment and additional tenemants to explore.

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Thanks for the heads up on EXS. Got a position in at 69.5c. Cash backing 62c so pretty cheap price for all the other assets. Expect the price to go up after they announce the capital return (even though it is flagged now) because that's how irrational the market is.

skc said:

Thanks for the heads up on EXS. Got a position in at 69.5c. Cash backing 62c so pretty cheap price for all the other assets. Expect the price to go up after they announce the capital return (even though it is flagged now) because that's how irrational the market is.

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May be not that smooth sailing on the sale.

Anglo-Swiss mining giant Xstrata has moved to pick up two copper tenements from local outfit Exco Resources for $175 million, in a move designed to expand the acreage of its Earnest Henry Mines. However, it looks like one of Exco’s shareholders, Ivanhoe Australia, may yet throw a spanner in the works for Xstrata. Exco has told the market that not all of the $175 million will be shared between shareholders, with a substantial amount put aside for exploration and development work. However, The Australian reports that Ivanhoe – which holds a 22.8 per cent in Exco – has warned that it's all or nothing and the proceeds from the sale should all be paid to investors.

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http://www.businessspectator.com.au...0421-G4SG8?OpenDocument&emcontent_wheelsdeals

And here

http://www.businessspectator.com.au...roject-to-Xstrata-for-175m-G4CDB?OpenDocument

With regards to playing the EXS sale, I would suggest that you should weigh up the situation carefully. IF they distribute capital, then their SP will fall immediately after to reflect this. This copper asset has been one of the main drivers of EXS and if they sell it they are again a small small gold producer (making good money but short term only) with a pile of cash for exploration and a bit of dirt to drill. The ground of which nothing is known and hasn't returned EXS any great results to speak of so far....
They have struggled with SP action for a while and the idea was that IVA was going to eventually just buy the company entirely and flick off the gold bit...now that looks unlikely and we end up with short term cash. Of course it could go either way, but its no exciting takeover play at the moment.

Yeah EXS hasn't really played out as I saw it would, same as BTA, down a ridiculous amount today. Looking like it might attempt to close the gap from the spike up following the BARDA announcement, if it does I would look to load back up as the pricing would then be quite irrational.

From the statement from Ivanhoe they were trying to split EXS between in and Xstrata so that Xstrata would get the copper deposit next to its Ernst Henry mine which it would value much higher as it has spare milling capacity <10km away and that Ivanhoe would get the rest of the exploration tenaments. Ivanhoe probably still wants the exploration ground and wants EXS to pay out all of the cash it recieves from Xstrata as 1) It would give it money to take out EXS, 2) Would decrease the amount of money it would have to raise to take out EXS, 3) The premium offered would appear to be larger as a smaller percentage of the company would be cash backed.

Purchased more ARDO today at 0.051 as the time value of the options were negative. The options were in the money 0.067 at trade time due to the spike up today in ARD.

Additional HOG bought at 0.325, reserve report should be out soon.

Update on stock holdings,

ARDO - Looks like this one may not work out was a short term play based on silver price and expected news flow. Silver price is coming back up but the recent capital raising, not sure why they did that was expecting them to maybe underwrite the option expiry not raise 1.5m has meant I lost most of my profit on this. Just waiting for the drill results and mettullargical studies which were anticipated to be released before option expiry to help get them across the line.

BTA- Think I will have to wait until start of next year when the SHIELD study for use of INAVIR as flu prophylaxis for the next catalyst unless they sign an INAVIR ROW license in the interim. They need to clarify the relationship with Daiichi Sankyo for the ROW, they have said that they believe that the agreement would be similair to the deal they have with DS in Japan but in reverse which would be fantastic, but market does not seem to believe that.

DRA- Seems like the increase in SP was someone spiking it up to distribute more stock, keeping this as my gold play, not much in the way of production increases for 2-3 years but solid free cashflow at present.

DRXO- Waiting to see what sort of agreement they get with BaoTi to develop their heavy mineral deposit, no idea at all what the result will be but management have a lot of skin in the game and timeline is supposed to be before june 30.

EXS- Waiting for sale of the cloncurry mine to go through, share price seems to be picking up and confirmation of the sale should see a further improvement.

HOG- Another one of my stocks to do a cap raising which was unexpected given they are getting quite siginificant amounts of revenue at present. Good news is that the money was to drill a couple more wells in the current resource which should see revenue increase dramatically and the size of the reserve increase with the update given they think that it is worth drilling a couple more wells to tap the reserve. They are also building a gas plant as 3rd party processing is costing them 17% of revenue which should see a further uplift, notably the gas plant will be rated at 30mmcf/d whereas they are currently pumping about 7 a day at present which gives an indication about future revenue.
Big uplift will be from the Chets well as this would give them a second field if succesful. Selldown will be quite bad if it fails though.

IDM- Plant is starting its initial processing and waiting for it to ramp up. Unsure what sort of price it will get for it spherichrome as a zircon replacement but they were projecting US 500 when zircon was about US 700-900, zircon is a lot higher than that now but until the revenue breakdown comes through unsure what the profit will be and there are all the problems with plant commisioning to go through.

TAP- Seems to be having a good year with its drilling now 2 for 2 with the big Zola gas field, almost large enough for a single LNG train and near the pipeline to the proposed whatsone project and apache already an equity partner there. They have also found some oil near their HJV. Share price however has done diddly. Perhaps there is some uncerntainty regarding the alcoa suit against TAP for US 158m, whilst a big number Alcoa is suing 2 suppliers for the sum in the explosion at Varanus Island and TAP is a 12.2% equity partner in 1 of those joint ventures but the east spar JV was less affected. It may however lead to further suits if succesful and I guess will need for that to be resolved for an uplift in value.

UOS- Good increase in SP, discount to NTA thus decreasing as with the increase in the AUSD, management is still buying back shares so probably still see it as undervalued. Very opaque balance sheet though.

Two new positions

ROS- Red october has an option to acquire a copper tenament in Kazackhstan, apparently has had about 700 holes drilled in there and russian c1 and c2 reserves, figures sourced are from 200m to 1m tonnes copper, wide range but a bit expensive at low end and cheap at high end, just had a small IPO and light on cash to acquire the project so only took a small position as was expecting a cap raise.

Cap raise came in today but also says that they are going to acquire a project, not sure if that means they are exercising their option, wouldn't want it to be a different reason.
In at 0.34

FAR- Drilling a large wildcat well, 440m barrel prospect, has 100% WI licenses next to the Kora prospect and has a reciprocal farm in agreement with Ophir the operator for the Kora prospect pending the result of the Kora drill, Net result would be about 35m boe if well is succesful and would mean that the other acreage would become extremely valuable. High risk play but good short term upside with spud in the next few weeks.
In at 0.10

In for some more pain with CKK in at 0.157, have just announced that they have signed a letter of intent for use of their drill rig in the oil and gas industry, small contract 1-2m but small market cap 30m. Will stay in if they sign it as a contract and out again if not or if large price spike.

Forgot to add that I subscribed to IDM rights issue so more at 0.20 and free oppies, the secondary mineral sand plays have been having a run since the price announcement from Illuka about large price increases for zircon.

Exited ARDO completely in at average of 0.032 out at average of 0.043. Played this one very poorly, got greedy and over extended with my purchase at 0.05 at that point I had about 3% of the options outstanding and had to liquidate a bit post the capital raising which came out of left field for me as I had no hope of exercising all of them. It only raised 1/4 of what they will get from option expiry if they underwrote that which should have been cheaper option to do given the options were in the money but knocked out all the profit from what was a short term trade for me. Worse of all I was overseas at the time so was unable to act on the news appropriately.
In the end it was a D&D reccomendation that got me out with a decent profit, definitely one trade that will change how I operate in the future.

I sent this to suhm by PM, but I'll make it public here.

My holdings:
ALB - Low market cap for a potentially profitable and significant producer. The next production update will be an important one.
AMA - Sitting on a big capital gain waiting for ex-CGT (might sell). Unsure if this one is still good value or not, I have so see a quarterly to decide.
AOH - Like this one, tripled my holding in the Japan disaster...now is still a fairly good price.
CNH - Maybe bankrupt! Goodbye $5000. They were building a second steel mill to quadruple their production, now they are in court and not paying the contractors. Insider trading before the suspension of trading, then very little news at all...just months of suspended trading.
CUP - Good yield, small company.
GXY - Crazy downtrend, but could be good in the future...
III - Strong plans, will do a capital raising at $0.075. Will be entering the capital raising.
KCN - Like this one, good value and projects ramping up and coming online.
LYC - Sitting on a big capital gain, it has both risk and upside.
MRE - Simple to understand, many minor initiatives in the works and a strong yield.
OGC - Good value and projects ramping up and coming online.
PBP - If the news turns positive this one will more than double...
PLA - Seems cheap...
RFG - Love this one, hoping for the SP to fall so I can top up more. 6%+ fully franked dividend yield, projected growth, seemingly safe...
TCQ - Sitting on a big capital gain, limited upside from here.

My resource shares are looking a bit too red after the past couple of months, but I imagine they will turn green in time. I have a small amount of leverage, like 20%.

Now only like 25% of my portfolio pays dividends, but I intend to move that up towards 50% in the next 12 months. Waiting for the 12 month ex-CGT date is a slow wait for me...like AOH was up 30% just a month after purchase (since I topped up in the Japan disaster), but I can't sell for 11 months without paying double tax...

Also I put 2.5% of my portfolio value into my own new business venture. Higher risk but higher potential than the share market, I think. It's a shipment of products from China, 200 products, I'll run an Aussie targeted ecommerce website. I'm doing further business/marketing planning now while I wait 1 month for the products to arrive through sea freight.

Capital preservation time and a note to self not to fall in love with stocks.

Made a mistake with CKK, recognised it basically the day after I bought it, the contract wasn't something ready to go but was for later this year, instead of doing what I should have and sold I held to await further contracts to drill water bore holes. In at 0.157 out at 0.11.

More bad news today surrounding BTA, offloaded due to release of preliminary results for LANI prophylaxis. This was supposed to be the catalyst I was waiting for and was expecting results out in March or so next year. Preliminary shows it probably does work as a prophylaxis as the risk reduction was half vs placebo, but they were modelling the trial based on a 70% reduction which means that they may not be powered enough to reach significance and will need to extend the SHIELD trial for another flu season. In at 1.46 out at 0.92.

Confessing I still like BTA as a stock given the price at 0.92 it is now worth less than the grant it is recieving from the US government to progress LANI, it also has plenty of cash, relenza and LANI earning royalties and a pipeline of drugs but unless something comes out of left field there is nothing left in 2011 that will act as a catalyst and it is most definitely in a downtrend. Will pick the shares back up when it starts to go back into an uptrend or if it gets to cash backing, which at the rate it is going down might not be that long.

i am totally overweight in TRH - bought in March for an average of 39.7c and now 53c having touched 90c a month or so back.

Mkt cap will be around $35mn after the recent CR of which close to $20mn is in cash or RAD shares.

TRH is sitting on approx 3bn tonnes of Sylvinite yielding about 25% potash on average with drilling to start on 4 holes in August to firm up a JORC. Historic drilling records are available. The resource sits in Utah, USA, so no country / political risk.

Only 67mn shares in issue after the CR.

EV is only around $18mn

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I also hold MWN - Fe play in SA yielding 69.9% Fe after benefication.

Only 30mn shares in issue at 10c each for an EV of just $100k.

These 2 are the majority of my portfolio's risk capital.

I am also free carried in MNM & EVG

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I fully expect all 4 to be major gainers in H2 2011 whatever happens in the wider market.

EB

New position STS structural systems, mining services company with forecast NPAT of 4-4.5m including loss of 5m from discontinued operations, should finally stop the losses as contracts are nearly all fulfilled. PE of around 10, little debt, mining services income has been improving, forward PE should be around 5, less if they continue to increase income levels. In at 0.745.

suhm said:

New position STS structural systems, mining services company with forecast NPAT of 4-4.5m including loss of 5m from discontinued operations, should finally stop the losses as contracts are nearly all fulfilled. PE of around 10, little debt, mining services income has been improving, forward PE should be around 5, less if they continue to increase income levels. In at 0.745.

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Saw the announcement today but didn't pull the trigger. Their P/L looks OK and like you say forward PE could be as low as 5. But there were several things I didn't like.

1. What constitute discountinued operation? In H2 FY09/10 they have loss from discountinued operation of $4.4m. Last half it was $2.3m. And now the update says it's $5m for the full year, implying H2 was ~$2.7m. So it's bleeding at the same rate, but it was discontinued 18 months ago? Where is the clarity around when it will be truely discontinued?!

2. Their cashflow numbers from the half year was pretty terrible... op cash flow was -$850K. It's so bad that they claim 'not needing to draw down bank overdraft' as a positive achievement on the cash flow side in today's announcement.

3. Their balance sheet is also pretty weak. Cash minus bank overdraft is a whopping $500K (less than my trading account ). Debt ~$14m. And heaps of accounts receivable ($54m!). Considering their annual revenue is only $115m, they have >45% tied up in working capital. What's their payment term? Half a year?! They need to hire a receivables manager nice and quick.

4. With the shape of the balance sheet I see little prospect of a dividend. It will be imprudent to issue a dividend. A cancelled dividend will likely see the share price fall, while an issued dividend will further weaken the balance sheet. No win either way.

May be more will be revealed in the full year report but with the information at hand I couldn't quite be sure STS is a bargain. I will look out for them and see if they can pull out a good positive cash flow half year for H1 FY12.

As you said, many things in this stock which have very little visibility. The discontinued operations just seem to keep popping up and from the statement it appears this won't be the last result where they will be popping up.

Cashflow was a problem in the half year but as you say they are no longer using the overdraft (they don't have other bank debt) but the cashflow was strong in the previous year and a decrease in trade receivables would solve that problem. My thought was that some of this must be related to their discontinued operations as the contract for these seem to never end. At this stage the market cap is is less than the trade receivables so bringing it down to the amount of trade payables would release about a 1/3 of the market cap in cash. Maybe they need to get Mick Gatto to pay their customers a visit.

Profit in the previous year was inflated by a tax benefit, that is clearly unsustainable and that appears to have reversed in this set of results without unduly affecting the underlying number.

Not sure whether it will be a bargain at this stage, my gut says yes but my head doesn't have all the figures yet as about 60m for continuing operations would be quite cheap which gives you a value of around -10m for discontinued operations which gives you a couple of years at the current run rate.

Will review my position when the annual report comes out.

suhm said:

Profit in the previous year was inflated by a tax benefit, that is clearly unsustainable and that appears to have reversed in this set of results without unduly affecting the underlying number.

Not sure whether it will be a bargain at this stage, my gut says yes but my head doesn't have all the figures yet as about 60m for continuing operations would be quite cheap which gives you a value of around -10m for discontinued operations which gives you a couple of years at the current run rate.

Will review my position when the annual report comes out.

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Definitely positioning as a turnaround story. Figures don't support that yet but a similar story over at SIP see them free up their balance sheet with much improved customer terms and sent the share price up 60%...

suhm said:

Maybe they need to get Mick Gatto to pay their customers a visit.

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My thoughts exactly

Some TAP sold for 0.83, have to do some home renos, will probably buy back when market bottoms

More FAR bought at 0.084, has been going down coming into terminal depth for the KORA drill, POS is supposed to be >50%.

Cacophany of errors recently, will need to reasses what I am doing to learn from my errors. FAR sold out of at 0.046, no oil in KORA, POS was supposed >50% which given upside was 2-4 time the sp vs downside of 50%, i thought that it was a fair play especially since it was nearly double the share price I had bought it for pre-spud.

Oil and gas has really not been a good play for me, quite a few of my big losses have come from them but was bullish for the energy sector.

suhm said:

Cacophany of errors recently, will need to reasses what I am doing to learn from my errors. FAR sold out of at 0.046, no oil in KORA, POS was supposed >50% which given upside was 2-4 time the sp vs downside of 50%, i thought that it was a fair play especially since it was nearly double the share price I had bought it for pre-spud.

Oil and gas has really not been a good play for me, quite a few of my big losses have come from them but was bullish for the energy sector.

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I don't know anything about FAR but IF the risk/reward was truely as you say then you will take that punt every time. An individual loss means very little. You do however need to make sure you have the right position size so you stay in the game to realise the edge. The more important question was if your 50% chance was the right number...