From: Biniam Haile \(SWE\) (email@example.com)
Date: Sun Feb 22 2009 - 16:21:47 EST
Excerpt: 'So WMT is picking up some serious ounces of gold at a low
price, mainly because of the cash squeeze being felt by SBS, which will
now focus on its Koka gold project in Eritrea.'
Kagara goes for gold in nick of timeBarry Fitzgerald
February 23, 2009
Mungana Goldmines is set to salve the sting of zinc's tailspin.
THE crew from Perth-based Kagara hit the eastern states this week to
sing the praises of Kagara's planned gold/copper spin-off, Mungana
Given gold is now nudging $US1000 an ounce, the crew can expect a good
Mungana is to be the new home for all of the zinc producer's gold/copper
interests, essentially its Red Dome and Mungana porphyry gold deposits
near Chillagoe in Far North Queensland.
The properties come with an inferred resource of 1.6 million ounces of
gold, 90,000 tonnes of copper and 14 million ounces of silver. While the
market has long known about the gold resource base and its near-term
development potential, it has continued to value Kagara as a base
We know that because Kagara's closing price on Friday of 37.5¢ gave it a
market capitalisation of a little more than $90 million whereas
first-pass analyst reports on Mungana suggest a value ranging from $200
million to more than $500 million.
So the timely extraction of the gold premium hidden away in its asset
base is shaping up as the fix Kagara needs to overcome balance sheet
pressure caused by the collapse in zinc prices. It has some near-term
refinancing issues ($50 million in March and $100 million in October).
JUNIORS with plenty of cash are a rare breed. Western Metals is part of
the breed, with about $20 million in cash.
As covered by Garimpeiro last year, WMT had planned to pick up the
historic Parys Mountain base metals project in North Wales while
continuing to tickle along its uranium interests.
But land title issues and some other frustrations had WMT pull out of
the Parys Mountain deal just as the GFC was working up a head of steam
back in October.
That left WMT free to chase down a new opportunity.
WMT has found such a deal. For an all-up cost of $6.25 million in staged
payments, WMT is to buy Sub-Sahara Resources' (SBS) gold projects in
Tanzania. In the SBS deal, WMT has put its foot on the 4.5 million ounce
Tusker gold deposit, a joint venture with Barrick.
SBS, and now WMT, can increase its stake in Tusker to 68 per cent by
completing a positive bankable feasibility study into its development.
It is only upon commercial production starting that WMT would have to
pay the biggest chunk ($5 million) of its instalments deal with SBS. So
WMT is picking up some serious ounces of gold at a low price, mainly
because of the cash squeeze being felt by SBS, which will now focus on
its Koka gold project in Eritrea.
WMT closed at 3.8¢ a share on Friday, not all that far off its cash
THE collapse in oil prices has renewed pressure for mergers and
consolidation among the junior oil stocks. But not the type of deal that
Drillsearch (DLS) is proposing to 3D Oil (TDO).
As 3D managing director and 18 per cent shareholder Noel Newell put it:
"My shareholders are better off in 3D than they are in Drillsearch."
The Drillsearch offer of four of its shares (trading at 2.1¢ each) for
each 3D share (trading at 9¢ each) has an imputed value of 8.4¢ a 3D
It has already been rejected by 3D and there is good reason to believe
that is also the attitude of more than 50 per cent of the company's
So when Drillsearch finally releases its Bidder's Statement, it would
seem to have two chances of achieving its minimum acceptance condition
of 50.1 per cent, Buckley's and none.
It is the scrip-only nature of the bid and the respective upside of the
two companies that is the problem. While Drillsearch has some production
interests, its cash balance was run down to a little more than $8.1
million in the December quarter. Spread that across 1.6 billion shares
on issue and you end up with a minuscule amount.
3D, on the other hand, has about $14 million in the till (6.7¢ a share).
So even if the Drillsearch offer was a cash bid of 8.4¢ a share, which
it is not, it would barely cover 3D's cash backing. That might be fair
enough if 3D had nothing on the go, but it has been coming up with a
development plan for its wholly owned West Seahorse oilfield in Bass
Strait (7.86 million barrels of oil).
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