Posted by albertlaw > 2013-11-06 18:33 | Report Abuse

Blumont and Liongold - What does the future hold for this two resource investment holdings? Blumont A share with a phenomenal rise over the last few months. It kept rising from 0.05 to 2.41 before crashing to its now 0.133 share price. Interestingly, a few days before the collapse, while I was on the train, I observed an aunty sitting beside me scrolling through her stock portfolio, one stock she stare at for a long while (like it could make a difference) was Blumont. A stock that I saw everything that I was against. - Phenomenal rises in prices for not much reason, at some point, its market cap made it worth more than SMRT or NOL while its largest acquisition is only 45m. - No key all star management with special connections - No key businesses but purely rising on acquisitions. I found some interesting points that may possibly quantify an investments at current price of 0.133. Not at the previous high prices though. It was the unfolding of events plus the contrarian and bargain hunter mind of mine that seeks the cheapest price for the highest value. At a risk of overstating anything, this is how I quantify things. Investment highlights: - Hong Kong-based mining entrepreneur Alexander Molyneux has been named chairman designate. He bought a 5.2% stake with a price ranging from $0.2 - $0.4/ share. So his minimum investment is at least $27m. No small sum for someone who was formerly an MD in Citibank for Investment banking in resources. - With Alexander Molyneux on board, the company does gain some traction in creating a resource champion, especially with prices of resources at a low price now, it may makes sense to acquire undervalued assets. - Platinum Partners will subscribe to redeemable convertible bonds for up to an aggregate principal amount of US$200 million at 8.0% p.a.. A hedge fund interest continues to provide more support for its possible business credibility. Proceeds to be used to fund the announced investment in Discovery Metals Limited. - Discovery Metals Limited is a credible investment, its current price of 0.7, was previously a privatization target by a billionaire. (which failed) Risk - Blumont yesterday said its one-for-two rights issue at five cents apiece was over-subscribed by about 37 per cent, raising gross proceeds of some $43.05 million. (The flood of new shares may continue to provide more downside pressure) - No certainty of strategy. While company has additional $43.05m of cash, the NAV at 0.4 shows that it is valued 3x bookvalue at current price. - Certain downside may still persist as people are running for cover. Conclusion - New chairman, new investors and strategic alliances can help this company to grow. But the lack of clear strategy other than mere acquisitions and aiming for lofty ambitions. - While I am positive that the new chairman and the investment hedge fund appearance will help the company grow. I remain skeptical of any credible upside unless more funds are deployed through share placements. - Target price 0.2 (upside of 50.4%) Liongold - Former Citibank Investment Banking MD at the helm (a smart dealmaker) - More quantifiable assets and undervalued by most metrics (compared to similar sizable gold miners in the region and much cheaper than CNMC goldmine) - Mere acquisitions only, not much good in terms of creating a good strategy. Unless a profitable strategy is drawn out, I remain skeptical of the price. On a pure gold mining value, it could be worth anything around 0.30/share (100% upside) Disclaimer : Caveat Emptor (Buyers beware), the writer has no positions in this two stocks. Extra notes on Platinum Partners PPVAF is a multi-strategy hedge fund established and registered in the Cayman Islands with assets under management in excess of US$700 million and is managed by Platinum Partners (the “Firm”). The Firm is a New York based investment management group with more than US$1 billion in assets under management. The Firm was founded in 2003 by Mr. Mark Nordlicht, an investor with over twenty years of experience in asset management. The Firm manages a number of funds, including PPVAF. Extra notes for Blumont Copper (September 2013): Blumont entered into a concurrent convertible bond and equity placement agreement (the “Placement”) with Discovery Metals Limited (“DML”), a copper exploration and production company listed on the Australian Securities Exchange (“ASX”) and Botswana Stock Exchange, for a total investment consideration of approximately A$116 million. Pursuant to the Placement, Blumont acquired approximately 11.56% of the total issued share capital of DML; Thermal Coal (September 2013): Blumont entered into a conditional share subscription agreement to acquire up to 15% of the potential enlarged issued share capital of ASX and Johannesburg Stock Exchange-listed coal mining company, Resource Generation Limited, for a total investment consideration of between A$20.97 million and A$22.11 million; Copper (August 2013): Blumont acquir