Joel’s Resource Roundup (19 June 2019) #JKX #MKA #SO4 #RBD
I’ve been relatively quiet in the past month or so as I’ve been focused on getting a US work visa for a month in Atlanta. That being said, there have been a slew of announcements at companies that I’m invested in.
JKX Oil & Gas – directors given the boot!
Nearly the entire JKX Board has been given the boot at the AGM. A number of shareholders who were at the AGM believe JKX’s largest shareholders may look to reverse UNB into the co, although the company has stated this isn’t the case. The share price has fallen back perhaps reflecting some nervousness amongst investors:
Mkango Resources (MKA) – US government in discussions
China continues to threaten that it will restrict access to rare earths. I recently highlighted that I believed MKA was at a ridiculous valuation. The shares were at one point up nearly 50% on news that the US government was in discussion with the company. The company then somewhat shot itself in the foot by stating that “detailed discussions have not as yet taken place”. Somewhat bizarrely they also took the chance to mention that a subsidiary had gone bust at the same time – if they were looking to cool the share price, it worked!
Additionally,, the 6.6 pence warrants expired last week and the company received £.1.1m from exercises. Mkango is cashed up and a potential trade war appears to have brought some interest back to the shares:
Salt Lake Potash – strong institutional demand
My favourite potash play as detailed here continues to outperform its peers since coverage. Despite the resource sector being out of favour the company announced a A$20m fund raise with minimal discount. CEO Tony Swiericzuk mentioned that placing was over-subscribed in a recent podcast.
Salt Lake announced results of its scoping study which showed the project to be a “low capital and operating cost operation”. The headline numbers were post-tax NPV8 A$381m and a post-tax IRR of 27%.
The project is forecast to be breakeven even if there is a significant 40% decrease in SOP prices. Given that Australia is a stable and mining-friendly jurisdiction, my conviction continues to increase that Salt Lake’s project is one of the most attractive potash projects in the world. I remain perplexed as to why retail investors aren’t interested in Salt Lake and instead seem to prefer capital-intensive projects in less favorable jurisdictions.
Lombard Odier appear to agree that the project is compelling as they now own over 15%. Salt Lake’s share price has reacted favourably to the positive developments:
Arc Minerals (ARCM) – investor call
Arc Minerals held an investor call to update them on progress. I must admit that Arc has been something of a drag on my portfolio given my over positioning last year. Evidently some shareholders have taken to moaning at the company about a lack of news. It was refreshing to hear Chairman Nick Von Schirnding’s short shrift for those who wish the company to RNS endlessly on no real news.
The company confirmed that due to the primarily cobalt resource, production from the pilot plant is not a focus given the circa 50% collapse in the cobalt price. More importantly Arc has lots of exciting drill targets and new quality shareholders who are willing to fund the company. As evidenced by this, Remy Welschinger has been appointed as a NED.
Chart – nothing to see here – I’ve definitely not lost much capital here – ahem! The company is entering what I believe to be a news rich period and I look forward to updates.
Reabold Resources (RBD) – potentially largest UK onshore gas field
Reabold at first glance looks like yet another junior oil & gas company. It’s not – it’s listed as a specialty finance business that funds oil & gas projects. I rate management (ex-M&G fund managers) who are well connected in the city. The company has assets in California, the UK and Romania, which are covered in more detail on their website.
Reabold has an effective 24% stake in the West Newton discovery. Preliminary data suggests that contingent resources are at least 189 Bcf (equivalent to over 31 million barrels). Oil has shown in the deeper exploration target which had a less than 25% chance of success but an estimated gross NPV of $850m vs $247m for the gas. It’s early days but Reabold’s model appears to be validated – hopefully they can continue to replicate it across the asset base and new projects. Reabold’s shares have responded positively to the news:
Until next time!
At the time of publication, the author holds long positions in the stocks mentioned.