I personally have no interest in the blue-chip stocks or anything close to paying dividends - franked or otherwise, but then I retain some excitement for any opportunities I see. The following stocks are likewise.
- Emperor Mines (EMP): Emperor's Vatakoula UG mine in Fiji has one of the longest lives of any in the world. I remember this company from its heydays in the 1980s, when the stock was trading at $12. Some 20 years later, it is still producing 110-140,ooooz/year, albeit at higher operating costs. Its record over that time has been chequered, but what can you expect when the prior MD was an accountant. Nevertheless this is a difficult mine. For starters its a 'hot' volcanic mine requiring refrigeration. Grade control & reserve calculations are spirilous because of the irregular distribution of the gold. The veins are thin, so mine headings are narrow. Having visited this mine, I can say workers are confronting some of the hardest conditions in the western world, excluding South Africa. Little surprise that strikes are common. The last 6mths has been shocking after a mine flooding, shaft equipment failure, high oil (thus power) costs and higher maintenance costs. The mine went from $6-8mil 6mth profit to a $33mil annual loss. The management team has abandoned the mine, opening the project to fresh ideas. DRD Gold's takeover demonstrates the value inherent in this minem having secured 49% of the equity. Conversion of their loans into convertibles suggests this might increase. Regardless, the bad news seem to be behind them. They still have a respectable 3.3Moz of gold resources at an average grade of 12g/t. The company has $6mil in cash and its debt will be reduced by $8mil if Alcaston can negotiate the sale of the Tavolu project (0.4Moz in Fiji). The Net Tangible Asset value of the company is $0.18, and the share price is $0.26. Being a significant gold producer (albeit high cost) presents an attractive turnaround story at a time of rising gold prices, particularly if they succeed in returning gold production to 140,000 oz per annum. Higher oil prices and continued operational problems pose the biggest concerns. See the chart below - I see scope for a break-out.
- Resolute Gold (RSG): They operate 3 gold mines in Australia (Ravenswood) and Africa (Ghana & Tanzania) producing around 230,000 0z per annum. They have alot of blue-sky upside to expand resources, and I wouldnt be surprised to see a merger with Gallery Gold (GGN) to expand their market profile with institutions. They have a significant about of hedging, but expanded output will create added upside. The chart suggests the best opportunity to buy has been missed. Wait to see if resistance at $1.30 is broken, as a better entry might come yet. ie. A delayed wedge breakout.
- Croesus Gold (CRS): CRS operates in 3 districts of WA. The company operates mines in the Binduli, Davyhurst and Norseman areas of WA. Production is currently running at 183,000 oz per annum. The company has hedged 21% of its reserves. It has recently increased its total resource base to 3.6Moz, and the company has raised $15mil through a convertible note issue to fund an exploration program in the Norseman area, as well as acquisitions overseas. The notes raises CRS cash reserves to $21mil + $4mil in investments. The project has significant upside in underground resource potential. The institutions dont like it because it lacks a large resource base and has high operating costs. The chart suggests weakness in CRS despite higher gold prices. The reason is the deterioration in cash operating costs the Davyhurst (and Binduli) operations. Their 329mil shares at 36c are worth $118mil. Look for support at 35c, otherwise weakness to 20c. See chart below.