The Speculator

We buy into gold prospector Beacon Minerals and wait for an internet windfall.

PORTFOLIO POINT: We buy into gold prospector Beacon Minerals as a challenge emerges to block the profitable sale of assets.

Optimum luck has so far eluded prospector Beacon Minerals (BCN) on its Barlee Gold project at Halleys East, 200 kilometres north of Southern Cross in Western Australia.

Its 995 million issued shares have traded down from a 12-month high of 1.7¢ to a low of 0.4¢ and last week closed at 0.8¢ as a deal was put together to restore its fortunes. At that price the company carried a market capitalisation of $7.96 million.

The trouble is that although the company has discovered a shallow, comparatively high-grade resource at Halleys East, it’s not big enough to sustain a stand-alone treatment plant and the company’s exploration funds were rapidly running down.

Beacon’s December quarterly report, released on January 14, revealed an initial economically optimised mining resource of 172,000 tonnes of 7.5 grams per tonne (g/t) gold for 42,000 ounces. Remaining cash stood at $1 million after expenditure for the quarter of $420,000, half on exploration and half on administration.

The gold resource is contained within a single 12 square kilometre Mining Lease 77/1254, which is excised from Beacon’s 400 square kilometre exploration licence area containing the broader Barlee gold project on which various targets remain to be tested.

In December the company revealed it was talking to various parties interested in buying the Halleys East resource, including the listed Ramelius Resources (RMS).

On January 30, Beacon’s managing director Darryl Harris, a metallurgical engineer, revealed the company had received a requisition from GTP Legal to convene a meeting of shareholders to remove Harris and fellow directors Paul Lloyd and Matthew Egan and replace them with nominees Graham McGarry, Geoffrey Greenhill and Marcus Michael. The incumbents believe the nominees represent shareholdings of about 5.3%.

Last week, on February 1, the final agreement was signed with Ramelius to sell the 12 square kilometre mining lease in exchange for:

  • An up-front payment of $4 million cash, representing reimbursement of past exploration expenditure.
  • Royalty of $80 an ounce for gold produced up to 40,000 ounces, with first production expected in late 2012.
  • Royalty of $160 an ounce for gold produced from 40,000-100,000 ounces.
  • Royalty of 2% any further gold production.

The sale is subject to the approval of shareholders at a general meeting to be held in Perth on March 12.

Following completion of the sale, Beacon will have:

  • Cash reserves of about $5 million.
  • Listed securities in Consolidated Tin Mines Ltd with an estimated value of $900,000.
  • Royalty income of up to $12.8 million, with a near-certainty of the first tranche of $3.2 million from the first known 40,000-ounce resource.
  • Retention of 388 square kilometres of exploration ground, with at least four exploration targets scheduled for drilling in early 2012.

It’s hard to conceive that shareholders will reject this proposal at their meeting next month '¦ unless the challengers come up with a better offer.

The proposed buyer, Ramelius Resources, from its other operations in WA produced 5493 ounces of gold in the December quarter and held $102 million cash at bank.

-The Speculator portfolio, as at February 8, 2011
Company
ASX
No of shares
Bought
Purchase price
Current price
Current value
Image Resources
IMA*
15,000
31/12/2010*
0.362 av
$0.350
$5,250
Viralytics
VLA
19,995
20/12/2011
$0.308
$0.365
$7,298
Robust Resources
ROL
6,000
31/12/2010*
$1.49 av
$1.240
$7,440
Scotgold Resources
SGZ
25,000
31/12/2010*
$0.053
$0.063
$1,575
Scotgold Resources Options ex30/4/12 @ 8c
SGZO
2,500
$0.000
$0.005
$13
Coalworks
CWK
10,000
31/12/2010*
$0.830
$0.790
$7,900
GoConnect Ltd
GCN
120,000
31/12/2010*
$0.038
$0.041
$4,920
Minemakers
MAK
20,000
25/01/2011*
0.425 av
$0.345
$6,900
Platsearch
PTS
20,000
8/02/2011*
$0.130
$0.091
$1,820
Broken Hill Prospecting
BPL
20,000
22/02/2011*
$0.160
$0.100
$2,000
Austpac Resources
APG
40,000
2/03/2011*
$0.060
$0.044
$1,760
Potash West
PWN
11,050
30/03/2011*
$0.200
$0.280
$3,094
Cortona Resources
CRC
20,000
13/04/2011*
0.146 av
$0.155
$3,100
Golden Gate Petroleum
GGP
270,000
20/04/2011*
0.013 av
$0.022
$5,940
TNT Mines
TNT
4,440
22/07/2011*
$0.000
$0.250
$1,110
Quickstep Holdings
QHL
20,000
23/11/2011*
$0.185
$0.170
$3,400
Orpheus Energy
OEG
19,250
17/08/2011*
0.164 av
$0.120
$2,310
Beacon Minerals
BCN
100,000
8/02/2012
$0.008
$0.008
$800
x
Total value of portfolio
$66,630
Cash at bank
-$10,374
Total
$56,256
x
Portfolio change since January 3, 2012 (started with $50,000)
12.51%
All Ordinaries change since January 3, 2012 (then 4155.22)
4.56%
x
*Shares held from previous year, carried at their December 30, 2011 closing price.

GoConnect windfall due in March-April

Readers who followed the Speculator into the listed internet content supplier GoConnect (GCN) last year, and retained at least 55,000 shares, will be in for a handy windfall in the next month or so.

In this column on August 31 last year we reported that GoConnect had entered into a memorandum of understanding (MOU) with the public unlisted company Priority One Network Group Ltd to form a joint venture to deliver promotion of merchant partners’ goods and services to an audience of 400 million consumers.

As we tracked this ambitious deal through subsequent weeks, when GoConnect shares recovered from a year’s low of 0.6¢ to a high of 7.1¢, it emerged that GoConnect shareholders with a minimum of 55,000 shares at October 21 would be eligible for a free distribution of 135 million Priority One shares to enable that company to join the ASX with a sufficient spread of shareholders.

That has since been achieved, with shareholders notified last month of their entitlement based on 1513 Priority One shares valued at approximately 30¢ each to be allocated free for every 10,000 GoConnect shares held on the “ex” date minimum of a 55,000 shareholding on October 21.

GoConnect reported that Priority One was preparing another information memorandum this week before applying for listing on the ASX, which directors hope to achieve in March or early April.

With 200,000 GoConnect held on the “ex” date, the Speculator can look forward to a free issue of 30,260 Priority One shares and, hopefully may so many of his Eureka Report readers.

David Haselhurst writes a monthly column for Money magazine. Please note that he is not able to provide personal replies to emails.