The Speculator

Beacon shareholders reject an offer from Ramelius Resources, while Image raises its required cash.

PORTFOLIO POINT: Beacon shareholders reject an offer from Ramelius Resources and shoot themselves in the collective foot.

On Monday of this week, shareholders in West Australian prospecting tiddler Beacon Resources (BCN) gathered at the Celtic Club in West Perth to vote on the company’s future.

Since it was only 10 am, the bar would have barely been opened. So it’s hard to account for their astounding rejection of a generous offer from Ramelius Resources (RMS) that would have greatly improved Beacon’s financial situation.

Readers may recall that on February 8, we added 100,000 Beacon shares to our portfolio at 0.8c a share. In the previous 12 months, Beacon’s 995 million issued shares had slipped from a high of 1.7c to a low of 0.4c.

We bought in at 0.8c after a deal was announced to restore the company’s fragile fortunes. At that price, the company carried a market capitalisation of $7.96 million.

Apart from $1 million in remaining cash, Beacon’s principal asset was its Barlee Gold project at Halleys East, 200 kilometres north of Southern Cross. Within its 400 square kilometre exploration licence area, it had so far identified a single gold resource, held within a 12 square kilometre mining lease (ML 77/1254).

The find, however, was adjudged to be not big enough to sustain a standalone treatment plant, and various small producers, with existing operations, became interested in buying it.

Beacon’s December quarterly report claimed an initial economically-optimised mining resource of 172,000 tonnes of 7.5 grams per tonne (g/t) for 42,000 ounces of contained gold. Although remaining cash stood at $1 million, quarterly expenditure was running at $420,000, half on exploration and half on administration.

One offer was already on the table (since early last year), with Southern Cross Goldfields (SXG) willing to buy the mining lease, plus all of Beacon’s other exploration tenements, through a paper offer of 60 million of its shares, to be distributed in specie to Beacon’s 2800 shareholders. Most would have ended up with unmarketable parcels and Beacon, with no exploration tenements, would have faced suspension of its stock exchange listing.

Then, on February 1, Ramelius Resources emerged with an offer to buy the mining lease, only with an upfront payment of $4 million cash (representing reimbursement of past exploration expenditure), plus royalty payments starting at $80/oz for the first 40,000oz of gold produced and escalating payments thereafter.

-The Speculator portfolio, as at March 14
Company
ASX
No of shares
Bought
Purchase price
Current price
Current value
Image Resources
IMA*
15,000
31/12/2010*
0.362 av
$0.410
$6,150
Viralytics
VLA
19,995
20/12/2011
$0.308
$0.390
$7,798
Robust Resources
ROL
6,000
31/12/2010*
$1.49 av
$1.295
$7,770
Scotgold Resources
SGZ
25,000
31/12/2010*
$0.053
$0.070
$1,750
Scotgold Resources Options ex30/4/12 @ 8c
SGZO
2,500
$0.000
$0.001
$3
Coalworks
CWK
10,000
31/12/2010*
$0.830
$0.775
$7,750
GoConnect Ltd
GCN
120,000
31/12/2010*
$0.038
$0.030
$3,600
Minemakers
MAK
20,000
25/01/2011*
0.425 av
$0.280
$5,600
Platsearch
PTS
20,000
8/02/2011*
$0.130
$0.085
$1,700
Broken Hill Prospecting
BPL
20,000
22/02/2011*
$0.160
$0.097
$1,940
Austpac Resources
APG
40,000
2/03/2011*
$0.060
$0.038
$1,520
Potash West
PWN
11,050
30/03/2011*
$0.200
$0.270
$2,984
Cortona Resources
CRC
20,000
13/04/2011*
0.146 av
$0.145
$2,900
Golden Gate Petroleum
GGP
408,500
20/04/2011*
0.0145 av
$0.021
$8,579
TNT Mines
TNT
4,440
22/07/2011*
$0.000
$0.250
$1,110
Quickstep Holdings
QHL
20,000
23/11/2011*
$0.185
$0.165
$3,300
Orpheus Energy
OEG
19,250
17/08/2011*
0.164 av
$0.130
$2,503
 
Total value of portfolio
$66,955
cash at bank
-$9,940
Total
$57,015
 
Portfolio change since January 3, 2012 (started with $50,000)
14.03%
All Ordinaries change since January 3 2012 (then 4155.22)
4.36%
 
*Shares held from previous year, carried at their December 30, 2011 closing price.

The sale was subject to shareholder approval at the meeting called for Monday, March 12. Surprisingly, 40.37% of shares voted in favour of the sale, but 59.63% voted against, leaving Beacon seriously short of funds needed to carry out future exploration plans on at least four targets within its licence area, identified for drilling in the coming months.

I dumped our 100,000 shares at 1.1c as soon as the results of the meeting became known. Meanwhile, Beacon has appointed one Neil Fearis as an alternate director to Beacon’s chairman Paul Lloyd. The appointment will be valid until the March 27 shareholders’ meeting, which has been called to vote on replacing the present board.

* Sold 100,000 Beacon Minerals (BCN) at 1.1c ($1080)

Image raises cash to accelerate feasibility study

Our heavy minerals prospector had no trouble raising $1.88 million in cash through a share placement to accelerate the feasibility study now underway on its North Perth Basin Project.

The company placed 5,395,858 shares to so-called professional and sophisticated investors, at 35c each, to raise $1,888,550.

Following the placement, Image now has 99,184,817 shares on issue, with cash and liquid holdings of $2.8 million.

As reported in this column on February 29, Image has appointed a highly-experienced mineral sands
processing executive as project manager for its feasibility study. The study is being carried out over six of Image’s 11 100%-owned identified mineral resource discoveries.

Potash West waves the flag in Hong Kong

Investors in our fertiliser hopeful Potash West (PWN) may look forward to renewed support for the stock in the next week or so, if managing director Patrick McManus impresses the punters at Hong Kong’s Mines and Money conference from March 19-23.

Potash West is investigating the development of one of the world’s largest-known potassium-rich glauconite deposits, within exploration tenements covering 2900 square kilometres north of Perth.
It is also earning a 70% interest in a large, potentially rich phosphate/glauconite project near Derby in WA’s north-west.

Potash West, having reported encouraging extraction testworks, has seen its share price slip from a high last year of 35c to trade today at 27c.

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