The Speculator

Market ignores Gullewa affiliate’s high-grade gold hits.

PORTFOLIO POINT: Market ignores Gullewa affiliate’s high-grade gold hits, once again confirming the company and its potential are seriously under-rated.

Readers of this column may recall that I first bought into the low-keyed mining investor Gullewa Ltd (GUL) on May 22 this year at 6.3c a share for a parcel of 100,000 shares.

The attraction then was Gullewa’s 56.6% retained holding (100 million shares) in the spin-off of its soon-to-be-listed (and much larger) subsidiary, Allegiance Coal Ltd (AHQ).

In the week that followed, Gullewa shares soared 66% to a week’s high of 10.5c. I sold 60,000, recovering our total investment cost, and retained 40,000 Gullewa, which I still hold today.

While enthusiasm for coal has cooled somewhat in more recent months, Gullewa still retains its 100 million AHQ shares, for which participants in the public float paid 20c a share for a total of 35 million shares raising $7 million. AHQ shares traded this morning at 7c, equating to a nominal value on Gullewa’s 100 million share holding of $7 million.

Allegiance Coal in its September quarterly report (issued on October 31) suggested that results from recent drilling of its Queensland coal tenements should provide sufficient data to report a JORC-compliant resource hopefully in the current quarter.

Gullewa has some other irons in the fire that appear to be largely overlooked.

Gullewa’s gold affiliate

Gullewa also has a 36.1% holding in the Toronto-listed Central Iron Ore Ltd, which has 16 granted tenements covering 1,594 square kilometres on WA’s Yilgarn iron ore province with an exploration target of 510-850 million tonnes. One tenement (EL57/819) covering 120 sq km has been farmed out to the listed Pacific Ore Ltd (PSF), which may earn 51% by spending $1.5 million within the next 18 months, another 19% by spending a further $3.5 million in 3.5 years, and an additional 20% with the expenditure of another $10 million within five years.

But more sexy perhaps, after an announcement last week, is Central Iron Ore’s (CIO) holding in the South Darlot Gold Project, 320 km north of Kalgoorlie, with a tenement package of 336 sq km including the old British King Mine (on care and maintenance) 5km west of Barrick Gold’s Darlot mine.

At the end of last week, Gullewa reported more high-grade gold intercepts from drilling two of the 3l gold targets identified within the South Darlot Project (being 24 targets located on tenements that are the subject of a joint venture with Barrick Gold and 7 targets on CIO’s 100%-owned tenements. Best intersections announced were:

  • 4m at 50.3 g/t, including 1m at 158g/t from 43m
  • 7m at 27.1g/t including 1m at 159g/t
  • 4m at 23.2g/t including 1m at 81.8g/t

With the completion of its drilling program spend, Gullewa announced “the company envisages it will have earned a 51% interest in the Barrick tenements”. CIO can earn another 20% (equal to a total interest of 70%) through spending another $250,000.

At 9c a share, Gullewa’s 149.7 million shares carry a market capitalisation of $13.47 million. That is represented by remaining cash at the end of the September quarter of $7,697,000 less forecast expenditure in the current quarter of $1.3 million, or net cash of $6.4 million.

That doesn’t even match the market value of Gullewa’s holding in the listed Allegiance Mining, and suggests there is no value at all attributed to gold and iron ore projects.

With masterly understatement, Gullewa’s chairman, geologist/geophysicist Dr Tony Howland-Rose, commented: “These results are most encouraging”, and pointed out that the location of the most recent gold results “is only 3km from Coal and Iron Ore’s British King gold mine and 7km from Barrick’s Centenary gold mine.”

Golden Gate Petroleum grants extraordinary meeting

The board of Golden Gate Petroleum Ltd has confidently granted the request of a group of dissidents to hold an extraordinary meeting of shareholders on December 19, seeking the replacement of two directors – Frank Brophy and Frank Petruzzelli, two veterans of the board.

It appears the present board has the numbers to hold the status quo and at the company’s recent annual meeting an attempt by dissidents to block a capital raising through a convertible note was defeated.

During the recent investor hubbub, director Frank Petruzzelli added another 5.5 million shares to his holding, taking it to 26.8 million, and executive chairman Steve Graves has returned to Texas where Golden Gate’s first horizontal well is drilling ahead.

Cash windfall for Viralytics

Our cancer cure hopeful Viralytics Ltd (VLA) has collected a $1.467 million reimbursement from the Australian Taxation Office for research and development expenditure incurred in the 2011-12 financial year.

This is greater than the $871,000 originally estimated in the company’s 2012 published annual report, thus enhancing funds available to maintain its promising clinical trials including its Phase 11 melanoma study in the USA and other potential indications including bladder cancer.

The company’s executive chairman, Paul Hopper, also reported that Viralytics had delivered a paper last week to an international symposium in Dublin, Ireland, on the progress of its CAVATAK oncologic virus in treating late stage melanoma, prostate, breast and colorectal patients.

In the current depressed overall market, the news did nothing to enhance investor enthusiasm. After trading 813,000 shares to a high last week of 46.5c, Viralytics shares drifted back yesterday to trade at 35.5c.

New chief executive for Viralytics

Viralytics’ Paul Hopper today announced the appointment of Starpharma Holdings vice -president Dr Malcolm McColl as the new chief executive of Viralytics (VLA).

From 2010, Dr McColl was vice -president of business development at Starpharma (SPL) and before returning home of Australia in 2010, he spent three years based in the UK at NYSE-listed company Hospira as business development director for Europe, the Middle East and Africa.

Prior to that he was director of business development Asia-Pacific for Hospira (previously Mayne Pharma), and also spent 13 years with CSL in its animal health division (including four years based in the US).

Dr McColl holds a Bachelor of Veterinary Science degree with first class honours from the University of Melbourne, and an MBA from Melbourne Business School.

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

The Speculator portfolio, as of November 13, 2012
CompanyCodeNo of sharesBoughtPurchase priceCurrent priceCurrent value
Image ResourcesIMA*20,00031/12/2010* $0.338 av$0.190$3,800
Robust ResourcesROL6,00031/12/2010*$1.49 av$0.565$3,390
Scotgold ResourcesSGZ27,50031/12/2010*5.5 av$0.065$1,788
GoConnect LtdGCN250,00031/12/2010*0.034 av$0.011$2,750
Broken Hill ProspectingBPL30,00022/02/2011*0.132 av$0.100$3,000
Austpac ResourcesAPG40,0002/03/2011*$0.060$0.036$1,440
Potash West PWN11,05030/03/2011*$0.220$0.250$2,763
Cortona Resources CRC25,00013/04/2011*0.146 av$0.091$2,275
Golden Gate Petroleum GGP408,50020/04/2011*0.0145 av$0.007$2,860
TNT MinesTNT4,44022/07/2011*$0.000$0.250$1,110
Quickstep HoldingsQHL20,00023/11/2011*$0.185$0.170$3,400
Orpheus EnergyOEG19,25017/08/2011*0.164 av$0.064$1,232
Black Mountain ResourcesBMZ10,00017/04/2012$0.300$0.225$2,250
Chesser ResourcesCHZ12,00027/08/2012$0.360$0.390$4,680
Total value of portfolio$48,815
Owe the bank-$8,835
Portfolio change since January 3, 2012 (started with $50,000)-20.04%
All Ordinaries change since January 3 2012 (then 4155.22)5.99%
All Ordinaries close 13 November 20124404.2

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