The Speculator

PORTFOLIO POINT: Discount share placement in Robust Resources raises the ire of shareholders '¦ and we plan to take up our rights in Scotgold Resources.

An unknown number of investors in Robust Resources (ROL) are miffed at having been ignored in a discounted share placement to new and existing institutional shareholders a week ago.

The Indonesia-focused gold and base metals prospector’s shares sold as high as $2.28 in the week preceding the announcement of the placement, at just $1.65 a share, to raise $30 million cash.

At that price, it was no surprise to read in the company’s announcement to the ASX, released on October 22, that “the capital raising was well supported and heavily oversubscribed, with the company attracting some of the world’s largest and most experienced resource sector institutional investors to its register”.

Bully for them. But during last weekend I had any number of disgruntled readers of this column bowl up to me at both my local pub and the Paddington-Woollahra RSL to grizzle.

Yesterday, among emails that arrived at my Sydney office was a missive from one Peter Ashby of South Australia, confidently asserting: “I know that you will agree that the issue of stock to an outside purchaser at what turned out to be a big discount to market with a subsequent 15% diminution in price for existing shareholders is a disgraceful exhibition of lack of fiduciary responsibility by directors. They should all be sacked.

“It beggars belief why ASIC does not regulate to ensure all share placements must be offered to existing shareholders first to enable them the opportunity to maintain their equity in the companies they own.”

Robust’s placement of 18,181,820 new shares will boost issued capital to 84,144,097 shares. The issue is being made in a first-tranche placement of 9 million shares and a second-tranche placement of the balance, to be approved at a special shareholders meeting in early December. Dissenting shareholders are not likely to gain any traction there.

The prompt placement was arranged through Investec Bank (Australia) as lead manager for Australia, the UK and Europe, Helmsec Global Capital in Asia, and Casimir Capital of New York for the North American component.

As I pointed out in this column on September 1, Robust shares rose from a previous weekly low of $1.27 to a week’s high of $1.50 after Helmsec Capital released a favourable report on the company at the end of August.

It referred to Robust’s “world-class projects located on Romang Island in Indonesia’s richly endowed magmatic arcs”. The 25,000-hectare island, 650 kilometres northwest of Darwin, is almost entirely held under Robust titles.

At a closing price of $1.47 on the release of the report, Helmsec analyst Jean-Francois Bertincourt saw the stock as “fairly valued” but a positive flow of news over the next year from mineralisation extensions and potential new discoveries “should warrant significantly high valuations”.

We take up a 1-for-4 offer in Scotgold

Shareholders in our highlands gold prospector Scotgold Resources (SGZ) have until November 3 to take up a non-renounceable entitlement of one new share for every four shares held on the record date of September 28, 2010, at a price of 3.5¢ a share, together with one free option for every two new shares subscribed for, exercisable at 8¢ by April 30, 2012.

Since the Speculator holds 20,000 Scotgold shares, we’ll take up our 5000 share entitlement plus options to be accounted for in next week’s column. The issue will raise $1.02 million with issued shares rising by 29.32 million to 146.4 million.

The company is undertaking a board reshuffle preparatory to appealing against the rejection of a mining application on the company’s gold and silver deposit at Tyndrum, 80 kilometres north of Glasgow, Scotland.

By a narrow margin of 10/12, members of the Loch Lomond and Trossachs National Parks Board voted last August to reject the application. Exploration continues on a larger part of the project area which lies outside the park boundary.

-The Speculator portfolio, as at October 26, 2010
Company	ASX	No of shares	Bought	Purchase price	Current price	Current value
Cortona Resources options ex. 20¢ by 31/01/2012	CRCO	25,000	31/12/09	$0.053 av	$0.085	$2,125
A1 Minerals	AAM	40,000	31/12/09*	$0.24 av	$0.120	$4,800
Image Resources	IMA	4,000	31/12/09*	$0.830	$0.430	$1,720
Golden Gate Petroleum op ex. 8¢ by 31/8/2012	GGPO	6,665	31/12/09*	$0.017	$0.005	$33
Viralytics	VLA	50,000	31/12/09*	$0.037	$0.032	$1,600
Trafford Resources	TRF	20,000	31/12/09*	$0.760	$0.510	$10,200
OBJ Limited	OBJ	100,000	31/12/09*	$0.029	$0.032	$3,200
OBJ options ex. 1¢ by 31/12/2010	OBJO	11,111	21/01/10	Free	$0.022	$244
Beacon Minerals	BCN	300,000	13/01/10	0.0213av	$0.018	$5,400
Quickstep Holdings	QHL	20,000	14/01/10	$0.520	$0.390	$7,800
Golden Gate Petroleum	GGP	120,550	25/01/10	$0.038 av	$0.017	$2,049
Robust Resources	ROL	3,000	9/02/10	$1.15 av	$2.020	$6,060
Scotgold Resources	SGZ	20,000	16/02/10	$0.105	$0.042	$840
Coalworks	CWK	10,000	9/03/10	$0.275	$0.470	$4,700
Queensland Mining Corp	QMN	50,000	23/03/10	$0.125	$0.081	$4,050
Austex Oil	AOK	10,000	1/06/10	$0.120	$0.125	$1,250
GoConnect Ltd	GCN	100,000	13/07/10	$0.028	$0.042	$4,200
Imperial Corporation	IMP	20,000	10/08/10	$0.086	$0.089	$1,780
x
Total value of portfolio						$62,052
Owe the bank						-$25,024
Total						$35,989
x
Portfolio change since January 4, 2010 (started with $40,000, now raised to $50,000)						-28.02%
All Ordinaries change since January 4, 2010 (then 4889.8)						-2.62%
x
* Shares held from last year. They are carried at their December 31, 2009, closing price.

GoConnect to spin-off herbal medicine float

Shareholders in our internet investment GoConnect (GCN) will be offered an entitlement in the spin-off of a yet-to-be listed Chinese herbal medicine company.

Terms of the offer and the book’s closing date are yet to be announced, but GCN investors holding shares with a minimum market value of $5000 on the books closing date will have a priority entitlement to subscribe for shares in the float of Pharmasafe Ltd (PHS) ahead of a planned listing on the ASX.

More details next week.

A wake for veteran sailor and Bond financier

Yachtsmen assembled at Bunbury’s Koombana Bay Sailing Club last Friday to farewell 86-year-old Newton Roberts, a veteran yachtsman and World War Two crew member on HMAS Australia.

As a member of Royal Perth Yacht Club’s sponsorship of Alan Bond’s successful America’s Cup challenge in 1983, Roberts was manager of support services for Bond’s team in Newport, Rhode Island.

One of his duties was delivering dry-cleaning and laundry to the local laundromat. On each trip, the laundromat presented him with a ticket in a Rhode Island lottery with a first prize of $US500,000 '¦ which he won.

Friends say he was fond of recounting that “Bondy bit me for half – and guess what? He repaid me every penny.” With his windfall, Roberts bought himself a motor yacht and named it Providence. Another wake is planned to take place at RPYC.

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