PORTFOLIO POINT: Emerging gold miner Chesser Resources could bring some Turkish delight from a gold project near the Dardanelles.
Readers who followed The Speculator into last week’s share purchase will have cause for some joy – particularly since picking winners has been a hard business for much of this year.
As reported in last week’s column, we added 100,000 Hughes Drilling (HDX) to the portfolio at 3.8c a share on August 17 in a week where 2.7 million shares traded up from a week’s low of 3.6c to a week’s high at the close of 3.8c.
Then last week, the share price soared from a low of 3.9c to a high of 5.1c and turnover almost trebled to 6.92 million. Although I’ve taken a profit, remaining shareholders in the stock can take some comfort from a recommendation I’ve come across from a Canadian-linked stockbroker – Canacord BGFR. The report, released on July 5 when Hughes Drilling was trading at 3c, predicted the company’s inherent value to be 6c a share, with a 12-month target for that price to be achieved.
I expect that target will prove to be too conservative. Remember, as I pointed out last week, Hughes legitimately claims to be the largest provider of blast-hole drilling services to the Australian coal-mining industry with 41 rigs on open pit mines in NSW and Queensland.
The company is barely involved in exploration drilling of potential coal or minerals discoveries – the first activity to see cancellations in any downturn in funding for expansionary programs. Its rigs are solely devoted to blast-hole drilling on proven resources to be extracted to meet contracted shipping requirements.
We buy into a promising Turkish gold show
A telephone call last week invited The Speculator to attend a corporate briefing on the Aussie-listed Chesser Resources (CHZ), which is developing an increasingly promising gold discovery in north-west Turkey.
I noticed among recent announcements to the ASX that one Morrice Cordiner had joined the board of Chesser as a non-executive director on June 27. Cordiner is a corporate lawyer who moved from the UK to Australia in 1989 and worked in funds management.
In 2003 he became a founding shareholder of Andean Resources Ltd which, in 2004, completed the purchase of the Cerro-Negro gold project in Argentina from MIM Ltd. For the next five years he worked as an executive director of Andean as it advanced from early exploration through feasibility and environmental studies to winning mining permits to build a 250,000oz/year gold mining operation in Argentina.
In late 2010, the US company Goldcorp Inc acquired Andean for $US3.5 billion. It crossed my mind, as I made an initial modest purchase of 12,000 Chesser at 36c on Monday, that Cordiner and his well-qualified fellow directors in epithermal gold exploration might do it again.
Flagship project near the Dardanelles
Chesser’s flagship project is the 100%-owned Kestanelik epithermal gold project, located in western Turkey, some 10 kilometres south-east of the Dardanelles with ready access to essential infrastructure.
So far, a maiden resource of 5.9 million tonnes of 2.4 grams/tonne gold has been announced for 462,000oz at a 0.5 g/t cut-off grade. Some 70% of the resource is within 50 metres of the surface (and 90% within 100 metres) and is likely to be open-pittable.
The initial resource is based on drilling 3.5 kilometres of more than 22 km of gold-bearing veins identified. The resource estimate was based on the results of 23,500 metres of drilling out of 26,000 metres completed at June 30. At that date, another 4000 metres remained to be completed in the 30,000 metre program.
A new 15,000 metre program will begin in early October.
Chesser has on issue 152.9 million shares which, at 36c, carry a market capitalisation of $55.5 million, with remaining cash at June 30 of $9 million.
Directors hold close of 10% of the stock and institutional investors around 30% including various Macquarie Bank funds with 7.8%
Delivering the corporate presentation this week was Chesser’s managing director, Dr Richard Valenta, who won his PhD in structural geology at Melbourne’s Monash University in 1988 and lectured there from 1990-94.
He is supported by non-executive chairman Stephen Evans (managing director of Adelaide accounting firm RJC Evan and Co), and four non-executive director: Morrice Cordiner, another legal practitioner Simon O’Loughlin, geologist Simon Taylor and Creagh O’Connor, founding director of specialist resource and energy investment bank, Gryphon Partners.
I notice three stockbrokers have put out encouraging assessments of Chesser in recent months.
Macquarie Equities in mid-August, when Chesser was trading at 30c, awarded it an enterprise value of 54.6c a share but no projected value.
Taylor Collinson on June 4, when the stock traded at 36c, rated it a speculative buy with a 12-month price target of $1.19 a share.
Clarus Securities Inc of Canada, when the stock was $A0.32c on July 12 gave Chesser a 12-month target price of $A1.
I bought 12,000 Chesser Resources (CHZ) at 36c.
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 at August 28, 2012)|
|Company||Code||No of shares||Bought||Purchase price||Current price||Current value|
|Image Resources||IMA*||15,000||31/12/2010*||0.362 av||$0.300||$4,500|
|Robust Resources||ROL||6,000||31/12/2010*||$1.49 av||$0.670||$4,020|
|Scotgold Resources||SGZ||27,500||31/12/2010*||5.5 av||$0.061||$1,678|
|GoConnect Ltd||GCN||250,000||31/12/2010*||0.034 av||$0.019||$4,750|
|Broken Hill Prospecting||BPL||30,000||22/02/2011*||0.132 av||$0.115||$3,450|
|Cortona Resources||CRC||25,000||13/04/2011*||0.146 av||$0.095||$2,375|
|Golden Gate Petroleum||GGP||408,500||20/04/2011*||0.0145 av||$0.011||$4,494|
|Orpheus Energy||OEG||19,250||17/08/2011*||0.164 av||$0.085||$1,636|
|Black Mountain Resources||BMZ||10,000||17/04/2012||$0.300||$0.240||$2,400|
|Total value of portfolio||$54,290|
|Owe the bank||-$10,570|
|Portfolio change since January 3, 2012 (started with $50,000)||-12.56%|
|All Ordinaries change since January 3 2012 (then 4155.22)||5.58%|