The Speculator

Dissident shareholders are seeking a boardroom spill at Golden Gate Petroleum.

PORTFOLIO POINT: Golden Gate Petroleum prepares to fund its first horizontal well in Texas as the board comes under challenge.

The wagons are being circled around Golden Gate Petroleum (GGP) as a group of dissident Melbourne shareholders seek to spill the board at the forthcoming annual meeting scheduled at Sydney’s Radisson Blu Hotel on November 9.

Executive chairman and managing director of GGP’s three-man company board, Stephen Graves, was working on a planned new capital raising of between $5-$7 million to fund the company’s first horizontal well and other projects in West Texas.

Then a missive lobbed on GGP’s Melbourne office late last Friday from OTDAA Enterprises, finance consultants, of Cobram, Victoria, requisitioning a general meeting to:

  • Remove two of GGP’s three directors – veteran petroleum geologist Frank Brophy and public accountant Frank Petruzzelli,
  • To replace them with two nominees identified only as Trevor Kelly and Thomas Burt,
  • To restrain the company’s possible issue of convertible notes through broker Novus Capital.

OTRAA claimed to represent a group of GGP shareholders holding more than 5% of the voting shares.

They were identified as Alan Mitchell, Nine Lives Investment Trust, Xtra Super Pty Ltd, Dr Karen Coates as trustee for the Coates Family Fund, Ag Health Solutions Pty Ltd, Philip Kanizay, Hariwadan Hiralai, Ganeshaya Pty Ltd and Ganeshaya Super Fund.

Graves told The Speculator that a move to replace just two of the three existing directors could indicate a takeover by stealth.

On the ASX last week, 1.505 million GGGP shares traded, mainly at their year’s low price of 0.007c. Today, turnover surged in morning trade to 29.5 million at mainly 0.008c.

That’s not much, of course, out of 2,415.6 million issued shares.

While the dissidents point to accumulated losses of some $80.1 million over the past decade, most of that was due to failed exploration years before Graves became a director.

In a presentation to shareholders he points out that in the past financial year, GGP drilled four discovery wells on its West Texas Permian project where it has a 100% working interest in 8800 acres. The company also participated in several other wells in joint ventures and lifted total production sales revenues by 37% to $3.7 million in 2011-12.

The first horizontal well production

In Sydney last week, he presented an upbeat assessment based on a Haliburton well log analysis on the potential to lift daily production threefold from the initial horizontal well to spud this week.

The company aims to lift production from a low point of around 2,000 barrels/month in August to more than 6,000 come December following the fraccing of two existing vertical wells and the first expected production from the horizontal well by December.

GGP plans to drill six to eight horizontal wells exhibiting four production zones each during 2013.

He vowed yesterday not to leave town until he had tied down between $5-$7 million – probably about half through a convertible note and the balance through a 75% underwritten rights issue.

Image Resources trading halt ahead of capital raising

As readers may be aware, our heavy mineral sands developer Image Resources (IMA) was granted a trading halt on October 30 while it arranges a new capital raising to advance the exploitation of its zircon-rich heavy minerals project on the North Perth basin.

Last sale ahead of the voluntary suspension was 27c a share.

More cash for Robust Resources

Unlike many exploration companies, our Indonesian-focused portfolio stock Robust Resources (ROL) remains cashed-up to finance its operations until well into the coming year.

At the end of October Robust confirmed it had received another $6.3 million cash from a subsidiary of Indonesia’s Salim Group as part payment for a 22.5% equity in the local company that owns the mining rights over Romang Island, 500 kilometres north-west of Darwin.

This is the third of five instalments to be paid from Salim Group’s PT Kilau Sumber Perkasa (PT  KSP) to buy a 22.5% stake in Robust’s affiliate PT Gemala Borneo Utama (PT GBU). So far, some $19 million has been subscribed in three instalments, with another two instalments to come totalling $31.6 million in investment.

At the same time, the Salim Group continues to build a direct equity holding in Robust and owns 19.7% of the Australian-listed company through another Salim group offshoot Droxford International Ltd, now Robust’s biggest shareholder.

As Robust managing director Gary Lewis said this week: “Robust is well-funded with around $30 million in cash and receivables ... it gives us the financial flexibility to continue developing and exploring the Romang Island project.”

The company boasts a 1.18 million oz gold equivalent JORC mineral resource estimate, 1.47 million pounds of base metals plus newly discovered manganese ore.

A scoping study should be available by the end of the current quarter and a feasibility study completed on the gold-silver-copper project by mid-2013.

Despite all the encouraging news and available cash, the share price is languishing – down from a high of $1.60 earlier this year to a recent low of 57.5c. At a current price of 62.6c, the shares carry a market capitalisation of $55.75 million.

The Speculator portfolio (as at October 30, 2012)

CompanyCodeNo of sharesBoughtPurchase priceCurrent priceCurrent value
Image ResourcesIMA*20,00031/12/2010* $0.338 av$0.270$5,400
Robust ResourcesROL6,00031/12/2010*$1.49 av$0.620$3,720
Scotgold ResourcesSGZ27,50031/12/2010*5.5 av$0.061$1,678
GoConnect LtdGCN250,00031/12/2010*0.034 av$0.013$3,250
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$0.265$2,928
Cortona Resources CRC25,00013/04/2011*0.146 av$0.097$2,425
Golden Gate Petroleum GGP408,50020/04/2011*0.0145 av$0.009$3,677
TNT MinesTNT4,44022/07/2011*$0.000$0.250$1,110
Quickstep HoldingsQHL20,00023/11/2011*$0.185$0.175$3,500
Orpheus EnergyOEG19,25017/08/2011*0.164 av$0.062$1,194
Black Mountain ResourcesBMZ10,00017/04/2012$0.300$0.230$2,300
Chesser ResourcesCHZ12,00027/08/2012$0.360$0.420$5,040
Total value of portfolio$52,899
Owe the bank-$8,835
Portfolio change since January 3, 2012 (started with $50,000)-11.87%
All Ordinaries change since January 3 2012 (then 4155.22)8.43%
All Ordinaries close 30 October 20124505.7

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles