When looking for gold stocks I am always trying to anticipate what will be the next big story. One of my strategies is to systematically read through reports for all of the listed stocks on the ASX. This is how I started doing it when I was 14yo. Over 25 years later, I don't have to go to the stock exchange anymore. All the information is online.
When I last did my periodically research a month ago, a stock that I stumbled across was MIL Resources. I remember this stock from about 8 years ago when it had magnesium projects. Today its focus is iron ore and gold in PNG. There are several aspects I like about this company:
1. The small market capitalisation of just $10mil - this gives me a lot of upside or bang for my buck if they have somerthing
2. They have $3.7mil in cash according to the latest quarterly - so they have some spending to do before the next capital raising, so I don't need to worry for a while.
3. They are currently preparing a gold project in PNG for drilling. I am expecting some high grade drilling results which could well capture the interest of the market
4. They have the Amazon Bay iron ore project. There are numerous deposits like this around the world. One of the other such deposits is controlled by Rio Tinto off the Taranaki coast of NZ. Unfortunately for Rio, the Maori Party is not so keen on seabed mining. I don't expect this will be a problem in PNG. In fact, there are other benefits. This iron ore could be barged a relatively short distance to Singapore or Malaysia as feed for a Direct Reduction Iron (DRI) plant. In fact the resource at Amazon Bay is so large that the project could justify its own on-site DRI plant. These are small-scale modular plants. All the better that PNG has onshore gas which would provide a local energy feedstock. But it gets better. This iron ore resource lies both onshore and offshore. It is unconsolidated so its easy to dredge.
5. There is another company based in Indonesia - I forget but I think its Indo Mines - which is ccapitalised at $17mil, and it has no gold exposure. I'd have thought this company justifies a $20-30mil market capitalisation prior to drilling the gold project, just to be on par with that company. Frankly, why would a Chinese steel maker want to buy into a WA based project when they would have to pay a steep rail and port charge. WA does have the offsetting benefit of deepwater port, however this project should be able to more than match those WA projects on costs. Why so cheap? Its a strategic asset close to Asia.
6. Pat Elliot is a well-known WA mining industry executive, so the company has some legs. He is accustomed to large projects. He's prepared a few feasibility studies :) I think we can expect a new investor for this iron ore project in coming months. The Chinese government I think was put off by the likes of Rio Tinto & BHP merging recently. Expect China to spend on a multitude of resource projects, just as Japan did from the 1960s. What else can China do with all those surpluses. It makes more sense for it to buy into resource projects than hoard commodities.
I bought some MGK.ASX over the last few weeks for 3.7-4.1c. I will retain them on the expectation of a JV partner for the Amazon Bay iron ore project, plus the prospect of some positive drilling results from their nearby gold prospect. I am expecting the bullish gold market to help lift this stock significantly. The iron ore project is longer term, however the short term decisions will be important in underwriting both projects, and the gold target is attractive.
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Andrew Sheldon www.sheldonthinks.com
When I last did my periodically research a month ago, a stock that I stumbled across was MIL Resources. I remember this stock from about 8 years ago when it had magnesium projects. Today its focus is iron ore and gold in PNG. There are several aspects I like about this company:
1. The small market capitalisation of just $10mil - this gives me a lot of upside or bang for my buck if they have somerthing
2. They have $3.7mil in cash according to the latest quarterly - so they have some spending to do before the next capital raising, so I don't need to worry for a while.
3. They are currently preparing a gold project in PNG for drilling. I am expecting some high grade drilling results which could well capture the interest of the market
4. They have the Amazon Bay iron ore project. There are numerous deposits like this around the world. One of the other such deposits is controlled by Rio Tinto off the Taranaki coast of NZ. Unfortunately for Rio, the Maori Party is not so keen on seabed mining. I don't expect this will be a problem in PNG. In fact, there are other benefits. This iron ore could be barged a relatively short distance to Singapore or Malaysia as feed for a Direct Reduction Iron (DRI) plant. In fact the resource at Amazon Bay is so large that the project could justify its own on-site DRI plant. These are small-scale modular plants. All the better that PNG has onshore gas which would provide a local energy feedstock. But it gets better. This iron ore resource lies both onshore and offshore. It is unconsolidated so its easy to dredge.
5. There is another company based in Indonesia - I forget but I think its Indo Mines - which is ccapitalised at $17mil, and it has no gold exposure. I'd have thought this company justifies a $20-30mil market capitalisation prior to drilling the gold project, just to be on par with that company. Frankly, why would a Chinese steel maker want to buy into a WA based project when they would have to pay a steep rail and port charge. WA does have the offsetting benefit of deepwater port, however this project should be able to more than match those WA projects on costs. Why so cheap? Its a strategic asset close to Asia.
6. Pat Elliot is a well-known WA mining industry executive, so the company has some legs. He is accustomed to large projects. He's prepared a few feasibility studies :) I think we can expect a new investor for this iron ore project in coming months. The Chinese government I think was put off by the likes of Rio Tinto & BHP merging recently. Expect China to spend on a multitude of resource projects, just as Japan did from the 1960s. What else can China do with all those surpluses. It makes more sense for it to buy into resource projects than hoard commodities.
I bought some MGK.ASX over the last few weeks for 3.7-4.1c. I will retain them on the expectation of a JV partner for the Amazon Bay iron ore project, plus the prospect of some positive drilling results from their nearby gold prospect. I am expecting the bullish gold market to help lift this stock significantly. The iron ore project is longer term, however the short term decisions will be important in underwriting both projects, and the gold target is attractive.
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Andrew Sheldon www.sheldonthinks.com
3 comments:
So is there a reason you prefer the Australian exchange over others? I really don't know anything about metals or metals markets, and I would avoid shares priced in USD right now... but you like Aussies?
Also, what price did you get in at? Your post said "I bought some MGK.ASX over the last few weeks for 3.7-4.1c" but I don't know what that means.
Thanks for your patience with a newb!
Hi Shaun, the Australian exchange has had a good reputation until the last few years, but regulation is probable as weak as Canada now. The USA, Australian and Canadian markets all offer good global exposure. Its the market I know best, since I have watched it for the last 30 years, but it helps to know something about the geology of the globe, since most exploration is offshore now.
I bought stock between 3.7-4.1cents in anticipation of some interest in MGK's iron ore project, but also drill testing on their gold project in PNG. They did look like breaking out last week (rising 12%), but it might be this coming week.
this stock continues to fall, and I keep buying more. Basically their projects are valued at nil. Being listed is probably worth $5mil, they have $3.3mil in cash. The strategic value of the iron ore resource has only expanded in the wake of Kevin Rudd's Aust Resource Rent Tax. Chinese investors will look at more non-Australian resources.
I gold target - also in PNG - is also looking good.
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