Several months ago we signalled that this was a good stock to buy....in this time it has remained in a consolidation band between 2.8-4c. At these prices the stock is only trading at cash value - if you base its value upon $3.3mil in cash and $5mil nominal value for ASX listing. The company has signalled its future direction. It has:
1. Earning a 90% stake in the Amazon Bay iron sands deposit in PNG. This is a large resource on the doorstep to Asia, which will prove particularly attractive if the Rudd government is able to adopt its Resource Rent Tax. Regardless, we believe the Rudd govt has done irreparable damage to Australia's sovereign risk rating, so we expect Chinese, Korean, Indian firms are looking at this project.
2. A 50% stake in Titan Metals: The company has a stake in a number of promising gold projects in PNG through Titan Metals. These projects are at an early stage of testing, but PNG is a highly mineralised province, and we expect some exciting results. MGK is close to completing its farm-in provisions to earn 50%, so we can expect more spending to increase this stake. This is subject to a future agreement. In recent weeks the company has announced its acquisition of a number of attractive gold projects in the northern PNG islands (New Britain area).
We see a lot of upside for investors - conservatively 300%, though as much as 1000%. Hard to say at this point....there is still no drill holes into the first gold project. The company has however extended the strike potential of its most advanced gold project from 3km to 11km.
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Andrew Sheldon www.sheldonthinks.com
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