A few weeks ago we bought Union Resources (UCL.ASX) at 0.5c and today they have not disappointed, up 60% this morning. They peaked at 0.8c this morning, and appear certain to test 0.9c by the close of the day. I actually expect this stock to break resistance at 0.9c, and move higher later in the week. Here is why.
We mentioned in our last post on Union Resources that the company has a JV with Minemakers in an offshore Namibian phosphate project. We would not be surprised to see Minemakers make a move on their JV partner because:
1. They have $34mil in cash, Union Resources have little
2. They have a dog phosphate project in Qld, and really need this Namibian project
3. Minemakers has just listed in Canada, so they seem to be attracting a lot of interest because of that.
Personally, I think there is a bit of manipulation going on prior to a takeover of Union Resources.
Of course, you don't need to listen to me, look at the stock. I'm not buying any....I got mine at 0.5c. This JV is going to be consolidated. I wouldn't be surprised if we see a move on Minemakers as well. Perhaps a likely candidate is Incitec Pivot. The fertiliser business is ripe for consolidation, as its already tightly controlled....but night tight enough to gain market power. Those pesky Moroccans have no idea about how to extort high prices from the market. Someone is going to come in and 'do a Rio-tro'. You can watch the price action at Google Finance.
Minemakers australian project is 1200km from the coast by rail, the Namibian project (MAK/UCL partnership) is on the coast. Its unconsolidated sands, using the same dredging technology to extract the phosphates that diamond mining uses. You can even lease the equipment. The large resource will justify a large plant on the coast. A major investor is likely. Where is the World Bank when you need them? Well last time I looked they were in the Far East of Russia.....helping Aricom raise $700mil.
When one thinks of Russia one is inclined to think of bad infrastructure, isolation and cold climates. The reality however is that parts of Russia are surprisingly close to China. What has caught my attention is the development of iron ore resources in the Far East of Russia by AIM-listed Aricom or ‘Anglo-Russian Industrial COMmodities’ [AIM:TIO]. It was spun off a Russian gold producer and explorer Peter Hambro Mining [AIM:POG] in Dec-2003. At the time it had one major asset, a 74% share in the Kuranakh ilmenite and titanomagnetite deposit, and a remit to acquire, develop and operate non-precious metal assets in Russia. Today however it controls 4 major deposits:[i]
Being an analyst/researcher, one is inclined to explore...go off on tangents if you like. In the process of researching about another one of my favourite stocks, I came across this company, Aricom. Relax, the stock is probably fully priced now...let's move onto bigger and better things. My point is that such projects really can take off. You just need to identify them.
Interestingly, Aricom is developing a titanomagnetite resource in the Far East of Russia to supply the northern Chinese steel mills. The Rio trio has got the Chinese throwing money at everything....but we cannot forget that there are other countries in the world which need steel. Everyone is so 'China' focused.
This is why I like MGK....because it is a company with another world-class resource just waiting for an integrated strategy to take it forward. The Chinese know now they cannot trust the Australian government to change the rules, so they will be looking outside Australia to diversify. Thanks Gillard/Rudd! Anyway, it suits me. I just hate to see a good country keep down. More importantly there is nothing more dangerous than politicians with no money sense throwing your money around. Just think - politicians with no financial literacy throwing 28% of GDP around with bogus accountability. They wouldn't allow it to happen in the funds management industry....well ok, I guess they do....but they do pretend to regulate....but they don't even accept that they should be held to a higher standard.
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Andrew Sheldon www.sheldonthinks.com
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