Hi guys, here is a quick write up of what i consider to be a multibagger in 2 years time. MANAS RESOURCES Brief overview Market cap: ~35m (Insane) Cash: ~10m Share price: $0.165 Resource: 1.25m JORC Reserves: 285koz Aiming to produce early 2014, 53000oz average annually, 411$ cash cost Below is the Definitive feasibility study (DFS) (Definitely read this) http://www.manasresources.com/aurora/assets/user_content/MSR-ASX Release 030412 DFS (2).pdf The DFS is the last step prior to mining. Due to the costs involved, some companies only complete a pre-feasability or scoping study. DFS is used to obtain debt finance and a lot of scrutiny is placed on the viability of a project. This DFS is also verified by Snowdens International. This DFS has NPV of 148m based on a conservative 1500$/oz gold. The IRR of 96% is insane. 1. Shareholders If we look at the top shareholders, Perseus Mining (PRU) holds about 24%, Asian Lion 8%, Macquarie bank 5% and other international banks 7%. These guys control about 44% of the company with top 20 holding over 53%. This company is a spin-off from PRU and they are no strangers... They are a billion dollar market cap goldie on the ASX with 100m in cash. Most of these guys have a buy-in around $0.20. 2. Finances As mentioned, PRU is our big brother so it is constantly taking care of MSR. Evidence of this has been consistently supporting in any capital raising and even underwrote the options at a premium of $0.20 while the shareprice was around $0.16. Other major holders participated as well at a premium. http://www.manasresources.com/aurora/assets/user_content/MSR-ASX Release 060912 TEO.pdf In the link above, it shows that MSR has received the green light to go ahead and will be seeking debt financing. It has received positive responses from several institutions and i think we will see Macquarie bank (Who is a shareholder) heading the finance package. 3. Management PRU managing director and some executives are on board to provide assistance. MSR MD is very experienced and used to be the MD of Azumah Resources (AZM). Good track record of capital management. Still have a plenty of cash after intensive drilling and completing a DFS. In the annual report, you will notice that management opted to take a big portion of their paychecks in options. These are about 60% of their pay packet with exercise prices over $0.20. Strong hint there. 4. Huge upside The current DFS only represents one fifth of their resources. All 1.25m are within a 7km radius and a process route will see the mine life extend over 4.5 years with almost a certainty. On the exploration front, it has over 4000km2 land holding. Only 6 out of 54 prospects have been drilled and all of them have had significant gold discoveries. To understand why PRU bought these land holdings, look up this link http://en.wikipedia.org/wiki/Carlin–type_gold_deposit They are searching for a Carlin deposit and they are huge. This Shambesai project will bring in over 225$m over 4.5 years to help fund aggressive exploration. There is definitely sovereign risk issues with this country but i believe this mine will go ahead as they are cash strapped. The Americans have a strong interest to see that this country remains in a stable state due to their airbases in Manas Airport. We have been included in the state 2014 budget to be producing gold. Corporate taxes are 10% in this country so i expect they will go up in the near future as it is too low but not to a level where it would scare off investors. As such, investing in a 'stan' is risky and will always trade to a discount to aussie goldies. In two years time i expect them to be trading at least $0.50 without exploration upsides. Potential $0.80-1.00 on major hits, which is quite likely given their track record. Happy to answer any questions. Good luck all Peace
Up strongly on Friday. After the announcement of a JV with Central Asia Resources (CVR) based in Kazakhstan. http://www.asx.com.au/asxpdf/20121005/pdf/4295trnqvdts56.pdf The deal is basically to toll-treat with a world-class facility 25km away. MSR will gain 70% of the project upon spending 2m on exploration. Gaining 70% of CVR's Flagship project means MSR has effectively bought around 750k++oz for around 2.6$ per ounce. CVR went down strongly after the announcement. For now the plan is to toll-treat the surface bit which seems to be very shallow and high grade. Deeper hits are good as well. Cash cost should come in below 1000$/oz. Shallow results 43.6m at 19.3g/t from 7m http://www.asx.com.au/asxpdf/20080526/pdf/3199k4534wcd3p.pdf Deeper results 176.3m at 3.58g/t from 152m http://www.asx.com.au/asxpdf/20090319/pdf/31gnzkgl01n1jz.pdf Exploration is underway to confirm previous drilling and toll-treatment can begin in a short time as just require permits to scoop ore and truck it over to the plant. Just 50koz at profit of 750$ per oz is 26m$ which is more than half of the current market cap (which also has about 8m cash left). Kazakhstan is very stable and has an established oil/gas industry.
If you crunch the numbers (53000 oz gold production x $1200 profit for each ounce) ------------------------------------------------------------------------ 250,000,000 shares that only works out to a value of 0.255c per share for a 4.5 year mine life - if there is no upside AND soverign risk Doesnt seem like risk reward ratio favors enough for me. The only upside is the gold price (profit leverage) assuming they get it into production (low capex is good indication for that happening)
The mine is just phase 1. There is 1m resource within 7km radius. Just a matter of deciding a process route later. 4000km2 exploration area highly prospective. 53000x1200$ = 63m each year. Not sure what the market cap will be for a company that makes 63m a year. Current market cap is under 40m. Very quick payback period as well... 10 months An important thing to note is that capex to first gold is 32m+ while life of mine is 37m+ This shows low on-going capex requirements typical of open pit, which means more free cashflow for exploration.
I guess a way to let you see why i buy MSR is perhaps to use a holding of yours, CJO. Assuming both companies raise full amount at current SP. Combining current market cap plus capex required (At 68%), CJO is 191m MSR is 73m Using average production rates and gold price of 1500$, CJO (68%) will make 63m/year without including royalty (calculated using cash cost 516$/oz). MSR will make 57m/year with royalty included (Using cash cost 411$). CJO has a longer mine life but market cap is more than twice MSR. In terms of financing, i think this market is going to be tough for big capital raisings. However assuming both companies have their project up and running i believe MSR will be valued on a lower P/E ratio than CJO due to sovereign risks.
CJO is in Mexico, has another project nearing resource estimate, the deposit (cerro del gallo) is 2mil ounces of gold, its close to all infrastructure and workforce needs (its not remote) - shall I go on? Far less risk in CJO than MSR (IMO) as for the value of MSR divide 63 million by the number of shares fully diluted = about 250mill You get .254 per share value assuming they reach that value ----------------------------------------------------------------------- There is some upside in the joint venture with Central Asian Minerals (about 600,000 ounce deposit) But that also costs money - but could create a pipeline of small projects.
That is quite good considering the share price is 0.17 atm. (I bought at 0.12 average) I am not sure what CJO will get though... Tax rates are different as well. Kygyrz is 10% corporate tax rate but i reckon they will go higher. Probably 15% 3 years down the road. The joint venture will require a capex of 1.5m for toll treatment mine development. Estimating 10-15koz per year at cashcost <1000$/oz. I do not plan to hold for too long. Probably 3 years. Snapshot, year 3, debt repaid, profit 50m/year. P/E of 4 = 200m. 5 bagger at least. Dilution would be kept low due to low capex requirement. Staying adverse of big capex projects atm. I can take sovereign risks but funding risks to me is the biggest in this market. IMO. Good luck, 2014 let us all be rolling in cash in whatever goldie we hold.
Up very strongly on good volume the last two trading days. Might be news coming. Gold symposium on Tuesday and MSR MD is presenting. Perhaps something will be released prior to Tuesday. Might hit 20c over the next few weeks.
