#MTR Kingsgate game of cards

Metal Tiger has been a sleeping giant for a while.

Interest has been sparked and investors are now taking more interest in the business.

This blog highlights some of the Metal Tiger Business opportunities (see here).

Since then Metal Tiger have indicated they are investing in Kingsgate. This blog provides some background information on Kingsgate and the Chatree mine and indicates MTR are not the only business who see Kingsgate’s challenges as an opportunity (see here).

Metal Tiger have previously stated they intended to curtail their asset trading activity and would sell investments at the appropriate time. We have seen this most recently with Greatland Gold (GGP).

We can therefore conclude that Metal Tigers investment in Kingsgate is possibly a strategic investment.

MTR have been steadily buying KCN shares in the open market. Currently have 5.34% of the shares plus whatever they bought on the 18th October.

Why are Metal Tiger interested in Kingsgate?

Obviously since the announcement of the closure of the Thailand Mine, Kingsgate shareholders have seen the value of their shares plummet.  Many large shareholders will have watched the share price drop from c$6 a share to c24c. Those who bought in at AUS$4 will have experienced a 94% drop.

If the mine re-opens and KCN shares increase in value to $2, this being a third of previous highs, based on today’s share price this would be a 440% return. This doesn’t take into account Kingsgate’s Chile assets or the profits MTR will have already potentially made buying KCN shares at a much lower price.

News on Chile asset due in December. This is expected to have a positive impact on the value of KCN assets.

So looking at conservative figures, MTR potentially looking at a minimum of a 500% return in a relatively short period of time. This is all dependant on the Chartree mine reopening.

What do Metal Tiger have to offer that could facilitate the opening if the Chatree mine?

1. Contacts

  • CEO lives in Thailand and is married to a Thai. Has great contacts in Thailand.
  • Terry Grammer lives in Thailand. Why in the last couple of weeks did he invest just under a half of a million pounds in MTR?
  • Mark Potter recently became a Thai national and lives in Thailand. Mark has exceptional contacts in Thailand.
  • Extensive network of contacts in government departments.
  • Team on the ground with extensive experience in obtaining mine permits. For example Surapol Udompornwirat a Thailand permitting specialist. Surapol previously worked for Kingsgate.

2. Reputation

MTR have a good reputation in Thailand. This is completely opposite to Kingsgate’s reputation.

Everybody knows that to operate in Thailand you need to respect the Thai culture.

3. Liquid Assets/funds

MTR have in recent weeks built up a significant war chest with for example £480k from Terry Grammer and returns from their asset trading division,

4. Sprott / Rick Rule

The Warren Buffet of the mining sector has made a significant investment in MTR. Why recently was MTR CEO at a meeting with Rick Rule of Sprott? Sprott will be on side with the KCN play.

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What happens next regarding KCN?

1. MTR decide not going to achieve their goal and exit their position with a substantial profit?

2. MTR continue to buy and at the appropriate time make their move.

a. Put somebody on the board?

b. Replace the board?

c. Package up KEMCO/KCN?

d. Use contacts/expertise to get Chartree mine reopened?

e. KCN take measures to repel MTR action. All they can do is take on debt to make business less attractive, buy back shares to make cost for MTR greater, convince shareholders that they rather than MTR are the best option for shareholders.

KCN have informed ASX that they intend to buy back 10% of the shares. These will be cancelled pushing up the share price. Unfortunately for KCN they now have to wait 2 weeks and can then only purchase 2% of the shares every 30 days.

This means MTR have a two week window to buy on the open market before KCN can do the same. I am therefore expecting MTR to buy everyday on the open market.

MTR can buy about 15% of the traded volume in a day without moving the sp up or down. The fact they are currently buying c20% in the open market indicates they are being fairly aggressive.

If MTR stop buying we can conclude they have reached their goal or have an off market agreement with a major shareholder.

This is getting interesting, with MTR currently in the driving seat for the next couple of weeks.

I await KCN’s and MTR’s next moves with interest. It certainly looks as if MTR are holding all the Aces in this game of cards.

 

 

 

 

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Why convert £480k of MTR warrants now?

Metal Tiger Director converts warrants, thereby investing £480k into the business (see here).

Why would Terry Grammer invest just under £1/2m now, when the KEMCO IPO isn’t until February 2018? Why didn’t he wait another three months and use his capital elsewhere?

Whilst this development was expected (see here) in reality you would have expected the timing to be nearer the February KEMCO IPO date. We know MTR have funds, therefore cash flow isn’t an issue.

It would therefore be logical to assume MTR have another use for the funds.

Longterm holders await with interest the next development in the MTR journey.

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#MTR share price movement has started. Metal Tiger will surprise many.

Many analysts, chartists, bloggers and twitter posters are predicting the Metal Tiger share price is going to re-rate upwards.

Many follow what analysts and chartist ‘experts’ say and this can become a self-fulfilling prophesy. The herd arrive and the share price goes up.

Bonker99 has produced a blog highlighting the investment case (see here). This excellent blog indicates because of the Botswana asset the current value is c4.5p.

Significant value to be unlocked as at the time of writing this blog the share price is c2.08p.

As well as Botswana progressing well, other events are happening that are going to bring the investment case to a wider investor base.

 

The Swiss Cheese model suggests that when everything aligned the unexpected happens. The share price rise could therefore when it happens according to the theory be significant.

 

The Botswana opportunity is well documented in the broker99 blog. We also have the following events coming that will potentially impact in the share price.

 

1. MOD resource / MTR business alignment

Currently the 70%/30% JV split offers shareholders in both companies equal value, in the event of a capital event, as MOD has significantly more shares in issue than MTR.

What needs to change is an alignment of the two businesses that facilitates;

1.1 One business, or a structure that enables the two businesses to be bought by a major copper mining company.

Need to prepare now for the time when the business will be sold.

Reason for believing this will happen is:

  • Julian Hanna has a timeline for entering retirement and would obviously like a capital event to happen so he can enjoy the fruits of his endeavours, over the last few years.
  • MTR are an investment business rather than a production business.

 

1.2 A structure that provides better alignment between MOD and MTR.

Currently MOD if they could fund 100%, could focus on non JV areas. Currently costs are split 70%/30%. Hypotheticaly, if T3 sold MOD would be awash with funds and wouldn’t need MTR, they could therefore focus on non JV areas.

MTR have already built up a c5% interest in MOD. This is significantly reducing MTR’s risk. Increasing this percentage would further reduce MTR risk.

Reason for believing a plan is in place, is Sprott has invested millions in MTR rather than MOD. Why didn’t Sprott invest directly in MOD?

Obviously MTR have a strategy that Sprott has bought into.

Note: Sprott is the Warren Buffet of the mining sector.

 

2. Warrant Holders

To receieve ‘free’ KEMCO shares, shareholders need to exercise their warrants. When this happens private investors will know they are preparing for the KEMCO IPO.

Expect in the near future we will see warrant conversions. This will be like a chequered flag to some investors.

3. Delayed KEMCO IPO

Mid October we will get an announcement indicating the percentage of Pre-Ipo investors who have extended their agreement until February 2018, so they can take part in the KEMCO IPO.

We know MTR BOD are leaving their funds invested. Many private investors will also leave their funds invested.

This will be a big vote of confidence as investors are basically agreeing to leave their funds with MTR for another 4 months. Funds that could be invested elsewhere making returns.

 

4. Copper Price

The price of copper recently breaching the $3 a pound level for the first time since November 2014. This also significantly increases the potential returns from the T3 prospect and wider licence areas.

 

Conclusion

The cheese holes are aligning, with many aligned and long term holders are about to reap the rewards.

The share price re-rate will be quick.

 

Invest in Metal Tiger #MTR or MOD Resources #MOD?

The recent brokers note on MOD Resources indicated a target, giving an uplift of 50% to the current share price (see here).

This target is based predominantly on the T3 prospect, a joint venture with Metal Tiger (70/30% split).

IMG_1788Investors wanting to invest in this copper prospect in Botswana, have a choice, invest in Metal Tiger (MTR) or invest in MOD Resources (MOD).

Because of:

1. British Pound vs Australian dollar exchange rate

2. MOD has significantly more shares in issue the MTR

3. 70% MOD, 30% MTR split

4. MTR having 5% of MOD share capital

the returns should the T3 prospect be sold and capital returned to shareholders would currently favour MTR investors.

Looking at  the pros and cons for investing in MTR vs MOD,you need to consider the following:

1. MOD have announced over the next year they will be investing A$10m in Botswana. 75% of this investment will be used on MOD/MTR prospects. The downside is what the exploration within MOD 100% areas will discover.

2. MTR JV covers several MOD prospect areas. All the areas highlighted in orange in this table.IMG_10073. MTR will be announcing this month details of the Thailand IPO (KEMCO). MTR shareholders will receive ‘free’ shares in KEMCO. Currently the MTR share price doesn’t include any value for Thailand.

4. Disparity between MOD and MTR share price. MOD share price has increased whilst the MTR share price has stagnated.

IMG_1858At some stage you would expect MTR share price to increase and for the gap to close. Alternatively it could be MOD over priced.

5.  Copper price now over $3/lb. This is still below the 5 year high with many analysts predicting the price will continue its rise.

6. Having met the management of both companies they come across as professional and competent.

7. Assays due from the holes drilled on T3 when drilling recommenced in the first week of August. We already know visible copper present. What will happen to the share price if significant results or trading halt called due to ASX requirements? Could this result in a spike in the MTR sp as trading will not be halted on the AIM market?

8. Sprott took a significant investment in MTR. Why didn’t they invest in MOD when they did their placing? Have they decided that MTR is the better investment?

9. Finance – both MTR and MOD have significant capital to fund drilling.

10. NPV of A$210m for T3/T1 is only going to increase as data analysed.

Looking at these 10 points, the following graphic indicates the best investment, MOD or MTR (white = neutral, green MTR, red MOD).

IMG_1793

 

Near term more value is going to come from MTR/MOD JV licence areas rather than those owned 100% by MOD.

If somebody wanted more exposure to the other MOD licence areas, you could put a strong case forward to invest in MTR, take the potential near term gains and then invest in MOD.

Another consideration would be each businesses other interests such as MOD’s Sams Creek asset and MTR’s investment portfolio.

MOD or MTR, it looks like September is going to be a very interesting time for the share price.

The recently released MOD, Ocean presentation and brokers note made me question if I should invest directly in MOD. I have concluded that investing in MTR offers the greatest potential.

If MOD and MTR merged (after the KEMCO split), this would remove the requirement for investors to make the decision and also simplify the acquisition process, if a major copper business was interested in the business. 

Investors who invest now are in at basement level prices. It’s just a matter of sitting and waiting for the BOD’s of both businesses to deliver.

#MTR – everything is aligned for a share price rerate.

Many analysts, chartists, bloggers and twitter posters are predicting the Metal Tiger share price is going to re-rate upwards.

Many follow what analysts and chartist ‘experts’ say and this can become a self-fulfilling prophesy. The herd arrive and the share price goes up.

The Swiss Cheese model suggests that when everything aligned the unexpected happens. The share price rise could therefore when it happens according to the theory be significant.

IMG_1317

We have for several days now had share price rises of 3%+ a day with a c14% rise over the last week.

 

1. Resource  increases

These have been happening for a while and are covered in these two blogs.

MTR stunning results under T3. link

MTR results due. link

MOD Resources our partner will be issuing additional data in the very near term (possibly this week). This information is expected to significantly increase the T3 resource and translate into better NPV and IRR figures.

Obviously the price of copper breaching the $3 a pound level for the first time since November 2014 (see here) also significantly increases the potential returns from the T3 prospect.

 

2. Strong fundamentals, business strategy and leadership

Charles Hall (Chairman) and Michael McNeilly (CEO) interview highlights the changes that are taking place.

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This link takes you to an interview with Charles and Michael.

Metal Tiger is a private investor friendly business. It was no surprise when Charles a private investor with a T1 holding was appointed Chairman.

3. Thailand IPO 

The Thailand IPO will be announced soon.

Metal Tiger shareholders will be ‘gifted’ shares in the new business KEMCO.

The positive noises coming from Kingsgate and the Thailand Government regarding the Chatree mine are also a positive for those involved in mining in Thailand.

 

Conclusion

The cheese holes are aligning, with many aligned and long term holders are about to reap the rewards.

Those that hope to benefit from keeping the share price low will soon be shocked by a significant sp re-rate. The share price re-rate will be quick and the impact devastating for those who haven’t realised it’s coming.

 

#RGM Metallurgical coal

The market for metallurgical coal in the United States is increasing predominantly because it is required for steel production.

The following table indicates some key reasons as to why the price of steel is increasing.

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With the positives around steel it is hardly surprising we are getting coal companies announcements such as:

  • Contura Energy are in the middle of a $162m IPO (see here).
  • Warrior Coal have record income of $129.9m in Q2 2017. Warrior’s highly successful second quarter validates their value proposition as the only publicly traded ‘pure-play’ hard coking (metallurgical) coal operator in the U.S. (see here).

U.S Coal global research firm IHS Markit also pointed out that metallurgical coal revival isn’t just dependant on Trump infrastructure projects.

Probably the single biggest driver of the surge in exports is that there is international demand for U.S. metallurgical coal right now. “That is a function of the market rather than the political environment.”

Regency Mining are well placed when production commences to deliver much needed metallurgical coal.

It would appear the recent RGM RNS indicating coal projects are not now going to be progressed piecemeal but the ‘big picture’ route taken is based on some solid foundations..

#RGM Diverse portfolio

The current Regency mines market cap has no relation to the assets of the business.

Regency have a diverse portfolio of assets covering different commodities and jurisdictions.  A portfolio that offers significant opportunities and manages the potential risks associated with businesses that have one product in one area.

The following graphic indicates the diverse nature of the business, its potential and the minimum expected revenue.

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Follow this link for a better quality graphic. REGENCY MINES

It is interesting that the latest RNS provided no new information but the share price dipped.

All the information in the RNS had been deduced by those carrying out research into the business. The case for investment hasn’t changed.

The slight delays to the coal projects are just that, a slight delay. The share price will react accordingly in the near future.