August 28, 2002 BUSINESS AND INVESTING > THE SPECULATOR
SAND BANK
Shares in Magnetic Minerals staged a sudden flurry in the last week of July and ran up from a week's low of 50¢ to peak at 56¢. The punters thought a takeover was imminent. It wasn't, however, and the shares came off the boil.
At current prices of less than 50¢, however, the shares offer a comparatively safe punt for a possible bid in the next few months. This column first recognised that Magnetic (B, July 2) had been a winner for shareholders since it listed in October 2000 following a public issue of 30¢ shares. The shares of this heavy minerals sands prospector were trading in July at 55¢, having peaked at 64¢.
The company originally attracted some attention since it was the first mineral sands listing for many years and was based on extensive tenement holdings over the prospective sand plain country north of Perth. The holdings now total about 3100 square kilometres.
Central to the float was the concept of depending on magnetic mapping technology to locate hidden deposits, a speciality of director and geophysicist George Sakalidis.
By the time of the last annual meeting, chairman and geologist Alistair Cowden was able to tell shareholders that magnetic mapping had proved to be a low-cost, highly effective tool.
Drilling on identified targets has since outlined an inferred resource of 133 million tonnes of 4.8% heavy minerals at Dongara, 320km north of Perth. A pre-feasibility study gave the Dongara resource a net present value of $63m as a stand-alone project or considerably more if integrated with an established producer.
This column pointed out at the time that the find was just 60km north of world-class producer Iluka Resources' Eneabba mine. Iluka was then in the middle of its successful $130m friendly takeover of emerging Murray Basin producer Basin Minerals. We suggested that something similar could emerge for Magnetic, which at 55¢ carried a market capitalisation of just $20m.
On July 26, Magnetic announced an exclusive but conditional deal with major heavy minerals producer Ticor, which has a four-month right to undertake due diligence on Magnetic to decide if it wants to bid.
That's what set the shares off briefly, although Ticor is not obliged to make an offer. If due diligence is positive, Magnetic's board has indicated that any bid at a negotiated price of 60¢ or more, if acceptable, would be recommended.
As a fall back, the parties have an option agreement. Ticor may, during the exclusive due diligence period and before December 13, require Magnetic to issue it with 5.48 million shares at 60¢ each, raising $3.5m in cash for the junior.
Otherwise, if Ticor withdraws, Magnetic may require Ticor to subscribe for 5.48 million shares at 50¢ to raise $2.7m cash. Hartleys the broker put the deal together and it looks to have more upside than downside.
Meanwhile, most of our oil plays look firm, led by Hardman with an earlier-than-expected result from the Atlantic coast of the west African republic of Mauritania. Hardman shares put on 10¢ as operator Woodside confirmed the Chinguetti 4-2 well, 2.5km north of last year's discovery, had intersected several oil zones, adding more certainty to hopes of a recoverable field discovery of at least 100 million barrels.
Norwest Energy's managing director, Ivan Burgess, announced a deal that pleased shareholders with the acquisition of a 7.5% interest in north Perth basin offshore block WA-226-P from Black Rock Oil and Gas, a company listed on London's AIM market.
Under the deal, Norwest will be "free carried" for the October drilling of the planned Morangie 1 well on a structure with indicated potential to hold as much as 250 million barrels of oil in place. Norwest will issue Black Rock with 12 million shares plus 3 million options.
Harking back to earlier this year (B, March 5), I bought 10,000 Independence Gold shares and reminded readers that "buyers in this stock up to March 25 will get a one-for-two entitlement to buy an option at 1¢, exercisable at 20¢ by January 31, 2005". I then went on holidays and neglected to write in the take-up, which, of course, was the prime reason for buying in the first place.
That has been adjusted this week, adding a legitimate $800 to the portfolio's value.
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