September 11, 2002 BUSINESS AND INVESTING > THE SPECULATOR
SPECULATOR: WET BLANKET
It's heartening to see directors buying more of their company's shares, particularly when the company is out of favour with the punters. So Robert Annells, chairman of the battling petroleum explorer Lakes Oil, can take a bow after adding another 2.5 million shares to his holding near the end of the financial year. That commitment cost him $52,446 (or just over 2¢ a share), according to the notice filed with the Australian Stock Exchange. Last week, the shares traded as low as 1.8¢, giving the company's 800.64 million issued shares a market capitalisation of $14.4m. Annells holds just over 10 million shares and another 10 million options exercisable at 5¢ in mid-2005.
Lakes Oil has been in our portfolio since last October and has hardly starred since I bought the things at 2.9¢ each. Last week, a letter from a reader, Stuart Jacobson, of the Sydney suburb of Mosman, asked why I continued to hold the stock. The short answer is that they're hardly worth selling at these prices and hopefully there's not much downside left in them. The company still has $3.83m in cash, having spent $4.3m in the year to June 30, more than three-quarters of that on so-far-unsuccessful exploration in the Gippsland and Otway basins of Victoria.
On a brighter note, the company confirmed gas discoveries in both its Trifon 1 and Gangell 1 wells in the Gippsland basin but in tight sands that the company hopes will flow under fracture stimulation of the reservoir. Gas was encountered over a large section in both wells, with the most promising extending over a column exceeding 800 metres. Lakes has held talks with potential joint venturers in Canada and the United States with successful experience in producing gas from tight formations.
The company now has a 100% interest in almost the entire onshore Gippsland basin, which during the past 40 years in the offshore section has hosted Esso-BHP oil and gasfield production. Lakes does not have to start relinquishing any of that acreage until mid-2005. An announcement of a serious overseas joint venturer would give the stock a much-needed boost.
Lakes also has interests in extensive onshore and offshore acreage in the Otway basin extending through the west of Victoria to South Australia.
Meanwhile, shareholders in Rimfire Pacific Mining will be hoping the diamond prospector has some encouraging news this week. In its last notice to the stock exchange on August 28, Rimfire reported that results from a diamond bulk sampling program at Bingara, northern NSW, were expected by September 12. Then, late last week, an invitation arrived from Rimfire's directors to join a press lunch at a seafood restaurant on Sydney's Darling Harbour. Did I smell something fishy? We'll have to wait and see but the stock traded last week at 6.2¢ and looked weaker with a seller at 6¢ and a buyer at 5¢. We'll try to get set at the lower sell price.
Rimfire has been trying for the past few years to solve one of Australia's great geological mysteries: the source of the many alluvial diamonds found in the Bingara-Copeton region. Since the first stones were discovered as long ago as 1872, some two million diamonds totalling nearly 500,000 carats have been recovered from the Tertiary-age sedimentary beds, usually overlaid by later basaltic lava flows.
Using modern aeromagnetic survey results plus extensive geochemical sampling for indicator minerals, Rimfire has found several targets. Three samples of 20 cubic metres of material were sent last month to Striker Resources' diamond testing laboratory in Perth. The results are now awaited.
Another potential newsmaker for Rimfire is its Fifield platinum project in central NSW, where in July the company reported broad zones of primary platinum mineralisation. With platinum at $950/oz being nearly twice the value of gold, chairman Norbert Calabro saw results as "particularly encouraging", with results including 16m of 0.9gpt platinum, 2m of 3.4gpt, and 20m of 0.8gpt. Australia has no operating platinum mine, with some modest production only as by-product from some nickel operations.
Rimfire has on issue 48.72 million shares which, at 6¢, gives the company a market capitalisation of nearly $3m. The company had $1m in cash at June 30.
Sold
10,000 Pancontinental Oil & Gas options @ 3¢ $275
(Allotted free; 11.04.02)
Ordered
30,000 Rimfire Pacific Mining to 6¢
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