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Pastimes : Crazy Fools Chasing Stocks w/5-letter Symbols Ending in F -- Ignore unavailable to you. Want to Upgrade?

To: ms.smartest.person who wrote (281)	10/25/2002 12:25:47 AM
From: ms.smartest.person	Read Replies (1) \| Respond to of 307

June 19, 2002 BUSINESS AND INVESTING > THE SPECULATOR SPECULATOR: TOO GOOD BY HALF Shares in tin miner Marlborough Resources fell to a year's low of 5.5¢ last week, which defies reason since its current capital raising is fully underwritten and its expansion plans will ensure it is among the lowest cost producers in the world. We've snapped up 60,000 shares for the portfolio at that price. As I wrote (Inside hedge, April 30), at the then share price of 7¢ to 8¢, Marlborough (ASX code MBG) must be a safe bet for the longer term, since it claims it gets the highest tin price of any producer in the world due to its clever hedging arrangements. It also announced plans in April to boost production to 140% of original design capacity from the reopened Ardlethan tin deposits in the Riverina of south-western NSW. Shortly afterwards, Marlborough announced a one-for-six non-renounceable rights issue at 6¢ a share to raise $1.85m to fund the expansion and provide working capital. Importantly, the entire issue is underwritten by Perth brokers Hogan and Partners, a firm that values MBG at 11.7¢ a share following completion of the issue. Of course, no one ever suspects that an underwriter would show restraint in valuing his client's stock, but at 5.5¢ (ex-entitlement) the shares are trading at less than half the broker's assessment. As brief background, the Ardlethan mine closed in 1986 due to high costs. It was then producing about 800 tonnes of tin a year from an underground operation employing 300 people. MBG reopened it on June 29 last year employing just 18 people in mechanised open-cut extraction of 500,000 bench cubic metres of alluvial ore a year to yield 500 tonnes of tin in concentrate. Design capacity for mining and processing was reached in November-December last year. During the latest March quarter, the company produced 85,000kg of contained tin in concentrate then boosted output of tin in the single month of April to 43,181kg and in May to 70,900kg. So robust was the feasibility study to reopen the mine that the Commonwealth Bank provided 100% loan funding. MBG then covered its entire production costs for 26 months from last October , plus 150% of principal and interest payments through a floor price scheme with Barclays Bank of London. Under the scheme, MBG sells its concentrate to Malaysia Smelting Corporation for the local spot price, Barclay guaranteeing a floor price of $US4420/tonne for the first 42 tonnes of sales each month. The spot price last week was $US4235/tonne. Significantly, MBG estimated its cash cost of production when it reached its initial target would be less than $US3000/tonne and perhaps as much as $US3500/tonne, including freight and smelting charges. But with the planned expansion, due for completion next month, total costs could come down to as low as $US3000 for each incremental tonne of output. As an important step in that direction, MBG's managing director Chris Storey returned from an international tin conference in China a week or so ago and revealed a 30% cut in smelting charges plus buying interest from other Asian smelters. Following the current issue, MBG will have 216.1 million issued shares which, at 5.5¢, capitalises the company at $11.8m. Hogan and Partners value the shares after the issue at a net 11.7¢. Meanwhile, we partially took up our entitlement to the offer of biotech stock Chemeq, whereby shareholders could acquire up to $3000 of extra shares at $2 each. We took up only 1000 shares (or two-thirds of our entitlement) for the company is already the biggest holding in the portfolio. Chemeq has raised $2.75m from small shareholders and a total of $7.5m, including placements to fund the building of its plant south of Perth. It will make its world-patented polymeric antimicrobial to hopefully eliminate the use of antibiotics in the food chain of the world's $8bn-a-year pig and poultry food market. Chemeq shares promptly recovered after the generous share issue closed and the daily press and television coincidentally gave widespread coverage to a Choice magazine exposure on the dangers of feeding human antibiotics to chickens. We also dumped at a slight profit Pan Palladium after chairman and entrepreneur Bill Murphy moved to sack from the board two respected mining industry figures, analyst Warwick Grigor and former Emperor Mines chief Colin Patterson. Sold 12,000 Pan Palladium @ 32¢ (bought 28.5¢, 11.02.02) $3782 PPD.AX PNPDF.PK Exercised entitlement 1000 Chemeq @ $2 $2000 Bought 60,000 Marlborough Resources @ 5.5¢ $3366 portfolio bulletin.ninemsn.com.au Material in The Bulletin is protected under the Commonwealth Copyright Act 1968. No material may be reproduced in part or in whole without written consent from the copyright holders. bulletin.ninemsn.com.au