Consider the companies getting on with ‘Business as Usual’

There There has been so much news and commentating about deteriorating world events both economically and politically that I thought it would be good to think about the companies and people that have impressed me as a private investor over the past year.

The share prices of some of these companies have been sold down with the market as the shenanigans of various financial factors have played their games, which have very little to do with individual companies.

A private investor has been an endangered species for many years and even with the power of the internet you will be at a disadvantage to the professional fraternity, so having the opportunity to meet with management of individual companies is immensely valuable when considering an investment with what is crucially your money.

Over the past year I have met the management of the companies below and would like to mention my personal views.
 
Ausdrill is an international mining services company, providing leading edge drill and blast exploration, supply and logistics services to many world mining companies in the United Kingdom, Australia and Africa.

This company has a market cap of around $850 million with a dividend yield of over 4 per cent and a full and expanding order book including contracts into the growing LNG and CSG market in Australia.

A look at its in-house magazine, ‘Ausbits’ is well worth a read to gain a real idea of good mining culture.

A few months ago I visited Sandfire Resources, which discovered the massive DeGrussa copper-gold VSM project 900 kilometres North East of Perth.

 

From the Degrussa discovery in April 2009 and completion of the Definitive Feasibility Study in June 2011, this company has been motoring along at top speed with first Direct Shipping Ore due to be shipped in the first quarter of 2012.

Rather unusually managing director Karl Simich dictated his own terms to the banks when arranging finance and already two copper off-take agreements have been put in place.

DeGrussa is expected to be a high margin project with life of mine project revenue estimated at $4.2 billion and pre-tax operating cash flow of $2.4 billion over the initial seven plus year life of mine.

There is a $25 to 30 million per year exploration budget to continue exploring the highly prospective 22km DeGrussa corridor and the rest of the company’s 400 square kilometre license.

The enthusiasm and efficiency of this team is truly impressive along with its strong shareholder base with Oz Minerals owning 18.8 per cent, POSCO 15.9 per cent and management 8 per cent.

Sandfire has several other projects elsewhere including 17.4 per cent of Whinnen Resources, a copper-gold exploration and development company operating in Northern Chile.

Two companies operating in the Republic of Congo (the peaceful one) have also made good progress with their different projects, which are equally interesting as they have proven and confident management.

The first is Elemental Minerals, which is exploring and developing the Sintukoula potash project, situated near the coast, 60km from the major West African port of Pointe Noire.

This company has identified significant sylvinite and caranalitite prospects on its 1436sqkm exploration license.

Infrastructure is straightforward, with power and gas readily available.

The company has recently acquired oil seismic data on their licence with potentially exciting upside.

The Elemental board have proved themselves with other projects in the past and have a much focussed approach to fast track potash production for 2015.

Elemental is well advanced with BFS and are funded until 2015.

Equatorial Resources is the other company, which has two iron ore projects.

Mayoko-Moussodji has a 2.3 to 3.9 billion tonne iron ore potential exploration target at 30 to 65 per cent iron.

Equatorial is aiming for DSO (direct shipping ore) on an existing bulk haulage railway line that goes directly to Pointe Noire for shipping.

The company expects to announce a maiden JORC resource in early 2012.

The company’s other project, Badondo, is in the North, adjacent to Gabon, surrounded with other world class projects being advanced by Sundance Resources, CMEC and Core Mining.

Equatorial has built a cash balance of $55 million to take it through the next phase.

Staying with iron ore, Baobab Resources is a Mozambique focussed explorer with a 620sqkm landholding in the central North of the country surrounded by coal companies such as Rio, Jindal Steel and Power, Vale, Minas de Revobue (Talbot group, Nippon Steel, Posco) and others.

Like many brownfield projects this company has had a rough ride in the market although it has recently proved up an inferred JORC resource of over 323 million tonnes at 30.1 per cent iron.

One broker has a mid-estimate of an increase for nearly 400Mt of additional resources and exploration upside.

Drilling is on-going at the company’s flagship Tete project and more results are expected over the next few months.

One of its considered aims is pig iron production which has a higher value and will broaden market options.

Additional drilling is underway at Mundouguara, for nickel,copper and gold.

Baobab has a 15 per cent JV partner in the IFC who are committed to supporting the project and other funding options should take them through to the PFS in FY14.

Hot Chili is an unusual copper exploration company operating in Chile.

Firstly it has recently raised $30M at a premium to its share price with support from strategic investors and secondly, has over time, negotiated and built relationships into a number of JV’s with powerful Chilean companies such as Codelco and CMP.

Its flagship project, Productura, produced a maiden resource of 85.1Mt at 0.60 per cent copper in September and a resource upgrade is expected in the third quarter.

Hot Chile is aggressively pursuing an expansion and drilling program and all signs are for plenty of upside.

None of us know what will happen over the next few years but following people and good management seems to be as good a strategy as any.

Happy New Year.

Susie Boeckmann is a private investor and resources blogger.