SRL - Straits Resources

[oldblue]

Yes, it can be a bit of a worry when a cashed up company starts taking minority interests in others. It might indicate a lack of focus on the main game and/or indecision about what to do with the cash.

What is the general view of the calibre and track record of the SRL board and management?

 

[jman2007]

I'm happy for them to buy some quality gold assets, but I think buying 5% of this and 5% of that will just keep them under the radar and undervalued. Why not just buy the whole operation and be known as a gold miner instead of an investor. I've seen too many companies with part ownership in projects trade well under NTA and never be fully valued. I hope they're not trying to turn themselves into an LST. So, SRL, go and buy AZM with 1m oz au for about $40m, and then PRU with 7m oz au for about $400m, and I'll be happy.

Yeah fair points kennas

I didn't know SRL had such a large stake in Goldminco, who essentially look to be just a little tiddler poking around somewhere in NSW in the Lachlan Fold Belt, and are also listed on the TSX for some reason. Can't really see the synergy between the two right now. That article notes that SRL have long flown under the radar of the market, although "dull" may be a little unfair on them. Although if this is the best they can do, it suggests they'd maybe be better of returning monies to shareholders as a special divvy. Although I have to say SRL was the standout perfomer amongst my portfolio today, healthy volume and a strong close too.

 

[Kremmen]

What is the general view of the calibre and track record of the SRL board and management?

For better or worse, I judge companies by what I know, which is IT. Based on my own experience with SRL in 2003 (yes, I was a shareholder back then and am again now), they seemed to be children trying to play with the adults.

When I pointed out that the main navigation buttons on the web site didn't work on standards-compliant browsers, I was told that the web site was not done by their IT department and that they had no plans to fix it. It had been done by "a consulting group on a personal request by the CEO", which, given how crappy it was, I took to mean an unemployed relative of the CEO.

Their web site is certainly much better now, but still looks unprofessional under the skin. (e.g. All of the styles are embedded in every single page, instead of being included from a single file, which was one of the main points of CSS.)

I think the main hope is that their assets are of sufficient value that one of the big miners decides to make a takeover bid sometime.

 

[Sean K]

For better or worse, I judge companies by what I know, which is IT. Based on my own experience with SRL in 2003 (yes, I was a shareholder back then and am again now), they seemed to be children trying to play with the adults.

...

Their web site is certainly much better now, but still looks unprofessional under the skin. (e.g. All of the styles are embedded in every single page, instead of being included from a single file, which was one of the main points of CSS.)

I think the main hope is that their assets are of sufficient value that one of the big miners decides to make a takeover bid sometime.

I judge companies on their website too, and I just happened to be having a brouse through it to check the status of the Tritton Copper project.

They tell me this:

Development of the new declines started in late 2007 and both are scheduled to commence production of ore in late 2008.

 

[Sean K]

I thought this was about to fall over and had the parachute donned, but it's had a remarkable 3 days. Early today, yes, but looks to be pursued for some reason. Touching $2.20 intraday. Will be interesting to see how she continues. As I've said before, nothing really technically stopping it for some time.

 

[Garpal Gumnut]

I thought this was about to fall over and had the parachute donned, but it's had a remarkable 3 days. Early today, yes, but looks to be pursued for some reason. Touching $2.20 intraday. Will be interesting to see how she continues. As I've said before, nothing really technically stopping it for some time.

I'd agree Kennas,

A nice looking chart with room for an upward move , slow but sure. and the volume ain't bad either.

gg.

 

[Kremmen]

Plunged to 1.865 just now. So, the question then is whether this is a buying opportunity, or the start of a downward trend.

 

[Sean K]

I'm still confused by the cash on hand and market cap, pre and post sell and dividend. It seems to be anything from $1.40 to $2.50.

During this correction or capitulation to new lows, these companies must be watched to be picked up out of the rubble.

Soon, you might get their cash backing at the price of a share, plus their assets and investments for free. Just like what was available a few months ago. This may sound quite insane (being half invested), but I am really looking forward to the next capitulation to take advantage of it.

 

[skc]

I'm still confused by the cash on hand and market cap, pre and post sell and dividend. It seems to be anything from $1.40 to $2.50.

During this correction or capitulation to new lows, these companies must be watched to be picked up out of the rubble.

Soon, you might get their cash backing at the price of a share, plus their assets and investments for free. Just like what was available a few months ago. This may sound quite insane (being half invested), but I am really looking forward to the next capitulation to take advantage of it.

Just make sure you take all other parts of the capital structure into account so shares are fully diluted.

I recently did a quick exercise on another share. It had a relatively small convertible bond issue, but the conversion price was so low that it would actually add 40% to the shares on issue. This killed the cash backing per share calculations and basically act like a poison pill for takeovers.

 

[Kremmen]

This evening's news: RMI will not participate in cash call in Three Rivers joint venture with SRL. As a result, their share of the venture will drop from 30% to 15.73%.

If the Three Rivers project has value, then SRL's increased return from it should be a good thing. (Unless RMI failed to pay because it's not working out, rather than because of lack of funds.)

 

[Sean K]

I'm not sure what is driving this right now, but I don't care.

They have a bunch of projects, none of which excite me, and some investments in some things that excite me even less, but they have a massive cash reserve which just says 'buy me'. Well, it did at 90c anyway, which is where I had a 'dabble'.

There's a bunch of resource stocks that hit a bottom a few months ago and were amazing opportunities. Up 100-300%.

Wish I had have taken them all.

 

[jman2007]

I'm not sure what is driving this right now, but I don't care.

They have a bunch of projects, none of which excite me, and some investments in some things that excite me even less, but they have a massive cash reserve which just says 'buy me'. Well, it did at 90c anyway, which is where I had a 'dabble'.

There's a bunch of resource stocks that hit a bottom a few months ago and were amazing opportunities. Up 100-300%.

Wish I had have taken them all.

Well you picked this one pretty good kennas

I pretty much agree with your sentiment, their assets don't look to be setting the world on fire by any stretch of the imagination. They're due the final installment from the Straits Asia transaction during the next quarter I believe, that's going to give them one hell of a war chest to play with. Not sure what the techy stuff on the chart is called, but it looks to me like a pattern of "higher highs" and "lower lows" is being set. Other than that I don't care either!

 

[J.B.Nimble]

Well there goes the little bit of resistance we were seeing at 2.20 - three bounces but finally we're through. A nice looking chart...

 

[jman2007]

Well there goes the little bit of resistance we were seeing at 2.20 - three bounces but finally we're through. A nice looking chart...

Yes have to agree,

Looking pretty good chart wise, let's hope SRL continues to set higher highs. Don't seem to recall any mention of a potential divvy in the Quarterly, anyone else able to shed any light on this?

 

[J.B.Nimble]

Yes have to agree,

Looking pretty good chart wise, let's hope SRL continues to set higher highs. Don't seem to recall any mention of a potential divvy in the Quarterly, anyone else able to shed any light on this?

No specific mention. I'm guessing the special divvy will be held until such time as they have decided upon and undertaken a significant strategic investment. Any divvy from operations is probably going to have to wait until Straits Asia have reported.

Performance of the non-coal assets is disappointing with the exception of Tritton, which is starting to look very good with cash costs of US0.93/lb copper. Sorting out Hillgrove looks to be a tricky exercise that will eventually reward our patience. Mt Muro is the troubling one - seeming to flip between marginally profitable, marginally loss making and their plans seem to flop with these flips. The Muro story makes interesting reading looking back over previous quarterlies. Perhaps the new deposits they refer to will be the catalyst for sustained profitable performance. I'll give 'em full marks for persistence on this one...

 

[Sean K]

I don't know how they are mining Whim Creek and Mt Muro. With cash costs around US$2.50 ave for the Cu and US$1000 Au, they must be wondering themselves. Serious questions need to be asked of the projects long term viability really. Unless Cu and Au double. No mention about hedging or what they are actually selling the product for. I thought that might be nice to know..

So, a litte home calculations:

Stated group sales revenue of US$64,491,000 (excludes GfE/Magon)

Total costs (excluding Hilgrove cause they give no cash costs?)

Triton Whim Mt Muro
6010 1455 64373
0.93 4.27 1106
5,589 6,212 71,196,538

Total $71,208,340

So they seem to be losing about $6m on these.

At Mt Muro they're planning on producing 68k Au equiv at US$620 an ounce next FY. Still a bit high really...

I'm not sure about their investments in explorers either. Goldmenco looks like a turkey. Grades are too low, and so far low tonnage. Malachite is a dog, and should be let loose. Their $3m donation to Saracen to keep them from folding has 'old mates' written all over it. Same with the Adamus hand me out. Maybe I'm being a bit skeptical there. I'm not sure why they ever mention the Torrens Project in their presentations, nothing going on there. I've gone back to 2005 and haven't found an announcement regarding it.

Lets hope they make some cunning decisions on all that cash earning 2% in the bank. If they leave it too much later they might get to buy at the top of the cycle...

And where the hell is that dividend?

 

[doogie_goes_off]

I have/had a mate working at Hillgrove, he reckons management have no idea and they just paddled into the wave at the right time, could well be set for a wipeout. Very sound analysis Kennas, always appreciated. With 248M in the bank they should be doing some strategic investment or they should take some advice from Chopper Read (aka Franklin) and hand over their f***ing cash.

 

[Sean K]

Well, just continues to go, following the market mostly I suppose.

Copper running helps I suppose. That can't just keep going straight up can it? I imagine when it corrects SRL may too.

What's coal doing? I imagine a floor has been found there too.

Break up through the 1 month $2.20 line seems to be following through, early in the day though.

 

[shag]

coal and iron ore r both great for aus. not sure about srl but ok prices times massive quantities equals damn flash in this environment.
im sure theres stockpiling of coal occuring too, to help support it.
these countries will remember how tight supply got pre crash.

 

[J.B.Nimble]

Late announcement yesterday - almost missed it - rezoning of the forested areas at Sebuku. With the reserve upgrade that flows form this it looks like the second installment of the PTT deal is in the bag...