TRF - Trafford Resources

[ParleVouFrancois]

Recently did a blog post about TRF and why I added it to my portfolio (see sig for URL). I was wondering if anyone had any opinions as to why TRF is so undervalued? Is it merely just the lack of shareholder communication as I think?

 

[Trader Paul]

Hi folks,

TRF ... has been in a long downtrend for the past year,
but we will be alert for a positive time cycle, early
this week ...

TRF chart attached, below.

have a great week

paul



=====

 

[Cloud9]

anyone picking this super undervalued one up at 40c?

here's my back of envelope numbers.


1. TRF has a current Market Capitalization of $34m @ 40c per share (microcap = tiny)

2. They have an investment in listed gold/copper stock ROL (Robust Resources) worth $16-17m (they own 9.28% of ROL/ $2.08) or approx 20c per TRF share, so this alone underpins half the current TRF stock price.

3. They have a 43.6% investment in listed Iron Ore company IFE (IronClad) currently worth $20m, this adds another 23.5c per TRF share.

4. They have a 20% free carry on IFEs Iron Ore project (IFE current market cap $47m/$.75c) so this is worth at least another $10m at face value, but if you consider the term "free carry" then its worth alot more in reality as they have NO ongoing costs in the startup of contruction or production....hence "free carry". This adds a basic 11.75 cps but this has the ability to climb significantly towards production/ end of 2011.

5. They have already started an new drilling compaign on their own Lead/Zinc/Silver project at "Telephone Dam" SA. Upside here from drilling results.

6. At 1m tonnes of Iron ore delivered for 2012, TRF @ 20% would receive approx $AUD 11m NPBT (net profit before tax). This is projected to double in 2013 but we won't even go there until 2012 and avoid forward projections beyond a year which is risky.

7. Cash - the dec 1/2 yearly put cash at around $7m, so I'll use $5m currently, or approx 6c per TRF share.

8. No Debt


TRF value summary

1.ROL = 20cps
2.IFE = 23.5cps
3.Cash = 6cps

so a base liquid asset value for TRF is 49.5cps

No value / or a negative value has been subscribed for

1. 20% Iron Ore project free carry at valuation (11.75cps)
2. Drilling upside at Telephone Dam (current)
3. Future cashflow from Iron Ore (PER in 2012 could be a mere 5 on this project alone)
4. Upside to watching ROL (approaching maiden JORC) and IFE shareprices
5. Possible Gold credits at Whicherry Hill

TRF currently has a 20% discount to LIQUID ASSETS

Chart is in consolidation phase and 40c is starting to act as base (5 weeks) downtrend has slowed.

I'm expecting a bounce soon.



any insights/corrections from others please.

 

[skc]

TRF value summary

1.ROL = 20cps
2.IFE = 23.5cps
3.Cash = 6cps

so a base liquid asset value for TRF is 49.5cps

No value / or a negative value has been subscribed for

1. 20% Iron Ore project free carry at valuation (11.75cps)
2. Drilling upside at Telephone Dam (current)
3. Future cashflow from Iron Ore (PER in 2012 could be a mere 5 on this project alone)
4. Upside to watching ROL (approaching maiden JORC) and IFE shareprices
5. Possible Gold credits at Whicherry Hill

TRF currently has a 20% discount to LIQUID ASSETS

Chart is in consolidation phase and 40c is starting to act as base (5 weeks) downtrend has slowed.

I'm expecting a bounce soon.



any insights/corrections from others please.

Your calculations are correct. But you are missing TRF's cash burn. If they burn say $1m p.a. then you need to capitalise that at say 8-10%, which is a negative asset of -$10m.

I've taken a position on TRF before on the same premise... see my post back in Nov last year.

https://www.aussiestockforums.com/forums/showthread.php?t=21005&p=592633&viewfull=1#post592633.

But I've exited the position at a loss here

https://www.aussiestockforums.com/forums/showthread.php?t=21005&p=598676&viewfull=1#post598676

Believe it or not there are so many stocks out there that are like TRF - go look up BEL, OEQ, HRS, MLM, MFC etc etc. In order to profit from such companies what you will need is some trigger event where the share price will be re-rated. A price breakout of the underlying assets will be one such event.

You need to be aware that, there is no protection if the underlying assets keep falling in price, unless you can get some shorts for IFE / ROL to arbitrage the valuation gap. And even that, profit is not guaranteed as you need prices to converge - Is it possible that the price never closes? How long will you hold? Here's a good example.



BEL is a listed investment company and their main asset is units in a managed fund that invests in ASX200 companies. Buying in 2007 because it was 'undervalued' (which was true) would have you underwater 4 years later. However, buying in Mar 09 and you could have riden a nice trend up, as the underlying assets (essentially the ASX200) were rising.

So imho you should assess the prospects of IFE and ROL, and not just rely on TRF being 'undervalued'.

 

[Cloud9]

thanks, good info.

and I agree, IFE and ROL are key and I like them both

holding co's always seem to trade at discounts to assets, and I'm aware of this and even if IFE turn around and ROL keeps going, TRF will probably still trade at a discount until cashflows come in.

so yes, a new uptrend in IFE and a continuation of ROL to maiden JORC with lift the TRF boat...but most probably still at a discount.


still think it will have a run soon.

 

[skc]

thanks, good info.

and I agree, IFE and ROL are key and I like them both

holding co's always seem to trade at discounts to assets, and I'm aware of this and even if IFE turn around and ROL keeps going, TRF will probably still trade at a discount until cashflows come in.

so yes, a new uptrend in IFE and a continuation of ROL to maiden JORC with lift the TRF boat...but most probably still at a discount.


still think it will have a run soon.

Fair enough. Can I ask how do you determine your exit, either at profit or at a loss? Price based? Event based? Valuation based? What would u do if IFE falls significantly but TRF is still undervalued? These are the things I struggled with when i take similar positions and would like to hear your plan if you don't mind sharing.

 

[springhill]

Trafford enter into Joint Venture with Kingsgate’s Dominion Gold Operations – South Australia

· Purchase of a 51% share of Western Gawler Craton Joint Venture (JV) surrounding the established high grade Challenger Gold Mine (>1Moz).
· The JV agreement doubles Trafford’s Western Gawler Land Holding to > 5,600 Km².
· The JV landholding includes advanced exploration targets, brownfields exploration and abundant high quality greenfields prospects in the Gawler Craton.

Trafford activities stand to be further boosted by the recent announcement (May 2012) by the South Australian government to provide $2.0 million of funding to promote exploration on the Gawler Craton within the recently opened WPA. Southern Gold earned their 51% share in the Joint Venture by spending $2 million on the tenements surrounding Challenger. Trafford have purchased this for $500,000 cash and 3,000,000 Trafford shares. Upon Trafford entering into a feasibility study on a JORC resource of over 500,000oz gold, Trafford will issue a further $1 million worth of Trafford shares to Southern Gold.

 

[System]

On May 21st, 2015, Trafford Resources Limited (TRF) was removed from the ASX's official list following implementation of the scheme of arrangement by which IronClad Mining Limited (IFE) acquired all of the Company's issued capital.