equamineral holdings ipo

Here’s an IPO that managed to fly under my radar till a mate pointed it out to me – Equamineral Holdings Ltd.

Brought to you by Colin Ikin and associated with Cominco Resources which seems to be hitting it out of the ball park with their phosphate/uranium play; EQH seems to be Ikin & Co.’s iron ore vehicle in the Republic of Congo, also known as Congo Brazzaville.

EQH is raising $2.5m at 20c/share. Following the raising, EQH will have an issued cap of 25.4m shares. Ikin & R&H Trust Co. (Guernsey) Limited will own 29.83% of the stock and Macquarie Bank Ltd will own 2.91%, assuming none of these parties subscribe for more shares.

10m shares & the 1.2m director options are escrowed for 24 mths, 2.9m shares till the beginning of Dec. 2012 (from a seed round at 10c). That leaves 12.5m tradables at listing. It seems as though the 10m shares escrowed for 2 years were freebies issued to Cominco shareholders & that’s how Macquarie ended up on the register.

So, what does EQH have? 80% of the 956km² Oyabi Licence.

Taken from the Coffey Competent Persons Report:

Landsat interpretation has confirmed the presence of large outcrops of ferruginous quartzite
within the Oyabi project area...
Samples collected of greater than 60% Fe show the potential for hematite and itabirite Iron Ores.
Assays of the hand samples collected are comparable with other Iron Ore deposits.

The Oyabi EL is located on the Ivindo Massif, home to other iron ore deposits in the region, such as Youkou (WGO:ASX), Avima (Core Mining – unlisted, but partnering with Glencore), Mayoko (AKI:ASX taken over by Exxaro for AUD338m), Mayoka/Badondo (EQX:ASX), Nbalam/Nadeda (SDL:ASX).

The iron ore explorers neighbouring EQH all have pretty hefty valuations but most of these are much more advanced than EQH. Possibly the best relative comparison for valuing EQH would be WGO which has their 90% owned Youkou project just up the road. WGO at the time of writing was capped at approximately $24m with an EV of approximately $22m. And that is after halving in price over the past 2 months, which is pretty savage even for this market.

It seems as though this is VERY early stage but when you consider the market cap at the raising price, we’re talking about a $5m company with an EV of about $3m. There seems to be plenty of upside in EQH given this comparison.

Should they actually have a future discovery, they are close to rail & port facilities with plenty of water nearby. They are also currently flaring off gas in the ROC, so energy costs should be very competitive. No need to tell you that these are MAJOR considerations when looking to develop a mine.

The register will be nice & tight as half the stock is escrowed & I assume, given my initial enquiries, that coming across stock will be near impossible. This is a deal “for the boys,” & I was told that I should send in as many applications for a minimum parcel as possible since they will only effectively be giving stock to help with spread.

Reading the material on the Cominco website, with which EQH shares an office and which has loaned money to EQH, Ikin seems to have been kicking rocks around in the ROC for a few years now & I suspect is very well connected there & would know how to get things done. IMHO, it’s always a good sign when someone has the foresight to peg tenements in a country that was off the radar a few years ago & is now starting to gain recognition.

The ROC was recently runner up as the in the Mines and Money Conference Outstanding Achievements award for the country that has shown the most improvement, in terms of attractiveness to mineral investors, during the past year.

In the prospectus it states that they intended flying a Helimag Survey over Oyabi in late 2011. If that occurred, the results should be available in the not too distant future. Similarly, $2m (after listing fees etc.) is not going to last this company too long. Consequently, I suspect that should the share price see higher levels, I would not be surprised to see another financing round.

In summary, I believe that EQH, notwithstanding the crappy market in which we find ourselves, could be a stand out IPO. A small issued cap, tight register, market savvy operators, and a very cheap valuation when compared to WGO could see this stock list at multiples of its raising price.

The downside is that if you want to participate, I reckon you have Buckleys of a chance unless you either are connected to Ikin or Smith, or apply in a spread capacity, i.e. 10,000 share/$2,000 lots.

Happy hunting!