oeq a cheap entry to srk

If you like SRK, then you should have a look at OEQ. They are a listed investment company who has a large stake in SRK. Current market cap is $17mill with asset backing after tax of 31.53mill as at 30 June (46% discount). They currently have a position in Strike of approx 6.5 million shares (includes $0.20 strike options), which is worth over $13 mill at current prices. So there current market cap is nearly entirely accounted for in Strike shares. Their remaining portfolio is made up of large cap shares, and an olive grove of all things (this is marked at approx $2mill of value)

On top of this they own a 70% stake in Berau coal project in Indonesia for which Strike owns the remaining 30%. If you refer to the announcements from today/yesterday for both SRK and OEQ, you can see that this project is pushing towards production in 2009, with a likely 10 million tonne resource, with a likely sale price of around US$100 per tonne. Strike are currently negotiating with OEQ to buy this 70%, with the likely consideration being further SRK shares. I would venture to suggest that a conservative sales price for this project would be in the order of $15-$20million worth of shares. This project is currently assigned no value on the balance sheet.

In addition they own a 25% stake in the Paulsens East Iron or prospect in the WA. Strike are also negotiating to purchase the remaining share off OEQ with the consideration again being SRK shares. If you read the current quarterly you will see that SRK are looking to start 1 mill tonne operation in 2010. I would venture to suggest a conservative valuation of OEQ's 25% share would be approx $5mill of further SRK shares. This project is also not assigned any value on the OEQ balance sheet.

Therefore for a company with a market cap of $17mill you get:

- Existing strike holding of +$13mill.
- Other assets totalling $18mill.
- The likelihood of $20mill+ further shares in SRK.

By buying OEQ you are effectively buying a stake in SRK at an extreme discount. Sounds good to me. Is a very illiquid stock, but if you're patient you can get hold of some.