Investors, the last couple of days has been a blessing for me,personally,and i guess that it would be appropriate of me to send my appreciation to the moderators. I have managed to do much more due diligence in all of my plays on the international and domestic front, spend much more time building my knowledge base and have now resolved to make several purchase orders in the next couple of weeks. The time away had also given me the opportunity to meet up with a mining mentor and discuss on share investing and the relevant junior mining industry. Suffice to say, i was constantly reminded to not be too bullish in my interpretations.
We went through OVR [among other international plays] with a fine tooth comb as i had wanted his input on where they stand in the discovery cycle and wanted to get a third person's interpretation of their prospects. With that, we had come to the conclusion that OVR will need both the Darcy and Andrew deposits to be operational; this would certainly enable an economically robust feasible operation to begin. He stressed that the Darcy was the actual game-changer and predicted that its resource base was much bigger than the Andrew deposit. He believed that a resource base of 12.5MT at 2% cutoff will make their operation quite attractive to intermediate players in the region. We both agreed that the market is valuing them based on just the Andrew deposit play. He also mentioned that the strip ratios are good at 1.1 to 1 and reiterated that management will probably have to drill a few more DD holes in the Darcy to enable a more accurate geological model in the months to come. This will probably be done after the DFS is complete. Currently, OVR does have considerable information to complete the DFS and we estimated that an NPV above $230 million is on the horizon. He agreed that management were prudent with their funds and have increased shareholder value in the last year - a good sign for the future. In his opinion, the current market cap [i.e. 38 million] is undervaluing their resource base and considers 40 cps to be a fair value at the moment. If they release another resource upgrade, it should be consequently higher. We both agreed that OVR will be taken over before or after Mine Permitting and estimated 75 cps - 85 cps at the takeover premium. If they get to getting the mine running, share price should be above 100 cps easily.
In relation to OVR's share price movements, i am actually inclined to agree with Asteroider in that the share price of OVR is able to be manipulated to some extent on the way up and on the way down. This is primarily due to the tight register that they have in their fold and the obvious lack of fundamental analysis done by new investors. However, in times of a rerate, this fallacy becomes a huge bonus for savvy investors.
The volatile nature of the current market has been a boon for value investors like me and as such opportunities are presenting themselves on a daily basis. As a matter of fact, fundamental and value analysis has once again allowed me to filter out the "noise" from the music and engage in MORE purchases of a certain gold company [i.e. Ventana Gold] from its 30cps [two years ago] to a week ago when it traded for 800cps. By way of update, the prediction of a takeover just happened and they are now being bought for more than 1300cps. The rewards in doing your own DD and sticking it out with constant reassessments along the way is truly rewarding.
I can go on and on about my other two takeover plays this year and it might sound like i am boasting but my intention with this post needs to be clear. That is, for investors to undertake sound due diligence practices and educate themselves in their potential investments regardless of what anyone else is saying [i.e. including me]. One needs to at least understand geotechnical, geochemical and geological interpretations to get a grasp of what the mining releases from juniors are indicating. Investing in the mining and junior exploration sector calls for having these competitive advantages and is not for the faint hearted. If you want to fly with the eagles, you cannot hang with the crows. Most often times, the answers had been sitting for months to years before the general market even picks up on what the company release is saying.
As such, let's ask ourselves what's imminent and what's inevitable:
1] It is certain that there will be a resource upgrade and that a new NPV will need to be calculated. It is also certain that this figure will be higher then the previous figures of 8.95MT and 174 Million NPV...how much higher, we are not able to accurately say. However, by just referring to their previous figures and their place in the discovery cycle, their current market cap is undervalued by a margin. Therefore, we might have a margin of safety built in to the current share price.
2] It is also certain that the management are expediting the DFS and are trying to obtain a mining permit. What is not clear is, if they would prefer a takeover or head towards the production of their resources. Their hiring of mining engineers and implementation specialists, however, indicates the latter.
FYI - most juniors build up their resource base and get themselves to mining permitting stages prior to a takeover offer to ensure shareholders and management are rewarded handsomely. Rarely would they want to produce their resources. With this, it is important to remember that management have a lot of "skin in the game" too....Hugh Bresser itself has more than 4 million shares and has kept his stake from 7cps till the current share price value. This is a clear indicator that they foresee a much higher market cap then the current figures.
3] Additionally, it is clear that OVR has numerous satellite deposits to feed off on and that the metallurgical properties of these deposits are favorable towards production. This is a bonus as mid-tiers and majors tend to look for expansionary capabilities when they calculate their goodwill and premiums.
4] It is important to understand that OVR is a long term investment of 1-2 years. Let me repeat that again....investors who are comfortable with their due diligence should hope for rewards or a possible takeover offer in 12 months at the very least...the share price will be volatile till then as the general market tries to constantly find its fair value. If you aren't able to grasp this important point, i suggest looking for other short term plays or alternatively reading up on the all the announcements to familiarise yourself with OVR's projects to get your comfort level higher.
Look up other company charts [i.e. look up Ventana Gold, ATAC resources, Capstone Mining etc]....there will be periods of huge movements up and down [and it does not necessarily mean a Pump and Dump which is a phrase used much too often]... if a company has ALREADY MADE DISCOVERIES AND HAS A SUBSTANTIAL RESOURCE BASE THAT IS PROVEN "ECONOMICAL", eventually they will get rerated and sometimes even bought over by a major or intermediate.
It's just a matter of patience, due diligence and fortitude....Additionally, the proverbial "Santa Rally" is starting to build up in the world markets and coupled with QE2, money market funds will start to filter into the majors, intermediates and the juniors. In fact, the junior market index has already started to make its move upwards. Watch for a quick move to the upside in the next couple of days.
Mentor's credentials - Has built [from the ground up] numerous base metal and precious metal mines in Chile, Nevada, Arizona and Argentina. Extremely conservative and realistic in his expectations. Has also predicted 5/6 of my takeover plays this year...let's hope he is proven right again.
OVR Price at posting:
25.0¢ Sentiment: LT Buy Disclosure: Held
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