Following some more research over the weekend, the fundamentals...

Following some more research over the weekend, the fundamentals of this stock are compelling at this stage in its life - market cap ~$25m.

I will start a summary below for discussion/addition by the forum. Apologies for the length of post, but I hope you find it useful and can shed some light from your understanding of the stock. Let's make this thread like the BRM thread, informed posting, none of the agro often seen on the other threads.

Management:

From a couple of hours sratching around on the internet, I have summarised the below.

Chairman:
Ian Levy has been quite successful in the past. His time at Allegiance Nickel saw the shares climb from 20 odd cents to the takeover price from Zinifex of $1 per share. The company had grown to be worth in the order of $800m. He was also a founding director of Gloucester Coal which grew to a market cap of in excess of $1Bn.

He has served with some large companies, notably WMC.

See full background: http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=8706806&ticker=LSA:AU&previousCapId=875123&previousTitle=LACHLAN%20STAR%20LTD

Technical Director:
Malcolm Carson has over 35 years of exploration geology experience across all of DMA's target minerals including IO. He was appointed on 1 Sept 2008

http://investing.businessweek.com/businessweek/research/stocks/people/person.asp?personId=34925386&ticker=DMA:AU&previousCapId=8353391&previousTitle=D'AGUILAR%20GOLD%20LTD

Other directors also have useful contacts in the industry and their profiles can be accessed from the links above.

One perplexing thing is who in fact the CEO of the company is. Normally this is abundantly clear, but not so, at least as far as I can tell. Rita Brooks was the MD back in 2007, but seems to have gone the way of the dodo without a directors resignation announcement??

Can anyone shed any light on the management structure (ie who is CEO and steering the ship)?

In all though the management that have been assembled do have a track record of delivering shareholder value.

Management also have "skin in the game" and have made on market purchases of shares, although pretty insignificant in the scheme of things. They are all incentivised to achieve shareholder returns, although their options are already in the money at 20c.

Strategy:

The company has interests throughout many sectors of the commodity universe, from Iron Ore, to Gold, to Uranium to coal, and coal seam gas.

There has been a distinct focus in the last 18 months on IO, with targeted exploration campaigns which have got us to where we are today. They have a track record of delivering on their stated targets, at least in the time that the core focus has been on IO.

The company's many other resources are being progressed with an MOU signed with Ning Xia to explore the other tenements. There is a view that these other tenements will be spun out of DMA via an in speci allocation to shareholders at the time of the IPO.

As long as management do not get distracted from the MAIN GAME then this could be attractive in raising funding for the IO strategy without being dilutive to equity.

Iron Ore in particular:

The company has put together a sweeping tract of land that is nestled in and around the Newman area. The 1.4Bt delineated already is only on 2% of the total tenements held.

The grade and impuraties in the ore are worthy of note. The Fe content is low by Hematite standards at <35%, but after beneficiation, this gets up to 61%. Now the company states that this is from "Area 3". Does anyone know what the significance of area 3 is?? Is it reasonable to conclude that the same types of results could be achieved across the tenement?? or is area 3 a sweet spot that supports better than average beneficiation results??

This will be important in the overall analysis of the likely value of the project. If representative of the broader site, then this could be a very significant project imo. The grade is good at 61% and the impuraties are low. At this rate it really would be comparable to the characteristics of BRM's final product.

The costs of the beneficiation are likely to be higher than BRM given the lower Fe starting point. Are there any geo's out there that could confirm my laymans understanding of this??

Also they have just won another 2 strategically place tenements in the recent past. They have huge tenement(s) in one place, not scattered all over the country side and hence have a better chance to leverage of the infrastructure solution.

Strategic Partners:

The company is placing itself with strategic particulars, most recently Hebei Xinghua, noting that production in the future will ramp up and therefore, to position itself with an offtaker is a good strategic step imo.

This is where DMA needs a different strategy to BRM for example, as they are further down the path and hence will be coming on line prior to a possible IO surplus. DMA will be further behind, and hence needs to have a readily available market for its ore. An offtaker on board will achieve this (at least wont hurt).

Infrastructure:

Same as all of the others, however proximity to AGO's Ridley is an advantage here, especially if all of the postering around rail access goes somewhere. For DMA luckily it is no where near the critical path of the project as yet, and hence they have time on their side.

A few options exist - BHP/AGO, BHP/FRS/BRM, BRM/Hancock, FMG/BRM, etc - there are so many possible scenarios depending on how the next 2 years plays out.

Scale:

The indicative resource would support a 15mtpa operation so is of a large scale by junior standards. Being a bulk commodity, I have always preferred large reserves to higher grade reserves. Obviously the two together is the best case scenario, but as long as marketable, size is better than quality given the capital required to get it to market.

Corporate tie-ups:

DMA if it can prove its ore is a very good target for one of the juniors to have a go at to develop the scale to really make a rail way viable. Just look at the intent of the Wah Nam play at BRM/FRS. A BRM/DMA/FRS tie up would create a 55mtpa operation, without even exploring each of their respective other tenements.

AGO would also be a candidate.

Port Access will be pivotal. A BRM/FRS/DMA tie up would be value adding to all sets of shareholders imo.


Capital structure:

with only 89m shares on issue, the company's register is tight, with Hebei a substantial holder and management with a fair swag of shares as well.

From the AGM report the other day, management claim to have gotten the message loud and clear regarding future capital raisings, so it is hoped that they truly have and can get them away with minimal dilution.

BRM did a great job at this, and are now in a position to finance the project without losing control of the project and company.

Valuation:

From the company's presentation, they are assuming that the 1.4Bt after beneficiation will amount to 200mt of final product. At 25c per share, that values it at 9c/t.

BRM holders will know that the market valued BRM ore at negative during the GFC - the company was below cash backing.

Now, at $1.70/t or so based on final product, and the market should be less harsh on DMA. As I said the other day, it is always easier being the second child.

BRM has proved that simple screening can turn their product into a marketable grade. Indeed the DMA ore has less impuraties from my readings, but is of a lower grade.

One thing is pretty safe, 9c per tonne with all of the other tenements thrown in is inherently cheap.

Based on the preso, only IRD and IOH are even close to being valued as low, and they are DOUBLE the value of DMA on an EV/tonne basis.

IRD is a magnatite project - more complex and expense to mine. IOH is a hematite DSO play - but their tonnage is spread over 6 tenements and hence the capital cost is higher than a large mass of ore in one spot. Hence my view that size is better than quality per se.

Fosters broking rates IOH a buy with a target of $3.24 per share (currently $2).

imo, DMA will start the journey that BRM has had. An improvement in beneficiation recoveries was experienced at BRM which if repeated by DMA will improve the overall resource available.

Say the company can move to 300mt of final product at 40c per tonne (noting that BRM is $1.70 and UMC was taken over by BHP for $2.77/t before the IO price doubled since then), then we should have a market cap just under $150m, 6 fold higher than where we are today.

All in all, the charts are good, the fundamentals are better. This is no BRM in my opinion. Grade is lower, scale of the tenement is smaller, but it is compelling at these prices.


Questions:

1. Who is the CEO?
2. How does the Abydos JV with Atlas fit in. A google search does not come up with anythign conclusive here?
3. What is the significance of Area 3? Is it representative?


Bring on the next 12 months.......