Interesting read follows .... taken from Minews yesterday. GIP gets a mention. Oriel Resources ... 8 times oversubscribed exp spec !! Yes 8 times. The stock has quite some similarities with GIP , except they raised GBP25m vs GIP only looking for GBP700k ! Hot money a plenty in 'Blighty' atm !! GIP lists next Tuesday on AIM London. I hold SALTY
Date : March 3, 2004
Oriel Resources Placing By Canaccord Capital Was Nearly Eight Times Over-Subscribed.
When Canaccord Capital was starting to market Oriel Resources a couple of weeks ago a certain website, which shall be nameless except to say that it clearly knows more about Johannesburg than London, commented that “some observers believe that it will test investors’ appetites for such stocks to the limit.” It then went on to claim that £217 million in total had been raised for the junior mining sector on AIM in 2003 and here was Oriel asking for £25 million which was 11.5 per cent of the total. It reminded Minews of the Highland Gold IPO back in December 2002 when the Financial Times, no less, suggested that it was doubtful if the company would raise £20 million in the remaining two or three weeks to Christmas. What the pinker than pink’un had forgotten was that Cazenove, Fleming Family & Partners and Harmony Gold were in the background and it was effectively a done deal from day one.
Since then Highland Gold and other AIM listed companies in Russia and the FSU such as Celtic Resources, Oxus Gold and Peter Hambro Mining have matured and investors have made a lot of money. Along comes Oriel and it offers exposure to these countries and to gold and nickel which are top of the pops at the moment. It also has an executive chairman, Dr Sergey Kurzin, with dual Russian /UK nationality, who has a great track record of successful mining deals in these countries and he is supported by Stephen Dattels who is an experienced corporate financier and a promoter par excellence. Just what the doctor ordered and it brought a number of fund managers, yet to get their feet wet in the mining sector, out of their burrows in droves. Sadly for them they had their applications cut back drastically as Canaccord shut the book when the issue was nearly 8 times oversubscribed.
Just to repeat that, applications for a £25 million placing by Oriel Resources exceeded £180 million. It gives some impression of the funds sloshing round London for interesting companies. And before squads of Canadians and Australians descend on London, before or after PDAC, it is worth pointing out that the AIM queue is pretty long with five more companies due to list before the end of March. Moreover UK investors, new and old, are reasonably cynical and the feeling is that if Australian and Canadian companies with projects on their home territory do not feel they are fairly rated, there might be something wrong with them. Companies operating away from home are a different matter and that is why Albidon and Gippsland are right at the front of the queue.
The next test as far as Oriel is concerned is how Canaccord deals with the secondary market. It will be no easy matter to sort out investors disappointed with their allocation who want to take a quick profit and move on and those who want to build up a serious holding. At least the market has not been squeezed as it was with Trans-Siberian Gold which is still lingering well below its issue price as brokers Collins Stewart took all the money that was on offer. Canaccord also has another issue in the wings, European Nickel, and may be able to assuage thwarted fund managers with the hope of some stock there.
The main focus initially for Oriel Resources is on the 100 million tonne Schevchenko nickel laterite deposit in Kazakhstan where it has a 51 per cent interest with the right to increase its stake to 90 per cent. This deposit is said to contain 730,700 tonnes of nickel and 51,200 tonnes of cobalt and is close to surface with a low stripping ratio. It is also close to infrastructure and railways. The question mark is nickel laterite which caused such problems for Australian operators, but the company thinks that it can solve the metallurgical problems with a pre-processing route to produce a ferro-nickel matte for the smelters or chloride leaching which results in nickel metal. The drawback of ferro-nickel matte is that the cobalt is lost and this is a very profitable by-product. More work has to be done, but the nickel cycle is in favour of higher prices for the next few years as inventories fall and demand rises. Inco, one of the world’s leading nickel producers reckons that the annual world growth in demand for nickel is around 50,000 tonnes. It has two mines – Voisey’s Bay and Goro – heading for production in 2006 and 2007. They will satisfy the growth in those years, but nothing is in sight to make up for the ongoing shortfall.
Oriel Resources also has gold properties in Russia, Kazakhstan and Kyrgyzstan. The Russian prospect is a 70 sq kms concession at Urup, one of the Russian Kuril islands north of Japan where there is a newly discovered epithermal gold field with bonanza grade mineralisation and potential for a multi million ounce deposit at a grade of around 10 g/t according to Canaccord. Preliminary trench sampling at Kupol and neighbouring Aynskoye has defined drill targets which could convert to a significant resource within the next 12 to 24 months. The brokers have carried out a peer group assessment on Oriel and come up with a price of £0.90p per share, most of which is assigned to the nickel project. The price at which this successful placing took place was 65p per share, so maybe there is room for some upside.
