An alternative way of seeking exposure to Danakali

The DNK story progresses like a well oiled Rolls Royce in the making and failing a “world event” it will most certainly prove to be a world tier 1 project. Management has maintained a very professional approach and performance, so going forward, future investors will be very regretful at not having an exposure now to this very viable project and at this very point of time. As is the usual case though with unique projects such as this, DNK will most likely and ultimately succumb to being taken over by one of the large international fertilizer companies. Such a take-over of DNK though will not be successful below a share price of at least $ 2.50 per DNK share with the first pitch probably appearing ex funding approval and around midway through the construction period which would equate to around mid 2018. Meantime though, the DNK share price will likely trend upwards to around the $ 1.50 area as the more formal heads of agreements for production off-take and funding approvals are finalized.

This past week witnessed a very significant event with DNK and the emergence of the CAPITAL GROUP OF LOS ANGELES becoming a substantial shareholder with the announcement of them holding 16,700,000 DNK shares which is 6.79% ownership of DNK. This is a huge catalyst for the DNK share price.

The CAPITAL GROUP is an American financial services company, established in 1931 and ranking amongst the world’s largest investment management organizations with US$ 1.4 trillion in assets under management.

The CAPITAL GROUP have owned TWO investments in Australia, namely:
Amcor ( 9.42% and Fortescue Metals Group ( 7% ) –

DANAKALI is its THIRD investment in Australia ! ( thus far owning 6.9% ) so Friday’s performance with the DNK share price rising 15% is undoubtedly the result of other investors following the CAPITAL GROUP lead, a group who are meticulous with their research and very possibly in this case, the front line holder for an eventual predator of DNK.

On the surface, it appears that investors only have ONE way to obtain an exposure to Danakali and that is to purchase shares in DNK. Interestingly though, this is NOT the only method of entry to gain an exposure to the Colluli potash project, which infact is the sole DNK project and 50% owned by Danakali.

The Chairman of Danakali is also the Chairman of a minnow company named MONTEZUMA MINING COMPANY (MZM) and as can be seen in the last Montezuma quarterly report, amongst other MZM investments, Montezuma has the ability to own a remarkable holding of around 10,000,000 shares in DNK ( at a total cost price of < 30 cents/DNK share. )

MZM own outright a total of    7,527,369 shares in DNK = 3.10% of DNK, PLUS MZM also owns 2,272,727 35 cent options = 0.92% of DNK (after MZM convert)

MZM total ownership in DNK =  9,800,096 shares in DNK = 4.02% of DNK

MZM have only 83,464,350 issued shares & share price $ 0.13 = Market Cap of just $ 10.85 million !

MZM also have a large range of exploration projects of questionable value and potential + other investments in listed public companies.

Forgetting any other MZM interests, the question to answer is:

What happens to the MZM share price if within 12 months DNK receives a take-over offer at $ 2.50 / DNK share and MZM then receiving $ 25 million in CASH !?

Such an outcome would mean that apart from the existing very strong MZM balance sheet, it would then have an additional $ 25 million cash which equals a cash injection of $ 0.30 / MZM share. MZM shares would SOAR !

MONTEZUMA shares at 13 cents therefore appear to be a real steal and certainly worth considering as far as being a real alternative and much higher leveraged exposure to Danakali.