Here's a chance for me to contribute something - at last! I find this thread one of the more informative and owe, like many of you, a debt to Olympian - and Oly, Ancient History , esp the Greeks, was my best subject at School (back in the days with it was actually taught!)
I've taught a bit in China and from what I reckon when Chinese business people give a commitment of the type they given to CMR it a matter of 'honour', they wont be backing out - a CMR director would have to be either rude to a Hunan counterpart or be perceived as 'shifty' in some way. But I'm not cross cultural expert, by the way.
I wished I held more stock like some of you - and good on you all - I bought into CMR as about my third trade ever, when still a raw novice. But this thread has helped convince me of it's virtues.
And, I'm really looking forward to your accounts of the AGM, best HayMan
When investors marked up base metals miner Compass Resources more than 50 per cent after its deal with Hunan Nonferrous Metals to provide more than $600 million, many obviously considered it a foregone conclusion.
Hunan signed a letter of intent, not a legally binding agreement, but investors and the management are treating it like a done deal.
Hunan is to take a placement of almost 30 per cent of Compass's shares at $2.50 a share, paying $30 million in total. The price is a steep discount to the present price of more than $4.30. The stock was at $2.62 before the announcement.
In non-binding agreements, Hunan also stated it would fund Compass's Browns base metals project at Batchelor in the Northern Territory. In the short term, this will cost $60 million and in the longer term, up to $500 million. Hunan also has undertaken to fund 70 per cent of Compass's exploration budget for 50 per cent of the return.
Why is Compass chairman Gordon Toll adamant this deal won't fall over? "We wouldn't bother sitting down with them if they didn't invest in the company. But the fact of the matter is they really, really want the metal," he says, referring to the fact that Hunan is one of the largest base metals producers in China. The Browns base metal deposit contains copper, cobalt and lead.
The 84 million tonne resource, estimated to be worth about $13.5 billion before mining costs, will be mined in two stages. A tenth is oxide ore, which is easier to mine and will cost $60 million. The more difficult component is the remainder, the sulphide ore, which could cost between $350 million and $500 million.
For its funding, Hunan receives 45 per cent of the project, or half of Compass's 90 per cent. Guardian Resources owns 10 per cent.
Aspect Huntley resources analyst Mark Taylor values Compass at $4.50 a share, which assumes a 50 per cent probability the sulphide project goes into production in mid-2010. Applying a 100 per cent probability, he says, raises his valuation to $5.65.
CMR Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
