There is a passage in the Tao Te King which runs .... "people often ruin a thing by not being as careful at the end as they were in the beginning"....
We have done the hard yards on this stock .... but it is not yet the end. The next phase is confirmation of the quality of the assets and then getting good value for our efforts.
Over on the 'Short term trading' thread [weekend lounge] they are running a discussion on 'the one that got away' ... .... .... I think we can all relate to that. I think we have all 'gone down with the ship', as well, on various stocks. To my mind, the way to play in this game is to be a high conviction buyer, understand thoroughly the value .... and by all means take the profits when they come but don't sell too early.
As far as the horizon is concerned for SOC ... it seems the first meaningful results are going to come from the Sugec JV drilling campaign. I have to admit that is the tenement I know least about. But I was thinking about it tonight ... those guys have been out in the paddock for around 2 years .... you can imagine they have all gone feral and are hiding out from the Chinese authorities back home ... or... they have been busy working and finding stuff. The diamond drilling campaign is a significant endorsement of the prospect they are exploring .... there is no other way to read it ... unless you think they just want use up all the money before packing their bags.
To my way of thinking SOC is going to have 4 separate re-rates.
The first ... is some [but not all] of the damage, done by Bergen, to the SP will retrace. Book value for SOC is 1.1 cents fully diluted [based on the auditor's valuation in the recent annual report] however, since then SOC has [will] extinguished its debt, and funded exploration for Mt Adrah. Just on value the SP will slowly attract buyers in coming weeks.
Second ... is results from Sugec. That will put some meat on the bones. It is impossible to know in advance how much value they will bring. But if it is anything decent they will want to activate the MOU which is a commitment of $15M for further exploration. If that happens it is a minimum $25M of implied value for SOC ... or put another way 10x's the current MC.
Third ... Halls Peak. I really didn't pay much attention to this early on and so I completely underestimated it. For me, investing in SOC has been a learning process on a number of fronts. In the beginning I knew ziltch about geology. I still don't know anything much but I have picked up on some of the salient, SOC specific, aspects. Until SOC runs a drill down to the conductor there are only guesses about the value of Halls Peak. However, in a longish conversation with Michael Leu he explained that if the drill hits the conductor and returns a mineralised sample what that tells you is the whole conductor is mineralised. Many, many millions of $$ then have to be spent drilling and establishing a JORC.
Halls Peak basically sat as the prime asset in the now defunct PMR. PMR was under-capitalized [sound familiar??] and over a 2 year period no exploration money came in to the company to drill it. I asked ML if anyone had taken any interest at all and the answer was no. I then asked ... "if you confirm the conductor will that bring anyone to your door?' ... "Oh yes" he said.
The history of Halls Peak is worth knowing. In the 1970's ...BHP had bits of the area, CRA [now Rio] had bits and a few others had the rest. All of these companies recognized it as a potentially very rich deposit [you can find some quotes on the SOC website about the area] ... but none of them did any deep drilling. The conductor is 500 metres down and the deepest they went was 200 metres. All of the majors relinquished their tenements ... because a) at the time base metal prices were poor and b) the tenement holdings they had were too small for them to be all that bothered.
So what is there now are abandoned, scattered open pit mines and some underground mines. Only about 10,000 tons of material was actually mined and shipped. But, it was all very, very high grade DSO ore.
Now ... in the intervening time.... all of those small tenements have been amalgamated into 3 and SOC controls the entire area. If the upcoming drilling hits the conductor and it returns a mineralised sample ... what that means is the whole area is a base metal province. The possibility exists that Halls Peak is in the same league as Mt Isa. Just dwell on that for a moment.
I asked ML in that same conversation .. "what about the conductor being so far down?". His reply ... "that's ideal, the area is State Forest and a rich deposit 500 metres down is suitable for underground mining which will not greatly disturb the surface". He then mentioned that the Century mine [in the NT] which currently supplies 5% of the Worlds zinc is closing this year. If SOC confirms a new 'province' this is just at the right time to do so.
So ... that is re-rate potential number 3
Fourth .... Mt Adrah. This is the asset which first drew me in. The JV partners have gotten a very good deal on this asset. What SOC is going to receive in return is the same attention to detail that Sugec have applied in the Uralla exploration [When SOC management sign the Mt Adrah deal with the 'consortium' I expect we will finally be informed who they are.... but Sugec is a component of it] So it will be interesting to see what Sugec 'brings to the table' in the coming weeks in Uralla. The exploration of Mt Adrah, so far gas been less than satisfactory.
There is little point going over old ground speculating about Mt Adrah. It is a matter of patience and wait and see. My speculation is it will be the icing on the cake.
All of the above are the good things. On the negative side of the ledger ....in the short term I am uneasy about GTT Ventures and what their plans might be. I remain adamant that SOC management have given a sizable chunk of the company away with very little to show for it. Retail shareholders have suffered badly due to management's financial blunders .... the drilling now underway should have happened last year already. I hope that GTT Ventures' involvement doesn't end up adding 'insult to injury'. The bottom line overall though is ... potentially .... there is deep, deep value in SOC.
(20min delay)