I rang the Rights Issue support line today curious about how the raise is going. I am participating and subscribing for some extra although I'm starting to get antsy about the bloated share base as well. We really need all those big holders to stick fast for the long term - the potential overhang problems are diabolical.
Anyway, they couldn't be specific of course but said that based on response to date it looked likely that anyone subscribing for additional shares above entitlement would get what they were after. That being the case it's again curious that people are supporting and even paying over 0.5 on market.
In relation to future targets. As I see it, we're primarily about our sand assets. I currently value the Coburn asset at $0 because that's what the market has been saying for a long time. At the peak of the previous market it was pricing at $30+ million. Let's say, being generous, that the market gives us that for Coburn again as pricing restores. Let's say further that we prove up something significant in Tanzania, say along the lines of BSE's Kwale. Kwale picked up a market cap of $150+ mill at the peak of the last boom. That gives us $180 million market cap potential IF valuations get back to the last boom level. Spread across 2 billion shares = 9 cents and an 18 bagger from 0.005. I think that's a very generous upside target, one that has a lot of kind assumptions built into it. On that basis I'm prepared to say it's not worth more than consideration as a fantasy.
Let's instead say that nothing ever gets added for Coburn but we do get at least the mobile mining strategy going in Tanzania. I consider that scenario quite likely since it's very modest capex and actually can have scale for STA because of their control of so much ground. Chucking some loose numbers in, a 15+ year operation looks feasible and earnings of $10million p.a not silly. Those sort of outcomes could see a $50million cap held comfortably for some time ie 2.5 cents or a 5 bagger from the cap raise which would gain further support if our remaining shareholding in Torrens/Mt Gunson copper project comes good. This sort of target is feasible in my mind and I would suggest that it's also in the minds of management based on the exercise prices of the options attaching in the cap raise.
So I figure a decent return is available over the next 2 years but I'm no longer hopeful of a spectacular one - too long under the weight of the bear. For that we need something to happen that's out of left field which I think was Buick's point.
STA Price at posting:
0.6¢ Sentiment: Hold Disclosure: Held
(20min delay)