15c for ABZ is an absolute steal, I'm actually amazed to see it
Really highlights the disconnect with retail investors and their understanding or lack thereof of resources outside of your usual Au & Ag
ABZ has been sold down on light volume due to either impatience or incompetence IMO. It is simply retail positions exiting the stock over the course of the last few months, coupled with CXA algo trades working it on a daily basis.
The lack of buying IMO is due to the lengthy 6 moment DD process that Xinfa had, which created no urgency to buy the stock as buyers knew they had ample time to enter. Impatient sellers therefore had no option other than to take market.
For anyone that understands the bauxite market, China and Indo environments and the quality of ABZ's resource, ABZ is worth well north of 20-25c any day of the week
Bauxite prices look set to move to $80 IMO, which would leave margins of around $40/t to ABZ once they ramp up production. The list of potential suitors outside of Xinfa is pretty substantial, with 1 or 2 domestic majors a perfect fit also
Xinfa by my calculations have now paid around $700k in just fees to ABZ for exclusivity on this deal ($500k initially + $100k per month delay). If they proceed with the deal the first tranche of $2M is locked in at 38c per share, with fully funded production and offtake to follow.
So with ABZ having a few $M in the bank so no need to dilute to late 2014, record bauxite imports into China and very bullish prices, a quality resource and a huge suit of suitors outside of Xinfa, still with the Xinfa deal to be finalised, you really have to question the mentality of the sellers
Risk vs reward here is a no brainier IMO - ABZ don't need $100M's of funding for development and at current bauxite prices have margins of almost 30% with look set to increase to 40-50%. "If" Xinfa walk (which I think is highly unlikely given they are paying $100k per month to keep exclusivity), then there is a huge list of other parties a perfect fit. If they do proceed, first transaction is a $2M placement at 38c and production + dividend to come late next year.
Unfortunately the retail seller does not weigh this up in their head most days of the week when exiting
Upside IMO is 30-35c on first tranche going through at 38c once the deal is signed. Downside I can't reasonably see anyone lower or on real volume at least - it is already stupidly cheap on any valuation method.
Will continue to soak these up if punters are happy to give them away due to impatience.
ABZ presenting in Brisbane today at resource conference
ABX Price at posting:
15.0¢ Sentiment: Buy Disclosure: Held
