I just dug these up and thought they were a timely reminder of why we are all holding MHL. The credit for the research must go to Young Trader and I have also copied the Far East Capital Report that is referred to. News is imminent on a number of fronts so keep a close eye on MHL.
MHL
Mkt Structure Shares 635m
Mkt Cap @3c = $19m Current Mkt Cap @4c = $25m Mkt Cap @5c = $32m Target 1 if CIG hit Oil on adjacent lease Mkt Cap @6c = $38m Mkt Cap @7c = $45m Target 2 if a major like Santos or Chineses National Oil farm in
Cash $2m
Ascent Capital To begin with MHL is an Ascent Capital re-cap, however I always viewed it as the one that never made it,
When you consider their other re-caps, EXT 2c -15c, DYL 2c-65c, BLR 2c-25c, WMT 2c-30c, even MKY 2c-9c, thus MHL's 2c- 4c seems an anomoly, I would think its the last decent Ascent Capital re cap left to run.
So given their track record and the fact that you see the Steinpris name (Ascent Capital) still on the share registry suggests that more is still to come, in addition to this Ascent Capital control 50% of the Uranium projects and so this all makes for a very interesting mix.
Management Oil and Gas The 2 main men are Scott Spencer and Ted Ellyard, both are the ex creators/architects of Hardman Resources, they took HDR from "a market cap of less than $5m in 1994 to eventually over $1.5 BILLION"
Thus these two oil boys know what they're doing and as such MHL has been viewed by some such as Peter Strachan of Sotck Analysis as Ted Ellyards next oil and gas venture.
Uranium The Uranium project is being managed by Leopard
Leopard is an unlisted private company thats owned and controlled by Ascent Capital, its technical guys are James Pratt who is the Managing Director of Deep Yellow Ltd (DYL) and Dr Joe Drake-Brockman who is in charge of technical explorationa and development for DYL.
So effictively Leopard is a mini DYL, created by the creators of DYL and managed and run by the current DYL top boys who have taken DYL from $5m to over $500m.
Projects
Kyrgyz Oil Oil and Gas, 100%, Kyrgyzstan Surrounded by many prolific oil and gas producing basins which have produced probably a few BILLION BARRELS OF OIL and a few Trillion Feet of Gas, reserves are still a few Billion Barrels of Oil and a couple of Trillion feet of Gas.
The obvious comparison is as Warrick Grigor has done, to that of Caspian Oil and Gas (CIG), "Three years ago we spent a week in the Kyrgyz Republic, coming to grips with a junior oil stock named Afminex (it subsequently changed its name to Caspian Oil and Gas). Back then, the shares were less than 1.8¢, the company had precious little cash, the market capitalisation was $8m and the oil price was only US$30-35/bbl.
Since then it has raised more than $20m, it has signed a joint venture with Santos and, independent of that JV, it is preparing to drill a number of shallow targets. CIG’s market capitalisation is approximately $170m with the share price at 16.5¢. Our clients have done very well out of CIG, irrespective of whether or not they hit big oil in the forthcoming program."
So CIG's Mkt Cap has gone from $8m to $170m yielding a return of 2125% over 3 yrs, however over the last 5 months the stock has yielded over 300% (5.5c - 16.5c)
Given CIG's current Mkt Cap of $170m I would expect MHL to move up to 5c =$32m if CIG hit oil, moreover if MHL, which is in the final stages of negotiating a farm out, gets someone like Santos, or even the Chinese National Oil Corp I would expect a re-rating towards 7c = $45m.
There is not too much info on target size or potential of MHL's Oil and Gas licences however the company is in the final stages of interpreting and reprocessing data to determine drill targets, priority survey area's etc etc in addition to this further survey results are due back,
So to summarise there are 3 potential catalysts fora re-rating of MHL because of its oil and gas leases
1. CIG striking oil 2. A farm in partner such as Santos or Chinese National Oil Corp 3. Siesmic/survey updates with target/potential size of oil targets
This is just an intial target, base don historic work/drilling by the soviets, mineralisation is reported at surface and up to depths of 150m's over a strike of 800m's, they "mineralised seam widths" vary form 4.2m's to 6.6m's and avg 0.03% - 0.4% U
Its early days here but given the current mkt cap of other companies operating in Kyrgyz such as MRO mkt cap $50m and NMR mkt cap $100m there is plenty of upside value for MHL once a JORC is released I would expect $20m of attributable value = 3c
As stated the Uranium project is being managed by Leopard
Leopard is an unlisted private company thats owned and controlled by Ascent Capital, its technical guys are James Pratt who is the Managing Director of Deep Yellow Ltd (DYL) and Dr Joe Drake-Brockman who is in charge of technical explorationa and development for DYL.
So effictively Leopard is a mini DYL, created by the creators of DYL and managed and run by the current DYL top boys who have taken DYL from $5m to over $500m.
Summary
- Chart wise support seems to be 3.2c and then 2.6c, however I doubt we will see it fall below 3c
- Its is a direct comparison to CIG, even Grigor is getting his clients who he got on to CIG very early days on to this, moreover any drilling success for CIG will boost MHL's prospectivity and thus SP
- A farm in deal for MHL's oil and gas licences is in the final stages, if its Santos or Chinese Oil watch out!
- The Oil managment is excellent being ex HDR architects who took the company from $5m to over $1.5Billion
- The Uranium management via Leopard is also excellent as its all the DYL boys who took DYL from $5m to $500m
- So given it is being run by the people he created so much value for HDR and DYL, as well as the fact that it can be compared to CIG for oil and MRO/NMR for the Uranium MHL seems cheap!
__________________
FAR EAST CAPITAL REPORT
“Cousin of Caspian”
Energy Exposure at an "Option Price" MHL has exposure to two out of three of our preferred commodities – uranium and oil – at a time when the world is approaching its longest, most serious energy shortage that has resulted from under-investment in the case of uranium, and over-consumption in the case of oil. Throw in the compounding concerns with global warming and the naïve reliance on green energy to carry the day, and the increasing politicisation of energy by the Russians in particular, and we see that the future becomes more uncertain. We should all be looking at increasing our weightings in the oil and gas sector, ranging from exploration through to production. We favour a basket approach to the higher risk exploration end of the business due to the unpredictability of the business, and that should involve frontier oil stocks for maximum leverage. One such stock is MHL, which, at a market capitalisation of $15m, is carrying only “option value” with the price at 2.4¢. Reminds Us of Caspian Oil & Gas Three years ago we spent a week in the Kyrgyz Republic, coming to grips with a junior oil stock named Afminex (it subsequently changed its name to Caspian Oil and Gas). Back then, the shares were less than 1.8¢, the company had precious little cash, the market capitalisation was $8m and the oil price was only US$30-35/bbl. Since then it has raised more than $20m, it has signed a joint venture with Santos and, independent of that JV, it is preparing to drill a number of shallow targets. CIG’s market capitalisation is approximately $170m with the share price at 16.5¢. Our clients have done very well out of CIG, irrespective of whether or not they hit big oil in the forthcoming program. Differences Between Monitor and Caspian CIG’s focus is mostly on the Fergana Basin with a few licences to the east. With the exception of At Bashi, MHL’s licences are in the NE of the country. CIG initially promoted itself on a series of oil seeps and very shallow oil, but these oil finds have been shown to offer low productivity due to the lack of pressure near the surface, and it has been lower quality oil that is sold at a significant discount to world prices. The deeper plays offer much more promise but Santos is yet to drill these. Monitor’s targets are all much deeper, at 2,500- 6,000m depth, without the distraction of the lower productivity of near surface positions. Caspian did have the opportunity to acquire uranium leases in the Kyrgyz Republic but at the time the directors wanted to stick to a pure focus on oil, so the leases were acquired by Monaro Mining NL. Notwithstanding the difference, Monitor could easily qualify for the mantle of “Cousin of Caspian”. Inspiration from Nearby Fields MHL has four licences covering 9,950 km2, in close proximity to major proven oil provinces. The prolific Tarim Basin, to the SE in China, has reported resources of 170 billion barrels of oil and 710 TCF of gas, with production of 350,000 boe/day. The Junggar Basin, with 65 billion barrels of oil and 13 TCF, is located to the east, also in China. Exploration History of the Licences There is no production history on the licences but previous exploration work conducted in Soviet times has provided evidence of a number of play and lead types, including four-way-dip and fault-dependent anticlines, fractured and karsted carbonates, strategic pinch outs and salt-related diapers. Both Paleozoic and Cenozoic sediment thicknesses of over 5,000m are indicated within the foreland basin troughs resulting in sufficient burial for hydrocarbon generation. Complex deformation comes from thrust faults and related compression shear faults. The most prospective horizons are thought to be in the Paleozoic units where the hydrocarbon generation postdates the tectonic activity. Higher up the Mesozoic and the tertiary units offer opportunities for captured leaks. Very little drilling has been conducted previously. At the At Bashi licence the Soviets drilled a well to 2,000m, which blew out and had to be filled and abandoned. At the Tyup licence there were four holes drilled with two having oil and gas shows and two not being completed. Far East Capital Ltd/OzEquities Junior Resource Company Comment ________________________________________________________________________________________________________________ This research report is provided in good faith from sources believed to be accurate and reliable. Far East Capital Ltd directors and employees do not accept liability for the results of any action taken on the basis of the information provided or for any errors or omissions contained therein. 2 MHL believes that 100 mill. bbl targets are realistic, though these are likely to be broken up into blocks of 10-20 mill. bbls. The predominant petroleum system present in the areas have the following features; a. Source: Paleozic marine algal, Carboniferous limestones and Permian shales, Mesozoic Jurassic coals, shales and possible remnant Cretaceous shales and Cenozoic deep basin lacustrine mudstones b. Reservoir: primary porosity in sandstones and limestones, secondary porosity in carbonates in the form of inter-granular voids, vugs, moulds, caverns and fractures. c. Trap-Timing-Generation: multiple periods of structural deformation; thrust fold closures in the Paleozoic, surface expression anticlines in the Paleogene-Neogene; paleokarsts, salt diapers and related sub-salt traps d. Retention; hydrocarbon generation postdates some of the tectonic activity and pools generated prior and during tectonic episodes will have been distributed and remobilised and trapped in shallower target zones. (For those of you with a technical bent, the Company has produced a brochure that gives more geology). Fiscal Considerations The Kyrgyz Republic has an attractive fiscal regime with company income tax of 10%, royalties of 5.3%, low work commitments, long tenure and a free market economy. Looking for A Joint Venture Partner MHL has shown initiative in acquiring the licences back in April 2005, at minimal cost. The classic formula for junior companies of getting in early and promoting the opportunity to larger, better financed oil companies is the model being pursued by MHL (just as CIG did with Santos). Depending upon the Company’s negotiating skills, we could see it end up with a 10-30% free carried interest in gravity and seismic surveys and a number of wells. This would provide excellent leverage on any discovery. The Uranium Interest – The Following Comment was Taken from the Uranium Review Released by FEC MHL has 50% of an interesting uranium project in the Kyrgyz Republic, named East Kokmoinok. Our examination of Soviet work suggests a non-JORC resource of 770 t U3O8 at Kashkasu, which awaits confirmation and conversion to JORC status. The Soviet work comprised a shaft to a depth of 160m and 800m of drives. The uranium mineralisation is hosted within coal horizons of the Jurassic sedimentary strata. Lower grade mineralisation is associated with sandstones and siltstones adjacent to the coal. There have been historical uranium mines in the same uranium field at Turakavak, Agulak, Sashytash deposits. The mineralised coal seams vary in width from 4.2- 6.6m and the grade is typically 300-2,000 ppm, with an average being close to 1,400 ppm. MHL paid US$230,000 to acquire a local company which held a 97.5% interest in East Kokmoinok, then sold a 50% interest to Leopard Minerals at cost price. Ongoing exploration cost are shared 50:50 between the two companies. Investment Perspective: MHL is one of the cheapest uranium stocks on the bourse with a market capitalisation of only $13m (share price 2.1¢). It seems that the market is considering only the oil exploration licences, and even then it is not placing much value on them. The share price will be affected by news on the uranium front, but there will also be a rub-off from oil drilling in the Kyrgyz Republic by Caspian Oil and Gas, which is capitalised at $131m The Cash Position Currently there is minimum cash with $1.2m in the kitty at 30 June. Whilst this suggests that a placement may be needed, it also suggests that the Company will be beating the drum to generate more interest. Far East Capital would probably be interested in helping out on the funding front. Management and Technical Strength MHL is headed by Jon Roestenburg, a petroleum industry geoscientist with over 35 years of experience including periods with Mobil Oil Australia (Geotechnical Manager), Ampolex (Technology Advisor) and Schlumberger (Chief Geologist – SE Asian Geomarket). The Bottom Line Monitor is a cheapy that offers an attractive risk/reward ratio. It is one for those who don’t mind a bit of speculative risk. We are frequently being asked for another stock like Caspian in the early days, and MHL seems to fit the bill. The share price will be influenced by the progress with joint venture negotiations on the oil licences, the uranium market, drilling results when the uranium deposit is drilled, and eventually by the success or failure of the oil exploration. There is plenty of room for upward share price movement.
MHL Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
