PORTFOLIO POINT: Market ignores Gullewa affiliate’s high-grade gold hits, once again confirming the company and its potential are seriously under-rated.
Readers of this column may recall that I first bought into the low-keyed mining investor Gullewa Ltd (GUL) on May 22 this year at 6.3c a share for a parcel of 100,000 shares.
The attraction then was Gullewa’s 56.6% retained holding (100 million shares) in the spin-off of its soon-to-be-listed (and much larger) subsidiary, Allegiance Coal Ltd (AHQ).
In the week that followed, Gullewa shares soared 66% to a week’s high of 10.5c. I sold 60,000, recovering our total investment cost, and retained 40,000 Gullewa, which I still hold today.
While enthusiasm for coal has cooled somewhat in more recent months, Gullewa still retains its 100 million AHQ shares, for which participants in the public float paid 20c a share for a total of 35 million shares raising $7 million. AHQ shares traded this morning at 7c, equating to a nominal value on Gullewa’s 100 million share holding of $7 million.
Allegiance Coal in its September quarterly report (issued on October 31) suggested that results from recent drilling of its Queensland coal tenements should provide sufficient data to report a JORC-compliant resource hopefully in the current quarter.
Gullewa has some other irons in the fire that appear to be largely overlooked.
Gullewa’s gold affiliate
Gullewa also has a 36.1% holding in the Toronto-listed Central Iron Ore Ltd, which has 16 granted tenements covering 1,594 square kilometres on WA’s Yilgarn iron ore province with an exploration target of 510-850 million tonnes. One tenement (EL57/819) covering 120 sq km has been farmed out to the listed Pacific Ore Ltd (PSF), which may earn 51% by spending $1.5 million within the next 18 months, another 19% by spending a further $3.5 million in 3.5 years, and an additional 20% with the expenditure of another $10 million within five years.
But more sexy perhaps, after an announcement last week, is Central Iron Ore’s (CIO) holding in the South Darlot Gold Project, 320 km north of Kalgoorlie, with a tenement package of 336 sq km including the old British King Mine (on care and maintenance) 5km west of Barrick Gold’s Darlot mine.
At the end of last week, Gullewa reported more high-grade gold intercepts from drilling two of the 3l gold targets identified within the South Darlot Project (being 24 targets located on tenements that are the subject of a joint venture with Barrick Gold and 7 targets on CIO’s 100%-owned tenements. Best intersections announced were: •4m at 50.3 g/t, including 1m at 158g/t from 43m •7m at 27.1g/t including 1m at 159g/t •4m at 23.2g/t including 1m at 81.8g/t
With the completion of its drilling program spend, Gullewa announced “the company envisages it will have earned a 51% interest in the Barrick tenements”. CIO can earn another 20% (equal to a total interest of 70%) through spending another $250,000.
At 9c a share, Gullewa’s 149.7 million shares carry a market capitalisation of $13.47 million. That is represented by remaining cash at the end of the September quarter of $7,697,000 less forecast expenditure in the current quarter of $1.3 million, or net cash of $6.4 million.
That doesn’t even match the market value of Gullewa’s holding in the listed Allegiance Mining, and suggests there is no value at all attributed to gold and iron ore projects.
With masterly understatement, Gullewa’s chairman, geologist/geophysicist Dr Tony Howland-Rose, commented: “These results are most encouraging”, and pointed out that the location of the most recent gold results “is only 3km from Coal and Iron Ore’s British King gold mine and 7km from Barrick’s Centenary gold mine.”
Read more at EurekaReport: http://www.eurekareport.com.au/article/2012/11/14/mining-stocks/speculator#ixzz2CBhYnbO7
GUL Price at posting:
8.7¢ Sentiment: None Disclosure: Not Held
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