" ... those that are interested have bought into Gippsland...

" ... those that are interested have bought into Gippsland instead ... "

http://miningbeat.blogspot.com/2008/10/noventa-bores-market-to-tears.html

Senin, 2008 Oktober 13
Noventa Bores The Market To Tears

Mozambique is a great place to go on holiday. The beaches are long and sandy, the sea is warm, the snorkelling is stupendous, and the sun shines brightly enough, even in wintertime. What’s more, following two decades of civil war at the end of the last century the country is gradually getting itself sorted out. Roads are being re-laid, the north and the south of the country are connected once more, power is on the way, mobile phone networks have gone in, and so have mining companies.

Still, a recovering economy does not a company make, as a glance at Noventa’s share price graph will show. Over the last twelve months Noventa’s shares have more than halved in the wake of a series of troubling updates, and indifference about the tantalum market. The 175p year high was hit in November last year, so we are not just talking about a spate of weakness over the summer, although September’s not been kind to the company either. It dropped 10 per cent on Tuesday 30th alone, closing out the day at a meagre 81p. Looking back just a little bit further, some of the early trades that went through after the company listed on Aim in the spring of 2007 were for as much as 230p per share. At the current levels the shares are touching new all-time lows all the time.

So what’s gone wrong? You can blame the markets to some extent. But some companies have even managed a rise in spite of the chaos in America. Admittedly, they are few and far between. The discount for Mozambique was, is, and always will be in the shares, so it can’t be that. In any case, as we’ve already stated, Mozambique on the whole is on the up. Delays to projects aren’t that uncommon in the mining sector either, so Noventa’s own issues at its Marropino tantalum mine in the north-west Zambezia province don’t tell the whole story either. Sure, production targets were missed in the spring. And sure, the company had to raise extra money to tide itself over. But the mine is producing, and the first shipment was actually made last year, so there is at least some money coming in.

The real issue is that the market is beginning to get used to the idea that Noventa doesn’t deliver on its promises. In May, when Noventa shares were on the floor, and not for the first or last time, Minesite was one of the few places that Noventa could get a hearing. At that time Clinton Wood stated, “This year we plan to produce 300,000 to 330,000 pounds of contained tantalum”. One month on and the company’s preliminary results stated that one of the company’s objectives for 2008 was to “produce 200,000 pounds of tantalum concentrate”, a steep drop over the course of a single month. Given that there was no material news whatsoever over the summer, if the company’s projected output continued to drop away at that rate, now that we’ve reached the beginning of October, it would have no production at all. Have there been any further issues at Marropino? Well, apparently not, according to the company’s interim results, released on 25th September. Noventa reckons it will now hit “cashflow breakeven” at the end of the year, but does anybody care?

The company went months without updating the market over the summer and early part of autumn, enough time for anybody with any interest to lose interest, especially with everything else that was going on. Even the July update only detailed how the Noventa board had recognised that a convertible bond issued earlier in the year at 175p per share was now flying in the face of reality, and needed a bit of re-adjusting. The trouble is, in the face of this track record of underperformance and under-delivery, there just isn’t really a good reason to buy Noventa shares. You might look for a production re-rating when the ramp up to over 400,000 pounds is completed, if it ever is. But that’s about it. And given, as we said, that Noventa has actually been in production, albeit missing targets, since 2007, perhaps the production re-rating has already been and gone.

Aside from that, Noventa also suffers from a structural problem – the lack of market interest in tantalum itself. No need to mention that tantalum is essential in mobile phones and all the other marketing guff that those in the industry put out. More to the point is, does anyone in the equity markets want exposure to it? The answer is surely that not many do, and those that are interested have bought into Gippsland instead. Gippsland shares are up by around 12 per cent on this time last year, supported by some canny marketing by boss Jack Telford, good progress on the lead project in Egypt, and - which is perhaps the insurance nervous buyers need right now - some exposure to other metals, namely tin and gold. Noventa offers morganite, which is hardly the stuff of open outcry on Leadenhall Street, or indeed of a pm fix in London. So why isn’t the market interested? Noventa isn’t interesting, that’s why. Mozambique’s all very well for a holiday, or for gold mining. But for tantalum, look north to Egypt and Gippsland.

Diposkan oleh Noer di 08:30