I have spent a number of hours this evening doing some research into CVI which I present below. I have tried not to take a technical or sensationalist viewpoint but to find all the relevant facts place them in a collection of points and then with a conclusion give a fair value per share for both the existing and diluted share structure:
1) When valuing CVI it is important to bear in mind a major point. Cityview is not a pureplay mining company like, say, THX or CQT. CVI describes itself as an investment company. It's purpose is to take a number of stakes in major prospects as a junior partner and to benefit from any big finds or value that is uncovered. As a result CVI is able to position its portfolio to benefit from much more potential upside than a simple explorer or standard mining exploration firm. It is important to bear this in mind when looking at CVI's cashflow statistics and investments. As it is investments that comprise the asset base of the company.
2) CVI holds a 30% interest in the Longonjo Uranium and Ucua Beryllium project with Petro African holding the other 70%. The 30% interest in this project has been valued at AU$8mn by an independent consultant, This from ASX ann. dated 11th July.
3) Petro African and CVI are now in the process of making a joint application for an onshore oil field in the Kwanza basin of Angola. This is from an area that is seeing very strong interest from international oil firms who are well aware of the geological propensity of the Kwanza basin to be rich in minerals and hydrocarbon deposits. You should bear in mind that Kwanza basin is already producing 1.5mn barrels of oil per day with majors such as Exxon already there.
4) CVI holds 8.3% of Quest - a middle eastern entity with a portfolio of reserves and prospects in the arabian region. The entire portfolio has been valued by Morsion Menon Dubai Chartered Accountants to be worth Euro 45mn. Thus the 8.3% that CVI owns is currently worth AU$ 6.3mn. It is important to note that Quest will assist CVI through its contacts in the region in finding and benefiting from new investment projects in the region.
5) CVI holds a 2.5% interest in the Simengarris oil field which is being drilled by the partner firm PT MedcoEnergi and Pertamina the Indonesian State Oil Company. This interest had a value of AU$3.4mn which CVI has written down to zero in it's last set of accounts. The drilling here has fallen behind schedule and not produced the expected results. However it is important to note that the drilling off deep wells is still actively ongoing. Following the write down however this prospect is in the CVI mix for free having been financially completely written off. So, any hint of a positive result here will result in an extraordinary increase in assets for CVI. The directors of CVI still have faith in a positive outcome of this project.
6) Following the investment in the Longonjo uranium prospect with petro African CVI holds AU$1.72mn in cash - the consideration for Longonjo was 20mn shares in CVI plus USD 500,000 for a share of past work already carried out on the project. It is important to note that the 20mn shares will be held in escrow until 20th July 2007.
7) Out of the 181mn shares currently in issue 97mn are held by long term major investors. See here http://www.cityviewcorp.com/financialsframe.html The 20mn in escrow is included in the 97mn figure.
8) The company has 80.6mn options in issue these mature March 31st 2007 and have a strike price of 8c. Full conversion of the options will therefore produce AU$6.45mn for the company in March of next year.
9) The following 3 announcements from CVI pertain to the Konang-3 well currently being drilled by MecoEnergi and Pertamina in Indonesia. It gives us an idea of how the drilling is progressing. CVI has a 2.65% interest in this well and is completely free carried so will have to contribute nothing to any future costs while benefitting from any reserves identified and recovered. Drilling progress is as follows:
COMPANY RELEASE August 14, 2006 KONANG-3, SPUD IN CityView Corporation Limited (“CityView”) is pleased to announce that it has been advised by the operator MedcoEnergi that the Konang-3 well spudded on August 8, 2006. The Konang-3 well has a target depth of 4,920 feet with the Kujung formation as the target area. CityView is free carried through the drilling of Konang-3.
COMPANY RELEASE August 29, 2006 DRILL RESULTS, AUGUST 29 2006 CityView has been advised by Medco Energi that the drilling of Konang-3 well has reached a depth of 2,212 feet. The target depth is 4,920 feet. CityView is free earned through the drilling of Konang-3.
Konang-3 is being drilled in the Madura Block on Madura Island near the city of Surabaya where there is a ready market for oil and gas. The Block covers an area of 674,100 acres. A number of large fields have been discovered in the vicinity and it is these same producing trends which are being examined on Madura.
COMPANY RELEASE September 11, 2006 DRILL RESULTS, SEPTEMBER 11 2006 CityView has been advised by Medco Energi that the drilling of Konang-3 well has reached a depth of 2776 feet. The target depth is 4,920 feet. CityView is free carried through the drilling of Konang-3. Konang-3 is being drilled in the Madura Block on Madura Island near the city of Surabaya where there is a ready market for oil and gas. The Block covers an area of 674,100 acres. A number of large fields have been discovered in the vicinity and it is these same producing trends which are being examined at Madura.
10) For information on MedcoEnergi the main drilling partner in the Asian investments go here: http://www.medcoenergi.com/contract.php
Bearing in mind the above points it is now possible to come to some sort of valuation for CVI at the moment. To do this it is necessary to produce 2 sets of figures, one set for today and a second set for the diluted situation next March. It is important to bear in mind though that the figures for March do not take into account anylikely increase in the valuations of the various projects the company has underway between now and then.
So a valuation undiluted based on current figures is:
Longonjo Uranium JV AU$8mn Quest Middle East AU$6.3mn Cash in bank AU$1.7mn
Total: AU$16mn
Number of shares 181mn
This equates to 8.8c per share on pure asset based value and takes no account of potential value increases in the Beryllium, Uranium and Oil prospects as these projects move forward.
Following March the the 80.6mn options convert which will produce AU$6.45mn for the company - so if you want to value it on a diluted basis then it is only reasonable to add in the option conversion fees.
Thus we get:
Longonjo Uranium JV AU$8mn Quest Middle East AU$6.3mn Cash in bank AU$1.7mn Options conversion AU$6.45mn
Total: AU$22.45mn
Shares in issue after options conversion now 261mn and this equates to 8.6c per diluted share.
Although the diluted figure is a bit meaningless because I would expect some substantial value increases in these assets over the next 6 months.
So, the heads are 5.5c and the options are 1.8c - do you see what I see? A company that is undervalued with some good looking prospects and very cheap options. Thes heads being only 2.5c away from the option strike price.
CVI also has a quote in the USA.....so that means the Americans can be busy trading this stock while we sleep.
I think CVI has limited downside because it is so cheap while the upside is huge. If you want to play safe buy the options they are only 1.8c and have the potential for gains in the hundreds of percent at these levels.
All the information above has been taken from publicly available sources - I have simply drawn it all together into one post so we all have a point of reference.
CVI represents tremendous value imo - a small company with the capability to work with the majors as a junior partner.
I would be interested in any sensible viewpoints on the information I have uncovered and presented here.
And please make it sensible - it has taken me 4 hours to compile this lot and is now after midnight here in NSW.
EB
CVI Price at posting:
0.0¢ Sentiment: Buy Disclosure: Held
