smh.co.au
Richard Hemming September 28, 2012
Some are claiming that the resources boom is dead, but it hasn’t deterred speculators from bidding up the oil and gas explorer Pura Vida, causing its shares to more than double sinceUnder the Radar covered it earlier this month.
And its trading in the stock has been strong, with about $250,000 changing hands every day for the past two months, in which time the stock has more than tripled. Pura Vida (PVD) now stands at 80 cents, delivering it a market cap of $41 million.
Just to remind you, the company has a block in a highly prospective area for oil and gas off the coast of Morocco – which just happens to be a few clicks north of the block ex-BP executive Tony Hayward’s company Genel Energy has recently bought into (or “farmed in”), in order to develop.
What has excited some is Pura Vida’s resource upgrade from 2.4 billion to 5.3 billion barrels, along with the verdict of its main prospect “Toubkal” having a “31 per cent chance of success”, according to one of these “independent” consultants that are paid for by the company.
Alongside the speculators are the usual suspects in the broking community, who’ve suddenly come up with reports containing fantastically high price targets in the region of $1.88.
It is almost a speculator’s dream come true. Will it continue?
Next week they have a bunch of suits from big oil companies going into a “data room” to work out whether to “farm in” and develop the field. Pura Vida’s chief executive Damon Neaves told Radar that he was confident of a deal occurring by Christmas, so presumably the punters who have bought-in also feel this way. Whatever happens, it’s going to be a long time, if ever, before any oil gets sucked out of the Atlantic with Pura Vida’s name on it.
Another spec bet
Australian politicians might be trying to curry favour with Indonesia and its President Susilo Bambang Yudhoyono, and the same can also be said for the foreign companies which are operating there.
For companies, this has been made more difficult by the publicity surrounding gold and silver miner Intrepid Mines, having been kicked off its site in East Java by its local partner.
Despite its name, Sumatra Copper and Gold (SUM) is trying to develop a gold and silver prospect called “Tambang” in a mine that was in operation in the late ’90s. It has silver and gold reserves of 403,000 ounces gold equivalent. This is not insignificant and has come about through something like 150,000 metres of drilling.
A quick look at its share price, and you might conclude that this company is going well. At 15.5 cents it’s almost doubled since late June. But you have to remember that it was trading at higher levels late last year.
The reason for the recent optimism is the involvement of local private equity player Provident Group. Investors are hoping these guys can get Sumatra C&G the forestry licence it so desperately needs. Managing director Julian Ford tells Radar that he is confident that this will occur in the next few months.
If it gets the green light Ford says Sumatra C&G should be able to get $30 million from the banks and another $20 million from equity investors in order to develop its mainly open-cut mine.
It is definitely a spec bet, but because it owns 100 per cent of its mines, at least investors don’t have to worry about a local partner pulling the rug from underneath them, as happened with Intrepid.
Click here to access the fortnightly newsletter Under the Radar Report: Small Caps edited by Richard Hemming. Visit here for more Under the Radar articles.
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