UML 0.00% 3.3¢ unity mining limited

just too cheap - stock worth 20-30 cents/share

  1. 11 Posts.
    lightbulb Created with Sketch. 1
    Great quarter from a cash perspective and valuation is compelling.

    $40m cash in the bank
    $10m in investment in Goldstone Resources (GRL LN - market cap of AUD$30m, Goldstone owns 33%.

    So at today's close you are paying only $10m ($60m market cap less $40m cash and $10m GRL) for Henty - a producing gold mine with minimum 4 year life, cash flow positive ($3-4m per quarter after tax and after exploration expense or $12-16m per year after tax and after exploration expense).

    Would you pay $100m for a gold mine that could make $120m in after tax profit in just one year - ofcourse you would. Your investment is paid off in one year and you sit back for the next three years collecting free money.

    Henty has a value of at least $50m based on resource today (3-4x earnings). The real upside is the updated resource statement - if UML can extend mine life to 8 years (double current resource), then value of Henty should be $100m.

    So total market cap should be:
    $50m-$100m Henty
    plus $40m cash
    plus $10m Goldstone

    ie. $100-150m market cap or 20c-30c per share

    This includes nothing for the exploration upside in old Bendigo tenements where exploration continues (funded by third party).

    Goldstone: this is the great upside in the stock and completely underestimated. CEO Jurie Wessels is proving to be a great dealmaker. Getting the jump on the majors for the tenements in Gabon was genius - the EU pays millions for gold in soil analysis and GRL gets it for free by doing their homework and being first in line. The talent of this team reminds me of Tullow Oil - a UK oil company in Africa that I ran across six years ago and has been a 15 bagger since I first got involved. Smart guys on the ground pulling smart deals in countries where the majors are just too slow. UML should buy 100% of GRL and appoint Jurie as CEO of all UML activities.

    Take three minutes and read this interview with Wessels:

    http://www.stockopedia.co.uk/content/on-the-african-gold-trail-with-goldstone-resources-53402/


    UML bottom Line: Business is back on track and stock should be trading at back at 20c levels. Bendigo mine was always near the end of life (unless there is further exploration success) so why everyone got so upset about the mine closing is beyond me. One quarter of poor production from Henty is a small hiccup in the overall life of the mine and investors have massively overreacted. Goldstone management is smart and have created nothing from something in a very quick space of time. UML are making the right moves and executing on plan.
 
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.