mbg- green alert >10c

  1. 258 Posts.
    I have been watching at Marlborough Resources for some time now and noted that since its placement of shares in the middle of last year at 6c, it has been trending lower down to below 5c. In the last couple of days though volumes are picking up and the price crept up above 5c and looking to trend higher. From my research I was surprised that it even went down below 5c as I will explain later. Perhaps it is true that tin is not as sexy as gold, and that must be the main reason for MBG not getting the recognition that it deserves. All these hopefully will be changed in this year as the market appreciates how profitable this company is and how much potential that it can offer plus it is not just a tin player, it has valuable gold properties as well.

    The main asset of the company is the Ardlethan Tin project located 500km from Sydney in the Riverina area of SW NSW- yes all its projects are in Aust. It was a reopening of an old mine closed in the 80s. Production only commenced last year ahead of schedule and in the last 2 quarters have been producing beyond expectations. Tin as a metal has been suffering in the last couple of years and has been trending as low as US3600 per tonne coming down from a level of over US5000. One of the reason is the uncontrolled dumping of the metal by certain Asian countries. Many producers have closed down as the production cost can be quite high and at the $3600 selling price, many producers were put out of business. Tin price has however been creeping up slowly over the last few months. This week it is now commanding about US4300 per tonne a vast improvement.

    MBG, through its clever management has been able to lock in sale of its tin at $4420 per tonne (for up to 42 tonnes per month) until end of next year and also it has locked in exchange at 55.6US - as we can see at the moment that the Aussie dollar is increasing and 60c is likely soon which will hurt many of our US denominated metals producers. So MBG will be protected from US dollar fluctuation. The locked in tin price is only for a period of time but it is hoped that tin will recover back to its US5000 level by next year. In the past year it has been able to enjoy the fixed price of tin at a much higher level when the spot price was below $4000. It tin price is above the fixed price then MBG has option to sell at higher price- so win win situation.

    MBG is also proud that it is able to achieve the highest selling price for tin (due to its clever strategy) and its operating cost per tonne is also one of the lowest in the world (in the new year looking at cost of US3000 per tonne)- and yes profit will be just number of tonnes multiplied by difference of selling price minus cost price all in US dollars.

    Mine has at least 10 years to go and last Sep Mbg proved an increase in resource. There are also tailings available for further processing and it is estimated that there is available (in addition to the resource) gross in ground value of A$113 million to be treated separately- and this is the next stage of the project expansion.

    Back to the main project, the last quarter should show maximum recoverability with 100 tonnes per month (1200 tonees per annum). The quarterly report which should be due end of this month should show some very good results (the OCT quarter was 204 tonnes). To do the sums, if 1200 tonnes produced with a profit of (US4420- US3000) = US1.7m or about A$3m. This is assuming that the tin price is at about US4400. There is potential for it to go close to US5000 as many producers have been forced out of business in the last year. This is before we take into account any of the tailings. This gives about earbings per share of about 1.3c and at current 5c it is only trading at less than 4 times earnings.

    Tin is mbg cash provider. It has other gold projects which have not been appreciated.Mount Mackenzie is the largest gold bearing hydrothermal system in Eastern Aust. Mbg had a number of majors wanting to farm in but obviously with majors they do not drive the best deals for small juniors. As a consequence , mbg has gone with Smarttrans and the first phase of exploration in the Sep quarter has provided very encouraging results. More definite results will be available either in the quarterly report or as they are assessed.

    Their other property Lucky Draw, jv with Michelago Ltd has a resource of over 100,000 ounces of gold and they are working now on preparing a feasibilty study for the development of the resource. Even on the tailings alone, which can produced at US174 per ounce, this is worth a cash operating surplus of A$5m. The overall project would obviously be worth a lot more than that.

    Mbg has a couple more projects and they are now on alookout to acquire other tenements and projects. It has the guaranteed cash from the tin project which will last several years to fund new projects and acquisitions.

    It has been hard to describe all their projects in detail but in summary, mbg has great potential as:

    n -well run company with limited downside, and price appears to have turned
    n - the tin project has been maximised and will be reported on in the last quarter report and will be cash positive from thereon
    n - based on earnings and say 10times earnings ratio, the price based on sale of tin alone should be more than 10c
    n - tin project and resource can still increased and tailings which is worth a lot has yet to be processed
    n - it is looking for other acquisitions and a major may become their partner. Mbg has in the past rejected a major obviously not good enough deal
    n - tin price although not as sexy as gold is on the improve (it has gone from US3600 to US 4300 per tonne)
    n - it has great gold properties in Aust and are being developed to produce gold and being explored

    It has in the past been recommended by various parties- The Speculator, Huntleys smaller companies(and again a price in excess of 10c has been suggested even at a time when mbg was still improving on the tin project but now we know that they maximised production and getting good profits)

    On this basis and at current price, it looks strongly like a green alert to >10c

    Research yourself and see if you agree.

arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.