Tuesday, September 20, 2011

Follow up for Tribune Resources (TBR)

Tribune Resources (ASX: TBR) is one of the first companies I covered on this blog. The previous commentary is here and a recommended read for background to this post:

Tribune Resources NL (TBR) - October 3rd, 2010

Not a great deal has changed over the past 12 months. Number of shares on issue has remained constant at 50.3m. They continue to produce and stockpile Gold from their Kundana (East) Project (jointly owned with Rand and Barrick). Exploration at the Ghana project continues with some impressive results recently:

Dadieso - 17m @ 5.19g/t Au from 114m
Japa - 12m @ 15.37g/t Au from 126m

Dadieso's northern extension continues over the boundary where Perseus Mining (ASX: PRU) has a JORC compliant resource of 153,400oz Gold (1.8g/t). Japa lies south of Dadieso. The company is investigating the exciting possibility that strike continues along the 1.4km between the two prospects which would result in a strike length of more than 6km. The company is targeting the top 120m for open pittable mineralisation.

The share price has approximately doubled since my post in October last year. TBR was trading at $1.485 and today closed at $2.80 and has traded as high as $3.36. I haven't held TBR shares the entire 12 months. I sold out in late 2010 and bought back in recently at around $2.70 (avg). TBR was also added to the Bullion Baron Fantasy Portfolio today at $2.79 as per tweet. I will post an update to the portfolio later this week reflecting current positions.

While uncertainty remains around the purpose of the stockpiled Gold, the storage rather than sale has certainly worked in the favour of shareholders. This an excerpt from the last annual report:
"Gold on hand at 30 June 2010 has a net realisable value of $53,398,876 [2009: $6,800,154] measured at spot rate. The gold in transit at 30 June 2010 had a net realisable value of $1,635,583 [2009: $1,897,618]."
The spot price of Gold (in AUD) as of 30th June 2010 was $1475, as of 30th June 2011 the spot price was $1400 (so even the annual report due in the next 10 days for 2010/2011 won't really capture the true value of their Gold position). At today's spot rates we can calculate the value of the stored/transit Gold from the last annual report at around $65m. That doesn't account for Gold produced and stored from July 2010 to June 2011. I expect the value of their stored Gold to be much higher come the current annual report (likely in the order of $100m worth at current spot prices). At today's share price the company's market cap is only around $140m.

There are some downsides to TBR, management has some sketchy history:
Billis has had many legal scrapes over the years and has been raided by ASIC investigators over dealings associated with Rand.
But a WA District Court jury in 2006 cleared Billis of charges of dishonestly using his position as an officer of Rand to gain an advantage over another person. Billis, who was listed on Australia's National Personal Insolvency Index between 1991 and 1994, was also found not guilty of charges of falsifying company books. SMH
Some further background is available here (LINK). Further to detailing his past the source goes on to suggest that Billis is also hiding takeover offers and potentially gearing up for a purchase with the hoarded bullion:
Is he publishing all the offers he has for takeover bids for example? Some share Holders close to him are telling me "no he is not". Link
BILLIS has been producing a fortune in gold bullion for close to a decade and has managed to keep it all except for Directors fees and his needs. No dividends of course.
If he says there is gold in the new gold venture he wants to buy albeit overseas although it will blow almost the entire kitty about 80 to one hundred million, you can bet your bottom dollar there will be gold there and lots of it. Link
It all makes for some interesting reading, however the writer seems to have a personal issue with Billis (something to keep in mind when making judgement). If all accurate this information is particularly disturbing when you consider that Billis controls a very large percentage of the company (directly/indirectly). The large percentage held/controlled by Billis and other top holders also poses liquidity risk with over 88% of the company held by the top 20 (as per last annual report).

In my post from 2010 I wrote the following:
Over the past financial year Tribune has not released any investor presentations. Their market announcements contain no flashy graphics and contain little more than the bare facts. I have seen no broker reports or recommendations. Often there is little depth with only a few buyers and sellers on each side.
What a boring company you must be thinking! Why the big move? For the answers you need to read their Annual Report.
It is once again coming time for the annual report and I suspect a rerating will occur as the cover is once again pulled back to reveal TBR's updated bullion position and profit figures.

The chart certainly tells the story with the last 3 half yearly or annual reports resulting in a re-rating:


1. March 15th, 2010 - Half Yearly: Rallied from $0.78 to $1.25 (60%) in 3 weeks and then consolidated at lower prices.

2. October 1st, 2010 - Annual Report: Rallied from $1.14 to $2.49 (118%) over 3 months (including 30% rally on day report was released).

3. March 17th, 2011 - Half Yearly: Rallied from $2.05 to $3.36 (64%) over 6 weeks.

In my opinion the annual report will bring a further re-rating, similar in magnitude to that bought by previous releases. The risks associated with owning mean that I personally keep my position in this stock relatively small.


BB.


Disclosure: Position held in TBR. Not investment advice. Do your own research.

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