Cheap??

30th Oct '08 by rpcroft

14 comments 4578 reads

Am i reading this right?

Even after more than doubling today, Aricom has more than double its market cap in cash and a NAV of 6 times market cap.

Anyone have any info on this company?

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About the Author

Rpcroft

Premium Member

14 comments

promethean

30th Oct '08

Oddly enough it's Jay Hambro who is CEO - Evy's younger brother... it's a spin off from Peter Hambro Mining (POG)... it's all russian ore, and my little birdy tells me that this is a serious buy at these prices. (I do not own this)... I have done no DD on the numbers and to be honest think the Hambros have some shady dealings in Russia... let me know what you dig out.

promethean

30th Oct '08

http://www.stockopedia.com/news/announcement/ORE/081030ore0662h.htm

announcement today

Stocktaculous

30th Oct '08

Some good buying by management according to this article but check out the massive development cost for the mines - $1 billion of external funding and not fully operational until 2015. Still, I really like the idea of digging iron ore out of the ground in Russia and then moving it straight to China for consumption. Ka-ching!

http://proactiveinvestors.co.uk/companies/news/3155/aricom-directors-snap-up-shares-3155.html

promethean

30th Oct '08

so i guess it's falling on funding worries then? Were they relying on equity financing?

promethean

1st Dec '08

It seems the market was spooked when Jay Hambro (CEO) told the city that they planned to raise $1bn in debt financing. the company ought to end the year with about $250m in cash... which you can pick up for approx $138m now.

They made their first iron ore sales from the Kuranakh project in June, and expect to ramp up to full production by the second quarter of 2009. The Company and its project finance advisers are currently in discussions with banks, contractors and other potential partners in order to finance the K&S and Garinskoye projects which need the serious financing mentioned above.

The proximity to China is one of the boons of Aricom if they get financed... the Russian and Chinese authorities reached agreement on a proposal for the construction of the first railway bridge between the countries in October. Aricom expects that if the bridge is constructed, it is likely to result in a saving of approximately US$4.0 per tonne of iron ore in transport costs to China.

We can all join the dots. Looks to me like the market got spooked, and hasn't come to its senses yet. Essentially you are picking up a dollar for 50 cents and finding a few mines thrown in for the bargain.

Only thing that worries me is that it's Jay Hambro as CEO - never was sure whether to trust him!

Stocktaculous

1st Dec '08

Supposed to be in talks with China Metallurgical Group Corp about building a $200-300 million plant to treat ore. "The plant, which is scheduled to start operating in 2011, will be a key asset in London-listed Aricom's plans to become a significant supplier of iron ore across the border to China, where one-third of the world's steel is produced".

http://www.miningweekly.com/article.php?a_id=147514

Stocktaculous

1st Dec '08

There's an interesting interview in the Telegrapg from 2006 with Jay Hambro here - pretty soft questions. He looks pretty green around the gills, but maybe that's just ageism!!

-------------

Jay Hambro, 31, became chief executive of Aricom, the Aim-listed iron ore and titanium mining company, this month. He previously spent four years as director of business development at Peter Hambro Mining and was a manager of metals and mining corporate finance at HSBC, and in the resource finance team at NM Rothschild and Sons.

http://www.telegraph.co.uk/finance/2944483/Market-profile.html

promethean

4th Dec '08

Aricom hit today due to an announcement that they are going to stop selling the pre-concentrate from the Kuranakh project (which started production in June). In a nutshell, Aricom's iron ore processing plant won't be finished until mid 2009, so they'd been trying to monetise the pre-concentrate ore (the ore before processed into iron ore (titanomagnetite) and ilmenite concentrates) by selling in the open market. But as the market has tanked, noone is giving a good price any more and demand has seized up.

This should only a temporary setback to the long term prospects of the Aricom portfolio.

pennant

5th Dec '08

ORE needs competition to fund that debt finance in order to strike a fair deal - in this market?? The time limited business model means any cash ready financier/partner will have the youthful CEO over a barrel until commodity prices recover. All he can do is cut costs to the bone and play a waiting game. Not good for the sp in the short term. All imho of course.

MrT

7th Dec '08

Sure, the commodities gloom will hurt the stock in the short term but, once the Olekma plant is commissioned in mid-2009, Aricom will be able to deliver iron ore concentrate to the Chinese market at a fraction of the cost of Australian shipments. Make sense to get in before that, in my view. Chinese economic growth is slowing but there's still a massive need for resources.

Murakami

7th Dec '08

Interesting to track the relative fortunes of Aricom and its parent, Peter Hambro Mining. Back in June, Aricom overtook PHM with a market cap of £1.06bn, while PHM was worth about £1bn. Now, Aricom is worth £79m and PHM is worth £188.7m. Somewhat useless trivia but interesting nonetheless.

promethean

10th Jan '09

Well done to all those who picked up on Aricom... the Hambro clan has come to the rescue... with bid talks about POG buying Aricom back at a significant premium.

promethean

12th Jan '09

Citigroup note

Potential takeover — Today OREA announced that it is in preliminary takeover
discussions with POG (POG.L; £4.22; 2H) which may or may not lead to an all
share offer being made for OREA at a “substantial premium” to the current
share price (£11.25/sh at the open). Although no formal offer has been made
at this stage, given the historical relationship and crossholdings between POG
and OREA (OREA was spun out of POG in 03) we believe the deal is likely to be
successful.

NH:
Deal rationale — The key reasons for the deal, in our view, is for POG to access
OREA’s cash reserves of c$250m (c£0.14/sh) in order to address its balance
sheet concerns. If the deal proceeds it is likely that POG’s gold projects will be
favoured over OREA’s iron ore projects given the weak outlook for steel
demand. A takeover by POG may offer OREA investors greater liquidity in a
larger entity. However, there are no obvious operational reasons for the deal
from OREA’s perspective.

NH:
Fair value — Our base case NPV for OREA is £0.16/sh, however this is highly
sensitive to the iron ore and capex assumptions. Moreover Our NPV is
substantially lower than the feasibility study numbers released by OREA on the
8th Oct 08, which valued K&S and Garinskoye operations at around £1.10/sh.

Recommendation — OREA has been trading below £0.10/sh since mid-Nov.
Given the weak outlook for iron ore demand, the significant project funding
requirements and the likely friendly nature of the deal we do not see any
current upside to the share price. As a consequence we are reducing our target
price to £0.16/sh in line with our NPV and maintain our Hold rating.

promethean

27th Feb '09

I honestly don't know why I didn't load up on Aricom after the conversations we'd been having.... benefit of hindsight etc.
Does anyone know when the merger is finalised?

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Rpcroft

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