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#ASX Announcements
Last edited 3 years ago

As per below, it looks like the left wing candidate is going to win. Given he stated he wanted to nationalise all mines, it might pay to review if any of your mining companies are exposed to Peru.


Much like other ASX listed miners, and as previously and repeatedly highlighted by Bear77, sovereign risk is not inconsequential. 
Here follows an excerpt from my usual rag; the economist. The low probability of a populist nationalising the mines seems to be increasing 

Cajamarca, in peru’s northern Andes, is known mainly as the place where Atahualpa, the last ruler of the Inca empire, was murdered by the Spanish conquistadors despite having paid his ransom by filling a room with gold. Today Cajamarca is the capital of a large region of struggling farmers, rough roads and modern gold mines. It still feels betrayed: the mines have brought more prosperity to the nation than to the region, which is Peru’s poorest. It is the home of Pedro Castillo, a rural schoolteacher and union leader who surprised the country by winning 19.1% of the vote in a presidential election on April 11th, ahead of 17 other candidates. He did so on a platform that calls for the nationalisation of foreign mining firms, a new constitution and a much bigger state.


Peru Iron Ore Offtake Agreement Signed with US$2 Million Prepayment
Binding Offtake Agreement signed with international iron-ore trading firm for 100% of Peru iron ore for two (2) year initial term
Offtake Agreement incorporates US$2 million prepayment facility to fund first ore on ship First ore on ship of a minimum of 30,000 tonnes expected in May/June 2021
Strike is initially targeting annualised sales of ~125,000 tonnes of iron ore from specific portions of concessions comprising the Apurimac Project
Potential exists to significantly expand sales through ore from multiple sites within the Apurimac Project, once steady state operations are achieved
Current project profile targeting sale of a high grade “Apurimac Premium Lump” DSO product of ~65% Fe with low impurities
FOB target cost at Pisco Port of less than ~US$70 per tonne
Based upon current iron ore prices and lump premiums, Strike is targeting a CFR price of approximately US$180 - 200 per tonne for its Apurimac Premium Lump DSO product indicating a significant near term positive cashflow opportunity
Strike Resources Limited (ASX:SRK) (Strike) is pleased to advise on a further significant milestone for the Company with the execution of a binding Offtake Agreement (Offtake Agreement) for 100% of the iron ore currently being mined from its 100% owned Apurimac Iron Ore Project in Peru for an initial two (2) year term.
The Offtake Agreement also incorporates a US $2 million prepayment facility to fund first ore on ship and to allow Strike to accelerate plans to expand iron ore sales to capitalise on current strong demand and premium prices for high grade Lump Iron Ore.
The Offtake Agreement has been entered into by Strike’s 100% Peruvian subsidiary company and Good Importing International Pty Limited (GII), an international iron ore trading company currently involved in iron ore offtake into China from various countries including Australia, Russia and South Africa and having previously been involved as an offtake partner for a number of Australian iron ore producers including Mt Gibson Iron, Karara Mining, Pluton Resources and Shree Minerals.
Terms of the Offtake Agreement include market reflective pricing referenced to relevant S&P Global Platts pricing indices and market-typical lump premium and impurity penalties, on a Cost and Freight (CFR) basis for delivery into China.

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#Media Articles
Last edited 3 years ago

25-Feb-2021:  AFR: Next iron ore mine’ to ride surging price

28-Jan-2021: Full Steam Ahead for DSO at Strike's Peruvian project

19-Jan-2021:  Stockhead again:  Is Lithium the Ace up Strike Resources' Sleeve?


I do NOT hold SRK shares, but I do hold Bentley Capital (BEL) shares, and it's BEL's 25.37% of SRK that underpins BEL's valuation.  It's BEL's main asset.  

BEL has a market cap today of just $6m, and it owns one quarter (or $12.4m worth) of $49m SRK.

I'm playing SRK via BEL, but I'll be the first to admit it's a risky way to do it, as the ownership structure of Queste Communications (QUE) is murky enough and involves some interesting characters with their own motives which are far from clear, and Queste control Orion Equities (OEQ) and Orion is the largest shareholder of Bentley Capital (BEL)Farooq Khan and his associates - including his brother (Yaqoob Khan) and sister (Ambreen Chaudhri), and his brother-in-law (Azhar Chaudhri) - control all four companies, including Strike Resources (SRK).  There are also other relatives of Farooq's that pop up, such as Ayub Khan and Afia Khan (with 0.8% each of QUE).

I've posted straws about this rather complicated ownership structure over under Bentley Capital (BEL) if anyone is interested.  I believe the reason for it all is most likely to generate fees and expenses for the participants and to also make it quite hard for anybody to gain control of any of the four companies - anybody other than those that already control them now (and most of their names are highlighted above).  

Caution should be exercised here I think.  WAM Funds' Geoff Wilson has been in quite a few battles with Farooq Khan and his associates, including over Keybridge Capital and Molopo Energy.  Back in 2009 Wilson voted in favour of removing Khan from the chairmanship of Bentley. And in 2016 Khan, through Bentley, opposed Wilson's attempt to wind up the Hastings High Yield fund.  The battles over Keybridge and Molopo were more recent. 

Interestingly, Wilson is listed as owning 16.2% of Queste (QUE) and 5.9% of Orion (OEQ). 

It should be noted however that the total market cap of OEQ is less than $3m, and QUE is less than $1m ($810K).  These are very tiny nanocap companies, or smaller - if there is a word that describes companies smaller than a nanocap...

Geoff Wilson's "investments" in these companies have been private, through his personal SMSF, "Dynasty Peak", not via his management company, WAM Funds, who manage 7 LICs (WLE, WGB, WAM, WAX, WAA, WMI and WMA).

My thoughts are that if SRK doesn't fall in value, then BEL is worth roughly double their current share price, but they are unlikely to ever trade at their true value because of their ownership structure, and the high fees that the ownership structure generates.  That's the first risk, that the massive discount either persists or even gets larger, as it has done over recent days.  The second risk to BEL is that their main asset is SRK and SRK is an explorer and project developer who is not yet profitable and may not ever be profitable if they never get into production.

That said, if you are bullish on SRK - and being bullish on iron ore would help there - AND you have a pretty high risk tolerance, then buying some BEL at current levels (under 8c/share) might be an interesting way to play SRK.

I wouldn't bother trying to buy QUE or OEQ though.  QUE is so small and so illiquid, they have had zero offers on the sell side all this week and they have traded on just 2 (two) days during the past 8 months - the most recent being $495 worth of QUE shares ten days ago (15-Feb-2021), and prior to that, $81 worth on 11-Nov-2020.  You have to go back to June last year for the next most recent trade. 

OEQ is a little better, in that they do trade most months, but not most trading days.  They typically trade between 1 and 4 times per month and the average daily volume in dollar terms - on the days when they DO trade - is only a few thousand dollars worth on those days.  On the highest volume day that OEQ has had in the past 12 months (15-Jan-2021) there was a total of $667K worth of shares traded.

Once again, OEQ is worth less than $3m and QUE is worth less than $1m.  If you could get the shareholders to sell at the last traded price, you could buy all of Queste (QUE) for $810,000 - but you would not get the shareholders to sell at anywhere near the last traded price - and that is the crux of the issue.  These companies are tightly held and the free float is very small (and completely non-existent with QUE) so you have to view them as lobster pot stocks - meaning BEL and OEQ might be easy enough to get into (QUE is impossible), but - later possibly - either impossible or very painful to escape from. 

And what happens to the iron ore price in the meantime, with sentiment around iron ore being what is driving the share price of SRK, and SRK being the single largest asset underpinning BEL, OEQ and QUE.

All that said, I do currently hold BEL shares.  Just go in with your eyes wide open, if you are brave enough.  Or silly enough.  I'm still trying to work out which of those I was when I bought $20K worth on BEL...

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Valuation of $0.585
Added 4 years ago
NPV10 of $0.586 assuming USD100/t iron ore price. IO price at $120/t+ atm which is NPV10 of $0.931. All on fully funded and diluted basis. Massive upside and company proving its on the path to developing this assets with recent native title agreement and pending state deed to convert their retention licence into a mining licence. Shaking off the Khan discount step by step. First shipment due early CY21.
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