Kolar Gold – By CamKite
Currently trading around cash with 106.09m shares in issue of which 68% are held off market.
The company having a 23% investment in Geomysore Services (India) Pvt Ltd (GMSI) … GMSI nearing the end of their current drill campaign which began in April this year, having hit an all time low this past week (huge news due, bet big), I think the market is potentially offering investors a decent opening in what could prove to add considerable wealth for KGLD and its shareholders.
As of the 2015 HY report the company confirmed they have enough cash to meet its requirements upto Q3 2016.
With funding in place and drill results from the 7 month campaign due in September / October which will vastly increase the GMSI valuation when comparing to industry peers it’s easy to see the company is undervalued and if GMSI manages to meet its 2-4m Oz Resource KGLD will be sat on a wealth of gold with KGLD’s % being worth a great deal more than the market currently values it at.
As of the update released by GMSI on the 9th July the company were half way through the drill program which started in April which leads us to believe the company will be finished by the end of September and will upgrade the current 710koz JORC resource.
GMSI is one of the only companies in India to be granted a production licence in the last few decades, which with this drilling programme increasing and upgrading the defined gold resource inventory, will bring Jonnagiri closer to becoming a commercially viable operating gold mine.
The current campaign has been for 15,800m of resource drilling that aims to extend the currently delineated ore bodies, with a 2-5Moz exploration target for the whole licence and KGLD holding 23% of that gold it really is easy to see how undervalued the company is in comparison to its peers… Also taking into consideration that as of the half yearly results the company had cash balances of £1.97m and current cash burn stood around £600k per half, the companies value of investment in GMSI being recorded at c£2.5m and 100% debt free.
It’s worth noting that GMSI and DGM (The only listed gold company on the Bombay stock exchange) are in talks regarding a merger and although the facts are unknown regarding this, in my opinion it’s not so far fetched to think GMSI’s valuation will increase from this merger and being traded and more liquid on the exchange. As noted in the HY results, the company is hopeful this will happen in the later half of 2015.
KGLD or the company is also pursuing the renewal of its own licences which are located in the Kolar goldfields in India and remains optimistic that these will be brought back online at some point in the future having received a more positive backing from the current Government.
I have already taken a position in KGLD ahead of the drill results which I am positive about and are due in the not too distant future. Given the heavily discounted valuation to the current assets in my personal opinion it would seem this is yet another bargain basement play and could be seen as a decent binary bet. I’m sure the market will agree as the deadline for results gets closer!
Best of luck.. See ya’ll at the river!
(Note: Please stay tuned for a more detailed review on my poker strategy)