Seeking Alpha

Proactive Investor's  Instablog

Proactive Investor
Send Message
Proactiveinvestors is a leading multimedia news organization, investor portal and events management business with offices in New York, Sydney, Toronto and London. Proactiveinvestors operates five financial websites in four languages providing breaking news, comment and analysis on hundreds of... More
My company:
My blog:
View Proactive Investor's Instablogs on:
  • Yellow Brick Road Secures $13.8M Facility From CBA

    Yellow Brick Road (ASX:YBR) has secured the $13.8 million facility from Commonwealth Bank (ASX:CBA) to refinance the existing $5 million facility and provide additional funding capacity.

    Importantly, this along with the $42.05 million share placement in July and existing cash ensures it is fully funded for the acquisitions of Vow Financial Holdings and Resi Mortgage Corporation.

    Acquiring Vow, one of Australia's largest mortgage aggregators, as well as mortgage manager and originator Resi builds the company's lending portfolio.

    It also supports its growth strategy to build the business through acquisitions while cementing the company as one of the leaders in the 'non-bank' mortgage segment.

    Besides refinancing its existing facility with Commonwealth Bank, the new facility will also provide additional funding capacity for:

    - Any upfront, deferred or earn-out cash payments (if needed) related to the acquisitions of Vow and RESI;
    - The working capital requirements of the expanded YBR group; and
    - With the consent of CBA, any future acquisitions.


    YBR has already secured 100% acceptances from all 24 Vow shareholders for its takeover, which values the aggregator at $17.6 million.

    It has also entered in July into a conditional agreement to acquire Resi for a total of $36 million consisting of $28 million cash payable at settlement and the issue of 7,857,144 shares priced at $0.70 each at settlement.

    A deferred payment of up to $2.5 million in cash is payable on the first anniversary of settlement subject to satisfying certain earn out conditions.

    Vow is a mortgage aggregator that negotiates on behalf of its mortgage brokers directly with lending institutions and collects up-front fees and trailing commissions from lending institutions in respect of home loans introduced by the brokers.

    It represents 776 independent broker groups and had an aggregated loan book of approximately $18.9 billion as at 31 January 2014.

    Resi offers a range of 'resi' branded residential mortgage loans and commercial loans through a network of franchise offices, authorised representatives and brokers, as well as an in-house sales team servicing on-line and telephone enquiries and a credit approval team.

    The loan funding is obtained from wholesale funders and Resi earns a margin between the wholesale interest rate provided by the funder and the interest rate paid by the borrower.

    Resi pays a commission to its franchisees and contractors on loans that they originate.

    It is a profitable business with a loan book of approximately $1.764 billion as at 30 May 2014.

    As at 1 April 2014, Resi had 22 franchisees and 11 authorised representatives acting as franchise territory managers. In FY13, Resi's loan settlement volumes exceeded A$310 million.

    YBR shareholders have supported these acquisitions by approving the acquisition of 204,803 shares in Vow from Macquarie Bank (ASX:MQG) for 4,959,158 YBR shares priced at $0.70 each.

    They have also approved the issue of up to 77,195,813 under its share placement and as consideration to shareholders of Vow and privately-owned mortgage manager and originator RESI Mortgage Corporation.

    Both the Vow and Resi business models are new to YBR and will be managed by their existing management teams with its support and direction.

    YBR's existing 'Yellow Brick Road' wealth management and finance businesses will continue to be operated under the 'Yellow Brick Road' brands, by the company's current subsidiaries and their branches and other distribution networks.

    Quarterly Performance

    The company had revenue uplifts in all divisions with receipts from customers increasing by 17% to $7.11 million in the fourth quarter ending 30 June 2014.

    This included a 13% increase in receipts from branch customers to $5.67 million and a 49% increase in receipts from Professional Services customers to $1.36 million.

    It also improved net operating cashflow deficit by 46% to $0.79 million.


    The new $13.835 million facility from Commonwealth Bank ensures that Yellow Brick Road is funded to complete the acquisitions of both Vow Financial Holdings and Resi Mortgage Corporation.

    Their acquisitions support its aspiration of becoming a leader in the 'non-bank' sector and provides significant opportunities to build revenues, increase margins and gain market position as an alternative to the big 4 banks in Australia.

    YBR had $12.11 million as at 30 June 2014.

    Proactive Investors considers the acquisitions are value accretive in the medium term.

    We continue to rate Yellow Brick Road as one of our top picks for 2014/15. We maintain our share price target of $0.73 to $0.97 in 2014.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

    Aug 28 8:33 PM | Link | Comment!
  • Tiger Resources To Acquire Remaining 40% Interest In Kipoi Copper

    Tiger Resources (ASX:TGS) has positioned itself to acquire the remaining 40% interest in the Kipoi Copper Project in the Democratic Republic of Congo.

    The acquisition will increase attributable earnings for Tiger in FY14 and is a low risk opportunity to lift annual production from an asset that Tiger already operates and understands.

    The purchase price is US$111 million, and will be funded by a $19.5 million placement, $53.9 million fully underwritten share entitlement offer and up to US$100 million debt facility.

    Tiger Group currently holds 60% of the shares in SEK. Upon completion of the agreement, which remains subject to the satisfaction of certain conditions precedent.

    Tiger will acquire the remaining 40% interest, resulting in SEK becoming a wholly-owned subsidiary of Tiger.

    Following the acquisition, Tiger's attributable copper reserves will increase to 737,000 tonnes.

    Brad Marwood, managing director for Tiger Resources, commented: "Kipoi has been the cornerstone of our business over the past seven years and together with our DRC business partner we are proud of our achievements.

    "We see the potential to grow our business by focusing on near-mine exploration and sourcing plant feed from elsewhere in the Kipoi region, thus ensuring the mine should operate well into the next decade.

    "We believe the acquisition of the additional 40% interest in SEK to be earnings-accretive and offers the opportunity to grow our business and cement our future in the DRC as a 50,000t per year copper cathode producer once the proposed expansion of the SXEW facility has been completed.

    "The purchase price is considered a good outcome for all parties having regard to the current 25,000tpa copper cathode production and the fact that the HMS operations are nearing the end of their life."

    DRC Government

    Post completion of the transaction Tiger intends to cede a 5% interest in SEK to the DRC Government to bring the mining title into alignment with the current mining law and regulations in the DRC.

    Tiger manages operations on behalf of SEK at Kipoi where the recently completed 25,000 tonne per annum solvent extraction electro-winning plant has been constructed and successfully commissioned.

    Acquisition and funding details

    The agreed purchase price is US$111 million, of which a deposit of US$6.5 million has been paid and a completion payment of US$104.5 million is due by 10 November 2014.

    The equity component totalling $73.4 million will be funded via a:

    - Placement of 65 million fully paid ordinary shares at $0.30 per share to raise $19.5 million; and
    - Fully underwritten pro rata accelerated non-renounceable entitlement offer to raise $53.9 million .

    Key terms of the entitlement offer include:

    - Ratio: eligible shareholders will be invited to subscribe for 1 New Share for every 5 existing Tiger shares held at the Record Date;
    - Record Date: 7pm (Sydney time) on 2 September 2014; and
    - Amount: $53.9 million.

    Tiger has executed a finance facility with Taurus Mining Finance Fund, which will be partially used to fund the acquisition.

    Key terms include:

    - Facility amount: up to US$100 million;
    - Term: 6 months with options to extend on a monthly basis for up to a further 6 months;
    - Interest rate: 11% per annum;
    - Extension fee: if the term extends beyond 6 months, a monthly extension fee of 0.5% of the facility amount is applicable; and
    - Warrants: 20 million warrants with a four-year term exercisable at A$0.40.


    The acquisition will increase attributable earnings in FY14 for Tiger, and the company will become the ASX's largest listed copper cathode producer.

    It is also the lowest-cost copper producer on the ASX, as well as the fourth biggest attributable copper producer.

    This is a transformational acquisition for Tiger and we expect it to be share price accretive in the medium term, as it will increase attributable earnings and provides a low cost pathway to lift annual production from an asset that Tiger already operates and understands well.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

    Aug 28 8:31 PM | Link | Comment!
  • Sun Resources Raising $10M To Drill High Impact Texas Oil Well

    Sun Resources (ASX:SUR) has received a major vote of confidence in the company's U.S. based assets from institutions and investors, with the company set to raise $10 million.

    Major shareholder Gina Rinehart's Hancock Prospecting Pty Ltd has already committed to participating in both the placement and the rights issue to maintain its shareholding of about 19.5%.

    Proceeds will be used for the imminent drilling, multi-stage fraccing and subsequent flow testing of the Jack Howe-1H lateral well in Texas, procure further leases in the Southern Woodbine Oil Project and for working capital.

    The capital raising consists of an equity placement of 398 million shares priced at $0.01 each to raise about $4 million and a 1 for 5 renounceable rights issue to raise up to circa $6 million that is underwritten to an amount of $5.25 million.

    In addition to Hancock's commitment, the raising is strongly supported by existing shareholders and a number of new domestic and international institutional investors.

    The capital raising includes one free attaching option exercisable at $0.025 up to three years from date of issue for every two shares subscribed.

    "It is extremely encouraging that we continue to share the support of our strong shareholder base and the equity markets in Australia," interim chief executive officer Matthew Battrick said.

    "We remain committed to our business plan of maintaining a strategic net acres lease position in the unconventional oil plays of East Texas and funding our material working interest share of operations to potentially deliver reserves and production revenue from the Eaglebine plays we have under lease.

    "We thank our largest shareholder, Hancock Prospecting Pty Ltd for its continued support of our plans and we also thank those current and new investors that participated in the Placement.

    "We also look to ensure ongoing support from all shareholders with respect to the Rights Issue that will be distributed to shareholders over coming days."

    "Finally, we are due to commence horizontal drilling operations at Jack Howe-1H over the coming weeks with a view to completing the drilling and casing operation during September 2014, allowing for fraccing and flow back in October 2014."

    Sun is also preparing a capital management plan for ongoing funding of development drilling in its Southern Woodbine leases, with a focus on the equity and debt markets in the U.S.

    Use of Proceeds

    Proceeds from the capital raising will be used as follows:

    - Drilling of Jack Howe #1H Lateral ($1.2 million net to Sun at 50%WI);
    - Hydraulically fracture the Jack Howe #1H well ($2 million);
    - Lease bonus payments for new oil and gas mineral leases ($2 million);
    - Resolve matters with Amerril Energy LLC in respect of SW Leona Oil Project ($2.3 million); and
    - General working capital ($2.5 million).

    Jack Howe-1H Lateral

    The capital raising will fund drilling, multi-stage fracture stimulation and flow testing of Sun Resources' Jack Howe-1H lateral well in the Normangee Oil Project, which it has a 50% operating interest in.

    Sun has already successfully drilled a vertical pilot well to recover conventional core across the primary objective Lower Woodbine Formation and evaluating the underlying Buda Formation

    Notably, hydrocarbon indications have been observed in both formations.

    Subject to securing a suitable rig, the Jack Howe lateral is expected to be spudded in September with an expected timeframe through to commencement of flow testing of 50 days.

    Notably, EOG Resources (NYSE:EOG) - one of the most successful independent oil companies in the U.S. with a US$59 billion market cap - has successfully completed at least 7 horizontal Lower Woodbine oil producing wells in the immediate area in the last 12 - 24 months.

    These have delivered initial 30 day production rates of between 200 and 600 barrels of oil per day.

    In addition, EOG currently has 4 new wells planned at its Grove location which is 7.5 miles west of Jack Howe and has recently completed its Zeus-1H well that is only 2.8 miles east of Jack Howe.

    Sun currently holds approximately 18,000 net acres in the wider Woodbine region; however the approximately 7,000 net acres in the Southern Woodbine area hold significant potential upside for the company in the event Jack Howe is successfully drilled and achieves a commercial flow test result.

    In addition to its existing Southern Woodbine acreage, the Company is currently in discussions with a number of land owners to further increase its position, subject to satisfactory completion of due diligence, capital availability and commercial negotiations.

    CEO Selection Process

    Sun's board has advanced the search process to secure a new chief executive officer.

    A number of candidates have been identified and reviewed by the board with a view to selecting a suitable candidate that has substantial North American experience and is likely to be U.S. domiciled.

    A further announcement will be made when that process is complete.

    Capital Management - Forward Planning

    Sun is preparing a capital management plan for ongoing funding of development drilling in its Southern Woodbine leases, with a focus on the equity and debt markets in the U.S.

    This will capitalise on the company's core business being in the U.S. where there is an extremely large pool of investment funds available under the right, structured arrangement.

    The plan will be implemented progressively through the remainder of 2014 and into 2015 as successful wells are drilled and reserves are booked, with the expectation of utilising Sun's balance sheet more for capital requirements, rather than continuing to issue further equity where possible.

    Sun has engaged the services of EAS Advisors LLC in New York City to advise and support this process.

    The process is subject to further refinement and commercial negotiation but is expected to be a 'step-wise' one with the first step being a sponsored Level 1 American Depository Receipt program (ADR).

    Such a program will allow the ADR to be listed and traded and Sun is currently considering engaging an investment bank to facilitate the process with the primary aim to allow North American investors access to invest in Sun.


    The strong support for shareholders - including Gina Rinehart's Hancock Prospecting - and new institutional investors in Sun Resources' $10 million capital raising highlights the confidence in both the company and its Lower Woodbine acreage.

    This is notable given that its upcoming Jack Howe-1H lateral well is located close to where EOG Resources has drilled a number of successful lateral wells that produced oil at initial 30 day rates of between 200 to 600 barrels per day.

    Success at the well will unlock the company's Southern Woodbine area, which covers about 7,000 net acres.

    Share price catalysts ahead include:

    - Drilling, fraccing and testing of Jack Howe-1H;
    - Drilling of 1-2 proposed wells in its new Lower Woodbine leases; and
    - Drilling of a well in the Badger Project (Eagle Ford Shale) in the fourth quarter of 2014.

    Sun had $2.6 million in cash as at 30 June 2014.

    Proactive Investors Australia is the market leader in producing news, articles and research reports on ASX "Small and Mid-cap" stocks with distribution in Australia, UK, North America and Hong Kong / China.

    Aug 28 8:11 PM | Link | Comment!
Full index of posts »
Latest Followers


More »

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.