Seeking Alpha

CBOE Trader's  Instablog

CBOE Trader
Send Message
Delete
  • A Rare Opportunity To Invest In Africa's Natural Resources 0 comments
    Dec 13, 2013 8:12 AM

    "The Rich Continent" appears to be more appropriate for describing Africa, the continent that was once called "The Dark Continent." One of the major reasons for that is the continent's immense mineral wealth, a large part of which still remains unexplored. Africa, rich in metals and minerals, - almost 30% of world's mineral and metal reserves - offers a welcome opportunity for investors looking to invest in the mining sector particularly gold, cobalt and platinum group metals.

    Despite its immense natural resources, most African nations are poor, tumultuous and underdeveloped. However, with the western world taking cognizance, [http://www.businessdailyafrica.com/Mineral-wealth-sparks-rush-of-foreign-investors-to-Kenya/-/539552/1913464/-/e3mrlk/-/index.html] things are evidently going to change in the near future. It also offers investors a feasible opportunity for investing in Africa's growth story.

    One way investors may want to look into that aspect is by investing in companies like African Queen Mines Ltd. (AQ.V) that are engaged in exploration and development of mineral resources in southern part of Africa.

    African Queen Mines Limited

    African Queen Mines is a Canadian company having properties in Mozambique, Botswana, Namibia, Ghana and Kenya where its operations are carried out through its subsidiaries. Of particular mention are its ongoing projects in Kenya and Ghana. In Kenya it has two areas under license - the Ogunja and Odunda projects. In Ghana, the company has acquired 30.23 sq. km. in the Ashanti Gold Belt within 100 km. of Obuasi Mine of AngloGold Ashanti. [http://www.africanqueenmines.com/props.htm]

    In October this year African Mines completed the first tranche of non-brokered private placement of 6,008,300 units (one unit comprising of one common share and a purchase warrant for one-half of one share) at CAD$0.05 unit amounting to CAD $300,415 ($282,390). Each warrant entitles the holder to purchase one full share at a price of $0.075 until October 2015.

    This followed an earlier private placement in August 2011 at 25 cents per unit whereby Pinetree Capital raised its stake in the company to 11%.

    Stock performance

    The African Queen stock has seen an all-time high of above 70 cents and between September 2009 and October 2010 the stock was range bound - 31 cents-72 cents a share.

    After gold touched its all-time peak in September 2011, gold failed to regain its all-time high price achieved in 2011; the share price of African Queen too failed to regain its all-time highs. The spectacular rise in share price - from 8 cents in early 2009 to all time highs in 2009 and 2010 - was attributed to the new discoveries in Ghana. [http://www.ghanaweb.com/GhanaHomePage/NewsArchive/artikel.php?ID=196731]

    After that the price of the company's shares has been moving up or down more or less with the prevailing sentiment for commodity prices including gold.

    Reasons to invest

    At $0.70, shares of African Queen were trading at almost 15x book value. The stock now quotes at a significant discount to its book value despite no significant change in fundamentals and absence of any negative views.

    On the contrary, there was a significant positive development in March 2013 when the company started its 2013 field program at the Ugunja project for gold in the Lakeland district of Kenya, a follow up of the positive results shown by the phase 1b exploration started in the previous year. This was significant considering that the calm environment that prevailed in Kenya after the elections and no roadblocks expected going forward.

    Moreover, the company announced that the primary results revealed by satellite imagery showed an environment favorable to gold deposits. In addition, on-site field work showed presence of uncharacteristic gold and a visible quartz vein that showed the value for gold to be at 30.018 grams per metric ton (g/t) and for silver at 4.8 g/t. The collaboration agreement with Kenya Discovery Ltd. gives African Queens up to 85% right in the project.

    The Ugunja project covers 370 sq. km. of land, North of Lake Victoria and 100 km. northwest of African Mines' Odundu project in Rongo Gold Fields where the company started core drilling in 2012.

    Apart from the Ogunja project, in February 2012, a physical sample from an artisanal pit within the shear zone shown by airborne magnetic and radiometric survey of the Odundu property in southwest Kenya's Rongo Gold Fields, revealed value of as high as 10.10 g/t of gold.

    Add to that the fact that a lot of area within the shear zone is yet to be explored and it becomes easy to understand that the market is not taking into account the potential of hitting gold in the Kenya properties, which is valued roughly fifteen times the current valuation (market cap) of African Mines.

    In addition, the fall in the price of gold also does not justify the fall in share price.

    Bottom Line

    African Queen Mines presents an opportunity that is rarely seen in the mining sector, particularly in gold mining. Year-to-date, the stock has decline almost 67%. Long term investors would do well to buy the stock at current price.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I am long AQ.V.

Back To CBOE Trader's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

  • ACTC
    Apr 20, 2013
  • PRXI
    Jan 14, 2013
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.