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Fleming fingers Wits Gold
David McKay
Posted: Mon, 22 Oct 2007
[miningmx.com] -- YOU'VE really got to hand it to the suave figure of Adam Fleming, he of Fleming Family & Partners fame, because he’s a dab hand at spotting a trend.
Fleming, a noted gold bull, was an early support of Harmony Gold under the stewardship of a 30-odd-year-old Bernard Swanepoel about 12 years ago.
After several years chairing the company, Fleming took his timely leave, well before the troubles that resulted in the resignation of Swanepoel in August this year.
At the same time, Fleming was buying up property in central Johannesburg, well before it became fashionable to do so.
And it was in Johannesburg’s city centre that Fleming decided to set up offices for Wits Gold, a company he chairs and which is now trading at around R150/share.
Wits Gold listed in April last year at R20/share, a level some regarded as scandalously high.
What would they think now?
What did they think when Wits Gold was trading at R92/share a mere two months ago?
Canny as he appears to be, Fleming knows that, time and again, resources shares show its better to promise than to deliver.
For example, take Uranium One. Its share price doubled and tripled while purring about its land grab strategy involving pounds of uranium in South
Africa, Australia and the US. But the share is now, probably temporarily, under pressure as it grapples with actually producing uranium oxide from its Dominion Reefs mine.
More so for Wits Gold, which doesn’t seem likely to ever fully develop the 159.7 million ounces under its ownership – although the prospects of bringing some of its gold ounces to account have been greatly increased as the gold price continues on its merry way upwards.
At the time of writing the gold price was bobbing around $760/oz while the rand gold price was north of R166,000/kg, another record.
Gold Fields’ Ian Cockerill believes the gold price has the potential to get to $1,200/oz within years. So why isn’t his company considering a joint venture with Wits Gold, which has reserves throughout South Africa’s goldfields?
Better to dabble there than in risky Venezuela (Choco 10) or Burkina Faso (Essakane), where infrastructure is so hard to source?
Well, Gold
Fields does in fact have right of first refusal over gold rights it sold into Wits Gold on its listing, says Hethen Hira, investor relations manager for the exploration firm.
According to an agreement between the two companies, Gold Fields can invest 40% in certain projects over which Wits Gold completes a full feasibility report. Wits Gold can elect to follow its rights, or not, as capital calls mount upon the venture.
And wither Wits Gold? Hira says the average value of gold exploration companies is around $40 per resource ounce, whereas at its current share price Wits Gold’s untapped resources are valued at $3/oz.
“That’s why some institutions are in the stock, such as BMO Nesbitt Burns and The Tocqueville Fund in the US,” says Hira.
Wits Gold, which is currently drilling holes in the ground, has many resources and very few shares in issue – a situation that at the current 28-year high gold price gives it a market capitalisation of around
R3.8bn ($548m).
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