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Marc Hasenfuss
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CHROMETCO LIMITED (CMO)
Last Trade : R 0.39
Change(%) :0.00
Cumulative Volume :25000
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Chrometco continues to limp on lime

Marc Hasenfuss | Tue, 16 Feb 2010 13:23

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[miningmx.com] -- AT face value, small exploration company Chrometco looks like a lovely value opportunity.

Tangible net asset value of around 17 cents per share is made up almost entirely of the company’s R34m cash pile. With the share trading at 11c, there’s a rather attractive discount on the cash.

Now that would be a fantastic opportunity if Chrometco, which currently sits sans meaningful operational or exploration assets, were contemplating paying out that cash to shareholders.

Instead, a fair chunk of it will be set aside to buy into two exploration projects: Lime-Chem Minerals (a limestone deposit) and Summer Seas Trading 84 (a dolomite deposit). Chrometco has taken an initial 9.7% stake in the companies for a nominal sum, with a call option agreement to buy out the remaining shares at a cost determined by exploration results.

While the call option agreement looks like a safety first approach, there’s obviously something the market doesn’t like about the deal.

I’d guess the small minority stake, notwithstanding the call option agreement, raises questions about whether Chrometco will have any influence over the exploration projects in their early stages.

Its cautious approach might also be a letdown for shareholders, who might have wanted a more decisive advance. After all Chrometco had previously punted an agreement to acquire a 90% interest in Lime-Chem – a deal enticingly tagged to proposals to construct a 500 tonne/day kiln to convert its existing raw limestone and dolomite resources into higher value burnt lime and burnt dolomite.

Officially, Chrometco argued the proposed scale of the kiln project convinced the company – which isn’t “loaded” by exploration company standards – it would be better strategy to first acquire additional limestone and dolomite resources.

Fair enough. But Miningmx reckons evidence of some inspiring deal-making to secure further exploration deposits is needed before the market generates any enthusiasm for new-look Chrometco.

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