[miningmx.com] — DO you like contrarian stock market plays? If yes, take a long, hard look in the mirror. Is that the flat, expressionless gaze of riverboat gambler Brett Maverick staring back at you?
If the answer to that is also affirmative then you might just risk buying Pamodzi Gold (PZGold) shares. You’ll still probably need the stockmarket equivalent of a derringer pistol up one sleeve and a spare ace of spades up the other.
If you recall the theme tune from the Maverick TV series the chorus line ran “Maverick didn’t come here to lose’. However, investors in PZGold have been on a horrendous losing streak this year.
The share has lost 94% of its value in a Wile E Coyote style plunge into the abyss from around R19 to current levels around R1/share. Ouch. Big time!
The reasons are twofold: Mining juniors are seriously out of favour with investors while PZGold has compounded that with some near-fatal financial problems.
In fact, plenty of observers – including a number of its worried creditors – seem surprised the company is still in operation. PZGold got into its current position through buying up a number of marginal gold assets – such as President Steyn and Harmony’s Orkney shafts – in the process taking on a “toxic’ hedge position.
The company has been battling to raise US$50m or R400m since first quarter 2008 to keep those operations going. It now seems to have organised R200m of that through a loan from a consortium headed by the IDC.
So give management full marks for tenacity. Assuming it can rustle up the balance of the money then all PZGold needs for a swift recovery would be a nice up-tick in the gold price.
RBC Capital Markets analyst Leon Esterhuizen reckons discounting its net asset value by 50% to cater for the funding hassles gives a target price of R15/share.
Also push back anticipated higher gold production by two years and he still gets a price of R10/share, assuming US$800/oz gold and US$1/R8.
So, stranger, it’s time to either put your chips on the table or fold your hand.
