[miningmx.com] — MATODZI Resources, which earlier this year sold virtually its only operating interest, a controlling shareholding in the Letseng diamond mine in Lesotho, an overpriced cash shell or an interesting asset play?
The interim report to September, published this morning, doesn’t provide the answer, but does contain some valuable clues.
With the receipts from the Letseng sale having already been passed on to shareholders in a 76c dividend, Matodzi’s net assets now total only R40.3m.
Of this, in effect R33.6m consists of 210m shares in, or 9.5% of the equity of, JCI, valued at that company’s pre-suspension share price of 16c.
Apart from this, there’s a 35% interest in White Water Gold (Pty), which is investigating re-opening the old Wit Nigel gold mine, and various old order mineral rights for which new order prospecting rights have been applied.
These cover diamonds, gold, coal and other industrial minerals, and some have already been granted. Matodzi has had approaches from various parties interested in participating in their exploitation.
Nevertheless, at the moment everything except the JCI stake is pretty much blue sky. Matodzi has 370.5m shares in issues, so that stake is “worth” 9c per Matodzi share, less than half the latest quote of 22c. On that basis it looks seriously overvalued.
But as Matodzi points out, if the JCI and Randgold & Exploration merger goes through, JCI’s net worth will be substantially above that 16c.
Lots of uncertainties
Indeed, JCI’s latest announcement, published last week, puts its net worth at 103c, although that includes its biggest asset, its holding of Gold Fields shares, at 12 809c a share.
Gold Fields is now down to 10 031c. Other things being equal – which they may well not be – that will have trimmed JCI’s NAV to about 80c.
Each Matodzi is backed by about 56% of a JCI. That suggests Matodzi’s underlying or see-through NAV is now of the order of 45c, double the market price.
Even applying a 20% discount, which is not uncommon for a holding company of this nature, NAV is still a healthy premium.
Of course, there are still lots of uncertainties. Nasties could still be found in JCI’s books, the merger might not go through . . . you name it.
Another clue may lie in what happens to the 57% of Matodzi now held by JCI itself. The interim says Matodzi is discussing with JCI the placing of this stake with a BEE investor, though of course the price of such a deal, if it happens, may not be 100%-market linked.
There’s much to chew over in all this, and only one thing is certain: whether 16c is on the high side or the low side, it’s nowhere near Matodzi’s long-term fair value.
