Reverse Mergers & Low Float Plays

[Potse]

QMEI's purchase of Besra shares......

Either way I'm happy if Potse chimes in here since as I said he is looking into this stuff deeper than most and usually has all the DD behind anything if someone wants details. Let's see what he says.

I really don't have any special knowledge or insight into why QMEI has made this investment, or why it was done at a significant premium. But here are a few observations and thoughts that are going through my head......

QMEI seems very much interested in broadening its overall business involvement in the gold industry. Not just focusing on the fintech/distribution, but getting exposure to basically all aspects of the industry. The CEO stated in one of his presentations earlier this year that QMEI would acquire a gold refinery at some point, so I am still semi-expecting to see that occur.

I can certainly understand why QMEI would be very interested in owning a part of Besra Gold. From a geographic and business/investment standpoint it probably makes sense. Besra's gold deposits are about 25 miles from the city where one of QMEI's regional offices is located and where the new headquarters for YAST Group (Esther Law's investment holding company) is located. So QMEI is probably fairly familiar with the location and aware of any positives/negatives regarding Besra and this specific situation. Basically the amount of confirmed gold is 3+M ounces, and their other exploration targets in the same area will at a minimum probably double or triple that amount. To put it mildly, that is quite a bit of gold/money sitting in the ground there and owning a nice percentage of the company might turn out to be a very profitable investment for QMEI.

Regarding the premium that QMEI paid: There could be a number of reasons for that. Maybe QMEI is aware of some behind-the-scenes stuff going on and felt a sense of urgency to get this position secured and the seller was unwilling to sell at such a deep discount to the IPO price. Acquiring that many shares on the open market might not have been a viable option for QMEI.

It seems relatively known/accepted by everyone that Besra is going to need another infusion of capital at some point here. So, given that situation, I find it extremely interesting that QMEI chose to take a position by purchasing the shares from another large investor, rather than just doing a private placement with Besra and giving Besra access to the cash. Maybe this was just phase one of acquiring a larger position in Besra. Maybe QMEI will follow up its initial position with a private placement, or maybe QMEI will help Besra secure financing from other strategic investors.

Far East Capital devoted part of its June 11 2022 newsletter to Besra. Below is an excerpt. The last line is somewhat interesting......

The Bottom Line - shares are selling very cheaply

A 3.3 Moz resource is nothing to be sneezed at, so why is
the market capitalisation only $20m? Could the refractory
nature of the orebodies have blinded investors as to the
upside potential? Maybe, but therein could lie the
opportunity. There are plenty of profitable, refractory
orebodies in the world. Sure, you need to be more careful
in the design of the process route, but the intended pilot
plant is a smart move aimed to get this aspect right. Maybe
it is just a combination of insufficient promotion to get the
message across, combined with the weaker stock market
generally and end of financial year tax selling.
Besra Gold does seem to offer a very cheap entry price at
these levels. We can talk about the trend being your friend
in the market and going with the flow, but one of the safest
ways to make money is to buy when everyone else is
looking the other way. This may be a good case in point,
but you may need to be more patient that the average
trader to take advantage of this overlooked gold company.
Upgrading and optimising the Bau Goldfield will require a
sensible amount of time. However, it would not surprise me
if there was a bid by Asian investors that might shorten the
time frame.

http://www.fareastcapital.com.au/imagesDB/newsletter/WeeklyComm11June2022.pdf

Overall I think that QMEI is an interesting/intriguing investment play right now, given the extremely low unrestricted share count, and the potential for some nice catalysts. I keep thinking about the Nasdaq uplisting comments the CEO made earlier this year, and his statement about where he thought QMEI's share price would be heading in calendar 2022. I could be completely misjudging the potential here, but I just get the gut feeling QMEI is setting up for what might be a pretty nice move from the sub-dollar area.