SN.V, This might be of some interest to folks here. Little dated though.
The Growth Stock Report
www.jameswinston.com
Sennen Resources (SN, TSXV) I had to Smile
The day I sent out my review of Sennen, it turned out to be the highest traded stock on the TSXV. And again on Friday, it ranked number 3 in trading volume.
In fact, over the last 2 weeks Sennen has traded nearly half of all their issued shares -about 19.5 million have traded hands with some extreme price swings from 16 cents to 54 cents and now at 33 cents.
Though I’m never happy to see a pick go down, I had to smile on Friday morning.
If I’ve seen this once, I’ve seen this a thousand times. Old time shareholders, who are fed up waiting for something to happen, dump their positions just prior to significant news - which if they had been patient – would have produced a scenario for a triple digit return in the near future.
Sennen came out with news on Thursday which will have their old impatient shareholders kicking themselves in the pants down the road.
Agreement Reached with DJB Coal Pty Ltd. for Development of Middlemount, Collingwood and Onaview Coal Projects in Queensland, Australia
Sennen reached an agreement with DJB Coal Pty Ltd. ("DJB Coal") of Sydney, , Australia whereby DJB Coal has entered into a Joint Venture to finance and develop the Middlemount, Collingwood and Onaview coal deposits in Queensland, Australia.
The news release stated that “DJB Coal, a company that was formed by a group of Australian energy industry executives, is focused specifically to look for opportunities for investment in coal. They have access to extensive knowledge about the Queensland Coal Industry as well as the international coal market.”
This is exactly what Sennen was aiming to do. Find and partner with experts who have the knowledge and contacts within the coal industry.
DJB Coal is now financially responsible for the maintenance and rental payments, exploration, engineering, development, and the completion of feasibility studies on all three coal projects.
Under the terms of these agreements DJB Coal has acquired an interest of 5% of Middlemount with the right to acquire a further 65% interest, and has acquired a 10% interest in Collingwood and Onaview, with the right to earn a further 60% in each of these two projects. In the event that agreement is reached over the sale of the Middlemount coal property to a third party prior to the completion of a feasibility study, the Company and DJB Coal will each have a 50% interest in the proceeds from the sale.
DJB Coal will acquire these interests in return for their financial commitments leading to bankable feasibility studies within 5 years.
As I wrote last week, the Onaview, Middlemount, and Collingwood deposits are located in established coalfields and all contain Measured and Indicated resources, proven up by extensive drilling and coal quality analysis. The Shell Company of Australia did extensive work on these properties and compiled all the historical data. Though the company considers the data relevant and reliable, updated feasibility studies will be done in order to estimate the coal reserve in accordance to National Instrument 43 101. So with that in mind, here’s the potential resource this joint venture can profit from.
The Ownaview deposit contains a measured coal resource of 172 million tonnes of recoverable, high volatile, low sulphur thermal coal. The average thickness of coal seams ranges from 4 to 8 m as reported by Shell Company of Australia.
The Collingwood Deposit contains a measured coal resource of 85 million tonnes, with a further indicated coal resource of 30 million tonnes as prepared by the Shell Company.
The Middlemount block contains a measured coal resource of 367 million tonnes of low to medium volatile, low sulphur, bituminous coal as prepared by the Shell Company, and adjoins producing and developing coal mines with well developed infrastructure. Another company owns the property next door called the Foxleigh which has projected costs which are among the lowest 10% in the world.
Middlemount is actively being marketed now!
OK here’s the scoop which nobody yet understands about Sennen and its potential near term. The Middlemount property has already been actively marketed. Don’t be surprised to see a news release in the near future detailing a deal has been cut to sell this property.
That’s the benefit of joint venturing with DJB. They have the contacts.
Middlemount is the hot property. If they sell it to the highest bidder, I see this as a way to finance everything else they want to do.
In speaking with Ian Rozier on Friday, he told me DJB wanted to get 50% of each property if DJB could find a buyer. Ian responded by saying “No way. We will give you 50% on one (the Middlemount property) as a real incentive to get our name out there. The idea is that we would put 50% of the proceeds to cash up the company with no dilution to the shareholders and that would give us 30% interest in the other two properties to carry on up to feasibility.”
So what would that mean in dollar terms? Rozier wouldn’t speculate on that – not that I blame him – who really knows.
But even if you used a low ball figure like 20 cents per tonne by 367 million tonnes, that would give you about U.S. $73.4 million or in Canadian dollars $86.6 million. Split 50/50 that’s $43.3 million each and over $1 per share in cash for Sennen. Then they have 2 more properties which they can develop.
In commenting on DJB Rozier said “These are serious guys, not Johnny-come-latelys to coal engineering, marketing, and finance. They are really busy on the marketing side. I don’t have a problem if all the properties get sold as long it equates to an increase in share value.”
According to Rozier, DJB has meetings with BHP twice a week and they have engineers looking at Middlemount right now not to mention a couple of other companies too.
Rozier feels that Middlemount could have its feasibility study in a short period of time and that’s why DJB wanted to get 50% of a possible sale because they thought they could get a deal quickly. “But I wasn’t prepared to do that with all of them,” said Rozier.
Shareholder turn over
I asked Ian about the large turn over of shares over the last two weeks. He commented that “There has been a flushing out. We had raised $3 million last year on a different property at 30 cents. The stock traded to a low of 12 cents and now all these people are looking at the share price and saying thank God for that.”
While the old shareholders use this current run up to sell their “old deal” they will be missing the boat on this very hot coal deal. As Ian said “Coal was in the dumps back then, I had been holding on to those properties for five years and nobody cared. It seems some people still don’t. HOWEVER I DO."
