by Travis Johnson, Stock Gumshoe | August 20, 2007 7:17 pm
That’s the mysterious tagline of a recent email I got from the S&A Gold Report from Matt Badiali. He’s teasing us with the name of his favorite commodity penny stock, all we have to do is start a subscription for $99 …
… or, read on, and listen to your friendly neighborhood Gumshoe for free.
Shall we whet your appetite first?
“Triple Digit Gains on Mystery Island”
Cue spooky music, thunder and lightning. But wait, that rain coming from the heavens — it’s money! Cold, hard cash! We must grab it quick, quick, before Mystery Island recedes into the mist!
Or at least, that’s how I pictured it while I was reading the email. In reality, it appears, the situation is somewhat more subdued. Still, credit the Stansberry copywriters for conjuring up some good visuals.
So … what is this “Mystery Island?”
“On a little-known island, 9,000 miles off the coast of Florida … Billions of dollars of nickel and copper lay trapped beneath its surface – until recently.”
Oooooh, I love this movie! This is where James Bond comes in, right?
No? Scooby Doo, then?
Hmph. OK, more clues:
“The Mining News reports, that ‘after nearly four decades of self-imposed isolation, [this island] has been reopening itself to the outside world and foreign investment.’ “
And the World Bank says they’re “very rich in minerals and precious stones.”
The World Bank is famous for their mining and exploration prowess, right? Or is that the IMF?
There are a bunch of junior mining companies exploring “Mystery Island,” apparently.
And Badiali describes the one he’s teasing about thusly:
“According to my research on their findings, I believe that the land they are testing could lead to uncovering a mine worth up to $3 billion. This is over 16 times what the company is even worth.”
Between February and July this year, the stock climbed 85%.
They have three “world class” mine sites, and “exploration permits of more than 100,000 hectares of prospective.”
OK, who can picture in their mind how big a hectare is … no? I can’t either. We’ll stipulate that it’s “pretty big.”
So … are you ready to learn the name of Matt Badiali’s “Favorite Penny Stock of 2007?”
Me, too. A moment of your patience, please, while I find the thinking cap. And the batteries. Ok, this wee firm is almost certainly …
Wait! First, don’t you want to know the name of “Mystery Island?” This is a two-parter …
The Mystery Island is …. Madagascar. And I wager that even the Madagascar Tourism Board has never, ever referred to the place as “9,000 miles off the coast of Florida.” While technically true, it’s more frequently and simply described as “about 250 miles off the coast of Mozambique.” That’s on the East coast of Africa, for those who are geographically challenged.
And Madagascar did indeed recently reopen to foreign mining interests, to some acclaim. The Mining News article that Badiali quotes about Madagascar is here.
So now, which of the many companies is it that we’re dealing with here? At first I thought this was Pan African Mining, and I think I emailed someone that, but it’s not. No, it looks to me like this company is the much more interesting …
Jubilee Platinum (JLP on the AIM in London, JUBPF on the pink sheets, where it appears to trade extremely thinly)
Jubilee is much more well known for its Platinum holdings in South Africa, but they do have three key sites in Madagascar as well, Londokomanana, Ambodilafa and Lanjamina. They are also, for full disclosure, significantly owned by Ambrian (Ambrian owns around 10% and is the largest shareholder), which itself is a Stansberry and Associates recommendation from April and a holding in my personal portfolio. Ambrian describes Jubilee as one of the few mining holdings that they want to keep as a core part of their portfolio, even as they divest most of the others.
So, that’s a few endorsements, and that’s about all I know about this junior miner. What is this company?
Well, as noted above, they do have over 100,000 Hectares of prospects in Madagascar, which is apparently a compelling place for mining lots of good stuff like Gold, Nickel, Copper, etc. Perhaps not surprisingly, they don’t talk much about their project in Sierra Leone … “conflict platinum,” anyone?
Any more talk about that and I’ll sound like an idiot, justifiably so, so let me look at the some things that I do understand.
The research report that Badiali quotes is available on Jubilee’s website, you can [pdf file] find it here if you’re interested — they have a price target of 294p on the shares, which would be nearly a 300% return from today’s price.
The shares did have a massive run up of at least 85% in the first half of this year, but recent weeks have seen the completion of the curve — the shares are below 80 pence and nearing their low for the year, after highs in the 125 pence area back in July. The Minesite page for Jubilee has some more description of their data (submitted by the company or by their broker, I’m sure, so supply your own grain of salt).
As recently as last month, speculation was that the company might be taken over, or might sell their biggest project, the Tjate area in South Africa’s Bushveld. One consultant speculated that the Tjate project might be worth $400 million on its own and, at that market cap, generate a 22% annual return.
From what little math I’m capable of, it appears to me that they have about 75 million shares outstanding and a share price of about 80 pence, which puts their market cap at just about $120 million dollars. Not sure how much debt they have, and I’d check that math if it matters to you, but certainly 120 is much smaller than 400. Right?
And certainly, the “$3 billion” potential Badiali notes is also significantly larger than 120 million.
The company CEO described his options in a Minesite article as “Carry on. Consolidate in the junior sector. Get taken out by a big buyer.”
Of course, I have no idea which of those final avenues they might pursue … or whether all are even feasible after the recent collapse of the share price. The share price fell significantly at the same time as they issued more shares to increase their holdings in Tjate to about 58% (had been around 48%). I don’t know if there are other reasons for the fall in share price, though it’s easy to speculate that the fall in commodity prices and the general malaise in financial markets have had something to do with it, particularly for a company that has (or had) a significant likelihood of being a takeover candidate at some point.
So … a beaten up junior platinum explorer/miner with a site smack-dab in the heart of platinum country, that’s far from making a profit, with perhaps a surprise profit potential in their holdings on “Mystery Island.” I have no idea whether it makes sense to invest in the shares at this point, especially given the very fast fall they’ve seen in the last few weeks, but it certainly seems that Matt Badiali and the folks at Ambrian, among others, are big fans.
I think I’ll likely be content to keep my indirect exposure to Jubilee through Ambrian for now and not delve further into Jubilee Platinum itself, but I’m sure we’d all love to hear from you if you’re digging deeper — especially if you know why the shares tumbled recently from their peak. Happy Investing!
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