Loewen, Ondaatje, McCutcheon Limited (LOM) issues a new report on Clifton Star regarding the amended option agreement with property vendors.
Clifton Star Resources Inc. (CFO-TSXV)1
Target:$5.96
September/13 closing price: $1.13
Michael Fowler, M.Sc MBA
416-964-4440
Clifton Star Amends Its Option Agreement On The Duparquet Project - Very Positive : Under the old option agreement the company was required to pay the underlying owners $22 million on December 1st 2012 and $30 million on December 1st, 2017 to acquire a 100% interest. The terms of the new agreement are:
1) Payment of $2 million on December 1st, 2012 and issuing 250,000 shares of Clifton Star.
2) Payment of $10 million on December 1st, 2014.
3) Payment of $10 million on December 1st, 2015.
4) Payment of $15 million on December 1st, 2016.
5) Payment of $15.2 million on December 1st 2017.
The total payment is $52.2 million to acquire a 100% interest. The positive news is that the shares have been held back because investors have assumed there was a risk that the company was unable to meet the December 1st , 2012 payment. The company has $11 million in working capital and thus can easily meet its obligation. This lessening of risk should be reflected positively in the share price.
It is likely that this company will be involved in some form of merger, acquisition or joint venture in the future. This should have a further positive effect on the share price. The company also announced that a PEA will be tabled at the end of 2012. We have a speculative buy on the stock with a $5.96 per share target.
1. Loewen, Ondaatje, McCutcheon Limited (LOM)'s analyst has visited the material operations of the company to the extent of viewing the corporate headquarters and/or major production facilities along with meeting certain key management.