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Eastern Platinum Ltd. (TSX: T.ELR, Stock Forum) (7.5 cents)
www.eastplats.com
Shares Outstanding: 928 Million
Financials Ending December 31st
Cash & Investments: $93 Million
Receivables: $3.6 million
Total Current Assets: $96 million – Current Liabilities $6 million = Net Cash & Investments $90 Million (9.5 cents per share) - highly liquid, fully guaranteed.
Net Book Value of Property & Plant: $336 million (36 cents per share)
Provision for Reclamation: $9 million
On August 1, 2013, the Company ceased production and their PGM mine in South Africa was put on care and maintenance.
The company has estimated PGM (Platinum Group Metals including Palladium) reserves at 4.6 million ounces - also valued at zero by the market.
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December 27th I featured ELR in this weekend column at 8 cents and while it has failed to move higher, I am still holding out hope as the supply of palladium is expected to tighten severelyand the price of platinum could also be moving higher this year if sanctions against Russia are effective.
The following table is older but little has changed in terms of supply origin.
My focus in December was the accumulation of ELR by Invesco (www.invesco.ca) - a powerful investment fund that controls ETF’s and the Trimark group of mutual funds. On November 8th it was disclosed that Invesco Canada had reached 15.8% ownership with 146.6 million shares.
I have been hoping that:
1) Existing management and directors decide to find a buyer for the South Africa assets, adding the sale proceeds to the large war chest of existing cash, and put the money to work elsewhere or distribute to shareholders as the company is wound down.
2) Funds (the largest shareholders) exert their control to remove existing management and directors – then execute on (1) above.
3) A takeover by the Chinese, an International mining major, or a private equity fund
This current trading price reflects what their net cash balance might look like at the end of 2014 (given the current burn rate) plus there is no value assigned to the mine itself or the PGM reserves. We have to ask ourselves how long shareholders are willing to just sit around waiting for PGM prices to improve OR someone else to take control of this company.
South Africa is a mess associated with unstable politics, poor power, and huge labor issues. However, ELR is sitting on very tangible PGM assets that the stock market dramatically discounts.
Platinum is stable right now (although still too low for South African mines to produce economically) but there are some MAJOR issues on the horizon with Palladium.
Palladium recently hit a 2 1/2 year high and may get a lot worse by Q3. Russia is a major supplier of Platinum and the largest exporter of palladium - proposed sanctions against Russia could seriously hamper the global supply of Palladium and help support higher prices for platinum.
Existing Palladium inventories are critically low and the demand side is being fueled by strong vehicle sales (platinum and palladium are used in catalytic converters) and two palladium ETF's launched in recent weeks.
Strikes in South Africa, mine closures, and Russian sanctions may be enough to fuel a big run in palladium this year. If that occurs, and if platinum also moves higher, the speculation would be that it's enough to generate broader interest in ELR.
** TWITTER NOTE: I maintain a twitter page at - twitter.com/tsxalerts
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Disclosure: Danny Deadlock owns 200,000 shares of ELR
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