Pathfinder Minerals – new BoD appointments light the fuse for long awaited licence resolution

August 10, 2018 | Posted by

News this morning of a new Nomad in the form of respected house Strand Hanson (of whom we are familiar and hold in high regard) and, finally, the two Board appointments including ex Kenmare Resources director Simon Farrell is resolutely good news for long suffering Pathfinder Minerals shareholders.

At a stroke it provides new blood to a Board that has delivered nothing for the last 7 years aside from equity dilution, inordinate legal costs and an increasingly fractious relationship with the parties in Mozambique that currently holds the disputed licences. Both new directors are, we understand, on initially nominal salaries – their reward being essentially the same reward as all PFP shareholders – a meaningful rise in the stock price and which is, at heart,  the principal reason we have backed these guys and the consortia that funded the placing in May of some £250,000 in withdrawing our EGM at the time.

We believe that from being ‘odds against’ for a resolution over the licences that these 2 fundamental changes today now make an outcome now an ‘odds on’ event. An event that we anticipate could come to a conclusion pretty swiftly for a variety of reasons, not least the impending Mozambique court decision on the validity of the UK ruling. In short, if ever a deal is to be done it is now.

The current market cap of just under £3m still values the company effectively as a shell, ie there is at present no value in the stock price whatsoever for such a material asset in the hot heavy mineral sands space. And it is this of course this situation that provides such skew to the upside.

Recall  that as per the piece we released last year HERE that before the loss of the licences back in 2011 the company was valued at in excess of £80m (at meaningfully lower ilmenite prices we add) and Kenmare Resources is approaching £300m. This is quite aside from the pre-feasibility study that estimated an NPV of almost £400m on the asset. It does not take a genius to work out that given the licence’s recognitions as one of the most prized heavy mineral sands assets across the globe that IF they are brought back under PFP’s control this would result in a transformation of the current equity value.

We had estimated in our previous blog a likely market reaction that would put a circa £8-10m value overnight on the company which, post the extra equity issues since then equates to just over 4p. For numerous reasons we believe this a conservative figure and in holding just under 5% of the company our money is now very clearly where our mouth is. At the current price of 1.1p we are expecting multi-bag returns from our holding as the balance of the year plays out should the 2 new directors pull off what has escaped Nick Trew for 7 years – a resolution to the licence impasse.


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