What emerged after a long interview with the management of Altura is a company that could easily be described as “colourful”, being involved in everything from iron ore, lithium and uranium mining to coal production to drilling services. But the big Queenslander James Brown says that Altura (ASX:AJM) is really focussed on the black stuff:
“Everything we do is geared towards coal production because that's where we come from...we are operators and developers, not miners.”
Its senior managers do have form, coming from coal producer New Hope' Indonesian operations, Adaro, which now produces 43 million tonnes of coal a year. New Hope (ASX: NCM) has a market cap of just over $4 billion.
And in a couple of years, Altura has ambitions of producing 4 million tonnes a year in coal, worth a cool $500 million at current prices.
But trading at 17 cents a share and with a market cap of $58 million the market thinks it is a long way from doing this...
Its Tabalong coal project in South Kalimantan, Indonesia has a planned production of 500,000 tonnes a year of thermal coal, which is used by power stations.
The small size of this project is dismissed by fellow director Paul Mantell who says that it is low cost and will produce $25 million of cash a year from early 2012. The idea is that the cash from a number of projects will allow the company to expand its coal operations.
Its other major asset is its 30 per cent interest in Mt Webber, an iron ore mine in the Pilbara, with its partner Atlas Iron (ASX: AGO), which owns the remaining 70 per cent. Brown says that this should be in production in late 2012 and produce in cash in the region of $50 million a year for Altura.
Brown does not envisage raising capital, but this assumption seems to be based on a scenario where he would be singing “Sex Machine” with Jimmy Hendrix playing his Fender Strat in the Pilbara.
Certainly Shaw Stockbroking has what could be considered a conservative valuation of 25 cents...but it's clear that investors will have to show a lot of faith in the management's ability to find new projects in South East Asia, and fast. At its current levels, the market does not believe that Altura will be another New Hope.
Trust me, I'm Greg Paramor
Another case of a company willing its investors to back the label on the tin, rather than what's inside (or not) is Greg Paramor's new vehicle, the property developer/investor/fund manager Folkestone.
This week, after a fight that would make the rumble in the jungle look like a tea party, or at least a sporting contest, Paramor's vehicle trumpeted that it had raised $31.5 million from capital raisings.
At 12 cents, Folkestone (ASX:FLK) now has a market cap of $45 million.
The raising is a far cry from the $40 million to $60 million it originally wanted, although it does give Paramor control.
When asked whether his company was merely a “cash box” or as one fundie describes it, “a trust me situation”, Paramor does not hesitate:
“Yep,” is his response.
Such is his faith in property. It is a faith that has paid off for many in the sunburnt country and explains his company's ability to raise any money at all, without presenting any concrete investment targets.
In the longer term, Folkestone wants to be a major player in property funds management, which means placing its assets in the hands of fund investors (and off Folkestone's balance sheet). But in the mean time, in order to generate share price, sorry, earnings growth, the idea is to develop and invest in properties.
Paramor says that this will be achieved by “trading properties” but in the same breath says that the average holding period will be 36 months. But how will this be possible?
An example he says, is Folkestone buying a residential property and then getting a development approval soon after, thereby increasing that property's value. That property is then “placed” into the company's fund because it has been “de-risked”, he says.
According to one fundie, “investing in Folkestone will simply put you in the firing line for a regular schedule of capital raisings”.
Paramor says that his fund has “adequate capital for the foreseeable future”. He also says that 11 institutions have invested. Whether they are in the firing line or not, time will definitely tell.
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