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19-May-2011
KINGROSE MINING, MEDUSA MINING & OOH MEDIA
Only one Kerry Packer for Kingrose
ASX Code KRM, MML, OOH
Kingsrose Mining's Bill Phillips is one of the few people who can justifiably say “You only get one Kerry Packer in your lifetime”.

For those that can't remember, Packer famously inserted Alan Bond into this phrase to describe buying the Nine Network back from him for an unbelievably cheap price.

In this case, Phillips, a Western Australian mining veteran, purchased two gold mines in South East Asia from Kerry Packer's resources arm and is now developing the second.


By purchasing these assets, he is literally making millions - assisted by the exponential rise in price of the yellow stuff and the lack of exploration done by Packer's team.

He has sold both into companies listed on the ASX for a stake. The first was the Co-O underground mine in the Philippines now owned by Medusa Mining (ASX:MML). It produces about 100,000 ounces of gold a year, worth close to $150 million at current prices. Medusa has a market cap of $1.4 billion.

His latest project is “Way Linggo” in Southern Sumatra, Indonesia. It mines gold and silver. Phillips sold this mine to Kingsrose Mining (ASX:KRM) of which he owns 20 per cent.

The mine is described by finance director Tim Spencer as “an early stage Co-O”.

He has a point. This asset is due to produce cash of about $60 million a year for the next four years. It churns out about 45,000 ounces of gold and 650,000 ounces of silver a year. The silver production reduces its production costs to only $25 an ounce.

But Kingsrose is still a minnow. At $1.45, its market cap is $383 million, which reflects its short mine life and the problems the company has had in its production - its share price has fallen about 20 per cent in the past 5 weeks.

The production difficulties relate to the presence of clay in the ore body, which has made crushing difficult. This is being rectified in July with a “sag mill” that enables larger sized rocks to be processed.

What may have confused investors was the shutdown of the mill in April because equipment had been worn down and needed replacing.

But what is more important is its exploration profile, which Spencer says is “outstanding” partly because it is relatively unexplored. The company is frenetically drilling away to firm up the amount of gold it hopes is there.

It aims to come out with some exploration data in July. Kingsrose's future cash flow and its cash and bullion holdings of about $24 million go a fair way towards underpinning broker valuations that are northwards of $1.55 a share. But exploration success will definitely help unlock value. And Bill Phillips no doubt hopes the Kerry Packer's midas touch, or the lack of it, will continue to pay dividends.

Ooh Media's “donnybrook”

If you've ever driven around regional Australia and passed a billboard in a farmer's paddock, it's likely that it comes from Ooh Media.

Its shares haven't been as erect as its products, having fallen 16 per cent this week to 21 cents and are down from their 12-month high in mid-February of 29 cents.

One of the reasons for the fall is the tussle the company is having with two major shareholders, according to Rob Hopkins of Smallco Investment Manager, whose fund has been making money out the share price volatility. And at its current price, he reckons it's a no brainer, trading on a price/earnings ratio of 8.5 times and with this year's earnings per share growth forecast to be 30 per cent.

But first the donnybrook, or pugilistic contest:

Earlier this month Ooh Media (ASX:OOH) made an application to the Takeovers Panel in relation to one of its major shareholders, PFG Investments, selling an option over 75 million shares to QMS Asia Pacific for 30 cents a share. Ooh Media is claiming that as a result of this transaction, there was an “inefficient, uncompetitive and uninformed market”. This is because it was more than 5 per cent of issued capital and no substantial notice was lodged.

Among the remedies Ooh is looking for is the sum of $9.8 million from QMS, representing the difference between 30 cents and the placement price of just over 20 cents at which it raised $20 million late last year.

Possibly Ooh Media's argument is that it would not have done the placement to PFG Investments at 20 cents had it been aware that there was the option agreement in place at the 30 cents share price.

Back to Ooh Media's fundamental. In a difficult domestic advertising market which fell in April according to research agency SMI, it seems low cost bill board advertising is doing well. For the four months to April it climbed 12 per cent.

For shareholders like Rob Hopkins, backing this small cap underdog is paying off.

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