Hi Nick,
Looks like you are right. However, I think Quek is happy just to keep it going and continued to milk the trust. Valuations for these few good men is simply a number, only meaningful to poor desperate people like us - hence it may be a big thing for stock markets player wanting share price to trade at valuations but is just another cashflow for these rich blokes.
Another long green/purple neck exercise.
Cheers
GG
http://www.guocoleisure.com/invest.html
Oil & Gas
The Company receives royalties from the Bass Strait Oil Trust (BSOT) which is a unit trust managed by Bass Strait Oil Management Limited, a wholly-owned subsidiary of the Group in Australia, by virtue of BSOT’s 55.11% entitlement to the Weeks Royalty.
The Weeks Royalty refers to a 2.5% overriding royalty relating to all hydrocarbons produced by BHP Billiton Limited (formerly known as The Broken Hill Proprietary Company Limited) (BHP) from designated areas in the Bass Strait, Australia, granted by BHP. Production is currently undertaken in those designated areas by BHP and Esso Australia Resources Pty Ltd (Esso).
Dr Weeks' vision is a gift that will keep on giving
BY:BARRY FITZGERALD From: The Australian April 02, 2013 12:00AM
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Source: The Australian
MELBOURNE-BASED Royalco Resources is the only gold-base metals explorer on the Australian Securities Exchange lists that pays a regular dividend.
That unique ability comes from the fact, while it is involved in potentially high-impact early stage exploration in The Philippines and East Africa, its main undertaking is that of a royalty company.
And its royalty business just got a lot bigger thanks to the acquisition of an interest in the Weeks royalty, named after US geologist Lewis G. Weeks.
It was Dr Weeks who in the early 1960s famously told Broken Hill Proprietary - as BHP Billiton was known then - that he knew where oil could be found within a relatively short distance of its Melbourne head office, but before he would tell, he would want a 2.5 per cent over-riding royalty on any future oil and gas production.
BHP agreed and Dr Lewis is said to have told the BHP men to turn around and look out the window towards Bass Strait, or more particularly the waters offshore from Gippsland. History tells us that Exxon was later brought in by BHP as a 50:50 partner and operator to spearhead what at the time was considered a frontier exploration hunt.
Before the 1960s were out, oil and gas production from the Bass Strait fields was under way, and in the more than 40 years since, four billion barrels of oil and seven trillion cubic feet of gas have been produced. It was the making of BHP and worked wonders for Australia's national accounts as well. All these years later, the Bass Strait fields are still giving, as is the 2.5 per cent Weeks royalty.
Dr Weeks has long gone and the royalty has been broken up in to 39 parts. Royalco's deal is to acquire a 1 per cent interest in the royalty, giving it an equivalent 0.025 per cent over-riding royalty on all of the Exxon-BHP joint venture's oil and gas production.
It does not sound like much when you say it quickly. But the 1 per cent of the royalty acquired by Royalco - from an undisclosed Australian institutional investor - has delivered average annual income in recent years of about $800,000, paid quarterly.
Royalco is paying $8.5 million for the interest, valuing the full 2.5 per cent royalty at $850m. Based on recent history, Royalco has secured itself a long-term income stream with an annual yield of more than 9 per cent.
Payments from the royalty could well improve. While Bass Strait's heyday has passed, Exxon-BHP have been reinvesting in its medium future by developing the Kipper gas project and upgrading the Longford gas treatment plant.
There is also the prospect that with Queensland's liquefied natural gas projects to suck up all of the spare gas on the east coast, gas prices in the domestic market are set to rocket.
And who knows what the new technologies in exploration could uncover in Bass Strait in years to come? Royalco estimates the royalty still will be generating income in 20 years. A call that it could still be giving in 30 years would not be unreasonable either.
Thanks to the cash that its existing non-energy royalty stream has yielded in recent years, Royalco can fund the Weeks royalty acquisition comfortably by drawing on its $17 million bank balance.
Royalco last traded at 47.5c a share, giving it a market capitalisation of $25m. There has been a lid on its share price in recent times because of some selling by its biggest shareholder, London-based Anglo Pacific.
The end to the first stage of its royalty on gold production in New Zealand by OceanaGold has not helped. But the Weeks royalty goes a long way to plugging that hole and comes as other production royalties held by the company are being advanced by their owners to becoming a reality.
Among them is a royalty on Kingsgate's Bowdens silver project in NSW that could generate $3m-$5m a year for Royalco in its early years.
Mamba Minerals (MAB)
BACK on February 12 it was mentioned here that Mamba Minerals was attracting some followers on the strength of a drilling program in Canada's Labrador Trough iron ore province that was about to start. Mamba was trading at 46c then and has since marched off 13 per cent higher to 52c.
That's not a bad effort given iron ore stocks have not exactly been in favour this year thanks to expectations that over-supply will hit in the second half and send prices down sharply.
Having said that, iron ore prices are still holding on to elevated levels and the Chinese, and others, are still interested in securing long-term supplies from outside the grip that Vale, Rio Tinto and BHP Billiton have on global seaborne supplies.
But the absence of rail and port access in Brazil where Vale calls the shots, and the Pilbara where Rio and BHP dominate, means that the chances of new suppliers emerging are growing more remote by the day.
The Labrador Trough - where Rio has an operation - is in a different category because the region's existing rail and ports are covered by open-access regimes, with the availability of cheap hydro-electric power a bonus.
So find something half decent, and there is a better chance that a junior can get in production and become an iron exporter in the Labrador Trough than just about any other iron ore province.
From the update file then comes news that last week Mamba went into a trading halt pending an update on drilling results at its Snelgrove Lake project, 200km north of Labrador City.
It is known that the initial holes in the program were all about confirming the seriously big-tonnage magnetite potential of Snelgrove, as well as determining the potential for higher grade (direct shipping ore) hematite material.
Confirmation of the magnetite potential would be welcome news. But it will be news that the first of DSO holes have come in with big hits that will really excite the market.
Given the stock has gone into a trading halt, the guess is that Mamba has come up with the goods, with the magnetite and the DSO, all within 60km of a multi-user railway that heads off to a multi-user port.
At its last sale price of 52c a share, Mamba was sporting a (fully diluted) market capitalisation of $45m.
That used to be nothing for an iron ore explorer, particularly for one trying to break in to production in the Pilbara. But without rail and port access, dreams of getting into production in the Pilbara for junior companies have remained just that, dreams. Backers of Mamba are betting the Labrador Trough will be more user-friendly.
Maybe so. But Mamba's drilling results will have to point to something big in tonnage terms before anyone gets too excited. Then comes the grind of confirming it before setting out on a development pathway.
(09-05-2013, 01:33 AM)Nick Wrote: Dr Weeks' vision is a gift that will keep on giving
http://www.theaustralian.com.au/business...6610496934 [Article]
http://www.royalco.com.au/Weeks%20acq.pdf [Royalco M&A]
This article gives some history behind the Bass Strait royalty trust which GL has a 55.1% stake in. It seems that 2 months ago, Royalco acquired 1% stake in this trust for A$8.5 million. This would imply that the market valuation of GL stake is A$468 million or 44 cents per share. Please correct me if I am mistaken.
(Not Vested)
http://www.netplasm.com/article/bso.html
BSO 20 January 2002
http://www.registriesltd.com.au/clients/bsot
The Bass Strait Oil Trust (BSO) receives royalty from the Bass Strait oil field in South-Eastern Australia. In 1960 the late Dr Lewis G Weeks was engaged as a consultant to BHP and was instrumental in the discovery of oil in Bass Strait in 1966. BHP (now BHPBilliton) granted Dr Weeks a 2.5% overriding royalty related to all hydrocarbons produced by BHP from designated areas in Bass Strait. During 1996 Bass Strait accounted for 37% of Australia's oil production.
The ordinary units in BSO are fully paid and capital guaranteed during their redeeming period of 10 years extending from 1997 until 2007. Initially 44 million units were offered at a purchase price of $5.00 (Aus). Ordinary unitholders receive 55.11% of the total "Weeks Royalty" payment stream made in the normal course by Esso (BHP's joint venture partner) and BHP. Royalty revenue is recognised as it is received. Distributions are half yearly and include the standard $0.25 (Aus) capital return per ordinary unit. At the final distribution in 2007 the value of the ordinary units will be zero. The capital redemption payments are secured by a National Australia Bank Letter of Credit. There are no management fees or trust expenses. Residual units are held and it is the owners of those residual units who eventually assume total rights to the Weeks Royalty stream.
The 2001 Annual report of BSO indicates that the net fair value of the Weeks Royalty at $350 m (Aus) which exceeds the carrying amount of $311.4 m (Aus). Both capital redemption and income for ordinary unit holders are paid from the gross royalties received. With a P/E ratio of 5.6 and a yield around 16.5% after a lower than the prospectus production level is still an acceptable return against a standard interest return of around 4%. Of particular importance is the actual oil price of $53.65 (Aus) against a prospectus forecast of $30.09 (Aus). If production can be increased to prospectus levels, or if the oil price and the foreign exchange rates are favourable, then a comfortable upside exposure exists. Alternatively, unless there is another incident of the scale encountered when Esso's Longford gas plant in Victoria exploded in 1998, there does not appear to be any substantial downside. Esso and the state of Victoria in general seem committed to avoiding such incidents.
Capital payments and distributions occur according to ownership on the 15th of January and July each year. Ordinary unit holders are entitled to semi-annual distributions of any royalty income remaining after the capital repayment has been made. The 2001 financial year saw a small increase in cash held year on year. 2001 also saw a resolution to the proposed "Review of Business Taxation" changes which would have adversely affected unit holders. All income continues to be non-taxable (to the trust) and unfranked provided: its taxable income, and all realised taxable capital gains distributions are made in full to unitholders.
Major unit holders include subsidiaries of the National Australia Bank, however they are held under an "equity swap" arrangement with the original holder of the units who, in turn, is a subsidiary of Australian Consolidated Industries Limited (ACIL). At the time of purchase, my intention is to retain the units until they are fully redeemed and thus worthless. The hope is that Lauren will receive $2.75 (Aus) in capital redemption payments and a bone-fide capital loss at expiry of $0.56 (Aus) with income distributions in the order of 15% to 20% from now until 2007. Lauren selected the oil sector on the basis of "Oil, Daddy. I'd like to sell Mummy her petrol when she stops at the service station."
Decision: Buy (22 Jan 2002) 235 ordinary units - Lauren.
Last modified : Friday, December 7, 2012
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