The attraction to investors of cash shells with mining assets, is that one day the mining assets might be worth something.
Stand up and take a bow, Bauba – you little beauty.
Latest results from Bauba, which has a chromium mine and platinum interests, are profits before tax of R134m per year, a just-announced 10 cents dividend, and a recent chrome price that has rocketed from $125 per ton to $230 per ton.
Bauba is making about R10m a month and has next to no gearing.
As profits have soared, so has the share price.
Bauba, when it was making losses of several million a year, was trading as low as 23 cents per share. Now the company’s chromium prospects are coming into play, Bauba’s share price has nearly trebled to a recent high of 79 cents.
On the day the results were announced, a million shares changed hands and the price moved from 59 cents to 74 cents.
But at the release of the next set of figures, with Bauba making profits of close to R10m a month, it looks set to do it all over again.
And if the chrome price goes up, Bauba will make even more.
Bauba has a market cap of about R284m, a PE of 5.1 and cash on the balance sheet of R118m.
But if the chrome price holds up or improves, I can see Bauba going way over R1.
Now the key to all this is the price of chrome. It needs to be watched almost daily as it’s the key to Bauba’s future profitability.
The most bullish factor here is that Chinese supply is drying up, and suddenly demand for chrome has perked up.
Long may the chromium price rise continue, but it also may not. And the “may not” is the only uncertainty for Bauba’s future profits.
Jeremy Woods trained for three years as a journalist on the Herts Advertiser, St Albans, in the U.K. Once qualified, he left England to work as a crime reporter on the Vancouver Sun in Canada. After three years, he worked for the Los Angeles Times as a trainee financial journalist, spending most of his time reading company accounts and finding publishable stories in them. He moved to South Africa and for the last five years in journalism worked for the Sunday Times, Business Times, as Investment Editor. He has also published a financial thriller called “Special Payments”, which was a best-seller on publication, and optioned three times for a film.