New York, NY -- (SBWIRE) -- 01/07/2014 -- RAYDIRKS Research publishes its INITIAL report on Borneo Investment Resources Ltd., and suggests that our readers/investors do their due diligence, consult their investment advisers, and then consider taking a position in the common shares of Borneo at current prices for the possibility of capital appreciation of several times on their investment over the Short Term (6 to 12 months) and over the Long Term (1 to 3 years).
Borneo Resource Investments Ltd. is a profitable mining company that mines gold and develops producing gold mines as well as coal mining properties in the Republic of Indonesia. Borneo's current assets include three gold properties, two of which are now producing gold, and one coal mining asset.
In the view of Ray Dirks and his team of security analysts and money managers, Borneo Investment Resources common stock is currently undervalued – as it’s under-followed by the investment community due to a combination of three factors. First, in the past few years there has been a general, and in our opinion temporary and soon-to-change, downward sentiment towards gold mining stocks in the market which has left BRNE unnoticed as a new producing miner in the market. Second, in addition to BRNE being a producing and profitable gold miner, it also has coal mining assets that are not yet recognized by the market and therefore are not priced into the stock, while the coal mining assets also serve to reduce and minimize any perceived risk associated with gold. Third, during the 4th quarter of 2013 BRNE has issued some very positive news that has transformed the company and fundamentally increased its value, and because the market has not yet priced this into the stock, BRNE is huge opportunity for investors.
Currently priced at $0.50 per share on December 30, 2013, RAYDIRKS Research believes investors could benefit from adding BRNE to their portfolios. The 12-month price target for the stock is $3.00 per share based on BRNE’s current assets. This price target could go higher if the company acquires additional gold and coal assets.
Ray Dirks and his team of security analysts and money managers will first lay out the broader trends in gold and coal which create this immediate opportunity for BRNE, a company that has both gold and coal assets.
During 2013, as the price of gold has gone from about $1700 per ounce to approximately $1200 per ounce, many gold mining stocks have taken a hit. Many investors looking for tax loss selling have seen their gold mining stock as assets to sell, putting further downward pressure on these stocks. The result was an overall down trend in gold mining stocks at the end of 2013. In general gold prices tend to increase when economies are weak because investors look for a safe haven.
Borneo’s timing couldn’t be better. It has just started mining gold in June of 2013, and the company’s operating expenses are appropriately geared to current gold prices, resulting in profitability for the company in Q3 of 2013, the company’s first full quarter of mining. This is in contrast to so many gold miners that geared their operating costs to higher gold prices which neared $2000 per ounce in 2011.
In contrast to gold, coal, which is used to power 40% of the world’s electricity generation, tends to be in higher demand when the economy is on the upswing. Today, as the global economy has recovered from the 2008 recession and the world is seeing stable growth, gold is likely to remain stable or go higher from current levels. Coal, meanwhile is expected to continue to increase in price as global demand, particularly in Asia, namely China and India drive demand. According to a recent report by energy consultancy firm Wood Mackenzie, coal will surpass oil as the key fuel for the global economy by 2020. And where is most of the demand coming from? It’s coming from China and India which get much of their coal from Indonesian imports. BRNE’s coal asset is ideally located to meet demand.
Against this backdrop of global economic conditions and the drivers for gold and coal, BRNE has unique attributes and recent news triggers that drive its movement.
BRNE has made several key announcements during the fourth quarter of 2013 that make it clear this is a mining company with upside, growing cash flows, increasing asset values and potentially set to up-list in 2014. All of these triggers set the stock for significant appreciation in 2014.
Profitable in Q3 of 2013
Based on mining just 1 of its 3 gold mines in Q3 of 2013, BRNE is profitable. This is a testament to how effectively the company manages its assets, its efficient operations, and how strategic the company has been in acquiring gold mining properties with surface mining that offer low operating costs. The company just started mining operations in June of 2013. In Q3 of 2013, the first full quarter of mining, BRNE reported revenues of $507,771 and net income of $41,201. I point out that this profitability is based on initial mining at only one property, Talawaan. BRNE reports it expects to significantly increase mining capacity of Talawaan. Add to this the Company has just started mining at its newly acquired mine Ratatotok South in December 2013 and reports it will mine at its third mine, Ratatotok in 2014.
Brilliant Move by Management to Purchase New Mine: Ratatotok South
On December 12, 2013, BRNE announced it acquired a producing gold mine for just $250,000. The acquired property, Ratatotok South, is adjacent to the southern border of one of BRNE's other gold mining properties, Ratatotok. Ratatotok South comes with assets including a stockpile of ore on site ready for processing, as well as significant infrastructure and equipment. BRNE reports that the acquisition will further boost its gold production levels, revenues and contribute to gross profits. The ore at this site may produce 99% pure gold and the structure and quality of the ore body on the property means that the extraction process used at Ratatotok South will be significantly less labor intensive and at a lower cost than the extraction method employed at BRNE’s Talawaan property, the company reported. With this acquisition, BRNE says it has just reduced its expense and accelerated its timeline for mining at Ratatotok.
Gold Generates Cash for Investments
BRNE is now cash flow positive with just one mine. It appears to be set to increase these cash flows and profitability through: a) further increasing mining at Talawaan; b) the addition of mining at Ratatotok South at the end of 2013; and c) adding mining at Ratatotok later in 2014. With cash thrown off from current gold production, BRNE can invest in yet more producing gold mines as well as investing in the development of coal assets which can really produce huge gains in the future. Cash flow also means the company has less need to raise capital from outside sources and new share issuance can be minimized, taking out a large portion of risk for investors.
Gold Assets Worth More Than $240 Million
As of December 30, 2013, BRNE owns three gold properties, Talawaan which it began mining in June 2013, Ratatotok South which it began mining in December 2013, and Ratatotok which it plans to mine in 2014. The company current has estimates of gold reserves at Talawaan alone of $240 million. The company has not yet reported what the reserves are at the other two properties. However, $240 million at one mine alone, relative to BRNE’s current market cap of just under $40 million seems like a value to us.
Beyond Gold and Into Coal
BRNE is building its gold assets while generating cash flows. However, investors looking at the company’s gold assets and revenues may easily overlook the fact that the company also has coal assets. BRNE develops ‘coal concessions’ which means they acquire the coal mining rights to properties. Because coal mining requires larger scale investments, the company has a smart strategy to monetize its coal assets through joint ventures with larger mining companies. BRNE’s strategy is to survey properties through geological tests to prove feasibility of mining and then partner with other mining companies to mine and monetize the best properties on a larger scale. Coal is a huge opportunity for the company that is not currently priced into the stock. Buying this stock is like owning an undervalued gold company with huge upside and in addition, having an option on a major coal play.
Coal Asset Worth $1.5 Billion
BRNE now has one coal concession which has estimated coal reserves worth $1.5 billion. If this one coal concession alone were moved forward into development and mining, BRNE’s current market cap of under $40 million would be dwarfed by the potential worth of the company in the future. Additionally the company reports it has signed letters of intent and memorandums of understanding with more coal concession holders.
Indonesia: Location, Location, Location
Both in terms of gold and coal, Indonesia offers huge advantages in location. Indonesia was the 8th largest gold producing nation in 2012, producing 95 metric tons that year. The mines acquired by BRNE are properties where the company can ‘surface mine’ which means the costs of production are lower than other forms of mining where the gold is not as easy to reach and extract. For coal, Indonesia is a major world player. Indonesia is the world’s largest exporter of coal, with $25 Billion exported in 2012. Its geographic proximity to China and India make it the largest exporter of coal to these countries. 77% of China’s and 57% of India’s economy is powered by thermal coal. The costs of transporting coal are high and therefore the proximity of Indonesia to China and India is a huge advantage.
Management & Relationships
BRNE’s quick path to profitability based on its first full quarter of mining at just one property is a huge testament to the talent of its management team. My team and I also point out that one key executive, BRNE’s Chief Operating Officer and Director, and another of its Directors, are both Indonesian nationals. This is a key. Strong relationships with local asset owners, business people, and the government are very important in any foreign nation. BRNE appears to have solid relationships which create unique opportunities for them in Indonesia. BRNE’s CEO has a solid track record in resource financing and experience in Indonesia.
Look for More Triggers 2014
Beyond what the company has recently announced in Q4 of 2013, look for these key triggers which may move the stock into the levels of our $3.00 per share 12-month price target.
Q4 Results – The Company reported profitability in Q3 2013 and they may do it again in Q4 2013 and into the future.
More Gold Acquisitions – BRNE is actively looking for more acquisition opportunities. More smart buys like the one they just made with Ratatotok South will add further value.
Developments on Coal Concessions – As gold mining provides more cash flow look for BRNE to make investments in coal concessions that can unlock billion-dollar-plus opportunities for the company.
Up-listing – BRNE may have the shareholder equity and price to up-list to a major exchange in 2014. Based on BRNE’s December 19, 2013 press release, on a pro-forma basis the company had stockholders' equity of $1.9 million for its Q3 ended September 30, 2013. An uplisting would add further value by opening the stock for purchase by numerous institutions that may be restricted from buying the stock now while it’s listed on the OTCQB.
RAYDIRKS Research suggests that our readers/investors do their due diligence on Borneo Investment Resources (BRNE), and consult their investment advisers, and then consider taking a position in the common shares of BRNE at current prices for the possibility of capital appreciation of several times on their investment over the Short Term (6 to 12 months) and over the Long Term (1 to 3 years)
Ray Dirks and his team suggest that investors place no more than 1% of the funds they devote to common stocks in any one issue. It’s best to diversify.