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By Tom Winnifrith | Tuesday 14 November 2017
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
At 4.12 PM yesterday it was announced that my old friend Jim Mellon and his associate Gerard Holden had resigned with immediate effect from West African Minerals (WAFM). Old Jim founded the company and was its chairman. It is now almost game over for West African and the scores on the doors are shocking.
Mellon injected assets, originally bought for peanuts, into West African and has raised vast sums on the back of the promote. As at the last year end retained losses ( that is to say other folks' cash spunked)( were £44 million.
As a bonus we are now told that the company's iron ore assets at Sanga in Cameroon are not worth progressing.
"The continuing Board does not intend therefore to expend any further funds on the Company's iron ore assets other than is strictly required to maintain the licences in good standing and preserve value pending any prospective sale of the assets.
The continuing Board is considering all options in respect of the Company's existing iron interests, including whether to separate the Company's interests by means of a demerger or otherwise and seeking investment opportunities in a different sector, and in particular life sciences. The Board is also assessing whether to remain on AIM or seek admission to another recognised market and a further announcement will be made in due course as and when this review has been completed."
The odds on the iron ore assets realising anything like their carrying value of £18 million? 100-1, 1000-1? In other words there will in due course be a writedown of up to £18 million taking the total spunk, of other people's money, on this folly to up to £62 million.
At least Mellon's departure will mean no more generous fees paid to his offshore, non tax paying, Burnbrae company. But the company's cash pile of £3.1 million as at 31 March will probably still fall by another £500,000 this year.
At 2.125p the market cap is £8.1 million. Given the state of the iron sector and the lousy progress made at Sanga it is hard to see disposal proceeds being anything like enough to close the gap between the market cap and net cash. And with the threat of an AIM delisting hanging over the stock too, it has to be a sell.
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