Orbis Gold (OBS) Research Update 20141029


Orbis Gold Ltd (OBS) 29 Oct 2014

Plans to raise capital with a different dollar for greater value.

Orbis Gold has changed its plans and structure for raising near term capital, terminating the agreement with Greenstone Resources to raise USD 20m at AUD 0.42/share, instead proposing to raise AUD 20m at AUD 0.60/share, via an entitlement issue to all shareholders. The effect of this is to increase our un-risked DCF and risked 12 mo fwd target price both by $0.05/share to $1.06 and $0.62/share respectively. We consider OBS an attractive investment opportunity priced near our Target price, which we expect to move upward as the project progressively de-risks.


Investment Thesis

  • On 28th October OBS agreed with Greenstone Resources LP to terminate their Subscription and Cooperation Deed and the plan to raise USD 20m (AUD 22.6m) at AUD0.42/share. The associated General Meeting required for approval of that plan has been cancelled.
  • Instead OBS is proposing to raise AUD 20m via a non-renounceable entitlement issue priced at AUD 0.60/share. This proposed equity raising will require shareholders’ approval, to be at the OBS AGM on 28 Nov. 2014. We have yet to see the issue time-table and ex-entitlement dates for this issue.
  • The proposed raise-price ($0.60) is at a 12.4% discount to the share price ($0.685) of the 27th Oct, the day prior to the date of proposed change of capital raising plans above, and is at a 6.7% discount to TERP ($0.643).
  •  Assuming 100% uptake our previous un-risked DCF increases by 5 cents to $1.06/share with an increase in our prior Target price of 5 cents to $0.62/shr.
  •  For our original forecast parameters in addition to those described above, and for a detailed discussion of OBS and investment parameters, refer to the Matau Advisory 15 October 2014 report on Orbis Gold.
  •  Varying the percentage of uptake has little impact on the valuation outcomes: Reduced uptake results in fewer new issued shares, until uptake reduces to a low 25% uptake upon which OBS would need to raise $5m more than our forecast of $105m in a later Dec 2015 raising.
  •  We consider that our Target Price will most likely be progressively upgraded toward our un-risked DCF as OBS continues to upgrade the Resource, and to progress the project evaluation through feasibility and into development and production. On that basis we consider OBS an attractive investment opportunity. We consider that the probability of expanding the minable Resource is strong, which should result in an increase in either mine output or life, further increasing the un-risked value.



  •  Achievement of evaluation milestones at Natougou, regarding feasibility study outcomes, permitting, and project financing, through to development.
  •  Good exploration results from ongoing work at OBS’ other projects in Burkina Faso or Cote d’Ivoire.



  •  Natougou has yet to successfully pass through the rigour of the feasibility stury process.
  •  While gold price has potential to reduce, Natougou’s high grade and low cash costs make for a robust, positive cashflow operation.
  •  The risk of Ebola remains in west Africa, though we note that the disciplined response in Nigeria has resulted in no new cases in that country for 60 days resulting in it being declared Ebola-free by WHO. We expect a similar disciplined response in Mali to the latest occurrence near the Guinea border. We believe that should the disease present in Burking Faso that the administration and health system there is capable of a strong disciplined response, (unlike that in Liberia and Sierra Leone). Refer to Matau Advisory’s 26 September report “Ebola – a summary”.


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