On 4 February 2013 I advised selling Boabob (BAO) Resources at 35.75p arguing that the valuation was crackers given the financing risks. Today the company has said that it will de-list and if shareholders wish to sell then the largest shareholder Redbird will offer 6p per share. Oh dear, another win for Tom Winnifrith versus the morons.
Baobab Resources (BAO) has won a 25-year mining licence from Mozambique’s National Department for Mines for its long-standing flagship pig iron and and-vanadium project in the southern African country’s mineral-rich Tete province. Since both substances are involved in the currently out-of-fashion process of steelmaking and trade at fractions of previous peaks, the stockmarket has hardly jumped for joy, but the company, which has also agreed a new £700,000 funding package with its key shareholder, Luxembourg-based African Minerals Exploration and Development Fund (Amed), prefers to take a more sanguine view.
Jeremy Dowler, energetic chairman of AIM-quoted Baobab Resources (BAO), is preparing for some key developments that will shape prospects for the company’s future. He hopes to turn the company’s pig iron and vanadium project in Mozambique’s Tete province in south-east Africa from a 750 million-tonne aspiration into a long-term supplier to the steel industry there and abroad. If he can achieve this then Baobab stands to become a major generator of cash.
Ben James, managing director of Baobab Resources (BAO), is rubbing his hands with glee. Busy commissioning studies of the Middle East and other product markets, the AIM-quoted company also moves closer to an imminent new measured resource estimate for the key Mt. Tenge block in its $1 billion (£625 million) Tete pig iron and ferro-vanadium project in Mozambique.
Given the horrible slump in the shares of Baobab Resources (BAO) in 2013 – well done TW, crawl, crawl - it would be understandable if even the least squeamish of chartists/technical analysts would shy away from making any commentary here lest their precious track record/reputation(!) might be damaged.
The last thing that a bull of a stock or the market would wish to see after a massive Spike for the price action is the kind of extended drift over many months that we are currently seeing on the daily chart of Baobab Resources (BAO).
Roger Bade at Whitman Howard is one of the most cynical and usually bearish mining analysts in town. But he appears to like Baobab Resources (BAO) describing the stock as “cheap” at 17p.
Calling AIM listed wannabee iron miner Baobab Resources (BAO) as a sell at 35.75p on February 4th and again on 29.125p on 21st February managed to generate stacks of abuse on the Bulletin Board but with the shares at 13.625p today I have been 110% vindicated.
With Baobab Resources we have a classic example of why giving the benefit of the doubt to resources plays has been such a bad idea in 2013.
2013 to date for Baobab (BAO) has perhaps been as much about gauging the effects of the drawdown in January of its debt facility, taking £1m of the £17m equity line. Ironically the immediate result in share price terms for the Mozambique focused iron ore explorer was for a further spike to the upside and a 35p plus peak.
After many years of scratching around Southern Africa for a project with real prospects AIM listed Boabab (BAO) appears to have found something that could be a winner in the form of the Tete pig iron/vanadium/titanium target in Mozambique. With iron ore stocks all rallying sharply in the past two or three months on the back of hopes of resurgence in Chinese demand, Baobab shares have raced ahead to 35.75p which values this company at £106 million. This is a stock that has now got far ahead of its fundamental value and I can reveal that last week well known bear raider Lucian Miers opened up a short. That is a good call which you should follow.
