Monday, October 18, 2010

Ho Wah Genting Bhd: Potential to fly like Australian mining counters??

By William Koay

In Australia, there are some mining stocks which were trading at very cheap prices around 10-20 cents before they found the minerals underneath the mining land. However, their shares rocketed to the sky once they found the minerals such as gold, copper, tin, gas or rare earth.

There is a stock named Sanfire which traded at 9cts in May last year and had since sky-rocketed to more than A$7.00 now as they found big deposits of copper in its mine worth about A$5-6 billion at current market value. Another stock named Karoon Gas drilling for oil and gas off N-W part of Australia, has its share price zoomed from a few cents to more than $8 now!! In year 2005, a share called Redback Minerals Resource which has a very small market cap found gold in West Africa and saw its market cap. zoomed to $6 billion currently traded in Canada stock Exchange. In view of this, many Malaysians might not be aware of the craziness of share prices of mineral companies overseas. Will this happen to Ho Wah Genting Bhd (HWGB)?

The current 3rd or 4th richest man in Australia who is worth a few biillons was once a farmer before he found one of the biggest deposit of iron ore in its farm land. He concluded the deal with a Chinese company to develop it into one of the biggest iron-ore mine in the world and thus his company share sky-rocketed and made him a billionaire.

Ok, back to HWGB, it has 35% stake in a magnesium company called CVM Mining which is listed in HKEX and is worth at about $110m. The current market cap of HWGB is worth about this sum as well. Thus, its 100%-owned factory in Indonesia producing copper cable/wire and 100%-owned HWGB Tin Mining company as well as some properties coupled with tour bus business are not priced into its share price yet. In other words, if you buy its shares at 28 cents, these businesses are basically free!!

Nonetheless, aside from this, the main impetus is actually tin mining. The boss said that it has reserve of 50,000 ton of tin which is worth about 50,000 x RM 80,000/ton = RM4 billion at current price of tin. But how true the statement is remains unknown. Assuming that it's half true, the tin beneath could worth RM2 billion which is shocking.

So, let us watch to see whether HWGB could become another Sanfire or Karoon Gas company of Australia!

Wish you all the best in investing!

Click here for some info on Malaysian mining.

The Star Article on Tin Mining:

The lucrative revival of tin mines

Commodities Talk - By Hanim Adnan

A full revival of tin mining operations can potentially be lucrative ventures for governments in states with high tin deposits. Malaysia’s tin reserves – ranked the third largest in the world – are estimated at RM350bil or about one million tonnes currently.Perak, for example, used to be the centre of tin mining activities, supplying to over 40% of the world’s tin market.

The collapse in tin prices back in the early 1980s had resulted in the closure of many tin mines in the state.

However, a recent upsurge in tin prices amid a global supply shortage had prompted many state governments to open their doors for more exploration and prospecting of high-income generating minerals.Perak stands to benefit significantly from these current encouraging developments; hence its recent announcement of an indepth study being taken on its tin deposits and other high quality minerals, like kaolin, limestone and ball clay, was timely.

This move can lead to the reopening of the many defunct tin mines scattered all over the Kinta Valley which still have ample tin deposits. The re-activated mining operation can also provide a multiplier effect for other activities such as property, manufacturing, logistics, landscaped townships, ports and railways. This can lead to a boom in Perak, which needs to actively spruce up its economic activities.

Only a handful of companies with big financial muscles are involved in tin mining in Perak. Malaysia Smelting Corp Bhd via its unit Rahman Hydraulic Tin Sdn Bhd has the country’s biggest hardrock tin mining operations in Klian Intan, Hulu Perak, since 1907.

Last year, a 30-year mining concession was awarded to Rahman Hydraulic for prospecting tin ore and other minerals in a newly identified 14,000ha at Pengkalen Hulu near Ipoh. Perak also stands to receive a 5% royalty from the tin ore and minerals to be mined. A 10-year mining lease was also awarded to HWG Tin Mining Sdn Bhd, a unit of Ho Wah Genting Bhd in 2008 to mine tin and other minerals on 500 acres in Pengkalan Hulu with a potential for a further 500 acres as work on the initial area progresses.

Unknown to many, mining operations contribute about RM2bil annually to Malaysia’s GDP, according to the Malaysian Chamber of Mines.To ensure efficient and effective implementation of tin or other mineral mining operations, state governments keen to open up mining areas must strictly adhere to the newly revised Second National Mineral Policy (NMP) which was launched last year, as well as the State Mineral Enactment.

Previously, mining was perceived as damaging to the environment, hence the reluctance of many state governments to issue new mining licence to potential operators.Environmental-friendly mining including environmental protection, sustainable development and the management of social impacts are vital to modern day mining activities.In fact, the thrust of the NMP is on optimum exploration, extraction and utilisation of resources using modern technology as well as research and development with strong emphasis on the environment.

Apart from tin, it is worth noting that Malaysia is also endowed with gold, coal, feldspar and industrial minerals like river sand, granite dimension stone, clay and silica sand for prospecting and mining.

Disclaimer: The above article does not represent an investment advisory service as no subscription or management fees are charged. The contents of the article are provided as general information only and should not be taken as investment advice or as a recommendation to buy or sell any security or financial instrument. Any investment decisions carried out based on information, analysis, or commentary provided above is solely your responsibility. You should consult your investment adviser before making any investment decisions.

1 comment:

  1. Great foresight and write up on HWBG. Great work David.