Google Finance
Filing
Jan. 30, 2017
Oct. 2017 Data (Q3 2018)
Price: $0.19, Shares: 95m. Cap: $18m
1.Basic Information
(1) History
Stan Bharti was the key person in this company. He is a mining expert and in 2002 he created a private investment bank called Forbes & Manhattan. The company invested in potential small resource deposit and actively manage and help the mining to exploration and running the business. Then after several years, it brings the resource company to the public. It was a very successful model and in some cases, returned hundreds of times.
Aberdeen was very small resource investment fund created around 1997. It was less than $1m in assets until Stan Bharti along with George Faught came in at 2005. They changed the company to provide funding for Forbes & Manhattan's private mining companies. Between 2005 and 2007 the company raised $10m and $60m accordingly. It did quite well before 2011 with $70m in retained earning. However, for the next 5 years, it lost around $90m, basically all the retained earnings because of the downturn in the mining sector.
At end of 2014, activist investor Ryan Morris along with a fund holding 9% of total shares started a proxy fight with Stan Bharti. Seeking to replace all directors but failed in the share holder's vote. In response, the company replaced 3 directors. Since then At 2016 and first 3Q of 2017, the company earned back around $20m.
(2) Business-related:
Major holdings:
A) Lithium X(CVE:LIX)(PLASA): 30% of book value.
Lithium X Filing
At end of 2015, Aberdeen acquired a Lithium minging called Diablillos project(also called PLASA) at Argentina for $5m.
In April 2016, Aberdeen sold 50% interest of PLASA to Lithium X(CVE:LIX) for 8m shares of Lithium X. Lithium X's share price raised to around $2. Making Aberdeen's holding value of it worth $15m. Aberdeen reduced Lithium X's shares to 4.2m by Jan. 30, 2017. Reduced again to 1.4m by Apr. 30. 2017.
In June 2017, Aberdeen sold remaining 50% interest of PLASA to Lithium X for $5m plus 6m shares of Lithium X. Among which 3m shares is on hold until Nov. 11, 2017, 3m shares are on hold until May 10, 2018. Also, Lithium X will issue to Aberdeen an additional 3,000,000 LIX Shares if, during the three years following closing, the volume weighted average trading price of LIX Shares is $3.00 or more for a period of 20 consecutive trading days. The total cost recorded in Lithium X for the PLASA project is $33.8m.
By Q2, 2008(July 31, 2017), Aberdeen seems sold all previous 8m shares. Just holding 6m shares from the second sale.
On August 10, 2017, Aberdeen purchased 1% smelter returns royalty of PLASA project as previously agreed for $1m plus 7m AAB shares which valued around $930k.
By Q3, 2018(Oct. 31, 2017), Aberdeen still holding those 6m shares. It is unknown whether it still holds those after that because it can sell 3m shares after Nov. 11, 2017. Based on the 6m shares, the value of LIX holding itself could worth $15m already which is close to the whole AAB market cap.
At Dec. 18, 2017, Lithium X announced to be sold for $2.61/share to a Chinese company called NextView. The vote will be held at Feb. 2018. There is breakup fee of $16m by Lithium X and $20m by NextView accordingly if one party break the deal.
Overall, Aberdeen has made close to $30m on this investment. It was really a good return. I feel it might vote no on this deal since it needs to give up the 3m stock if LIX share price rises above $3. However, if Lithium X give the company some compensation for that. It might agree to the deal. Even ABB vote no on the deal. The deal might still be done without AAB's vote. The deal is quite possible given the breakup fee is quite high for both sides and the Chinese company actually made a deposit for that purpose.
(Feb. 06) The deal actually passed in shareholder voting.
B)Fura Gems Inc(CVE:FURA): 20% of book value
Filing
Gemstone mining in Colombia and Mozambique, currently AAB holds 13m shares might account around 18% of total FURA shares. It has 3 mining licenses including one production and one exploration license in Colombia, and one exploration license in Mozambique. The production mine in Colombia is in very low volume and in manual mode. The company is planning to improve it.
C)Desert Lion Energy Inc: 12% of book value
Website
Filing
Private Lithium mining in Namibia. It started production at Oct. 2017. Will go public through a reverse merger with Camex Energy. The vote is set at Feb. 15. Each 12.0258 share of Camex will be converted to 1 new share. The latest private placement of Desert Lion is $1.82/share.
D) African Thunder Platinum Limited: 10% of book value
It is private platinum mining. The company spent around USD$15m. Currently been suspended due to low platinum price. It was sold to a company which will be public. It might be able to get the $5m on the book back.
(3) Management.
Stan Bharti
(4) Debt and Credit Facility.
(5) Insider holding, options, Insider trading info, share buyback.
George Faught: Founder and original CEO from 2006 to 2012?. As Jan. 2017, he holds 6.5m shares(7.3%).
David Stein: COO and CEO from 2009 to 2016. Succeeded by Stan Bharti. As Jan. 2016, he holds 7.1m shares(8%). Since he resigned in 2016, at Jan. 2017, his share was not disclosed in MIC.
(6) Employee numbers
(7) Industry comparison.
PINETREE CAPITAL
Previously I have invested in Pinetree's secured debt. Pinetree was very similar to AAB which is a fund invested in junior resources. However, it took too much debt and it only invested in public companies. Both suffered greatly during the resource downturn. Pinetree was eventually been liquidated as 3c/share.
(8) Major events
2. Financial data.
3. Valuation
(1) Currently, the company is traded around 1/3 of its book value. Looks very cheap. However, in the past, it was always been traded less than half of its book value. Sometimes around 1/3 of the book value as well.
(4) Since 2016, AAB has shifted strategy to take a major position on private mining properties. It is more close to the way Forbes & Manhattan works. It actually worked on PLASA investment which returned close to $30m for an initial investment of $5m.
(3) Currently, the value of LIX holding itself actually worths close to the market cap of the whole company. If the LIX deal goes through, the company will have over $15m in cash. It could make good use of it. (Feb. 06: The deal passed)
(4) The Fura Gems shares appreciated quite a bit lately. However, the mining has some medium risk. Not sure whether it will work.
(5) The Desert Lion is another Lithium mining which will very likely be successful. Need to watch out once it goes public.
(6) The African Thunder mining is a failed investment the total $15m would be zero if the platinum price stays low.
4. Risk
(1)The company seems not shareholder friendly. It paid a lot to management in the previous years. Also, after the proxy fight in 2015, the company even stopped to update its website. However, since now Bharti owns 20% of the company, at least his interest is aligned with shareholders.
(2)The resource segment is still very weak. It might take a long time to recover. Like the platinum price, if stay low for a long time, the African Thunder might be worth nothing.
5. Conclusion
Although the company did pretty badly in the past several years. With it shifts its strategy on several major projects likes Forbes & Manhattan did, it might do very well if the mining sector continues its recovery. Given the big discount to the book value, this seems to be a very attractive stock.
6.Links
