Ovoca Gold targets oil as shares lag assets
Chief executive says new projects needed to close gap with net current assets, writes Gavin McLoughlin
Irish-listed Ovoca Gold is considering opportunities in the oil and gas sector as it seeks to close the gap between its market capitalisation and its net current assets.
The company is valued by the market at just over €7m, despite the fact it has cash in the bank around $6.5m (€5.5m) and a stake in gold and silver mining business Polymetal currently valued at around €15m.
Around half of the shares are owned by Russian board members, and the company's exploration assets are located in Russia.
The company is currently embroiled in legal action after a loan it gave to another business went into default. Chief executive Kirill Golovanov told shareholders at the company's AGM in Dublin last week that Ovoca management believes there is the potential to acquire oil and gas assets on foot of this process.
"That would fundamentally change the business of the company and for sure we would need to seek shareholders' approval to do that ... there is a big fight regarding these assets among the creditors.
"Before we resolve this issue we cannot consider any dividends because if we are to acquire that property ... we would need funds to develop those assets," Golovanov said.
"I do understand there is a substantial gap between our market cap, and the value of our cash in the bank and securities that we have. We can argue why that is going on but there are probably some issues because of the Russia issue - that the company has all its assets in Russia - which is not true technically because the cash is in foreign banks and Polymetal is an international public company. Its shares are traded on the London Stock Exchange."
Golovanov said he believed the best way to close the gap between market cap and assets was to acquire new projects.
"My view on our company is that we have enough of our own funds, and we are in a better position than other companies. So for us it is more a question of finding the right project which would create value for the shareholders and change this gap."
The company's Russian gold exploration project - known as Stakhanovsky - needs a gold price of $1400 an ounce to be commercially viable, Ovoca director Tim McCutcheon told the AGM. Gold is now trading around $1300 an ounce. McCutcheon was formerly the company's chief executive.
"Ovoca has enough money to actually do something, and the question has always been what project do you take when you can actually do something.
"I can fully appreciate the fact that it's been a while [looking for a new project] but when we find the right project we'll have enough money to actually do something and not have to raise shares and beg other people for funds."
Sunday Indo Business