Anvil's Cash is Grossly Discounted + Licenses and Resources now carry Value


Anvil Mining (AVM.T $1.53)


If you have bottom fished Anvil with us over the past two months (as low as $0.75), there is an important announcement out this week. The Democratic Republic of Congo (DRC) is full of political risk and copper prices are weak so this has weighed heavily on companies like Anvil. Most companies have worried about losing their mining agreements or lease contracts and this has been ongoing for almost 2 years.


Anvil's most important project in the DRC is Kinsevere (it employs about 1,800 people during production). Wednesday it was announced that all licenses and leases remain firmly in place. In addition, I announced a couple weeks ago that the region had dropped mining taxes from 28% to 1%.


Both of these announcements are extremely important as we have been buying Anvil's $200 million in cash at a dramatic discount.  That cash is worth almost twice current levels so it means the underlying metals and mine assets are a gift.


Signing of these agreements reduces our risk dramatically and because Anvil is 1 of only 2 companies in the country with such approvals, it becomes extremely valuable to them. It may open up significant opportunities for consolidation in this mineral rich region as many will be denied licenses and even more will disappear from bankruptcy. Anvil's large warchest of cash and clean balance sheet creates many opportunities for growth.


If and when we see bounces in the price of copper, the price of Anvil shares should move accordingly. Someone could still buy Anvil for cash value (about $2.60) and get several hundred million in assets for free along with over a billion pounds of high grade copper. It doesn't change the fact they are in the DRC, but it does demonstrate the value here.




Longford Energy (LFD.V $0.185)


Fundamentally this company is very basic - a very small oil company producing about 50 bopd (enough to keep burn rate down). However, it is run by a group from Toronto known for putting strong deals together and the company's mandate is to find a strong international oil & gas play. Their timing was fortunate (lucky) because they raised $20 million at $0.80 when oil was at its peak in the summer. Now they are shopping at the bottom.


What makes this so appealing....


a) Shares Outstanding: 42 million

b) $18 Million Cash (no debt) $0.42/share


Their burn rate is low (about $1/2 million per quarter) and they will remain under pressure to reduce it even more. If a person buys the cash for anything in the $0.17 to $0.19 range, they are paying $0.50 on the dollar. If they land an oil deal that is half decent, the stock should trade close to cash value. That would provide a 100% gain from here.


The benefit to this strategy is that the downside risk is the value placed (by the market) on discounted cash. Even if a person sat on the paper through 2009, it provides a comfort level because they simply bought cash. If LFD finds something really promising that doesn't suck the life (cash) out of them, the upside can be much greater than 100%. However, this conservative approach allows a person to sleep at night - which is very important in this market.


Liquidity is good right now to $0.19. Objective is to tuck away until they find an acquisition target.