Deccan Gold Mines Ltd.
CMP – Rs. 15.60 (As On 20-Nov-2008) BSE Code –512068
Face Value – Re.1
For FY 07-08
Sales - Rs. 0.00
PAT Rs. – (-3.61 mn)
Market Cap. - Rs.75 cr.
For Qtr Sept 08-09
Sales – Rs. 0.00; Other Income – Rs. 2.5 mn (Refer last section – Recent Development)
Profit – 0.35 mn ; EPS – Rs. 0.01
Equity Capital – Rs. 5,84,50,000
No. Of share - 5,84,50,000
Promoter Holding – 51.50 %
Institutions – 13.38%
Public – 48.16% (Including Institutions)
By looking at the above financials for FY 07-08, you may like to give the investment a pass since for a company with zero revenues and making a loss, and with a market cap of Rs. 91 cr., may look to be highly overvalued.
However, taking a closer look at the company and the potential of its business may make you change your mind.
Here’s what Deccan Gold Mines is all about ….
Deccan Gold Mines is the first private sector Gold Exploration company to be listed company on the Indian bourses.
The company has been promoted by Australian Indian Resources Pty. Ltd. (AIR) through its Mauritius subsidiary – Rama Mines (Mauritius) Ltd. The promoters hold roughly 70% in the company. Consequent to the opening of Indian Mining industry to Foreign Direct Investment in 1993, AIR incorporated a 100% subsidiary Geomysore Services (India) Pvt. Ltd., which made an application for mineral exploration. It was only in the year 2000 that Geomysore India was granted Reconnaissance Permit (RP) to undertake exploration activities in the state of Maharashtra.
Geomysore Services now has 26 Reconnaissance Permits for gold and base metal exploration spread through seven states in the country. Indophil Resources Explroration Services Pvt. Ltd., a 100% subsidiary of Deccan Gold Mines has also been granted Reconnaissance Permits to undertake exploration in some prospecting blocks.
Deccan Gold has entered into agreements with its associated companies, Geomysore Services (India) Pvt. Ltd and Indophil Resources Exploration Services Pvt Ltd for the transfer of Prospecting Licences to Deccan Gold in the Karnataka state - Dharwar Shimoga, North and South Hutti, Ramagiri and Mangalur prospecting blocks.
CMP – Rs. 15.60 (As On 20-Nov-2008) BSE Code –512068
Face Value – Re.1
For FY 07-08
Sales - Rs. 0.00
PAT Rs. – (-3.61 mn)
Market Cap. - Rs.75 cr.
For Qtr Sept 08-09
Sales – Rs. 0.00; Other Income – Rs. 2.5 mn (Refer last section – Recent Development)
Profit – 0.35 mn ; EPS – Rs. 0.01
Equity Capital – Rs. 5,84,50,000
No. Of share - 5,84,50,000
Promoter Holding – 51.50 %
Institutions – 13.38%
Public – 48.16% (Including Institutions)
By looking at the above financials for FY 07-08, you may like to give the investment a pass since for a company with zero revenues and making a loss, and with a market cap of Rs. 91 cr., may look to be highly overvalued.
However, taking a closer look at the company and the potential of its business may make you change your mind.
Here’s what Deccan Gold Mines is all about ….
Deccan Gold Mines is the first private sector Gold Exploration company to be listed company on the Indian bourses.
The company has been promoted by Australian Indian Resources Pty. Ltd. (AIR) through its Mauritius subsidiary – Rama Mines (Mauritius) Ltd. The promoters hold roughly 70% in the company. Consequent to the opening of Indian Mining industry to Foreign Direct Investment in 1993, AIR incorporated a 100% subsidiary Geomysore Services (India) Pvt. Ltd., which made an application for mineral exploration. It was only in the year 2000 that Geomysore India was granted Reconnaissance Permit (RP) to undertake exploration activities in the state of Maharashtra.
Geomysore Services now has 26 Reconnaissance Permits for gold and base metal exploration spread through seven states in the country. Indophil Resources Explroration Services Pvt. Ltd., a 100% subsidiary of Deccan Gold Mines has also been granted Reconnaissance Permits to undertake exploration in some prospecting blocks.
Deccan Gold has entered into agreements with its associated companies, Geomysore Services (India) Pvt. Ltd and Indophil Resources Exploration Services Pvt Ltd for the transfer of Prospecting Licences to Deccan Gold in the Karnataka state - Dharwar Shimoga, North and South Hutti, Ramagiri and Mangalur prospecting blocks.
Deccan Gold is currently working on the following projects:-
Mangalur Belt – The Mangalur Belt is 25 km long and 4-5 km wide. It is composed of metamorphosed basalt, gabbro, ultramafic rocks, felsic volcanic rocks and coarse clastic sedimentary units like at Hutti, Kolar and Sonakhan belts. The Mangalur belt has been known for gold mineralization.
North Hutti - The Hutti Greenstone belt is host to the world class gold deposit being mined by The Hutti Gold Mines Ltd (HGML), a Government of Karnataka undertaking. Gold mining activity in the belt has been known since pre-Ashokan time, about 3000 years ago. The company has two Reconnaissance exploration licences (RPs) covering 851sq km area of the most prospective part of the Hutti belt.
South Hutti – The South Hutti project extends into a 315 sq.km block covering the South Hutti greenstone belt. This tract contains several promising prospects. The company has been working on a few prospects in the South Hutti project based on highly encouraging gold values obtained during preliminary geochemical sampling.
Dharwar –Shimoga Belt – The company has 5,329 sq km area under 3 Reconnaissance Permits blocks which cover a major portion of this belt that is 155km long and 100km across.
Ramgiri Gold Field - The Ramagiri RP block comprises the well known 13 km long Ramagiri Gold Field (RGF) that was a scene of intensive underground mining activity by the Britishers in the early part of the last century. Until April 2001, the Government of India owned Bharat Gold Mines Ltd. (BGML) was operating the underground Yeppamana Mine in the RGF.
Gold Exploration –An International Perspective & Potential in India:
Gold has been historically mined internationally in countries such as Australia, Canada & South Africa.
Production of Gold:
Australia - about 300 tonnes per annum of which three quarters come from Western Australia.
Total world production - about 2400 tonnes
India - average production of 3 tonnes per annum
India is a country rich in mineral resources. More than 20 million tonnes of proven, probable and possible gold ore reserves have now been identified (Source: World Gold Council) Yet, India’s annual gold mine output is only around 3 tonnes and 6 tonnes as a by-product of copper mining.
India’s gold mining history dates back to some 8000 years with more than 900 gold mining and innumerable gold panning locations. The land of the world famous Kolar Gold Fields and the largest consumer of gold on earth, India has however suffered in developing it’s gold mining potential due to lack of adequate exploration expenditure and the policies of the governments.
The liberalized policies and strong economic growth outlook, is reviving the mineral exploration and mining sector through foreign and Indian private investment. Deccan Gold with some of the best gold prospects in the country, geologically similar to areas that have been home to major world gold discoveries, is playing a leading role in this revival. The Indian terrain is easily accessible but under explored. The potential for gold discoveries in India is substantial.
Deccan Gold Mines has been undertaking Systematic exploration and Drilling programs at the various prospects in the projects being undertaken by it. The drilling results in the Hutti Fields and Dharwar –Shimoga belt have been particularly very encouraging.
Other Developments:
Deccan Gold Mines has entered into an Agreement with De-Beers India Pvt. Ltd., Indian subsidiary of De-Beers, world’s largest diamond mining company, whereby Deccan Gold has granted De-Beers the right to explore for diamonds in all its exploration areas. In return Deccan Gold will obtain the right to explore for Gold and other minerals in De- Beers exploration areas in India. The agreement also involves exchange of exploration data between the two companies.
Recently, the company has allotted 70 lakh shares and 1.10 crores Warrants with an option to convert into shares at Rs.15.10 per share to Sun Mining & Exploration Ltd., a company incorporated in Cyprus.
Conclusion:
Deccan Gold has made applications and/or acquired control over a very large portfolio of exploration blocks covering an area of 10,403 sq kms spread in the states of Andhra Pradesh, Karnataka, Kerala and Rajasthan. Moreover, the exploration activities on Dharwar Shimoga block and North Hutti block have provided highly encouraging results.
The probability of success in these fields is high, which can catapult the stock into a different orbit.
Deccan Gold is not a trading stock – the stock is suitable for long term investor with an appetite for HIGH RISK. Gold Exploration is a capital intensive industry where the rewards may not be immediate – they may come after years of perseverance and hard work and then too are uncertain. The advantage Deccan Gold has is that the company being one of the first private sector players in the industry is sitting on some of the most prospective blocks. The company has been working on these blocks for years and substantial capital & human resource has gone into the exploration process. The other factor which inspires confidence in the business is the fact that Gold Exploration is still in its infancy in India. Even though India has a geology and metallogeny very similar to Western Australia and Africa and India’s pre-cambrain auriferous greenstone belts are geologically comparable with those of Western Australia and Southern African gold bearing greenstone belts, the country’s share in Gold production is minuscule compared to countries like Australia and Africa. With very few private players, there is a Huge Unexplored potential.
Long Term Investors can accumulate the stock at the current price and on declines.
RECENT DEVELOPMENT:
Deccan Gold has Concluded MoU with JB. Details are given below.
Announcement:
Deccan Gold Mines Ltd has informed BSE that the Company has concluded a Memorandum of Understanding (MoU) with JB Mining Holdings Ltd, Hongkong (JB)."DGML", announces the signing of a Memorandum of Understanding (MoU) with 38 whereby DGML shall carry out the entire gold exploration, resource estimation and planning for feasibility studies to facilitate mining activities for Projects held by 38 in the Republic of Djibouti, North East Africa.
Mangalur Belt – The Mangalur Belt is 25 km long and 4-5 km wide. It is composed of metamorphosed basalt, gabbro, ultramafic rocks, felsic volcanic rocks and coarse clastic sedimentary units like at Hutti, Kolar and Sonakhan belts. The Mangalur belt has been known for gold mineralization.
North Hutti - The Hutti Greenstone belt is host to the world class gold deposit being mined by The Hutti Gold Mines Ltd (HGML), a Government of Karnataka undertaking. Gold mining activity in the belt has been known since pre-Ashokan time, about 3000 years ago. The company has two Reconnaissance exploration licences (RPs) covering 851sq km area of the most prospective part of the Hutti belt.
South Hutti – The South Hutti project extends into a 315 sq.km block covering the South Hutti greenstone belt. This tract contains several promising prospects. The company has been working on a few prospects in the South Hutti project based on highly encouraging gold values obtained during preliminary geochemical sampling.
Dharwar –Shimoga Belt – The company has 5,329 sq km area under 3 Reconnaissance Permits blocks which cover a major portion of this belt that is 155km long and 100km across.
Ramgiri Gold Field - The Ramagiri RP block comprises the well known 13 km long Ramagiri Gold Field (RGF) that was a scene of intensive underground mining activity by the Britishers in the early part of the last century. Until April 2001, the Government of India owned Bharat Gold Mines Ltd. (BGML) was operating the underground Yeppamana Mine in the RGF.
Gold Exploration –An International Perspective & Potential in India:
Gold has been historically mined internationally in countries such as Australia, Canada & South Africa.
Production of Gold:
Australia - about 300 tonnes per annum of which three quarters come from Western Australia.
Total world production - about 2400 tonnes
India - average production of 3 tonnes per annum
India is a country rich in mineral resources. More than 20 million tonnes of proven, probable and possible gold ore reserves have now been identified (Source: World Gold Council) Yet, India’s annual gold mine output is only around 3 tonnes and 6 tonnes as a by-product of copper mining.
India’s gold mining history dates back to some 8000 years with more than 900 gold mining and innumerable gold panning locations. The land of the world famous Kolar Gold Fields and the largest consumer of gold on earth, India has however suffered in developing it’s gold mining potential due to lack of adequate exploration expenditure and the policies of the governments.
The liberalized policies and strong economic growth outlook, is reviving the mineral exploration and mining sector through foreign and Indian private investment. Deccan Gold with some of the best gold prospects in the country, geologically similar to areas that have been home to major world gold discoveries, is playing a leading role in this revival. The Indian terrain is easily accessible but under explored. The potential for gold discoveries in India is substantial.
Deccan Gold Mines has been undertaking Systematic exploration and Drilling programs at the various prospects in the projects being undertaken by it. The drilling results in the Hutti Fields and Dharwar –Shimoga belt have been particularly very encouraging.
Other Developments:
Deccan Gold Mines has entered into an Agreement with De-Beers India Pvt. Ltd., Indian subsidiary of De-Beers, world’s largest diamond mining company, whereby Deccan Gold has granted De-Beers the right to explore for diamonds in all its exploration areas. In return Deccan Gold will obtain the right to explore for Gold and other minerals in De- Beers exploration areas in India. The agreement also involves exchange of exploration data between the two companies.
Recently, the company has allotted 70 lakh shares and 1.10 crores Warrants with an option to convert into shares at Rs.15.10 per share to Sun Mining & Exploration Ltd., a company incorporated in Cyprus.
Conclusion:
Deccan Gold has made applications and/or acquired control over a very large portfolio of exploration blocks covering an area of 10,403 sq kms spread in the states of Andhra Pradesh, Karnataka, Kerala and Rajasthan. Moreover, the exploration activities on Dharwar Shimoga block and North Hutti block have provided highly encouraging results.
The probability of success in these fields is high, which can catapult the stock into a different orbit.
Deccan Gold is not a trading stock – the stock is suitable for long term investor with an appetite for HIGH RISK. Gold Exploration is a capital intensive industry where the rewards may not be immediate – they may come after years of perseverance and hard work and then too are uncertain. The advantage Deccan Gold has is that the company being one of the first private sector players in the industry is sitting on some of the most prospective blocks. The company has been working on these blocks for years and substantial capital & human resource has gone into the exploration process. The other factor which inspires confidence in the business is the fact that Gold Exploration is still in its infancy in India. Even though India has a geology and metallogeny very similar to Western Australia and Africa and India’s pre-cambrain auriferous greenstone belts are geologically comparable with those of Western Australia and Southern African gold bearing greenstone belts, the country’s share in Gold production is minuscule compared to countries like Australia and Africa. With very few private players, there is a Huge Unexplored potential.
Long Term Investors can accumulate the stock at the current price and on declines.
RECENT DEVELOPMENT:
Deccan Gold has Concluded MoU with JB. Details are given below.
Announcement:
Deccan Gold Mines Ltd has informed BSE that the Company has concluded a Memorandum of Understanding (MoU) with JB Mining Holdings Ltd, Hongkong (JB)."DGML", announces the signing of a Memorandum of Understanding (MoU) with 38 whereby DGML shall carry out the entire gold exploration, resource estimation and planning for feasibility studies to facilitate mining activities for Projects held by 38 in the Republic of Djibouti, North East Africa.
The salient features of the MoU are as under;
a) JB has entered Into a Joint Venture (JV) with the Government of Republic of Djibouti to undertake gold exploration activities in certain mineral prospects in Djibouti.
b) The mineral prospects proposed to be explored are the blocks of Hesdaba, Asaleyta, Garrabayis and V.GPS41 respectively The area covered by each one of these 4 prospect blocks is 100 sq., kms
c) The exploration strategy for the aforesaid gold prospects would include remote sensing studies, geological mapping, systematic channel sampling followed by planning of boreholes and core drilling, core logging and analysis of cores and fire assay for gold and silver.
b) The mineral prospects proposed to be explored are the blocks of Hesdaba, Asaleyta, Garrabayis and V.GPS41 respectively The area covered by each one of these 4 prospect blocks is 100 sq., kms
c) The exploration strategy for the aforesaid gold prospects would include remote sensing studies, geological mapping, systematic channel sampling followed by planning of boreholes and core drilling, core logging and analysis of cores and fire assay for gold and silver.
d) 38 has appointed DGML as the Project Manager to carry out the entire exploration work and ascertain feasibility of the Projects to commence commercial production.
e) 38 proposes to execute the Projects through an SPV (JV Co.,) to be incorporated in an off shore jurisdiction. The JV Co. shall be primarily responsible for execution of the Projects in Djibouti.
f) DGML shall be entitled to a Professional Fee, equivalent to 10% of the total operational & management cost of the Project over and above getting reimbursed for all its direct and indirect costs in under-taking its role as Project Manager.
g) Further, DGML would get free carried equity in the JV Co equivalent to 5% of JB's equity stake in the iv. Further, DGML has the right to take up an additional equity stake in the JV Co., equivalent to 20% of is stake in the JV at a 50% discount to the Market Value of the Project. DGML plans to exercise this right should exploration activities result in the successful discovery of mineable deposits.
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