Can Blackham Resources Dodge the Scepticism Discount?

John Robertson

PortfolioDirect

Gold companies frequently appear cheaper than their foreshadowed cash flows for good reason. The industry is habitually long on promise and short on delivery. Value is normally contingent on a series of interdependent events making achievement of all necessary development preconditions a low probability. Limited resource bases constrain operating lives requiring ongoing funds to sustain businesses. There are hardly any examples of gold producers returning material amounts of anticipated cash flows to shareholders. Blackham Resources has an apparently compelling investment proposition. The company, with a current market value of $37 million, intends to invest $30 million to generate EBIT of $40 million a year starting in 12 months. It should be better positioned than most to overcome the prevailing scepticism discount but one has to assume it, too, will succumb to the temptation to spend its cash flows unless it is bought by another company first. Blackham could be a target for a bigger group. Its assets are in a historically productive location and it has successfully bundled regional assets itself to get to where it is.


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John Robertson is Chief Investment Strategist for PortfolioDirect a provider of resource sector investment stock ratings and portfolio strategies for mining and oil and gas investors. He has worked as a policy economist, corporate business...

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