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I previously tipped Ovoca Gold in 2016 due to the extraordinary discount of its liquid assets vs. its market capitalisation, you can read the piece here. A number of shareholders, both current and past have since contacted me to express their disappointment in management, more specifically management’s lack of engagement with shareholders and consequently a share price languishing at a steep discount to fair value. During the same period the disconnect between these liquid assets has widened further, based on my calculations the market’s valuation is now just 1/3rd of the total liquid assets, i.e. £7m versus combined cash and shares in Polymetal of £19.6m.
The perception from the market is that the company has not made any material progress in any direction since 2014. Looking at the RNS archive, it shows that virtually nothing has been filed apart from what is statutorily required in past 4 years. I accept that the existing Stakhanovsky asset was hard to develop during what had been a period of lower gold prices, but what is less excusable is no evidence of any business development activities outside the existing asset base. All considered it feels it difficult to stomach that the board is currently drawing around $400,000 of salaries per annum against a backdrop of stagnation. I have therefore decided to contact management, a copy of the email I sent is included in figure 1.
I am disappointed to say that 5 days later I have yet to receive a response but to elaborate on my own position in the meantime; I believe management should commit to a strategic review of the Stakhanovsky Asset with a clear ‘go/no go’ decision, or at very least the publishing of milestones to get to a ‘go/no go’ decision. I would also propose going forward Quarterly operational updates outlining what management have achieved in the quarter. If the above cannot be committed to then it is my belief that the company should consider liquidating the company and returning the proceeds to shareholders, this could return up to a 250% gain to shareholders based on current share price.
The directors currently hold 48% of the company so it will be difficult for minority shareholders to have an impact, but nonetheless I urge all existing shareholders who share similar views to get in touch at gavin.alan.uk[@]gmail.com . Please remember to state your shareholding.
This post is purely my opinion and should not be taken as financial advice. I welcome any alternative comments and will consider adjusting posts based on information made available to me.