Torque Metals Ltd is raising $2,000,000 through a public offer of 20,000,000 Shares at an issue price of $0.10 each.
Torque Metals Key Points
- Small highly leveraged gold play
- Two major projects in key WA locations
- All underexplored by modern methods
- Paris project near important Boulder-Lefroy Fault
- Paris/HHH gold project has 32koz Indicated resource on existing Mining Lease
- Inground value >A$80m Net value ~A$16m (min)
- Bullfinch gold project has good exploration prospects
- Pre money value of Torque is only A$4m
- A$2m @ A$0.10 IPO closing 3 July
- Very good Independent Expert’s Report in Prospectus
- Listing on SSX in mid July
- Term Sheet and Prospectus attached
Call me to discuss investment here. +61 2 9222 9111
For a public offer of 20,000,000 Shares at an issue price of $0.10 each to raise $2,000,000.
Oversubscriptions of up to a further 5,000,000 Shares at an issue price of $0.10 each to raise a further $500,000 may be accepted.
SSX Code: 8TM
Lead Manager
Martin Place Securities
AFSL 291787
bdawes@mpsecurities.com.au
Phone: +61 2 9222 9111
www.mpsecurities.com.au
SSX Sponsor
Trident Capital
AFSL 292674
http://www.tridentcap.com/
Important Information
You must read this important notice before you attempt to access the electronic version of the Prospectus through this website. The information on this page is not part of the Prospectus. If you do not understand it, you should consult your professional adviser without delay.
Lodgement of Prospectus with ASIC
The paper form of the electronic version of the Prospectus (including its attached Entitlement and Acceptance Form) accessible through this website has been lodged with the Australian Securities and Investments Commission.
No offer of securities is made on the basis of the electronic version of the Prospectus accessible through this website. An application for securities can be made by completing the Entitlement and Acceptance Form attached to or accompanied by a paper form of the Prospectus and then lodging the form and the application monies in accordance with the details set out in the Prospectus and the relevant Entitlement and Acceptance Form.
No Advice
Nothing contained on this website or in the Prospectus constitutes investment, legal, business, tax or other advice. In particular, the information on this website and in the Prospectus does not take into account your investment objectives, financial situation or particular needs. In making an investment decision, you must rely on your own examination of the Company and the securities and terms of the offering, including the merits and risks involved. You should consult your professional adviser for legal, business or tax advice.
WARNING
For legal reasons, the electronic version of the Prospectus accessible through this website is available to persons accessing this website from within Australia and New Zealand, only. If you are accessing this website from anywhere outside Australia and New Zealand please do not download the electronic version of the Prospectus.
The Prospectus does not constitute an offer of securities in any jurisdiction where, or to any person to whom, it would not be lawful to issue the Prospectus or make the offer. It is the responsibility of any applicant outside Australia and New Zealand to ensure compliance with all laws of any country relevant to their applications, and any such applicant should consult their professional advisers as to whether any government or other consents are required, or whether any formalities need to be observed to enable them to apply for and be allotted any securities.
It is not practicable for the Company to comply generally with the securities laws of overseas jurisdictions having regard to the number of overseas shareholders, the number and value of securities these shareholders would be offered and the cost of complying with regulatory requirements in each relevant jurisdiction. Accordingly, the offer pursuant to the Prospectus is only being extended and securities will only be issued to shareholders with a registered address in Australia and New Zealand.
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Torque Metals has two projects - One at Paris/HHH to the South of Kalgoorlie and the second at Bullfinch at Southern Cross to the West of Kalgoorlie.
Paris/HHH is near to production and surplus cash would provide additional funds for further exploration.
The Boulder-Lefroy Fault is the dominant structural feature in the Kalgoorlie region and this diagram clearly shows its NNW-SSE orientation
and the numerous subparallel structures either side.
All the largest gold mines in this region are on or very near this Boulder-Lefroy fault which is acting as the mineralised fluids plumbing system. Paris/HHH is within 50km of some very large gold deposits and the area has not had much modern exploration.
The Paris/HHH Gold Project deposit had 18koz recovered in 2017 in a small mining operation and currently has a JORC `Indicated’ resource of 32,000 ounces
on existing granted pre Native Title mining leases that should allow gold production within the next 18 months. The previous scoping study is still basically current.
Assuming a conservative 50% recovery and $1000/oz margin at A$2500/oz just this resource this would bring A$16m cash surplus to the project.
As with all mines, the increased A$ gold price will increase the total gold in a revised pit design so the resource number should be higher
Paris has good high grade zones and some old workings and good potential down plunge.
The HHH deposit has potential down dip and in the footwall.
Additional potential is noted in a sub parallel structure at Paris North where 5.2m @ 14.2g/t has been intersected.
The 68km2 contiguous granted mining lease tenements have additional potential along strike at in the sub parallel zones for Strauss and Marmaracs.
But much of this is underexplored.
Paris has also has a 10km northward extension in a 80% earn in JV with Jindalee Resources Ltd.
Some high grade intersections have been encountered including Maynard’s Dam with 3m @28g/t.
Following the share of market turnover of the ASX S&P 300 Gold Index has been a very useful task with this indicator giving us a great deal of confidence in the Dawes Points views.
So have a look at this! The Gold Sector made up 14% of ASX AllOrds turnover in the past 2 weeks and the 5 week moving average hit 12.6% while the 12 week is 7.5%. Astonishing!
I was happy that the downtrend had broken but the moving averages of the last peak in the sector have just been left behind.
There is a massive need to BUY! The market is drastically underweight.
The Index is only just starting to move and this break above 3000 should get close to 6000 in 2016.
And the Dawes Points Gold Index corrections chart is suggesting a massive rally is about to unfold.
The driver is primarily that gold stocks are still very cheap against the A$ gold price.
The Australian stocks are leading their North American counterparts but a high volume break out also occurred last week.
And I hope you recall this very long term graphic of the Barron's Gold Mining Index back to 1940.
And the North American stocks are trading at less than 25% of previous 25 year history. (plus graphic)
Gold stocks will outperform gold and probably almost everything else for the next few years.
The portfolio gives everyone a mix of size, liquidity, dividends, growth and risk so I am very happy to reinforce the selections.
Newcrest has more gold resources than anyone else and improvements will allow resumption of dividends. Northern Star is just brilliant and Oceania Gold has some excellent leverage. Evolution has acquired a massive swag of gold resources over the past couple of years and will be a big player in the Zuleika Shear zone.
These stocks will be the dividend paying cornerstones of every pension fund for the next decade.
Blackham will continue to please everyone for quite a while and my target of A$1 in my research report in early 2015 stands firm. This is a potentially very long mine life play.
Doray, Saracen, MetalsX and Gold Road among the developers are flying.
Tribune is outstanding and the market place will soon cotton on to the significance of Pegasus and the East Kundana JV. Its 140koz of gold bullion in the vaults currently worth over A$4.00 per share is an added golden bonus.
The offshore players of Medusa and Resolute are just too cheap.
The smaller growth players look very exciting and will be happy to talk to anyone about them.
There are of course many other attractive gold stocks out there( like Dacian Gold and Perseus) and they will be covered soon but let's just stay focussed for now.
And the Australian Gold Sector is leading the world out of this miserable pricing time. Gold stocks, gold, metals companies, industrial metals, technology metals, then oil, oil and gas companies and the bulk commodity producers will follow.
So participate in the gold sector now with a good portfolio approach and let's have some real fun.
I own NST, NCM, GOR, DRM, MLX, CGN, TYX, TBR, BLK, TNR, MML, RSG, GEE
8 February 2016
Edition #45
You can draw some very interesting conclusions here about sector rotation.
So when looking at Dongfang Modern here is what you find.
First of all I hope you expect that the Due Diligence carried out on this company is of a high standard. The Legals were overseen by Piper Alderman and the accounts were reviewed by PKF Lawyers. The accounts have been audited since 2009 by PKF Hong Kong so the data is reliable. The cash on the balance sheet is actually there!
I have made mention previously that this has to be the most impressive set of accounts I have seen in my +30 years.
This company was set up in 2005 and in 2008 the current Chairman injected about US$6m to acquire an 89% holding.
This was the last capital injection to the company. No more equity and no debt at all.
The plan was to acquire as many plantations as possible and by 2012 it was 9 plantations over 4500 hectares and by end 2015 it will be 19 plantations over 9,000 hectares.
That initial investment of US$6m in 2008 has probably provided the highest multiyear IRR ever recorded. After A$57m (A$ equivalent) earnings in 2014 DFM's June 2015 Interim showed Retained Earnings of A$216m. All done without additional equity capital and without debt.
These numbers are attractive and make interesting reading. 2015 and pre 2015 are PKF numbers and the forecasts post 2015 are Dawes Points alone.
The company is now probably the largest citrus grower/harvester in China with about 1.3% market share by revenue in a very fragmented industry. So many industries in China seem to be highly fragmented and the aggregation and consolidation process there has probably twenty years more to run. These are important business drivers and help to show another side of China.
Paradigm carried out major financial due diligence and modelling and made a site visit to several of the plantations.
Detailed forecasts were made based on all available published information and then some conservative assumptions were made.
Growing and harvesting citrus produce isn't all that far from something like coal mining.
You have a resource (trees) that should give a certain grade (harvest) with output of net fruit (grade) and at an expected recovery (yield). The selling price is the market price so revenue is saleable output time's price. Costs are roughly fixed so improved yields and productivity improvements can increase volume without fixed costs rising. Dongfang is hoping improve yields by about 4-5% pa for the next few years. So output should rise and costs rise less so.
Output will also rise as additional plantations are acquired.
Prices have been rising over the past few years too because demand has been stronger than supply and supply growth.
Dongfang's operating margin has been over 40% for the past few years and it expects to will stay high.
A study of future earnings for the next decade based on increasing tree volume through plantation acquisition, rising labour cost (which they are doing), modestly improving harvest yields and marginally higher product prices gave some quite astounding numbers.
Dongfang was #2 by sales revenue in 2014 with 1.2% market share after AIM listed Asiatic Citrus but the increased output to 230,000tpa in 2015 by Dongfang coupled with a couple of operational issues for Asiatic Citrus should now make DFM #1 with about 1.3% market share.
Market leader with 1.3% market share reinforces this fragmented industry concept.
Dongfang would like to go to 4-5% market share over the next several years so that implies organic and acquisitional growth
The numbers for Dongfang as assessed from public information by Dawes Points look like this with historic data in RMB and converted to A$ at historic rates or using the IPO Prospectus forecast of RMB 5:A$1.00.
This Valuation Matrix shows DFM's P&L and Balance Sheet in one and also gives a valuation target for DFM.
Note three years earnings history, the current year estimate and three years forecast for EBITDA on a product basis (note the very low D&A levels) and no interest cost.
Forecasts are deliberately conservative on prices, output, acquisition growth and costs but still show earnings rising steadily rather than surging.
The staff levels are low (only about 100 people) so administration expense is low and all harvesting is by contractors so EBITDA for each product is net cash. Note no tax is payable on earnings from agricultural food production and that almost all earnings have been reinvested, with capex mostly into acquisition of additional plantations.
The balance sheet is cash-rich without debt and EBITDA against estimates of sector assets gives a Return on Investment (on book value) of 30% overall and almost 100% for tangerines.
If we put each product division on 5x EBITDA, and add the cash, the appraised value for DFM is over A$500m and A$1.47/share compared to the IPO price of A$1.00.
Note that the forecasts have used 5:1 on the exchange rate, well above the current level, so A$ earnings would be higher with today's 4.62:1.
I expect over time that the market will give a much higher rating after DFM delivers on its plans.
Dongfang Modern is one of the largest China operations listed on ASX and shouldn't be the last.
If you came into the IPO, (and thanks for your help), you probably only came in in a modest contribution.
If you haven't, the hard work has been done so you should now be able to come in at lower entry risk to share the gains.
Barry Dawes
19 October 2015
I own DFM and Paradigm was the lead manager of the DFM IPO.
Edition #42 
Iron ore has seen a 50-60mt global stock drawdown while crude steel output has remained firm. Port stocks have fallen back to 80mt after reaching 110mt earlier in 2015 and steel mills’ stocks are well down. Some restocking is coming.
Then we look at some other simple data like Qtly annualised GDP growth and Indexed GDP. No economic collapse here.
Source: China National Statistics
And then something even simpler as average annual personal disposable income in China. At <5 RMB :A$ this is ~A$6,000pa in the cities and just ~A$2,000 in the country.
Source: Dongfang Prospectus
China is growing and its citizens are becoming wealthier.
Diets are changing. More protein. More fruit and nuts. And less cereals.
Source: Dongfang Prospectus
So demand for higher quality, unadulterated, clean healthy food is rising. So are prices - as demand can’t match supply and flows into imports.
Source: Dongfang Prospectus
You are all familiar with the 100m people moving from rural areas to the cities. Well you might like to imagine that farm food output suffered somewhat and led to rising food prices. The PRC government, eyeing their remaining 800m farmer supporters, reacted as true agrarian socialists by exempting agricultural food production from Enterprise Income Tax and personal income tax and VAT. At least until 2025.
So now you have a major market of 1400million people that just wants more and better food.
Having 800 million individual farmers means a lot of individual farms. Try about 10 million!
So lots of little inefficient farms. Fragmented industries I think is the term.
Now how to play it.
Here we come to Dongfang Modern Agricultural Company.
Could it get any better?
This company was set up in 2005 and in 2008 the current Chairman injected about US$6m to acquire an 89% holding.
This was the last capital injection to the company. No more equity and no debt at all.
The plan was to acquire as many plantations as possible and by 2012 it was 9 plantations over 4500 hectares and by end 2015 it will be 19 plantations over 9,000 hectares.
In calendar 2014 DMF earned RMB 315m ( ~A$56m) and in 2015 this should be over RMB 370m (~A$75m but over A$80m at the current exchange rate). How many Australian companies make this amount of earnings? And at a 43% margin? Without any debt?
The company acquires uncapitalised plantations from village cooperatives and manages them professionally. It then takes the products that were generally suitable only for local town markets and sells them in high volume premium markets in supermarkets and hotels for double the price.
Margins are over 40%. And no tax.
The villagers are happy. They get to sell or lease out their plantations and still get to work as harvesters.
The PRC government is very happy because plantation productivity is significantly better and output is rising. Food quality is improved. Food adulteration risks are lowered. Imports reduced.
Shareholders are very happy because the returns are strong and the risk and volatilities are low.
The returns on paid up capital of just ~US$10m are huge while the returns on shareholder funds which includes RMB 1,000m in retained earnings (~A$180m) are over 30%.
Can you find a better company track record anywhere? In any industry?
Taking the next step, DFM is the second biggest producer by revenue of citrus in China. Produces over 200,000t with just over half being tangerines (mandarins to us) - which is more than Australia’s total of mandarins.
It has about 1.1% market share in these very fragmented industries. Aims to have a much bigger share over the next few years. Wants to be the market leader.
So there. Market leader in the world’s largest and rapidly growing consumer market producing a consumer staple that is in rising demand.
High margins, PRC Govt support in almost everything it does, no debt, and 10-15 years of growth ahead.
What more do you want?
The Shanghai and Shenzhen markets are volatile but have a look at some more sedate alternatives. These ETFs might give you a better idea of listed stocks in China. Not overextended.
I can only conclude that those who gave us warning of the US Greater Depression in 2009 and the Collapse of the European Banking System (over 2009-2015) are just as accurate on the Collapse of China (2010-2015) and that over the next 12 months all those in the market places now sitting on vast hoards of cash (A$17.17bn here in Australia, >RMB 100Trillion (US$18tn) in China and so on all around the world) will be in buying all these stocks.
Stock markets have been climbing a wall of worry for years now and many investors are out.
Many funds are loaded up with ridiculously overpriced and very dangerous bonds or are sitting on mountains of cash.
Meanwhile, so many indices around the world are at or very near all time highs while the bears keep calling the next Crash.
And just think. Half the world is already sitting cautiously in these highly defensive investment positions and 10% has been (we in the Resources Sector)thumped by falling commodity prices. 40%, especially in Asia, is just having a great time. Corporations also have mountains of cash too.
And just like Sydney property sellers are finding, the supply is just not there to quickly get back into the market.
So think about China just beginning to hit its straps as hundreds of millions of increasingly wealthy consumers demand more and higher quality products. And as industry and commerce utilise all of China’s amazing new infrastructure that is assisting with the consolidation of its many internal markets. We are seeing the rise of hundreds of well positioned growing companies who are just totally unaffected by what Janet Yellen thinks.
Dongfang Modern is one that the ASX is lucky to get and I am sure there will be many more quality Chinese companies offering ASX investors an eye and a dividend link into China.
So don’t delay. Fill in that application form or contact me - 
The comparison of the Shanghai index against the FT 25 Index shows the top 25 hardly overextended at all. The pull back is classic. Off to new highs. These blue chips are doing just fine.
China Globalx Financials Index
This says bull market only just starting and still on <10xPER.
China Globalx Industrials Index
Only just starting here too.
China certainly is an immature market with high volatility but look at the Hong Kong Hang Seng.
Hong Kong Hang Seng Index
And for a bit of history and volatility just see what happened when Shanghai opened in 1991.
Clearly an immature market.
Up 1300% then down 73% before running 300% to new highs. All within 24 months.
And how are the other major markets round the region coping with China’s supposed meltdown?
Japan? Yawn. India? Cruising.
Japan’s Nikkei
India’s National Exchange Nifty Index
And China’s steel industry still hasn’t collapsed.
Steel consumption in China has been lower but exports to ASEAN and now India are rising and should exceed 100mt in 2015.
And China port iron ore inventories have been down more than 25% from the highs.
An apology here on incorrect comments about the low volumes in the iron ore futures markets. The data on the Dalian Commodity Exchange gives stupendous volumes of over 1,500 million tonnes per month which is about the same volume as annual seaborne trade. It seems everyone trades in it.
So the outlook on these simple indicators is not one of collapse but probably a bottoming and resumption of world growth.
Don’t forget that Dawes Points has highlighted the current or looming deficits in most LME metals and the continuing declines in their LME inventories.
Australian resources stocks are so cheap and the latest production data pre the formal June Qtr Reports show some cash laden gold companies on very low single digit PERs.
More on this next time but for the moment let’s just focus on China.
So coming back to Dongfang Modern Agricultural with its 200,000 tpa of citrus and camellia fruit produce generating A$175m revenue and A$75m forecast earnings and looking for another twenty years EPS growth, what is there not to like?
The IPO roadshow starts this week and include presentations through Wholesale Investors (
Dongfang Modern will be available through ASXBookbuild so if you do not have an account with Paradigm you can apply for shares through your broker.
14 July 2015
Edition #38 
China Industrials Index ETF
China Financials ETF
These are not over extended markets in my view.
In India the picture is much the same. Market has surged but is not over extended given the correction of the past few months. The two main indices are the BSE 30 and the NSE 50.
The Bombay Stock Exchange Sensex Index
And the Nifty Fifty National Stock Exchange Index
The India Fund is seeking to raise a minimum of A$35m and a maximum of A$100m at A$1.00 per share and will have a 1:1 loyalty option (only available to shares purchased in the IPO and held to the entitlement date of 6 months after listing) with strike price of A$1.00 and expiry date of 18 months after vesting.
