DGR Global creating exploration companies


Transcription of Finance News Network Interview with DGR Global Limited (ASX:DGR) CEO, Nick Mather

Joel Spreadborough: Hello I’m Joel Spreadborough for the Finance News Network and joining me from DGR Global Limited (ASX:DGR) is CEO, Nick Mather. Nick thanks for talking to us.

Nick Mather: Thanks Joel.

Joel Spreadborough: For investors not familiar with DGR Global, could you outline for us how the Company is structured and what you do?

Nick Mather: The Company has approximately 330 million shares on issue and we create exploration companies, which focus on very large scale resource projects. So we like to take a provincial view of the projects that we’re looking for, look for a whole base or a whole goldfield and equip it with entrepreneurial management and technically excellent management, and raise the capital to affect an ASX listing. And then DGR Global holds a major position in that Company and nurtures it through to hopefully feasibility study, or ultimately development in those projects.

Joel Spreadborough: Nick, are you able to give us a snapshot of your progress in implementing DGR’s corporate strategies over the past 12 months?

Nick Mather: Over the past 12 months, the most important project that DGR has embarked on is the creation of, and ultimately listing of, Armour Energy Limited (ASX:AJQ). We completed a $10 million seed round over a year ago now, and that was followed up in March this year with a $75 million IPO (initial public offering). DGR Global holds 75 million shares in the Company and even though the share price has fallen since the IPO, we are expecting some great technical results which should very much re-rate the value of DGR’s holding in Armour, in the near future.

Joel Spreadborough: DGR has invested in five ASX listed companies. Since we last spoke back in June, with the exception of Armour of course, which have seen the biggest developments?

Nick Mather: Apart from the listing of Armour Energy, we have taken on a new CEO and completed a number of raisings at very cheap prices in SolGold (LON:SOLG). The new CEO Malcolm Norris is ex Intrepid Mines Limited (ASX:IAU) and he was responsible for the discovery of the Tujuh Bukit project in Indonesia. We’re expecting him to deliver a similar result on our copper porphyry/gold porphyry project in Ecuador. And as a result of that, we expect a significant re-rating in SolGold and DGR Global took part in the last raising. We’re boosting our equity holding in SolGold, so that we can take part of the rerating progress.

Joel Spreadborough: DGR has also announced a sale of shares in Orbis Group (ASX:OBS) which was formerly known as Mt Isa Metals (ASX:MET). What did you sell and on what terms?

Nick Mather: We sold 5 million shares at 35 cents a share to raise working capital in DGR Global. That money has been and is still being applied to the development of new opportunities in the DGR Group. And obviously, IronRidge Resources is an important element of that process. We still have 45 million of them; it represented a very small stake from our point of view to sell and we had a quick clean willing buyer that was organised through Bell Financial Group (ASX:BFG) in Geelong, and didn’t impact the Orbis price.

In fact it’s probably helped to consolidate Bell’s interest in seeing Orbis safely through a very interesting phase of development for Orbis, where we’re going from 700,000 ounces of gold in the ground at a high grade already in Burkina Faso. And hopefully up to a much more significant resource, which will provide the basis for a development plan.

Joel Spreadborough: Let’s turn to your financials now; DGR rebounded to a net profit in Financial 2012. What’s your profit forecast for the year ahead?

Nick Mather: The rebound of the net profit was a result of the deconsolidation of the Armour accounts, when we floated Armour. We don’t anticipate selling large slabs of shares in any of our subsidiaries. So while we will continue to post our profit results as a result of deconsolidation whenever we float something off, it’s not as a result of selling outside our group substantial equities in any of these companies. We only intend to sell just enough here and there to maintain adequate working capital reserves for the DGR exploration and project generation activities. And we’re quite committed to not issuing anymore straight equity paper in DGR. There’re 330 million odd shares at the moment, we want to try and keep it at that.

Joel Spreadborough: Nick, what’s the difference between DGR’s current market cap and the value of its assets. And why is it that you think it presents good value for equity investors?

Nick Mather: The current market capitalisation of the Company is approximately $19 million. If you just went and sold our equity positions in the listed assets, being SolGold, Orbis, Armour, Navaho Gold Limited (ASX:NVG) and AusNiCo Limited (ASX:ANW), you’d be selling them at very low points in their individual market cycles. And notwithstanding that they’re down low anyway, you’d still be recovering approximately $40 million worth of value. So just on a breakup comparison, we think we should be trading about a little over double what we’re currently trading at. 

And that takes no account at all of the new opportunities that we’re currently working on generating in the Company, particularly in IronRidge which is not yet listed, but we’re working on. So given the upside in Armour, SolGold, Orbis and IronRidge, we think the ultimate valuation of the listed assets in DGR Global will be well, well, well in excess of the current $40 million. And obviously multiples of that in comparison to our listed market capitalisation, currently of about $19 million.

Joel Spreadborough: Nick Mather, thanks for talking to FNN.

Nick Mather: Thanks Joel.