With us today is Frank C. Smeenk President & Chief Executive Officer of KWG Resources Inc. Mr. Smeenk discusses recent conversation with Noront Resources after proposed acquisition of Cliffs Chromite was announced.
Canaf investors surely noticed the latest press release, stating the company could be awarded up to 10M$ in a lawsuit against the Uganda government started 5 years ago. In brief, the Uganda government decided to nationalize a property which Canaf partly owned. A lawsuit was initiated by Canaf for compensation on their losses. Everything seems to point towards an imminent settlement in favor of Canaf. Should the maximum be awarded to the company, this would represent 22 cents per share of cash infusion.
With such influx, the company can eliminate all its debt, consider growth opportunities or even provide a dividend to existing shareholders. Without a doubt, any meaningful amount announced shortly will provide a price spike, confirming its price multiplication potential.
Had it not been for a diamond property write-off in Q4, Canaf would have declared about 1M$ of net profits in 2010. The underlying price to earnings multiple is already showing an undervalued state, and any windfall from this lawsuit should catapult the stock price outside of its current boundaries. Savvy investors reading this board have definitely witnessed several picks I made with logical and accounting based argumentation to support my claims, and Canaf falls in the same category, with promising price multiplication possibilities should logic repeat itself.
Canaf surprises investors, hopes to receive millions 2011-03-25 12:31 ET - Street Wire by Stockwatch Business Reporter
Last summer, when shares of Canaf Group Ltd. could be bought for 1.5 cents, few knew a $10-million windfall might be in the offing, but that happy event now seems possible. Last week, the company surprised investors with news that a "lengthy litigation dispute" in Uganda was approaching a settlement. Apparently the legal battle has been going on in faraway Africa since 2007. Unlike most lawsuits, this one has no downside for Canaf. The company's law firm, Uganda-based MMAKS Advocates, is working on a no-win no-fee basis, so Canaf has no legal bills. If it loses the dispute, it will lose a project that it has already written off; if it wins, it could receive its share of up to $10-million.
The last time investors heard about Canaf's Ugandan efforts was in 2006. In June of that year the company (then Uganda Gold Mining Ltd.) reduced spending at the past-producing Kilembe copper-cobalt mine, a joint venture with state-owned Kilembe Mines Inc. It was having trouble acquiring a nearby processing plant necessary to bring the mine back into production. By August, 2006, Canaf decided to stop all spending on the project.
A year later, in 2007, the Ugandan government decided to privatize Kilembe Mines and sell all its assets, including the old copper-cobalt mine. Canaf sued, claiming Kilembe did not honour its obligations under their joint venture agreement. Canaf is seeking $10.37-million in damages and a permanent injunction to stop the Uganda government from privatizing Kilembe, according to AllAfrica.com reporter Hillary Nsambu.
In 2009, as reported by several media outlets, a high court granted Canaf a temporary injunction, stopping the sale of the Kilembe project until the case is resolved. Canaf consultant Christoper Way confirmed the injunction and told Stockwatch that "any use of proceeds will be applied to furthering the company's ambitions in Africa and enhancing shareholder returns."
A multimillion-dollar settlement would be welcome by the company, which is barely turning a profit in South Africa. There, it is producing and selling calcine, a substitute for coking coal in the production of steel and manganese. For the year ended Oct. 31, 2010, Canaf earned $551,552 on revenues of $11.8-million. It attributes the largest portion of its expenses, $8.1-million, to purchasing the raw anthracite coal, and the second-largest portion, $481,910, to high electricity costs. The company says it is trying to find ways to reduce its dependence on South Africa's unreliable energy provider, Eskom. Canaf's largest shareholder is chief executive officer David Way, of South Africa, with 4.87 million shares. For shareholders who might wish to visit Canaf's calcine plant, Mr. Way also runs a 4,000-hectare game reserve, Bonamanzi, nearby. A safari package for two costs $120 a night. Bonamanzi is home to several species of exotic animals, including crocodiles, warthogs and impalas.
The above is simply my personal understanding and not to be construed as investment advice. I’m not a broker, promoter, director, manager or employee of the aforementioned company, just a shareholder. Some typos could have occurred, do your own due diligence.