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Premier Management – Initiating coverage: Speculative Buy at 2.925p with a 6.0p target price

Premier Management Holdings is a shell company which is now moving into gold exploration in the highly prospective Tien Chan Gold Belt in Kyrgyzstan having disposed of its legacy football management business – on 21st March the company raised £2.12million at 3p to further its ambitions. The Tien Shan Gold Belt appears to be Elephant Country as it hosts a number of massive world class gold deposits and is probably one of the richest gold regions in the Earth’s crust. Premier has become a clean shell into which mineral exploration interests are going to acquired, in a transaction masterminded by Irish entrepreneur John McKeon who is came to the attention of investors for his involvement in Circle Oil, a company that that he help take from start-up to one with a market capitalisation of £200 million.

The Company will be focusing its attentions on Kyrgyzstan – the third largest gold producer amongst the Commonwealth of Independent States (CIS) after Russia and Uzbekistan. Kyrgyzstan is peppered with gold deposits which include major sites like Kumtor (17 million ounces), Makmal (5 million ounces), Chaarat (4 million ounces) and Jerooy (3 million ounces). Kyrgyzstan covers an area of 198,500 square kilometres but has a population of just 5 million people and despite its high prospectivity for gold and rare earth metals, it remains largely unexplored. A lot of this prospectivity results from Kyrgyzstan containing part of the 2,500 kilometre Tien Shan gold belt hosts a number of mesothermal-type world-class gold deposits such as Muruntau, Zarmitan, Jilau and not to mention Kumtor.

Premier has an option to acquire Central Asia Resources Limited (CAR) which is investing, and has signed protocols on, natural resources projects in Kyrgyzstan which includes the Cholokkaindy Project gold exploration licence. Cholokkaindy is the site of an old underground trial lead and tin mine where gold values have been recorded as high as 38.8g/ t. The prospect has four known prospects for the team to start to explore in area where many mineralised lodes have already been discovered. The main target is the Talbaital Prospect where an initial 1,200 metre zone of high gold values has been identified with potential for extension both to the north and south of the current explored section; and where the highest gold values have been discovered to date. This project was chosen after a regional assessment of more than 300 gold occurrences in northern Kyrgyzstan by an experienced exploration geologist.

Premier has been given the structure of a mining finance house that secures projects and then provides the funding. The Company will be gaining important economies of scale in project management by an innovative move which involves employing the services of long term Russian exploration player Eurasia Mining to provide on-going technical support and management to Premier. Eurasia has tremendous experience of advancing platinum group metals exploration projects both in the Urals in Central Russia and also in the Kola Peninsula in North West Russia. Eurasia’s Managing Director Christian Schaffalitzky has become a Non-Executive Director of Premier.

The new board will be assisted in its endeavours by consultant John McKeon who helped Circle Oil grow to become an international oil and gas company by assembling a portfolio of attractive assets in Egypt, Morocco, Namibia, Oman and Tunisia. He has already proved the worth of his network of contacts both in industry and natural resources ministries government in Asia Africa and the Middle East with the impressive value creation seen at Circle Oil and his work in starting to turn AIM-quoted Niche Group into a Turkey-focused gas explorer/producer. At the same time McKeon has developed an equally consequential business network in mineral resources which is evidenced by Mr McKeon being founding shareholder of IM Minerals which has recently been reversed into Pathfinder Minerals. In this move Pathfinder Minerals is now an exploration company with impressive licenses over titanium dioxide prospects in Mozambique which lies fairly close to FTSE 250 constituent Kenmare Resources’ operations in the North of that country.

Examining the experience of the Chinese group that is working 15 kilometres away, it is not beyond the realms of reason that Cholokkaindy might have four targets with 500,000 ounces of gold. Based on peer group analysis we have placed a perceived valuation on the Premier 80% stake in this project at £24.4 million which would be worth 3.5p per share (on a fully diluted basis assuming 700.53 million shares) which is quite comforting as it does show that the current price is underpinned by our perceived valuation of Cholokkaindy.

It does looks as though Cholokkaindy will be just the beginning of Premier’s planned foray into the high prospective Tien Shien gold belt in Kyrgyzstan where many multi-million ounce gold resources have already been identified. The Company has a board that understands how to go about doing business is Kyrgyzstan and has already demonstrated the wealth of its local network with the Cholokkaindy deal. The funds raised recently seem to have sufficient headroom to allow the Company to embark on further investment in Kyrgyzstan to gain more licences or stakes in projects. Given the elevated valuation that some gold exploration companies are attracting in the current market, plus the combination of gold in Kyrgyzstan, the proven deal making skills of John McKeon and the mining expertise of Russia specialist Eurasia makes for a potent cocktail. We have no hesitation in suggesting that the Company could attract a potential valuation in the future of £42 million including the recently raised funds which would equate to a fully diluted target price of 6.0p per share. We initiate our coverage at 2.925p with a stance of speculative buy and a target price of 6.0p.

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