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Each time the amount gets smaller and each time less is raised. Less than three months since its last fund raise Sefton Resources (LSE:SER) is passing the hat around yet again. This time it has raised £650,000 gross ( call it £620,000 net) with clients of Dowgate Stockbrokers. Lucky them. The amount raised will cover about three months cashburn. Put another way it is about 18 months total remuneration (including bonuses, pension contributions, etc) for chairman Jim Ellerton, a man who runs a company that has destroyed around 99.7% of the value of an investment made in Sefton at the time of its IPO 12 years ago.
The company states that the funds will be used “primarily to fund the ongoing workover and recompletion programme as well as expanding the lease acquisition programme for future exploration and development in Kansas. Leases being targeted have been highlighted by consultant Dr Nafi Onat’s on-going engineering study and the Company’s internally developed geological maps.”
Given that the average Kansas well to date is producing 1.8 barrels per day (perhaps £40 net to the company) the company clearly needs to get an awful lot onstream to cover its local management costs in Kansas. And it costs up to $15,000 per well to do that. There are of course also Sefton’s bloated corporate overheads to fund. Given that California does not generate enough cash to cover anything like PLC costs and its ongoing maintenance capex this is not exactly a game changer.
My guestimate – based on first half cash generated from operations, production levels then and now and stated capex plans is that Sefton is still burning cash at c£200,000 pcm ( more now that it is using uber-expensive City lawyers Pinsent Masons to defend the reputation of overpaid chairman Jim Ellerton by suing me for libel). And that suggests that this latest cash is only enough to postpone the day when Jim shuts up shop ( or raises more) from around late March until the end of June.
If any private investor still has faith in Sefton I ask you three questions:
1. Yesterday at 7.02 AM Sefton issued a trading statement in which it was bullish. Some folks paid 0.9p to buy shares first thing. Seeing new stock issued today at 0.6p, do you feel used at all? Do you feel warm feelings of love towards a company that sent out that “have my baby, buy my stock signal” knowing full well that it was placing stock at a whopping discount at the time? Are you feeling the love? Go on tell me that you still want to give chairman Jim a big warm hug, stroke his greying moustache tenderly and say “thank you.”
2. Do you start to see a pattern here? Positive RNS then placing. Go back through the years. Take any year it is all the same. Concentrate now. Try not to think about hugging Jim. Just look at the facts.
3. It is suggested that I am either brave or stupid in accusing Sefton yesterday of misleading the market on October 9th. I am neither. Sefton posted a presentation on the interweb saying output then was 150 bopd. Yesterday’s RNS made it clear that output in October, September, August and in fact all months of 2012 was nowhere near 150 bopd. If that is not misleading what is? And so question three is why – being able to see for yourself in black and while how this company has behaved in the past, do you believe anything it says now?
The shares remain ones only for financial masochists and those seeking to accumulate capital losses only. Target price 0.01p.
Tom Winnifrith writes about lots of companies and subjects other than Sefton Resources but if he goes on Mastermind his specialist subject will be “misleading statements made by Sefton Resources to its investors, 2009-2012” You can follow tom on twitter @tomwinnifrith or get links to all of his free content at www.TomWinnifrith.com
Hi Tom,
Thanks Tom for saving me from Sefton, I was out of this few months ago after reading your articles, at that time I was waiting for Dr. Ali’s report and after reading your articles I checked previous RNS that Dr. Ali is preparing his report for God knows for how many years and I wonder what effect will that report have on the company whenever it will be out if it ever will be.
Tom, there is another company called ZincOx Resources, producing Zinc & Iron from waste dust from the steel industries, I got in the company at around 70p and today the sp is 27p, there is a pattern that every time RNS is out the sp drops, the company says there are teething problems and production stops every now and then but the company also says the plant works on 80% capacity or 70% capacity for rest of the time, every time the company also says that the plant is near the target throughput, it raised $6.5 Million in Nov 2012 and indications are that the money is nearly finished, if possible can you please cover this company to find out what is going on ? Is this company another Sefton in the making ?
Thanks and Regards
Pankaj
Alexis
Not up to date on Pinsent Masons charge out rates but at partner level my guess is £500-750 an hour. This is not cheap for SER.
It will merely add to the horrendous rate of underlying cashburn
t
The 650,000 gbp raised pays for 1300 hours at Pinsent Maisons. Look forward to the hearing, as this should be a very straight forward case. I think once Ellerton loses this case we shall see the SP at 0.3p.