SINGAPORE (Nov 25): LionGold Corp was one of the three counters at the centre of the 2013 penny stock saga. Since October that year, its share price has crashed to stay rangebound at the rock bottom of 0.1 cent on most days.
The company, in its previous reincarnation, was listed in 2005 before a shift into gold mining, following the acquisition of assets such as the Castlemaine Goldfields mine in Australia.
For years after the crash, it was funded by Value Capital Asset Management, which issued a series of convertible bonds to the company. The convertible bond programme was terminated in October this year, as two new investors from China, Yao Liang and Yao Yilun, have come on board.
The two Yaos, via an entity called Yaoo Capital, now own 72.57% of the enlarged capital of the company after paying $23 million for 23 billion new shares at 0.1 cent each. On Nov 7, Yao Liang, previously an independent non-executive director of Hong Kong-listed Mingyuan Medicare Development Co, was appointed executive director and group executive chairman of LionGold.
For the past three years, the alleged masterminds of the penny stock saga John Soh and Quah Su-Ling have been making their appearances in court as their trial drags on. Amid the negative publicity, other stocks linked to the saga such as Attilan Corp floundered; it was eventually suspended. Yet, LionGold continued its gold production.
On Nov 14, the company reported that earnings for 2QFY2019 ended Sept 30 was $1.3 million, compared with the loss of $0.4 million suffered in 2QFY2018. It reported that revenue rose 12.4% y-o-y to $18.5 million. During the period, LionGold produced and sold a lower quantity of gold: 9,182 ounces versus 9,945 ounces in the preceding year. Still, average selling prices increased from A$1,658 an ounce to A$2,143. As at Sept 20, its net asset value was 0.13 cent a share.
In its outlook statement, LionGold notes that gold might become an attractive diversifier, more effective than bonds, justifying a higher portfolio allocation than historical performance suggests. “This sentiment generally augurs well for the gold mining industry. However, the board is also wary that trade tensions between the US and China will continue to dominate headlines and stifle growth in the near future. The board therefore remains cautiously optimistic that the price of and demand for gold will remain stable in the foreseeable future,” it says.
In addition, LionGold notes that the investments by Yaoo Capital have strengthened the company’s financial position. The net liabilities of the group notwithstanding, the management adds that it is likely to have enough working capital for the next 12 months and will be able to repay its debts when they are due.
