I have been reading about Subsea resources, and I will be keeping an eye on the stock, as their first salvage operation is imminent, and it will be interesting to see what level of sucess they can achieve, measured against their expectations.



SubSea Resources has been formed to salvage cargoes from cargo ships that have been lost in deep water. Only a handful of wrecks have been salvaged in water depths exceeding 1000 metres, whereas hundreds have been worked on in depths down to 300 metres. The barrier to deeper work has been a lack of technology, which is now available mainly due to developments in the offshore oil and gas industry.

Sonar scan of wreck

SubSea Resources has identified at least 70 commercial salvage targets and has identified twenty major target vessels containing cargoes with a gross value of over $450 million (based on recent LME metal prices and contemporary lading records). In the first phase of the companys business plan it aims to raise the cargoes from six of these vessels over the next three years.


In addition, it is anticipated that certain historic cargoes may be integrated with the commercial salvage operations. Some of the historic targets have potential values of many millions of dollars each, bringing the combined value of identified historic and commercial targets to well over $1 billion.




Initial Salvage Targets

SubSea Resources has an initial programme to salvage the cargos of six commercial wrecks in the period to 31 March 2008. The gross value of these six wrecks is estimated at US$180 million.

The wrecks allow for a mix of weather conditions - allowing for both northern summer and winter working conditions. All wrecks are in international waters and all of the cargoes will be recovered through contracts with the legal owners. The water depths range from below 1500 meters to 5000+ meters.




Corporate website : http://www.subsearesources.com/index.php

MD, I wasn't arguing for a rights issue (although you may be right in saying that the company won't use one - this tends to be a last-ditch measure in the case where not enough willing investors can be found to subscribe to a placing). An equity placing is a different animal and was going by today's RNS as being a possibility.

Just to be devil's advocate, the wording of today's RNS doesn't exclude the possibility of a rights issue, as the words "equity finance" cover a variety of options. However, I don't think that SUB will be so short of takers that they'll have to go to the lengths of putting the squeeze on their shareholders.

same question really on the sp , at what price will we see a placing? could be very damaging

MD: Off the top of my head, possibly 50 - 60 million shares at 10 - 11p in the worst case. That assumes they have to raise minimum 5 mil, including a premium of 10% to cover the placing costs.

That's a 60% dilution, meaning the SP would have to hit around 10.6p to equal current market cap (17.2 mil at SP 15.5p). However, it's possible there will be at least a partial recovery in the SP, a la Stanelco, once the bad news is out of the way.


I still think there might be some mileage in a convertible bond, but they don't seem to be issued all that frequently and do present the company with more of a problem if they find themselves facing bankruptcy. However, I don't think this is likely - the recent problems have been incidental rather than fundamental IMO and can be resolved given time and funding.

How can their problems be incidental soult?
Revenue from salvaged cargoes should cover operating costs, payment of debts & produce a % profit to finance future work. It doesn't.

What I mean by "incidental" is that the problems are due to issues that are happening more or less by chance, rather than issues intrinsic to the company's business model. I refer to Stockdog's excellent post a couple of pages back in which he points out that there is a lot more certainty with this co than with minnow oilers, who mostly find dusters all the time. Also they are able to outstrip miners (perhaps the best direct comparison due to the fact that the end product is identical) in terms of time taken to get to production and sales.

Looked at like that, a bit of weather trouble and the fact that one of their supposed contractual partners in the financing has either got cold feet (for what good reason?) or is severely lacking in competence are trifling issues. SUB will arrange financing; with all small co's you have to expect some dilution along the way, so SUB will hardly be a unique case if they have to go to a placing.

If this co is really going to make a 12 month op profit of 35 mil on 50 mil revenues, you may as well make an appointment with the TVR garage now, because the potential EPS is huge.

At the point of the last results, the co hadn't had any revenues, but they are now selling salvaged cargo. As long as they just keep bringing up the goods, the rest should take care of itself.

Crikey, I've almost talked myself into buying on the spot . . . !!

The unfortunate thing about that is, you are obviously unaware of the recent demise of TVR in the U.K. I rest my case :o)

soul,

It's tough raising cash in the city at the moment apparently, so I would see an equity finance as the only option here.

So relieved I sold and took my profit, but I will consider a tranche in any placing if I have the chance, as at this low market cap, there really could be some value IMO.

LOL - you have to be joking! My brother just bought a (fairly old) Cerbera about 4 months ago! I don't believe it!

Still, my brother knows nothing about investing. And I want a BMW 1-Series anyway.

Andy, thanks for the insight; I agree equity placing looks most likely.

Wish I had the readies to get a toe in on the placing; will have to settle for grabbing some stock via the usual channels, but I agree that the market cap (even allowing for a 60% increase in shares in issue) looks cheap.

If they seriously manage to make 35 mil op profit, deduct a generous 5 mil for admin costs, leaves 30 mil, minus tax at 30%: 30 - 9 = 21 mil net profits. PE 10 gives you a market cap of 210 mil, divide by 162 million shares = SP 129.6p.

Am I being silly?

Heck, if they're going to make that kind of money, they could buy another couple of boats and seriously expand their operations.

Never mind the shares - I think I might write to them and ask for a job!

Soult, I think you might be needing my brown paper bag pretty soon if you don't pause for breath!!!
"The boy stood on the burning deck whence all but he had fled". I can think of others, but I am sure you have got the messsage by now. :o)

LOL - thanks Harry!

I will retire to the lifeboat and view the situation from a safe distance. :o)

I suspect it will be close to 10p. Management has taken its eye off the ball with the (hoped-leaseback) of the ship which faltered = gross carelessness - even with a company used to explaining away Events outside its control.

The business of Risk Management...... is NOT being good at explaining after the event....it is in having alternatives, so that each Risk is minimised - to the extent that if ( out of five ), they ALL OCCUR the overal strength of the business is not severely affected..........Not Easy....but then that why these Execs are so Very Well Paid for looking at Charts.......

. . . . . . . .. . . . . . .. . . . . . . . . . . . . .Expect some dilution with this new money -

I haven't followed SUB with my own money - but why haven;t they Factored the cargos? ie sold them on at a discount, taking the cash to pay for the recovery?
-Has this been suggested?
((It reduces profit, but it (should) eliminate risks:- in getting the metal, identifying its grade and fluctuations in Metal prices... A small bonus might be due to SUB if they raise the Metal within a tight time-scale to encourage good practice at sea, etc.))

soul* ..... please tell me you were not suckered into buying into this leaking and now foundering hulk.

It is sinking like the Titanic, not looking salvageable.

on the other hand, memory tells me that the Titanic or at least its artefacts were!

Cynic, HL, you exaggerate. I believe the point is that they have now proved they can recover the goods from wrecks in deeper water than the Titanic.

Another thought has occurred to me regarding the potential dilution: if they really do generate the kind of profits they are expecting, then there may well be a share buyback once they have some cash in the bank. Reverse dilution (= concentration??) !! Makes sense to me.

I may be a sucker (the jury has retired and has been deliberating its verdict for many long years now), however I did see a programme on German telly a few months back that followed a crew that did exactly what SUB is doing: recovering silver coin and bar using a mechanical grab, ROV and sonar and they were very successful. Admittedly they were in shallower waters than SUB but the principles were identical.

The only major snag that did occur was that the grab bucket suffered metal fatigue and sheared off from its attachment while at depth. By that stage, however, most of the cargo had been successfully recovered and the grab was bringing up more sea-bed mud than anything else. So the crew shrugged its shoulders, toasted a job well done and sailed back to land to get busy with doling out the booty. Which amounted to around 15 million of either , $ or , I can't remember which now.

Having seen it being done for real, I guess I'm slightly more optimistic.

However, I do know better than to catch a falling (sinking!) knife, so will observe and be patient.

Hangon: "gross carelessness"? If someone lets you down, they let you down.

getting gold bars from the bottom of a swimming pool is easy.
i think you will find it is the excessive depths that are the major problem.
AVOID like the plague but enjoy watching

getting gold bars from the bottom of a swimming pool is easy

The heck it is!

I had trouble with a brick when I got my Bronze Medallion for life saving.

I really am not too good a swimmer, but luckily my "casualty" was and with his help when I was towing him, we whizzed through the water at a fair rate of knots and the examiner did not notice, even though I was making quite a bow wave with my head nearly underwater.

Those were the days.