2011 Yearly Report

I was not sure whether I should write a yearly report or not as most of the information on each stock is covered in my “Stock Name: Year in Review” (I know I still need to do one for MHM) and “Where do I see my stocks going in 2012” posts. However, I have decided to put together some brief analysis so that I can review this post in the years to come.

CODE:	Purchase Date:	Original Price:	Current Price:	Percentage Increase/ Decrease:	Weighted Increase/ Decrease:
XJO	28/04/2011	4873	4056	-16.77%	n/a
MHM	30/11/2011	1.01	0.855	-15.35%	-2.53%
KGL	7/11/2011	0.10	0.12	20.00%	1.67%
KGL	27/10/2011	0.09	0.12	29.03%	2.74%
KGL	31/08/2011	0.10	0.12	20.00%	3.15%
OBJ	11/07/2011	0.02	0.019	-9.52%	-1.16%
OBJ	20/06/2011	0.02	0.019	-9.52%	-0.83%
MHM	31/05/2011	1.20	0.855	-28.45%	-4.73%
OBJ	28/04/2011	0.03	0.019	-24.00%	-2.98%
					-4.68%

The above table details the purchase date and price of each stock in the portfolio, as well as the percentage increase/decrease and weighted percentage increase/decrease. I have then tracked the XJO at the top of the table with a starting date that aligns with my first purchase of shares in OBJ.

As you can see from that date (28 April 2011) the ASX 200 has decreased by 16.77% until its close on the 30^th of December 2011. During that same period the value of my stocks have decreased by 4.68% (this figure is different to the Dec monthly figure as it includes the effect of brokerage). It also does not take into account that fact that part of the portfolio still remains in cash and is unaffected by the moves in the market. If that was to be incorporated then the impact on the weighted value of my portfolio would be slightly less.

Overall I am pretty pleased with the effort. Obviously I would have liked one or all of my stocks to break through in 2011, however, I think 2012 is shaping up to be a positive year. In summary I believe that outperforming the market by 14 odd % (even if it was still a loss) is fairly reasonable for the start of my first full year utilising this strategy.

Kentor Gold: 2011 - A Year In Review

I know this is a little bit late in coming out seeing as we are already five days into the new year, but as they say better late than never. The first yearly review I did was on OBJ Limited and in that instance I went through each announcement and summarised what had been happening. In Kentor’s case it is much easier to discuss each of their projects in a general sense as all the material items can be condensed into a couple of paragraphs without repeating information and boring you all to death. I have however spent today re-reading Kentor’s announcements just to re-familiarise myself with the year that was 2011.

Some of the most important news arguably came in the first half of the year when Kentor’s Andash project started to face delays. It is important to keep in mind that this project was bought as “development ready” and management certainly hoped to get it off the ground within the year. Unfortunately for Kentor political interference, a court case surrounding the 20% of the project not held by Kentor and local opposition to the project resulted in delays. However, what is one man’s problem is another man’s gain as this provided an environment that saw the share price trade at 10 cents and under and resulted in me seriously considering the stock for my portfolio (and later on making a number of purchases).

Kentor Gold also announced plans to acquire Jinka Minerals in April 2011. At the time there was speculation that this was to take the focus off Andash and the delays that were occurring in the Kyrgyz Republic. This however was dismissed by management who stated that the aim of Kentor was (and continues to be) to acquire and develop late stage projects. If Kentor wasn’t a good investment on Andash alone then the takeover of Jinka Minerals certainly boosted its prospects. The acquisition bought the Burnakura Gold Project, Gabanintha Gold-Copper Project and the Jervois Base metals project, all of which are on granted mining leases and have been mined at various times throughout their history.

As a result Kentor Gold is now in a very strong position in my opinion. Firstly they have announced their plans to re-commence production at Burnakura, with works currently underway, by mid 2012. This will provide Kentor will strong cash flow that can then be utilised to fund further exploration and development.  Next online could be the Andash project of the expansion of the Burnakura project to treat the Gold-Copper ore from Gabanintha, followed by Jervois in 2014ish (IMO) if all goes to plan. As you can see it is an ambitious plan but management have stated that their aim is to develop three mines in three years and I am backing their strategy.

Throughout 2011 we also had the results of drilling plans, surveys and initial resource statement which are obviously important, but have been previously discussed and won’t be mentioned in detail in this post.

The other projects I do want to comment on are the Bashkol exploration Licence in the Kyrgyz Republic and the Geo-Thermal Project. Firstly, the Bashkol exploration licence looks very promising with additional exploration scheduled to take place in 2012. I am a firm believer that additional opportunities will be presented to Kentor Gold within the country once they are able to get Andash off the ground and run it profitably. Obviously there is a long way to go with Bashkol but the initial results look promising and I eagerly await any additional exploration date that will be forthcoming throughout the year.  My understanding of the site is that it is at a high elevation and on sloped terrain as a result most of this exploration work would have to be carried out in the warmer months.

Secondly, the Geo-thermal project was mentioned in a quarterly report a couple of months back. This is often over looked by the market but is a fairly simple project to get off the ground. My understanding (having spoken to management) is that it takes one drill hole to take the resource from inferred to indicated status and that they are currently waiting on a licence application. This could provide some additional cream for all holders in 2012 and is something that I am following closely.

In general 2011 has been a year of acquisitions and delays, 2012 is all able moving these projects forward and starting to generate some cash flow. I remain confident in management’s ability to execute their strategy and look forward to announcements on Andash and Jervois which are expected in January 2012.

OBJ A Year in Review

In the lead up to 2012 I will be reviewing each of my holdings and providing a brief summary of what they have achieved throughout the year. I believe this is a good time to reflect on each investment and ensure that I am still 100% comfortable holding it as part of my portfolio.

The first stock I will examine is OBJ. OBJ started the year at 2.3cents and hit a hit of 3 cents on 17 May. Since then the share price has largely trended down and along with the rest of the market hit its lows (1.5 cents) throughout August and September.

Reviewing price performance alone is however a poor judge of what the stock has achieved over the last twelve months as there have been a number of important announcements released. The first major news came on Tuesday 5 April in the form of a shareholder update. For people unfamiliar with the stock this is probably the best announcement to start with as it clearly lays out each of the partners we are dealing with the and progress the company has made:

GlaxoSmithKline (GSK)

GSK has been on board with OBJ for a number of years now and 2011 saw a continuation of those discussions. At the time of the announcement the two companies were processing well with plans for first-in-man studies.

FMCG – Strategic Alliance – Consumer Care Products

This company only linked up with OBJ in September 2010 and required a number of new test models to be developed in order to evaluate OBJ’s technology and the impact/benefit it could offer for their line of products. There was also a range of regulatory requirements to be addressed.

The announcement also provided an insight into the company’s product line with a recent university studying showing a significant increase in the delivery of key anti-aging ingredients through the upper skin surface (stratum corneum) and into the living tissues of the skin. This obviously led to speculation about what large, global skincare company this FMCG could be.

FMCG – OTC Healthcare

This company had been collaborating with OBJ since 2009 and had progressed through a number of technical evaluation and consumer studies. The results of these studies were promising and at the time of the announcement the development program had been moved to being reviewed by the FMCG’s international marketing department.

That concluded the April update, however news would follow on 17 May 2011 when our relationship with GlaxoSmithKline proceeded to the next stage. This announced detailed how we had entered into an “exclusive Collaborative Development Agreement with the objective of developing new consumer products in the field of oral health utilizing the Company’s proprietary technologies.” The announcement also said that the GSK and OBJ would be looking to develop products using two of our technologies, the Enhanced Transdermal Polymer (ETP) and the Field-In-Motion (FIM) technology.

The announcement then went on to state that “The objective of the Collaboration is to develop and commercially release Oral Healthcare projects” (bolding added for emphasis). OBJ rallied on the back of the news, however it was short lived and 17 May marked the high for the year. This announcement, more than any other, really highlights to me how the market fails to place any value on the progress OBJ has made. Here we have a company stating that they are working towards the development and commercial release of a product and all the market can manage is one strong up day before it falls by the way side again. Investing in bio-techs is therefore not for the impatient or faith-hearted.

Moving on, we had the announcement of the “Pain Patch Development Program” I will admit that when this was first released I was somewhat annoyed at the company’s apparent change of direction. There was a lot of “panic” by certain posters on HotCopper at the time and speculation was rife that a partner or two had jumped ship and OBJ was now going it alone. Fortunately, this was not the case, and upon review it is just another “iron in the fire” for OBJ. In my opinion it now appears that this development program is being pushed forward for one of two reasons:

Firstly, it may be to show our partners that we are prepared to take a product through to market ourselves if they are not towing the same line in regards to timeframes and the commercial release of products. This therefore would act as a bit of a catalyst to move things along.

Or secondly, OBJ envisage that they will be able to develop the patch and then tie in the “compound” at a later date. This appears to be the more likely scenario in my opinion and it essentially means that OBJ can say to a partner we have the patch, it works and all we need is your compound and it can go to market. Given the close links with the PNO management team, speculation is obviously centred towards a tie in with their “Thermalife” anti-inflammatory product.

News continued to come thick and fast in August and a week later we were granted “allowance” for our Dermaportation Patent in the US. The “allowance” stage all but confirmed that we had received the patent, subject to OBJ paying some processing fees. An important, but often overlooked aspect of this announcement was the final paragraph which stated “Dermaportation is current being developed for a number of applications and the allowance of a US patent over this key drug delivery technology is expected to assist with partnering discussions”. In simple terms, no international company is going to sign a licencing agreement to use a technology over which there is no protection. As a result this was an important step, in my opinion, towards the ongoing development, and eventual licencing of products using the Dermaportation technology.

In October the company that had previously been referred to as “FMCG – Strategic Alliance – Consumer Care Products” in the April 2011 update announced that they had commenced negotiations with OBJ for a “Joint Development Agreement for the development and commercialisation of new products in the consumer health and beauty fields utilising OBJ’s three core technologies”.

The stock rallied a little on the news, but largely remained unchanged over given the relative importance of the announcement. Here we have a company that says they want to develop and commercialise new products, yet the market hardly bats an eye lid. On top of that the company wishes to use all three of our core technologies. This gives the market solid proof that not only does the technology work in a laboratory setting but it is able to be utilised in real world products and is being considered by a global company.

This company is also fast moving when compared to GSK and the other FMCG. They have been with us the shortest amount of time (September 201) but have already progressed to a stage where they are considering the commercialisation and development of new products. Which is very positive in terms of finally seeing an announcement that gives some sort of timeframe to market or the all-important dollar value of these agreements.

In November we got confirmation that OBJ had been granted their US patent. This was a bit of a non-event for informed holders given that research on HotCopper had located our approved paperwork on the internet well before this announcement came out.

Finally we had the AGM on 25 November. For some reason OBJ did not release their corporate presentation via the ASX and only made it available on their website. If I could have any criticism of the company, this would be it. There public relations could certainly be improved to highlight the steps the company has made and what it means for their future. That is however, a discussion for another day. What the AGM presentation highlighted was that we now have a new FMCG player on board. This is on top of GSK and the two FMCG’s announced in the April 2011 update. Furthermore a number of graphs contained within the presentation highlight the progress that has been made in 2011. In particular every project (except hygiene and surface care) has passed the proof of concept, with a number now in the concept testing and efficacy stages.

Most importantly, the Cosmetic and Skincare product line (which aligns with the FMCG who are negotiating the JDA) are on the cusp of the prototype stage which is followed by production and product launch. Obviously news about this agreement could come at any time (i.e. not just when the product is going to be launched) and is therefore, in my opinion, the most advanced of our partner programs.

Before I finish up the review I also wanted to comment briefly on the financial position of OBJ. If you review each of these quarterly announcements you can see that cash burn is extremely low (given a number of our programs are partner funded) and by my calculations OBJ should be well funded for 2012. As long as we get some form of agreement in 2012 that pays even a tiny milestone or upfront payment the need for any further capital raisings will be all but diminished.

So in summary the share price is certainly not reflective of the steps OBJ has taken over the last twelve months and 2012 does have the potential to be rewarding. However, 2011 also highlights that OBJ and Bio-tech stocks are certainly not for the impatient or those seeking instant gains. After completing the review I am very happy to hold OBJ as part of the portfolio and still believe that the potential rewards strongly outweigh any risk currently associated with the stock.

As always please do your own research and consult a licenced financial advisor before making any investment decision.