September 2016 UK Investor Show Magazine

UK INVESTOR MONEY // SHARES // INTERVIEWS

ISSUE 15 // SEPTEMBER 2016

5 AIM frauds named - and why this nonsense has to stop

Tom Winnifrith’s 7 Biggest Investments Wishbone Gold - An exclusive interview Gary Newman’s three resource stocks to buy today UK Investor Magazine — 1 — September 2016

INSIDE

Intro

4 Three resource shares to buy for September

Gary Newman 6 I’m livid, aren’t you?

Tom Winnifrith 7 Avesco - a post Olympic buy Steve Moore 8 Five AIM frauds named - and why this nonsense has to stop

Tom Winnifrith 10 Hedge funds say the Pound is sunk…which means it isn’t Chris Bailey 12 Q&A with Richard Poulden of Wishbone Gold

Tom Winnifrith 14 Three shares to sell in September Tom Winnifrith 16 My seven biggest investments

Tom Winnifrith 17 The House View

CONTACT US UK Investor Magazine 91 - 95 Clerkenwell Road London, EC1R 5BX E: info@ukinvestorshow.com W: www.UKInvestorShow.com EDITORIAL Tom Winnifrith Editor

Welcome to a, once again belated, UK Investor Show Magazine. Once again there are more than a dozen investment ideas inside this edition plus a Q&A with Richard Poulden of Wishbone Gold, one of the darlings of AIM right now. I hope you enjoy the read.

The cover story is not about shares to buy and sell but about bringing back honesty to the financial markets. We already have rules in place to protect investors from fraud it is just that they are not applied or enforced as they should be. I know that some folks take objection when I go after a fraud in which they are invested.

But in the end unless AIM is cleansed of the frauds we will all lose as white collar criminals simply steal our cash.

Meanwhile we continue to work on the event after which this magazine is named, the UK Investor Show which takes place on April 1st in London. No kidding, this is not an April fool. We know that 2,500 or more of you will be with us on April 1 as our audience increases every year. And we are also increasing the number of companies presenting in what will be the biggest ever yet. In 2016 there were just over 100 exhibitor stands but on April 1st 2017 there will be in excess of 120. As things stand we already have more than 60 booked in.

Among the most recent companies signing up are Boohoo.com, Kibo Mining, Falanx, Guscio, Alliance Pharma, Metal Tiger, Distil and Action Hotels. Perhaps you can see a trend there? In prior years just over half of the companies attending were oil, gas and mining companies. This year I predict that well under half of those attending will be in the “hole in the ground” sector.

Perhaps it is the influence of Nigel Wray, whose family now owns half the show - Britain’s Buffett says he does not understand resource plays and almost never buys into the sector. As things stand I predict that the technology/biopharma segment of the market will be the most heavily represented at the show. And with my friend ,the Queen of tech Vin Murria back on main stage as a keynote speaker the show will have a slightly different feel to it this year.

You can check out who is attending the show at our website which is normally reasonably up to date and is at www.UKInvestorshow.com We have 20 free investor class tickets to give away with the magazine this month. On a first come first served basis they will be allocated to people ordering an investor class seat and using the promotional code MAGSEP when applying. Its first come first served.

As you may know my wife is due to give birth almost any day now.

As such Steve Moore will be in charge for the next few months at least but I am not quitting entirely and will be back with the October issue in a few weeks. I wish you all well and hope you cat fast to grab one of those 20 seats.

Tom Winnifrith Editor PS You can keep updated on new speakers and companies at the show by following it on Twitter at @UKInvestorShow UK Investor Magazine — 2 — September 2016

UK Investor Magazine — 3 — September 2016

Three resource shares to buy for September Suggests Gary Newman

C

ommodities have performed very well in the past few months, and that is making it harder to find value amongst the companies which produce them, especially when it comes to oil and gold.

I’ve been very pleased with the performances of most of the companies that I have covered here in recent months, with some of them already showing very nice rises – although I’ve purposely picked ones which I think have good long term potential rather than just being a quick trade.

Most commodities are now starting to see a bit of a pullback, and some such as copper and platinum have already tumbled quite sharply, with even gold looking fairly weak and having dropped 3-4% from its yearly highs.

Platinum has been one of the strongest performing commodities during 2016, and despite the recent pullback of close to 10% from the peak, I’m still bullish on the metal and producers

of it, and see the current weakness as a potential opportunity – I also hold longs in platinum itself.

Back in June I covered Sylvania Platinum (SLP) as one of my top picks, and since then it has been on a bit of a rollercoaster journey and at times traded at a share price in excess of 9p.

Today the company released its results for the full year up until the end of June 2016, and I think for a company with a market cap of just £21 million they made for quite impressive reading.

Not only did the company manage to increase its net profit to $3.7 million as compared to $1.7 million for 2015, but it helped to achieve

UK Investor Magazine — 4 — September 2016

that by significantly cutting its costs, and which bodes well for any further period of very low commodity prices, and for platinum group metals in particular.

Admin expenses for the year were 31% lower at $2.3 million, and cash cost per ounce reduced to $470/oz versus guidance of $700/oz, although a weak Rand will have played a big part in that, and at the same time production increased for the third year in a row and is now at its highest ever level of just over 60,000 ounces for the year.

In terms of cash in the bank, that actually reduced by $1.7 million for the year to $6.7 million, but that was largely as a result of a tax bill of $3.6 million, as well as spending $1.1 million on share buybacks, so was far more positive than it might initially seem. The second half of the year saw that cash balance grow by $1.6 million, and the company still has undrawn facilities in place.

So for me there is very little not to like here and it remains a buy at the current ask of 7.5p as long as you see platinum as continuing to recover – and there is always the chance of bonus news on one of the companies earlier stage projects or on a sale of its Grasvally project, although that will be larger dependent on chrome prices.

that, totalling over $42 million.

It didn’t have huge amounts of cash in the bank at that point, just $3 million or so, but did also have over $67 million in inventories, and had secured a new three year $50 million loan agreement to refinance existing debt. So I see little in the way of problems on the financing front, plus the company does pay a dividend, albeit a small one.

Given gold prices for the year so far I would expect that the 2016 results will be far more impressive and will more than justify the current market cap, providing that gold prices stay anywhere near current levels, so I see it as a buy at around 113p.

Miners of precious stones have also performed quite well in general so far during 2016, but have received less attention than those operating in other commodities.

Two of my favourites, Gem Diamonds (GEMD) and Petra Diamonds (PDL), have already shown good rises and I wouldn’t necessarily be rushing to invest at these levels, but there are a few which are still lagging and could have potential.

A dip in gold price, largely as a result of the US talking about raising interest rates, has sent producers tumbling, but that could offer a buying opportunity, and Highland Gold (HGM) would definitely be on my list.

The company is listed on AIM but is in the AIM100 with a market cap of close to £370 million and is already producing large amounts of gold from its mines in Russia.

Its most recent operational update showed that quarterly production up until the end of June had increased by 12% to nearly 72,000oz, and also that some of its exploration projects were progressing well – such as the Blagodatnoye deposit which is being explored to help enhance the already producing Belaya Gora mine nearby.

The last set of financials up to the end of 2015 made for some fairly disappointing reading, with a net loss of $10 million, but impairment charges and deferred tax expenses had a big impact on

I think that Gemfields (GEM) falls into that category, and has upside potential from the current share price of just under 40p.

The company produces emeralds and rubies, from Kagem in Zambia and Montepuez in Mozambique, as well as owning Faberge and having a number of exploration projects.

The company has had its share of problems in the past, but recently refinanced its debts via facilities totally $65 million, and at the end of June had over $41 million in the bank, which should be plenty going forwards, given that the last financials showed a net profit of over $8 million for the six months up to the end of 2015.

That is definitely on the low side given the market cap of over £210 million, and we really need to see that returning to the sort of levels that it made the previous year.

Gemfields remains highly speculative for me, but I can see value and potential at the current share price which make that a gamble worth taking.

UK Investor Magazine — 5 — September 2016

Black Lives Matter, Climate Change and £50,000 of your cash spunked - I am livid aren’t you?

Writes Tom Winnifrith I have noted before how ludicrous the demonstrations of BlackLivesMatter in the UK are given the incidence of Police on Black crimes. They are almost non existent. So to broaden its appeal BLM is now protesting against climate change which, apparently, is racist. Natch. But it gets worse and this is where your blood will start to boil.

O

ne of the leaders of BLM in the UK is Natalie Jeffers who is the sole employee and shareholder of MattersoftheEarth Ltd a company set up in 2012 which neglected to file accounts for two years and was almost struck off but which now makes a tiny profit and has net cash...thanks to you the grateful taxpayer.

You see the Department for International Development gave Miss Jeffers’ company £50,000 in 2015 to run a programme tackling issues of “gender-sensitive governance” in Nigeria.

By October 31 2015 just £9,534 was left on the balance sheet so where did the other £40,466 (plus £5,109 left over from 2015) so call it £45,575 go? Has anyone asked for an audit of where it went and if not why not?

MattersoftheEarth says that it tries to bridge ‘the gap between the academic and creative worlds.”

FFS. You really could not make thiis rubbish up. But it gets better. Miss Jeffers missed last week’s BLM protest at London City airport where all the protesters were in fact white folks, angry guilty millenial liberals who are affluent enough not to have to do a proper job. Ms Jeffers was elsewhere at a feminist conference at the luxury Costa do Sauipe resort in Brazil.

Her trip will have caused over 3 tonnes of carbon to be consumed but since man made global warming is a myth I don’t really care about that although one might note the startling hypocrsiy of Jeffers.

What I note is that a cash strapped Government running a vast deficit is spening taxpayers cash on

such obvious crap. Ms Jeffers will no doubt say that Priti Patel is racist when she scraps this funding but my challenge to Priti is to ask what other daft programmes is her department funding? I note that one official in that department described this programme as “small scale”.

Fifty grand may be small scale to him but to many of us it seems quite a lot to be wasted in such an obvious way. Ms Patel should start her work by sacking this employee who regards spending £50,000 of other people’s money as small beer. Anyone with such a casual disgregard for the wasting of cash, which you and I have had extracted from wages we have laboured hard to generate, is not fit for purpose. Then Perhaps Miss Patel might proactively took at which other daft companies and fake Charities her department is supporting.

It is incidents like this that make one despair of a decadent West with its bloated Governments, sucking the private sector dry to fund such pointless activity. This will not be a one off, far from it.

As you wake up to go to work tomorrow think what good works your taxes fund. Think of Miss Jeffers at her conference at a luxury beach resort in Brazil.

Think of some civil servant in Priti Patel’s department who thinks fifty grand is small beer and who actually thought that this was money well spent who will not be fired but will get a flat rate inflation beating pay rise this year and every year as he works towards a gilt edged pension.

And the establishment wonders why so many of us are so angry?

This article first appeared on www.TomWinnifrith.com UK Investor Magazine — 6 — September 2016

company profile

Avesco Group

A golden post-Olympics buy

By Steve Moore

S

hares in Avesco Group (AVS) commenced August at 209p, but are now around 270p following an update on trading over the summer months – this is a clear gold medal winner from the Olympics.…

the period with net debt reduced to just £3.24 million and net current assets of £9.55 million and net tangible assets of £43.72 million, whilst it was emphasised “the outlook for the group remains very positive”.

Avesco is a media equipment and services group, I first tipped in October 2013 at an equivalent to a current 110p per share. I do not like to boast, I have learned everything one needs to know about modesty from Tom Winnifrith. Back then in what was, have I mentioned, a rather good share tip, I was drawn to a yield of 4.5%, great asset backing and clear momentum at a trading level.

This saw me particularly note that full-year earnings per share forecasts looked conservative – and the company has now just updated that “the directors anticipate that results for the year to 30 September 2016 will be comfortably ahead of their previous expectations”. This follows continued growth in the US and “a very successful Olympics in Brazil providing equipment and services to many of the ceremonies and events in and around Rio de Janeiro… will be providing further equipment and services during the Paralympics”.

By towards the end of 2015 the shares were heading towards 230p, but I still made this one of my two tips of the year – noting that although a bit of a leap of faith with there having been no announcements from the company since June, the positive outlook of then suggested earnings per share forecasts of around 17p for the now current year could prove highly conservative and an 8p per share dividend forecast.

This year, on 9th June, the company announced results for its half year ended 31st March 2016.

These showed an adjusted pre-tax profit of £3.89 million on revenue 10.6% higher than in the corresponding prior year period, at £73 million, generating earnings per share of 13.3p and facilitating an increased 2.5p per share dividend.

The balance sheet showed the company ending

This sees earnings per share expectations for the year now heading to around 25p – suggesting a still quite modest price/earnings multiple, particularly given the balance sheet backing still for a £51.5 million market capitalisation.

With the dividend yield also still decent, I consider there still good upside potential from here. However, after such a swift recent price rise it would not be surprising to see the shares now pause and indeed drift back somewhat. I’d suggest this would then represent a decent buying opportunity for the patient long term investor.

Backing Avesco is not for the sprinter but for the middle to long distance runner. Perhaps not the Brownlee Brothers but certainly Mo Farah.

UK Investor Magazine — 7 — September 2016

Five AIM frauds named and why this nonsense has to stop

An argument

by Tom Winnifrith

It is now just under four years ago that I first accused Sefton Resources of being an AIM listed fraud. The company was eventually goaded into suing me for libel but, after a hard fight, it had to drop the case and pay me damages as its chairman, Mr Jim Ellerton, was removed from office. Looking back, Sefton was fun and also shocking in that, for some reason, I regarded fraud as something that rarely happened on AIM. I do not know how I could have been so naive.

Sefton was an eye opener for me in that it clearly demonstrated that the regulatory authorities were useless. Folks round at AIM Regulation and the FCA were presented with clear evidence that Sefton was lying to its investors and cooking its books thanks to auditors who would sign off on anything, and that it was thus regularly raising money on the basis of lies, so committing fraud. The regulators did nothing.

That shocked me. After the same pattern repeated itself at Quindell and elsewhere nothing shocks me about the UK’s useless regulators. They are just not fit for purpose.

I was also appalled by the way that too many in the City were happy to play along with the frauds. London’s most odious and morally bankrupt PR man Mr Dominic Barretto told me that since Sefton was on AIM it MUST be kosher and that, despite the clear evidence I had proved of fraud, he therefore supported it against me. Top City law firm Pinsent Masons not only authorised but took part in a dirty tricks campaign on behalf of Sefton against me. The senior partner at Pinsents was made aware of this but no action was taken by him against those responsible at his firm. And so it goes on. Far too many folks in the City are supporting frauds either by active involvement or by turning a blind eye.

And thus I now look at AIM and see a market where it is clear that fraud has been endemic. It has now got to the stage where I find myself battling two high profile companies that have quite simply put out statements that were not true and then within days used the consequent share price strength to raise money via a placing. That is fraud but it appears that there is nothing

UK Investor Magazine — 8 — September 2016

that is being done about by the authorities. This cannot be allowed to continue.

If we get into a situation where there is no sanction against companies who issue lies via RNS ahead of placings what incentive is there for any company on AIM to tell the truth in an RNS? All AIM Companies are in a battle to attract what is a limited pool of capital. If one arrives at a sutuation where the honest will lose that battle, the temptation to lie or embellish will become all too irresistable.

Advisors are clearly happy to play ball and so arguably we are there already. And that makes AIM almost uninvestable.

I would hope that after all the high profile frauds such as Globo, InternetQ, Quindell and the China stable, that someone round at the Stock Exchange is saying “enough is enough.” Collaring companies that tell demonstrable lies ahead of a placing is the easiest fraud to prove.

If the LSE won’t act I shall do so by accusing companies such as African Potash of fraud until it takes the bait and sues me for libel at which point it will meet a Sefton-like fate. But if the regulators were even half awake this would not be needed as the very well paid watchdogs would be acting swiftly and brutally in order to restore confidence in a broken market.

African Potash has promised to sue me for libel and our legal team are working on the case already. If you want a “See you in Court Bitchez” T-shirt (below) make a donation of £25 or more to our costs and we will send you a shirt as a small thank you. You can donate HERE.

Naming and shaming five proven AIM Frauds whose shares still trade In the USA the companies listed below would already have had their shares suspended and their bosses would be doing a perp walk. They are demonstrable frauds. Eventually they will run out of other people’s cash. Pro tem their shares - underlying value 0p - still trade.

1. AFRICAN POTASH. Its crime is issuing RNS statements that were simply not true to ramp the shares ahead of a placing. It also did not disclose material cash committments (payments made to a distributor to sweeten a deal) ahead of a placing. That is fraud.You can read my full exposes HERE 2. EDEN RESEARCH. A long time fraud which first sent me fascist lawyers letters back in 2005. Small scale accounting fraud since its AIM listing in 2011 racked up a scale in August 2015 when it engaged in a panama pump style securities fraud with an associate company Terpenetech. That is to say Terpenetech (a company ewith negative net current assets and sod all cash) agreed to “buy” a worthless asset from Eden for £600,000 in cash.

Eden “bought” a 29.9% stake in Terpentech in shares. Terpenetech sold the shares to pay Eden the cash. 29.9% of Terpentech is not in reality worth a row of beans. This is a blatant fraud that everyone is ignoring although the FRC has been alerted and is looking at it.You can read my full exposes HERE. 3. CLOUDTAG. Its most notable crime is issuing a wholly untrue RNS on 25 January 2016 which saw its shares soar allowing a major placing on 29 January. It has now admitted that the 25 January statement was not true so it is a self-confessed fraudster. There are many other matters and you can read our full exposes HERE. 4. CHINA NEW ENERGY. Its crimes are issuing RNS statement after RNS statement which records at Companires house show, without any doubt, cannot be factually correct. Who cares? The Nomad Cairn - which also acts for Cloudtag and Jiasen - certainly does not give a hoot. The statements allowed a series of keep the lights on placings. To raise money on the back of an RNS that cannot be true is surely a fraud.You can read our full exposes HERE 5. JIASEN is a China fraud. Quite simply, almost nothing that this maker of wooden doors says is true. If you believe its claims about cash and profits it is the cheapest stock on AIM. But no-one does as this construct is a fraud from top to bottom as its fraud friendly Nomad Cairn knows full well.You can see our full - it is very full - series of exposes HERE

UK Investor Magazine — 9 — September 2016

Hedge funds say the Pound is sunk…which means it isn’t. And how you can prosper as a result

By Chris Bailey of Financial Orbit

I

see The Sunday Times has plastered all over the front page of its business section the observation that as ‘Speculators, including hedge funds, racked up short positions on the pound worth $7.8 billion (£5.9 billion) a few weeks ago — the largest ever’ the British currency is a cast iron certainty to be junked over the next few weeks or months.

I would observe the better news is that this has further embedded my thoughts that the Pound will end the year higher against currencies like the US dollar than it currently is trading at.

You know the theory about why the Pound is sunk of course. The Brexit vote, uncertainty, Article 50 enactment at some point, the four horsemen of the apocalypse being primed to run around the property market, recessionary fears, the Bank of England in panic mode cutting rates and boosting stimulus etc. You cannot fault the logic because such events generally do hit currencies. Classical economic theory would highlight as one of the self-adjusting mechanisms that a floating currency can offer an economy beset by recessionary fears and a large trade deficit.

Currency markets however are different. Being among the most liquid financial markets in the world they are even more prone than the equity markets – where individual stocks can be illiquid and circuit breakers kick in quicker – to ‘sell first and ask questions later’. In short my value investing thoughts are swamped by a whole load of speculative capital.

Hedge funds have had a shocking last year or two as many chase short-term profits in their attempt

to scrabble back some performance, keep their clients and justify their often gargantuan fees. And like any strategy where momentum plays a decent sized role this means jumping deeper into trades that did work for the one or two of their brethren who actually were short the Pound on 23 June and made a killing.

Currency markets are full of these position extremities currently – love the dollar and the yen, hate the Pound, euro, Chinese yuan etc. – and the reality is some reversion to the mean is a more likely scenario over the balance of this year. On a proper value investor perspective – using purchasing power parity data that compares the prices bases in different countries – the Pound was fairly valued on 23 June at about 1.50 against the US dollar.

Yes, take a discount for all those aforementioned concerns but don’t expect the Pound to plummet further…and progressively watch all those speculative hedge fund types capitulate on their trades.

Over the years I have heard a lot of rubbish about asset allocation – your choices between equities, bonds, ‘alternative investments’ and cash – being an 80%+ determinant of your return as well as the notion that stock picking is futile and we should all save time and money buying a bunch of cheap-aschips tracker funds.

Of course both approaches are not without some merit but an investor of any reasonable worth and acumen splits their investment decision-making three ways: asset allocation, sector selection and stock selection. Each has its own merits and can be a source of both return and losses. As noted above the bulk of investment musings concentrate on the former and latter areas. I have generally observed

Chris Bailey is the editor of FinancialOrbit.com UK Investor Magazine — 10 — September 2016

there is not enough thinking about sector strategy or – as I often put it – thematic thinking.

So lets invest on the basis of a theme...the pound will go up The weak Pound has certainly helped many US dollar earners in the mining, oil, pharmaceutical and global consumer sector. Logically then an end to the fall of the Pound could hurt these sectors, many of which are heavily weighted in the FTSE100 index.

However I also note that a rising Pound / falling US dollar combo – as I think is likely to happen over the balance of this year - is also often consistent with rising commodity prices. Simply put lower dollar prices of oil, copper and gold spur a bit of extra demand. So of the dollar outperformers of the last few months expect the mining and oil sectors to do the best. In short if you asked me whether I would sell Unilever (ULVR) and Diageo (DGE) here to buy BHP Billiton (BLT) and Royal Dutch Shell (RDSB) I still would.

A strong Pound may crimp a few exporters but

frankly with the UK currency still keenly priced relative to a year or so ago, this is no real problem to what is left in the industrial space - so hang onto your GKN’s (GKN), DS Smith’s (SMDS) and Rolls Royce’s (RR.) of this world.

And then we come back onto the more domestic plays – stocks like Lloyds (LLOY), Whitbread (WTB) and Easyjet (EZJ) – which are more dependent on the proclivities of the UK consumer.

Part of the thinking I blended into my call that the Pound will recover against other currencies like the US dollar is that the whole Brexit fear will not play out easily and consistently. In short just as currency speculators have oversold the Pound, there has been insufficient differentiation among the financial and consumer names. Good news for stock pickers applying thematic insights.

Of course there are many other themes out there apart from the Pound but as an influence on the UK market for the balance of this year I think it will be one of the stronger ones. Whoever thought sector/thematic insights could be so influential?

Tom Winnifrith’s

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newsletters.advfn.com/tomwinnifrith UK Investor Magazine — 11 — September 2016

Q&A With RICHARD POULDEN

Wishbone Gold Conducted by Tom Winnifrith We own shares in Wishbone Gold (WSBN ) and are 300% up so far with the shares at just over 1.28p.

But is there more to come? I put that question and others to Richard Poulden the Chairman and CEO of the company and its largest shareholder.

Tom Winnifrith: What percentage of Wishbone do you hold?

Richard Poulden: 41% if I include trusts and family. And of course a lot of that has been purchased in the last few years to support the company when exploration was out of fashion.

TW: As such a large shareholder can you ever sell? How will you personally make money out of the company?

RP: I could at some point hand it over to new management as I did with Sirius Minerals but I think we are far more likely to be seen as a takeover target. Also, if the market doesn’t like us ,with strong cash flows, we could always take it private.

TW: Wishbone used to own some small exploration assets in Australia. Do they have any value at all? Are they what might be termed “core”?

RP: We do still own those. Once we have strong cash flows from the trading we will look at reverse integrating back up the supply chain. That could include properties in any of the supply countries.

We are being shown constant opportunities in this regard as mining is still finding it hard to raise

money. Assuming this continues over the next few years I think reverse integration would be attractive and we would of course unashamedly be copying Glencore.

TW: A couple of months ago you bought the Black Sand gold trading operation, perhaps you might explain what it does and how it makes money?

RP: Currently Black Sand trades gold doré. Doré is physically impure gold which has been roughly smelted to bring it to 80-90% gold but still mixed with other metals such as zinc and silver and various minor impurities. The doré is shipped to us in Dubai by the mines in Africa and South America.

We comply strictly with OECD guidelines so to set up a supplier takes 3-4 months of checks with government, banks, checking licences etc. Once that comes back clean (which it does not always do and then we don’t proceed) we sign a supply contract that sets out the amount to be shipped. We always start small to ensure that the logistics chain from that supplier to us works and then step up the shipments to the contract quantity. We open a standby letter of credit for the estimated value of the gold to be shipped so that the supplier knows they will be paid however it is unlikely that the LOC will ever be drawn as we pay immediately the gold has been smelted and assayed.

The gold arrives with us in Dubai and we resmelt it using the two main refineries. Al Etihad or Emirates, separating out the impurities and producing 999.5 pure gold. The refinery does an assay

UK Investor Magazine — 12 — September 2016

at this point which will give the precise amount of gold. We sell the gold immediately and set the price both for the sale and purchase according to the London fix that day. Trading that way means that every trade is effectively hedged so we are not currently taking a position on the market movement of gold.

TW: Given what you say, is it not going to suffer if gold prices fall? After a good run for gold don’t you see that as likely?

RP: Gold prices will fluctuate for sure but we are still seeing a major accumulation of physical gold

by China and Russia. Readers of my Black Swan Newsletters know that I am firmly of the view that China is steadily taking over the world economy with new financial institutions and massive investment. This will inevitably mean a new role for the Yuan in world trade and a diminution of the role of the US$.

I think the accumulation of gold

by China means that they see a role for gold as part of this economic shift. Accordingly I think there is a strong possibility of a rise in physical gold prices but this might also lead to a commensurate collapse in paper gold prices.

Last Thursday week we saw a default by Deutsche Bank on delivery of physical gold to a shareholder in the XETA Gold ETF. The bank stated that “delivery was no longer possible for reasons of business policy”. I believe that means they simply do not have the gold as it has been sold or pledged. A few more defaults like that and I think the price of physical gold could rise substantially.

TW: Why base yourself in Dubai? Is that both a bit out of the way and also politically risky?

RP: We are based in Dubai for a number of reasons. Firstly, it is a very good market for physical gold. Around 40% of the physical gold traded in the world moves though Dubai. Secondly, it is an excellent logistics centre with direct flights to many of the countries we deal with and a new trade-only airport opening next year which will improve logistics even further. Lastly, tax: there is no tax on gold trading, no corporation tax and no personal tax. Given that Wishbone is in Gibraltar that should increase returns to shareholders. As regards political risk I think Dubai and the UAE are the most secure countries in the region. There is political risk in the region certainly but that is chiefly the risk of

America doing something stupid again.

TW: You have indicated that you will be at breakeven at 25kg a week or is it 45kg? And how close is that to being reached?

RP: What I actually said was that currently breakeven is around 25kg per week but that if we hit our target of 100kg per week by the end of the year then next year our breakeven would rise to around 45kg per week because we would need to add staff and infrastructure in Dubai to handle the volumes.

TW: Will you need to issue more shares to raise cash to last until then?

RP: If we do raise more equity it will be for investment but the trading itself is funded by the debt facility we put in place in June.

Of course if the volumes go above our budgets we may need more of both but I think that would be good news.

TW: You have asserted that you will be at 100 kg a week by Christmas.

How can you be so sure of that?

RP: The answer is that we are on track to hit that because we have supply contracts in place which commit to that amount. The uncertainty which remains is bringing those suppliers on stream.

TW: I reckon that 100 kg a week you’d be making a profit of c£2.75 million a year ( at current exchange rates and gold prices). Is that too optimistic?

RP: Tom, you know I cannot make a profit forecast!

TW: If my maths is even half correct will we be getting dividends in 2017?

RP: I think dividends in 2017 is unlikely because continuing the expansion and possibly some reverse integration would be a better use of funds.

Personally though, as the largest shareholder, dividends sound pretty attractive TW: Thank you.

RP: Tom, thank you very much.

UK Investor Magazine — 13 — September 2016

Three shares to sell in September The best time to kick a man is when he is down

By Tom Winnifrith

W

ith the stockmarket pushing on towards hew highs it is still not that much fun being a bear. But as one might feel on a summer night as the auir gets warmer and thicker and the heat ever more oppressive, as the skies start to darken you know something has to break. After all, October is the time of year when the markets often deliver a violent correction and boy are we due one in 2016.

As ever the case for equities is that they are the least worst asset class out there. If you earn zero or less on bonds and the yield after costs on prime real estate is pretty much zero you might as well buy equities as the “value” and income producing asset class. The argument against this is that with earnings visibility dire and a global economic slowdown suggesting pretty weak, at best, earnings growth in 2017 the PEs one must pay for equities are just insane. And that has to give, it is just a matter of when.

Keystone and xCite Energy, both of which have featured in this column before and where we are now 100% vindicated. Actually xCite has not actually completed its D4E swap and might still turn out to be a zero as opposed to an almost total wipeout. Fingers crossed.

IGAS is in the same boat. It is burning cash. It is almost certainly in breach of covenants on its mountain of bond debt. The bonds trade at a material discount to par which tells you all that you need to know. That the shares have not utterly cratered is down to mug punters adding 2+2 to get 27 - a modest bounce in oil prices & a relaxation of shale drilling laws in the uk = salvation. It is not salvation, the balance sheet is too much of a mess.

IGAS will go the way of XCite and Gulf it is only a matter of when. A stockmarkiret correction will make bondholders jittery and that might be the “when moment.”

When the mood changes the two sorts of companies that are most vulnerable to a share price collapse are those on sky high PEs where the rating bears no relation whatsoever to the prospects for earnings growth and those seeking to raise capital, especially if it is to bail out a business that is in trouble. In a bear market rescue fund raisings are not exactly a walk in the park and invariably result in share price decimation.

Second up is African Potash (AFPO) which stars in our feature on page 7 on AIM listed frauds. This company is, I should note, on record as saying that it will sue me for libel because I pointed out that it has committed fraud. Naturally I would welcome such a court case as the disclosure process will bring into the public domain documents that show the full extent of the fraud at Potash but also clear breaches of UK anti bribery laws. I cannot wait. So bring it on bitchez!

Thus we start this month’s selection with an old favourite IGAS. We have, in recent weeks, seen two high profile oil juniors make progress on refinancing via debt for equity swaps which has seen a near total wipeout for shareholders: Gulf

Amongst its crimes was to claim in an RNS of 6 January 2016 that it had a “purchase order” worth $10.5 million backed by a Letter of Credit from an AAA rated bank. The company has now admitted publicly that it had no purchase order at all and

UK Investor Magazine — 14 — September 2016

it also had no Letter of Credit. And so sales on that “contract” have, in fact, been nil after nine months when Potash promised the trade would be completed and paid for within 35 days. But on the basis of the original statement the shares rocketed and on January 12 2016 the company raised almost a million quid to stave off bankruptcy. That is a clear cut case of fraud and I have documents that prove everything I have written. And Potash has also admitted that what i wrote was true in a quite suicidal attempt at a fascist bully boy lawyers letter from Memery Crystal.

So this company is in a massive regulatory hole.

I know that the AIM Regulation Team and the FCA are useless but this case is so clear cut that action will have to be taken. Meanwhile despite a recent fund raise of £500,000 (gross), £400,000 net of costs and payments to be made to the FD’s wife (don’t ask, that is another scandal), Potash will have negative current assets and almost no cash by Christmas. There is not a cat in hell’s chance of a FY Audit sign off without numerous red flags from the auditor and as such a further refinancing will be very hard to achieve. At 0.21p the shares are a sell with a target of 0p.

Finally we have Cloudtag (CTAG) another company that lied to investors in an RNS (25 January 2016) shortly before a bailout placing (29 January). So we start with the premis that it has committed fraud. It appears to have no saleable product - despite proimising sales in Q1 2016 - a paper thin balance sheet and huge overheads.

The company probably has enough cash to last until Christmas but by then it will have served up the most monumental of lack of revenues/profits warnings.

At 11.5p the fully diluted market capitalisation is in excess of £40 million which, for a pre sales company with no balance sheet and which has lied to investors to raise money, looks more than toppy.

It is a sell with a target price of 0p on the day that it eventually runs out of other people’s money.

Hot Stock

ROCKETS Stocks Ready to take off hotstockrockets.com UK Investor Magazine — 15 — September 2016

My seven biggest investments

By Tom Winnifrith

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ctually, just for the avoidance of doubt should lawyers for African Potash or any other fraudsters who are considering suing me for libel, be reading, I own nothing. But I look after the investments of a family Trust which benefit my dependants but not me. So I am a pauper. But the Trust - starting with very little - has assembled a pretty decent portfolio with investments in around 25 companies. As it happens, its ownership of all bar 10 of the Wisden cricket books would count as the third largest holding but you are not interested in Wisdens.

Actually you should be. Over time Wisdens have proved to be far better investments than shares. I recommend that if you want exposure to Wisdens the place to start is the World War One years.

These are think books packed with Obituaries ( including that of WG Grace) and you can pay up to £5,000 for a 1916 (original hardback) although rebound editions will set you back less than £1,000.

I digress.

Looking at the portfolio as it stands today, I should note that the top two holdings are on their own each worth the same as 3-5 combined. This is not a balanced portfolio and it is shaped the way it is becuase of the great performance of our biggest holdings, not because we backed them any more heavily than, say, the stock at number seven. I also note that following recent share price movements, just over 20% of the portfolio is now exposed to gold or - in a minor way - PGMs. Outside the top seven we have decent mining sector holdings, certainly in every case - enough to pick up a couple of top of the range 1916 Wisdens, in Kefi, Kibo, Finnaust, Ariana and Eurasia. But none of them are close to the top seven which are, in reverse order:

7

FALANX (FLX). we bought in at a 4p placing with some 6p warrants chiucked in. Thanks to some spivs flipping post placing we are still only at 4-4.5p but I hope the flippers are done. In fact I believe they are. I am hopeful for some exciting contract news from this cyber-security play, which is heading rapidly towards profitability, very soon.

The target here is 8p to sell.

6

PETROPAVLOVSK (POG) at 6.96p we are modestoly ahead on this Russian gold miner. assuming it pays down its debt by 2018/19 I expect a decent re-rating but even without that if the Enterprise value is unchanged the shares will almost treble. I’m a patient holder until then.

5

REACH4ENTERTAINMENT (R4E) - at 1.875p we are c35% ahead here. Interims this week went down badly as H2 2016 will be weaker than H1 but 2017 looks like being far better and should see profits of well ovr £1 million which makes the shares look very cheap. On the basis that £2 million will be hit within 3 years - we’d only be selling at well over 3p.

4

PREMAITHA (NIPT) at 10.25p. The technology for non invasive tests for Downs’ in pregnant women is great. It is getting material commercial traction. But a big US company Illumina is trying it on with a patent challenge. I expect Premaitha to prevail and that will send the shares racing ahead.

3

WISHBONE GOLD (WSBN) - a gold trader at 1.1p. As I explained HERE, the company is on track to be making annualised net profits of £2.77 million within months based on its statement that it will be trading 100kg a week by Christmas. That justifies a share price of at least 2.8p which would make it almost a ten bagger for us. We are holding as this has real momentum. A Q&A with its boss Richard Poulden is on page 11 of this issue of UK Investor Show Magazine.

2

CONCEPTA (CPT). Like Optibiotix and Premaitha an Adam Reynolds healthcare RTO. This one tackles the fertility market. Its shares have raced away from our in price of 7.5p to 19p mid but we expect news of the launch in China within days and this market is big. We won;t be selling until 30p is in sight which, we hope, will not be too long.

1

OPTIBIOTIX (OPTI). Our “in” price was 8p (with stacks of warrants at 8p). The mid today is 73.25p. It happens. We await news of a demerger of one of the company’s four divisons to start a major Autumn re-rating. Operating in the microme space pulling all the right strings, notably weight loss, in obese Britain the technology and management are top notch. We would not be selling this side of 100p and we expect a re-rate on demerger news to take us there soon.

I am nervous about markets in general. Hence the gold weighting. None of these stocks are ones I want to hold forever but, equally, quality will out and I will show patience until targets are hit.

Then I will re-assess. I will publish another top 7 report in six months time, let’s see where we are then. But of our top seven only one (Premaitha) is marginally underwater, the other six are ahead.

And the three biggest holdings are c800%, c260% and c360% ahead respectively. That is not too bad a record is it?

UK Investor Magazine — 16 — September 2016

the house view Will Theresa May resign every time an MP commits a crime?

T

he Government wishes to change the law so that if a company employs people who commit fraud, the directors of that company can also be charged with an offence. Mrs Theresa May seems to think that fraud can only exist in companies where the board has created a culture that either encourages crime or where boardroom eyes are collectively turned the other way. She, and a Government almost entirely devoid of any hands on experience in the private sector, again show their dangerous ignorance.

Companies do not commit fraud, human beings create fraud. There are some companies which are rotten and criminal from the top down. One thinks of Quindell or Enron in this regard. But for such entities there is no need for new laws. The biggest crimes in these cases are committed at board level so the miscreants can already be nailed.

But in many companies there will be fraud taking place. At a small scale I suspect it exists somewhere in most big companies. How many of us can say that every single expenses claim we have submitted is 100% correct? You remember that after work drinks that you went on with a client and a colleague? The client left early and you carried on until late and put the whole tab on expenses. That is fraud of a sort. Of course it is small beer but once you have

accepted you can steal from your employer in a small way where do you draw the line?

Individuals commit fraud within companies for personal gain. Pad your sales pipeline and you get a bonus but that padding may lead to the PLC overreporting. These sorts of frauds are really tough to detect. Yet Mrs May wants to punish boards for thos sort of thing? All she will do is make the risk/ reward trade-off of being a company director less attractive. It is not good for British business. It is more red tape and more punishment. Another reason not to register your company in the UK. This idea, born out of ignorance and a craven desire for popularity, is bad for Britain.

But here is a suggestion. How about in return for enacting the law we agree that Mrs May will quit as leader of the Tories ( and PM) every time a Tory MP is caught fiddling with either his expenses or with a rent boy? And Mr Corbyn will agree to the same thing if a Labour MP sins in any way. Jeepers with Keith Vaz on board Corbyn won’t last long.

Mrs May are you up for that?

The reality is that our laws on fraud are fine. The issue, as discussed on page 7, is the lamentable failure of the established agencies to prosecute even the most obvious of sinners.

UK Investor Magazine — 17 — September 2016