Although Oracle Power has been one of the junior end of the stock market’s most long running waiting games, it would appear that in recent months there has been positive momentum building, both in terms of the newsflow and the share price.
Joint Development Agreement
The most notable action of late was at the turn of the year when the shares more than tripled with the announcement that H.H. Sheik Ahmed Dalmook Juma Al Maktoum (now a significant 15.1% shareholder in Oracle, and China Coal Energy Company were to form a Joint Development Agreement in order to develop the flagship 1,320 Mw Thar Coal and Power Project. Since then the project has been “in play” with investors hanging on any clue as to when the now key Letter of Intent will be issued by the Pakistan Government. Clearly, the China factor here is a standout, given that it is one of the world’s largest Coal companies, with the added bonus at Thar of Coal to Gas as a Green initiative.
Away From Thar
But perhaps the angle though with Oracle, is to step away from the Thar Desert, and look at the rest of the company. In particular, the journey to de-risk Oracle in terms of its major coal project. Indeed, it could be argued that this process has been ongoing since the present CEO Naheed Memon came on board early last year.
Along with an obvious determination as witnessed in her interviews, her CV is a clear asset. It includes Chairperson of the Sindh Province’s Board of Investment – where the project is based, and a series of entrepreneurial and management roles, including working in Private Banking for Merrill Lynch. It has been clear from the start that she is keen to bring the Thar Coal and Power Project on stream, and in turn de-risk Oracle Power in other areas.
In fact, a significant de-risking has already been achieved with the arrival of Sheik Maktoum, something for which Memon can fully take the credit, by gaining his trust. This has resulted in not only his 15.1% shareholding, but what he as part of the ruling family of the UAE brings the table.
The point is highlighted in the wake of the latest MOU signed between H.H. Sheik Maktoum’s Private Office and Oracle Power. According to the company website it is “an international power and resource project developer,” and in the wake of this announcement this is very much the case. Cautious investors will note from today’s RNS that the MOU does not commit Oracle to any capital commitments, but it can expect the opportunity to earn an interest in projects – the best of both worlds at this stage of its timeline. It may not be an exaggeration to use the “win-win” cliché either, the opportunities that no doubt exist at this booming stage in the mining cycle.
So, with the skill set, network and experience in place at the top, and the Oracle Power mandate via the MOU very much in place, what is likely to happen next?
The most obvious pathway would be that the company could be called upon to back and get projects of all shapes and sizes over the line in terms of development and then run with the best of them. If a buyer is found at any point along the way, and an exit is offered, so be it.
Oracle And H.H. Private Office
This point is underlined in the MOU, in terms of potential project development activities, joint ventures, co-investor / strategic partner between Oracle and H.H. Private Office. Perhaps as something of a relief after multi-billion Dollar sized Thar, the expectation is that most of the new projects will be sub $100m and likely to be in less ESG sensitive areas than coal. Iron ore is the likely candidate at this point.
In terms of where the projects may be, it is Africa which is the central focus and Guinea in particular, given the way that H.H. Private Office has a strong relationship with the Government there.
Incubator And Facilitator
Observers of the AIM market are all too aware that many resources companies are very often scuppered just before the finish line as much due to a lack of management expertise and key personnel, as a lack of cash.
If Oracle can step in and act as both incubator and facilitator, there may be much more to Oracle Power for investors to latch on in the future with projects running in parallel, even as Thar is resolved.
If one adds in the way that over the course of 2020 to date opportunities and prices have risen rapidly in the mining sector – especially PGMs, it could be that rather than the day job being just developing a massive Coal Project, Oracle has the backing and ability to develop other projects. One can even go so far as saying that if a tough nut like Thar can be grappled in partnership with leading international players, anything else should be relatively easy.