On 18 January, it was reported here that a 5.5 kg gold nugget (worth up to $300,000) was found in Ballarat with the help of a Minelab GPX-5000 metal detector. Minelab is a world class brand owned and managed by Codan Limited (ASX: CDA), a company that we hold in our investment funds.
The article provided some very positive endorsements of Codan’s products:
“Cordell Kent, owner and dealer of Ballarat Mining Exchange Gold Shop, commented that the nugget was found with a state of the art metal detector called a Minelab GPX-5000, marketed as the best in the world. “There has been many prospectors that have walked past the exact place where the nugget was found and have missed it with an ordinary detector and did not have the technology to find it…that’s why this guy found it. This detector he used is the best there is, it goes deeper and further into the ground, better than others.”
Codan has a number of businesses, including communications, metal detection and mining technology, but it has enjoyed particular success with its gold detectors, on the back of a twelve year run in the gold price, and a number of major nugget discoveries like the one described above.
The business faces some challenges, not the least of which is from counterfeit products produced in China. However, there is also potential upside from a new generation of detectors that will have the ability to look further down into the ground. This means that land already turned over may again become prospective.
The longer term outlook is difficult to forecast, but we feel there may be some upside to the company’s $40m profit guidance provided very early on in the financial year.