This article first appeared in The Edge Malaysia Weekly on November 4, 2024 - November 10, 2024

THE worst is over for previously loss-making Bahvest Resources Bhd (KL:BAHVEST). The Sabah-based gold mining company, which emerged from legal and financial crises in recent years, has secured a new deal that could add substantially to its books in the near future.

Bahvest’s share price soared to an all-time high of 84 sen last Friday, following the company’s announcement two weeks earlier of an exclusive deal to mine gold at an 18,000ha site at Mt Andrassy in Tawau, Sabah, with Aurelius Borneo Mining Sdn Bhd, which owns the territory and has a prospecting licence. Bahvest and Aurelius have a 70:30 profit-sharing arrangement for gold mined at Mt Andrassy.

Bahvest executive director and CEO Chong Tzu Khen tells The Edge in an exclusive interview that to secure the 70% stake, Bahvest, via its wholly-owned subsidiary Wullersdorf Resources Sdn Bhd (WRSB), will carry out the majority of the field work to explore, prospect, sample, survey and drill for gold.

“The prospecting job alone will cost about RM10 million, based on outsourcing fees, but we are proposing to have the works carried out by our existing team instead to lower the expenditure. We are still discussing how this can be achieved.”

Chong says Bahvest will have 90 days from Oct 22 to perform exploration at the site to produce a geological report for the necessary approvals and mining licence. Meanwhile, Aurelius will focus on obtaining the necessary licences, including applying for occupational forestry permits and engaging with government authorities.

“Bahvest has RM250 million in the bank from commissions on convertible warrants, which is more than enough to cover exploration expenses for the new mining deal. We will still seek, however, to minimise costs, particularly in terms of human capital,” says Chong, who holds a 0.15% stake in the company.

The joint venture with Aurelius is the only investment planned for now.

Chong, 67, was appointed as executive director and CEO of Bahvest last year on May 26 and 31 respectively. He was director of WRSB as well as finance manager of Bahvest and its group of companies.

Aurelius is led by directors Datuk Lee Vui Han (also known as Anthony Lee Vui Han) and Soo Kan Hung (also known as Soo Chin Yau). Lee, the third-largest shareholder in Bahvest, with an 8.14% stake, emerged as a substantial shareholder in Bahvest when he acquired a 5.44% stake last November.

Datuk Freddy Lim’s Kretam Holdings Bhd (KL:KRETAM), an oil palm plantation player, is the largest shareholder of Bahvest, with a 14.6% stake. Lim had led a group of five shareholders to remove Bahvest’s founder and then managing director Datuk Lo Fui Meng as well as his son Lo Teck Yong, also a director, from its board in April 2023. As the father and son faced lawsuits, a new management led by Chong took over Bahvest in June that year.

Bahvest had sunk into a net loss of RM181.9 million in its financial year ended March 31, 2020 (FY2020), from a net profit of RM5.7 million the year earlier as the group faced lower gold production levels and restrictions on export/import during the Covid-19 pandemic, an increase in operational costs, cessation of its aquaculture business in September 2020 and an impairment loss on plant and equipment, according to its 2021 annual report.

Bahvest’s net loss narrowed to RM14.1 million in FY2021 and the company subsequently turned the corner with a net profit of RM12.4 million in FY2022 and RM1 million in FY2023. Bahvest adjusted its financial year-end to Sept 30 last year when Chong took over in June.

For the third quarter ended June 30, 2024, Bahvest posted a net profit of RM834,000 on the back of RM42.9 million in revenue. There are no year-on-year comparable results because of the change in the company’s financial year end.

Chong says: “When we took over management in June 2023, we worked hard to cover the RM14 million loss. To turn things around, first, I instructed the geological team to understand how to extract extra high-grade ore from our mining site. Second, it was [just in time to ride] the uptrend in gold prices. Pure gold was going for RM290,000 per kg in June last year and the price increased progressively to the US$3,000 per ounce level. We also raised our production levels to cover the losses.”

Asked about the company’s upcoming announcement on Nov 22 of its fourth-quarter results and full-year performance and the possibility of a dividend payout, Chong says: “The results will certainly be better than last year’s. This will be the third consecutive year that we’ve made a good profit. After being audited, we will apply to transfer to the Main Market before June.”

Chong says 40% of the estimated gold ore reserve at Bahvest’s mine in Bukit Mantri in Mount Wullersdorf, Tawau, has been extracted.

“We have another 25-year permit for this site [and we should] be able to get an extension once it ends … On average, we smelt more than 60kg of gold from this mine in a month, at a purity level of 90%. In September, we broke the record with 80kg smelted.”

He came to know of Mt Andrassy’s potential for high gold mineralisation via a geophysical report by the Department of Mineral and Geoscience Sabah.

“The site will be divided into five lots, and we will explore four lots first. The characteristics of the site will be similar to those of Bukit Mantri, where gold, silver and copper ores are available. We have to work fast because … we have been given 20 months to complete the exploration,” says Chong.

“Bahvest is in discussions with companies interested in partnering with us [to receive outsourced work] for the exploration phase. We are talking about the contract fees and equipment they can bring in. As soon as the exploration phase is over, we will be able to carry out the mining works on our own.”

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.