Mining investor Equity Resources has reported pre-tax profits from continuing operations down by 50% at £34,702 for the twelve months ended 31st May 2011 on operating income down by around 48% to £83,240 – leading to earnings per share of 7p (2010: 14p). Investment sales showed a return of around c.17 times cost and the group closed the year with investments at a value of £1.08 million.

The fully diluted net asset value was 1.77p at the period end, but this dropped to 1.12p as at 6th October on the back of challenging equity markets. The company remains confident in its investments in Regency Mines and Red Rock Resources given both the huge potential within emerging markets to drive the price of steel up and the macro-economic uncertainty to increase the demand for gold.

On the balance sheet, there was cash of £16,322 at the period end and net assets stood at £80,828. Since the year-end the group has raised £30,000 through the issue of shares to the holder of a warrant. A short-term loan obtained just prior to the commencement of the financial year has also been partially repaid, with £21,924 inclusive of interest outstanding at balance sheet date.

At a mid-price of 2.75p, Equity Resources is currently capitalised at £1.4 million – a premium of 146% to its net asset value as at 6th October 2011. Given this premium there is no reason to buy the shares, especially when investors can simply buy shares in Red Rock and Regency in the markets at a cheaper price. Avoid.

*Funds managed by a subsidiary of Rivington Street Holdings (RSH), the ultimate owner of Unquoted-Analyst.co.uk, own shares in Red Rock Resources and Equity Resources. RSH owns shares in Regency Mines. Regency Mines and Red Rock Resources are corporate clients of RSH.