Bombed-out Pan Pacific Aggregates is seeking £1 million after a deal it believes will start to restore its fortunes.

Backed by RAB Capital and headed by resources veteran Don Nicholson and William Voaden, the former English China Clays luminary now running broker VSA Resources, Pan Pacific has agreed to buy the Pumptown granite quarry and other properties in the Canadian province of British Columbia from local land developers Herb and Steve Dunton for 80 million shares and £200,00 cash. The purchase, which will give the Dunton brothers 42 per cent of Pan Pacific and seats on its board, will bring the company an asset that observers believe could produce upwards of one million tonnes of granite a year for 12 years.

That could generate profits of £800,000 in its first full year on £2.5 million revenues. If so, it could provide a much-needed fillip to Pan Pacific’s AIM-quoted shares, which have collapsed from 2005’s 80p float price to a barely visible 2p.

Pumptown should replace the AIM-quoted company’s original project, to quarry the Sechelt Peninsula up the coast, which has been stalled by what the company regards as extraneous claims and counter-claims from factions among the area’s Sechelt Indian Band and involving the Ottawa government. Pan Pacific, which began a £7.5 million compensation claim from the government, still reckons it can quarry 750,000 tonnes a year from established licences on the Peninsula, but is more excited about the potential at Pumptown and Pine Flats, another Dunton project in the vicinity.

Acquired by the Duntons to establish a residential community and golf course, Pine Flats sits on an estimated 250 million tonnes of ‘Sechelt sands’, which Pan Pacific says the Californian transport authorities to the south have named as a preferred material for bridge and road renewal. The company is talking to Heidelberg Cement, the German parent of Britain’s Hanson group, with operations nearby, about a production and processing deal and suggests California alone could take five million tonnes a year.

Analysts suggest a Heidelberg deal could yield Pan Pacific nearly £4 million in extra annual profits. Longer-term, the company is working on several other potential projects.

With 33 per cent gearing, it is believed the company hopes to raise the £1 million it now seeks at 1p to 1.25p a share. More funds will be needed later on to develop the projects under consideration, but, if the deals go through as planned, the shares could merit a significant re-rating.  

Growth Company Investor subscribers have full access to all our AIM and small-cap share recommendations. To subscribe today with a half-price offer, and gain immediate access to all the recommendations, click here.

Pan Pacific Aggregates	AIM	£1.88m	0.65p	0.00p
Click here for interactive charting
Other company articles:
PPA perseveres			02/10/2008
PPA back to AIM			29/09/2008
Crisis hits PPA			29/08/2008
Pan Pacific Aggregates			08/07/2008
PPA builds for recovery			20/06/2008