No Pain, No Gain: Hope of second time lucky for Bolivian bonanza

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The Independent Online

Some companies, rather like individuals, are born survivors. Take the Dublin-based exploration group Pan Andean Resources (PAR). Once it appeared to be a busted flush. Yet it is now profitable and last week disclosed it had encountered "significant gas shows" at a field in Bolivia.

The shares made headway as the stock market applauded the South American strike by the Irish explorer. But longstanding shareholders could be forgiven for hoping history is not about to be repeated.

For PAR has an unenviable distinction. A dozen or so years ago, its shares suffered what must be one of the most spectacular one-day falls in the history of the stock market. One minute they were nudging 140p; the next they were struggling to remain above 30p. It was oil - or rather the lack of it - at a much-trumpeted Bolivian field that did the damage.

All the signs were that PAR was onto a winner. For months, investors had become increasingly excited about the potential of its Bolivian adventure. Rumours filtered from the jungle indicating a rich discovery. The shares made inexorable progress. Then an investor made an out-of-the-blue telephone call to the oilmen. He hoped to glean the extent of the find. Instead he discovered the well was dry. The company was flabbergasted. It had been awaiting confirmation of a strike. Eventually it issued a statement saying the oil had "migrated". The Bolivian adventure was over and PAR would apparently never explore again. But the chairman, John Teeling, and his team continued to prospect. They also built an income-producing business to go alongside what is an increasingly interesting collection of exploration sites. And in Bolivia these days PAR has a powerful friend: British Petroleum. Profits have hit £1.2m and expansion talks are in progress. The shares have, of course, never returned to their earlier, illogical, peak. They are now about 23p after plumbing 9p.

I am not keen on resource shares;there have been far too many disasters. They have, however, enjoyed a great run recently, with newcomers, most with more hope than substance, receiving warm receptions. I would ignore most of them, except for in-and-out flutters. But any investor seeking a more long-term investment could do worse than descend on PAR.

There is no relationship between PAR and Ofex, except that shares of the company running the eponymous fringe share market have also experienced a dramatic collapse. Like PAR all those years ago, Ofex is in deep trouble. Without a rescue deal, it would have run out of cash next month. Such an event would have been disastrous for investors holding shares in Ofex-traded companies. The City's third market started life when the London Stock Exchange abandoned the old matched-bargains facility, which had existed for decades, to accommodate companies that could not, or would not, join the main share market.

So Ofex (Off Exchange) was born to cater for such businesses. It also set about attracting more adventurous operations that were ill-equipped for a stock market presence. At first it thrived. And when, last year, shares in Ofex itself arrived, paradoxically on the rival Alternative Investment Market (AIM), it looked as though the third tier was set to become a significant share platform. A subsequent cash-raising exercise, combined with the arrival of the ex-AIM man Simon Brickles and the serial investor Luke Johnson, seemed to confirm its progress. But when the expected flood of new recruits failed to materialise and many constituents moved to AIM, revenue fell well below target. To add to the discomfort, costs spiralled and Ofex suddenly encountered the pressures many of its less successful constituents had endured.

A cash injection was necessary, not only for the company to survive, but possibly the market as well. It would seem the Jenkins family, which created and managed Ofex, will have to accept a reduced role. When Sid Jenkins started his stock-jobbing firm in 1948 he was a "diamond geezer" in a world dominated by the "old school tie" brigade. He thrived by dealing in out-of-the-way shares - Arsenal FC (an Ofex constituent) was one. His sons, Tony and John, continued the business but sold out at the time of the Big Bang market reforms in 1986. John resurfaced with a share-dealing firm and later created the Ofex market. At one time its capitalisation was £2.5bn. Now it is £1.67bn and companies continue to leave - with few replacements in sight.

I believe, as with PAR, the Ofex story will continue. But the shares, which at the start of the year looked attractive, are now only for brave gamblers.

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