Mercury investment in Ovoca leaves unanswered questions

Ovoca Resources director Frank Buckley told The Irish Times last week that Mercury Engineering's decision to pay €390,000 (£307,000) for a 5 per cent stake in Ovoca was part of Mercury's "ongoing investment strategy" and that the two companies would explore areas of mutual interest that could lead to business opportunities.

On the surface, and even when one looks far beneath the surface, it's hard to see what areas of common interest there are between a hugely successful engineering company like Mercury and an insignificant little exploration company like Ovoca whose only real asset is a lead/zinc prospect near Newcastle West in Co Limerick. So what's Mercury up to?

First of all, for those of you outside the mechanical, electrical and fire prevention businesses, a few brief details about what Mercury is. The firm has been around for about 30 years and is one of those construction-related firms that have done brilliantly out of the building boom of the past few years.

In the year to December 1999 - the last set of accounts available - Mercury had pretax profits of £9.6 million (up from £9.3 million), after-tax profits of £8 million (down marginally from £8.2 million and mainly due to a higher tax charge) and sales of £85.6 million (up from £77.1 million). In addition, Mercury is awash with cash with retained profits at the end of 1999 of now less than £25 million (up from £19.1 million). Mercury is owned by Frank O'Kane and Joe Morgan and employs almost 1,000 people.

So to repeat the question. What is Mercury up to? Is it a question of Messrs O'Kane and Morgan having a bit of a punt on a possible lead/zinc find in Limerick? Or is the investment in Ovoca more linked with the exploration company's stock market listing? Reversing into Ovoca would not be a problem if a listing is the reason for the €390,000investment for 5 per cent of Ovoca.

Frank Buckley - the man who discovered the Galmoy mine for Conroy Resources - said that using Ovoca to get a stock market listing is "not on the table". It mightn't be on the table now, but in the future. . .

At the moment, it's hard to see why Mercury needs a stock market listing. Privately owned, it has been able to fund its strong growth in recent years from its own resources, so there is no obvious need for cash.