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Beaufort Securities Breakfast Alert DekelOil, Kibo Mining, Orogen Gold, Xtract Resources and others

Published: 08:06 16 Oct 2015 BST

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The Markets

Market opening: The FTSE-100 is expected to open around 30-points higher this morning.

New York: Wall Street ended in the green amid better-than-expected corporate earnings reported yesterday. Little possibility of any interest rate hike this year as key economic data continued to remain weak, further strengthened investors’ confidence. The S&P 500 advanced 1.5%, led by the financial sector.

Asia: Equities are trading higher, taking positive cues from the Wall Street. The Nikkei 225 added 1.1%, as weak yen supported the export-driven stocks. The Hang Seng was trading 0.5% up at 7:00 am, tracking the stocks in mainland China.

Continental Europe: Markets ended higher amid positive corporate earnings reports. Moreover, speculation of delay in interest rate hike by the Fed boosted investor sentiment. Germany’s DAX and France’s CAC 40 rose 1.5% and 1.4%, respectively.

Crude Oil: Yesterday, Brent and WTI oil prices decreased 0.9% and 0.6%, respectively. The spread between the two varieties stood at US$2.3 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.59% higher yesterday at 736.34.

Today’s news

US inflation falls in September

As per the US Bureau of Labour Statistics, consumer price index in the US fell 0.2% m-o-m in September, the biggest drop in the last eight months. This followed a 0.1% decline in August. On y-o-y basis, prices remained flat in September, after a 0.2% rise in August.

Equiniti Group Share Offer – Now Open!

Equiniti Group, a leading provider of technology and solutions for complex and regulated administration serving corporate and public bodies, has announced its intention to proceed with an IPO on the London Stock Exchange and Beaufort have been appointed as an intermediary for private investors. The Share Offer is now open, but closes at 12:00pm, Friday 23rd October 2015 so you need to act fast to make your subscription. Click here for more information.

Company News

Xtract Resources (LON:XTR) – Speculative Buy

Xtract, a gold and copper mining and development Company with projects in South America and South Africa, yesterday announced that, further to the notification by the Company on 10th September 2015, Auroch Minerals NL have held a general meeting at which Auroch’s shareholders approved the disposal of 100% of the Manica gold project to Xtract. Completion of the Transaction remains subject to the Company obtaining the necessary approvals under the Mozambique Mining Act and other applicable laws relating to the change of control of Auroch Minerals subsidiary and communicating such change of control to the Mozambican mining authorities.

Our view: It is pleasing to have received approval from Auroch shareholders and look forward to the relevant approvals being granted by the Mozambican mining authorities. Importantly, the Company continues to advance negotiations with regard to the project finance as part of the final completion of this exciting acquisition. We retain our Speculative Buy on Xtract Resources.

Beaufort Securities acts as corporate broker to Xtract Resources plc

Kibo Mining (LON:KIBO) – Speculative Buy

Yesterday, Kibo Mining (Kibo) informed that it has completed Phase 1 of the Mbeya Definitive Mining Feasibility Study (MDMFS) comprising of a geotechnical drilling programme on the Mbeya coal mine. The drill programme consisted of 8 holes, positioned strategically to penetrate the pit hanging wall at depths from 95-120m and totalling 820m. A metallurgical sampling programme was conducted to confirm specific coal properties as per the necessities of power station.

Our view: Kibo’s progress in the Mbeya Coal to Power Project (MCPP) has been remarkable as it has successfully finished Phase 1 of the MDMFS. The company concluded the programme as per the schedule and within the budget. Earlier this week, Kibo informed that it completed the financial optimisation study for the coal mine component of the MCPP based on the feasibility results obtained as of now. The company reported encouraging findings with relatively low operating costs, high NPV and improved cash return on capital invested. Kibo boasts of having a diversified portfolio of mineral projects including the Lake Victoria Goldfields in the Southern Tanzania, with around 700,000oz JORC compliant gold resource and the highly prospective Haneti nickel project in the Central Tanzania. Furthermore, the company has commenced operations at its uranium JV with Metal Tiger covering the Pinewood uranium project. This signifies that the JV partners are confident of potential resurgence of interest in the uranium sector. We believe the company has long-term growth potential well supported by its solid assets and huge resources. Therefore, we continue to recommend a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Kibo Mining plc

Orogen Gold (LON:ORE) – Speculative Buy

Yesterday, Orogen Gold (Orogen) informed that it would restart drilling at the Mutsk gold project, located in Armenia. The company would commence drilling before the end of the current season.

Our view: Orogen’s recommencement of drilling at the Mutsk gold project offers attractive opportunities. The company has identified a number of drill locations and has planned the programme to establish continuity and presence of gold in neighbouring discovery areas. Recently, Orogen raised £450,000 through the issue of shares, which would help it meet the working capital requirements. Furthermore, as per the recently announced interim results, the company showcased a resilient performance and narrowed its pre-tax losses. We are encouraged with the appointment of Colin Bird as Orogen’s new CEO, an experienced and established company director who has successfully developed several mineral exploration projects worldwide. Additionally, Orogen is progressing nicely in its Deli Jovan gold project in Serbia as well as development of new projects. In view of the overall optimism surrounding Orogen, we maintain a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Orogen Gold plc

DekelOil Public (LON:DKL) – Speculative Buy

DekelOil Public Limited, operator and 51% owner of the vertically integrated Ayenouan palm oil project in Côte d’Ivoire, yesterday announced that it has entered into a contract to develop 10,000 hectares of brownfield land in West Ghana. The contract expands DekelOil’s potential portfolio of company-owned estates and diversifies its presence in West Africa in line with its strategy to become a leading crude palm oil (CPO) producer in the region. The contract relates to land near the city of Bibiani in the western region of Ghana. The contract has been undertaken with local land owners and a registered lease will be granted to DekelOil subject to due diligence including environmental and social feasibility studies and land surveys (the Ghana Bibiani Project). Due diligence is anticipated to take up to 12 months and DekelOil has the option of walking away from the contract with no penalties should any material issues arise. If formalised, the Ghana Bibiani Project will be developed as DekelOil’s third vertically integrated operation adding to the Company’s existing portfolio which comprises of the producing Ayenouan Project and the 24,000 hectare Guitry project area, both in Cote d’Ivoire.
The Ghana Bibiani Project –
• The 10,000 hectares of brownfield land will augment DekelOil’s company-owned estates but will be developed in partnership with local smallholders
• Smallholders will receive a third of the profits from the sales of FFB to a DekelOil-owned CPO processing Mill in consideration for providing the land
• This is consistent with DekelOil’s proven and effective model to work in partnership with local communities to deliver CPO requirements in-country
• Strong local market for CPO – Ghana currently has an unmet demand of 35,000 tons of CPO and like Cote d’Ivoire local prices for CPO are at a premium to international prices

Our view: This agreement is in line with the Company’s strategy to become a major CPO producer in West Africa. The land will be developed as the Company’s third vertically integrated West African project and considering the strong local market for CPO, the management team’s strong experience of working in Ghana, and its close proximity to its existing sites, we believe this project will add a complementary and valuable revenue stream to DekelOil’s business. In line with its current activities to operate in partnership with local land owners and smallholders, the community will benefit from the Company’s activities in Ghana, with the consideration for the land payable through a share of the profits delivered from sales of FFB to a company-owned Mill to be developed and built in the future. The deal is subject to the appropriate due diligence and will take up to 12 months. We welcome the news of the potential expansion and DekelOil’s continuing its strategy to become a major CPO producer. We continue to believe the company is undervalued. Speculative Buy.

Beaufort Securities acts as corporate broker to DekelOil Public plc

Anglo Pacific Group (LON:APF) – Speculative Buy

Yesterday, Anglo Pacific Group (Anglo) released an update on the Narrabri royalty. Whitehaven, the mine’s operator informed that it successfully completed a longwall change-out maintenance work. Coal production for the quarter ended 15th October 2015 stood at 1.0 million tonnes (Mt), 52% lower than the quarter ended 30th September, 2014. While, saleable coal production stood at 1.6Mt, with coal sales of 1.6Mt. Anglo attained the royalty on Australia-based Narrabri coal mine in March 2015 and would receive royalty income of over 100% of sales from the coal mine.

Our view: Anglo continued to drive on the excellent production numbers in H1 2015, as Whitehaven reported higher sales than production in the last quarter. Although, the maintenance work hurt the production level, this would definitely help to increase production and achieve operational benefits in the long-run. The company’s move to acquire an interest in Narrabri is turning fruitful as it awaits royalty income from the mine. Whitehaven expects the production for the fiscal year 2016 to be between 6.6Mt to 6.8Mt. Furthermore, as per the recently declared results for the first half of 2015, Anglo delivered solid performance despite the difficult trading conditions, with increased royalty income and reduced losses. We believe the company could witness improved earnings owing to the significant progress in its recent acquisitions of Narrabri and Maracas. Therefore, we retain a Speculative Buy rating on the stock.

Economic News

US initial jobless claims

Number of Americans filing their initial claims for unemployment benefits dropped by 7,000 to a seasonally adjusted 255,000 in the week ended 10th October, from last week’s downwardly revised claims of 262,000, the Labor Department said yesterday. Economists had expected claims to increase to 270,000.

US empire manufacturing

The US Empire State manufacturing index for general business conditions improved to -11.36 in October from -14.67 in September, the manufacturing survey by the Federal Reserve Bank of New York revealed yesterday. Economists had expected a reading of -8.0.

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