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Views From The Trading Floor Wednesday 18th January
Saints & Sinners
Oil & Gas
Tullow Oil (LOM:TLW) and Wessex Exploration (LON:WSX) issues an update today on operations in French Guiana in respect of progress on the Guyane Maritime block, in which Wessex holds an effective 1.25 per cent. interest. In early September 2011, Tullow announced that the Zaedyus exploration well offshore French Guiana made a significant oil discovery. This proved the extension of the Jubilee play across the Atlantic and opened up a new oil basin. Drilling operations continued until mid-November 2011 with an extensive data gathering programme being conducted including side tracking of the well in order to cut a core. A liner was run over the main oil bearing reservoir and the well was suspended for future re-entry. The rig went off contract on 23 November 2011. Core studies are currently underway and the initial phase wil l be completed in early-2012. On the back of that update Wessex Exploration were trading 11% easier to 5.75p in trading.
Yesterday we put out a BUY note on Matra Petroleum (LON:MTA) with a target price of 3.9p. Our risked valuation of the contingent resources using a chance of success of 70% equates to a risked NAV of US$5.8 per barrel versus Matra’s current market enterprise value of US$0.75 per barrel. We believe that the market is over discounting for the technical and funding risks and that the valuation gap presents an attractive investment opportunity. Matra received the 20-year Sokolovskoe Production Licence from the Russian authorities in December 2010 and the Company’s firm commitment to development of the field is the only condition for converting the contingent resources to recoverable reserves as per SPE guidelines. The Company, subject to securing the necessary funds or a farm-out deal, is planning to acquire 3D seismic and drill two productio n wells on Sokolovskoe during 2012. If successful, these new wells together with re-commencement of production from the previously drilled A-13 appraisal well could provide the technical premise for a full field development plan. Support looks to be 0.7p and first line resistance looks to be 0.8p.
Ascent Resources (LON:AST) the Oil & Gas exploration and Production company, pushed 12% better to 3.1p on 4 times the average daily volume. Investors are looking for an update on the Pg-10 well at the Petisovic Project in Slovenia. I think the market might be getting excited about this part of the RNS from the 25th of November “Stimulation work on both Pg-10 and Pg-11A wells is now complete. Both wells will be recompleted during January and February 2012 and a further testing phase will be undertaken.” With volumes moving in this fashion, it will be interesting to see if the market gets the update it is looking for.
I have mentioned TRAP Oil (LON:TRAP) a number of times over the last few weeks, highlighting the potential difference between cash in the bank and market cap. The stock has started to react running from 20p to 25p over the last few sessions. It seemed as though a large seller had been cleared a few days ago, and the stock has not looked back since. Shares were 2% dearer by lunch at 25p, first line resistance looks to be around 27p.
Equatorial Palm Oil (LON:PAL) announced it had completed the commissioning of its Palm Bay Mill. The company has successfully completed the commissioning of its processing mill at its Palm Bay Estate in Liberia, adding that production rate has now been increased to the full capacity of 5 tons per hour with current extraction rates in excess of 18% crude palm oil to be sold both domestically and in the international markets. Mill is sourcing fresh fruit bunches from the 3,500 hectares of existing oil palms rehabilitated by the Company. The stock had traded 3 times its average daily volume by early morning, and pushed 15% better to 17p.
Kea Petroleum (LON:KEA) started to heat up this morning, jumping 6% to 4.75p. Retail investors are waiting for drilling to commence at the Mauku-1 well. The last update on this was back in August 2011 when the company said “Such a target is the Felix structure, on which the Group is planning to drill the Mauku-1 well to 3500m, in the first quarter of 2012. This target is estimated by the directors to have a resource potential, in the event of discovery, centred at approximately 600 BCF of gas, with approximately 20 million barrels of associated condensate.” We will be keeping a close eye on this over the next few trading sessions to see how this one plays out.
Aminex (LON:AEX) the Oil & Gas exploration company with assets in Tanzania, started to pick up today, trading the average daily volume by mid-morning. The market is expecting an update on its Ruvuma Basin onshore Tanzania, as in the previous RNS they said “Following successful installation of the top drive to the rig the well is now drilling ahead at a depth of 620 metres. The target interval of the well is approximately 1,800 to 1,900 metres depth. Ntorya-1 is expected to reach total depth in late January 2011.” Retail investors started to nibble at the stock in anticipation of the update. Solo Oil (LON:SOLO) also have a holding in the asset, and pushed 18% better in trading to 0.73p on five times the average daily volume by midday. We will be watching closely for the update.
Another stock we highlighted a few days ago was Urals Energy (LON:UEN), The stock has woken up over the last few sessions, and pushed another 14% to 8.18p, on 2 times the average daily volume by early afternoon. Bulletin boards were speculating that news may come from the AGM scheduled for tomorrow.
Mining
Yesterday I highlighted the potential currency arb on Nyota Minerals (LON:NYO). The stock was trading at 6.6p on decent volumes, but the Australian line was trading a lot higher. Even with the currency conversion at the time of typing the OZ line was trading at 7.45p, a potential 15% discount to the UK line. It was no surprise to see the UK line playing catch up first thing, with the shares pushing to 7.5p, up 16% or 1p on 4 times the average daily volume. We will continue to watch for the currency arb on this one and try to highlight it if we see it again.
Ncondezi Coal (LON:NCCL) the coal exploration company focused on Mozambique, jumped 35% in trading to 66p on 4 times the average daily volume. The stock jumped after the company announced it had signed a new rail and port infrastructure study agreement with Rio Tinto Coal Mozambique ("RTCM"), a wholly owned subsidiary of Rio Tinto plc ("Rio Tinto"), and Minas de Revuboe ("Revuboe") to further study greenfield port and rail options and related infrastructure (together the "Integrated Transport Development Project" or "ITD Project"). This is a continuation of the jointly funded order of magnitude infrastructure study ("OoM Study") which was completed in Q4 2011. The market voted with its feet and jumped aboard the stock. They are a long way off the high of this time last year, when the stock was trading at 223p. One for the watch list.
Rambler Metals (LON:RMM) jumped 10% to 30.7p on 4 times the average daily volume, after the company gave what looked like a very positive update. The company said “Three gold pours have been completed to date with an estimated total of 2446 ounces of gold poured. The next gold pour is scheduled for 31st January and every two weeks thereafter. Mill gold recoveries of 90% with an average daily mill throughput of 591 tonnes for January and a single highest daily throughput of 680 tonnes. Copper Production update, development into the 1807 Zone continuing with copper concentrate production expected to begin during calendar 2Q 2012. Diamond drilling stations being developed for ore body delineation and further exploration. With gold pours expected every two weeks from here on, investors can expect a decent amount of news flow to keep the mark et interested for a while.
Horizonte Minerals (LON:HZM) jumped 8% to 13.4p in trading on five times the average daily volume. The stock has been on a decent run over the last week or so, since the Nickel update in Brazil. The company also announced the appointment of Non-Executive Director Dr. Bavinton, a qualified geologist, has over 40 years of experience in the mining and minerals exploration sector, most recently with mining major Anglo American plc.
After the large prints from yesterday, Beowulf (LON:BEM) continued to bounce as investors mopped up what looked like cheap stock. The shares pushed another 7% higher to 12.4p in trading.
North River Resources (LON:NRRP) announced that the three conditions precedents to the joint venture agreement between Extract Resources Limited and North River, as set out in the announcement of 21 September 2010, have now either been satisfied or waived. In accordance with the terms of the joint venture agreement, NRR Energy Minerals Limited, a wholly owned subsidiary of North River, will acquire a 50% interest in the issued shares of Brandberg Energy (Namibia) (Proprietary) Ltd ('Brandberg Energy'), a company established by Extract for the purpose of holding Exclusive Prospecting Licences ('EPLs') 3327 and 3328, following the payment of $800,000 by North River to Brandberg Energy, which should be completed within the next 4-6 weeks. A further announcement confirming payment of the subscription monies to Brandberg Energy and receipt of the shares in Brandberg Energy by North River will be made in due course. This RNS got the shares moving again, pushing 7% better on the day to 1.49p. If the stock can break through its resistance at 1.5p it could have a retest of resistance at 1.8p.
GGG Resources (LON:GGG) continued its impressive run of form, pushing another 16% better to 14.9p. Volumes have been steadily increasing since the Bullabilling Gold project update. Resistance at 16p could be the next level of interest.
Berkeley Mineral Resources (LON:BMR) continued to march on, as retail investors jumped on for the ride. The volumes traded have been steadily increasing over the last few sessions, and the shares pushed another 9% higher to 3.59p in trading today. If the stock can break its resistance at 3.5p, it does look like a test of the major resistance at 4p could be the next level to watch for here.
Frontier Mining (LON:FML) the minerals exploration company focused on Kazakhstan, jumped another 6% in trading on 5 times the average daily volume, to 3.14p. The company has been on a decent run of late, moving from 2.5p at the turn of the year to its current level. The stock is still a long way off from where it was trading this time last year at 8.5p. If volumes continue in this fashion, resistance at 3.5p could be tested.
From the trading floor
A rather uneventful trading day here in London, The main board had traded less than 500 million shares by 3pm and was trading flat at 5694. Once again FTSE AIM All-Share volumes were surging, trading 1.53 billion by 3pm. I have been preaching for a while now that the AIM market is back in play, and with volumes like these, it’s hard to disagree.
UK unemployment was on the menu today, with expectations of 8.3%. The number was a touch worse than the market had hoped for, coming in at 8.4%. Average weekly earnings were in line at +1.9%.
US Mortgage applications increase by 23.1% on last week’s reading, giving small hope for some positivity in the American housing sector. The US Producer Price Index (PPI) hit the wires in line at +0.1% this afternoon, and Industrial Production came in a little weaker than expected at +0.4% versus a consensus of +0.5%.
Talks between Greece and its creditors will resume later today, after they broke down last Friday. It is no secret that a deal needs to be done to see Greece receive its next tranche of bailout cash. Officials from the European Commission, IMF and EU will also meet in the Greek capital this week, to discuss in more detail whether or not to release the funds.
The German economy will grow by 0.7% this year, instead of the 1% the government predicted back in October last year, Economy Minister Philipp Roesler said. But he insisted: "There can be no talk of recession."
Commodities Corner
Gold – ↓Trading at $1644, down $6 (-0.37%)
Silver – ↑Trading at $30.20, up 15c (+0.55%)
Copper – ↓Trading at $8191, down $20 (-0.24%)
Zinc – ↑ Trading at $2005, up $11 (+0.54%)
WTI Crude – ↑Trading at $100.76, up 5c (+0.05%)
Brent Crude – ↓Trading at $110.98, down 32c (-0.24%)
Natural Gas (HH) – ↓ Trading at $2.53, down 13c (-5.02%)
FX
GBP vs USD = 1.5385
GBP vs EUR = 1.1995
Written by Steven Asfour, Sales Trader at Fox-Davies
