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Northland Capital Partners View on the City: Amara Mining, Dragon Oil, and StatPro

Last updated: 09:29 06 Aug 2014 BST, First published: 08:29 06 Aug 2014 BST

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MINING: Amara Mining (LON:AMA)

CLOSES KALSAKA/SEGA: TWO QUARTERS AHEAD OF SCHEDULE

Closure of Kalsaka/Sega

  • Amara Mining has ceased operations at its Kalsaka/Sega Gold Mine located in Burkina Faso.
  • The Directors decided to put the subsidiary owner of Sega operation into liquidation following a default notice from BCM International, the mining contractor. 
  • The subsidiary owner of the Kalsaka plant was not affected by the default notice.
  • Amara expected to close operations of its two Burkina based subsidiaries in Q414 with production expected to end in Q115.
  • Peter Spivey the CEO has resigned and John McGloin will take up the CEO position alongside his role as Chairman.

Drill results from Yaoure

  • 19 diamond drill hole results that targeted gaps in the model for the Yaoure deposit, located in Côte d'Ivoire, and as a result a significant proportion of waste is expected to be converted to mineralised material.
  • 9 diamond holes and 18 RC holes targeted the CMA zone and demonstrate the continuity and higher grade nature of the CMA zone.
  • Results include; 31m at 3.58g/t Au from 192m (YDD0193), 19m at 3.27g/t Au from 232m (YDD0187) and 16m at 2.04g/t Au from 12m (YDD0185).
  • Results from the higher grade CMA zone include; 17m at 3.09g/t Au from 66m (YDD0208), 17m at 2.81g/t Au from 86m (YDD0201), 16m at 3.62g/t Au from 80m (YDD0211) and 6m at 6.76g/t Au from 169m (YRC0699).
  • Updated mineral resource expected in H214.
  • Fully funded to Pre-Feasibility Study in Q115.

NORTHLAND UK VIEW: Disappointing news from Amara Mining with closure of its Kalsaka/Sega Gold Mine two quarters ahead of expectations. The Company has stated that it all cash assigned to the Pre-Feasibility for the Yaoure Gold Project remains committed to the project and believes that the premature cessation of mining will not materially affect its financial position as the $3m bond already in place should more than cover the cost for the closure and rehabilitation. However, Amara’s subsidiary does not at present have money to repay its subsidiaries debt to BCM due to the leach cycle and the lead to time to regain working capital from a heap leach operation. The management team believes there is no basis for any legal resource against Amara Mining plc and is going to focus on ensuring that all working capital locked up at Kalsaka/Sega is released efficiently to the benefit of its creditors. The Company also released another announcement with positive drill results from its Yaoure project but despite this we would expect shares to move into negative territory today.

 

TMT: StatPro (LON:SOG)

INTERIMS: FURTHER GROWTH IN REVOLUTION BUT CURRENCY HEADWINDS

  • Reported revenue down 5% to £15.7m but +4% on a constant currency basis. Adj. PBT down 43% to £1.1m (-28% CCY) and adj. EPS down 55% to 1.3p, following increased spend on sales people, marketing activities and development as part of cloud transition. Net cash of £3.2m (H1 FY13: £2.8m). Interim DPS maintained at 0.85p.
  • Annualised recurring contract value of £28.4m (down 6% reported but up2% CCY) but within this, the annualised recurring revenue contract value for StatPro Revolution increased 85% to £4.0m and StatPro Revolution related recurring revenue increased to £9.9m. StatPro Seven software licences down 12.4% to £10.9m. StatPro R+, the cloud replacement for StatPro Seven on track for full launch in 2015.

NORTHLAND UK VIEW: Ongoing transition to a fully cloud-based business as well as currency headwinds impacted the headline numbers but growth in StatPro Revolution annualised recurring revenues (+85%) is encouraging and StatPro has added 102 clients over 12 months (to 322). Meanwhile the legacy StatPro Seven business is holding up reasonably well and from next year StatPro will look to transition these customers over to StatPro Revolution and StatPro R+. Investment has impacted profitability as well as the shift to cloud but business remains comfortably capitalised. Higher revenue visibility reflected in current rating of 26.3x FY14 and 22.9x FY15.

 

OIL & GAS: Dragon Oil (LON:DGO

UPDATE FOLLOWING ANALYST CALL: OPTIMISTIC ON H214/CASH PILE EXPECTED TO FIND HOME

  • For the first half to June 30th, Dragon Oil produced average bopd of 73.4k slightly behind the 73.6k bopd recorded in H113. This translated to revenue of $547m, 11% up on the prior period given stronger oil price and a higher entitlement barrels. Cash generation of $364m offset capex of $313m, with cash balance increasing to $1.9bn (H113: $1.7bn).
  • The analyst conference call highlighted an improved second half outlook following some delays to development drilling in H1 due to rig delivery issues. In total, the company expects to drill 14-16 wells this year (seven in H114). 
  • Management noted an improved production rate of 81.3k bopd reached in August, providing confidence in its guidance of a year-end exit rate of 87-90k bopd with the target 100k bopd next year, following the drilling of up to a further 20 wells.
  • Its Iraq block 9 exploration well is drilling ahead having reached its primary objective with cores taken. The company was positive about findings and expects to deploy significant development capital to the prospect.
  • Company has been assessing opportunities to utilise its substantial cash pile.

NORTHLAND UK VIEW: An informative call in which management defended its significant cash balance. There is a strong balance sheet with cash of $1.8bn and management stated it has been considering acquisitions in the $1bn+ realm that would utilise significant additional funds (c. $500m) for capex. If these do not materialise it will consider share buybacks or special dividends. Current dividend support is reasonable, if not spectacular, at c.4%. Modest rating leaves scope for outperformance. Shares traded up 2.7% yesterday and have lost 6.5% on the year.

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