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In the news with RFC Ambrian: Metminco, North River Resources & Global Petroleum

Published: 11:17 30 Oct 2015 GMT

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METALS & MINING EQUITIES

METMINCO*† (LON:MNC)— Chilean Supreme Court Hears Company’s Appeal — The dual ASX- and AIM-quoted copper developer that is focused on advancing the Los Calatos Copper Project in Peru and the Mollacas Copper Project in Chile has announced that the Supreme Court of Chile has heard its appeal regarding access rights to the Mollacas Project and that it anticipates that a decision will be handed down by the end of the year.

RFC Ambrian Comment: Although difficult to second guess the court’s decision, we do note that a favourable ruling, giving it rights of access to the project area, is necessary for Metminco to progress the Mollacas Project. We believe that the project has considerable potential value. The company completed a positive updated scoping study in March 2014 that considered the development of a high-return, open-pit, heap leaching copper operation producing an average of 8,000tpa of copper cathode over a mine life of seven years.

The decision will settle a dispute over access rights between the company and the landowner that came to a head in March 2014 when a decision by a regional court invalidated the extension of the company’s rights of access onto the project area, as required for the permitting of the project. We await the court’s decision with interest.

The next steps for the project would be related to permitting, for which we anticipate the goodwill of the local population will be required, and also the completion of a work programme to support the completion of a definitive feasibility study.

We continue to recommend the company as a Speculative Buy. For a detailed analysis of Metminco and its prospects please see our report Metminco — Los Calatos Slims Down & Shapes Up, 23 October 2015.


NORTH RIVER RESOURCES† (LON:NRRP) — Namib Project Update — The AIM-quoted company focused on developing the brownfield Namib Lead-Zinc Project in Namibia has announced an update on the Mining Licence application for the project.

The company stated that, whilst ongoing discussions with the Namibian Ministry of Mines and Energy remain positive and continue to progress, it does not now anticipate that the licence will be issued by the end of October 2015. This had been the date assumed as per the recently completed US$4m Phase 1 Fundraising, which would have allowed a construction decision to be made by the year end.

The company is thus now reviewing the timeline to bring the project to a construction decision, and expects to provide a detailed announcement in the near future.


OIL & GAS EQUITIES

GLOBAL PETROLEUM*† (LON:GBP) — September 2015 Quarterly Report — The AIM-quoted and ASX-listed oil and gas company engaged in Africa and the Mediterranean has released its quarterly report for the period ending 30 September 2015.

The company ended the quarter with a strong cash position of US$11.9m, following a net cash outflow for the quarter of US$0.8m. This comprised US$0.64m of operating expenses (exploration and development) and a US$0.13m exchange rate adjustment.

As previously reported, the initial Exploration Period for the Namibian Licence, covering Offshore Blocks 1910B and 2010A, has been renewed to December 2015, in return for an additional work programme involving further seismic and gravity modelling. Global has indicated that this work has increased its confidence in the prospectivity of the acreage, specifically in the potential for a deepwater syn-rift oil play. We therefore understand that the company is in discussions with the Namibian authorities regarding the continuation of the Namibian Licence beyond the current extension period.

For the four Italian exploration permit applications, the company is continuing to progress the process towards EIA documentation approval. Global advises that the Italian authorities have recently requested supplementary information relevant to the applications.

In light of its robust cash position, the company is well placed to progress potential M&A activity, and has been actively reviewing opportunities in the space. The company has been engaged in detailed discussions with a number of counterparties with potentially suitable assets packages, and guides that it remains highly selective over which opportunities it would consider making a final investment in.

RFC Ambrian Comment: The low cash burn and maintenance of the strong balance sheet reflect Global’s commitment to cost reduction and financial conservatism. The company’s cash position of US$11.9m is supported by a debt-free balance sheet. Hence, with a market cap of US$6.9m, the company is trading at a significant discount to cash, with a negative EV of US$(5)m. We look forward to newsflow regarding potential M&A activity over the coming months. The company has commented that, in view of the ongoing market weakness, counterparties are prepared to accept more realistic transaction terms, enabling greater potential value delivery to shareholders.
We reiterate our Speculative Buy recommendation.

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