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Broker Roundup: Dragon Oil, Bowleven, African Eagle, Sunrise Resources

Last updated: 14:19 25 Nov 2010 GMT, First published: 15:19 25 Nov 2010 GMT

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Irish broker Davy today reminded investors that the developments in Total’s (NYSE:TOT) efforts to find a way to transport Turkmen gas directly to Europe through Azerbaijan directly affects Dragon Oil (LON:DGO).

After discussions with Turkmenistan's president this week, Total’s CEO said that in a few months Total will present concrete proposals for taking Turkmen gas across the Caspian Sea.

Dragon operates two oil and gas fields in shallow water in the eastern Caspian offshore Turkmenistan and should a pipeline be built, it will offer route-to-market for Dragon’s resource of 3.1 TCF of gas, which Davy called “very material”.

“Such an endeavour would be hugely positive for Dragon,” said Davy.

Davy currently has a price target of 532 pence for the stock, not including a value for Dragon’s gas.

Shares in Dragon Oil last traded at 439.5 pence.

Evolution Securities analyst David Farrell examined Bowleven’s (LON:BLVN) latest update from the Sapele-1 discovery well in the Douala basin, Cameroon.

Earlier this month, Sapele-1 exploration well was drilled to 3,360 metres, and it found light oil/gas condensate in moderate quality Lower Omicron reservoir units, and oil in high quality Deep Omicron sands.

Today, the company said that a further 123 metres has now been drilled in Sapele-1, where it encountered an additional 6 to 8 metres of net hydrocarbon pay beneath the previously logged section in Deep Omicron.

The Omicron discoveries now have between 31 and 43 metres of total net pay.

“This is not a game changer but an incremental positive”, Evolution Securities analyst David Farrell said in a note to clients.

Farrell expects block MLHP-5 to be at forefront of Bowleven’s drilling campaign for the next 12-18 months.

He adds: “The shares have been strong recently though and we urge some caution ahead of the higher risk prospects to be drilled.”

African Eagle (LON:AFE) shares could soar well past their current highs, according to Matthew McDonald, mining analyst at Seymour Pierce.

He set a price target of 18p a share (current price 6.62p) in the wake of the latest resource update, which focused on the potential of the Zanzui project in Tanzania.

Modelling based on the drilling done to date produced a JORC exploration target of at least 20 million tonnes at 0.9-1 per cent nickel.

Electromagnetic and geochemical data indicates there is “good potential” to increase this tonnage. 

A study of the VTEM survey has identified eight targets, including possible nickel sulphide and platinum targets and oxide nickel targets.

African Eagle's managing director Mark Parker said: "Our in-house deposit modelling shows good potential for a significant nickel deposit at Zanzui, even within the modest area drilled to date. 

“VTEM geophysical data also indicates other areas of thick laterite that remain to be tested and also possible bedrock conductors which may be nickel sulphides. 

“Together, African Eagle's Zanzui and Dutwa nickel deposits are shaping up to be an important nickel province. 

“The company has already delineated JORC resources close to one million tonnes of contained nickel equivalent in its Dutwa inventory and the deposit at Zanzui should help surpass this significant milestone."

African Eagle also owns the Dutwa nickel project also in Tanzania, which has a JORC inferred resource of 98.6 million tonnes at 0.93% nickel. 

Earlier in a busy session the shares peaked at 6.68p, before settling back to 6.62p, up 0.5p on last night’s close. So far this year it has advanced 60 per cent.

Seymour Pierce’s McDonald, reiterating his buy advice, said: “Coupled with an identified drilling target on Ngasamo Hill at Dutwa, which has been identified as having potential for resource expansion of up to 10 million tonnes, African Eagle has the opportunity to keep adding to its current inferred resource base of 98.6mt into the future.

Northland Capital - formerly Astaire Securities - analyst Andrew McGeary looked at Sunrise Resources’ (LON:SRES) new £1.2 million financing. 

It intends to use the funds to advance the Long Lake gold project in Canada and the Derryginagh barite project in Ireland.

McGeary said that whilst Long Lake is early stage, its appealing as it has established gold potential.

“The current drilling programme and contemporaneous geophysical work will not be conclusive but it should help establish the requirements necessary to define a compliant resource in a subsequent campaign,” McGeary said. 

“Whilst it is also too early to apportion a value, we suspect an inferred 500,000oz (management’s minimum target) resource could be conservatively valued at up to $15m, assuming 30/oz for this project alone.”

Long Lake is situated in Ontario, near the famous Sudbury mining region. The site hosts a historic gold mine which produced 56,000 ounces of gold up until it was closed in 1939. 

 

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