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Fox-Davies Capital Tuesday Energy and Mining News Wrap

21st Oct 2008, 9:05 am Fox-Davies Capital Tuesday Energy and Mining News Wrap

Faroe Petroleum  (FPM),  Encore Oil  (EO) and Stratic Energy  (SE)  announced the successful testing of the East Breagh well in UK Southern North Sea Block 42/13. The well flow rate from the upper zone reached 10.2 million standard cubic feet per day. Results are in line with management expectations.
 
Leni Gas & Oil  (LGO)  reports the results of the re-interpretation of the Company's exploration acreage in north-west Spain by Tracs The recoverable prospective and contingent resources across the 10 prospects have a total unrisked mean volume of 12.8 mmboe (10.6 mmbo prospective resources). These prospective and contingent resources are in addition to the recoverable reserves target from Ayoluengo of 10.4 mmboe.
 
Comments: this is a material addition to Leni resources base, but note that most of the additional resources are in the prospective category, associated with a higher degree of uncertainty.
 
Following the rejection of the Proposed Offer from Salamander (SMDR) to Serica's (SQZ) Board, the Board of Salamander has decided, in light of the continued uncertainty in the capital markets and volatility in the price of crude oil, to withdraw the Proposed Offer. Salamander had offered approximately GBP124 million in shares for Serica in late September.
 
Heritage Oil (HOIL) the operator of the Warthog-1 exploration well in Uganda, in which Tullow Oil plc (Tullow) is a 50% partner has announced a discovery on the Warthog-1 exploration well in Block 1 Uganda.

A gross hydrocarbon-bearing interval of approximately 150 metres, with 46 metres of net hydrocarbon pay have been encountered comprising of volatile oil, condensate and wet gas.

Warthog-1 will now be suspended as a future production well. The rig will now move to Buffalo-1 to commence drilling in mid-November and is expected to take 21 days.
 
Comment: With a further two prospects on the same block to be drilled over the coming months, this discovery de-risks the potential for the other exploration prospects.
 
DiamonEx Ltd (DON)  announces the execution of a Placement Agreement between the Company and Hartco Nominees Pty Ltd to raise A$2,000,000 by the placement of 20,000,000 shares. The placement will be carried out in two tranches.  The first tranche of the placement will be completed on 22 October 2008 with the allotment of 5,300,000 shares to Hartco at a price of A$0.10 per share. The second tranche of the placement is subject to DiamonEx obtaining the requisite shareholder approvals at its annual general meeting to be held on Friday, 28 November 2008. The company has also commenced the sale of its first parcel of diamonds, comprising more than 10,000 carats, recovered during the commissioning and start up phase. The diamonds are being presented for viewing in Gaborone this week, followed by a viewing in Antwerp.
 
Comment: It is good news that DiamonEx has finally commenced the tender process for its first parcel of stones. We await their sale for a clear guage of the average diamond value. In the meantime, we have reduced DON’s target price to A$0.25 (£0.10) based on (a) the share dilution from this placement, and (b) a reduction in our diamond price escalator (due to the poor economic outlook), from 5% per annum to zero growth until 2010 (3.5% p.a. thereafter)
 
African Eagle Resources  (AFE)  announces further results  from the  Company's  recently  discovered Dutwa nickel laterite project in Tanzania. The most significant nickel results from drill holes 51 to 80 are: 57m at 2.57% nickel from surface, including 15m at 6.91% 30m at 2.53% nickel from 15m depth, including 12m at 3.19% 57m at 1.04% nickel from surface 36m at 1.45% nickel from surface, including 9m at 2.71% 48m at 1.08% nickel from surface.
 
Comment: These are excellent grades near surface. This is turning into a significant discovery for African Eagle.
 
Gemfields Resources  (GEM)  announced a Tender Offer to purchase up to 30,754,970 TanzaniteOne Limited common shares at 42.75p per share. Its firm offer to acquire these shares is by a "first-come, first served" tender offer, on the terms and subject to the conditions set out in the Tender Offer Document and in the Tender Form. The offer is conditional upon Gemfields obtaining acceptances representing such number of T1 Shares as represents 50.1 per cent of the issued and to be issued share capital of T1 when aggregated with the T1 Shares  already held by Gemfields and its affiliates.
 

The International Copper Study Group released for world copper supply and demand for the January-July period indicating a production deficit of about 55Kt compared to a deficit of around 90Kt for the same period in 2007. Upon examination of monthly data, it is clear the ytd deficit is rapidly shrinking, with the ICSG reporting a surplus of 65K in July.
 

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