column http://www.proactiveinvestors.co.uk Proactiveinvestors column RSS feed en Tue, 30 Jun 2015 00:10:44 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) Which direction for Lonmin? http://www.proactiveinvestors.co.uk/columns/trendstargets/22306/which-direction-for-lonmin-22306.html Sat, 30 May 2015 09:08:00 +0100 http://www.proactiveinvestors.co.uk/columns/trendstargets/22306/which-direction-for-lonmin-22306.html Thomas Cook Backlash Overshadows Turnaround http://www.proactiveinvestors.co.uk/columns/trader-talk/22300/-22300.html Sat, 30 May 2015 07:00:00 +0100 http://www.proactiveinvestors.co.uk/columns/trader-talk/22300/-22300.html The Pay Zone: Oil Price Afren, Premier Oil, Rose Petroleum and Sefton Resources http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22307/the-pay-zone-oil-price-afren-premier-oil-rose-petroleum-and-sefton-resources-22307.html WTI $57.68 +17c, Brent $62.58 +52c, Diff $4.90 +35c, NG $2.71 -14c

Oil price

With the dollar running out of steam and the stock data providing a welcome pick-me-up, the oil price rallied after a down, if short week. Having been well over a buck down mid-session the rally left both crudes up on the day although notice the differential is still below $5. Those EIA stats showed a stock draw of 2.8m barrels against consensus expectations of 0.9 but inventories are still way higher than this time last year so no room for complacency. On the product side things continue to look very strong, with gasoline stocks down 3.3m barrels and refinery runs up to 93.6% as I said earlier in the week, refiners will be making out like bandits…

This time next week will witness the start of the Opec meeting so stand by for all the usual positioning and bandstanding as the various sides try to affect the outcome. Unless there is a genuine concert party of cutters expect a rollover of the 30m b/d which wont be adhered to…

Afren (LON:AFR) - litany of disaster continues…

In today’s statement Afren say that the recapitalisation will now be completed by the end of July…Remind me, when was it meant to be? 2105 provisional production guidance is now lower and high wide and handsome at 23/- to 32/- b/d sharply down from last years 36/- for a number of reasons. Nigeria is looking grim as is Kurdistan, we dont like to see statements like ‘a material reduction to previously published estimates of reserves and resources’ which refers to the latter but there it is. This stock remains uninvestable for the foreseeable future I suspect.

Rose Petroleum (LON:ROSE)

For a long time now I have been receiving requests to follow Rose so I met up with CEO Matthew Idiens earlier this week to try and learn about the company. I certainly cannot be accused of starting coverage at the top, they have just raised money at the low, a senior director has just left and they have just drilled a duster with a high impact well. To be fair they needed the money, they had a disagreement with the individual and the well was a brave attempt at a high risk prospect which would have been a game changer. This is an initial look at Rose which looks an interesting project about which I will learn more in due course.

Rose operates in Colorado and Utah, in the Paradox basin adjacent to Fidelity who have the Cone Creek field to the south-east, in the Uinta Basin targeting the Mancos shale formations and production from the Cisco Dome Project which targets conventional gas. Resource estimates from the former are 1.1bn barrels of oil and 2.19 TCF of gas and the latter 709m barrels of oil and 4.26 TCF of gas. The Cisco Dome Project provides production and infrastructure through the Williams pipeline, the company are now gaining drilling permits for 6 new wells in the field including the offset to 15-5, to be 15-5HZ. This will apparently lead to a 4 well drilling programme. Finally the company still has its mining operation in Mexico which has high-grade gold-silver production as well as exploration but I am assured needs no further investment, indeed it may throw off some cash.

I shall watch Rose and comment more after the results which are due soon but there are undoubtedly attractions and some pitfalls to be aware of. I like the upside potential that may be provided from the impending Ryder Scott reserve report and the company would clearly like to see a move from prospective recoverable to contingent which would add to the valuation somewhat. The process of permitting and potential drilling is under way at Cisco Dome and the longer term but more exciting prospect at Paradox provides a good deal of appeal. The value uplift of any success on any of the company’s assets is substantial as the in-place infrastructure keeps the costs down and makes money even at oil prices below those currently being obtained locally. On the downside the recent raise of £3.1m will not keep the wolf from the door, after permitting the company say that each well will cost around $3m so there is an inevitable requirement for cash which can keep the lid on the share price until cleared up. Also, whilst not taking anything away from the long term potential, the market was clearly disturbed by recent management change, I have it on good authority that it had nothing to do with the failed attempt at the conventional which as I said the company had to try.

Overall, provided funding does not become an issue, Rose offers the potential of access to a substantial resource base in proven basins with the opportunity to upgrade quickly should they be successful. News-flow should be in their favour over the medium to longer term and so it will be worth keeping Rose on the watch list at the very least.

Sundry 

Mixed news from Sefton (LON:SER) this morning as they announce that their CEO appointment is ‘imminent’. The trouble is that they mention in the same breath that potential litigation may delay the appointment. The litigation concerns former Chairman and founder Jim Ellerton, those readers with a long memory will know exactly what I think about Mr Ellerton. I hope that this litigation doesnt delay the appointment too long, I was just getting interested in Sefton for the first time in a long while. I am still waiting for a meeting with the CFO, it got very close a few weeks ago and then vanished!

Like London buses, news from Falcon Oil & Gas just keeps on coming as they today announce that drilling operations have commenced in Australia. With a spud target of the end of June and wells taking between 35-50 days each news-flow from the Beetaloo is likely to get more and more interesting. Interview with Philip O’Quigley below.

http://www.tiptv.co.uk/archives/updated-interview-with-falcon-oil-gas/

Reading the trade press this morning I see that Premier (LON:PMO) has decided to call it a day in block 2-B in Kenya, after the dry hole at Badada-1 back in February, this comes as no surprise although I cant find any official statement from the company yet.

A changing of the guard in the E&P sector as Mitch Flegg leaves his position as COO at Serica (LON:SQZ)  to become the new CEO at Circle Oil. This means that another former Enterprise Oil graduate steps up to the plate in running an oil company, the only one not doing so is running the Church of England…

While I was at IGTV the other day talking about the oil price, (link in yesterdays blog and on www.malcysblog.com) I stayed to have a chat about three companies I find interesting for different reasons at the moment. Views on Shell, Genel Energy and Sound Oil at this link.

http://www.ig.com/uk/market-insight-videos?bctid=4259418530001&bclid=3671160850001

And finally…

It’s FA Cup final weekend and I know that I have plenty of supporters of both the Gooners and the Lions amongst blog readers. Indeed Villa fans have been amongst the most vociferous complainants whenever I have put a foot wrong this season especially when I put a blog out after the game had happened!

In Scotland might Rangers remain in the Championship for another year? Last night in the first leg of the play-off final they lost 1-3 at home to Motherwell and it could have been worse they were three nil down with ten minutes to go. Back to Fir Park on Sunday where we will find out if that away goal gets them out of jail.

It’s election day today over at THIFA but unlike in most elections the candidate already knows the results. $epp Blatter will win and life will go on until someone pulls the rug. That is unlikely to be any of the sponsors who appear to be totally spineless, would you do business with any of them if you didn’t have to…..

A big night tomorrow for boxing fans where big fights are coming up all the time. The big bout is obviously Kell Brook against Frankie Gavin where the former is the favourite but I will be looking out for the marvelous Anthony Joshua.

And it’s also finals day in rugby union as Bath take on Sarries tomorrow afternoon at Twickenham. In a delightfully ironic move it seems that Dylan Hartley, following yesterdays ban has been withdrawn from the World Cup squad and replaced by Jamie George who is of course the bloke he head-butted in the first place, instant karma eh…?

And while the rain pours down in Leeds the second test is due to start at Headingly this morning. After last weekend we can surely not expect another blockbuster and the wet and dull conditions may mean that rain will play its part but going there dormy is better than I had expected at 30-4….

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Fri, 29 May 2015 13:27:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22307/the-pay-zone-oil-price-afren-premier-oil-rose-petroleum-and-sefton-resources-22307.html
Today's Market View Including EMED Mining, Gold Road Resources and OXUS GOLD http://www.proactiveinvestors.co.uk/columns/sp-angel/22305/today-s-market-view-including-emed-mining-gold-road-resources-and-oxus-gold-22305.html Intestinal commodities:

Cows gall stones currently selling for $23,000 per kilo – according to a BBC report

Ambergris $60,000 per kilo

Gold just around $39,000 per kilo – an Indian business man had 12 gold nuggets surgically removed after he swallowed the pieces to avoid customs duty

White truffles $4,300 per kilo

 

FIFA – Question – If proven, will Nike, Coca Cola and other sponsors continue to sponsor this corrupt organisation?

Surely it is time Septic Bladder to go

 

Economic News

US – Jobless claims ticked higher versus forecasts for a decline last week. 4-week average remains at historically low levels.

Weekly jobless claims: 282k v 275k in the previous week and 270k forecast.

Auto sales are forecast to show another strong month in May as automakers report their numbers next Tuesday.

Estimates are for annual sales rate to hit 17.3-17.4m units, the highest level this year, on Edmunds and J.D.Power numbers. This compares to 16.5m recorded in Apr.

Economic news due today: 

o Q1/15 GDP preliminary (2nd reading) (-0.9%qoq v +0.2%qoq estimated in the Advance release (1st reading)), Q1 PCE (+0.9%qoq unchanged from the previous reading), May Chicago PMI (53.0 v 52.3 in Apr).

 

China – Chinese equites went through a significant correction yesterday driven following a strong run in the last couple of weeks.

In addition, a number of mainland brokers notified its clients of tightening margin requirments this week.

Shanghai Composite and Shenzehn Index fell 6.5% and 5.5%, respectively.

This morning markets opened down 4.0% and 4.2%, but regained most of losses through the day.

 

Japan – Industrial production posted a second monthly increase since the start of the year but remained in the red on yoy basis.

Industrial production: +1.0%mom/-0.1%yoy in Apr v -0.8%mom/-1.7%yoy in Mar.

YoY negative figure marked the seventh consecutive month that manufacturing has been negative, the longest streak since 11 months of contraction to Jun/13.

A separate report showed household consumption surprisingly contracted in Apr (-1.3%yoy v +3.0%yoy forecast) despite being compared to low base.

Consumption has been in decline for 13 straight months.

 

Germany – Retail sales beat expectations and hit a six month high in Apr, climbing 1.7%mom versus +1.0%mom expected.

 

Greece – The IMF speculated Greek exit is “a potential” which would not mark the end of the euro.

Previously, the fund offered Greece a three weeks’ delay to the €1.6bn repayment due next month.

This moves the repayment date for the €300m previously scheduled for Jun 5 further out.

“It’s very unlikely that we will reach a comprehensive solution in the next few days,” Ms Lagarde said.

 

Mongolia – The government plans to issue US$1bn worth of sovereign bonds following a 84% fall in foreign investment in the economy in 2014.

The news comes on the back of a resolution reading the expansion of the Oyu Tolgoi mine which might see investors reassessing country risk.

 

US$1.0962/eur vs 1.0937eur yesterday.    Yen 123.82/$ vs 123.91/$.    SAr 12.155/$ vs 12.057/$.    $1.528/gbp vs 1.533/gbp

0.765/aud vs 0.768/aud

 

Commodity News

Precious metals:

Gold US$1,188/oz vs US$1,190/oz last week

Platinum US$1,116/oz vs US$1,125/oz last week

Palladium US$781/oz vs US$789/oz last week 

Silver US$16.71/oz vs US$16.73/oz last week

 

Base metals:

Copper US$ 6,100/t vs US$6,114/t last week - Lundin Mining has been served with 16 environmental breaches’ charges by Chilean authorities regarding its Candelaria copper mine.

“The most important infraction detected by the audits is related to the failure to flfil the commitment of reducing the consumption of fresh water,” environmental regulator said.

Among other charges were irregularities in managing the dispersion of particulate matter and the unauthorised disposal of liquid waste on a beach.

Aluminium US$ 1,764/t vs US$1,758/t last week

Nickel US$ 12,740/t vs  US$12,905/t last week

Zinc US$ 2,218/t vs US$2,206/t last week

Lead US$ 1,977/t vs US$1,962/t last week

Tin US$ 15,490/t vs US$15,605/t last week

 

Energy:

Oil US$63.3/bbl vs US$62.6/bbl last week

Natural Gas US$2.715/mmbtu vs US$2.839/mmbtu last week - 

Uranium US$35.00/lb sharply unch vs US$35.00/lb last week

 

Bulk commodities:

Iron ore 62% Fe spot (cfr Tianjin) US$60.2/t vs US$59.7/t – last week

Thermal coal (1st year forward cif ARA) US$57.4/t unch vs US$57.1/t last week

Seaborne hard coking coal index (quarterly) US$109.5/t unch vs US$109.5/t

 

Other:

Tungsten APT European US$257.5/mtu unch vs US$257.5/mtu

FeCr lumpy Charge 52% Cr US$1.08/lb vs US$1.08/lb last week

 

Company News

EMED Mining (LON:EMED) 5p, Mkt Cap £72m (undiluted) – Subscription, placing and open offer to raise US$95.1m at 4.75p/s

EMED Mining have launched their placing and open offer to finance the completion of the refurbishment of the RioTinto copper mine.

The subscription is for 1.15bn new shares and will be cornerstoned by existing investors: Orion, Trafigura and XGC.  A new investor Liberty Metals & Mining is also expected to sign as a major investor to make up US$80.1m of investment leaving just US$15m to raise in the placing.  The brokers on the deal are expected to raise a further US$10m leaving a further US$5m to come from qualifying shareholders.  

There is also $10m to come from a government subsidy to take the total capital being raised to US$105m.

A further US$38m is required to complete Phase 1 of the development / refurbishment 

Another US$598m is estimated to expand the mine to 7.5mtpa ore production

Working capital / contingency is estimated at a further US$9m 

The relatively new ceo Alberto Lavandeira has made good progress with the project and is already well advanced with Phase 1 of the project being 90% complete. 

Behre Dolbear, the consultants, initially estimated capex at US$199m for a 5mpta mine and plant.  The board now estimate costs should fall by US$62m based on forex and targeted cost reductions and that a further US$31m of costs can be deferred.  This is likely to relate to equipment financing.

Having the cornerstone investors has given Alberto confidence in the company’s ability to finance the project and has enabled the team to press ahead and advance development ahead of the major financing.

Bridge loan: management have used much of a $30m bridge loan facility advanced in December last year to take the project forward.  The board have spent $44m 

The financing should allow the company to complete Phase 1 of the mine development for 5mtpa of ore production with potential to rise to 7.5mtpa as an extension to Phase 1.

Details of the offer are contained in the offering document.

 

Gold Road Resources (ASX:GOR) A$0.5c, Mkt Cap A$279.7m – Gruyere delivers 44% resource increase to 5.5m ounces of gold – this is one of the world’s bigger gold discoveries in recent years!

Gold Road Resources has updated its resources estimate on the Gruyere deposit in Western Australia to 5,512 koz of gold.  The resources are reported in accordance with the JORC (2012) Code and represent a 44% increase on the 3,838 koz reported as a maiden resource in 2014.

The new estimate is based on 96.93mt at an average grade of 1.23 g/t gold and uses a cut-off grade of 0.7 g/t.

The update is based on an additional 28,000 metres of diamond and reverse-circulation drilling completed between October 2014 and May 2015 added to the previous 38,000 metres which formed the basis of the earlier resource estimate.

The increase in contained ounces is almost entirely due to defining additional tonnes as the grades are almost identical at 1.23 g/t in the 2014 estimate compared to 1.24g/t in the latest estimate.

An additional improvement in the update is that now 62% of the resource is classed as “Measured” (1%) or “Indicated” (61%) with only 38% classified as “Inferred”. In the 2014 estimate, almost 60% of the resource was “Inferred”.

Since discovering the deposit in October 2013, the company has moved quickly to establish a substantial resource. Gold Road Resources has spent A$10.9m so far at Gruyere, representing a competitive discovery cost of A$1.98/oz. The deposit remains open at depth and a deep drill hole, co-funded by the WA Government, is currently underway to test the Gruyere porphyry at 1500m below surface.

A pre-feasibility study on development of the Gruyere resource is currently underway and is expected to be completed by the end of 2016 and to be reported to the market in early 2016.

Conclusion: Gold Road Resources has delivered a significant increase in both the size and the quality of the Gruyere resource. Drilling is continuing and a further resource update is to be completed during the September 2015 quarter.

 

Oxus Gold* (LON:OXS) 3.25pence, Mkt Cap £18.7m – Final results

Oxus Gold today reports final results for the year ended 31 December 2014.

Oxus management are not able to report on the arbitration proceedings with the Uzbekistan government incise this breaches and potentially jeopardises its case.

Arbitration continues against the Republic of Uzbekistan for claims on Amantaytau Goldfields and Kahandiza mining assets

Sadly the company has not yet been able to secure the release of former employee, Mr Said Ashurov who remains in jail in Uzbekistan on what the company considers to be an unjust and improper conviction.

The company reports a loss of $3.03m vs $4.58m last year.

Arbitration expenses were $0.48m.

Total Group Assets fell to $74.98m vs $75.47m last year.

The company continues with its Arbitration and considers itself to have sufficient funding to continue through this uncertain period.

A decision was expected on the arbitration was expected by the year-end 2014 and we are hopeful for news on the success of the arbitration sometime soon

*SP Angel act as nomad and broker to Oxus Gold

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Fri, 29 May 2015 11:26:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22305/today-s-market-view-including-emed-mining-gold-road-resources-and-oxus-gold-22305.html
SP Angel Morning Oil & Gas Afren, Xcite Energy, Tomco Energy and 88 Energy limited http://www.proactiveinvestors.co.uk/columns/sp-angel/22303/sp-angel-morning-oil-gas-afren-xcite-energy-tomco-energy-and-88-energy-limited-22303.html Headlines

Afren (LON:AFR) – Going Concern Statement a Better Summary: Hawkins is still the only man for the job in the Finance Office for us. While his understanding of accounting may not be as expert as Comyn's he has experience has a sound knowledge of how oil and gas finance works, and more importantly he is a decent person who has had his reputation tarnished, not because of anything he has done, but by association. We have no doubt that he would be well placed, and motivated, to combat the seemingly lethargic approach the current management has, and will fight to restore the Company to where it once was, which would be good for the Company's owners.

88 Energy (LON:88E/ASX:88E) – Road From Casablanca: The current management team have restored a focus to the Company and in bringing Icewine to the table, have put it on a path to potential revaluation points; junior oil companies grow at the drill bit.

Tomco (LON:TOM) – Sometimes an Ill Wind Can Blow Some Good: While disappointing, we believe that the management team is right to take a hiatus and see what the outcome is with RedLeaf, and by then, the oil price will have recovered and will make whatever method the Company selects look a lot more worthwhile.

Xcite Energy (LON:XEL/CVE:XEL) 2P or Marginal Recoverable 2C?: As such, the team are not apparently showing no interest in getting the oil to the custody transfer point, which to shareholders, the owners of the Company, is the only important point. Management’s prevarication, to our mind are now taking value out of the Company in the form of salaries, then dilute the economic interest at point of execution.

 

News Items

Afren (LON:AFR) – Going Concern Statement a Better Summary

Despite a lot of good text in today's management statement, the real message from today is delivered succinctly in the going concern segment of the announcement, and that is that the Company is in breach of its covenants and is essentially bankrupt. There but for the grace of its creditors. Management do not run this company.

With cash balance sheet items of net deficit of ~$1,200mm, today's statement is a reminder of just how precarious the Company is. Given all the pain that the Company's owners have faced to date, and will face, that the management team still don't want to take matters further with the disgraced former officers, makes one start to question what else might come to light that currently is hidden? There has to be a reason as to why.

There is an increasing sense of unease that the chairman just wants the problem to go away with distance, not making it disappear by addressing the issues that will now plague the Company for at least the duration of his tenure. While we have some sympathy for the nonexec management, the top dog should be dedicated to the Company's success, not just his own, it is the events since that have made them look spineless and toothless.

It is difficult to see a future for this company unless management get some teeth and start to get hold of the situation they are in and actively quash the issues that still hang over the Company. If it doesn't, it will only trade out of its current predicament to the bond holders’ satisfaction, be left so weak that it's future become untenable, and disappears in a series of asset sales.

While we recognise the current CFO, Darra Comyn, has experience in oil, and is a more than capable FD, he has not been in any supervisory role in oil since 1995, when he resigned from Dragon. We believe that this experience is what we believe is necessary for the role going forwards and restore some form of stability in to the ship.

Hawkins is still the only man for the job in the Finance Office for us. While his understanding of accounting may not be as expert as Comyn's he has experience has a sound knowledge of how oil and gas finance works, and more importantly he is a decent person who has had his reputation tarnished, not because of anything he has done, but by association. We have no doubt that he would be well placed, and motivated, to combat the seemingly lethargic approach the current management has, and will fight to restore the Company to where it once was, which would be good for the Company's owners. 

88 Energy (LON:88E/ASX:88E) – Road from Casablanca

Today's news of the completion of the final stages of the Company's exit from Morocco now means that management can now finally focus on the delivery of its Icewine project in Alaska.

It's not that the Managment team weren't focused before, but it would have been a distraction, and such is the opportunity at Icewine, both in terms of the conventional and growing unconventional prospectivity, and the supportive tax treatment, (85% immediate exploration rebate which reduced by legislation at year end), that it demands a greater focus for longer than it would have got had the Company remained in Morocco.

We are fans of Morocco and as well as the prospectivity of its basins, and this departure is a sad reflection of how far Messers Howell and Co derailed what was a good company with first mover advantage in Morocco amongst the juniors, and an excellent potential transaction with Jacka Resources.

The current management team have restored a focus to the Company and in bringing Icewine to the table, have put it on a path to potential revaluation points; junior oil companies grow at the drill bit.

Tomco (LON:TOM) – Sometimes an Ill Wind Can Blow Some Good

The management team have acted decisively to address the issue of delays by the Total/RedLeaf Ecoshale commerciality trials, with Paul Rankine stepping down to a consultancy position within the Company.

It is important to remember here that Ecoshale is just one of a number of potential mechanisms by which shale oil can be treated to liberate oil for sale, and there are a number of other ways in which it can be done. However, with ~115mm bbl of recoverable oil from the shale series, it needs to be as commercial as possible, and the one advantage that Ecoshale has over all of the others is that it has a lower upfront capex requirement and running costs.

Should the team look at other methodologies? Potentially, but at the current moment, given that all of the development work is being done for them, it seems churlish to rush in to making a decision which will inevitably result in a significant increase in costs and consequently the value to the shareholders.

The flip side is that if RedLeaf are unable to progress things, TomCo could consolidate their acreage position, which will make the utilisation of other methodologies more attractive, due principally to the scale issues. That, however, is for the future.

While disappointing, we believe that the management team is right to take a hiatus and see what the outcome is with RedLeaf, and by then, the oil price will have recovered and will make whatever method the Company selects look a lot more worthwhile. 

Xcite Energy (LON:XEL/CVE:XEL) 2P or Marginal Recoverable 2C?

It is grant to see an increase in Reserves, but we are now at the stage where we are not so sure as to whether they can be classed as Reserves at all. The SPE PRMS system states that:

RESERVES are those quantities of petroleum anticipated to be commercially recoverable by application of development projects to known accumulations from a given date forward under defined conditions. Reserves must further satisfy four criteria: they must be discovered, recoverable, commercial, and remaining (as of the evaluation date) based on the development project(s) applied. Reserves are further categorized in accordance with the level of certainty associated with the estimates and may be sub-classified based on project maturity and/or characterized by development and production status.

As such, and in the absence of a development plan to justify, we believe that these would be more accurately reclassified as Marginal Contingent Resources, which are those barrels which are technically recoverable commercially.

While this might see pedantic, value is only created at the point at which the barrel is valorised, which is the moment it passes the custody transfer point and you receive more economic benefit than you expend to get it to that point.

We believe that for these barrels to continue to be realistically categorised as Reserves, the Xcite team must start laying down meaningful foundations for taking the project to the FID stage, rather than still finding the best strategy, which is contrary to the “Justified for Development” requirement that is one of the mainstays of being classed as Reserves.

As such, the team are not apparently showing no interest in getting the oil to the custody transfer point, which to shareholders, the owners of the Company, is the only important point. Management’s prevarication, to our mind are now taking value out of the Company in the form of salaries, then dilute the economic interest at point of execution.

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Fri, 29 May 2015 10:31:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22303/sp-angel-morning-oil-gas-afren-xcite-energy-tomco-energy-and-88-energy-limited-22303.html
Beaufort Securities Breakfast Alert Northcote Energy, MotifBio, Premier Oil, Falkland Oil and Gas and others http://www.proactiveinvestors.co.uk/columns/beaufort-securities/22302/beaufort-securities-breakfast-alert-northcote-energy-motifbio-premier-oil-falkland-oil-and-gas-and-others-22302.html The Markets

Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 4.8 points down at 7:00 am.

New York: Wall Street retreated on cues from Chinese shares that plunged 6.5% earlier in the day and indecisiveness over Greek debt talks. The S&P 500 contracted 0.1%, with industrials and energy leading the losers.

Asia: Equities are trading higher, shunning discouraging leads from global indices. The Nikkei 225 added 0.1% on better-than-expected CPI that rose 0.3% y-o-y in April. Meanwhile, the Hang Seng was trading 0.2% higher at 7:00 am.

Continental Europe: Markets ended in the red, with EU officials rebuffing claims of a near-term Greek deal. Meanwhile, Greece remained in focus at the G-7 meeting of finance ministers and central bank chiefs. Germany’s DAX and France’s CAC 40 lost 0.8% and 0.9%, respectively.

Crude Oil: Yesterday, the prices of Brent and WTI crude oil increased 0.8% and 0.3% respectively. The spread between the two varieties stood at US$4.9 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.57% higher yesterday at 770.26. To read our latest research click here.

Today’s news

Gfk consumer confidence in UK slips 

Gfk Consumer Confidence Index in the UK fell 3 points to +1 in May from +4 in April. In addition, the optimism over the economic situation and the personal finance prospects also lowered. The decline in the confidence stems from a lack of public faith in the economic prospects under a Conservative government, the Gfk said.

Lagarde considers the possibility of a Greek exit from Euro 

Chistine Lagarde, the managing director of International Monetary Fund, stated that Greece’s exit from the Eurozone was a possibility but unlikely to mark an end to the single currency. Athens needs to repay £1.1bn to several creditors by the end of the month to avoid bankruptcy.

Company News

MySQUAR – AIM IPO of a Myanmar-based Internet-build group, focussed on Mobile Social Media Services

You may have seen reference in the Financial Times and other press sources of this upcoming AIM IPO in which Beaufort is sole broker

MySQUAR is a technology group focussed on internet-content build in Myanmar, a country which until recently had been effectively cut-off from the rest of the world. Its first main product now rapidly building users is ‘MyCHAT’, a free to use social media and mobile chat service. The Company has recognised that offering local language and locally-derived content is the best route to acquisition and retention of massed users still very new to the worldwide web. Within a short 15 months its services could be accessible by over 40m residents. MySQUAR is positioned to be the local platform of choice in what will shortly become Southeast Asia’s fastest growing online territory. The Company is expected to have over 1m users by the end of the year with rapid growth continuing into the foreseeable future. With users comes monetisation opportunities, including gaming, news, information, financial and payment services.

Should wish to have more information or are interested in getting involved, please contact your Beaufort Broker on 020 7382 8300 (London) or 0117 910 5500 (Bristol).

NEW: Beaufort launches its first Enterprise Investment Scheme Fund, the Beaufort Smaller AIM Companies EIS Fund - click here for more detail

Northcote Energy (LON:NCT) – Speculative Buy

Yesterday, Northcote Energy informed that drilling at the Shoats Creek property in Louisiana is expected to begin shortly, in line with the announcement on 5th May 2015. The prospect had suffered due to an extended period of thunderstorms and heavy weather. Hence, the company plans to commence drilling as soon as the weather clears out and would make an appropriate announcement accordingly.

Our view: The upcoming drilling campaign at the Shoats Creek project is an important event for the company as it holds nearly 70% stake in the prospect. The inclement weather conditions are expected to improve soon followed by the drilling. The prospect’s economic returns remain lucrative despite the current oil prices. The company already has all the regulatory requirements in place for the campaign along with a standby drilling contractor. On the other hand, earlier this month, the company raised £2.8m and formed a joint venture with the Gaia Ecologica, a local Mexican company, in order to pursue exploratory opportunities in the country. Work is in progress towards participating in a production sharing agreements along with environmental remediation, oilfield services and waste water treatment in Mexico. The company also aims to acquire further acreage with exploitation potential that may generate substantial returns for its shareholders. Thus in view of the above, we reiterate a Speculative Buy rating on the stock.

Beaufort Securities acts as corporate broker to Northcote Energy plc

DDD Group (LON:DDD) – Speculative Buy

Yesterday, DDD Group launched its TriDef SmartCam, an innovative real time background replacement solution for popular Windows PC applications. TriDef SmartCam is the company’s first software solution, targeted at growth markets, and finds its applications in the 2D video conferencing and game video creation markets. The company’s total addressable market forecast for this product is expected to exceed 1.8 billion units per year by 2018. The product is designed to turn a conventional PC webcam into a powerful compositing tool that can replace the user’s immediate environment with alternative background images and filter effects in real time. The added advantage is that it does not require any special hardware such as a 3D sensor or ‘green screen’ to perform the background replacement. Moreover, the solution is cost effective and compatible with several popular Windows software applications.

Our view: With the development of TriDef SmartCam the DDD Group has significantly upgraded its software solution product base. The SmartCam remains the first in a new line of 2D software solution being developed by the company. Moreover, the solution promises to be highly cost efficient, easily distributable and compatible with many popular Windows software applications. We expect 2015 to be an exciting year for the company as the focus shifts to commercialization of the new 2D products to the device manufacturers and software developers. The company’s futuristic imaging solution that transforms the visual experience of its consumers is likely to witness a greater demand going forward. Thus in view of the above and the company’s progress in the 2D software solution base, we retain a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to DDD Group plc

Motif Bio (LON:MTFB) – Speculative Buy

Yesterday, Motif Bio announced that it has received the official meeting minutes from the U.S. Food and Drug Administration (FDA) guidance meeting which was held on 14th April 2015. The minutes confirm the FDA’s agreement of Phase III clinical development programme for the company’s lead product candidate, iclaprim, a broad-spectrum antibiotic designed to be effective against multi-drug resistant bacteria. The Phase III programme is designed to obtain marketing approval for an intravenous formulation of iclaprim in the treatment of acute bacterial skin and skin structure infections (ABSSSI) and hospital acquired bacterial pneumonia (HABP) caused by Gram positive pathogens, including resistant strains such as MRSA (methicillin-resistant Staphylococcus aureus) and MDRSP (multi-drug resistant Streptococcus pneumoniae). According to the minutes of the meeting, the FDA has confirmed that two successful Phase III trials are required for the approval of iclaprim.

Our view: The confirmation from the FDA for conducting the trial programme is great news for the company as it gives an opportunity to test the safety and efficacy of the medicine against two life threatening infections caused by multi‐drug resistant bacteria. The emergence of the multi-drug resistant bacteria has made the antibiotics, the global pharmaceutical development industry’s most urgent area of research and, importantly, Motif’s novel platform prospectively offers a range of further indications. A successful outcome to the trials programme could prove to be a turning point for the company and set a platform for the creation, research and development of such medicines. Future benefits may include large up-front phased payments directed to Motif along with an exceptional stream of royalties. Thus, with the positive growth outlook and expected future advantages, we maintain a Speculative Buy on the stock.

Infinis Energy (LON:INFI) – Buy

Yesterday, Infinis Energy announced the preliminary financial results for the year ended 31st March 2015. During the period, revenues contracted 1% to £236.0m with contributions from LFG (£180.0m) and the onshore wind (£56.0m). Operating profit more than doubled to £66.5m from £30.2m in the absence of any loss from operating exceptional items. Overall, the company swung to a profit of £20.7m from a loss of £11.8m and the basic earnings per share stood at 6.9p against a loss per share of 3.9p in the previous year. On the operational front, the company delivered 2.5 TWh (Terawatt-hour) of electricity during the year and its RIDDOR accident rate dropped to 0.2 from 0.3 in FY2014. During the period, the company disposed of its Hydro business for a consideration of £20.5m. The future plans include the construction of a 43 MW A’Chruach wind farm in Argyll & Bute, expected to be fully commissioned by March 2016. Meanwhile, the Galawhistle wind farm in South Lanarkshire is likely to reach financial close shortly and its final design led to an increase in the installed capacity from 55 to 66 MW. The company announced a final dividend of 12.2p per share, taking the total dividend for the year to 18.3p per share, in line with the commitment of £55m for the first full financial year. On the other hand, in December 2014, the general partner of the company’s largest shareholder, Terra Firma, announced their desire to sell their entire and remaining holding of nearly 70%. In addition, Mr Radu Gruescu, an investment director of Terra, resigned as a non-executive director with effect from 28th May 2015.

Our view: Infinis Energy delivered a resilient performance for the year despite weakening of UK wholesale power prices throughout the year. Though 50% of the company’s revenues are fixed and RPI-adjusted, a lower contribution from the wind business due to lower wind speeds somewhat offset the LFG division gains, impacting it’s the overall revenue figures for the company. Moreover, the company has also disposed of the hydro power portfolio to focus on the wind farms. Recently, the company secured a significant financing facility with the Royal Bank of Scotland and National Australia Bank, to develop its A’Chruach Wind Farm. The company’s stable earnings growth and progressive dividend policy authenticate its operational excellence and commercial expertise. Infinis’ reasonable earnings visibility and commitment to the payment of a strong and progressive dividend led to the declaration of a strong final dividend for its shareholders. Thus in view of the overall optimism, we recommend the shares for investors seeking and retain our Buy on the stock.

Rockhopper Exploration (LON:RKH) – Speculative Buy; Falkland Oil and Gas (LON:FOGL) – Speculative Buy; Premier Oil (LON:PMO) – Speculative Buy

Yesterday, Rockhopper Exploration announced the discovery of oil at the Isobel Deep exploration well 14/20-1 in the North Falkland Basin, nearly 40km south of the Sea Lion field. The well has been drilled to a depth of 2527m after penetrating the top of the target reservoir at 2503m. The oil bearing F3 sands, at the bottom 24m of the well were at a higher than expected reservoir pressure, leading to influx of fluid (oil) into the well. While removing the influx, oil was recovered at surface from the Well that seems to be comparable to Sea Lion crude. The oil discovery at the well was further verified by the LWD (Logging While Drilling) data collected over the first 12m of the reservoir and oil stained sandstones at the base of the Well. Meanwhile, consequent to the new geological information, operations would be suspended before reaching the planned total depth and the rig would be moved to the South Falkland Basin. The rig is expected to return to continue operations in the North Falklands Basin in August. Rockhopper Exploration holds a 24% in Isobel Deep. Premier Oil (operator) holds a 36% and Falklands Oil and Gas Limited holds a 40% interest in the prospect.

Our view: The discovery at the Isobel Deep in the North Falkland basin follows the discovery at the Zebedee well. The latest finding has considerably de-risked the entire Isobel / Elaine fan complex due to the confirmed presence of an oil prone hydrocarbon system. Furthermore, this marks the exploration success rate of 9 out of 11 wells in licences PL004 and PL0032. Rockhopper Exploration plans to appraise the discovery over the coming weeks while the rig is used to conduct drilling in the south Falkland Islands. Of late, the company acquired the Mediterranean Oil and Gas to diversify into the Mediterranean and East African basin from its major operations in the Falkland basin. In addition, it also obtained 40% interest the in the offshore Block 9 in Croatia, that lies in the proven hydrocarbon area, in association with Eni. With a strong balance sheet, the company enjoys a comfortable position to progress with the development of its assets. Given the overall optimism surrounding the company, we expect a strong upside in future and reiterate a Speculative Buy for the company.

Our View: The presence of oil bearing sands is encouraging news for Falkland Oil and Gas, as these initial results have the potential to open up an exciting opportunity for discovering a new oil play in PL004 license. The operations have been put on hold till August, when the rig would return after the drilling at the Humpback well. The evaluation of the drilling results is likely to unlock the true potential of an asset that lies in the untested area about 40km to the south of Sea Lion and has the potential to be among the best wells North Falklands Basin. The similarity of the oil recovered to the Sea Lion crude, that is expected to contain reserves of around 300 million barrels of oil, bodes well for the company. Moreover, the company enjoys the favourable position of being carried through the costs by its business partners at the prospect. The Falkland Island basin remains interesting with a number of explorations by several energy players planned in the area. Besides, the company’s Zebedee prospect also encountered a successful well earlier this year. Thus in view of the overall positive updates, we retain a Speculative Buy on the stock.

Our View: Isobel Deep has proved to be an important discovery for Premier Oil and its partners, as it is located in a previously unexplored area to the south of the Sea Lion field. The well has successfully demonstrated a trapping mechanism and the presence of moveable oil in the Elaine/Isobel fan complex. The company plans to continue further exploration in the South Falkland Basin until August. As has been the case with majority of the oil exploration companies, Premier too was marred by the reduced oil price environment and forced to announce a slew of reforms to improve productivity and review capital expenditure plans. Since January, the company continues to seek low-cost solution for the first phase of the Sea Lion project. Despite the challenging environment, the company possesses some world class assets and has a knowledgeable management team that has significant exposure to the business and the global markets. The recent plunge in the share prices should be seen as an opportunity for investment. In view of the above, we retain a Buy on the stock.

Economic News

UK GDP

UK GDP grew 0.3% q-o-q during Q1 2015, remaining unchanged from the preliminary estimates and missing the market expectations of 0.4% expansion, the Office for National Statistics revealed yesterday. The GDP grew 0.6% in the previous quarter. On an annual basis, GDP slowed to 2.4% in the quarter, missing the market forecasts of 2.5% growth.

Eurozone consumer confidence

The Eurozone consumer confidence fell to -5.5 in May, matching market expectations, the European Commission said on yesterday. The previous month’s reading stood at -4.6. The reading matched the flash estimates and marked the consumer decreasing confidence for the second time in a row.

US initial jobless claims

The number of Americans that filed their first initial claims for unemployment benefits increased by 7,000 to 282,000 in the week ended 23rd May, the Labor Department stated yesterday. Economists had forecasted a reading of 270,000. The last week’s was revised upwards to 275,000 compared to the last week’s unrevised level of 274,000.

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Fri, 29 May 2015 10:27:00 +0100 http://www.proactiveinvestors.co.uk/columns/beaufort-securities/22302/beaufort-securities-breakfast-alert-northcote-energy-motifbio-premier-oil-falkland-oil-and-gas-and-others-22302.html
Broker spotlight – AB Foods, Ophir Energy, Enquest, Premier Oil, BHP Billiton, Rio Tinto http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22301/broker-spotlight-ab-foods-ophir-energy-enquest-premier-oil-bhp-billiton-rio-tinto-22301.html Fri, 29 May 2015 09:57:00 +0100 http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22301/broker-spotlight-ab-foods-ophir-energy-enquest-premier-oil-bhp-billiton-rio-tinto-22301.html Equity buoyancy suggests optimism on Greece http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22304/equity-buoyancy-suggests-optimism-on-greece-22304.html FTSE100 Index called to open flat at 7040, with the index holding up around recent highs, and in a very narrow range overnight, showing appetite to break higher, but still failing to make any headway with April falling highs resistance. Potential for recent activity to be bullish reverse head and shoulders pattern which breaks 100pts to the upside. Greek headlines likely to decide? Watch levels: Bullish 7075, Bearish 6995.

The flat opening call comes after a choppy session yesterday that saw FTSE100 sell off in the afternoon on the back of a disappointing US open with confusion rife surrounding Greek debt talks and a crisis in Chinese equities. The IMF is suggesting this morning that a deal between Athens and its creditors is unlikely by Sunday, and that it cannot rule out a Greek exit from the Eurozone as a possible outcome.

The EU’s Moscovici has been somewhat more upbeat with his outlook, suggesting that the Eurogroup is committed to seeing Greece remain in the fold despite there still being much work to do. Moscovici is the first to give his thoughts this morning. Expect more as the day evolves with potentially volatile trading to boot.

US markets receded yesterday to close lower with equity markets spooked by the Chinese sell off and Greece.  San Fran Fed Pres John William echoed Yellen suggesting a US rate rise later this year is likely while Kocherlakota remained dovish on 2015 citing a loose labour market and lacklustre inflation. But all this talk of when a hike will happen is now meaningless and slightly tiresome. It’s going to happen and the issue is not when, but how. Wake us up when you can tell us that, Messrs. Fed.

Asian equities positive overnight, despite negative lead from Europe and Wall St (Greek uncertainty, mixed macro data, M&A, US rate rise), with weaker USD (profit taking ahead of potential weekend Greek deal strengthening EUR) and higher commodities prices (US oil inventories fell; barrel +2$) boosting resources names.

Fed chatter (William echoing Yellen’s caution; Kocherlakota dovish; Bullard policy not helped) also offsetting market uncertainty and choppy trading in China (more stimulus?) following yesterday’s equity sell-off and Shanghai’s brief flirtation with reversal and technical correction. End of bull-run?

Japan’s Nikkei extending winning run thanks to weak JPY, still subdued inflation supporting continued stimulus, a rebound in industrial production and improved jobs data. Australia’s ASX outperforming led by banks, 1% fall in AUD and new home sales hitting 5yr high, offsetting poor private sector credit and business surveys.

In Focus today we have US GDP at 1330 with expectations for a contraction on the year, Chicago PMI at 1445 looking for an improvement in May (that’s only Chicago, though), University of Michigan Confidence also looking up. The Baker Hughes Rig Count rounds off the afternoon at 1800.

Gold flat around $1190 despite USD coming off its highs with safehaven tug of war between optimists and pessimists on whether a Greek deal is round the corner or not. Weakness saw test of March raising lows and support kick in at 2-month lows $1880. 2-month sideways trend intact, but can it counter the Downtrend and falling highs from mid-May?

Talking all things oily, both Brent ($64) and US benchmark WTI ($58) made a bounce off support levels around $61 and $56 respectively yesterday as US stockpiles fell more than expected. Both off overnight highs this morning amid record outflows the biggest US Oil ETF, the United States Oil Fund, raising concerns that 2015’s 30% rally is set to stall.

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Fri, 29 May 2015 08:36:00 +0100 http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22304/equity-buoyancy-suggests-optimism-on-greece-22304.html
Northland Capital Partners View on the City Rockwell Diamonds and Nektan http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22298/northland-capital-partners-view-on-the-city-rockwell-diamonds-and-nektan-22298.html Rockwell Diamonds (TSE:RDI) – CORP: FY15 results

Market Cap: CAD$12m; Current Price: 23c

Saxendrift to wind down as Remhoogte/Holsloot wind up

  • Loss for the year attributable to equity holders of parent Co. (14.0) (9.4) 49
  • Source: Northland Capital Partners estimates
  • Rockwell expects to close the acquisition of the Remhoogte/Holsloot Project at the end of May 2015 as all the conditions precedent have been met.
  • The declining grades at Saxendrift mean that Rockwell is planning to reduce operations at the Mine and redeploy the plant at its other development projects.
  • Forecasts, rating and price target remain under review.

NORTHLAND CAPITAL PARTNERS VIEW: Wednesday’s announcement was the start of what we hope will be the rebirth of Rockwell Diamonds. FY15 has been difficult year for Rockwell with a 54% increase in total income for the Company YoY outweighed by a 52% increase in total costs, resulting in a 49% increase in the attributable loss YoY. During the financial year the Company closed the Saxendrift Hill Mine, put Niewejaarskraal on care and maintenance while the geological model is refined and the processing capacity is increased and is now looking to close operations at the flagship Saxendrift Mine due to the declining grades. The securing of a bridge financing facility (27/05/15) is a major development for Rockwell Diamonds that allows the Company to close the acquisition of the Remhoogte/Holsloot Project, associated fleet and three plants. Once Rockwell closes the transaction with Bondeo, expected at the end of May 2015, and owns the projects outright it should then be easier for the Company to secure a longer term finance facility. The acquisition of the Remhoogte/Holsloot Project will be a transformational event giving the Company a higher margin operation that should move Rockwell forward.

 

Nektan (LON:NKTN): Financing

Market Cap: £37m; Current Price: 166p

£8m financing complete 

  • Nektan raised a further £0.9m through the fundraising over-allotment which will be used to further support the growth strategy. The amount consists of £0.75m non-VCT convertible loan notes at the same terms as the previous notes announced on 28 April 2015. Furthermore, a total of 89,552 new ordinary shares have been placed at 167.5p (£0.15m) makes up the remainder.
  • This takes the total funds raised to £8m including the financing of c. £6.7m from existing, new institutional and private shareholders announced on 28 April 2015, of which a proportion to the value of £4.7m was comprised of convertible notes at c. 167.5p and a DTL loan facility for a further £0.6m. DTL has agreed to exchange £0.45m of the remaining £0.6m drawdown under the loan facility for a subscription of non-VCT notes of equivalent value.
  • The funding will support the Company’s expansion in the US tribal and commercial casino market where it has now signed 18 contracts and/or letters of intent with licensed casino operators. Furthermore, the funding will support the continued growth of the Company’s European business where 16 white label partners have gone live on the Evolve platform with a further 14 contracts signed in the past 90 days and finally the funding will enable the business to launch its partnership with The Sun in the UK where it will operate white-label real money gaming from the end of the current financial year (June 2015). 

NORTHLAND CAPITAL PARTNERS VIEW: As alluded to previously despite the funding (£8m) being secured at what looks to be a c. 29% discount to the IPO price in November 2014, the additional funding not only puts the business in a good position to execute on recently signed contracts in the US and white-label solutions in Europe but also provides additional firepower for further growth so the news should be well received by the market in this regard.     

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Fri, 29 May 2015 08:14:00 +0100 http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22298/northland-capital-partners-view-on-the-city-rockwell-diamonds-and-nektan-22298.html
Avago Agrees to Buy Broadcom for $37 Billion http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22297/avago-agrees-to-buy-broadcom-for-37-billion-22297.html Avago Agrees to Buy Broadcom for $37 Billion 

This article by Dana Mattioli, Dana Cimilluca and Shayndi Raice for the Wall Street Journal. Here is a section:

Neither Avago nor Broadcom has the kind of dominance over individual markets that better-known rivals such as Intel Corp. and Qualcomm Inc. enjoy, and a merger could help address that. In addition to consumer applications, Broadcom supplies the vast majority of chips used in the latest networking switches found in corporate data centers, a fast-growing business that could enhance Avago’s communications-focused revenue stream.

And

Researcher Dealogic estimated before the deal was announced that an acquisition of Broadcom valued at $35 billion would be one of the largest semiconductor takeovers ever, coming amid a burst of deals among such companies. So far this year, there have been more than $26 billion in semiconductor deals announced globally, not including the tie-up between Broadcom and Avago, according to Dealogic. That is more than double the volume in the same period last year and the largest year-to-date total since Dealogic started keeping records in 1995.

Eoin Treacy's view 

With interest rates so low and corporate spreads no longer contracting there has seldom been such an opportune time to borrow money. The flip side is that prices have increased in line with increased activity. Nevertheless demand for chips remains robust as the number of connected devices remains on a secular growth trajectory in line with the Internet of Everything theme.

Broadcom had been confined to an almost 15-year base and it took an acquisition to push it to new recovery highs. This helps to illustrate how focused the bull market has been on a select group of companies. As prices increase it is inevitable investors will look for promising companies that have not yet rallied which may represent catch-up potential.

Avago remains in a reasonably consistent uptrend and while somewhat overextended relative to the 200-day MA at present, a sustained move below $110 would be required to question medium-term scope for additional upside.

The results of this Chart Library Filter of the Nasdaq Composite Index highlight that there are a number of shares with similar long-term base formation completion characteristics. 

 

What Google Just Announced Is a Bombshell 

This article by Joshua Topolsky for Bloomberg may be of interest to subscribers. Here is a section:  For instance, while listening to music in Spotify you can search for more info on an artist, or if you're talking about a restaurant in WhatsApp, Google can pull up data on the place and even help you make reservations. And this is not a feature of the app itself, rather a helper that lives inside of the entire operating system.

This is a major move for two reasons. The first is that it really brings Google back to a place of dominance as the glue that holds your digital life together. The web has thrived and grown in no small part because of Google's ability to track, organize, and understand all of its disparate pieces. Now it's able to do the same thing with every app running on your phone. It allows Google to get back into the search game by speaking the common language of apps. It gives the company a second life with access to user behavior and needs.

But secondly, it starts to show how Google can be an interconnecting layer between the apps themselves — a kind of neutral staging ground between one action and another. This is a sea-change for how we use our mobile devices and how mobile apps interact with one another. Currently, we use OS-defined tools which let apps interact with each other (with rules defined by the OS-makers, not developers). But imagine if developers didn't have to think about how their work connects to the rest of your world? Imagine if Now on Tap is aware enough of the core functions of those apps that it can predict what you'd most likely want to do with them, and then execute on those needs?

Eoin Treacy's view 

We have become somewhat inured by Google’s announcements of what can realistically be described as vanity projects; plans for a massive new headquarters which had to be shelved being the most recent. However today’s release is important because it takes Google back into where it makes the vast majority of its money. I downloaded the Google search app onto my phone last week. The linking together of various different elements of search results is a positive development in my opinion. I’ve been using it more as a result and this type of user engagement should be beneficial for the company’s bottom line. 

 

China Most-Wanted: Nabbed in New Jersey 

This article from Bloomberg News may be of interest to subscribers. Here is a section: China’s most-wanted fugitive, an official accused of embezzling more than $40 million, is in U.S. custody, according to the Communist Party’s anti-graft agency.

Yang Xiuzhu, who fled China in 2003, was detained after entering the U.S. using a fake Dutch passport last year, according to the party’s Central Commission for Discipline Inspection.

In the first confirmation of Yang’s whereabouts in a decade, the commission’s International Cooperation Department said she escaped from detention in the Netherlands in May 2014 - - after being rejected for political asylum and before she could be sent back to China.

Eoin Treacy's view 

Considering the vast sums of money that change hands within state owned organisations my first reaction to this news was “Is that all?” $40 million might sound like a lot of money but is in fact very little when one thinks about the personal and family wealth accrued by the ruling cadres.

Nevertheless this is a PR coup for the Chinese administration. China’s anti-corruption chief and Politburo member Wang Qishan announced in March he will be visiting the USA this summer. Following today’s news we can now put that visit in a wider context. The Party wishes to throw media attention on members who have absconded with millions of Dollars while ensuring that the process of internal reform sustains the status quo. 

 

The Markets Now 

Monday 15th June, at the East India Club, 16 St. James’s Square, London SW1Y 4LH

David Fuller's view 

Here is the new brochure listing some of our topics and the important questions most investors face.  I think all investors will benefit from guest speaker David Brown’s new presentation. I learned from it, not least how to assess some familiar data more clinically.  In other words, he shows us how to think a little more clearly, particularly in terms of identifying bear markets near their tops.  This is never easy given all the emotions involved.  Many people jump the gun, as you will have seen over the last few years, which can leave them susceptible to overstaying when the important and often overlooked warning signs are flashing.  Note also Iain Little’s challenging topic summarised in the penultimate question.  I look forward to their presentations and also to hearing the views of friends and subscribers.  

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Fri, 29 May 2015 08:04:00 +0100 http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22297/avago-agrees-to-buy-broadcom-for-37-billion-22297.html
In the papers: Brands fear for their reputations over FIFA fraud scandal http://www.proactiveinvestors.co.uk/columns/guardian-cfds-newspaper-briefing/22296/in-the-papers-brands-fear-for-their-reputations-over-fifa-fraud-scandal-22296.html Fri, 29 May 2015 06:58:00 +0100 http://www.proactiveinvestors.co.uk/columns/guardian-cfds-newspaper-briefing/22296/in-the-papers-brands-fear-for-their-reputations-over-fifa-fraud-scandal-22296.html The Pay Zone: Oil Price Falcon Oil & Gas, Genel Energy, Velocys, Falkland Oil and Gas and others http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22295/the-pay-zone-oil-price-falcon-oil-gas-genel-energy-velocys-falkland-oil-and-gas-and-others-22295.html WTI $57.51 -52c, Brent $62.06 -$1.66, Diff $4.55 -$1.14, NG $2.82 -1c

Oil price

Still under pressure the oil price fell again yesterday for a number of reasons but mainly due to the strength of the dollar. As I said in an interview with IGTV yesterday, if you are a bull of the dollar you almost have to be a bear of oil and that seems to be what the currency experts are telling us.

Other influences on the oil price remain the same as we head towards a June which will be busier than usual. Saudi sources yesterday said that output ‘won’t be cut’ at the June 5th meeting and the French are considering using their veto in the Iran talks unless ‘full access’ is given to nuclear sites, a red line the Iranians are not prepared to cross.

Also and after the close, the API inventory stats came out and as usual Wall Street’s finest got it wrong, again. Predicting another stock draw, this time of around 2m barrels, the number turned out to be 1.3m but a build which helped no one. There was a draw in gasoline of 3.6m barrels and refineries are flat out filling product demand earning juicy margins into the bargain, one for the notebook for the 2nd quarter figures for majors and refiners.

So, the short/medium term outlook for oil is hampered by stocks and a likely strong greenback but in my IGTV interview I assess the much more bullish longer term scenario.

http://www.ig.com/uk/market-insight-videos?bctid=4259259872001&bclid=3671160850001

Premier(LON:PMO)/Rockhopper(LON:RKH)/FOGL(LON:FOGL) -Isobel deep oil discovery

Another successful oil discovery from the North Falklands Basin consortium although the well wasnt drilled to TD. Premier say that they drilled to 8,289 feet and into the top reservoir on prognosis, with the bottom 75 feet being oil bearing F3 sands. Due to higher than expected reservoir pressure this resulted in an influx into the well, oil was recovered to the surface and appears to be ‘of similar quality’ to Sea Lion crude. The rig has been released and will now head south to drill the Humpback prospect before coming back north in a couple of months time. At that stage I imagine that the consortium will drill Jayne East and Chatham which have had preparatory work done while the faulty BOP was repaired, before deciding whether or not any further drilling is needed before appraisal.

This is clearly another big success for the teams out in the Falklands and finding a workable hydrocarbon system, with movable oil and recovering to surface justifies the faith in the region. It is another step to developing Sea Lion and ticks a number of boxes in key areas of risk. Whist the doubters will remain, ( I think that some will need to drink the oil before they believe it) they are being proved wrong almost every time the drill bit turns, now lets see what’s down at Humpback in the south…

Falcon Oil & Gas (LON:FOG)

Yesterday I interviewed Philip O’Quigley, CEO of Falcon on TipTV, the link to which is below this article. I think all is well explained by Philip but clearly the company are approaching a very exciting time on both major fronts. In Australia it looks like drilling is imminent on Beetaloo with the first of their three well programme due to spud next month. The farm-out last year provided Falcon with $20m of cash and a carry of between $165-185m over the life of the project which is a pretty good deal and life will be exciting as they drill out the portfolio. In South Africa things are also looking up with shale exploration being treated more favourably as is fraccing, expect more good news in due course. To me Falcon looks cheap enough to consider, at least while the initial drilling season is under way.

http://www.tiptv.co.uk/archives/updated-interview-with-falcon-oil-gas/

Sundry

DNO has said that they have achieved record production from Tawke and have got up to 170/- b/d of which 30/- b/d is for local consumption, the rest for export. With upgrades complete one can expect up to 200/- b/d which bodes well for Genel (LON:GENL)  which is ludicrously cheap having come over 100p off the recent high for no sensible reason.

And I see that Roman Abramovich has increased his stake in Velocys (LON:VLS) to over 20% which at these levels is very wise…

And the FT reports that Trafigura has been exporting a significant number of crude oil shipments from Russia, all above board you know…

And finally…

The great FIFA (or should it be renamed Thiefa?) scandal grows and grows with magnificent moves by the US departments, something no one else dared do, read John Gapper in the FT today..How can tomorrow’s election go ahead?

Football is now almost history for a while but for the HubCap Stealers, news that new Real manager Rafa Benitez is talking to Raheem’s agent is almost as bad as the fact that apparently Balotelli is staying…

And on the subject of bad news, apparently Richard Avocado was unimpressed by the Sunderland offer and is leaving the club, less cheers over at Ofgem…

You probably needed to watch both games between Worcester and Bristol but with a few minutes left and trailing by 14 Worcester needed a miracle. Fortunately two Bristol players got yellow cards and the rest is history, victory over two legs by 59-58..

And talking about brain short rugby players, Dylan Hartley has proved the point by getting a ban for head butting and will miss all or part of the World Cup…

And if you were lucky enough to be invited by Cantor Fitzgerald to their race night at Sandown Park tonight (some weren’t…) you have a treat in store. The weather looks set fair and a great card includes the Brigadier Gerard Stakes, always a true test and very difficult to call, be lucky…

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Thu, 28 May 2015 12:19:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22295/the-pay-zone-oil-price-falcon-oil-gas-genel-energy-velocys-falkland-oil-and-gas-and-others-22295.html
Today's Market View Including Ortac Resources, Stellar Diamonds, Shanta Gold, Vast Resources and others http://www.proactiveinvestors.co.uk/columns/sp-angel/22294/today-s-market-view-including-ortac-resources-stellar-diamonds-shanta-gold-vast-resources-and-others-22294.html US Congress are defined a bill for new commercial property rights in space

The ‘commercial space bill’ should help asteroid miners better define their rights in space

Claim jumping might just as prevalent in space as it was in California during the gold rush

We reckon its first come first served

 

Diamond Producers Association ‘DPA’  

ALROSA, De Beers, Rio Tinto, Dominion, Lucara, Petra and Gem Diamonds are the founding members, with the aim of working together to support the development of the diamond sector.

The association is to be corporately registered in London

The DPA is to maintaining and enhance consumer demand for and confidence in diamonds including joint category marketing initiatives – sounds like DeBeer’s old ‘CSO’ to us

It also plans on providing a reliable source of industry information, including trade and consumer research – please continue to come to SP Angel for company research

The DPA will act as the unified voice of the diamond producers to communicate the role and contribution of diamond producers to the diamond sector and broader society eg CSR type stuff

The DPA will operate in compliance with all applicable competition/antitrust laws, unlike recent allegations at FIFA.

 

Norwegian Sovereign Wealth fund to sell off coal assets

Norway’s very rich sovereign wealth fund is selling down stakes in companies which have significant exposure to coal

We don’t know if this will impact Rio Tinto, BHP, Glencore, Anglo American, Cliffs NR, Peabody.

Pressure groups have been lobbying the fund to divest companies linked to fossil fuels – ironic for a fund built on the wealth generated from state oil revenues.

 

Fifa officials accused of ‘rampant systemic, deep-rooted’ corruption – FT

Just like Russia, China, South Africa, Argentina, Greece, Indonesia, Pakistan and the DRC to name just a few

 

Zijin Mining on gold mine acquisition spree as China launches $16bn gold fund 

 

Economic News

US – Economic news due today:

Weekly jobless claims (270k v 274k in the previous week), Apr pending home sales (+0.8%mom/+10.2%yoy v +1.1%mom/+13.4%yoy in Mar).

 

Japan – Retail sales climbed 0.4%mom, the second positive reading in the past six months, in Apr.

The numbers suggest effects of the sales tax increase are dissipating, but at a weak pace.

Estimates were for a 1.1%mom increase.

YoY numbers (+5.0%yoy v +5.5%yoy) are biased given the low base in Apr/14, the first month following the 3pp increase in sales tax.

 

UK – Auto production fell 3.8%yoy in Apr as an increase in output of units for the domestic market fell short of a decline in exports, on SMMT numbers.

Domestic market auto production climbed 11.1%yoy to 230k units.

Targeted for exports units which represent a much larger portion recorded a 7.6% decline in production to 98kt.

“The UK buyer is more confident than the average buyer across the rest of Europe,” the SMMT said.

 

Australia – Capital spending contracted 4.4%qoq in Q1/15, double the fall market estimated, according to the Australian Bureau of Statistics.

Forecasts indicate capital expenditure this year is sharply lower from a year ago for all three major categories of mining, manufacturing and other selected industries.

ABS estimates are for A$104bn in 2015/16, 24.6% lower than the second estimate for 2014/15.

The news has seen the Australian dollar down c.1% to as low as US$0.7667

 

Greece – Time is running out with the earliest IMF repayment due on Jun 5 while both sides disagree on the progress in negotiations.

European officials rebuffed Athens claims yesterday that a deal is close with the ECB, EC and IMF.

“Negotiations between the three institutions and the Greek government still haven’t come very far,” German Finance Minister said on Wednesday.

 

US$1.0937/eur vs 1.0917eur yesterday.    Yen 123.91/$ vs 123.05/$.    SAr 12.057/$ vs 12.044/$.    $1.533/gbp vs 1.540/gbp

0.768/aud vs 0.774/aud

 

Commodity News

Precious metals:

Gold US$1,190/oz vs US$1,189/oz last week

Platinum US$1,125/oz vs US$1,128/oz last week

Palladium US$789/oz vs US$786/oz last week 

Silver US$16.73/oz vs US$16.77/oz last week

 

Base metals:

Copper US$ 6,114/t vs US$6,122/t last week

Aluminium US$ 1,758/t vs US$1,749/t last week

Nickel US$ 12,905/t vs  US$12,710/t last week

Zinc US$ 2,206/t vs US$2,178/t last week

Lead US$ 1,962/t vs US$1,937/t last week

Tin US$ 15,605/t vs US$15,400/t last week

 

Energy:

Oil US$62.6/bbl vs US$64.4/bbl last week

Natural Gas US$2.839/mmbtu vs US$2.834/mmbtu last week - 

Uranium US$35.00/lb sharply unch vs US$35.15/lb last week

 

Bulk commodities:

Iron ore 62% Fe spot (cfr Tianjin) US$60.0/t vs US$59.7/t – last week

Thermal coal (1st year forward cif ARA) US$57.1/t unch vs US$57.1/t last week

Seaborne hard coking coal index (quarterly) US$109.5/t unch vs US$109.5/t

 

Other:

Tungsten APT European US$257.5/mtu unch vs US$257.5/mtu

FeCr lumpy Charge 52% Cr US$1.08/lb vs US$1.08/lb last week

ESKOM, the South African power utility have asked selected ferrochrome producers to commit to stage 2 power consumption, eg minimal load, between the hours of 5 and 9 at night

The problem is that management change at ESKOM means that new managers are not overly familiar with how the system works

ESKOM is now considering other options for and can see that cutting power to ferrochrome producers is not a workable solution

 

Company News

Anglo Asian Mining* (LON:AAZ) 5.1p, Mkt Cap £6.3m – FY14 financial results

Anglo Asian today report financial results for year to end December 2014

Revenue came in at US$68.0m (FY13: US$70.8m) as stronger gold sales partly (50.6koz in FY14 v 46.1koz in FY14) compensated for softer gold prices (US$1,267/oz in FY14 v US$1,387/oz in FY13).

Copper concentrate sales from the SART plant (1,300t) generated US$3.7m (FY13: US$6.4m)

Cash operating costs averaged US$971/oz  (FY13: 626/oz).

Costs rose on the back of increased cyanide consumption from treating ores with higher than expected copper content and a higher depreciation charge reflecting full year of operation of agitation leaching plant.

EBITDA came down to US$10.1m (FY13: US$17.5m) with EBITDA margin contracting to 15% (FY13: 25%).

Net loss totalled US$10.9m vs a net profit US$0.3m in 2013 with EPS at -9.79USc (FY13: +0.30USc).

Net operating Cash Flow (post interest payments) came in at US$10.0m (FY13: US$14.6m).

Free Cash Flow run at –US$6.9m (FY13: -US$17.2m) with capex accounting for –US$16.3m including capitalised waste stripping costs, floatation plant construction costs and expansion of tailings storage capacity.

Net Debt stand at US$50.7m (US$0.5m cash) as of Mar/15, down from US$52.5m as of Dec/14.

New loan:  Reza Vaziri, CEO, recently loaned US$4m to the Company to enable completion of the company’s second US$2.6m debt repayment to the Amsterdam Trade Bank in May and cover general working capital purposes.

IBA ‘International Bank of Azerbaijan’ has agreed to allow the company to delay loan repayments to 2016, payments of US$1.5m were due in Jun and Sep this year.

While the Company negotiated a delay to IBA loan repayments, US$5.2m remains due to the ATB through H2/15 and it is critical that the company generates sufficient surplus cash flow to meet this and other interest repayments out of operating cash flow as the year progresses.

Gold production target for 2015 is 70,000-75,000oz.

Gosha underground operation which contributed c.3,000oz gold (29kt of ore at 4.2g/t) in FY14 is expected to continue supplying higher grade ore to the plant at Gedabek through 2017.

Gosha’s mining operations have been affected by narrower than previously envisaged thickness of mineralised veins which resulted in higher mining dilution.

On current non-JORC estimates, the Gosha resource stands at 40,000oz gold (140kt at 9g/t before dilution). Further exploration around Gosha is planned.

The new Flotation circuit is on track for completion in Q3/15. The plant is estimated to contribute c. 5,000oz gold and 1,200t copper in the form of a concentrate through reprocessing of agitation leaching tailings.

The facility is expected to run at 20tph (c.160ktpa) and cost US$4.7m.  The floatation circuit might be further expanded to a capacity of 90tph depending on the recovery rates achieved. 

Rising copper production: The floatation plant will give much better recoveries for copper and should enable a significant increase in copper production from its better recovery rates particularly as the Gedabek mine access higher grade copper rich ores.

Gadir:  At Gadir, an underground mine located one km away from the Gedabek site, the Company completed 350m of decline and is expected to start mining ore in H2/15.

The exploration team completed 9 drill holes for a total of 3,400m in the Gadir area through FY14/

Latest estimates suggest Gadir hosts 700kt at 6g/t in inferred resources category that should provide high grade material to the Gedabek processing plant.

FOREX:  The recent c.30% depreciation in the national currency certainly helps and should have an appreciable impact on operating costs.

Recovery rates: Today’s results reflect the higher cost of processing of copper-rich sulphide ores which lower gold recoveries and raised cyanide consumption.  

Recovery rates remained subdued around 70-75% through the year in agitation leaching ‘AL’ circuit.  

Management are addressing the problem though installation of a 20tph floatation plant that will first treat tailings from the AL plant, but is also designed to process mined sulphide ores.  

Re-processing of AL tailings is expected to increase total metal recoveries to 90% gold, 80% copper and 70% silver.

The latest CAE consultants mineral reserve statement assumed 70% gold, 90% copper and 80% silver recoveries using flotation for processing of sulphide material which account for 47% of the total Gedabek resource.  The year’s lower recovery rates were compensated for by relatively high gold grade (2.93 g/t in FY14) of the processed material in the AL plant.

Conclusion:  FY15 has seen a strong start to the year with production up 52% yoy with processed grades at the AL plant up 44%yoy (Q1/15: 3.61g/t; Q1/14: 2.51g/t; Q4/14: 3.41g/t).  

Solid Q1 results enable management to forecast +70koz gold production vs 60koz last year.

The company are focussed on meeting production and cost targets which should both be helped by the operation of the new flotation plant.

*SP Angel acts as Nomad & Broker to Anglo Asian Mining.  SP Angel analysts have visited the Gedabek and Gosha mine sites

 

Ortac Resources* (LON:OTC) 0.1p, Mkt Cap £3.4m – Andiamo exploration update

(Ortac holds 25% of Andiamo, a private exploration company)

Andiamo Exploration has reported it is about to begin a 1,000m diamond drill program in Eritrea.

The drill program is directed by positive results from the Hoba trenching program and is looking to discover high grade VMS style deposits.

Trench grade appear variable and inconclusive but do show potential for greater discovery on drilling.

Yacob Dewar:  metallurgical results are contributing towards a JORC compliant resource.

Conclusion:  Development of a new JORC resource at Yacob Dewar offers a more certain lift value at Andiamo.    

*SP Angel acts as broker to Ortac Resources

 

Shanta Gold* (LON:SHG) 7.375p, Mkt Cap £34.2m – New loan facilities Approved

Shanta Gold reports that it has concluded its previously announced $40m financing with Investec Bank.

$20m of the loan is to be used “to refinance the existing loan from FBN Bank (UK) Limited whilst the balance will be a standby facility to be used as required during the implementation of the New Luika Gold Mine Life of Mine Extension Project.”

The loan facilities carry interest at LIBOR +4.9% per annum over five years.

*SP Angels analyst have visited New Luika 

 

Stellar Diamonds (LON:STEL) 1.0 pence, Mkt Cap £8.1m – Latest Baoule Diamond Sale realises $156/carat

Stellar Diamonds reports that it has sold a total of 2,822 carats of run of mine diamonds from its trial mining programme at its 75% owned Baoule deposit for an average price of $156/carat.

This brings total sales of stones from the trial mining programme to 5,173 carats at an average price of $135/carat, implying that the latest sale realised significantly higher per carat values than the earlier sales which we infer totalled 2,822 carats at an average of around $110/carat

Six lots totalling 48.12 carats of stones greater than 5 carats in size were also sold for an average of $3,510 per carat.

The company is targeting a total of 15,000 carats from its trial mining programme and “Trial mining is on-going and further diamond sales are targeted for the coming year.”

Conclusion: As Stellar Diamonds sells more stones from Baoule, it is moving towards gaining a large enough data base to assign realistic values to the diamonds from the Baoule pipe.

 

Vast Resources (LON:VAST) 1.0 pence, mkt Cap £13.6m – Pickstone Peerless mine expects to deliver gold to refinery in August 2015

Vast Resources (formerly African Consolidated Resources) reports that “substantially all of the gold processing equipment has arrived” at its 50% owned Pickstone Peerless mine in Zimbabwe and that the installation of this equipment is now estimated to be 80% complete.

The company is already mining at the oxide open pit where grade control drilling is underway and the start of ore stockpiling is imminent.

The gold ore treatment plant is due to start hot commissioning in July and the company expects to initiate gold deliveries to Fidelity Printers, the Zimbabwean State gold refinery, in August.

The CEO of Vast Resources, Roy Pitchford, commented that “Expansion options are under consideration for implementation as soon as practicable.”  Current plans are for annual production of approximately 11,000oz of gold per year from oxide ores at an average grade of 2.9g/t.

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Thu, 28 May 2015 10:43:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22294/today-s-market-view-including-ortac-resources-stellar-diamonds-shanta-gold-vast-resources-and-others-22294.html
SP Angel Morning Oil & Gas Falcon Oil & Gas,Falkland Oil and Gas, Premier Oil and Rockhopper Exploration http://www.proactiveinvestors.co.uk/columns/sp-angel/22293/sp-angel-morning-oil-gas-falcon-oil-gasfalkland-oil-and-gas-premier-oil-and-rockhopper-exploration-22293.html Headlines

Rockhopper Exploration (LON:RKH)/Premier Oil (LON:PMO)/Falklands Oil and Gas (LON:FOGL) – Sea Lion Not Alone Anymore: Today's news is good for the group and the Falkland Islands, and now demands that the tax issues that have beset the country, and hampered progress, be resolved, and the Falklands island government start to be more progressive in its approach to the opening up of what looks like being a new petroleum province.

Falcon Oil and Gas (LON:FOG) – A Period of Transition: All in all investors should be happy with where the Company is at the moment, and while everybody would wish for more from its Hungarian operations so that it could have a better balance between cash generating and cash consuming activities, that it is at this stage in the cycle as strong as it is, is a strong positive for management, which really means that the next 18 months are a period of transition.

 

News Items

Rockhopper Exploration (LON:RKH)/Premier Oil (LON:PMO)/Falklands Oil and Gas (LON:FOGL) – Sea Lion Not Alone Anymore

Today's news detailing above gradient pressures and free recoverable oil is a good sign, and allows the group to report a discovery. There is, unfortunately, a significant difference between a technical and a commercial discovery, and those barriers can be quite high depending on where you are.

Nevertheless, in order to have a commercial success, you must first have a technical discovery, and as technical discoveries go, today's sounds encouraging. We will await the new of size and a well test, but in reality, the barriers to commerciality are significantly lower given that there is already a commercial development in the offing, and as such infrastructure will be in place.

The next question, assuming a successful well test is undertaken, is whether the group opt for a an amendment to the Sea Lion development plan to encompass a "hub and spoke" development strategy, which makes infinitely more sense given the distance to the traditional oil centres and aggressive stance of Argentina.

Today's news is good for the group and the Falkland Islands, and now demands that the tax issues that have beset the country, and hampered progress, be resolved, and the Falklands island government start to be more progressive in its approach to the opening up of what looks like being a new petroleum province.

Falcon Oil and Gas (LON:FOG) – A Period of Transition

Today's results have provided a timely update as to the nature of the Company's operations, especially in Hungary, where its participation now looks set to be drawing to a close. Given the ~$11mm of cash resources and two new basins to participate in, one of which is a shale target, there is undoubtedly a fundraising somewhere in the future, but with its 2015 programme fully funded it is unlikely to be this year.

The hope would be that the results of this year's drilling programme in Australia will result in a discovery, which in turn will precipitate higher valuations, which hopefully will be the base from which to conduct the funding. But all of this depends on success.

In South Africa, the presence of chevron on your ticket is a blessing and a curse. A blessing in that it's chevron, and a curse in that it will, like all supermajors, have a set procedure to follow for its exploration programme, which although helpful will add cost. Added to that is the fact that South Africa is fast becoming a Zimbabwe.

All in all investors should be happy with where the Company is at the moment, and while everybody would wish for more from its Hungarian operations so that it could have a better balance between cash generating and cash consuming activities, that it is at this stage in the cycle as strong as it is, is a strong positive for management, which really means that the next 18 months are a period of transition.

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Thu, 28 May 2015 09:29:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22293/sp-angel-morning-oil-gas-falcon-oil-gasfalkland-oil-and-gas-premier-oil-and-rockhopper-exploration-22293.html
Broker spotlight, including Direct Line, Admiral, Zoopla and Intertek http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22292/broker-spotlight-including-direct-line-admiral-zoopla-and-intertek-22292.html Broker heavyweight JP Morgan Cazenove has its sights on UK insurers and has dialled up Direct Line (LON:DLG) with an upgrade.

It moves the shares to 'overweight' from 'neutral' prevously, while the target is punted up to 349p from 240p.

"UK non-life insurers are facing a tough environment at the moment, with all the profit drivers (i.e. underwriting, investment income and ancillary income) under pressure," says analyst Ashik Musaddi.

But  any hint of rising pricing would be good for any pure play motor insurers such as Direct Line, Admiral, and Esure.

Admiral (LON:ADM) has its target driven upward to 1,388p from 1,134p while the rating remains 'underweight'.

Esure (LON:ESUR) is kept at 'overweight' with  the target lifted to 299p from 280p.

US broker gives property portal Zoopla (LON:ZPLA) a kick today, raising the target to 400p from 269p and repeating a 'buy'.

"In our view, the acquisition of uSwitch has raised the bar with respect to the services offered by property portals and enhanced the customer journey. We also believe that this enhanced offering will be very difficult for its competitors to replicate or match. We expect the acquisition to be significantly earnings enhancing," it said in a note.

On the downgrade front today, Deutsche is downbeat on Intertek (LON:ITRK), downgrading the stock to 'hold' from 'buy'. The target price is also reduced to 2654p from 2725p.

"We believe that there is a considerable opportunity for the incoming CEO, André Lacroix, to effect a degree of cultural change in the business (more focus on cross selling, possible changes to incentive structures) but that this may take sometime to effect and is now partly priced in," the broker said.

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Thu, 28 May 2015 09:03:00 +0100 http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22292/broker-spotlight-including-direct-line-admiral-zoopla-and-intertek-22292.html
Greece heats up while China cools off http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22290/greece-heats-up-while-china-cools-off-22290.html FTSE100 Index called to open -5pts at 7025, with yesterday’s market rebound again struggling to better the key 7050 level, finding double-whammy resistance from the duo of April falling highs and the recently breached and now intersecting trend-line from 7 May lows. Watch levels: Bullish 7075, Bearish 6975.

The tepid opening call comes after Greek government officials  suggested on Wednesday that they were close to a deal with creditors over fresh bailout funds. EU officials poured cold water on the claims, however, saying negotiators still had much work to do before sealing a deal.

Investors nonetheless seemed confident in certain details (no risk to Greek salaries, pensions, bank deposits) of the Greek claims to keep European equity markets in the green this morning. US markets also posted gains off the back of the Greek news, with the Nasdaq the outperformer, making fresh all-time highs.

Asian equities seeing another mixed session despite a positive finish on both sides of the Atlantic with Greece’s debt deadline looming large and it remaining unclear whether an agreement can be reached. Be prepared for unhelpfully conflicting headlines (deal, no deal) from both sides of the negotiations continue.

Japan’s Nikkei making it a 10-day winning streak (longest since 1988) and fresh 15yr high thanks to a stronger USD on Fed rate-rise expectations sending the USD/JPY to its lowest in almost 12 years and the BoJ’s Kuroda saying an asset bubble not brewing and despite Retail data failing to rebound as much as forecast.

Note Chinese stocks lower, ending their 7-day rally on worries that the government will intervene to cool a rampant equities market and HSBC cut its China GDP outlook (to 7.1% from 7.3%; softer external demand, yuan strength) which is seeing Hong Kong’s Hang Seng underperform overnight.

Australia’s ASX just in the red, lead lower by a USD-hindered basic materials sector following a 3rd straight quarterly disappointment for Private Capital Expenditure as mining investment declines from historic highs and China fears (intervention, growth cuts) has a negative knock-on.

In Focus today we have UK GDP at 0930, Eurozone confidence data at 1000 and US employment prints this afternoon. Traders will be watching the US data closely for further indications of a Fed move on interest rates in the absence of other boat-rocking news on that front.

Crude oil prices still trending down, although of their May lows this morning as worries of a supply glut eased on forecasts of a supply/demand re-balance in late 2015. Nonetheless the prospect of increased US stockpiles (Arctic drilling, fracking…) is keeping gains modest at best. Brent currently at $63 while US cousin WTI trading around $58.

Gold holding support around $1185-1190 thanks to rising support from mid-March. USD hindering any advances, despite uncertainty linked to Greece and global growth after poor Aussie investment and SBC cutting China GDP estimates. Support $1185, Resistance $1205.

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Thu, 28 May 2015 08:23:00 +0100 http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22290/greece-heats-up-while-china-cools-off-22290.html
Northland Capital Partners View on the City Arian Silver, Mariana Resources, MotifBio, DiamondCorp and others http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22289/northland-capital-partners-view-on-the-city-arian-silver-mariana-resources-motifbio-diamondcorp-and-others-22289.html Motif Bio plc (LON:MTFB) - BUY*: FDA minutes confirm Phase 3 programme

Market Cap: £21m; Current Price: 33p; Target Price: 89p 

FDA meeting minutes confirm iclaprim Phase 3 clinical development programme

  • Motif announced today that it received the official meeting minutes from the U.S. Food and Drug Administration (FDA) guidance meeting which was held on 14 April 2015. 
  • The minutes confirm the FDA's agreement with Motif's Phase 3 clinical development programme for iclaprim - Motif’s flagship broad-spectrum antibiotic designed to be effective against multi-drug resistant bacteria. 
  • Iclaprim is being developed as an intravenous (IV) formulation to treat acute bacterial skin and skin structure infections (ABSSSI) and hospital acquired bacterial pneumonia (HABP) - two serious and life threatening infections caused by multi‐drug resistant bacteria. 
  • The FDA confirmed that two successful Phase III trials are required for the approval of the drug. 

NORTHLAND CAPITAL PARTNERS VIEW: iclaprim is set to fill a major market void in the battle against antibiotic resistance. If approved, the drug could achieve over $1bn/year in sales. Today’s FDA minutes confirm the regulator’s support for Motif’s programme. We maintain our BUY rating and 89p price target.

 

DiamondCorp (LON:DCP) – BUY: Update note

Market Cap: £36m; Current Price: 11.3p; Target Price: 16.4p (from 17.7p) 

FY14 results reflect last years the progress toward production

  • Forecasts and price target downgraded to 16.4p (from 17.7p). BUY rating maintained.

NORTHLAND CAPITAL PARTNERS VIEW: DiamondCorp’s FY14 results reflect the progress towards production made last year with a LBT of £3.3m. This was higher than our expectations (£2.4m) due to a £1.7m fair value adjustment that relates to the convertible bonds that outweighed the substantial £0.9m reduction in corporate expenditure against our forecasts. The Company’s net debt position of £21.9m was noticeably higher than the £14m we had previously forecast, largely a result of the increased capital cost in FY14 associated with the changes to the development schedule for the Lace Diamond Mine combined with an increase in the carrying value of the convertible debt. While these results reflected the development of Lace from last year, this year will see maiden production from the Upper K4 kimberlite at Lace that is expected to commence in H215. The extraction of diamonds during the ramp of production from the Upper K4 kimberlite is being treated as a credit to capex and not revenue. As a result, our headline forecasts do not reflect the cash generative nature of the business with Lace generating US$5.8m to fund development capital expense. We have made a number of changes to our valuation DiamondCorp following the FY14 results and the net effect is a downgrade to 16.4p (from 17.7p). In our view, the Company is still significantly undervalued with our revised price target offering 46% upside to the current price of 11.3p.

 

Arian Silver (LON:AGQ) – CORP: Q115 results

Market Cap: £10m; Current Price: 30.5p 

Q115 reflect the development of the San José Mine 

  • PBT for Q115 increased to US$1.9m compared to a LBT of US$1.1m in Q114, due to a US$3m fair value adjustment in relation to the derivative liability associated with the Quintana loan note and BMPA.
  • Net debt increased to US$24.5m in Q115 from US$21.7m in Q114.

NORTHLAND CAPITAL PARTNERS VIEW: The Q115 results reflect the significant transition Arian Silver has gone through in the first part of 2015. During Q115, Arian was focused on the continued development of the San Jose Mine and commissioning of the silver-lead circuit La Tesorera processing plant. In Q215, we expect first production from the zinc circuit as part of the commissioning process. Arian expects to start recognising production and revenue as part of the ramp up phase of operations during Q215 at it moves the mine towards commercial production.

 

Rockwell Diamonds (TSE:RDI) – CORP: FY15 results

Market Cap: CAD$11m; Current Price: 21c 

From yesterday: Secures bridge finance for the Remhoogte/Holsloot acquisition 

  • Rockwell expects to close the acquisition of the Remhoogte/Holsloot Project with Bondeo 140cc at the end of May 2015 as all the conditions precedent have been met and regulatory approvals granted.
  • The cost of the acquisition has been lowered to US$21.9m (from US$29m) through the exclusion of some of the earth moving fleet being acquired and the deferment of the acquisition of the Bo-Karoo property pending regulatory approval. The revised transaction will comprise of US$12.2m for the mineral rights and three processing plants and US$9.7m for earth moving fleet. Rockwell will also sell the Saxendrift Extension property to the vendors of Remhoogte/Holsloot for $0.5m.
  • Rockwell has secured a bridging loan for US$16.5m from key shareholders Diacore (US$15m) and Rockwell’s Chairman Mark Bristow (US$1.5m) to meet the revised purchase consideration and working capital. The initial term of the loan is three months, extendable for a further month. Interest is payable at 1.25% per month for the first period.
  • Rockwell plans to refinance the bridging loan in Q215. Should Rockwell not be able to refinance the by the end of August 2015 the providers of the bridging loan will be repaid from 25% of the sales of rough diamonds and 100% of the beneficiation income until the loan is fully repaid.
  • Forecasts, rating and price target remain under review.

 

Mariana Resources (LON:MARL) – SPECULATIVE BUY: FY14 results

Market Cap: £19m; Current Price: 2.5p

LBT in line with FY13

  • LBT of £6.8m in FY14 is comparable with £6.9m in FY13.
  • Net debt of £0.6m in FY14 was compares to net cash of £2.7m in FY13. 
  • No change to rating.

NORTHLAND CAPITAL PARTNERS VIEW: Nothing unexpected in Mariana Resources’ results from last year. Since the period end the Company completed a £1.8m placing in February providing what should be sufficient cash for the year. Mariana is currently focusing its attention on the 10,000m drill programme at the Hot Maden project located in North eastern Turkey that has continued to deliver exciting results. At its other projects in Peru, Suriname, Argentina and Chile Mariana has re-prioritised work to ensure that the Company has a cash buffer in the near term. This ensures that Mariana will be able to finance its share of the next phase of exploration at Hot Maden, post the 10,000m drill programme that is being funded by joint venture partner Lidya as part of its earn in to the project.


Connemara Mining Company (LON:CON) – CORP: Inishowen update

Market Cap: £0.9m; Current Price: 1.6p 

Initial results from Inishowen Gold Licences

  • Initial results from sampling of quartz vein boulders at the Inishowen Gold Project, located near Donegal, Ireland, returned grades including; 15.35g/t Au, 6.99g/t Au, 4.52g/t Au and 5.42g/t Au.

NORTHLAND CAPITAL PARTNERS VIEW: Positive initial results from Connemara Mining Company demonstrating the project justifies further work. Prospecting work is ongoing and the Company expects that Geophysics and additional sampling will be required to identify potential drill targets.

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Thu, 28 May 2015 08:14:00 +0100 http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22289/northland-capital-partners-view-on-the-city-arian-silver-mariana-resources-motifbio-diamondcorp-and-others-22289.html
EC Official Denies Greek Government Statement That a Deal Is Close http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22288/ec-official-denies-greek-government-statement-that-a-deal-is-close-22288.html EC Official Denies Greek Government Statement That a Deal Is Close 

This article by Nikos Chrysoloras, Eleni Chrepa, Rebecca Christie for Bloomberg may be of interest to subscribers. Here is a section:  The euro gained 0.2 percent to $1.0889 as of 4:58 p.m. London time. Greek two-year notes rose, pushing the yield 114 basis points lower to 23.77 percent. Greek shares also climbed, with the benchmark Athens Stock Exchange gaining 3.6 percent at the close of trading.

“Everyone was scared Greece was close to leaving the euro zone,” said John Plassard, vice president at Mirabaud Securities LLP in Geneva. “Just some hope is pushing the market up. They seem to be trying to do anything possible to keep Greece in the euro zone.”

U.S. Treasury Secretary Jacob J. Lew, who spoke Wednesday with Tsipras for the second time in less than a week, said he’ll push for movement in the standoff at a Group of Seven gathering of finance ministers and central bank governors in Germany.

“It’s time for everyone to park the rhetoric on the side and look for that sensible place where accommodation can be found,” Lew said at an event in London. “No doubt the worst and deepest consequence would be to Greece. But it’s profoundly in the interest of the European and global economy for the accident to be avoided.”

Eoin Treacy's view 

How the Europeans are going to resolve the Greek tragedy is still weighing on sentiment. Since they have patched over disputes at the last minute on every other occasion the market is beginning to price in the potential that this time will be no different.

Greece’s ability to make the next payment to the IMF is contingent on funds being released from their bailout package to fund it. This is a robbing Peter to pay Paul strategy but is unfortunately the reality of the Eurozone’s approach to the crisis. It means that the reforms demanded of Greece are where the crux of the argument lies and they will have to deliver if they are to expect leniency. 


Yen slides to lowest level in nearly 8 years 

This article from the Nikkei News service may be of interest to subscribers. Here is a section A weak yen used to provide a shot in the arm when Japan's economy depended heavily on exports. With production shifted offshore, the country has moved to an investment-driven growth model. Yet the weak currency still serves as a tail wind for exporters. Heavy machinery maker IHI assumes a rate of 115 yen to the dollar for the year through March 2016. If the yen remains weaker than this, operating profit will likely end up higher than the projected record high of 90 billion yen ($733 million).

But Honda Motor offers a contrast. Exports at the automaker accounted for a measly 3% in fiscal 2014, making currency fluctuations a small matter. Panasonic also has moved manufacturing overseas, particularly for products marketed there, shrinking the impact of foreign exchange rates to less than one-fifth the company's previous level.

"Exports are having a hard time growing in terms of volume, while its effects on capital investment and jobs are weak," said Masaaki Kanno at JPMorgan Securities Japan, referring to the yen's recent slide.

Nonetheless, publicly traded companies here expect combined pretax profit to grow 9% for fiscal 2015 to a second-straight all-time high. A weaker yen may even send profit growth into double digits.

Eoin Treacy's view 

The US Dollar completed a six-month range yesterday to break out to new recovery highs against the Yen, unwinding just about all of the credit crisis devaluation in the process. This remains a consistent trend and a sustained move below ¥120 would be required to begin to question medium-term scope for continued outperformance. 

 

Barrick deal fulfills Thornton aim of forging China link 

This article by Simon Casey for Bloomberg may be of interest to subscribers. Here is a section Barrick said Tuesday that Zijin will buy 50 percent of its interest in a Papua New Guinea mine for $298 million. Looking ahead, Toronto-based Barrick and Zijin will evaluate opportunities for future cooperation, including the potential to jointly construct mines. Barrick said it may take advantage of Zijin’s access to “low-cost capital from Chinese institutions.”

“A twenty-first century mining company with global reach and the intention to become an industry leader must, by definition, have a distinctive relationship with China,” Thornton said Tuesday in a statement.

Even before Thornton took over as chairman last year, succeeding Barrick founder Peter Munk, he was looking to build links with China. That’s a recognition of the nation’s growing importance not just as a user of key commodities but also as a producer. While Barrick has long been the world’s largest gold producer ranked by sales, Zijin is catching up fast and is now the second-biggest, according to data compiled by Bloomberg.

Eoin Treacy's view 

China is among both the largest consumers and producers of gold so it makes sense for Western companies to wish to gain access. They have an added incentive as access to additional capital for either acquisitions or expansion dwindles. Meanwhile Chinese companies are well capitalised and have access to attractive borrowing terms.

Barrick Gold needed this deal more than Zijin and the response of the respective share prices bears this out. Barrick has been ranging between $10 and $13.30 since November and pulled back from the region of the 200-day MA last week. It will need to sustain a move above that level in order to signal a return to demand dominance beyond the short-term  

 

Email of the day on how to make best use of the Service 

I am trialing your service. You speak in the daily service about your and David's favourite views. Could you tell me where I can find these and also could you recommend how I can get the best understanding of value from your site. Many thanks.

Eoin Treacy's view 

Thank you for taking the time to trial our service. FullerTreacyMoney is content rich so we understand that it may be overwhelming for new subscribers to figure out how best to use what we offer.

Every day we post a number of articles in Comment of the Day which we believe are of interest either in themselves or because they related to major issues or investment themes. We record a daily audio commentary to put what happened that day in context and to point our short-term movements in the market. As someone just getting acquainted with the Service I would suggest listening to one of the Friday Audios. This is when we put forward our longer-term outlook for the various different asset classes and would be the most accessible way of figuring out where we stand on various topics.   

I would also suggest playing around with the Chart Library. Add instruments you are interested in to your Favourites so you can monitor your portfolio and watch list. Our comprehensive globally oriented Chart Library is updated daily with close to 15000 stocks, bonds, indices, funds, currencies and commodities.

We also tell you exactly what we are doing with our own money both from a trading and investment perspective as it happens.

We spend a great deal of time identifying investment themes and have a strong record of being early. If you click on the Investment themes tab in the main menu (located in the middle of the black bar) you will be presented with two different category searches. Every article we write is categorised by whether it falls into one of our major themes (Energy, Technology, Precious Metals/Commodities, Autonomies, China, India, Japan etc.) as well as into individual “Tags”.

For example if you are interested in the broad China sector. The vast majority of the articles we write relating to the topic can be found under the China tab. If you are interested in an individual subject or company such as Citic Securities you can search the Tags for the name of the company or subject. You can also browse the Tags by clicking on one of the letters on the Investment Themes page.  

 

The Markets Now 

Monday 15th June, at the East India Club, 16 St. James’s Square, London SW1Y 4LH

David Fuller's view 

Here is the new brochure listing some of our topics and the important questions most investors face.  I think all investors will benefit from guest speaker David Brown’s new presentation. I learned from it, not least how to assess some familiar data more clinically.  In other words, he shows us how to think a little more clearly, particularly in terms of identifying bear markets near their tops.  This is never easy given all the emotions involved.  Many people jump the gun, as you will have seen over the last few years, which can leave them susceptible to overstaying when the important and often overlooked warning signs are flashing.  Note also Iain Little’s challenging topic summarised in the penultimate question.  I look forward to their presentations and also to hearing the views of friends and subscribers.  

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Thu, 28 May 2015 08:12:00 +0100 http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22288/ec-official-denies-greek-government-statement-that-a-deal-is-close-22288.html
Eurozone Is No Bargain Market, Despite Higher Gains in US: David Stevenson, Fleet Street Letter http://www.proactiveinvestors.co.uk/columns/sprott-s-thoughts/22287/eurozone-is-no-bargain-market-despite-higher-gains-in-us-david-stevenson-fleet-street-letter-22287.html Rip-roaring market valuations in the US are supported by ever-expanding corporate and government debt.

Corporations borrow cheaply and use the money to drive their share prices higher.

Just look at corporate debt rise in tandem with stock buybacks and investor payouts over the last few years (data: S&P Dow Jones Indices and Board of Governors of the Federal Reserve System).

Europe’s stock market and economic numbers have lagged the US in performance.

In January 2015, the ECB stepped in with over 1 trillion euros planned for bond buybacks, a program based on the Fed’s Quantitative Easing.1

Many investors see lagging performance in EU stock markets and the ECB’s new stimulus program and believe that Europe could catch up with US stock-market performance.

Is there more opportunity for bargains in European markets?

David Stevenson is the driving force behind the Fleet Street Letter, Britain’s “longest-running investment society.” He is a former fund manager from the City of London.

David warns that things are looking over-priced in Europe too, even if yield-seeking investors might find higher dividend yields there.

David also discusses why he’s bearish on the future of Europe’s currency union and why silver has been in his sights as a contrarian investor.

David, you’re based out of the UK and you are a contrarian investor. Can you talk about some of the past great contrarian opportunities in the UK and in the EU that you’ve experienced over the last 10 years or so?

David Stevenson: I think 10 years might be a bit long. I think the market has been very volatile over that period. Obviously we saw a build up to the Great Financial Crisis when markets were very strong and that was the time that I became very wary of stock market levels and then of course the Great Financial Crisis prompted a massive decline. I have to say that, probably along with a lot of other people, I hadn’t appreciated that there would be a recovery as quickly as there has been.

But what it has done is thrown up a number of value opportunities which we take advantage of in the Fleet Street Letter.

We’re now reaching a point where the value opportunities are less numerous than they were and I think that applies, Henry, to any stock market – it applies to the UK just as much as it applies to the United States.

So we’re now reaching a point where, for the contrarian value investor, it’s time to take stock and possibly reassess whether there are going to be as many opportunities going forward as there have been over the last five years.

Is the fact that markets in Europe have somewhat lagged the performance of North American markets an indication that there is more value to be had in European markets right now?

I would tend to put it the other way around and say that maybe it means there’s less value to be had in the US market.

That has now become very expensive in some areas and European markets have rallied too. I mean there’s the UK which is actually also near all-time highs. In Germany for example, you see the markets going through its previous highs, so it’s not like Europe and the UK have been sort of ‘sitting on the sidelines’ because they’ve both been performing pretty well. It’s just that the US has gone even faster.

Many years ago, Henry, I had started in the markets and was looking at companies on value criteria. I remember one analyst telling me he was appalled that I was contemplating something for around four times sales.

Now if you look these days across companies at prices to sales, a ratio of  four times is almost commonplace and it’s indicative, I think, of the extent to which markets have jumped up on the back of external influences like central bank policies and low interest rates – or nil interest rates.

It’s a reflection of how far the manipulation, if you like, has driven markets to levels that could be unsustainable.

Do you think that central banking is impacting the economy and creating these bubbles in stock market valuations to the same extent in Europe as it is in the United States?  How do you think it’s going to play out going forward?

Sure. The European Central Bank (ECB) decided to go down the same quantitative-easing floundering route as have been following the US, the UK and Japan.

I think the ECB is certainly saying it will try to do the same thing. It is having the same effect on asset prices. So while that still has a little way to go in terms of the policy implementation, in terms of the effect on stock market and pricing valuation I would suspect that Europe has gone quite a long way down the road to where it’s going in terms of stock market levels.

But I think it would be a mistake to assume that the ECB is going to drive European stock market a great deal higher from this point.

Does this lead you to own gold and silver right now as a protection against the potential fallout from these policies?

We’ve been quite optimistic about gold, if you like, as long-term insurance policy in the portfolio against financial crisis. It’s obviously also an insurance against inflation at the moment. There isn’t very much of that around, though inflation expectations are starting to pick up again.

Silver I think is the more interesting of the two. We’ve been very bullish about silver, not just because of its precious metal element as a ‘safe haven’ but also because it is an amazing metal in its own right.

It has so many applications in a lot of areas. It conducts heat for thermal application. It has electrical conductivity, light reflectivity, with use in everything from refrigerators to solar power. It’s a metal that has great industrial use and yet inventories are coming down progressively and mining supply of the metal is topping out.

So the metal is now moving into a shortage situation on an annualized basis and that can lead to a significant recovery in the price of the metal and silver producers over the next few years.

Why do you think the euro has gotten cheaper compared to the dollar when the ECB has pursued less aggressive central-bank policies than the Federal Reserve, until recently?

I think that’s now reversing with the ECB’s QE (Quantitative Easing) policy. I think the euro has also suffered from problems within the single-currency euro union. The fear that Greece might at some point pull out, causing a fragmentation of the single currency is one of the significant factors for the euro weaknesses.

Now, whatever anybody is telling you today or tomorrow about Greece, the fact is that the country is bust and it’s not going to get any better fast.

That said, there has been a little bit of a rally in the euro against the dollar and against the pound recently and that is something that is likely to continue for a little bit.

What is governing in terms of pricing? It’s that stock market prices have gone up – company share prices were being helped because of a weaker euro, as a weak euro would boost profits. Within the economies themselves, I think we will start to see a little bit of an increase in inflationary expectations returning, not least because the oil price is recovering again and that’s going to filter through.

So I think if you add up the whole euro picture, the euro itself probably could have a period of volatility and after that it could well decline.

I’ve actually been a bear of the euro structure for a very long time. I think it’s a dangerous concept to bring so many disparate countries together under the same currency banner and there are a lot of things still going wrong down the track.

So I take it that you don’t see a lot of contrarian buying opportunities related to Greece at the moment. You think that this is going to go from bad to worse?

Yeah, I just think you don’t know what currency they’re going to end up holding and therefore it’s probably not worth taking that sort of risk.

There was quite steep buying of Greek bonds a few months ago which has paid off but I think it isn’t a risk worth taking. I would tend to avoid that.

One thing you also mentioned of course was the UK and there the recent scene has been influenced by the general election which the conservatives —the more to the right of the mainstream parties -- have been reelected with an overall majority. They can now implement the sort of business-friendly policies which the stock market is going to like. So that has been short-term support for the sterling and that’s probably a reason why the pound has continued to be fairly firm.

In the last bubble in 2007 and 2008, we saw that the EU economy and stock market were very dependent on the health of the US economy. Will any problems with the stock market rally in the US likely cause some kind of crash in the EU as well?

I think it’s almost inevitable. When Wall Street sneezes, everybody else catches a cold. My belief is that at some point the US market could correct in a thunderous and fairly unpleasant way and that is going to be felt around the world.

I’m old enough to remember 1987 and Black Monday and what happened then. What happened in Wall Street hit London a few minutes later. It really was a question of the sort of global stock market contagion which hit very fast.

Who knows how long-lasting it would be? When you actually look back at something like 1987 you do see at the time that there was some performance in the markets. But I think no doubt that if the US markets were to fall very sharply, we would see ramifications around the world.

What are some differences with investing in contrarian opportunities in the UK and the EU relative to investing in the US and Canada? Is there anything that US investors should know if they’re thinking of entering European markets?

I think the principles remain the same around the world. I judge things in terms of valuation, in terms of yield, in terms of price-to-book value, in terms of debt levels, and cash generation and I apply the same criteria to stocks wherever they are.

The comment that I would make is that there are less opportunities to pick up income streams in the United States than there are in Europe or the UK. Dividend yields in the UK and Europe are much higher. That means payout ratios are higher.

If the dividend is the main thing you’re going to get, then if that dividend you’re going to get is sustainable – it’s covered by earnings, meaning that the distribution won’t be cut, and you can see that going forward in time -- then you’re better off with the companies that actually pay the higher dividend yields.

There are some figures produced by markets over a very long period of time that show the difference between when dividends are being reinvested into your investments and not reinvested and the difference is absolutely staggering.

If you basically get a decent dividend stream for a company, and you re-invest that in the stock, that’s amplifying the return over a 20 or 25-year period by a massive multiple.

That is an opportunity you’re going to have with high dividend yields. In the United States, there aren’t these dividend yields. In the UK and in Europe, if you’re selective and if you look around, you can find them.

Henry Bonner: Thank you for sharing your thoughts with us David and I look forward to speaking with you again.

David Stevenson: Great. Thanks a lot.

P.S.: Spots for Sprott’s upcoming Natural Resource Symposium are filling up fast!  Learn how to become a better contrarian investor at our natural resources and precious metals conference this summer. Join an elite group of investors July 28-31 in at the Fairmont Hotel Vancouver. Click here for the full details!

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Thu, 28 May 2015 08:02:00 +0100 http://www.proactiveinvestors.co.uk/columns/sprott-s-thoughts/22287/eurozone-is-no-bargain-market-despite-higher-gains-in-us-david-stevenson-fleet-street-letter-22287.html
In the news - Sky walks away from Berlusconi takeover talks http://www.proactiveinvestors.co.uk/columns/guardian-cfds-newspaper-briefing/22286/in-the-news-sky-walks-away-from-berlusconi-takeover-talks-22286.html The Times                      

Snapchat floats a serious proposal: In four short years, Snapchat has spurned Facebook, been banned by Eton, attracted the ire of the Federal Trade Commission and achieved a multibillion-dollar valuation. Now it is promising to float in what could be the biggest Silicon Valley IPO since Twitter.

Oil and gas groups prove to be masters of the big deal: Companies in the oil and gas sector are more likely to carry out successful mergers and acquisitions that generate long-term value for shareholders than those of any other industry.

President’s last word leaves ports in a storm: Some of the world’s largest oil companies could face increased operating costs in Nigeria if an eleventh-hour ruling by its ousted President comes into force.

Magnate donates £4.5 million to Aberdeen for when the oil runs out: Sir Ian Wood has given £4.5 million to Robert Gordon University in Aberdeen, to help secure the future of the city, “long after” North Sea Energy resources have run out.

PayPoint treats local retailers ‘deplorably’, says trade group: PayPoint has been accused of treating small retailers in a “deplorable” manner in an escalating dispute over how much commission is paid to shopowners who allow consumers to pay bills using the company’s system.

Call for new housing on wedges of green belt: Green belts around cities must be abolished and replaced with “green fingers” flanked by thousands of new homes built in the countryside, according to a former government planning adviser

Election certainty builds confidence at Telford Homes: Telford Homes declared that the Conservatives’ unexpected win in the general election had provided “certainty and stability” for Britain’s housing market.

Housing market brought to standstill by election nerves: The number of first-time buyers dwindled across Britain at the start of the year as pre-election jitters caused a slump in the housing market.

The Independent

Plus500 apologises to customers at spread-betting firm’s annual meeting: The Chief Executive of spread-betting firm Plus500 has apologised to customers and admitted “major failings” in the wake of money-laundering checks which locked tens of thousands of U.K. customers out of their accounts.

Former Thomas Cook Boss Harriet Green hands £3 million to charity: The former Thomas Cook Chief Executive, Harriet Green, has agreed to donate about £3 million to charity from a bonus she is due, in the latest fallout from the travel company’s handling of the death of two British children at one of its holiday bungalows in Corfu.

A licence to print money fails to rescue De La Rue: The banknote printer De La Rue has said that the weak euro had handed its European competitors a price advantage as it revealed sharply lower annual profits.

Banks face fresh wave of PPI compensation claims after landmark ruling: Britain’s high street banks could be facing a much bigger bill for mis-selling payment protection insurance (PPI) than they have planned for.

The Daily Telegraph

Sky walks away from Berlusconi takeover talks: Sky has walked away from talks to create a more dominant pay-TV provider in Italy, after failing to agree terms on a joint venture with Mediaset, the broadcaster founded by former President Silvio Berlusconi.

Banker accused of rigging markets boasted to traders: ‘Libor is high because I have kept it high’: A banker boasted that he had the power to manipulate financial markets by persuading traders, including his brother-in-law, to help rig interest rates, a court has heard.

Business leaders push to speed up EU vote: British business has responded to the first Conservative-only Queen’s Speech in almost two decades by urging the new government to speed up the EU referendum so it can focus on injecting further power into the British economy.

Ryanair ‘kingmaker’ in IAG’s £1 billion takeover of Aer Lingus: Willie Walsh, the Boss of International Airlines Group, has warned that he will not be forced into raising his offer for Aer Lingus to woe Ryanair into parting with its stake in Ireland’s flag-carrier.

Teva increases pressure on $40 billion takeover target Mylan: Teva, the Israeli generic drug maker, has stepped up its $40 billion (£27 billion) pursuit of Mylan by buying a stake in the U.S. company.

Qatar Airways: Let us land or forget $200 billion of building deals: The Chief Executive of Qatar Airways has issued a barbed warning to international airports by demanding a greater number of landing slots in return for access to lucrative government contracts in the gas-rich Persian Gulf sheikhdom.

Facebook buys British virtual reality start-up Surreal Vision: Facebook has bought an eight-month-old British start-up that recreates real-world scenarios in virtual reality.

Desperate French firms appeal for expats to return home: French start-up companies desperate for talented staff with international experience have launched a campaign to persuade expats to return, pooling their resources to offer free repatriation help and advice as part of the package.

China now has more than a million sterling millionaires: The number of sterling millionaires in China surpassed one million for the first time last year, as the country’s private wealth burgeoned amid increased innovation and international investment -- and 80% of the newly rich are younger than 50.

Nasdaq closes at record high as Greece raises hopes of debt deal: The Nasdaq has closed at a record high, led by a rebound in technology and healthcare shares and optimism that Greece would avoid defaulting on its debt.

The Guardian 

U.S. to urge Greece to end brinkmanship with creditors at G7 meeting: The U.S. Treasury secretary has said he will use the G7 Finance Ministers’ meeting on Thursday and Friday to press Greece and its European creditors to end their brinkmanship and forge a rescue deal.

Bank of England official received emails related to Libor rigging, court told: A senior Bank of England official nicknamed The Hammer was sent emails that, it is claimed, played a key role in the rigging of lending rates between banks, according to evidence presented in the first criminal trial in the Libor scandal.

Tesco relegated from premier league of global brands after nightmare year: Tesco has slumped out of the world’s brand premier league and been overtaken by the German discounter Aldi in the latest sign of the damage caused by a £263 million accounting scandal and errors on pricing, quality and customer service.

European commission outlines further corporate tax proposals: The European commission outlined plans on Wednesday to limit how much multinational companies can reduce taxes on their European earnings through the use of creative accounting.

EU urged to match Britain’s aid spending to tackle migrant crisis: The international development secretary Justine Greening is urging the EU to match Britain’s commitment to higher aid spending, warning that the flow of migrants will only be stemmed once poverty is tackled at source.

Daily Mail

Britain’s businesses warn Queen’s Speech falls short of expectations on tax, skills and spending: Britain’s businesses have warned that the Queen’s Speech fell short of expectations on tax, skills and spending.

Private equity Boss Jon Moulton brands laws governing consultation period when staff lose jobs as ‘idiotic’: Private equity Boss Jon Moulton has branded the laws governing the consultation period when staff lose their jobs as ‘idiotic’.

Demand from tourists in Europe and Americans at home helps jewellery brand Tiffany & Co report better-than-expected first quarter: Demand from tourists in Europe and Americans at home helped New York jewellery brand Tiffany & Co report a better-than-expected first quarter despite a strong dollar.

Fears of Greek default retreat as Athens seeks to reassure creditors it will make next debt repayment on June 5: Fears of a Greek default are retreating after the Athens government sought to reassure its creditors that it would be able to make its next debt repayment on June 5.

Daily Express

Post-election boom sees British households feeling richer: British household confidence in their personal wealth and the U.K. economy has soared in the wake of the General Election and is almost back to pre-financial crisis levels, a new report has revealed.

Car sales reach half a million in the U.K., according to recent figures: A strong U.K. market has pushed car production past the half-million mark, official figures have shown.

City A.M.

Tom Hayes recruited accomplices to manipulate Libor, court told: Former UBS and Citi trader Tom Hayes spent years recruiting other bankers and brokers to help him manipulate Libor submissions, prosecutors claimed.

EU and Switzerland sign pact for transparency in bank records: The EU and Switzerland have signed a deal to stop EU residents holding undeclared income in Swiss bank accounts.

Wizz Air results show revenue up 21%: Wizz Air announced a 21% rise in revenue for the year ending 31 March.

Julie Dedman joins Obtala Resources: The AIM -listed agri-business Obtala Resources has hired Julie Dedman as a consultant and strategist.

Mortgage lending expected to rebound after pre-election drop: The mortgage market slowed in the run up to General Election, according to figures released by the Council for Mortgage Lenders.

Workspace acquires Amnesty building in Clerkenwell for £17 million: Small business landlord Workspace has bought human rights charity Amnesty International’s offices in Clerkenwell for £16.55 million.

Renminbi takes lead in China’s trade with Asia: China’s currency is at last starting to make waves in international trade, after years trailing behind the country’s economy in terms of global importance.

Brewin Dolphin funds on track as Euroclear sale helps drive profits: Wealth Manager Brewin Dolphin lived up to expectations by revealing a £2.6 billion rise in assets under management.

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Thu, 28 May 2015 07:00:00 +0100 http://www.proactiveinvestors.co.uk/columns/guardian-cfds-newspaper-briefing/22286/in-the-news-sky-walks-away-from-berlusconi-takeover-talks-22286.html
Today's Market View Including Condor Gold, Goldplat, Hummingbird Resources and Bezant Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/22285/today-s-market-view-including-condor-gold-goldplat-hummingbird-resources-and-bezant-resources-22285.html Queen’s Speech today at 11:30 – for the state opening of Parliament

David Cameron will set out his vision for the UK in the Queen speech today

The speech is likely to include the Bill of Rights plan including mention of a referendum on UK membership of the EU.

We feel it is unlikely that the UK will leave the EU but there will be significant renegotiation on the cost and conditions of UK membership.

It appears the EU has reached a stage where the key member states are keen to restructure the EU Parliament and membership conditions.

$16bn gold mining fund being set up by China for investment into gold mining along the Silk Road

China has set up a $16bn fund for the development of gold mining along the silk road.

60 countries are participating in the fund which aims to encourage development of mines along silk road infrastructure being developed by China

We suspect the funds will focus on the land-based silk road which runs through Kazakhstan, Uzbekistan, Iran and Turkey

The fund aims to develop gold production for trading on the new Shanghai Gold Exchange and to enable central banks to buy gold locally for their reserves

M&A gathering pace in the mining sector as big deals highlight progress and value in the sector

 

Acquisitions

Zijin Mining buying 49.5% of Kamoa from Ivanhoe Mines for US$412m

Kamoa contains almost 1bt grading 2.5% copper but is located in the DRC.  First phase capex is $1.4bn.  Ivanhoe has so far invested $340m

Zijin are also buying 50% of Porgera from Barrick Gold

Sirius Resources – acquired by Independence Group for US$1.8bn for the Nova Bollinger nickel discovery in Western Australia

US dollar strength is holding back metals prices as traders react to better economic news from the US

 

Economic News

US – Positive economic data released yesterday raise expectations for the Fed to move ahead with the interest rate hike in H2/15.

Durables goods (ex transport): +0.5% in Apr v +0.6% (revised from -0.2%) in Mar and +0.3% forecast.

Cap goods orders nondefence (ex air): +1.0% in Apr v +1.5% (revised from -0.5%) in Mar and +0.3% forecast.

In the housing market prices climbed more than forecast in Mar while new home sales increased in Apr post a decline in the previous month, though, from a high base.

S&PCS: +0.95%mom in Mar v +1.21%mom (revised from +0.93%mom) and +0.90%mom forecast.

New home sales: +6.8%mom in Apr v -10.0%mom (revised from -11.4%mom) and +5.6%mom forecast.

Consumer confidence stabilised this month with the actual data beating market estimates (95.4 v 94.3 in Apr and 95.0 forecast).

All three equity indices (Dow Jones, S&P500 and Nasdaq) closed down 1.04-1.11% yesterday.

 

China – Industrial profits posted the first annual increase since Sep/14 and posted the highest reading since Jul/14.

Industrial profits: +2.6%yoy v -0.4%yoy in Mar.

 

Japan – Minutes of the Apr monetary policy meeting show few members expressed their concern regarding an updated inflation target forecast.

The BoJ expects inflation to hit 2% target in H1/FY16 running between Apr and Sep.

Some members “expressed the recognition that the rate of increase would not reach around 2% during the projection period”.

This compares to two year old guidance for inflation to reach the target by Apr/15.

 

Germany – Consumer confidence hit 13.5-year high led by the positive economic outlook and low inflation expectations.

GfK consumer confidence index: 10.2 in Jun v 10.1 in May and 10.0 forecast.

Very strong domestic demand in Germany and the low rate of inflation are fuelling economic expectations and consumers' willingness to spend," GfK said.

 

India – Business confidence down at the lowest in 12 months implying a “ bow to the government as it completes its first year in office”, on MNI numbers.

The index fell to 62.3 in May from 63.9 with the production component at the lowest since Jul13.

Measuring business outlook, both new orders and export orders were at the weakest since May-Jun/13.

A recovery in the sentiment earlier in the year led by two rate cuts from the RBA (Jan and Mar) has now waned.

 

Zimbabwe – Mining production lost 10% of run time in Q1/15 on the back of interruptions on the national grid.

 

US$1.0917/eur vs 1.0898eur yesterday.    Yen 123.05/$ vs 122.77/$.    SAr 12.044/$ vs 11.987/$.    $1.540/gbp vs 1.541/gbp

0.774/aud vs 0.778/aud

 

Commodity News

Precious metals:

Gold US$1,189/oz vs US$1,196/oz last week

Platinum US$1,128/oz vs US$1,136/oz last week

Palladium US$786/oz vs US$783/oz last week 

Silver US$16.77/oz vs US$16.82/oz last week

 

Base metals:

Copper US$ 6,122/t vs US$6,158/t last week

Labour union from southern regions in Peru express support for protests against the US$1.4bn Tia Maria project by calling a two day strike.

Regions involved in the strike include Arequipa, Moquegua, Tacna and Ayacucho.

The Cusco and Puno regions said they will have demonstrations, but will not support the strike.

All districts in the province of Islay remain in the state of emergency as protests have already cost four lives with hundreds of people injured.

Southern Copper announced a 60-day pause in the Tia Maria development in Peru last week  following two months of protests.

Aluminium US$ 1,749/t vs US$1,766/t last week

Nickel US$ 12,710/t vs  US$12,760/t last week

Nickel ore and concentrate imports in china climbed 38%yoy in Apr, according to the latest customs data.

Philippines remain the largest supplier of nickel ore and concentrates shipping 2.98mt in the month, accounting for 96..8% of total imports.

Spain was the second largest supplier, exporting 35.6kt to China.

May shipments are expected to come in even higher as stainless steel mills are seen taking advantage of lower prices in  Apr.

Zinc US$ 2,178/t vs US$2,187/t last week

Lead US$ 1,937/t vs US$1,944/t last week

Tin US$ 15,400/t vs US$15,800/t last week

 

Energy:

Oil US$64.4/bbl vs US$65.1/bbl last week

Natural Gas US$2.834/mmbtu vs US$2.851/mmbtu last week - 

Uranium US$35.15/lb sharply unch vs US$35.25/lb last week

 

Bulk commodities:

Iron ore 62% Fe spot (cfr Tianjin) US$59.7/t vs US$59.6/t – last week

Thermal coal (1st year forward cif ARA) US$57.1/t unch vs US$56.9/t last week

Seaborne hard coking coal index (quarterly) US$109.5/t unch vs US$109.5/t

 

Other:

Tungsten APT European US$257.5/mtu unch vs US$257.5/mtu

FeCr lumpy Charge 52% Cr US$1.08/lb vs US$1.08/lb last week

 

Company News

Bezant Resources (LON:BZT)  3.1 pence, Mkt Cap £2.6m – Bezant cuts costs and salaries to conserve cash

Bezant Resources is the latest company to announce cuts to its cost base including a 30% cut in salaries at board and staff levels.

The company has cash of £1.9m down from a cash balance of £2.4m a year ago.

Bezant received £5.2m from Gold Fields a year ago when Gold Fields elected not to pursue its option over the Mankayan copper / gold project in the Philippines.

The company is now trying to either sell or find a joint venture partner to advance the project but progress is hampered by uncertainty relating to a mining tax proposal made to the Philippines Government in 2014, by a civil service body, recommending an increase to a 50 per cent.

Mankayan has a resource of 390mt grading 0.38% copper and 0.42 g/t gold and could support a substantial 20mtpa block-caving operation with a capital cost of $878m as revised by GHD Group Pty in a study published on 24 September.

Bezant also has also scaled back the Eureka copper gold exploration project in Argentina to reduce costs and to better focus management efforts on the Mankayan project.

Conclusion:  It is good to see Bezant focusing on its cost base.  It will be better to see progress on the sale or joint venture of its project in the Philippines though this might have to wait for further clarity and resolution on taxation and local ownership issues. 

 

Condor Gold (LON:CNR) 69p, Mkt Cap £31.6m –La India development options include open pit and combined open pit/underground mining

Condor Gold highlights the progress at its La India project  in Nicaragua where it has defined a maiden probable reserve of 6.9m tonnes at an average grade of 3 g/t gold and 5.3 g/t silver for a contained 675,000 oz of gold and 1.2m oz of silver.

Pre-feasibility work indicates that La India could support a 1.2mtpa open pit mine and processing plant capable of producing 614,000 oz of gold over a 9 year mine life.  This is a significant increase on the 800,000 tpa case considered earlier and represents a capex of $124m.

Other development cases, including delivering a portion of the ore fed to the plant from underground sources  are also under consideration. These could increase gold output to 137,500 oz pa at costs of below $700/oz.

Conclusion: La India has a number of possible development options including both open pit mining and a combination of open-pit and underground production. All the options reported deliver robust outcomes and no doubt there remain possibilities to optimise the final development plan.

 

Goldplat PLC* (LON:GDP) 2.4 pence, Mkt Cap £4m – Drops potential acquisition of private exploration company

Goldplat report that it has dropped a potential acquisition of a private exploration company.

Management had signed a non-binding letter of intent for the potential acquisition.  Talks have now discontinued.

The company will continue to focus on gold production and development of its gold recycling and recovery operations in South Africa and Ghana.

Goldplat also holds the Kilimapesa gold mine in Kenya which is currently on care and maintenance.

*SP Angel acts as Nomad and Broker to Goldplat

 

Hummingbird Resources (LON:HUM) 36 pence, Mkt Cap £34.1m – Start of civil works at Yanfolila with first gold pour expected in H1 2016

The Yanfolila project was acquired from GoldFields and Hummingbird is planning to commence production at the rate of 100,000 oz pa of gold in H1 2016 at an all in sustaining cost of $733/oz from treatment of 1mtpa of ore.

Capital costs of Yanfolila are estimated at $71.6m

The project contains an estimated resource of 1.8m oz of gold at an average grade of 2.8 g/t. Approximately 52% (947,000 oz) of this resource is classed as “inferred”.

As part of its Annual Results, Hummingbird Resources comments that the initial earthworks have started at their Yanfolila project in Mali. These are essentially site preparation activities, due for completion by the end of June, for the civil engineering contractor to start on construction of the concrete slabs and structural foundations.

In addition to Yanfolila, Hummingbird also has the Dugbe Project in Liberia which contains a resource of 4.2m oz of gold at an average grade of 1.4 g/t.  Approximately 52% of the Dugbe resource (2.2m oz) is classed as “inferred”.

The company reports that it has fully drawn the full $10m of funding agreed under a Bridge Loan Agreement with Taurus Mining Finance in August 2014. The Mandate Letter also agreed with Taurus in August 2014 “set out the key terms of the refinancing mandate for a US$75mfacility to repay amounts under the Bridge Loan Agreement and fund the construction of the Yanfolila Project.”

Hummingbird Resources is “currently in discussions with Taurus over the next stage of funding”. 

At 31st December 2015 the company reports cash of $8.5m.

Conclusion: Start of construction is a landmark for the Yanfolila project as it moves into development.

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Wed, 27 May 2015 10:41:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22285/today-s-market-view-including-condor-gold-goldplat-hummingbird-resources-and-bezant-resources-22285.html
Beaufort Securities Breakfast Alert Mariana Resources, ANGLE plc, Kibo Mining, Stratmin Global Resources and others http://www.proactiveinvestors.co.uk/columns/beaufort-securities/22284/beaufort-securities-breakfast-alert-mariana-resources-angle-plc-kibo-mining-stratmin-global-resources-and-others-22284.html The Markets

Market opening: Markets are likely to open lower today. FTSE 100 futures were trading 7.8 points down at 7:00 am.

New York: Wall Street declined after the extended holiday as upbeat economic data fuelled speculation of an earlier-than-expected interest rate hike from the Fed. Focus also remained on the impact of a stronger US dollar. The S&P 500 shed 1.0%, with energy and information technology as the biggest losers.

Asia: Markets are trading mixed, taking cues from Wall Street. The Nikkei 225 added 0.2% despite the Bank of Japan being concerned about the expected inflation of 2%, while anticipating consumption to remain steady due to improving income. The Hang Seng was trading 0.7% lower at 7:00 am.

Continental Europe: Stocks continued their decline on concerns that Greece may default on loan repayments. Meanwhile, investors also eyed several corporate earnings released yesterday. France’s CAC 40 and Germany’s DAX declined 0.7% and 1.6%, respectively.

Crude Oil: Yesterday, the prices of Brent and WTI crude oil declined 2.7% and 2.2%, respectively. The spread between the two varieties stood at US$5.3 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.24% lower yesterday at 764.86. 

Today’s news

UK retail sales surges in May: CBI

The Confederation of British Industry (CBI)’s retail sales balance climbed to +51 in May, much ahead of April’s +12; the expected sales balance for June increased to +58. Meanwhile, the overall business situation reading improved to +20. The rise was ascribed to low inflation, which boosted consumer spending power.

Fed to consider global growth before raising rates: Fischer 

Federal Reserve Vice Chairman Stanley Fischer stated that the central bank may take a slower approach to interest rate hike considering its impact on global economic growth. Moreover, a stricter monetary policy would be imposed only when the bank is confident about achieving the inflation target and improvement in the labour market.

Company News

MySQUAR – AIM IPO of a Myanmar-based Internet-build group, focussed on Mobile Social Media Services

You may have seen reference in the Financial Times and other press sources of this upcoming AIM IPO in which Beaufort is sole broker.

MySQUAR is a technology group focussed on internet-content build in Myanmar, a country which until recently had been effectively cut-off from the rest of the world. Its first main product now rapidly building users is ‘MyCHAT’, a free to use social media and mobile chat service. The Company has recognised that offering local language and locally-derived content is the best route to acquisition and retention of massed users still very new to the worldwide web. Within a short 15 months its services could be accessible by over 40m residents. MySQUAR is positioned to be the local platform of choice in what will shortly become Southeast Asia’s fastest growing online territory. The Company is expected to have over 1m users by the end of the year with rapid growth continuing into the foreseeable future. With users comes monetisation opportunities, including gaming, news, information, financial and payment services.

Should wish to have more information or are interested in getting involved, please contact your Beaufort Broker on 020 7382 8300 (London) or 0117 910 5500 (Bristol).

Kibo Mining (LON:KIBO) – Speculative Buy

Kibo Mining, the exploration and development company focused on mineral and energy projects in Tanzania, yesterday announced an update on its Rukwa Definitive Mining Feasibility Study (DMFS). Phase 2, Stage 1 of the DMFS (pre-feasibility stage) remains on schedule and within budget. More importantly, trade off studies indicate that the overburden material is free-digging and that the use of surface continuous mining equipment has proven feasible at this stage. Kibo has also decided to officially change the name Rukwa Coal to Power Project (RCPP) to Mbeya Coal to Power Project (MCPP) to reflect the regional impact of the project area while avoiding any confusion with other similarly named projects owned by unrelated companies that have no relationship or association with Kibo Mining or its projects in Tanzania.

Our view: We are encouraged with the progress being made on the DMFS, with the overburden material amenable to free-digging and the potential use of surface continuous mining equipment for coal seam extraction we expect a significant reduction in mine operating costs. The free-digging will eliminate the need for explosives on site while the precise extraction of the coal seams will eliminate the need for coal washing, allowing raw material to be delivered to the proposed power plant. We maintain a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Kibo Mining plc

Stratmin Global Resources (LON:STGR) – Speculative Buy

StratMin announced the appointment of Mr Brett Boynton, CFA as Chief Executive Officer (CEO) and an Executive Director of the company with immediate effect. Mr Manoli Yannaghas, the current Managing Director, would immediately step down from the Board but would facilitate the handover to Mr Boynton. Mr Yannaghas was instrumental in bringing the company’s first operation, the Loharano project online and signing an off-take agreement, since becoming the Managing Director in 2013. On the other hand, Mr Boynton is an experienced corporate financer and an expert investment banker, having funded and founded numerous Australian resource companies. He currently heads the joint venture partner of Agripower Australia Limited that has a close resemblance to the mining and processing operation of Stratmin’s graphite production. Mr Boynton has worked as a senior banker with UBS and Credit Suisse but left investment banking in 2010 to co-found Tellus Holdings, a mining and hazardous waste management company. Towards the end of 2014, he began working with Stratmin and also founded Signature Gold, an investment company with a portfolio of Intrusion Related Gold Systems.

Our view: The appointment of Mr Brett Boynton as the CEO comes at an important juncture as the company recently witnessed significant developments towards the commercial production of graphite and the signing of an off-take agreement. Stratmin stands to gain immensely from Mr Boynton’s rich experience and impressive contacts in the Industrial Minerals space. The company would also benefit from the AgriPower’s extensive R&D program and global distribution network. Stratmin has demonstrated the ability to increase volumes within the existing plant and the increase in carbon content to 94% means that all graphite produced is now profitable. In addition, the recent stabilization in the political environment in Madagascar and the encouragement of foreign investment by the government have further enhanced the prospects of the company as it continues to add exploration and production assets in the country. Thus in view of the overall optimism surrounding the company, we retain our Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Stratmin Global Resources plc

Angle (LON:AGL) – Speculative Buy

Yesterday, Angle announced the receipt of a Chinese patent and an Australian patent for its Parsortix system that captures rare cells in blood for medical analysis. These patents would provide a protection over a wide range of uses of the Parsortix technology. Such grants have already been secured in the US and corresponding applications have been made to the potential new markets for the Parsortix products. The company aims to expand the breadth and duration of its patent coverage in order to make the best use of the commercial returns from the technology.

Our view: The grant of the new patents in China and Australia considerably extend Angle’s patent protection into these major markets that are witnessing a growing interest in the liquid biopsies. The company’s Parsortix system possesses the unique ability to harvest the CTCs from the patient’s blood sample that can be combined with other technologies to discover personalized care to cancer patients. The company has already seen growing demand in the US and the European markets and continues to make further applications for the new patent in different regions. Last year the company invested around £1.6m for the development of the Parsortix system and signed several collaborative agreements with five leading international cancer research centres. Progress was also seen towards an FDA authorization for the clinical market in the US. The aforementioned positive developments stand testimony to Angle’s successful transition from a support services company to a specialist med-tech company. Thus eyeing the rapid progress of the Parsortix product, we believe this to be a great investment opportunity to invest in the company. We reiterate a Speculative Buy rating on the stock.

Mariana Resources (LON:MARL) – Speculative Buy

Yesterday, Mariana Resources announced the completion of the drilling of the first four holes of the Phase II drill program at the Hot Maden Prospect in eastern Turkey by its JV partner Lidya Madencilik Sanayi ve Ticaret. A significant gold-copper (Au-Cu) mineralised system was confirmed between the HTD-04 and HTD-05 discovery holes which are 100m apart. Drill hole HTD-08 tested the northern extension and encountered a new area of zinc mineralisation above limited intervals of Au-Cu mineralization while drill hole HTD-09 hole also intersected a marginal Zn-Au zone. HTD-08 Hole intersected 90.9m @ 0.8% Zn from 9.5m and 7.2m @ 2.1 g/t Au, 1.6% Cu from 129.5m and Hole HTD-09 intersected 22m @ 3.1 g/t Au, 0.3% Cu and 1.0% Zn from 40m. The western margin of the Au-Cu zone encountered significant intervals of Zn mineralisation that suggests the formation of a distinct Zn halo around the Au-Cu zone. In the meantime, assay results are pending for drill holes HTD-10 and HTD-11, which will test continuity between the two discovery holes and extension to the south respectively. The HTD-12 and HTD-13 drill holes are currently in progress.

Our view: The above results signal another positive development for Mariana Resources from its Hot Maden project, located in Turkey. With the completion of the drilling at the first four holes, the company has gained a better understanding of the high grade Au-Cu mineralization zone that is expected to be surrounded by a Zn halo. The drilling indicated extensions of the mineralized zone and the company has plans to drill further for better understanding of the prospect. The visual inspection of the core from HTD-11 has also been quite encouraging for the extension of the high grade gold-copper shoot to the south. The Hot Maden project was acquired in January 2015 through the acquisition of Aegean Metals Group that fully owns the Hot Maden (Au-Cu) and Ergama (Au-Ag) prospects in Turkey. Additionally, the company possesses other promising prospects in Peru, Argentina, Turkey, Suriname and Chile. The company’s strategy focuses on acquiring prospective land packages offering the high probability for economic returns. The company’s other successful gold-silver discovery campaigns include Las Calandrias Project and Sierra Blanca Project. Thus, in view of the company’s promising asset base and its track record for previous explorations, we maintain a Speculative Buy rating on the stock.

Ryanair Holdings (LON:RYA) – Buy

Yesterday, Ryanair Holdings announced its final results for the year ended 31st March 2015. Passenger traffic rose 11% y-o-y to 90.6 million and load factor increased to 88% compared with 83% the year before. Total revenue firmed up 12% y-o-y to €5,654m while the operating profit expanded 58.3% to €1,042.9m. Pre-tax profit strengthened 66% to €982.4m for the year. Basic EPS advanced 69% to 62.59 cents. While the unit cost ex-fuel was flat, including fuel it slipped 5%. The airline finished the year with €364m in net cash, and its balance sheet was rated BBB+ by both S&P and Fitch Ratings. As part of the business development plan the airline used the AGB programme to improve customer experience. Ryanair informed that it would lease-in six aircraft to augment its fleet size for the peak period to meet the additional demand. Further, during the year, the company came up with a €850m bond offering at a coupon of 1.125%, and also placed an order for 183 B737-800’s for delivery from 2014-2018, and 200 B737 Max 200’s from 2019-2023. Also, the company has hedged its fuel costs for FY2016 and FY2017. Oil is 90% hedged at US$92 per barrel for FY2016, and 36% hedged at US$69 per barrel for FY2017. The company supports the development of additional runway capacity in the London market and expects traffic growth to be up 10% this year. Ryanair’s profit guidance for FY 2016 falls in the range of €940m to €970m. The stock was nearly 5% up in yesterday’s trading session on London Stock Exchange.

Our view: Ryanair Holdings put up a solid show for the FY2015. The airline’s strategy to target higher-paying passengers through business-friendly routes and new pay-for amenities has complemented its low cost segment operations extremely well. Ryanair continues to reap rewards for the introduction of its ‘Always Getting Better’ customer programme, aimed at providing low fares and a simpler forward booking platform. The airline also has plans to improve facilities by providing a new website and app, new cabin interiors and enhanced digital features. With massive fleet expansion plan in place, coupled with the expected increase in customer traffic, the airline is poised for strong performance in future. In view of these, we retain our Buy rating on Ryanair.

AstraZeneca (LON:AZN) – Hold

Yesterday, AstraZeneca provided an update on the Brodalumab Development Programme. Amgen, AstraZeneca’s joint partner for developing and commercialising five monoclonal antibodies, declared the termination of the co-development for Brodalumab a treatment for skin disease psoriasis and psoriatic arthritis, and axial spondyloarthritis. The announcement comes after Amgen decided to focus on other portfolio priorities as certain behavioural events in the Brodalumab programme may lead to restrictive labelling. AstraZeneca would conduct further review on the data and confirm its decision on the future development of Brodalumab.

Our view: The termination of the co-development contract with the Amgen is disappointing news for AstraZeneca at this stage as the company is looking forward to bringing more new products to the market in order to drive growth. In November 2014, the two companies had reported positive phase III results on Brodalumab but the recent revelations regarding the behavioural impacts of the treatment have put a question mark to the labelling and the future commercial appeal of the drug. AstraZeneca is undecided on the future course of action. Though of late, the company has made advances with some orphan drugs that substantiated the company’s capability in developing drugs for rare and typical diseases, yet the above news could offset some of those positives. On the other hand, the company enjoys a well diversified portfolio and drug pipeline that has been further strengthened by the recent additions of medicines for the opioid induced constipation and several others in oncology. The company has been facing some growth related concerns as some of its key medicines face patent expiry the coming years and may be substituted by cheaper generics. Despite all this, AstraZeneca continues its stronghold in the pharmaceutical industry with several drugs in the research stage. Therefore, we retain our Hold on the stock.

Economic News

US durable goods

As per the Commerce Department, US durable goods orders dipped 0.5%% m-o-m in April, after increasing a revised 5.1% in March, chiefly because of the decrease in orders for the transportation equipment. The reading matched the economists’ forecast for the month. However, excluding transportation equipment, orders improved 0.5% in April after rising a revised 0.6% in the previous month.

US new home sales

New home sales in the US surged 6.8% to a seasonally adjusted annual rate of 517,000 units in April, the Commerce Department said yesterday. The annualised sales figure for March was revised up to 484,000 from the previously reported 481,000. Economists had expected new home sales to increase at a slower pace of 5.0% recording annualised rate of 505,000. The median price of a new home stood at US$297,300 in April, marking a 4.1% increase from last year.

US consumer confidence index

As per the Conference Board, US consumer confidence index rose to 95.4 in May, from a downwardly revised 94.3 in April. Economists had forecasted a drop to 95.0 from the originally reported 95.2. The present situation index grew to 108.1 in May from 105.1 in April, whereas the future expectations index lowered to 86.9 from 87.1.

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Wed, 27 May 2015 09:37:00 +0100 http://www.proactiveinvestors.co.uk/columns/beaufort-securities/22284/beaufort-securities-breakfast-alert-mariana-resources-angle-plc-kibo-mining-stratmin-global-resources-and-others-22284.html
SP Angel Morning Oil & Gas Victoria Oil & Gas and Providence Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/22282/sp-angel-morning-oil-gas-victoria-oil-gas-and-providence-resources-22282.html Headlines

Victoria Oil and Gas (LOON:VOG) – Time to Look Forward. A Long Way Forward: Today's news is a solid step forwards, and one that provides an increasingly stable and solid platform from which to continue to build its business. Given the success, Nigeria beckons, and with a swathe of industrial buyers and a ready supply of "stranded" gas assets, the opportunity is an order of magnitude greater than it has experienced to date. Time to get start looking forward to where the opportunities are.

Providence Resources (LON:PVR) – Goal Still Visible, Just Smaller and Further Away: The Company's progress has been halted, but that doesn't mean that the value doesn't remain within its asset base. There continues to be concerns over the future funding plans, and to what extent the shareholders will see longer term access to their economic benefits. It is time the company started to move towards generating cash, rather than securing the best deal possible, before the unpalatable becomes the best deal possible.

 

News Items 

Victoria Oil and Gas (LON:VOG) – Time to Look Forward. A Long Way Forward

Today's news disclosing the acquisition of the Logbaba gas processing plant is a good move, and one which we believe is a solid step forwards for the Company. Not only will it be able to reduce costs, but it will also afford it a level of flexibility. The question now becomes one of which entity this will sit in, the upstream entity, or the midstream entity?

This is important as we believe that the Company is not receiving full value for the position that it is now in, and splitting the two businesses and dividending them out to shareholders will see that value better realised.

The businesses have two differing risk profiles, and if the wider midstream opportunity develops as it appears as it is, there could be a perceived conflict of interest with the client base of the midstream business. We believe that the midstream business can leverage its leadership position in Cameroon to tap in to the new gas finds offshore, especially as the Ferrostaal fertiliser plant FID is still in the offing; it could be the midstream development partner to the whole area.

Against this backdrop we believe that there is much to aim for and provided that the focus remains, we see no reason why the Company's leadership position will be challenged, in the near term at least.

This experience should also provide a measure of track record to tackle an even bigger prize, which is participation the rollout of Nigeria's gas master plan, which has been on the drawing board for at least 15 years and a central pillar to the country's much vaunted PIB. Compiling a bid document and pitching to NNPC will give the Company a leadership role, and one which could catapult it in to the big leagues.

With the experience that they have gained in Cameroon, there is no need to limit the Company's ambitions, as it can be rolled out anywhere where there is stranded gas and a fledgling industrial base, outside of Nigeria, East Africa springs to mind.

These are the next stages for the Company, but they don't sit well with the upstream. While the midstream business is moving forwards at a pace, in the upstream, however, the issue of well life in Logbaba is now the next concern to focus on, and in the wider context of the upstream business, what will be happening with the Russian and Kazakh offices. More reason to spin out the businesses.

Today's news is a solid step forwards, and one that provides an increasingly stable and solid platform from which to continue to build its business. Given the success, Nigeria beckons, and with a swathe of industrial buyers and a ready supply of "stranded" gas assets, the opportunity is an order of magnitude greater than it has experienced to date. Time to get start looking forward to where the opportunities are. 

Providence Resources (LON:PVR) – Goal Still Visible, Just Smaller and Further Away

Today's results are not about the income statement, but about the future steps and the net cash balance items, which are at a net deficit of ~$25mm (€22mm). On the one hand there are the assets awaiting sanction and development, securing the medium to longer term future. In this respect we have no concerns. However, we continue to have concerns that the balance sheet risk profile is out of keeping with the fact that it doesn't generate revenues.

In this respect providence is vulnerable, and like a number of other companies in the sector, operating to some extent at the largess of its creditors. A hawkish creditor seeking to assert control over the Company, or take a sizeable stake without the attendant investment, could feasibly use the threat of perfecting security to gain such an advantage.

There would undoubtedly be a refinance or a down round before it got that far, but this is the hidden leveraged power of debt for companies without the funds to meet their obligations. We have no doubt that the there is plenty of room for the Company to manoeuvre, but this isn't the point to some extent.

Either way it's the Company's owners that will see a dilution in some of their net interest in the economic benefits of the risk capital they invested. We see a fundraising within the next 12 months to pay for the debt or development, or both.

The Company's progress has been halted, but that doesn't mean that the value doesn't remain within its asset base. There continues to be concerns over the future funding plans, and to what extent the shareholders will see longer term access to their economic benefits. It is time the company started to move towards generating cash, rather than securing the best deal possible, before the unpalatable becomes the best deal possible

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Wed, 27 May 2015 09:18:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22282/sp-angel-morning-oil-gas-victoria-oil-gas-and-providence-resources-22282.html
SP Angel Morning Oil & Gas Victoria Oil & Gas and Providence Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/22283/sp-angel-morning-oil-gas-victoria-oil-gas-and-providence-resources-22283.html Headlines

Victoria Oil and Gas (LOON:VOG) – Time to Look Forward. A Long Way Forward: Today's news is a solid step forwards, and one that provides an increasingly stable and solid platform from which to continue to build its business. Given the success, Nigeria beckons, and with a swathe of industrial buyers and a ready supply of "stranded" gas assets, the opportunity is an order of magnitude greater than it has experienced to date. Time to get start looking forward to where the opportunities are.

Providence Resources (LON:PVR) – Goal Still Visible, Just Smaller and Further Away: The Company's progress has been halted, but that doesn't mean that the value doesn't remain within its asset base. There continues to be concerns over the future funding plans, and to what extent the shareholders will see longer term access to their economic benefits. It is time the company started to move towards generating cash, rather than securing the best deal possible, before the unpalatable becomes the best deal possible.

 

News Items 

Victoria Oil and Gas (LON:VOG) – Time to Look Forward. A Long Way Forward

Today's news disclosing the acquisition of the Logbaba gas processing plant is a good move, and one which we believe is a solid step forwards for the Company. Not only will it be able to reduce costs, but it will also afford it a level of flexibility. The question now becomes one of which entity this will sit in, the upstream entity, or the midstream entity?

This is important as we believe that the Company is not receiving full value for the position that it is now in, and splitting the two businesses and dividending them out to shareholders will see that value better realised.

The businesses have two differing risk profiles, and if the wider midstream opportunity develops as it appears as it is, there could be a perceived conflict of interest with the client base of the midstream business. We believe that the midstream business can leverage its leadership position in Cameroon to tap in to the new gas finds offshore, especially as the Ferrostaal fertiliser plant FID is still in the offing; it could be the midstream development partner to the whole area.

Against this backdrop we believe that there is much to aim for and provided that the focus remains, we see no reason why the Company's leadership position will be challenged, in the near term at least.

This experience should also provide a measure of track record to tackle an even bigger prize, which is participation the rollout of Nigeria's gas master plan, which has been on the drawing board for at least 15 years and a central pillar to the country's much vaunted PIB. Compiling a bid document and pitching to NNPC will give the Company a leadership role, and one which could catapult it in to the big leagues.

With the experience that they have gained in Cameroon, there is no need to limit the Company's ambitions, as it can be rolled out anywhere where there is stranded gas and a fledgling industrial base, outside of Nigeria, East Africa springs to mind.

These are the next stages for the Company, but they don't sit well with the upstream. While the midstream business is moving forwards at a pace, in the upstream, however, the issue of well life in Logbaba is now the next concern to focus on, and in the wider context of the upstream business, what will be happening with the Russian and Kazakh offices. More reason to spin out the businesses.

Today's news is a solid step forwards, and one that provides an increasingly stable and solid platform from which to continue to build its business. Given the success, Nigeria beckons, and with a swathe of industrial buyers and a ready supply of "stranded" gas assets, the opportunity is an order of magnitude greater than it has experienced to date. Time to get start looking forward to where the opportunities are. 

Providence Resources (LON:PVR) – Goal Still Visible, Just Smaller and Further Away

Today's results are not about the income statement, but about the future steps and the net cash balance items, which are at a net deficit of ~$25mm (€22mm). On the one hand there are the assets awaiting sanction and development, securing the medium to longer term future. In this respect we have no concerns. However, we continue to have concerns that the balance sheet risk profile is out of keeping with the fact that it doesn't generate revenues.

In this respect providence is vulnerable, and like a number of other companies in the sector, operating to some extent at the largess of its creditors. A hawkish creditor seeking to assert control over the Company, or take a sizeable stake without the attendant investment, could feasibly use the threat of perfecting security to gain such an advantage.

There would undoubtedly be a refinance or a down round before it got that far, but this is the hidden leveraged power of debt for companies without the funds to meet their obligations. We have no doubt that the there is plenty of room for the Company to manoeuvre, but this isn't the point to some extent.

Either way it's the Company's owners that will see a dilution in some of their net interest in the economic benefits of the risk capital they invested. We see a fundraising within the next 12 months to pay for the debt or development, or both.

The Company's progress has been halted, but that doesn't mean that the value doesn't remain within its asset base. There continues to be concerns over the future funding plans, and to what extent the shareholders will see longer term access to their economic benefits. It is time the company started to move towards generating cash, rather than securing the best deal possible, before the unpalatable becomes the best deal possible

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Wed, 27 May 2015 09:18:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22283/sp-angel-morning-oil-gas-victoria-oil-gas-and-providence-resources-22283.html
Broker spotlight - Tesco, Sainsbury, Morrison, Weir, Beazley, Hiscox, Homeserve http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22278/broker-spotlight-tesco-sainsbury-morrison-weir-beazley-hiscox-homeserve-22278.html JP Morgan Cazenove upgraded niche insurers Beazley (LON:BEZ) and Hiscox (LON:HSX); both are now rated as ‘overweight’.

Beazley’s target price increases to 308p from 255p, and for Hiscox it is lifted to 950p from 801p.

Amlin’s (LON:AML) rating is left unchanged at neutral by the broker, though the price target is nudged slightly higher to 475p from 470p.

Homeserve (LON:HSV), the emergency repair firm, meanwhile, had its price target increased to 490p from 440p by Citigroup. A ‘buy’ rating was repeated.

Energy sector engineer Weir (LON:WEIR) was downgraded to ‘hold’ from ‘buy’, by Deutsche Bank.

Nomura’s shopping list remained unchanged as it assessed the supermarkets, though there were some minor adjustments.

Tesco (LON:TSCO) and Sainsbury (LON:SBRY) remain as ‘neutral’ picks though the targets mover up slightly to 195p and 220p respectively, while Morrison (LON:MRW) remains a ‘buy’ and its target increases to 280p from 260p.

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Wed, 27 May 2015 08:50:00 +0100 http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22278/broker-spotlight-tesco-sainsbury-morrison-weir-beazley-hiscox-homeserve-22278.html
The Pay Zone: Oil Price Rose Petroleum, Victoria Oil & Gas and Fianally..... http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22277/the-pay-zone-oil-price-rose-petroleum-victoria-oil-gas-and-fianally-22277.html WTI $58.03 -$1.69, Brent $63.72 -$1.65, Diff $5.69 +4c, NG $2.82 -7c

Oil price

The oil price reacted downwards yesterday again primarily on technicals, the better economic stats from the US causing further dollar strength which seeped into the oil price. On the upside it is only three days until the deadline for an Iranian nuclear deal is meant to be signed and at the moment there are few white puffs of smoke appearing from Geneva. Also gasoline demand in the states and elsewhere is still robust, retail prices in the US rose again in the run up to Memorial weekend and are now $2.77 a gallon. Finally the API stats tonight are expected to show another draw, this time of around 2m barrels.

Victoria Oil & Gas (LON:VOG)

Another piece of good news from VOG as they buy the Logbaba gas processing plant from Expro for $2.578m. The money will come from cash generated from GDC operations and they will now operate the plant with significant cost savings and on long term contracts with Expro and other potential customers. Good news because this will enable VOG to grow the business, expand the plant and increase profitability and if it meant more demand for their gas then all the better. Still a big fan.

And finally…

A short blog today as I am in town doing TipTV, IGTV and have two other company meetings including a first with Rose Petroleum (LON:ROSE) for those with an interest. However even if there had been no other news there would have been a flash blog about FIFA. Those of you who have followed for a long time know my views on the organisation and its ‘leader’ $epp Blatter and if there was any realistic chance of this being the death knell for FIFA, bells would ring out all over the sporting world, go with Dignity I say…

And the Hammers have made it into the Boropa Cup on fair play rules, bet they were wishing they had been a bit more naughty now eh?

And Watford, having achieved promotion appear to have sacked manager no4 and are looking for someone who might be more successful……?

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Wed, 27 May 2015 08:27:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22277/the-pay-zone-oil-price-rose-petroleum-victoria-oil-gas-and-fianally-22277.html
Northland Capital Partners View on the City Hummingbird Resources, Premier African Minerals, MotifBio, Rame Energy and others http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22276/northland-capital-partners-view-on-the-city-hummingbird-resources-premier-african-minerals-motifbio-rame-energy-and-others-22276.html Motif Bio plc (LON:MTFB) – BUY*: Initiation of coverage

Market Cap: £20m; Current Price: 31p; Target Price: 89p

  • We initiate coverage with a BUY rating and 89p price target  
  • Global antibiotic resistance crisis: antibiotic resistance has become a major public health concern, with close to 50,000 deaths annually across Europe and the US attributed to the problem. Despite this looming crisis, the global pipeline of novel antibiotics is insufficient, creating an opportunity for specialist drug developers, such as Motif.
  • Iclaprim addresses desperate need for novel antibiotics: Motif’s flagship late-stage antibiotic, iclaprim, targets an underutilised mechanism of action making it less susceptible to developing antibiotic resistance. The drug has already been tested on over a thousand patients, providing considerable evidence to support its safety and efficacy. Iclaprim is expected to commence phase 3 trials in H2-2015. 
  • Grossly undervalued: we believe that Motif is grossly undervalued. Our risk-adjusted DCF analysis indicates a fair value of 89p/share, indicating 187% upside to the current share price. Moreover, Motif’s closest peer, NASDAQ-listed Paratek, trades at a substantial premium to our target value for Motif.

NORTHLAND CAPITAL PARTNERS VIEW: In the wake of a major global public health crisis driven by rampant antibiotic resistance, Motif’s late clinical-stage antibiotic, iclaprim, is set to fill a major market void. Having already been tested on over a thousand patients, iclaprim’s safety and efficacy is well supported. If approved, the drug could achieve over $1bn/year in sales. We initiate coverage with a BUY rating and 89p price target.  

 

Premier African Minerals (LON:PREM) – SPECULATIVE BUY: Initiation

Market Cap: £13m; Current Price: 2.4p

  • Production expected in June

NORTHLAND CAPITAL PARTNERS VIEW: Premier African Minerals (Prem) is now fully funded to move the RHA Tungsten Project, located in Zimbabwe, into production in June 2015. The open pit will have an estimated life of twenty-two months producing around 120,000mtu of tungsten. The funds generated from the open pit operation will be used to cover corporate overheads, delayed capex and as a contribution towards the cost of developing the larger underground operation at RHA. This underground operation is expected to result in the production of around 100,000mtu per annum for over twelve years. Based on the near term nature of production, the low operational and capital cost of the RHA project we initiate coverage of Premier African Minerals with a SPECULATIVE BUY rating.

 

Rame Energy (LON:RAME) – CORP: Raki/Huajache update

Market Cap: £9.1m; Current Price: 9p

  • Final grid certification pending; positive wind data on next projects
  • Certification for the final grid connection for the 15MW Raki/Huajache wind projects (where Rame has a 20% stake) is pending. The nature of the Raki/Huajache projects (they are electrically separate for qualification under the Chilean renewable energy regulations (PMGD) but share a newly built collector substation onsite) has led to a slight delay – this is the first such situation in Chile and has necessitated more legal definition and technical input. The minor modifications to the substation required are expected to be completed shortly.
  • EKA, the counterparty to the PPA, has agreed to delay the PPA start date to allow for the final completion. The JV partners (Santander Investment Chile Limitada and Rame) have now agreed on completion dates tied to a final commercial account with the EPC contractor Vestas. The agreement is still subject to final approval within Santander, which is imminent, and anticipates commencement of energy sales in the middle of June. 
  • Rame has been gathering further wind data at the next potential project sites in the Santander portfolio (133MW total). Following the installation of taller masts (112m) the actual data gathered over seven months indicates a ≥25% increase in annual energy production against previous assumptions for the next two projects (totalling 54MW). This could correspond to a significant increase in the NPV of the projects. The new data is being analysed to conclude turbine selection and Rame has started the consultation programme with local government and nearby communities.

NORTHLAND CAPITAL PARTNERS VIEW: The Raki/Huajache project is now nearing completion with the close out of the EPC contract and the modifications to the substation required to meet the PMGD regulations to gain certification. The project has been a learning curve for various parties and will mark Rame’s transition from an EPC to a niche Independent Power Producer (IPP) targeting 300MW in three years. The additional wind data on the next 54MW of projects suggests higher levels of energy production and hence a higher NPV on the next two projects. As previously argued, there is considerable funding interest in the Chilean renewables market and Rame has proven experience and expertise and a large portfolio of projects at various stages. This progress and potential is not reflected in the current price.

 

Hummingbird Resources (LON:HUM) – BUY: FY14 Results

Market Cap: £33m; Current Price: 35p; Target Price: 82.4p

  • Change in year end
  • Hummingbird Resources has changed its financial year-end to bring it in line with its subsidiary companies. It will move from the 31st May to the 31st December. As a result, the Company reports in these results as seven months to the 31st of December 2014. 
  • LBT for the seven months to 31st December 2014 was US$3.4m, which appears in line with the results for the twelve months to 31st May 2014. Net debt or the seven months to 31st December 2014 was US$20.6m, which is up from US$10.4m in the results for the twelve months to 31st May 2014.
  • Our forecasts will now be updated to bring them in line with the new year-end. Rating and price target maintained.

NORTHLAND CAPITAL PARTNERS VIEW: It is difficult to give a detailed review of these results compared to our forecasts due to the change in year-end but these results appear broadly in line with our expectations.

 

DiamondCorp (LON:DCP) – BUY: FY14 results

Market Cap: £35m; Current Price: 10.8p

  • From yesterday: FY results reflect development progress at Lace
  • LBT of £3.3m for FY14 was up from £2.6m in FY13 and higher than our forecasts of £2.4m largely due a £1.7m fair value adjustment that outweighed a reduction in corporate expenditure.
  • Net debt increased to £21.9m in FY14 from £11.6m in FY13 noticeably higher than the £14m we had forecasts due to increase in capex associated with a change in the development schedule.
  • Forecasts and price target under review. BUY rating maintained.

NORTHLAND CAPITAL PARTNERS VIEW: While these results reflected the development of Lace during last year, this year will see maiden production from the Upper K4 kimberlite at Lace that is expected to commence in H215. The impressive growth profile for DiamondCorp’s production will see production increase 547% in two years from around 68,000cts in 2015 to 440,000cts in 2017. We continue to believe the Company looks undervalued.

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Wed, 27 May 2015 08:15:00 +0100 http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22276/northland-capital-partners-view-on-the-city-hummingbird-resources-premier-african-minerals-motifbio-rame-energy-and-others-22276.html
Dollar bother, Lacker smacker http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22275/dollar-bother-lacker-smacker-22275.html FTSE100 Index called to open +10pts at 6960 having found support at 6935 100-day MA following sharp sell-off from April falling highs 7050 yesterday. While this puts paid to the trend of rising lows from May 7, the longer term uptrend from mid-December remains alive even if in competition with downtrend from mid-April. New watch levels: Bullish 6990, Bearish 6920.

The positive opening call comes after the FTSE100 pulled back to 3-week lows on Tuesday as mild panic entered the markets with Greece again at the forefront of investor sentiment. As a June deadline approaches for Athens to make its next IMF repayment, both the Greek government and its creditors are scrambling to ease fears of an imminent default and potential exit from the Eurozone.

FM Varoufakis is confident as usual – and maybe rightly so given the implications of a Grexit, ever more probable while remaining the worst possible outcome, for other struggling economies Spain and Portugal. ‘What about us?’

US markets have also taken a break from declines overnight after joining UK stocks in Southerly moves yesterday – Greece weighing there too while a hawkish Lacker of the Fed again put a June interest rate rise back on the table, citing a perceived rebound from a weak Q1 with inflation picking up and oil prices….firming?

Asian equities in the red, following European and US markets lower, perturbed by Greece’s proximity to a June 5 cash crunch and/or default, contagion fears following Spanish regional elections demonstrating austerity rejection and heightened expectations that the US Fed will raise rates this year, derived from better US data and comments from the Fed’s Lacker who said a June hike should be considered.

Japan’s Nikkei just above water, holding a 9-day rise, despite USD strength (driven by US data, US rate rise expectations and EUR weakness) taking JPY weakness close to levels last seen in June 2007 - something which would normally benefit exporters. Good news with Small Business Confidence rising more than expectation although tempered by a calm BoJ despite subdued inflation, and suggestions of no new easing.

Chinese equities taking their winning streak to 6 days after China Industrial Profits rebounded in April and Consumer Sentiment was stable with a drop in business optimism offset by a rise in consumer willingness to spend before the recent rate cut. Supportive stimulus hopes persist as questions remain over the strength of underlying growth in the world’s #2 economy.

Australia’s ASX is the region’s major underperformer, despite an uptick in the economy’s Leading Index turning higher, with energy names held back by a strong USD hindering commodities prices and after construction work data plunged, extending its weak 2014 trend. China stimulus hopes and Industrial Profits rebound offering no assistance despite the two nation’s export links.

In Focus today we have a quiet one with Spanish mortgage lending at 0800 - no specific expectations but surely hopes it will remain in growth mode after the last print’s impressive 30% improvement in house mortgage approvals. US mortgage applications follow at 1200 with the Bank of Canada rate decision at 1500, no change expected at 0.75%.

Gold has bounced at $1185 thanks to rising support dating back to mid-March, and despite continued USD strength which would normally hinder the dollar-denominated safehaven commodity. Having fallen through the major moving averages, watch for these serving as resistance on any run higher. Support $1185, Resistance $1205.

Crude prices still trending down in characteristically volatile style. The prospect of Shell commencing drilling in the Arctic circle will bode well for US energy security while putting pressure on global prices as yet more oil finds its way into the market. Note Saudi Arabia likely to react accordingly to a challenge to its market share. US light ($59) and Brent Crude ($65) trading up a little this morning while remaining well within falling channels since those late April/early May highs.

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Wed, 27 May 2015 08:11:00 +0100 http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22275/dollar-bother-lacker-smacker-22275.html
Bond Traders Uncover Secret to Rates That Fed Just Does Not Get http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22274/bond-traders-uncover-secret-to-rates-that-fed-just-does-not-get-22274.html Bond Traders Uncover Secret to Rates That Fed Just Does Not Get 

This article by Daniel Kruger for Bloomberg may be of interest to subscribers. Here is a section:  That pessimism has been reflected in yields on the 10-year note, which are still well below their most recent peak of 3.05 percent last year. They were at 2.18 percent as of 6:30 a.m. in New York on Tuesday, according to Bloomberg Bond Trader data.

“The Fed has opinions; the market has positions,” said Jack McIntyre, who helps oversee $45 billion at Brandywine Global Investment Management in Philadelphia. “If the data doesn’t show marked improvement soon, they’re going to get pushed back into 2016.”

Fed Chair Janet Yellen said Friday she still expects to raise rates this year if the economy meets her forecasts, with a gradual pace of tightening to follow.

Eoin Treacy's view 

Everyone seems to be talking about when the Fed’s first rate hike will be. However I don’t think this is the most relevant question. The bigger question is when the Fed’s second rate hike will be. The economy is doing a bit better and wages are beginning to rise. One the other hand the disinflationary pressure of lower commodity prices and the stronger Dollar has so far stayed the Fed’s hand. 

The Fed will need to begin to remove monetary accommodation if it wishes to avoid inflating an asset price bubble. This might be the deciding factor in whether they decide to raise rates in September or not. Following the first hike they will then probably wait and see what effect it has on asset prices. It could be a while before they raise rates again and it is reasonable to assume the pace of the advance will be slower than what we saw from 2003 onwards. 

 

IMF Says Yuan No Longer Undervalued Amid Reserve-Status Push 

This article by Fion Li for Bloomberg may be of interest to subscribers. Here is a section:

The yuan still has some way to go before it can become a major reserve currency, former Federal Reserve Chairman Ben S. Bernanke said Tuesday in Taipei. The IMF requires that a currency is “freely usable” to be included in its SDR basket.

Endorsement by the Washington-based lender would lead to about $1 trillion being switched into Chinese assets over the next five years, according to an estimate this month from Standard Chartered Plc. AXA Investment Managers estimated some 10 percent of the $11.6 trillion of global reserves would flow into yuan assets, though it didn’t give a timeframe.

China should allow greater flexibility in its exchange rate, with intervention limited to avoiding disorderly market conditions or excessive volatility, said the IMF’s China mission, which is led by the lender’s deputy director of Asia and Pacific Markus Rodlauer. The statement said it contains the views of the IMF staff involved and has not yet been endorsed by the institution’s board.

The yuan rose 0.6 percent versus the dollar in the past 12 months, while Brazil’s currency dropped 28 percent and Russia’s slid 32 percent. China’s productivity will probably rise more rapidly than the rest of world so its exchange rate will need to appreciate to take account of that, David Lipton, the IMF’s No.2 official, said at a briefing Tuesday in Beijing.

Eoin Treacy's view 

By remaining relatively steady against the Dollar over the last year, the Renminbi has appreciated against a wide basket of other currencies not least the Euro, Yen and Korean Won which account for more of its trade than the US Dollar. The currency has unwound almost the entire 1993 devaluation suggesting that the CNY6 level relative to the US Dollar is probably about as strong as the Chinese want to see the currency. 

 

Email of the day on London housing prices 

Dear David, As you are based in London and well placed to view the situation do you agree with Jim Mellon's opinion that the London real estate sector is both overheating and over leveraged? He is also positive on Some areas of European property which is probably fairly consensus due to the current global QE game of pass the parcel from USA/UK to the EU. I can personally report from Spain a notable pick up in real estate activity from foreign buyers and the re emergence of many high street estate agents (closed since 2008/9) which is almost always a leading indicator on property activity (in both directions as I saw in Dublin 2008). I am currently happily invested in Foxtons which is still benefiting from the election feel good factor but watching it like a hawk (AKA Estate agent). best regards

Eoin Treacy's view 

David is on holiday at present in the beautiful Welsh countryside but I’ll bring your email to his attention when he returns. Here are my thoughts:

As a truly global capital London property has benefited from its attraction to foreign investors, the proximity of the City with its outsized pay structure, low interest rates on a global basis, an expanding population and the absence of a building boom have all contributed to London’s high price environment.

This chart of London property prices highlights the fact they have risen by 140% in 13 years from 2002. They have paused over the last year in what is so far a reasonably gradual process of mean reversion. 

This chart of UK Nationwide Average House Price Index has been largely rangebound since 2007 and will need to hold the £180,000 level if the breakout to new highs is to be given the benefit of the doubt.

 

Email of the day on robotics and the Eoins Favourites section of the Chart Library: 

Regarding your optimism of the robotics and tech story and the prospects of the likes of FANUC in Japan, could you recommend a UK based investment vehicle to access FANUC and its peers? Also could you explain the criteria on the "Eoin’s favourites" section of the chart library?, I am assuming that they are favourites as in best of class as opposed to just favourites/watchlists from a both long and short perspective? Best regards

Eoin Treacy's view 

Thank you for these questions which I’m sure will be of interest to subscribers. Let me take them in reverse order. 

Over the years every time I have posted a review of a stock market sector I created a section in my Favourites so that I could easily return to the list in future. At The Chart Seminar I use my Favourites to go through examples of Commonality and to review sectors of interest to delegates. One of the most common requests in the feedback we get is that subscribers would like to have access to my Favourites list rather than recreating their own. With that in mind I started recreating the various sections from my Favourites in the main Chart Library about six months ago.

All of my lists of Dividend Aristocrats, Dividend Champions and Dividend Contenders can be found here.  

The Eoin’s Favourites section contains the lists I have so far entered. It’s not complete yet but it is meant to function as a resource rather than a recommendations list. 

 

Audi claims first synthetic gasoline made from plants 

This article by Eric Mack for GizMag may be of interest to subscribers. Here is a section: In late 2014, Global Bioenergies started up the fermentation unit for a pilot program to produce gaseous isobutane from renewable biomass sugars such as corn-derived glucose. Gaseous isobutane is a sort of raw material for the petrochemical industry that can then be refined into a variety of plastics, fuels and other applications.

The next step in the process was to run the material through a conditioning and purification process, allowing it to be collected and stored in liquid form under pressure. Some of it was then sent to Germany to be converted into isooctane fuel, creating a pure, 100 octane gasoline.

"To me this is a historic moment," says Global Bioenergies CEO Marc Delcourt. "It is the first time that we have produced real gasoline from plants."

Isooctane is currently used as an additive to improve fuel quality, but could also be used a stand-alone fuel. Audi calls the final, refined form of the fuel "e-benzin" and claims that it burns clean due to its lack of sulfur and benzene. Also, its high grade enables it to power engines using high compression ratios for more efficiency.

Audi will test the fuel composition and conduct engine tests to see how it performs before eventually trying it out in vehicle fleets. Delcourt says he could see it being used in consumer cars on a large scale "very soon."

"We thinking we're bringing green-ness to a field that desperately needs green-ness," says Rick Bockrath, vice president for chemical engineering at Global Bioenergies. "It's basically how we're moving away from an oil-based economy towards something that has a renewable, sustainable future to it."

Eoin Treacy's view 

This follows a story from a month ago talking about how Audi produced a diesel fuel from air and water through a chemical process. Today’s story is a further iteration of this concept.

In the last month we have also learned that artificial photosynthesis has been achieved. Here is a section from an article by Lynn Yarris for Lawrence Berkeley National Lab: 

Scientists with the U.S. Department of Energy (DOE)’s Lawrence Berkeley National Laboratory (Berkeley Lab) and the University of California (UC) Berkeley have created a hybrid system of semiconducting nanowires and bacteria that mimics the natural photosynthetic process by which plants use the energy in sunlight to synthesize carbohydrates from carbon dioxide and water. However, this new artificial photosynthetic system synthesizes the combination of carbon dioxide and water into acetate, the most common building block today for biosynthesis.

“We believe our system is a revolutionary leap forward in the field of artificial photosynthesis,” says Peidong Yang, a chemist with Berkeley Lab’s Materials Sciences Division and one of the leaders of this study. “Our system has the potential to fundamentally change the chemical and oil industry in that we can produce chemicals and fuels in a totally renewable way, rather than extracting them from deep below the ground.”

 

Email of the day on posting webinars 

I enjoyed your presentation on Webinar very much, very interesting and relatively easy for me to follow. Is it possible you and David can post this type of visual and audio presentation daily, or at least on Friday's for the big picture long term outlook, instead of audio only presentations you do at the moment. Thanks for a great service, from a veteran subscribe.

Eoin Treacy's view 

Thank you for your kind words. I agree that creating a chart illustrated talk would be helpful and we just need to work out the mechanics. One of the greatest impediments would be making sure the audio is captured as a separate file so that it can be uploaded for subscribers who only wish to listen to the mp3 while on the go. I’ll look into how to generate a screencast and save it as a link we can make available to subscribers. If anyone has suggestions on how this might be achieved I be happy to hear them.

 

The Markets Now 

Monday 15th June, at the East India Club, 16 St. James’s Square, London SW1Y 4LH

David Fuller's view 

Here is the new brochure listing some of our topics and the important questions most investors face.  I think all investors will benefit from guest speaker David Brown’s new presentation. I learned from it, not least how to assess some familiar data more clinically.  In other words, he shows us how to think a little more clearly, particularly in terms of identifying bear markets near their tops.  This is never easy given all the emotions involved.  Many people jump the gun, as you will have seen over the last few years, which can leave them susceptible to overstaying when the important and often overlooked warning signs are flashing.  Note also Iain Little’s challenging topic summarised in the penultimate question.  I look forward to their presentations and also to hearing the views of friends and subscribers.  

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Wed, 27 May 2015 08:06:00 +0100 http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22274/bond-traders-uncover-secret-to-rates-that-fed-just-does-not-get-22274.html
In the papers: British Airways owner closes on Aer Lingus after Irish government agrees to sell http://www.proactiveinvestors.co.uk/columns/guardian-cfds-newspaper-briefing/22273/in-the-papers-british-airways-owner-closes-on-aer-lingus-after-irish-government-agrees-to-sell-22273.html Daily Mail

British Airways Owner IAG moves closer to completing purchase of Aer Lingus after Irish Government agreed to sell 25% stake: British Airways Owner IAG moved closer to completing its purchase of Aer Lingus after the Irish Government agreed to sell its 25% stake in the airline.

Billionaire hedge fund backer of Plus500 hikes stake in embattled Israeli spread better: The billionaire hedge fund backer of Plus500 has hiked his stake in the embattled Israeli spread better.

The Times                      

Keydata chief is fined £75mln over death bond scandal: The City regulator has handed down its largest fine on an individual after one of the country’s biggest investment scandals in which people were mis-sold £475mln-worth of “death bonds”.

Flipboard ‘is Twitter’s US$1bn mystery takeover target’: The mystery that has surrounded Twitter’s acquisition plans cleared a little after reports emerged that it had been in talks over a billion-dollar takeover of Flipboard.

Deutsche Bank pays US$55mln to settle trade allegations: Deutsche Bank will pay US$55mln to settle a long-running investigation into whether the bank mis-stated the size of losses on a large derivatives portfolio during the 2008 financial crisis.

The Independent

Cineworld enjoys boost in revenues after blockbuster year: Blockbusters such as Avengers: Age of Ultron have helped Cineworld to record an impressive boost in revenues.

Greene King closer to £770mln takeover of rival Spirit Pub Company: Greene King’s planned £774mln purchase of rival Spirit Pub Company is poised to be approved after it offered options to dampen competition concerns.

O2 will not offer instant compensation to customers hit by signal problems: O2 will not be offering customers compensation for the signal failure on Monday that left people in Manchester, London, Glasgow and parts of Northern Ireland unable to call or text anyone.

The Daily Telegraph

Eurozone leaders attempt to quell fears of Grexit panic: The French Open found itself under attack from two Swiss stars on Sunday after a shambolic day that did nothing for the reputation of this historic tournament. 

George Osborne will struggle to balance to books by 2019, says Moody’s: The Government will struggle to balance the books by the end of the decade because of the scale of cuts required and the likelihood that the easiest reductions have now been made, a rating agency has warned.

John Malone’s Charter agrees US$80 billion takeover of Time Warner Cable: Charter Communications, John Malone’s US cable company, has agreed to buy Time Warner Cable in a deal worth nearly US$80bn.

China’s yuan is no longer undervalued, IMF says: The International Monetary Fund has declared China’s yuan currency to be fairly valued for the first time in more than 10 years.

AstraZeneca’s revenue ambitions hit by psoriasis drug setback: AstraZeneca’s hopes of doubling its revenues by 2023 have been dealt a blow after its partner on a drug to treat psoriasis pulled out after patients were found to have suicidal thoughts.

The Guardian 

EU referendum uncertainty could hit UK investment, consultants warn: The government’s plan to hold an EU referendum will dent foreign investment in the UK and threatens its position as Europe’s top destination for overseas investors, according to a new report.

UK consumer confidence hits pre-crisis levels of 2006: UK consumers are at their most upbeat for nine years on the back of improving job prospects and low inflation, according to the latest report to suggest spending power is recovering.

Libor trial: trader was ‘ringmaster’ in rate-rigging conspiracy, court hears: A City trader was the “ringmaster” at the centre of a conspiracy to fix lending rates between banks, a jury has heard during the first criminal trial in the Libor-rigging scandal.

Grexit: bookmakers put smart money on an unwise move: Paddy Power is quoting 11/10 on Greece leaving the euro – and after recent events it’s hardly a surprise that the bookmaker is offering the shortest odds ever on a Grexit.

Energy industry calls for new emissions targets to aid low-carbon growth: World governments must sign a clear new agreement on greenhouse gas emissions at a crunch conference in Paris this December, leaders of the world’s energy industry have urged.

Daily Express

Ryanair profits soar 66% as revamp reaps earning rewards: Profits growth at budget airline Ryanair took off last year as a revamp designed to improve its image and attract business customers sent earnings soaring by 66%

Amazon faces tax rise after UK sales switch: Internet shopping giant Amazon said it has begun booking U.K. sales in this country, which may mean paying more taxes.

 

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Wed, 27 May 2015 06:57:00 +0100 http://www.proactiveinvestors.co.uk/columns/guardian-cfds-newspaper-briefing/22273/in-the-papers-british-airways-owner-closes-on-aer-lingus-after-irish-government-agrees-to-sell-22273.html
The Pay Zone: Oil Price Range Resources, San Leon Energy and Tower Resources http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22272/the-pay-zone-oil-price-range-resources-san-leon-energy-and-tower-resources-22272.html WTI $59.72 -$1.00, Brent $65.37 -$1.17, Diff $5.65 -17c, NG $2.89 -6c

Oil price

There is nothing much that I can see in the oil market at the moment that would give the price much of an upward movement except perhaps further activity in the Middle East. With the greenback strong after the US inflation figures, the rig count easing and the speculators cutting long positions technically the market looks sated. Overall rigs were down 3 last week with a net fall of only 1 in oil with new rigs actually  appearing in one or two places, I get the firm impression that 6o bucks for WTI is reasonably comfortable for a lot of domestic producers. As to those speculative positions the last two weeks have seen a retreat from the highs with last week showing a fall of 7.6% in WTI length and 13.4% in Brent.

Added to that were the comments made at the weekend by the Iranian Oil Minister Bijan Zangareh who stated that at the upcoming Opec meeting the cartel would ‘maintain production’. Whilst it is likely to maintain the status quo, there are still some stories doing the rounds that an across the board deal between Opec and non-Opec producers is being put together but dont hold your breath.

The only other possible reason for getting really optimistic at the moment are the reasonably positive signs of a global pick-up in the demand for products which has fed through to demand for crude thus offsetting any possible weakness in the market.

San Leon (LON:SLE)

All the good news and a tick up in the San Leon share price recently has been offset today by the company announcing that it has lost its case in the Court of Arbitration and has to pay £13m on behalf of its subsidiary Aurelian Oil & Gas. The company say in the statement that the decision is without merit and it has appealed the decision. Just when I was getting a bit upbeat about SL……

Range Resources (LON:RRL)

I havent written much about Range lately partly as it has been suspended since 11/12/14 which in my book means that if nothing is done by the 11th of June its future is pretty bleak. With the Chinese in control and the Core Capital funding falling through it looked like the company would be subsumed by the major shareholders who have the power to do what they like with the company. Todays news that they have signed an MOU with Beijing Sibo may be the last chance saloon and if they can get something over the line before 11th June then maybe all is not lost.

Sibo is providing between $20-35m and if I read it correctly, the statement says that the management, in a personal capacity, will invest the same amount themselves. Up to $70m would indeed refinance Range and cover the costs of the Trinidad programme especially as LandOcean seem to have that covered, I half expected them to be involved in the refinancing, indeed not knowing much about Sibo, they still might be…..I remain unconvinced that shareholders, other than those Chinese ones in control, will ever see any decent return on their money, another example of how it can be dangerous not to be careful about what you wish for.

Sundry

I notice that Tower Resources (LON:TRP) has issued 10.2m shares at 0.381p per share to pay a few bills. Of that, 6.6m were issued to the outsourced exploration department owned by MD Dr Mark Enfield and the rest in fees in lieu of pay and rations for assorted directors. It is not unusual for this to happen i’m told and the company routinely pays its bills in such a fashion, if I was Dr Enfield I would probably rather take the folding stuff…

And finally…

With the blog not going out completely on Friday some people received it yesterday, for which, apologies again.

The weekend sports fixtures backed up something rotten and only the most expert of channel flickers were able to keep up with all the events.

At Monaco the Mercedes back room boys proved that they were total wallys as they brought Lewis in and lost him the race, if I didnt know any better I would say it was fixed like last year…

The French Open tennis started yesterday and with a record number of Brits in the draw this time. I think that there may be only three left as I write but even that is unusual. Muzza is as confident as he has ever been on the surface although Rafa, despite injuries may have held everything back for this tournament where he is -almost- unbeaten.

In the Prem the final relegation spot was filled by Hull who couldn’t beat Man Who while the Magpies beat the happy Hammers for whom Big Sam left after the match. The Potters put 6 on the HubCap Stealers, it might have been worse and so Spurs pipped them for 5th spot, both though will be in the Boropa Cup next year.

Having almost forgotten Norwich twice, they easily saw off the challenge of the Boro and will rejoin the Premiership next season, good news for brother Max (do visit Satchells of Burnham Market for all your wine needs!) and also for James Pinner supporting the Canaries from New Zealand. In the other play-offs Preston easily beat Swindon and Southend performed a miracle by equalising in the 122nd minute and then going on to win on pens…

And of course no surprise to see the Wally with the brolly being sacked again as Derby managed to grab defeat from the jaws of victory and miss a play-off place. Knowing football he will get another highly paid job just like all the other losers tend to…

On the subject of New Zealand, wasnt that one of the best test matches you ever saw? From start to finish it was exciting, absorbing cricket and even though England took wickets off no-balls, Bell was butter-fingered and conceded well over 500 runs in the first innings they managed to win. For the loser of this series it means a visit to 7th position in the world rankings and nobody wants to see that…

England have, into the bargain, hired a new coach in Trevor Bayliss, deciding that Jason Gillespie isnt good enough, thank goodness for that Yorkshire fans are saying but TB come with a good pedigree and should liven up the process somewhat.

And James DeGale actually went to America and won on points, that takes a bit of doing although he tried to give it away late on…

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Tue, 26 May 2015 12:59:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-pay-zone/22272/the-pay-zone-oil-price-range-resources-san-leon-energy-and-tower-resources-22272.html
Euronext offers a strong exchange http://www.proactiveinvestors.co.uk/columns/fat-prophets/22271/euronext-offers-a-strong-exchange-22271.html Euronext is a pan-European exchange that includes Paris, Brussels, Amsterdam and Lisbon.  The group was listed in June 2014 at €20 and recently reached around €40.  Improving Eurozone equity markets have generated brisk trading and the ongoing economic recovery suggests that this is likely to continue.

 

Euronext is the result of European integration with the ambition being to create a single continental bourse for stocks and derivatives.  The group was formed in 2000 through the merger of the Paris, Brussels and Amsterdam exchanges.

 

Euronext was subsequently listed in 2001 and merged with the Lisbon stock exchange in 2002.  The New York Stock Exchange bought the company in 2007 and Intercontinental Exchange acquired the combined group in 2013.

 

The merry go round resulted in Euronext being spun off in June 2014 just as European markets were improving. The introduction of Eurozone QE in 2015 has further bolstered European markets in part due to the resultant euro weakness.   

 

Euronext’s market backdrop in June 2014  

 

 

Source: Euronext investor presentation

 

Euronext is currently the second largest European exchange group by cash trading volume after the London Stock Exchange.  The group is the third largest in European derivatives after Deutsche Boerse and ICE Europe.

 

Listed market exchanges have outperformed the general equity market if they are strong enough to attract growing volumes.  However, exchanges have also tended to be highly cyclical as trade volumes slump in equity bear markets.

 

Euronext’s modest listing valuation and positive trading conditions have seen the shares double in less than a year.  The group offer exposure to recovering European equity markets and improving investor sentiment.

 

 

Euronext’s drivers

 

In 2014 cash trading made up 36% of Euronext’s revenue with the group enjoying a 65% market share in continental Europe.  Over 90% of cash trading is equity driven with the rest coming from ETF’s, structured products and bonds.

 

Listing revenue made up 14% of Euronext’s revenue in 2014 and is also driven by market activity. IPO and follow-on listing fees are over a third of listing revenue and have increased as stronger markets support new capital raising activity.

 

Euronext’s €458m third party revenue in 2014

 

Source: Euronext investor presentation

 

Euronext saw total third party revenue rise 9% in 2014 to €458m as momentum picked up in the second half.  In the first quarter of 2015 the pace continued with a 9.6% increase on a year ago to €130m.  

 

In 2014 cash trading revenue rose by 19.7%, listing revenue rose by 15.8% and Market data and Indices revenue was up 11%.  Post trade revenue was up 6.5% but derivatives revenue fell 4.5% and Market Solutions revenue fell 18.3%.

 

The decline in Market solutions revenue reflects a period of transition due to the separation from NYSE Technologies.  However, Q1 2015 revenue from Market solutions was up by 4.3% which suggests that it will now make a positive impact.         

 

Against this backdrop the departure of the CEO, Dominique Cerutti, was a surprise but Euronext has put in place an interim replacement.  Mr Cerutti is moving on to a new challenge to lead the consulting firm Altran   

 

Euronext’s financials: Q1 2015 EPS up 500%

 

Euronext’s EPS rose by 35% in 2014 to €1.69 and the group paid out half of profits as a €0.84 dividend.  At the end of 2014 Euronext had a marginal net debt position and a debt to equity ratio of 32%, which was in line with peers.

 

Q1 2015 EPS rose to €0.68 from €0.11 the year before as cost cutting helped boost margins.  At the end of March the group also moved into a net cash position of €54.5m which follows a €140m debt repayment.

 

Euronext’s EBITDA margin came in at 45.8% in 2014 and in Q1 2015 improved to 52.2%.  A target of €80m of annualised cost savings by the end of 2016 should enable the group to meet its target of an EBITDA margin “close to 53%”.

 

Summary and valuation

 

Euronext listed at an attractive valuation and has seen the introduction of QE this year produce strong trading momentum.  Investor confidence remains fragile, though, with the threat of Greece leaving the Eurozone in June.

 

As such the recent momentum could stall but, in our view, the overall direction of travel should remain in tact as markets recover.  In April the average daily transactions on Euronext’s cash order book were up by an impressive 38%.

 

Euronext’s volume momentum

 

Source: Euronext investor presentation

 

Turning to the valuation and listed exchanges are difficult to compare due to their varying product exposures. Euronext is mainly driven by equities while other exchanges may have more derivative or market indices exposure.  

 

Nevertheless, Euronext doesn’t appear to be expensive given the current stage of the economic and equity market cycle.  The forecast P/E is 17.8X for 2015, with a yield of 2.7%, which falls to only 14.2X by 2017 with a yield of 4.1%.

 

By contrast the LSE is on a forecast P/E of 19.6X for 2015 and then 15.1X in 2017.  The Spanish exchange, Bolsas Y Mercados Espaneoles (BME), is on a forecast P/E of 18X for 2015 which falls to 17X by 2017. 

 

Euronext has a diversified position in Europe and is well placed to consolidate the remaining independent exchanges.  An improving balance sheet position may also allow scope for special dividend payments in the medium-term.

 

This report was produced by Fat Prophets Senior Research Analyst, Andrew Latto

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Tue, 26 May 2015 11:50:00 +0100 http://www.proactiveinvestors.co.uk/columns/fat-prophets/22271/euronext-offers-a-strong-exchange-22271.html
Today's Market View Including Mariana Resources, Noricum Gold, Stratmin Global Resources, Ironridge Resources and others http://www.proactiveinvestors.co.uk/columns/sp-angel/22269/today-s-market-view-including-mariana-resources-noricum-gold-stratmin-global-resources-ironridge-resources-and-others-22269.html Economic News

US – Economic news due this week:

Tuesday: Apr durable goods orders (-0.5% v +4.7% in Mar), Apr capital goods orders (ex air) (+0.3% v +0.6% in Mar), Mar S&PCS house prices (+0.9%mom/+4.6%yoy v +0.9%mom/+5.0%yoy forecast), May consumer confidence (95 v 95.2 in Apr), Apr new home sales (5.0%mom v -11.4%mom forecast).

Thursday: Weekly jobless claims (270k v 274k in the previous week), Apr pending home sales (+0.8%mom/+10.2%yoy v +1.1%mom/+13.4%yoy in Mar).

Friday: Q1/15 GDP preliminary (2nd reading) (-0.9%qoq v +0.2%qoq estimated in the Advance release (1st reading)), Q1 PCE (+0.9%qoq unchanged from the previous reading), May Chicago PMI (53.0 v 52.3 in Apr).

 

China – The government announced new regulatory changes to cross-border investments.

New rules allow funds domiciled in Hong Kong and China to be sold in each other’s’ market effective Jul 1.

Hang Seng posted gains today on expectations of increased flow of funds from mainland China.

 

Japan – Weaker yen lifts exports (+8.0%yoy v +8.5%yoy in Mar and +6.0% forecast) and keeps trade deficit in check.

Trade deficit came in at ¥53.4bn in Apr compared with a ¥227.4bn surplus in Mar and a ¥351bn deficit forecast.

Weaker yen weighed on imports which recorded a 4.2%yoy decline versus a much smaller fall foreast of 1.1%yoy.

 

Spain – Indignados, strong supporters of anti-austerity measures, perform well in two largest cities as the ruling party loses c.2.5m votes compared with the previous regional elections in 2011.

Ada Colau, a leader of anti-corruption and anti-poverty En Comu, was elected mayor of Barcelona.

In Madrid, the more than two decades long leadership by the People’s Party is being challenged by growing support for a candidate representing Ahora Madrid, a coalition of leftist groups that includes anti-austerity party Podemos.

Regional and municipal elections showed a fall in the share of two major parties (the People’s Party and the Socialists) in the total vote to 52% from 65% four years ago.

General elections are due 20 Dec/15.

 

Greece – Government officials are hopeful the deal wold be finalised by the end of this week.

In Athens, Alexis Tsiparis is reported to have secured the backing among fellow Syriza party members to complete the bailout deal.

The urgency to secure the deal has been confirmed by the Interior Ministry last weekend that said the government may not be able to make the €1.6bn payment to the IMF due in Jun.

“The money won’t be given…It isn’t there to be given,” Nikos Voutis, the interior minister, said.

“It’s clear the June payments to the fund can’t be covered without external financing,” the other official said.

 

US$1.0898/eur vs 1.1153eur yesterday. Yen 122.77/$ vs 120.83/$. SAr 11.987/$ vs 11.818/$. $1.541/gbp vs 1.565/gbp

0.778/aud vs 0.790/aud

 

Commodity News

Precious metals:

Gold US$1,196/oz vs US$1,212/oz last week

Platinum US$1,136/oz vs US$1,157/oz last week

Palladium US$783/oz vs US$782/oz last week 

Silver US$16.82/oz vs US$17.28/oz last week

 

Base metals:

Copper US$ 6,158/t vs US$6,250/t last week

Aluminium US$ 1,766/t vs US$1,774/t last week

Nickel US$ 12,760/t vs  US$12,830/t last week

Zinc US$ 2,187/t vs US$2,190/t last week

Lead US$ 1,944/t vs US$1,977/t last week

Tin US$ 15,800/t vs US$15,855/t last week

 

Energy:

Oil US$65.1/bbl vs US$66.3/bbl last week

Natural Gas US$2.851/mmbtu vs US$2.996/mmbtu last week - US gas prices jump as consumers start to switch on air conditioning systems. 

The move to switch on air conditioning in the states is governed more by humidity than temperature and as with heating in the UK consumers in key regions tend to act en mass

Uranium US$35.25/lb sharply unch vs US$35.25/lb last week

 

Bulk commodities:

Iron ore 62% Fe spot (cfr Tianjin) US$59.6/t vs US$59.6/t – last week

Thermal coal (1st year forward cif ARA) US$56.9/t unch vs US$56.9/t last week

Seaborne hard coking coal index (quarterly) US$109.5/t unch vs US$109.5/t

 

Other:

Tungsten APT European US$257.5/mtu unch vs US$257.5/mtu

FeCr lumpy Charge 52% Cr US$1.08/lb vs US$1.08/lb last week

Lithium - Lux Research reckons Lithium-ion battery costs will fall to US$172/kWh by 2025

Others reckon lithium-ion battery costs will be around US$229kWh

Nissan see battery costs at US$261/kWh

BYD China expect US$211/kWh

 

Company News

IronRidge Resources* (LON:IRR) 5.25p, Mkt Cap £12.4m – Sumitomo nominates director to IronRidge board

IronRidge, which is to drill for iron ore in Gabon, has announced the appointment of Mr Tsuyoshi ‘Thomas’ Ueda Thomas Ueda to the IronRidge board.

Thomas Ueda joins the Board as part of the Company's strategic alliance with Sumitomo Corporation.

Mr Ueda is currently the Deputy General Manager of Sumitomo's Iron & Steel Making Raw Materials Department and was formerly General Manager for Sumitomo's Africa Division for Mineral Resources and Steel Products.

He brings expertise in the strategic development, marketing, operational and corporate development of the Company's Gabonese iron ore assets.

SRK Exploration are currently working on the exploration plan for the two key Gabonese licences at Tchibanga and Belinga Sud.

Conclusion:  Mr Ueda’s appointment is a positive move in preparation for drilling and metallurgical results from the Gabon exploration program.  We look forward to news on the start of drilling at Tchibanga which is located relatively close to the coast and to new port infrastructure.

*SP Angel act as Nomad and Broker to IronRidge Resources and a SP Angel Analyst has visited Tchibanga.

 

Noricum Gold* (LON:NMG) 0.2p, Mkt Cap £2.8m – Start of exploration and drill target identification at Walchen

Noricum Gold has announced the start of a geological mapping and sampling programme at its recently acquired Walchen VMS deposit in Austria. The programme is expected to take 2-4 weeks and will focus on existing known outcrops and sites exposed by recent forestry road construction.

Noricum acquired the prospect, which includes a former operating mine, in late March. “The VMS deposit comprises two main ore horizons with a horizontal extension of 3-4km and an average thickness of 0.5-4m. The average grade of the Walchen  ore mined from 1942 was 1.7% Cu, 3.23% Zn, 2.48% Pb, 0.83g/t Ag 0.5g/t Au.”

These grades are broadly supported by recent samples taken by Noricum Gold which are reported in a range of 0.78% to 1.55% copper, up to 4.2% zinc and 63 g/t silver.

The company also plans to review the historical information and map the accessible underground workings to help it develop a geological model of the deposit and identify potential surface and underground drill targets.

Conclusion: After acquiring the project in March, Noricum is compiling the available information before moving to geophysical surveying and drilling.

*SP Angel acts as Nomad and Broker to Noricum.  An SP Angel analyst has visited the Schonberg site in Austria.

 

Mariana Resources (LON:MARL) 2.50 pence, Mkt Cap £19.1m – Phase 2 drilling programme is widening the area of known mineralisation at Hot Maden

Mariana Resources has completed the first four holes of its 10,000 metres Phase 2 drilling programme at the Hot Maden copper/gold prospect in Turkey. Geological logging of all the holes and assay results received so far from the first 2 holes indicate “A significant mineralised system” which trends approximately north / south and “is steeply dipping, plunges south, has a strike length 225m north-south and is completely open at depth and to the south.”

Hole HTD-08, which was aimed at testing the northern extension of the structure intersected 90.9m at an average grade of 0.8% zinc from a depth of 9.5m in the hole and 7.2m averaging 2.1 g/t gold and 1.6% copper from a depth of 129.5 metres.

Hole HTD-09, which was stepped back to intersect mineralisation encountered in HTD-04 (103m averaging 9 g/t gold and 2.2% copper)  at deeper levels encountered 22 metres of mineralisation averaging 3.1 g/t gold and 1% zinc from a depth of 40 metres. This section included a single 1 metre wide section with an average grade of 17.3 g/t gold. A cross sections of the two holes (04 and 09) appears to show the intersection in 09 at a higher level than is consistent with the intersection in 04 and the prominence of zinc over copper may also indicate that the mineralisation in hole 09 could be “marginal to and beneath the plunge of the main Au-Cu zone.”

Although assays are not yet available for holes HTD 10 and 11, hole 10 intersected 66.1m of strong chalcopyrite/pyrite mineralisation from a depth of 81.8m and 80.2m of massive sulphide mineralisation from 147.9m.  Hole HTD-011 also intersected similar strong sulphide mineralisation from 225.3m “extending the Au-Cu zone a further 60m south of HTD-05.” We note that hole 05 intersected 82m averaging 20.4 g/t gold and 1.9% copper and look forward to the assay results of hole 10 when they become available.

Hole HTD-013, which is currently underway is designed to test the mineralisation encountered in HTD-05 at depth. Hole HTD-012, which is also in progress is testing the mineralisation intersected in hole 11 at a shallower elevation.

Conclusion: Mariana Resources’ local partner, Lidya Madencilik Sanayi ve Ticaret (Lidya) is funding 10,000 metres of drilling as part of its commitment to earn up to 70% of the project. The initial results have extended the area of known mineralisation and although at this early stage there are unresolved geological questions on the detailed interpretation, Hot Maden is delivering wide intersections of strong mineralisation.

 

Premier African Minerals (LOON:PREM) 5.4p, Mkt Cap £13.3m – Process plant delivered to mine site in Zimbabwe

Premier African Minerals today report that they have taken delivery of their new tungsten processing plant at site in Zimbabwe

The plant now needs to be installed and commissioned by 3 June.

The statement says the plant has just been offloaded and the management team induction is complete.

We reckon its going to be quite a challenge to get the plant installed and fully commissioned by 3 June, typically construction and commissioning might take six months to a year.

It will be good going if they make the 3 June target in the next 5 weeks and we wish the team all the best with this very ambitious program.

It will be testament to the ability to get things done in Zimbabwe if the target is even half achieved in this timeframe.

Good luck to the team from all of us at SP Angel.

 

Scotgold Resources Ltd (LON:SGZ) 0.675p, Mkt Cap £8.3m – 179% increase in Cononish reserve base

Scotgold has announced the upgrading of it reserves estimate at Cononish to 198,000 oz of gold and 851,000 oz of silver from its previously announced 71,000 oz of gold and 289,000 oz of silver announced in April 2003. Approximately 12% of the reserve is classed as proven under the JORC (2012) Code

Grades are broadly similar to the previous estimates at 11.1 g/t gold and 47.7 g/t silver (previously 11 g/t gold and 45 g/t silver) and the reserve estimates are based on $1100/oz gold and $15/oz silver.

The increase is based on the January 2015 resource estimate which included some additional historic drillholes and was able to upgrade previously inferred resources to “indicated” which then qualified them for inclusion in reserve estimation.

Current, prefeasibility stage estimates envisage an underground mine producing approximately 23,000oz pa of gold equivalent at a capital cost of £23.8m.

 

StratMin Global Resources (LON:STGR) 5.25p, Mkt Cap £6.2m – CEO resigns with immediate effect

Stratmin’s ceo, Manoli Yannaghas, has resigned with immediate effect.

He is to be replaced by Brett Boynton who has expertise in the mining space and is an accountant and corporate financier.

Mr Yannaghas is being paid in shares in lieu of unpaid salary on his departure with some 715,355 new shares being issued to Mr Yannaghas.

Stratmin has improved its graphite processing under Mr Yannaghas to meet its offtake requirement of >94% grade carbon and we understand this has effectively proven the ability of the mine to produce saleable quality graphite production.

The next challenge is for Stratmin to upgrade the scale of its operation to consistently produce greater tonnages of >94% ‘flake’ graphite

The company sold 150 tons of graphite in February 2015.

Brett Boynton will have done his homework before agreeing to join Stratmin and we look forward to further progress on the company’s operations under his leadership.

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Tue, 26 May 2015 10:36:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22269/today-s-market-view-including-mariana-resources-noricum-gold-stratmin-global-resources-ironridge-resources-and-others-22269.html
Today's Market View Including Mariana Resources, Noricum Gold, Stratmin Global Resources, Ironridge Resources and others http://www.proactiveinvestors.co.uk/columns/sp-angel/22270/today-s-market-view-including-mariana-resources-noricum-gold-stratmin-global-resources-ironridge-resources-and-others-22270.html Economic News

US – Economic news due this week:

Tuesday: Apr durable goods orders (-0.5% v +4.7% in Mar), Apr capital goods orders (ex air) (+0.3% v +0.6% in Mar), Mar S&PCS house prices (+0.9%mom/+4.6%yoy v +0.9%mom/+5.0%yoy forecast), May consumer confidence (95 v 95.2 in Apr), Apr new home sales (5.0%mom v -11.4%mom forecast).

Thursday: Weekly jobless claims (270k v 274k in the previous week), Apr pending home sales (+0.8%mom/+10.2%yoy v +1.1%mom/+13.4%yoy in Mar).

Friday: Q1/15 GDP preliminary (2nd reading) (-0.9%qoq v +0.2%qoq estimated in the Advance release (1st reading)), Q1 PCE (+0.9%qoq unchanged from the previous reading), May Chicago PMI (53.0 v 52.3 in Apr).

 

China – The government announced new regulatory changes to cross-border investments.

New rules allow funds domiciled in Hong Kong and China to be sold in each other’s’ market effective Jul 1.

Hang Seng posted gains today on expectations of increased flow of funds from mainland China.

 

Japan – Weaker yen lifts exports (+8.0%yoy v +8.5%yoy in Mar and +6.0% forecast) and keeps trade deficit in check.

Trade deficit came in at ¥53.4bn in Apr compared with a ¥227.4bn surplus in Mar and a ¥351bn deficit forecast.

Weaker yen weighed on imports which recorded a 4.2%yoy decline versus a much smaller fall foreast of 1.1%yoy.

 

Spain – Indignados, strong supporters of anti-austerity measures, perform well in two largest cities as the ruling party loses c.2.5m votes compared with the previous regional elections in 2011.

Ada Colau, a leader of anti-corruption and anti-poverty En Comu, was elected mayor of Barcelona.

In Madrid, the more than two decades long leadership by the People’s Party is being challenged by growing support for a candidate representing Ahora Madrid, a coalition of leftist groups that includes anti-austerity party Podemos.

Regional and municipal elections showed a fall in the share of two major parties (the People’s Party and the Socialists) in the total vote to 52% from 65% four years ago.

General elections are due 20 Dec/15.

 

Greece – Government officials are hopeful the deal wold be finalised by the end of this week.

In Athens, Alexis Tsiparis is reported to have secured the backing among fellow Syriza party members to complete the bailout deal.

The urgency to secure the deal has been confirmed by the Interior Ministry last weekend that said the government may not be able to make the €1.6bn payment to the IMF due in Jun.

“The money won’t be given…It isn’t there to be given,” Nikos Voutis, the interior minister, said.

“It’s clear the June payments to the fund can’t be covered without external financing,” the other official said.

 

US$1.0898/eur vs 1.1153eur yesterday. Yen 122.77/$ vs 120.83/$. SAr 11.987/$ vs 11.818/$. $1.541/gbp vs 1.565/gbp

0.778/aud vs 0.790/aud

 

Commodity News

Precious metals:

Gold US$1,196/oz vs US$1,212/oz last week

Platinum US$1,136/oz vs US$1,157/oz last week

Palladium US$783/oz vs US$782/oz last week 

Silver US$16.82/oz vs US$17.28/oz last week

 

Base metals:

Copper US$ 6,158/t vs US$6,250/t last week

Aluminium US$ 1,766/t vs US$1,774/t last week

Nickel US$ 12,760/t vs  US$12,830/t last week

Zinc US$ 2,187/t vs US$2,190/t last week

Lead US$ 1,944/t vs US$1,977/t last week

Tin US$ 15,800/t vs US$15,855/t last week

 

Energy:

Oil US$65.1/bbl vs US$66.3/bbl last week

Natural Gas US$2.851/mmbtu vs US$2.996/mmbtu last week - US gas prices jump as consumers start to switch on air conditioning systems. 

The move to switch on air conditioning in the states is governed more by humidity than temperature and as with heating in the UK consumers in key regions tend to act en mass

Uranium US$35.25/lb sharply unch vs US$35.25/lb last week

 

Bulk commodities:

Iron ore 62% Fe spot (cfr Tianjin) US$59.6/t vs US$59.6/t – last week

Thermal coal (1st year forward cif ARA) US$56.9/t unch vs US$56.9/t last week

Seaborne hard coking coal index (quarterly) US$109.5/t unch vs US$109.5/t

 

Other:

Tungsten APT European US$257.5/mtu unch vs US$257.5/mtu

FeCr lumpy Charge 52% Cr US$1.08/lb vs US$1.08/lb last week

Lithium - Lux Research reckons Lithium-ion battery costs will fall to US$172/kWh by 2025

Others reckon lithium-ion battery costs will be around US$229kWh

Nissan see battery costs at US$261/kWh

BYD China expect US$211/kWh

 

Company News

IronRidge Resources* (LON:IRR) 5.25p, Mkt Cap £12.4m – Sumitomo nominates director to IronRidge board

IronRidge, which is to drill for iron ore in Gabon, has announced the appointment of Mr Tsuyoshi ‘Thomas’ Ueda Thomas Ueda to the IronRidge board.

Thomas Ueda joins the Board as part of the Company's strategic alliance with Sumitomo Corporation.

Mr Ueda is currently the Deputy General Manager of Sumitomo's Iron & Steel Making Raw Materials Department and was formerly General Manager for Sumitomo's Africa Division for Mineral Resources and Steel Products.

He brings expertise in the strategic development, marketing, operational and corporate development of the Company's Gabonese iron ore assets.

SRK Exploration are currently working on the exploration plan for the two key Gabonese licences at Tchibanga and Belinga Sud.

Conclusion:  Mr Ueda’s appointment is a positive move in preparation for drilling and metallurgical results from the Gabon exploration program.  We look forward to news on the start of drilling at Tchibanga which is located relatively close to the coast and to new port infrastructure.

*SP Angel act as Nomad and Broker to IronRidge Resources and a SP Angel Analyst has visited Tchibanga.

 

Noricum Gold* (LON:NMG) 0.2p, Mkt Cap £2.8m – Start of exploration and drill target identification at Walchen

Noricum Gold has announced the start of a geological mapping and sampling programme at its recently acquired Walchen VMS deposit in Austria. The programme is expected to take 2-4 weeks and will focus on existing known outcrops and sites exposed by recent forestry road construction.

Noricum acquired the prospect, which includes a former operating mine, in late March. “The VMS deposit comprises two main ore horizons with a horizontal extension of 3-4km and an average thickness of 0.5-4m. The average grade of the Walchen  ore mined from 1942 was 1.7% Cu, 3.23% Zn, 2.48% Pb, 0.83g/t Ag 0.5g/t Au.”

These grades are broadly supported by recent samples taken by Noricum Gold which are reported in a range of 0.78% to 1.55% copper, up to 4.2% zinc and 63 g/t silver.

The company also plans to review the historical information and map the accessible underground workings to help it develop a geological model of the deposit and identify potential surface and underground drill targets.

Conclusion: After acquiring the project in March, Noricum is compiling the available information before moving to geophysical surveying and drilling.

*SP Angel acts as Nomad and Broker to Noricum.  An SP Angel analyst has visited the Schonberg site in Austria.

 

Mariana Resources (LON:MARL) 2.50 pence, Mkt Cap £19.1m – Phase 2 drilling programme is widening the area of known mineralisation at Hot Maden

Mariana Resources has completed the first four holes of its 10,000 metres Phase 2 drilling programme at the Hot Maden copper/gold prospect in Turkey. Geological logging of all the holes and assay results received so far from the first 2 holes indicate “A significant mineralised system” which trends approximately north / south and “is steeply dipping, plunges south, has a strike length 225m north-south and is completely open at depth and to the south.”

Hole HTD-08, which was aimed at testing the northern extension of the structure intersected 90.9m at an average grade of 0.8% zinc from a depth of 9.5m in the hole and 7.2m averaging 2.1 g/t gold and 1.6% copper from a depth of 129.5 metres.

Hole HTD-09, which was stepped back to intersect mineralisation encountered in HTD-04 (103m averaging 9 g/t gold and 2.2% copper)  at deeper levels encountered 22 metres of mineralisation averaging 3.1 g/t gold and 1% zinc from a depth of 40 metres. This section included a single 1 metre wide section with an average grade of 17.3 g/t gold. A cross sections of the two holes (04 and 09) appears to show the intersection in 09 at a higher level than is consistent with the intersection in 04 and the prominence of zinc over copper may also indicate that the mineralisation in hole 09 could be “marginal to and beneath the plunge of the main Au-Cu zone.”

Although assays are not yet available for holes HTD 10 and 11, hole 10 intersected 66.1m of strong chalcopyrite/pyrite mineralisation from a depth of 81.8m and 80.2m of massive sulphide mineralisation from 147.9m.  Hole HTD-011 also intersected similar strong sulphide mineralisation from 225.3m “extending the Au-Cu zone a further 60m south of HTD-05.” We note that hole 05 intersected 82m averaging 20.4 g/t gold and 1.9% copper and look forward to the assay results of hole 10 when they become available.

Hole HTD-013, which is currently underway is designed to test the mineralisation encountered in HTD-05 at depth. Hole HTD-012, which is also in progress is testing the mineralisation intersected in hole 11 at a shallower elevation.

Conclusion: Mariana Resources’ local partner, Lidya Madencilik Sanayi ve Ticaret (Lidya) is funding 10,000 metres of drilling as part of its commitment to earn up to 70% of the project. The initial results have extended the area of known mineralisation and although at this early stage there are unresolved geological questions on the detailed interpretation, Hot Maden is delivering wide intersections of strong mineralisation.

 

Premier African Minerals (LOON:PREM) 5.4p, Mkt Cap £13.3m – Process plant delivered to mine site in Zimbabwe

Premier African Minerals today report that they have taken delivery of their new tungsten processing plant at site in Zimbabwe

The plant now needs to be installed and commissioned by 3 June.

The statement says the plant has just been offloaded and the management team induction is complete.

We reckon its going to be quite a challenge to get the plant installed and fully commissioned by 3 June, typically construction and commissioning might take six months to a year.

It will be good going if they make the 3 June target in the next 5 weeks and we wish the team all the best with this very ambitious program.

It will be testament to the ability to get things done in Zimbabwe if the target is even half achieved in this timeframe.

Good luck to the team from all of us at SP Angel.

 

Scotgold Resources Ltd (LON:SGZ) 0.675p, Mkt Cap £8.3m – 179% increase in Cononish reserve base

Scotgold has announced the upgrading of it reserves estimate at Cononish to 198,000 oz of gold and 851,000 oz of silver from its previously announced 71,000 oz of gold and 289,000 oz of silver announced in April 2003. Approximately 12% of the reserve is classed as proven under the JORC (2012) Code

Grades are broadly similar to the previous estimates at 11.1 g/t gold and 47.7 g/t silver (previously 11 g/t gold and 45 g/t silver) and the reserve estimates are based on $1100/oz gold and $15/oz silver.

The increase is based on the January 2015 resource estimate which included some additional historic drillholes and was able to upgrade previously inferred resources to “indicated” which then qualified them for inclusion in reserve estimation.

Current, prefeasibility stage estimates envisage an underground mine producing approximately 23,000oz pa of gold equivalent at a capital cost of £23.8m.

 

StratMin Global Resources (LON:STGR) 5.25p, Mkt Cap £6.2m – CEO resigns with immediate effect

Stratmin’s ceo, Manoli Yannaghas, has resigned with immediate effect.

He is to be replaced by Brett Boynton who has expertise in the mining space and is an accountant and corporate financier.

Mr Yannaghas is being paid in shares in lieu of unpaid salary on his departure with some 715,355 new shares being issued to Mr Yannaghas.

Stratmin has improved its graphite processing under Mr Yannaghas to meet its offtake requirement of >94% grade carbon and we understand this has effectively proven the ability of the mine to produce saleable quality graphite production.

The next challenge is for Stratmin to upgrade the scale of its operation to consistently produce greater tonnages of >94% ‘flake’ graphite

The company sold 150 tons of graphite in February 2015.

Brett Boynton will have done his homework before agreeing to join Stratmin and we look forward to further progress on the company’s operations under his leadership.

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Tue, 26 May 2015 10:36:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22270/today-s-market-view-including-mariana-resources-noricum-gold-stratmin-global-resources-ironridge-resources-and-others-22270.html
Broker spotlight including DCC, Royal Mail, Burberry and Glaxo http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22268/broker-spotlight-including-dcc-royal-mail-burberry-and-glaxo-22268.html Energy distributor DCC (LON:DCC) gets an upgrade from analysts at German bank Berenberg today, who lifted the target price on the shares to £5,850 from £4,780.

It comes after the group's acquisition of Butagaz, France’s second largest LPG business and DCC’s largest acquisition to date.

"We believe the lower oil price is putting increased pressure on oil majors to dispose of downstream assets and view DCC, the market leader in Energy distribution in Europe, as a likely beneficiary," said the broker, rating the shares 'buy'.

Royal Mail (LON:RMG) was delivered an upgrade from City firm Cantor, which lifted the rating to 'hold' from 'sell'. Shares in the London-listed postal giant did well in early trades.

Cantor also rose its target price on the shares to 500p from 440p.

Heavyweight JP Morgan Cazenove repeated an 'underweight' rating on GlaxoSmithKline (LON:GSK) and lowered its target to 1,320p from 1,380p previously.

Fashion group Burberry (LON:BRBY) gets its target price slashed to 2,319p today from 2,513p by Goldman Sachs.

Last week, the group's full year results got a disappointed reaction from investors.

Positives on revenues and pre-tax profit were overshadowed by a 1.1% drop in adjusted profits, with FX costs weighing, and a cautious outlook statement.

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Tue, 26 May 2015 09:24:00 +0100 http://www.proactiveinvestors.co.uk/columns/broker-spotlight/22268/broker-spotlight-including-dcc-royal-mail-burberry-and-glaxo-22268.html
SP Angel Morning Oil & Gas Range Resources and San Leon Energy http://www.proactiveinvestors.co.uk/columns/sp-angel/22267/sp-angel-morning-oil-gas-range-resources-and-san-leon-energy-22267.html Headlines

San Leon Energy (LON:SLE) – Can't Catch a Break: Should the arbitration award be upheld, the Company could face a difficult 2H, especially as it would most likely have to raise the money through the existing owners of the Company, or through and expensive asset level dilution.

Range Resources (LON:RRL/ASX:RRS) – New Week, Must be Time for a New Funding: Talk of new funding and debt financing means nothing without cash to value or repay that investment, and yet again we find ourselves asking what is really going on at the heart of the Company.

 

News Items

San Leon Energy (LON:SLE) – Can't Catch a Break

No sooner had the Company started to make progress on its portfolio in Poland, but an arbitration award goes against them for ~$20mm. This comes at just the wrong time as the Company was starting to move forwards on its portfolio.

Should the arbitration award be upheld, the Company could face a difficult 2H, especially as it would most likely have to raise the money through the existing owners of the Company, or through and expensive asset level dilution. 

 

Range Resources (LON:RRL/ASX:RRS) – New Week, Must be Time for a New Funding

It is difficult to keep up with the Company's many funding options, and while we have not lost count, the thing we keep coming back to is:

  • "how the Company will ever repay these instruments when it doesn't have a cohesive development plan for its asset base?"

We know a comprehensive cash flow modelling exercise on its Trinidadian assets was undertaken for a past management team that was due to be implemented as part of a refinancing package. That cash flow analysis was detailed enough to identify peak cash needs and was developed in conjunction with the reserves auditor and company's development engineers at field level.

We know a plan exists, so we continue to be somewhat flummoxed as to why since its development, successive management teams have not been able to produce a cohesive production and cash flow projection to the Company's owners in the 3 years since it was completed.

Talk of new funding and debt financing means nothing without cash to value or repay that investment, and yet again we find ourselves asking what is really going on at the heart of the Company.

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Tue, 26 May 2015 09:17:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/22267/sp-angel-morning-oil-gas-range-resources-and-san-leon-energy-22267.html
Beaufort Securities Breakfast Alert W Resources, KEFI Minerals, Armadale Capital, Stratmin Global Resources and others http://www.proactiveinvestors.co.uk/columns/beaufort-securities/22265/beaufort-securities-breakfast-alert-w-resources-kefi-minerals-armadale-capital-stratmin-global-resources-and-others-22265.html The Markets

Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 11.1 points up at 7:00 am.

New York: Wall Street was closed for Memorial Day on Monday.

Asia: Markets are trading higher, driven by the optimism over the announcement of infrastructure projects worth US$318bn and a 50% import duty on some of the major import items in China. The Nikkei 225 added 0.1% as investors cheered the April exports data that increased 8.0% y-o-y. The the Hang Seng was trading 1.4% higher at 7:00 am.

Continental Europe: Equities ended lower amid thin trading volumes, with most bourses closed for a holiday. Investors await a slew of key economic data due to be released later this week. France’s CAC 40 added 0.5%, whereas Germany’s DAX was shut for Whit Monday holiday.

Crude Oil: Yesterday, the price of Brent Crude Oil increased 0.2%, whereas WTI crude oil did not trade due to a holiday. The spread between the two varieties stood at US$5.8 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.40% higher on Friday at 766.71.

Today’s news

Greece’s reform proposals inadequate: Blanchard

IMF’s chief economist Olivier Blanchard informed that Greece’s reform plans to ensure a 3% budget surplus are insufficient as the most recent projections indicate a considerable budget deficit. He added that several structural issues need to be fixed. Greece is in negotiations with its international creditors to unlock €7.2bn in bailout cash.

Company News

MySQUAR – AIM IPO of a Myanmar-based Internet-build group, focussed on Mobile Social Media Services

You may have seen reference in the Financial Times and other press sources of this upcoming AIM IPO in which Beaufort is sole broker.

MySQUAR is a technology group focussed on internet-content build in Myanmar, a country which until recently had been effectively cut-off from the rest of the world. Its first main product now rapidly building users is ‘MyCHAT’, a free to use social media and mobile chat service. The Company has recognised that offering local language and locally-derived content is the best route to acquisition and retention of massed users still very new to the worldwide web. Within a short 15 months its services could be accessible by over 40m residents. MySQUAR is positioned to be the local platform of choice in what will shortly become Southeast Asia’s fastest growing online territory. The Company is expected to have over 1m users by the end of the year with rapid growth continuing into the foreseeable future. With users comes monetisation opportunities, including gaming, news, information, financial and payment services.

Should wish to have more information or are interested in getting involved, please contact your Beaufort Broker on 020 7382 8300 (London) or 0117 910 5500 (Bristol).

Jiasen International (LON:JSI) – Speculative Buy

Jiasen International Holdings announced a changed in the directorate of the company. Jiasen informed that Mr. Jeff Teo would step down as the Non-executive Director of Jiasen at the company’s Annual General meeting to be held on 25th May 2015, though he would continue to remain an ad hoc consultant to the Board. Mr Teo had joined the company two years prior to its admission to AIM in July 2014. Henceforth, the company is seeking his replacement and would make a related announcement when appropriate.

Our view: Mr Jeff Teo has over 20 years of strategic planning and venture capital experience in the US, the PRC and Singapore. He held an important position in the company’s board when it went public in July 2014. Recently, the company released its final results that suggested a robust growth in top line following the diversification from the door products to the wall panels, furniture and fixtures. To a certain extent, this helped Jiasen distribute its business risk over a wider range of segments. The company’s strategy to focus on luxury property products is likely to pay rich dividends in the long run owing to the rapid pace of urbanization in China leading to a rise in demand for high-value products. Further, the opening of new outlets would help Jiasen grow the market and cater to a wider customer class. The stabilizing property market in China due to easing of interest rates and an order book mainly comprising orders from property developers, augur well for Jiasen. Moreover, the company continues to seek foreign and local brand partnerships and additional investment opportunities. In view of these positives, we retain our Speculative Buy rating on Jiasen International.

Beaufort Securities acts as corporate broker to Jiasen International plc

Kefi Minerals (LON:KEFI) – Speculative Buy

On Friday, Kefi Minerals notified that its Annual General Meeting would be held on Monday 15th June 2015 and the relevant AGM material and the latest annual reports are available on the company website. Moreover, the company appointed Beaufort Securities Limited as its Joint Broker with immediate effect. Brandon Hill Capital would continue as the Joint Broker and SP Angel Corporate Finance remains the Nominated Adviser to the Company.

Our view: Kefi is the operator of two advanced gold development projects within the highly prospective Arabian-Nubian Shield, comprising Tulu Kapi and the Jibal Qutman. With the mining license received, the company remains on track to become a gold producer in 2017 at Tulu Kapi, where it gained the complete ownership by acquiring the remaining 25% stake (that it did not own) for £1.5m in cash and shares. The company is conducting more detailed Preliminary Feasibility Study to further refine the anomalies encountered and identify targets to be drill tested at the Jibal Qutman prospect; a Mining Licence Application has also been drafted for the same. The significant progress and new discoveries made in Saudi Arabia with Jibal Qutman and Hawiah projects are expected to follow Tulu Kapi in short succession. Separately, the recent JORC compliant resource update for Tulu Kapi is likely to bring in financers for the project. Given the swift progress, we reiterate a Speculative Buy rating on the stock.

Stratmin Global Resources (LON:STGR) – Speculative Buy

On Friday, Stratmin Global Resources announced its final result for the year ending 31st December 2014. The company’s revenues increased from to £153,000 from £46,000 as compared to previous year, owing to improvement in volume of production and grade. Operating loss widened to £2.34m from £2.2m due to additions to the cost base as a result of graphite mining undertaken during the year. However, the pre-tax losses declined to £2.38m from £2.5m, mainly due to significant fall in the company’s finance cost compared to the earlier year. Earnings per share during the period decreased to 2.47p from 4.15p. Key developments on the operational side included the commencement of commercial production of graphite in April 2014. In addition, the company also signed an Offtake Agreement in October 2014 for its natural flake graphite product with one of the largest processors and merchants of graphite. In October 2014, surficial graphite mineralisation was identified at the Mahefadok prospect, which added to company’s exploration asset portfolio. Beyond the period, productions and sales volume increased consistently during the first quarter 2015. Also, rebuilding of plant flow sheet by making major additions and minor adjustments to the plant has resulted in a much improved flow sheet that can produce at more consistent rate. Significant exploration results were seen at Mahefadok, Mahela and Ambatofafana prospects. Also, the primary objective of raising the carbon content of graphite to 94% was achieved. The company plans to make additional improvements in production cycle as to increase margins and generate higher volumes.

Our view: 2014 proved to be a year of major transformation for Stratmin with significant developments such as commencement of commercial production of graphite and signing of an off-take agreement. Moreover, a stabilizing political environment in Madagascar and encouragement of foreign investment by the government further enhances the prospects of the company as it adds exploration and production assets in the country. We believe that the company has demonstrated the ability to increase volumes within the existing plant and the increase in carbon content means that all graphite produced is now profitable. Thus in view of the promising outlook of the company, we maintain our Speculative Buy on the stock.

W Resources (LON:WRES) – Speculative Buy

On Friday, W Resources announced its audited financial results for the year ended 31st December 2014. The company recognised revenue of £964000 for the year 2014 but the operating losses widened to £487,000 from £255,000 due to high cost of sales and increased administrative expenses. Consequently pre-tax losses expanded to £641,000 from £253,000 in 2013 and the loss per share increased to 0.03p from 0.01p. On the operational front, the infrastructure at the La Parrilla Mine was completed in December and the mine was connected to the Spanish national power grid. Meanwhile, the Fast Track Mine development remains on course and is expected to commence first production in late 2016. The processing at the La Parrilla tailings was completed and around 103 tonnes of tungsten was shipped leading to revenues of nearly £1.0m. Moreover, the Régua mine was awarded a 4-year Trial Mining Licence followed by the commencement of the 2,000 metre diamond core drilling campaign. The Crato Assumar Arronches (CAA) / Portalegre witnessed the completion of a 15 sq. km detailed mapping and an extensive trenching campaign. At Tarouca, a 15-hole drilling programme was completed and high grade zones close to the surface were outlined. During the period, the company raised £2.2m through five placings. The company expects significant progress towards production at the La Parrilla and Régua tungsten mines during 2015 and is likely to report further exploration success at Tarouca.

Our view: W Resources seems to be gathering momentum on the operational front as several of its assets are in the process of coming online and thereby becoming revenue generative. The most prominent being the construction of the La Parrilla tailings connection to the Sweden national power grid. In addition the exploration at the CAA/ Portalegre has also shown good progress and the company is in the process of seeking partners for the farming opportunities. Régua project development in Northern Portugal was substantiated at total resource of 4.46 million tonnes at a grade of 0.308% WO3. 2015 is likely to be an exciting year for the company as on one hand, the company is seeking farm-out options for the gold assets while on the other; the tungsten project continues to gather momentum. With the above update, the company has added to the prospectivity of its existing portfolio of assets. Thus, given the overall optimism, we believe that company has significant scope for an upside potential. We retain our Speculative Buy rating on the stock.

Armadale Capital (LON:ACP) – Speculative Buy

On Friday, Armadale Capital released its full year results for the year ended 31st December 2014. The company’s operating loss decreased to £1.1m from £3.3m and the pre-tax losses narrowed to £1.1m compared with £3.1m a year ago. During the period, loss per share declined to 0.03p from 0.16p in 2013. The company is nearing the completion of the Definitive Feasibility Study and expects to commence commercial gold production at the Mpokoto Gold Project in the Katanga province in H1 2016. During the year, Mpokoto’s established resource stood at 678,000 ounces (oz) of gold from 14.58 million tonnes ore at 1.45 gram per tonne of gold, which is expected to produce 25,000 oz per annum over a nine year life of mine. The project’s NPV is estimated to be US$55.3m and US$32.3m based on the forecasted gold price of US$1,250/oz and US$1,100/oz, respectively. Moreover, discussions are underway to seek potential partners for the advancement of the project in the second half of the year. In June 2014, the company converted all outstanding debt of Mine Restoration Investments into its shares at ZAR0.05 per share, leading to a resultant holding of approximately 28% in the latter’s share capital. Though the processing of waste coal fines in Kwa-Zulu Natal, has been slow in ramping up production but the plant is operating on a profitable basis. In addition, the company appointed Dr Andrew Tunks to the board as a non-executive director. The company’s cash balances stood at 120,000 as on 18th May 2015.

Our view: Armadale progressed well on its major assets during 2014 with principal focus on the Mpokoto gold project. Continuing growth in the scope and magnitude of the Mpokoto Gold Project further strengthens our belief in Armadale’s future prospects. Not only does the resource signify a successful acquisition, but also promises low operating and capital cost in a dynamic commodity pricing environment as Mpokoto promises highly attractive returns. Moreover, plans are underway to attract partners for further progress on the project. Thus, in view of the above and the company’s diversified projects including the KwaZulu Natal coal operations and Witwatersrand acid drainage projects, we are confident of a significant upside potential. We reiterate a Speculative Buy rating on the stock.

Severn Trent (LON:SVT) – Hold

On Friday, Severn released its full year results for the year ended 31st March 2015. The company’s revenue was up 2.5% y-o-y to £1.8bn owing to increased water consumption of 2.4% in Severn Trent Water segment and contract wins in the US for the Severn Trent Services segment, which was offset by large investments. The company’s operating profit stood at £540.3m, up 3.2% y-o-y and 2.6% y-o-y on reported basis to £521.6 m. However, the company’s pre-tax profits reduced considerably to £148.2m from £318.8m, down 53.5%. Earnings per share for the period were 107.2p, up 15.9% from 92.5p a year ago. On the operational front, the company had better and stable performance on 12 out of 14 Ofwat KPIs, driven by the operational improvements. Additional investment of £547.4m was undertaken as planned capital expenditure for the completion of AMP5 programme. Customer bills remained lowest in Britain at an averaged combined bill of £329 in 2015-16. Moreover, the company seeks to undertake a huge capital investment of £3.3bn for AMP6 programme, to improve service and quality for customers. In March, the company made investment in renewable energy to reduce Severn Trent Water’s gross energy consumption to around 50% by 2020. Also, focus on core activities lead to the sale of Water Purification business for a consideration of US$81.2m, to be settled through a cash payment of US$20.1m and the remaining through the net intercompany debt. The company declared a final dividend of 50.9p per share, representing a total dividend of 84.9p per share for the year, up 5.6% y-o-y.

Our view: Severn’s pre-tax profits took a hit due to regulatory pressure faced by the company to keep the prices low. However, on the brighter side, the company did well on the operational front and achieved decent growth in the operating profit driven by a better performance and revenue growth in Severn Trent Water and Severn Trent Services. Severn is well positioned for AMP6 and has undertaken significant cultural and operational changes which are likely to improve customer experience and satisfaction. On the other hand, the company is likely to face challenges in view of rising operational cost and inflation as it has been directed by the industry regulator to raise the water bills by less than the inflation rate. The company already has the lowest average combined water and sewerage bills in Britain. The new regulation would have a direct impact on the shareholder earnings as evident from the downgrade in the dividend from next year. Thus we maintain a Hold on the stock.

Economic News

Germany GDP

German GDP edged up 0.3% q-o-q in Q1 2015, in line with the market expectations, following an expansion of 0.7% Q4 2014, the Federal Statistics Office said on Friday. Positive contribution came primarily from household consumption, which rose 0.6% from the previous quarter and the government spending that improved 0.7% q-o-q. On a y-o-y basis, GDP growth slowed to 1.1% in Q1 2015, from 1.6% in the previous quarter.

Germany IFO

The German business sentiment index edged down to 108.5 in May from 108.6 in April, survey results from IFO Institute revealed on Friday. The index was forecast to read 108.3 for the month. The Current Assessment Index rose to 114.3 from 114 in the previous month, versus market expectations of a 113.5 reading. The Business Expectations Index, a gauge of attitude towards business prospects over the next six months, slid to 103.0 in May, from 103.5 in April, but matched the economists’ expectations.

US CPI

US consumer price index (CPI) growth matched market forecasts and grew to a seasonally adjusted 0.1% m-o-m in April from 0.2% in the preceding month, the US Bureau of Labour Statistics stated on Friday. Core consumer prices, excluding food and energy, rose 0.3% in April, following a 0.2% increase in the preceding month, and came ahead of the market forecast of a 0.2% rise. On y-o-y basis, CPI declined 0.2% in April vis-à-vis 0.1% in March, while growth in core prices remained steady at 1.8%.

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Tue, 26 May 2015 08:21:00 +0100 http://www.proactiveinvestors.co.uk/columns/beaufort-securities/22265/beaufort-securities-breakfast-alert-w-resources-kefi-minerals-armadale-capital-stratmin-global-resources-and-others-22265.html
Yellen Sees Rate Rise in 2015, Gradual Tightening Thereafter http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22264/yellen-sees-rate-rise-in-2015-gradual-tightening-thereafter-22264.html Yellen Sees Rate Rise in 2015, Gradual Tightening Thereafter 

This article by Jeff Kearns, Jeanna Smialek and Craig Torres for Bloomberg may be of interest to subscribers. Here is a section:

She also repeated the Fed’s two criteria for raising rates, which have been kept near zero since December 2008: “I will need to see continued improvement in labor market conditions, and I will need to be reasonably confident that inflation will move back to 2 percent over the medium term.”

Policy makers expect growth to pick up after stalling in the first quarter, even as they fret about the strength of the consumer spending that makes up two-thirds of the economy, minutes of their April meeting released Wednesday show.

Yellen said it will be best to proceed “cautiously,” which means taking “several years” before policy makers lift the federal funds back to its normal, longer-run level.

Even after significant employment gains, the labor market “is approaching its full strength,” though still short of it, Yellen said. While the U.S. is nearing what many economists say is full employment, the jobless rate “probably does not fully capture the extent of slack in the labor market,” she said.

Eoin Treacy's view 

Today’s news that discount fashion retailer Ross Stores has joined Wal-Mart, T.J.Maxx and Target in raising their starting wage to $9 suggests that companies are seeing tightness in the labour market. This is follows the decision this week that Los Angeles will be raising its minimum wage to one of the highest in the world by 2020. The Fed will be watching these developments closely not least because these are such large employers. 

 

Confessions of a Capital Junkie: An insider perspective on the cure for the industry's value-destroying addiction to capital 

Thanks to a subscriber for this report from Fiat Chrysler Automobiles (FCA Group) which may be of interest to subscribers. Here is a section: 

High mortality rate caused by partial if non-existent integration

Cultural divide (corporate and otherwise)

Inequality of integrating parties

Operating models radically different and never merged

Insufficient sensitivity for brand differences

Lack of respect/trust for one another

Complexity proved to be too much of a stretch for leadership teams

BUT

It enables

Fast execution, enabling rapid scale gain

Fostering step-change/best-of-best approach to modularity/ commonality

AND

The potential savings are too large to ignore

Eoin Treacy's view 

Mr. Marchionne’s most relevant comments are to be found about an hour into this lengthy call. Apple holds the intellectual property to its products and excels at marketing but outsources its production. Car companies have so far been unable to outsource production despite the obvious cost advantages this would provide. Mr Marchionne’s belief that this capital intensive mechanism needs to change is worthy of consideration because it would result in value creation if he can achieve it. 

 

Email of the day on cryptocurrencies and distributed data 

I tuned in to most of your Webinar. Excellent, and as always it gave me much to ruminate on.

Here is something also to ponder; pretty speculative but also with much to think about and references to many initiatives in this space that I had not heard of. Not sure if it should be of interest to the FTM collective.

Eoin Treacy's view 

Thank you for your kind words and I’m delighted you enjoyed the presentation. It has now been uploaded to YouTube. Here is a link 

I agree this article is speculative but it highlights some important points that are worthy of consideration. There is an undeniable trend towards digitisation of just about everything. If information is power, then it has a value and protecting it is more important than ever.

 

India quest for outperformance: cyclical outlook and structural agenda 

Thanks to a subscriber for this report from Deutsche Bank which may be of interest. Here is a section:

1) No trade-off between growth and inflation in the long term – Imperative to get inflation and inflation expectations down, to achieve higher growth and investments.

2) Growth is important, but composition of growth is even more important – healthy mix of consumption and investment growth needs to be achieved to prevent macro imbalances from building up

3) Need to maintain positive real interest (1.5-2.0%) in the economy – to incentivize higher financial savings, which is critical to fund investment needs of the country; unless this is achieved, pressure on current account deficit will persist

4) Inflation glide path – RBI has targeted to bring CPI inflation down to 6% by Jan 2016 and to 4% thereafter; need to sustain CPI inflation at 4-6% in the medium term 5) Current account deficit – Policy framework should be geared to sustain current account deficit at about 2.0-2.5% of GDP

Eoin Treacy's view 

A link to the full report is posted in the Subscriber's Area. 

India is an example of a country where people have voted for improving governance because they understand it is the only way the country will be able to capitalise on its demographic dividend. Developing a manufacturing base capable of employing millions of new urban workers will require major initiatives in terms of regulation, liberalisation, infrastructure development and policy stability. There is every reason to believe India is moving in the right direction to achieve these objectives. 

 

The Markets Now 

Monday 15th June, at the East India Club, 16 St. James’s Square, London SW1Y 4LH

David Fuller's view 

Here is the new brochure listing some of our topics and the important questions most investors face.  I think all investors will benefit from guest speaker David Brown’s new presentation. I learned from it, not least how to assess some familiar data more clinically.  In other words, he shows us how to think a little more clearly, particularly in terms of identifying bear markets near their tops.  This is never easy given all the emotions involved.  Many people jump the gun, as you will have seen over the last few years, which can leave them susceptible to overstaying when the important and often overlooked warning signs are flashing.  Note also Iain Little’s challenging topic summarised in the penultimate question.  I look forward to their presentations and also to hearing the views of friends and subscribers.  

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Tue, 26 May 2015 08:10:00 +0100 http://www.proactiveinvestors.co.uk/columns/fuller-treacy-money/22264/yellen-sees-rate-rise-in-2015-gradual-tightening-thereafter-22264.html
Northland Capital Partners View on the City: Mariana Resources, Premier African Minerals, W Resources and Melrose Resources http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22263/northland-capital-partners-view-on-the-city-mariana-resources-premier-african-minerals-w-resources-and-melrose-resources-22263.html Mariana Resources (LON:MARL) – SPECULATIVE BUY: Hot Maden update

Market Cap: £19m; Current Price: 2.5p 

  • Discovery of another zinc zone and extension gold-copper zone to the south
  • Mariana Resources and its joint venture partner Lidya has completed the first four holes of the Phase II drill programme and is reporting the assay results of the first two holes at the Hot Maden project.
  • The gold-copper shoot appears to be steeply dipping to the west and plunging to the south. Work to date has defined a strike of 225m and it remains open at depth and along strike.
  • HTD-08 was drilled to the north of the two Phase I discovery holes HTD-04 and HTD-05 and has discovered another area of zinc mineralisation located to the west of the gold-copper shoot. The hole then passes below the plunge of gold-copper shoot in to the area of zinc mineralisation to the east of the shoot. Results from the zinc mineralisation to the west of the shoot in HTD-08 include 90.9m at 0.78% Zn. Results from below the gold-copper shoot in HTD-08 include 7.2m at 2.1g/t Au and 1.6% Cu and 8m at 1.8% Cu. Results from the zinc mineralisation to the east of the shoot include 2m at 11.9% Zn.
  • HTD-09 was drilled between the two phase 1 discovery holes. This hole also appears to have also drilled below or on the margin of the plunge of the main gold-copper shoot but still returned relatively positive results that include 22m at 3.1g/t Au and 1% Cu.
  • HTD-10 was drilled between HTD-09 and HTD-05 to further test the continuity. Assay results are currently pending but a visual inspection of the core by the Company and its joint venture partner includes 66m of chalcopyrite and pyrite mineralisation in brecciated andesites with an additional 80m of sulphide bearing andesites.
  • HTD-11 was drilled to the south of the HTD-05 to test for a southern extension to the mineralisation. Assay results are also pending for this hole. However, a visual inspection of the core appears to indicate 125m of chalcopyrite and pyrite mineralisation located within brecciated andesite.
  • No change to rating.

NORTHLAND CAPITAL PARTNERS VIEW: These results are another positive development for Mariana Resources from its Hot Maden project, located in Turkey. HTD-08 has resulted in the discovery of another large area of zinc mineralisation to the west of the gold-copper shoot, with 90.9m at 0.78% Zn (Figure 1). This zinc mineralisation seems to be forming a halo around the gold-copper shoot that now appears to be plunging towards the south. As a result of the shoot’s plunge, it appears that the gold-copper shoot comes to surface between hole HTD-04 and HTD-08 and the gold-copper mineralisation observed in this hole is therefore narrower and lower grade. HTD-09 appears to have been drilled below the plunge of the gold-copper shoot (Figure 2) and a visual inspection of the core from HTD-10 also appears to confirm this with two larger zones of visually inspected sulphide mineralisation. The visual inspection of the core from HTD-11 is a further exciting development that appears to demonstrate the extension of the high grade gold-copper shoot to the south. Based on all the information to date the gold-copper shoot is steeply dipping to the west and also plunges to the south and extends over at least 225m. The mineralisation remains open along dip and along plunge towards the south, so there is further room for further upside.

 

Premier African Minerals (LON:PREM) – CORP: RHA update

Market Cap: £11.2m; Current Price: 2p 

  • Construction on schedule
  • Processing plant has been delivered to site on schedule
  • Management team induction has been completed.
  • Appropriate Process Technologies, the plant manufacturer, expects to be commissioning the plant by the 03/06/15.
  • Mining continues to progress well.

NORTHLAND CAPITAL PARTNERS VIEW: Premier African Minerals continues to stay on track for its ambitious production target of June for its 45% owned RHA Tungsten Project. With production imminent, Prem looks good value at these levels. 

 

W Resources (LON:WRES) – BUY: FY14 Results

Market Cap: £8.9m; Current Price: 0.28p 

  • From Friday: Maiden revenue of £1m
  • Maiden revenue of £1m during FY14. LBT increased to £0.6m in FY14 compared to £0.3m in FY13, as a result of the operational loss at La Parrilla and an increase in administrative and finance costs. Net debt of £0.6m in FY14 compared with net cash of £1m in FY13.
  • Company expects to receive approvals for the fast track mine development at La Parrilla in Q415.
  • AGM to be held on 19/06/15
  • Forecasts and price target remain under review, rating maintained.

NORTHLAND CAPITAL PARTNERS VIEW: No surprise in the FY14 results from W Resources. The weaker APT prices during the second half of the year lead the Company to complete a strategic review of its tailings operations with fast track development of hard rock operations at both La Parrilla and Régua cited has the best routes for the Company to achieve its objective of becoming a sizable tungsten producer. The Company is currently advancing its portfolio of projects in Spain and Portugal and further updates are expected shortly.

 

Management Resource Solutions (LON:MRS) – CORP: Financing update

Suspended 

From Friday: First replacement offer of debt financing received

MRS has received the first replacement offer of debt financing and anticipates receiving further competitive proposals within the next week. This follows the default by Halcyon Capital Management Pty on its contracted obligations to provide the funding for the acquisition of D&M Group.

The facility under negotiation is significantly less than that contracted from Halcyon, reflecting the lower level of equipment financing to be replaced, significantly reduced transaction costs and a smaller working capital facility. MRS and the vendors have also agreed in principle to revise the consideration structure so that c. 52% of the purchase price will be paid on completion (AUS$4m) with the balance deferred up to three years. As a result, the working capital position of MRS post acquisition should be improved on March’s terms.

The lending proposal from an established Australian bank is subject to a number of pre-conditions and the entering into of definitive agreements but it is anticipated that MRS will be able to complete the acquisition by the first week of July.

Given the focus on completing the acquisition, MRS has not been in a position to identify new directors and hence Murray d’Almeida has agreed to defer his retirement as non-executive chairman for the immediate future.

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Tue, 26 May 2015 08:04:00 +0100 http://www.proactiveinvestors.co.uk/columns/northland-capital-partners-view-on-the-city/22263/northland-capital-partners-view-on-the-city-mariana-resources-premier-african-minerals-w-resources-and-melrose-resources-22263.html
And this week's Club-med entertainment includes..... http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22262/and-this-week-s-club-med-entertainment-includes-22262.html FTSE100 Index called to open +10pts at 7040 after the long weekend, holding its May uptrend but with momentum hindered by April falling resistance trend-line at 7050. Support available via May rising lows at 7030 following last week’s 7020 breakout. A break above falling highs needed before revisiting recent/all-time highs 7088 and 7127. Still potential for last week’s bullish ascending triangle pattern to complete 7100. Watch levels: Bullish 7065, Bearish 7015.

The lukewarm opening call comes after European indices ended last week mixed with FTSE100, DAX and CAC40 trading around three-week highs into the long weekend. Greek government spokesman Sakellaridis put forward the country’s desire for a deal by the end of May or early June, adding that a bailout extension would not be needed.

This appeared at odds with PM Tsipras and FM Varoufakis’ comments that Athens would likely default on its next repayment if creditors refuse to make concessions in ongoing negotiations. Meanwhile, the ECB’s QE programme was appraised with government and corporate debt purchases rising by €11.8bn in the week ending 22 May, the smallest increase in 3-weeks.

US bourses closed flat on Friday 22 May with investors squaring positions ahead of the bank holiday weekend. Monday (US, UK and European markets all closed) saw US Fed vice chair Fischer seeking to calm rate-hike nerves by saying that the issue is not when, but by what process policy tightening would happen, and over what time period – namely a series of small hikes over several years.

Asian equities positive with Japan’s Nikkei a touch higher thanks to EUR weakening on regional concerns (Greek debt, Spanish regional elections) which strengthened USD and thus weakened JPY to the benefit of exporting names. Data showing a marked slowing in Japanese Producer Price Inflation has added to JPY weakness (more stimulus needed). Australia’s ASX higher for a similar reason (AUD weaker), helped by utilities as well as perceived benefit from Chinese stimulus.

Chinese stocks registering biggest 6-day gains since Nov ‘08 and Hong Kong hit 7yr highs (playing catch-up; closed yesterday) thanks to continued optimism over Beijing plans to stimulate Chinese economy with >1000 infrastructure projects (worth $318bn; open to private investment), slashing of import tariffs on clothing, liberalisation of capital markets to spur foreign inflows as well as opening of Hong Kong-registered mutual funds to Chinese investors.

In Focus today we have UK CBI Reported Sales looking for a large increase on last month’s print; US Durable Goods Orders pushed down by the transport component (expected -0.5%, ex-transport 0.4%). After lunch it’s an all American afternoon with FHFA House Price Index, Services PMI, New Home Sales (big improvement expected) and Dallas Fed Manufacturing Activity (looking for a less negative print in May).

Oil prices have come off over the weekend with the Brent benchmark trading around $65 with resistance above at $66, while US cousin WTI (US Light Crude) around $59 and testing its own resistance at $60. Both benchmarks now in shallow falling channels, however, amid continuing violence in the Middle East and with OPEC production policy and the prospect of Arctic drilling adding to global supply glut concerns.

Gold back below $1200 for first time since 13 May on account of USD rally/EUR weakening rendering yellow metal safehaven more expensive for non-USD buyers. Having fallen through the major moving averages, watch for assistance around rising lows $1190 which could keep the uptrend dating back to mid-March alive. Support $1190, Resistance $1215.


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Tue, 26 May 2015 07:52:00 +0100 http://www.proactiveinvestors.co.uk/columns/morning-market-pulse/22262/and-this-week-s-club-med-entertainment-includes-22262.html