With India today signifying it may become a net importer of iron ore because of new projects stalling and steel demand growing this is good news for iron ore developers such as Legacy.

The Inferred Resource is now 1.6 billion tonnes at 30.2% iron (25% iron cutoff), with Legacy Iron soon to start work on increasing the confidence categories of the resource.

Although classed as an Inferred Resource, drilling to date has shown the mineralised body to have exceptional continuity both along the 10 kilometre of strike and down dip.

Sharon Heng, managing director of Legacy, commented on the positive outcome:

“This significant JORC resource increase provides further confirmation of Mt Bevan as a genuinely premier magnetite orebody with outstanding potential for extremely attractive project financials which are further enhanced by NMDC’s confirmed support.

"We continue to move forwards to defining a commercially viable resource.”

Mt Bevan is a joint venture between Legacy and Hawthorn Resources (ASX: HAW) whereby Legacy will earn a 60% interest in the project by expending a minimum of $3.5 million to develop the project to a Pre-Feasibility status.


Confidence category boost drilling underway

Legacy Iron remains extremely active at the project and later in the month will commence the phase three 7000 metre drilling campaign, which is targeted at upgrading the resource to the Indicated category.

So far drilling at the project has been conservative to only 300 metres, with the mineralisation remaining open - providing the opportunity for extensions to the strike being made.


Davis Tube Recovery

To date, extensive Davis Tube Recovery testing of mineralisation from phase two has produced very similar results to that of previous drilling.

Using a relatively coarse grind size of P80/50 – 55 microns, testing shows achievable grades of 69% to 70% iron and with high weight recoveries of around 45%. Silica contents at this relatively coarse grind remain low, averaging 3% to 4% with very low sulphur and phosphorus.

Queensland copper-gold focus

Breakaway is selling the West Kambalda tenements to focus its ongoing exploration activities on the highly prospective Eloise copper-gold exploration project in Queensland.

The 480 square kilometre project is located in the Cloncurry Mineral District which hosts in excess of 5 million tonnes of copper.

Breakaway has identified multiple targets within 20 kilometres of the operating Eloise Copper Mine, owned by the company’s second largest shareholder FMR Investments.

Importantly, the Eloise Exploration Project has had very little copper-gold focused exploration for the last 10 to 15 years.

Breakaway recently intersected mineralised zones in all three diamond drill holes at the company’s Sandy Creek prospect, which is part of the Eloise project and a rapidly emerging copper-gold discovery.

Results from the latest round of drilling reinforce the potential for extensions to the existing mineralisation. 

Previous reverse circulation drilling at Sandy Creek has identified continuous high grade copper-gold mineralisation, with drill intercepts up to 6.23% copper over 600 metres strike and 120 metres depth.

Earlier rock chip sampling at the Sandy prospect has indicated the potential for a 125 metre extension to the already defined 600 metre strike length of mineralisation.


Coffers

The $0.3 million and ongoing royalty will build on Breakaway’s cash reserves of $2.2 million at the end of the December quarter.

The company successfully completed a $1.1 million capital raising during the December quarter which is being used to continue ongoing exploration activities at Eloise.

Peak Resources the new Lynas Corporation?

Peak has delivered a strong of very promising results from the project recently, which followed some encouraging preliminary metallurgical testwork.

Worth noting, the project has started to draw comparisons to Lynas Corporations' (ASX: LYC) Mt Weld, being rare earth enrichment in the deeply weathered regolith profile of a large carbonatite.

This week Peak announced some more broad intersections at the project, which will provide further support to the maiden JORC Resource for the the Southern Rare Earth and South West Alluvial Zones, which is on schedule to delivery to the market in the March quarter 2012 - to be completed by Hellman and Schofield.

Highlights from nine holes at the Southern Rare Earth Zone include:

- 49 metres at 5.08% REO from surface; and 95 metres at 5.06% REO from 52 metres (in one hole);
- 32 metres at 5.06% REO from surface;
- 34 metres at 5.03% REO from surface; and
- 120 metres at 3.52% REO from surface.

Across at the Northern Zone, peak results from five holes include:

- 56 metres at 0.48% Nb2O5, 137ppm Ta2O5 and 1.28% REO from surface; and
- 34 metres at 22.1% phosphate from 28 metres.

Adding some interest to a potential new area, a drill hole in the north east of the Southern Rare Earth Zone, 650 metres to the south of drilling in the Northern Zone,  returned high grade niobium; 8 metres at 1.31% Nb2O5 and 179ppm Ta2O5 from 8 metres.

Assays are still pending in the area for an additional 14 holes of the reconnaissance program.


Metallurgical testwork

Non–optimised initial acid leach test work on a composite sample of weathered mineralisation leaches 88% of rare earths, with further leach test work now having been prioritised.

This work is to evaluate the possibility of a relatively simple processing route to produce a high grade rare earth concentrate for this higher grade, near surface portion of the Ngualla rare earth mineralisation.

At the time Peak said that simple wet table characterisation of primary fresh rock rare earth mineralisation produces positive beneficiation results in preliminary sighter tests.

The company remains well funded with $5.7 million cash in the bank at the end of 2011.

- Validation and verification of the previously developed extraction circuit;
- Independent scoping study review;
- Optimisation of the product circuit to reflect the new emphasis on the heavy rare earths, dysprosium and yttrium, with by-product values from zirconium and niobium;
- Pre-feasibility study;
- Design of the revised pilot plant; and
- Working capital.

Monday, Sunridge received a new independent resource estimate, showing a significant increase in size for the Emba Derho volcanogenic massive sulphide (VMS) deposit.

Sunridge said that measured and indicated resources at Emba Derho now stand at 70.0 million tonnes, with an additional 15 million tonnes in the inferred category.

The deposits's copper-rich zone has 49.8 million tonnes at an average grade of 0.83 percent copper and 0.93 percent zinc, and the zinc-rich zone has 16.8 million tonnes at an average grade of 2.80 percent zinc and 0.31 grams per tonne (g/t) gold, according to the research estimate.

Total contained metals in the measured and indicated categories are now estimated at 1.00 billion pounds of copper, 2.1 billion pounds of zinc, 506,000 ounces of gold and 18.6 million ounces of silver.

The new resource estimate was completed by Snowden Mining Industry Consultants as part of the company's ongoing prefeasibility study on the Asmara North deposits, which include Emba Derho, the Adi Nefas zinc-gold-copper VMS deposit and the Gupo gold deposit.

The prefeasibility study is being conducted by Snowden and GBM Minerals Engineering Consultants, and is scheduled for completion in April 2012.

In a research note Monday, Ocean Equities said: "The results today are encouraging for Sunridge. By increasing the overall size of the resource and better defining the ore body the company will have a higher level of certainty in the conversion of resource into reserve as it progresses through the next step of a full feasibility study at Emba Derho."

Excluding the NW zone, Sunridge has grown the size of the measured and indicated Emba Derho resource "by 39 percent", the capital markets firm said.

Ocean Equities added that Emba Derho is set to become "the processing hub of the Asmara North assets", with current optimization studies analyzing the blending of material from Emba Derho, Adi Nefas, Gupo and Debarwa in the prefeasability study.

Looking ahead, in addition to the release of the pre-feasability study, Sunridge is also expecting to release the results of a feasibility study on the Debarwa VMS project.

Released to the market will be an appropriate valuation of the Debarwa project including a production schedule with initial direct shipping ore copper production to ensure quick ramp up and access to early cashflow, Ocean Equities said.

Sunridge Gold is a mineral exploration and development company focused on the acquisition, exploration, discovery and development of base and precious metal projects on the Asmara project in Eritrea. It also holds exploration properties in Madagascar.

The first production sized well is to be drilled in the vicinity of DRC-01, which intersected averages of 713 mg/L lithium (Li), 9,000 mg/L potassium (K), and 543 mg/L boron (B) over the 120 metre drill hole depth, first announced in September 2010. The company said the production well is strategically located to access higher grade portions of the resource,  potentially allowing higher grades during the initial production years.

"Initiating our first production sized well only 17 months after the discovery hole at Diablillos was announced, in our opinion, demonstrates the company’s strategy to fast track the development of the project,” said Rodinia president and CEO, William Randall.

"This marks yet another important step towards completing the work required for a feasibility study.  This first production well, along with the majority of the subsequent evaluation work to follow, will be designed and executed in a manner such that they can also be incorporated into the commercial production facility.

"This is anticipated to save us time and capital as we continue to move towards production.”

Indeed, Rodinia said the drill site is located within the anticipated commercial production well field. The well will target the two largest aquifers modeled in the resource estimate, in addition to being located in one of the deepest portions of the basin.

The production well is designed to test the range of pumping rates, well efficiencies and drawdown/recharge characteristics of the middle and lower aquifers during a long-term, high-volume pump test.

The proposed pump test will proceed for 10-15 days, the company said, and will provide engineering data for a feasibility study.

Last November, Rodinia announces the results of a preliminary economic assessment (PEA) for its Salar de Diablillos project, indicating a potentially low cost operation with a net present value as high as US$964 million, and a mine life of 20 plus years.

The report outlined two production scenarios, the first being an operation producing 15,000 tonnes of lithium carbonate and around 51,000 tonnes of potash per year, and the second producing an increased 25,000 tonnes of lithium carbonate and 85,000 tonnes of potash per year.

The first scenario returned a pre-tax net present value of US$561 million, and an internal rate of return (IRR) of 34 percent at an eight percent discount rate and a lithium carbonate price of US$5,500, while the second alternative projected a much higher net present value of US$964 million, along with a pre-tax IRR of 36 percent.

Total initial capital costs were estimated at $144 million, and $220 million, with years to payback at 1.6 and 1.5 years, respectively. Capital costs were kept low due to an initial unlined evaporation pond, and a planned lithium carbonate plant offsite at an industrial park in Pocitos, with infrastructure, natural gas and power already in place.

Initial capital costs also excluded closure costs and sustaining capital, which are estimated at roughly $80 million.

The company's management sees the first option as the base case scenario, with the potential to produce as much as 25,000 tonnes per year in the first stage in the event that further offtake agreements are secured.

Rodinia, which has an existing strategic investment secured from China's largest lithium-ion battery materials provider Shanshan, said it is already in discussions with multiple groups on this front.

Operating costs per tonne excluding potash and boric acid credits were projected as low as $1,519 per tonne of battery-grade lithium carbonate for the base case, and $1,486 per tonne for the 25,000 tonne per year alternative.

However, including by-product credits that exceed the costs to produce lithium carbonate, combined operating costs were brought below zero, at negative $703 per tonne for the base case scenario. This means lithium carbonate could be stockpiled, and the company would still make money from potash and boric acid revenue.

The proposed operation for Diablillos will use conventional evaporation-based processing, similar to other lithium brine projects (considered the more economical and environmentally friendly process as opposed to hard rock), as brine is to be pumped from subterranean aquifers by a series of production wells to an initial unlined evaporation pond to increase concentration.

High grades and recovery rates, favourable lithologies, low magnesium ratios and high specific yield rates are required to ensure enough contained brine will drain out of a formation by pumping.

The Salar lithium recovery process is a combination of solar evaporation steps, in-field brine treatment, by product potash and boric acid recovery and chemical processing to produce lithium carbonate, resulting in a high lithium recovery of approximately 65 percent.

The process contemplates a series of six ponds from largest to smallest, where the largest is used to bring brine to saturation and is designed to be unlined reducing the capital cost of pond construction, the company said. Rodinia also said there is natural clay occurring near Diablillos that will allow for the construction of the initial pond, offering cost savings over lined ponds.

The Salar de Diablillos property, which rests about 145 kilometres southwest of the city of Salta, has a recoverable inferred brine resource of 2.8 million tonnes lithium carbonate equivalent from an in-situ inferred brine resource of 4.9 million tonnes lithium carbonate equivalent.

In addition to its Argentina project, Rodinia holds 100 percent mineral rights to approximately 70,000 acres in Nevada's lithium-rich Clayton Valley in Esmeralda County, placing it in a prime position to benefit from increasing lithium demand.

Lithium's characteristics make it suitable for a number of uses, but for many years, the metal was used mainly in the production of ceramics, glass and as a strong aluminum alloy. However, demand for lithium has since boomed due to the advent of the rechargeable lithium-ion battery, used in anything from watches and cell phones, to BlackBerrys, iPods and for electric vehicles, power tools and military equipment.

Throughout 2012, Rodinia will focus on continuing to develop the Diablillos project by completing additional evaluation work and advancing through feasibility study.

Shares of Rodinia rose more than two percent Tuesday in early morning trade, to 23.5 cents as of 9:34am ET.

As a general rule, the most successful man in life is the man who has the best information

Sarfartoq Carbonatite Complex

The Sarfartoq Carbonatite Complex, in west Greenland, is 100% controlled by Hudson Resources TSX.V – HUD and is one of the worlds largest carbonatite complexes having approximate dimensions of 13km X 8 km.

The minerals of economic interest are:

Pyrochlore - a niobium and tantalum oxide. In the core of the complex there are high uranium levels corresponding with exceptionally high concentrations of niobium and tantalum, concentrations which are unusually high in comparison to other such deposits throughout the world - the Sarfartoq Project has produced some of the highest known niobium intercepts.

Uranium is directly associated with the niobium in the pyrochlore and is an effective prospecting tool used to identify other pyrochlore occurrences on the project.

Red Ankerite - the bulk material containing bastnaesite and monazite which are host to the rare earth elements. The Sarfartoq Carbonatite’s rare earth elements (REE) are generally found along the outer margins of the carbonatite.

The distribution of individual rare earth oxides, as a percentage of the total rare earth oxides, demonstrate a high proportion of neodymium oxide to total rare earth oxides.

The high grade rare earth oxides on the Sarfartoq Project are associated with low levels of thorium. As a result, the thorium radiometric signature is an effective prospecting tool for identifying additional REE occurrences.

A 2002 radiometric survey identified over 30 targets on the Sarfartoq Project but a significant portion of the area is covered by disaggregated material which may be masking additional radiometric anomalies.

Sarfartoq Project Historical Work

The Sarfartoq Carbonatite Complex was the focus of limited exploration activity after its discovery by Greenland government geologists in 1976.

Hecla Mining completed a small initial drill program in 1989 which was followed by New Millennium Resources spending in excess of five million dollars on exploration from 2000 to 2002.

Non-compliant NI 43-101 historical results include a trench sample grading 14.4% Nb2O5 over 200 meters and a diamond drill hole averaging 12.13% Nb2O5 over 20 meters starting from near surface.

Bench-scale metallurgical test work carried out on the pyrochlore material from 2000-2003 demonstrated that recoveries of over 95% for niobium and uranium are achievable utilizing solvent extraction.

No follow up work was ever done on some highly anomalous REE results in a number of areas within the outer ring structure of the carbonatite - the north area, despite the average combined lanthanum, cerium and neodymium oxides samples averaging 1.1% (a number of samples exceeded 4.0%), saw little advanced exploration.

Infrastructure

The Sarfartoq Complex is 20 minutes by helicopter from a major airport, is located near tidewater - in a year round ice free area of Greenland - and is adjacent to very good potential hydroelectric (run of river) sites.

Alcoa is currently evaluating a hydroelectric site within 15 km of the Sarfartoq project to support an aluminum smelter to be built on the coast. The hydroelectric facility would have an installed capacity of 600 to 750 megawatts. Civil infrastructure, including harbors, camps, roads and heliports would be developed to support construction of the project.

Hudson has had preliminary discussions with the Greenland government and Alcoa to ensure access to this clean, cost effective power source should it be constructed.

Moratorium On Uranium Exploration

The Government of Greenland amended the Standard Terms for Exploration Licenses and will permit - subject to their approval - the exploitation of minerals that co-exist with radioactive elements above normal background concentrations. There has been no change to the moratorium on uranium exploration and the government retains all rights to radioactive elements.

Because of the current controversy surrounding uranium mining in Greenland, and the exceptional grades of uranium - consistently hitting one percent - Hudson is not, despite average niobium grades of five percent, committing itself to working in the core of the Sarfartoq Carbonatite Complex at the present time. Instead, it is Hudson’s intention to focus on development of its rare earth prospects, in particular the REE(s) associated with the manufacture of today’s powerful miniaturized magnets.

Todays Sarfartoq Carbonatite Neodymium Mine Project

Hudson has recently released the results of a Preliminary Economic Assessment (PEA) for its Neodymium Mine Project.

The Study shows a Net Present Value of $616M and an Internal Rate of Return of 31.2 % with a 2.7 year pay-back period. The Study was based on the Company’s 43-101 compliant inferred resource of 14.1Mt at 1.5% TREO at the ST1 Zone.

A total of 16,514 meters in 71 holes were drilled in 2011 and these results have not yet been incorporated into the resource estimate or the PEA.

“We are very pleased with the results of the PEA which demonstrate the robust economics of the project. Having the project located adjacent to tidewater provides significant economic benefits in both capital and operating costs. Looking ahead, we expect to have an updated resource estimate completed in early 2012, which will incorporate all of the 2011 drill results which includes dozens of high-grade sections from 2.0% to 6.5% TREO.

We plan to update the PEA with the results of the updated resource estimate in early 2012. As the project economics are quite sensitive to grade, we are optimistic that higher project valuations will be reported in the updated PEA." James Tuer, Hudson’s President

Assays from a five tonne bulk metallurgical sample, collected on surface at the ST1 Zone, graded 2.5% Total Rare Earth Oxides (TREO). Neodymium oxide averaged 20% of total REO’s.

“The extraction of the five tonne metallurgical sample is very exciting for several reasons. Firstly, it confirms the presence of a significant amount of high-grade rare earth material at surface. Secondly, and possibly more importantly, it provides a sufficient quantity of material for us to take the metallurgy through to pilot scale testing. This sample will be incorporated into our updated resource model which we expect to have out in the first quarter of 2012.” James Tuer, Hudson’s President

Recent metallurgical test work from SRC has demonstrated successful extraction of rare earths utilizing acid baking and leaching. Test work showed that two hours of baking, at 220°C and approximately one tonne of acid per tonne of mineralized feed (concentrate) recovers 94% of the TREO.

Neodymium

The U.S. Department of Energy, in its Dec. 2011 report Critical Materials Strategy examined the role that rare earth metals and other key materials play in clean energy technologies such as wind turbines, electric vehicles, solar cells and energy-efficient lighting.

Five rare earth metals – dysprosium, neodymium, terbium, europium and yttrium are considered to be the most critical of the elements considered in the report.

Neodymium is the key to making the highest coercivity rare earth permanent magnets – the superior high strength permanent magnets used for many energy related applications, such as wind turbines (the most efficient turbines require approximately 1,000 kg of neodymium for each megawatt of electricity to be produced) and hybrid automobiles. The shift away from electromagnetic systems towards permanent magnetic-based direct drive systems is increasing demand for these high powered magnets.

Neodymium is in short supply in the global marketplace causing prices to remain robust with neodymium oxide currently quoted at US$200/kg, FOB China, and at US$100/kg, within China, according to metal-pages.com

Neodymium Mine

The distribution of individual rare earth oxides, as a percentage of the total rare earth oxides, from the Phase Two program at HUD’s Sarfartoq Carbonatite’s ST1 Zone are documented in the table below. The results are consistent with previous assay results and demonstrate a high proportion of neodymium oxide to total rare earth oxides at 19% - based on the present inferred resource the ST1 Zone at Sarfartoq represents one of the industry’s highest ratios of neodymium to total rare earth oxide (TREO).

Note that the gross amount of neodymium (Nd203, 40 Mkg in total) oxide is approximately the same at each of three locations, this is important for development of the project as a neodymium mine.

Also note; Hudson’s ST1 Zone represents one of the industry’s highest ratios of neodymium and praseodymium to TREO, totaling 25%, and that drilling at ST40 continues to intersect a very high ratio of neodymium oxide to TREO at 46%.

 Management & Board

  James Tuer - President & Director;

MBA, Mechanical Engineer. CEO of Hudson since 2000. Public company & corporate finance background (TD Securities)

  Jim Cambon – VP Project Development;

B.Sc. Geology. Over 20 years international mining/engineering project experience (AMEC, Bateman) including specific arctic project experience (Ekati, Snap Lake)

  John McConnell - Director

Professional Mining Engineer with an extensive background developing and operating mining projects, particularly in arctic regions. President of Victoria Gold

  Flemming Knudsen - Director;

Retired CEO of Royal Greenland A/s, Greenland’s largest company. Extensive world-wide business experience. Strong connections in the EU.

  John Hick - Director;

Has served in a senior capacity and/or on the board of directors of major mining companies (Placer Dome, TVX Gold, Rio Narcea) .

  Dr. John A. McDonald - Director;

He and his technical team were directly responsible for the discovery and development of the Snap Lake diamond deposit, acquired by De Beers for $480 million in 2000.

  Dr. Peter Le Couteur – Consulting Mineralogist;

A mineralogist with significant experience working with carbonatites. Ex-Cominco.

  Dr. Mike Druecker – Consulting Geologist:

Ex-Hecla, professional geologist, one of the pioneers in rare earth exploration dating back to the 1970’s.

  John Goode– Consulting Metallurgist:

48 years experience with numerous rare earth projects in China, Canada and the USA.

2012

Hudson’s plans for 2012 include the commencement of a prefeasibility study (PFS) and an extensive drill program which will further delineate the high grade zones encountered in 2011 as well as other prospective targets that have been identified around the 32 km circumference of the Sarfartoq Carbonatite Complex. With current working capital of $12.5M, the entire 2012 program could be accomplished with the current treasury.

Conclusion

There currently exists a formidable demand for Hudson’s primary target, neodymium and its other potential by-product credits ie praseodymium. Neodymium is in a supply deficit, both in China and in the west - the magnet industry demand for neodymium is expected to grow by about 10% per year.

Hudson’s Neodymium Mine Project should be on everyone’s  radar screen. Is it on yours?

If not, maybe it should be.

Europe planned to reduce dependence on Iranian oil gradually and stop importing crude from the Middle Eastern country, which is accused of illegally developing a nuclear weapon completely by July.

Iran reacted angrily, threatening to cut off oil supplies to Europe immediately and block access to the Strait of Hormuz – a major shopping route used to transport a fifth of the world’s oil.

A little over a week ago, the Iranian parliament delayed a vote on an oil ban; today, however, state media said the state is ready to halt shipments to Europe.

Such a move by Iran would force Europe to step up efforts to find oil suppliers to make up for the resulting shortfall. Europe imported 600,000 barrels of Iranian crude per day in the third quarter of 2011.

US light, sweet crude for March delivery, currently the most actively traded contract on the New York Mercantile Exchange (NYMEX), rose 7 cents to US$96.98/barrel in morning trade in New York.

March Brent crude surged 52 cents to US$116.54/barrel on the ICE Exchange this afternoon.

Today’s top risers in the oil and gas sector were:

Woburn Energy (LON:WBN), up 17.5 percent at 2.2 pence at midday

TXO (LON:TXO), up 14 percent at 0.615 pence

Nostra Terra Oil & Gas (LON:NTOG), up 12 percent at 0.465 pence

Sterling Energy (LON:SEY), up 8 percent at 41.25 pence

Amerisur Resources (LON:AMER), up 7.5 percent at 21.25 pence

The top fallers were:

Mediterranean Oil & Gas (LON:MOG), down 7.5 percent at 4.75 pence at midday

Petro Matad (LON:MATD), down 7 percent at 28.12 pence

Kea Petroleum (LON:KEA), down 6.5 percent at 6.3 pence

San Leon Energy (LON:SLE), down 5.5 percent at 10.62 pence

Caza Oil & Gas (LON:CAZA), down 5 percent at 11.85 pence

Other notable fallers included fashion house Burberry (LON:BRBY, down 3.4pct at 1,397p) and builders’ merchant Wolseley (LON:WOS, down 2.4pct at 2,234p).

US markets

US stocks dropped in morning trade, tracking losses in European and Asian markets.

The Dow Jones Industrial Average (DJIA) was down 25 points (0.2 percent) at 12,820 in morning trade and the broader S&P 500 index declined four points (0.3 percent) to 1,340.

Today’s macroeconomic calendar is very thin with no notable updates due to be released except for consumer credit data for December from the Federal Reserve. The key event of the day will be Fed chairman Ben Bernanke’s testimony to the Senate Budget Committee.

Speaking before the House Budget Committee last week, Bernanke said the economy had been on the mend, but said the pace of the recovery had been slow.

UK corporate news

Back in the UK, Xstrata and Glencore have agreed a merger deal, which will see the two FTSE 100 constituents create a US$90 billion resource group.

Under the terms of the merger agreement, Xstrata shareholders will receive 2.8 new shares in Glencore for every share they currently hold in the Anglo-Swiss mining group, providing them with a 45 percent stake in Glencore.

The deal values Xstrata at £39.1 billion, translating into 1,290.1 pence per share, which represents a premium of 15.2 percent to its closing price on February 1, the last day before the companies revealed they were in merger talks.

Other news in the FTSE 100 included an financial results report from BP (LON:BP., down 1.7pct at 481.1p), which raised its quarterly dividend by 14 percent to eight US cents per share, the first increase since the oil and gas supermajor resumed paying dividend a year ago.

The move came after BP saw an increase in its replacement cost profit from US$4.4 billion in the last quarter of 2010 to US$5 billion in the final three months of 2011.

In the FTSE 250, Bellway (LON:BWY, down 2pct at 764.5p) said the housing market remains resilient, however, it cautioned that it is unclear whether this strength is sustainable and could be better assessed at the end of March when it reports its interim results.

In addition, the house prices said growth in house prices will likely slow this year.

In the six months to end January, Bellway’s home sales rose five percent to 2,455 as private home sales surged 15 percent, resulting in an 8.7 percent increase in the average selling price to £183,000.

Fellow midcap tour group TUI travel (LON:TT., down 1.7pct at 203p) took advantage of the woes afflicting rival Thomas Cook to boost its share of the UK market.

The Thomson and First Choice owner said bookings for next summer were flat compared with a decline of 14% for the market overall.

The group added that UK Winter trading had improved with load factors and late sales margins ahead of the prior year, but the problems in North Africa hit demand and meant losses rose in the three months to December despite higher revenues.

TUI generated revenues of £2.85 billion, up from £2.72 billion, in the quarter but operating losses rose to £131 million from £117 million.

David Cummings, Standard Life’s head of equities, said the proposed exchange ratio "clearly undervalues" Xstrata's assets and future earnings contribution even though he added there were merits in the combination.

"Consequently it is our intention to vote against the deal unless the merger terms for Xstrata shareholders are materially improved,” he said.

Xstrata shareholders will get 2.8 shares in Glencore for each they own currently and end up in total with 45% of the enlarged company, which will be called Glencore Xstrata International.

The price values each Xstrata Share at 1,290.10p and the company overall at approximately £39.1 billion or a 15% premium to its value before the merger talks were revealed last week.

Richard Buxton, at investment firm Schroders, added that if it is a merger of equals, Xstrata shareholders should get a 50% proportion from the deal.

Schroders wants the premium over its pre-announcement value to be increased to 20%, according to reports today.

Schroders owns 1.45% of Xstrata, while Standard Life is Xstrata’s fourth largest shareholder at 2.15%.

The deal has been structured as a scheme of arrangement, which requires 75% Xstrata shareholder approval but with Glencore unable to vote its existing 34% stake, only 16.4% of shareholders need to object for the merger to falter.

It could also face a number of other hurdles before it is approved. Some observers have suggested it could take a year for the merger to get past the regulators.

Mick Davis, Xstrata’s chief executive, will assume that role at the enlarged group with Glencore’s chief executive Ivan Glasenberg to be deputy CEO.

Davis said today that the new group recognises it will have to spend time with shareholders to explain the deal.

He added though that the merger was the “logical next step for two complementary businesses, each with an outstanding track record of shareholder value creation, entrepreneurial management and a proven ability to spot valuable opportunities and capitalise on them".

Sir John Bond, the current Xstrata non-executive chairman, will be non-executive chairman of the combined group.

On a combined basis in 2011, the group would have generated revenues of $209.4 billion and adjusted EBITDA of $16.2 billion.

Cost savings from the merger are estimated at US $500 million in 2012, but broker Liberum Capital suggests this number is conservative with a further  US$300m possible financing synergies and further potential head-office synergies of $100m.

The broker also feels is it is unlikely shareholders will vote down the deal as shareholders would get no  synergies, no premium and be left with the problems  of what to do with management  and how resolve a heightened problem with its biggest shareholder Glencore. 

The deal comes less than a year since Glencore raised £6.8 billion through the largest listing ever seen in London.

Xstrata was formed when it bought trader Glencore’s coal assets in 2002. Since then, it has added interests in copper, zinc, ferrochrome and vanadium.

Glencore Xstrata International will be the world’s fourth largest mining group by market capitalisation, behind BHP Billiton (LON:BLT), Brazil's Vale and Rio Tinto (LON:RIO).

Xstrata’s full-year results today, revealing a 23% jump in pre-tax profits to $8.15 billion, as revenues increased by 11% to $33.88 billion.

Shares in Glencore fell over 2% to 448p, while Xstrata was 4% lower at 1,211p.

•      Greek PM due to meet with party leaders some time after 1600GMT, according to Greek press.

•      SNB says it will not tolerate EUR/CHF breaching the 1.2000 level.

•      RBA unexpectedly hold base rate at 4.25%.

•      RANsquawk European Morning Briefing Video:  http://www.youtube.com/watch?v=_xbimIsQx10

Market Re-Cap

Ahead of the North American open, European Indices are trading in negative territory following further deliberations over a Greek settlement, with a tentative meeting between the Greek PM and his respective Party Leaders scheduled for some time after 1600GMT as well as an underperforming Basic Materials sector following caution over the upcoming Glencore/Xstrata merger.

In foreign exchange news, the EUR/CHF currency pair has exhibited volatility following comments from the SNB’s acting Chair Jordan. Jordan has committed the Central Banks’ resources to preventing any further appreciation of the CHF adding that the SNB will buy unlimited amounts of Forex to defend the minimum level of 1.2000. Overnight, the AUD index has appreciated following an unexpected move by the RBA to hold its base rate at 4.25%, with many analysts expecting a drop in rates due to the global economic outlook and domestic job losses.

In terms of European economic releases, German Industrial Production data fell below expectations for the month of December, posting a 2.9% fall while the figure was expected to stay flat at 0.0%.  

US Headlines

President Obama will release his budget plan next week, calling for USD 3trl in deficit reductions over 10 years, including USD 1.5trl in tax increases to fall mostly on the wealthiest Americans. (WSJ)

Senate votes 75-20 to approve the USD 63bln FAA bill setting in place four years of airport construction and repairs as well as an ambitious plan to replace the country’s radar system. (Sources)

Data from the US later today will give a further insight into the US labour market with the JOLT figure for December expected at 1500GMT.

Asian Headlines

Japan’s push to enter a broad Asia-Pacific trade pact known as the Trans-Pacific Partnership faces one of its toughest challenges this week in the form of Washington’s approval. The Japanese pact is opposed by many American manufacturers and unions, but also those who do not believe Japan can deliver on its promises. (WSJ)

Fitch’s Colquhoun has said a Chinese hard landing is potentially the biggest risk for global economy in 2012. These remarks have come following an IMF cut of Chinese growth forecasts to 8.25% from 9.0%. (Sources)

EU and UK Headlines      

According to ekathimerini, the Greek PM is due to meet respective party leaders some time after 1600GMT to discuss new austerity measures required to meet the Troika’s standards for a second bailout. (Sources)

European Commission Vice-President Kroes has said that a Greek exit from the Euro would not end the currency union, adding that there would be “absolutely no man overboard” if Greece was to leave the EMU. (BBC) 

German Industrial Production data posted earlier in the European session reported disappointing figures for the month of December, with analysts expecting no change, however the figures exhibited a significant decline. 

German Industrial Production SA (Dec) M/M -2.9% vs. Exp. 0.0% (Prev. -0.6%, Rev. 0.0%)

German Industrial Production NSA WDA (Dec) Y/Y 0.9% vs. Exp. 4.3% (Prev. 3.6%, Rev. 4.4%) (Sources)

UK same store sales have fallen as consumer caution has returned to the UK economy, this caution has been reflected in the second worst January performance since the measure began 1995.

UK BRC Sales Like-For-Like (Jan) Y/Y -0.3% vs. Exp. 0.8% (Prev. 2.2%) (Sources)

EQUITIES

European equity markets are trading negatively ahead of the North American pulled downwards by the Basic Materials sector following news concerning the Glencore/Xstrata merger, with some shareholders, including Schroders PLC, intending to vote against the proposals. (Sources)

Despite weaker than expected revenues from GlaxoSmithKline which, in turn, weighed on the share price, the Health Care sector in Europe is showing modest gains due to defensive movements into the sector’s stocks and away from the riskier assets.

GlaxoSmithKline Q4 ex-items EPS GBP 0.284 vs. Exp. GBP 0.283

- Q4 group revenue GBP 6.98bln vs. Exp. GBP 7.31bln

- Sees GBP 1-2bln share buyback in 2012

- Q4 dividend GBP 0.21

- Q4 consumer healthcare sales increased 3% to GBP 1.27bln

- Co. in active discussions to sell rest on non-core OTC.

Shire have advanced yesterday’s gains amid further talk that the company is subject to takeover talks, with Bayer, Pfizer and AstraZeneca previously being linked to the company. (Sources)

The Consumer Goods sector is also suffering losses with Swatch Group exhibiting the largest percentage loss. The group published a set of corporate earnings that has “no positive surprises at all” according to a Swiss analyst. The company reported below expected operating profits and witnessed the largest share decline since November 21st. (Sources)

UBS have reported their corporate earnings for Q4 2011, showing unexpected underperformance for net profits and trading income, with the company saying that further tactical cost-cutting is limited and their revenue growth and net new money are facing significant headwinds. Following this, UBS are trading down ahead of the North American open. (Sources)

Top performing sectors in the BE500: Health Care (+0.58%), Utilities (-0.16%), Telecommunications (-0.49%)

Worst performing sectors in the BE500: Basic Materials (-1.38%), Industrials (-1.31%), Consumer Goods (-0.88%)

**Note: For US equity news in detail, kindly refer to the RANsquawk Daily US Equity Opening News report.

FX

Statements from the SNB’s acting Chair Jordan have reiterated the Swiss Central Banks’ stance that it will not tolerate EUR/CHF breaching the 1.2000 level, and the SNB will buy unlimited amounts of Forex to prevent the CHF from appreciating further. (Sources)

AUD index has appreciated following announcements from the RBA that they will maintain their base rate at 4.25%. Most analysts had expected a fall in rates to 4.00% due to concern over the global economic outlook as well as domestic job losses. (Sources)

COMMODITIES

Heading into the North American open, WTI and Brent crude futures are trading near the unchanged level as market participants await further clarity on debt swap talks in Greece. 

Oil & Gas News:

• Barclays sees WTI crude at USD 112/BBL and Brent Crude at USD 118/BBL in Q2 2012. 

• Exports of liquefied natural gas from the US will likely cause the domestic price of natural gas to increase minimally between 2015 and 2035, an Energy Information Administration (EIA) official said. 

• According to Iranian envoy to New Delhi, India is to pay 45% of its oil imports from Iran using INR and that Indian demand for Iranian oil is normal. Adds that Iran has no plans to extend discount on crude sales to India. 

• The Iranian oil minister yesterday placed a ban on licenses for foreign companies wishing to develop domestic petrochemical projects in Iran, Mehr news agency reported. 

• A Turkey energy official has said natural gas flow from Azerbaijan halted today and gas flows from Iran have declined. However officials noted that the cut in Azeri and Iranian gas supply are both due to a technical problem. 

Geopolitical News: 

• Some 20,000 marines, seamen and air crews from half a dozen countries, a US nuclear aircraft carrier strike group and three US Marine gunship carriers are practicing an attack on a fictitious mechanized enemy division which has invaded its neighbour. It is the largest amphibian exercise seen in the West for a decade, staged to simulate a potential Iranian invasion of an allied Persian Gulf country and a marine landing on the Iranian coast. Based largely on US personnel and hardware, French, British, Italian, Dutch, Australian and New Zealand military elements are integrated in the drill. 

**Note: For commodities news in detail, kindly refer to the RANsquawk Daily Energy Commentary report.

The broker reckons a preliminary economic assessment of the Songwe rare earth project in the third quarter of this year could see the firm being valued on a par with some of its larger peers.

At present Mkango is worth around C$18 million but, according to VSA analyst Jessica Pendal, the pivotal report could potentially put it in a similar bracket to Greenland Minerals (ASX:GGG), Quest Rare Earths (CVE:QRM) or Frontier Rare Earths (TSE:FRO) – which are valued at C$252 million (A$235 mln), C$198 million and C$100 million respectively.

Pendal highlights that Mkango has concentrated on the flagship Songwe project, which is hosted within the Phalombe licence. 

To date it has commissioned a technical report and is implementing a two stage drill programme. 

The first stage was completed in the first half of 2011. It completed 2,000 metres of diamond drilling in thirteen holes in this part of the programme. Then last month Mkango kicked off a 3,000 metre programme. Around 500 metres have been drilled so far.

The economic assessment will incorporate the findings from both drill programmes and the technical report.

The analyst adds that, like most rare earth projects, mineralogy and metallurgy are the key to unlocking value.

“Mineralogy work is on-going but the latest preliminary results suggest that the principal REE bearing minerals are synchysite, apatite and some minor florencite,” Pendal said.

“The HREE and yttrium are possibly being found in the highest concentrations within the apatite; a potential benefit is that technology for processing of apatite is well established. All mineralogical results are being used to assess processing options.”

Additionally, she points out that as a result of last year’s work, Mkango’s initial exploration focus is on alluvial occurrences of zircon.

"Mkango now plans mapping, geophysical tests and collation of local knowledge intended at fast-tracking the development process and putting the “Thambani alluvial zircon” project into small scale pre-production and generating some cash flow,” she added.

“Production, likely via simple gravitation, could potentially begin at the start of 2013.” 

The supply squeeze of rare earth minerals has been a hot story in the mining sector over the past few years.

In all there are around 17 rare earth metals – although there are many other associated minerals that are often bundled into the category.

These sought-after elements are used in products as diverse as iPods and hybrid cars. But the problem is that China controls the vast majority of global supply.

For manufacturers outside the People's Republic, such as Toyota - which makes the Prius electric car - or consumer goods giants such as Apple, the impending shortage is a major threat to business.

However it represents a massive opportunity for companies exploring for rare earths such as Mkango. The company owns two projects in Malawi – Thambani and the Songwe. 

Songwe is the most advanced of the two and has an interesting history. During the 1980s it was drilled by the Japan International Cooperation Agency, or JICA, and the Metals and Mining Agency in Japan (MMAJ). 

They actually got as far as establishing a historical estimate of 1.4 million tonnes at 1.74 per cent rare earths including lanthanum, cerium, neodymium, yttrium and europium, but didn’t assay for the full suite of rare earths. Furthermore, it was based on limited holes drilling only to 50 metres.

Morning View:

Economic News:

Europe - Pressure continues to mount of Greece.

· French and Germany officials reiterated yesterday that there would be no bailout unless the Greek political parties came to an agreement. 

· Officials from the 3 party coalition have postponed the meeting to agree the cuts until today. 

· Angela Merkel yesterday stated there would be no deviation from the deal. Greece must agree to current proposals and can not hold the rest of the Euro zone to ransom. 

· Greek Officials yesterday agreed to a 20% cut in minimum wage and 15,000 public sector job cuts 

China – Chinese stocks are off today on the back of new growth concerns following comments from the Ministry of Industry and Information Technology that indicate industrial output will slow this quarter. 

· “China’s industry development is facing an increasingly complex domestic and international environment with increased unstable and uncertain factors”

· Output grew 13.9% in 2011 from the previous year, according to the statistics bureau. 

· The government is targeting an 11% increase for 2012. 

India – India takes a knock as growth is expected to drop below 7% in the current financial year.

· The Reserve Bank of India is expected to begin cutting interest rates and inflation remains elevated which is adding to further stress on the central banks ability to prop up growth.

· The governments estimates for 20/11/2012 show farm output expected to grow at 2.5% and manufacturing to grow by 3.9%

Russia – Foreign Minister Sergei Lavrov will meet with President Assad today in Syria, in a bid to implement swift reform aimed at halting the attacks on civilians.

Australia –The Reserve Bank of Australia left the overnight cash rate target at 4.25%  - in line with estimates. 

South Africa – Government officials have indicated that no new taxes will be sprung on miners in the country and that if any changes were to occur it would likely happen with a revision to the country’s mining code.

· At the same time the Government’s Planning Minister indicated that the mining industry in the country needed to be used to drive other changes in the country. 

· Speculation continues to mount that the commission established to look into the case of mine nationalisation will find against it. 

Commodity News:

Precious:

Gold US$1,717/oz vs US$1,731/oz yesterday – Gold is little changed this morning ahead of a meeting in Athens today in regards of the terms of a new bailout.

· HSBC forecasts gold price to average US$1,850/oz this year amid low interest rates environment and an uncertainty in the financial markets. 

· Chinese gold imports dropped 62% to 38.8m in Dec from the highest ever level of 102.8t in Nov as retail and jewellery manufacturers’ demand slowed down.

· China’s physical demand is typically less in Dec according to the historical data.

· Workers at the Kumtor mine operated by Centerra Gold in Kyrgyzstan went on strike demanding additional contributions to a state social fund. The mine produced 585koz of gold in 2011.

· DRDGold has suspended operations at 2 shafts at the Blyvoor project in South Africa on falling recovery grades to below cut off.

· Halt of production at low-grade No 4 and No 6 shafts will affect up to 1,800 workers.

· The company will use shafts to pump uindeground water into Blyvoor’s surface recovery circuit on the surface.

· The sompany said negotiations with Village Main Reef in regards of a possible sale of DRDGold’s 74% interest in Blyvoor were not affected.

· SPDR gold trust holdings remained at 1.277t (41.061moz) value US$70.554bn.

Platinum US$1,629/oz vs US$1,618/oz yesterday

Palladium US$707/oz vs US$701/oz yesterday

Silver US$33.75/oz vs US$33.57/oz yesterday

Rhodium US$1,428/oz vs US$1,425/oz yesterday              

Base metals:

Copper US$ 8,470/t vs US$8,533/t yesterday – Copper is off today on fears a worsening financial crisis in the Euro zone may cut economic growth in China, the world’s largest consumer of the metal.

· Economic growth in China will hale in 2012 should a recession hit Europe, the IMF said.

· Barclays forecasts the copper market to move into surplus of 121kt in 2014 compared to a deficit of 376kt this year and 7kt in 2013.

· Prices will average US$9,000/t, the bank said.

Aluminium US$ 2,220/t vs US$2,245/t yesterday

· Barclays forecasts the aluminum market to record a 33kt shortage in 2014 versus to a surplus of 224kt in 2012 and 336kt in 2013.

· The bank expects prices to average US$2,313/t this year.

Nickel US$ 21,543/t vs US$21,214/t yesterday

Zinc US$ 2,127/t vs US$2,149/t yesterday

Lead US$ 2,185/t vs US$2,225/t yesterday

Tin US$ 24,360/t vs US$23,950/t yesterday

Energy:

Oil US$115.93/bbl vs US$114.58/bbl yesterday – Brent spot gets this morning with Brent futures March delivery reached $116.50 yesterday on the London-based ICE futures exchange.

· U.S. crude is relatively flat at $97.03/bbl on the New York Mercantile exchange with WTI at $97.13/bbl on the ICE. 

· Energy production is being severely damaged in Syria as another oil pipeline was blasted yesterday 

· The latest explosion hit a pipeline carrying crude oil from the eastern al-Ramlan field in the Eastern Deir al-Zor province, feeding a Syrian oil refinery near the city of Homs. 

· Shares opened up 0.6% at 492p over BP’s announcement of an increase in fourth quarter profits. 

· The profits were proportionally down to the company paying a lower tax rate and the effects of its divestments, therefore unsustainable. 

· BP has decided to raise its dividend for the first time since the Gulf of Mexico spill and future profit margins will improve off the back of higher oil prices. 

· Canada’s Prime Minister Stephen Harper is visiting China to hold oil sales talks following the Obama administration’s rejection of the TransCanada XL Pipeline that would have carried oil across the United States. 

· America soaks up 97% of Canadian oil exports. However, America wants greater energy independence which leaves Canada to look east in order to diversify energy sales. 

· Sinopec Corp., a Chinese state-controlled oil and petrochemical company has a stake in a proposed Canadian pipeline to the Pacific Ocean that would substantially boost Chinese investment in Alberta oil sands. 

Natural Gas US$2.55/mmbtu vs US$2.456/mmbtu yesterday – UK Spot prices traded at their highest levels since 2006, having risen steadily since last Tuesday following the recent cold weather spat.

· The UK’s natural gas prices are rising also to fall in line with higher European prices. 

· Same- day prices were trading at 87.50p p/therm by Monday afternoon 

Uranium US$52.95/lbs vs US$52.95/lbs yesterday – EDF and Areva are about to sign a long term contract this week for the supply of uranium, French newspaper Les Echos reported without identifying a source.

Coal – Glencore produces c.20million metric tons of power station coal.

· The $62bn takeover of Xstrata would make them the largest thermal coal exporter. 

· Glencore’s 20 million metric ton current production levels would increase fivefold through the acquisition. 

Other:

Iron ore – Global iron ore production increased by 8% yoy in 2011, a slower growth rate compared to the previous year, Raw Materials Group said yesterday.

· The bulk of iron ore was shipped to China tat accounted for 680mt of world demand.

· Demand is forecast to almost double over the next 20 years and reach 3.5bn tons.

Steel – ArcelorMittal, the world’s biggest steel maker, reported a 7.6% yoy drop in EBITDA in Q4 to US$1.71bn, the lowest reading in 2 years. Results were in line with analyst estimates.

· The company expects an improvement in the steel demand in H2 this year.

· Prices for hot-rolled steel coil, a benchmark material used in vehicles and construction, have been in decline for 3 quarters in a row and reached the lowest level in 13 months in Dec, according to Steel Business Briefing’s price index.

Company News:

EMED (LON:EMED)* – Agreement with a Chinese partner for a US$30m funding package

· The company secured a US$30m financing provided by its future customer, a leading Chinese metal processor Yanggu Xiangguang Copper (XGC).

· XGC will provide US$15m in a subordinated debt facility and the other US$15m in exchange for a 10% stake in EMED. XGC will buy newly issued shares at a price of 9p.

· As part of the deal XGC was granted rights for 25% of the company’s current reported copper reserves.

· The company said it is in advanced talks with various financial institutions in regards of a project financing of US$175m.

· Negotiations continue with regulatory bodies in Andalucia, Spain, in order to obtain all necessary permits to launch project works at the end of 2012 and to commence production in 2013.

· The funding and off take agreement will help the company to move the project towards production as well as to build business links with China in addition to local Spanish and other European markets.

* Fairfax acts as Joint broker to EMED Mining

Xstrata (LON:XTA) – Preliminary annual results FY 2011

· Annual operating EBITDA was US$11.6bn in 2011, up 12% from 2010.

· Attributable profit (excluding exceptional items) advanced by 12% yoy to US$5.8bn, beating an average estimate of US$5.63bn.

· Record net earnings were driven by higher volumes, cost cuts programmes and increased commodity prices that outweighed adverse currency changes and continuing regional and industry-specific inflationary pressures.

· US$391m in real cost savings with all commodity businesses moving into lower half of sector cost curves.

· The company announced a final dividend of 27 cents per share, taking the total for 2011 to 40 cents, up 60% from the previous year.

· 10 projects and expansions completed during 2011.

· Strong H2 production with record coal and nickel production.

Glencore/Xstrata merger – Companies have agreed a 2.8 of Glencore shares for every Xstrata share merger that would create a commodities group with a total value of US$90bn.

· The deal provides a 15.2% premium to Xstrata’s closing share price of 1,119.5p and nearly 27.9% to its volume-weighted share price of 1,008.9p over 3 months ended Feb 1.

Horizonte Minerals (LON:HZM) – Acquisition of Vila Oito and Floresta nickel laterite projects in Brazil

· The company completed the acquisition of 100% of the Vila Oito anand Floresta nicekel laterite projects for a total consideration of C$2m in the form of 8.5m of newly issued shares.

Amur Minerals (LON:AMC) – Placing of £5.48m in ordinary shares

· The company raised £5,480,800 (before expenses) for a total of 68,541,000 ordinary shares at 8p each.

· The funds will be used to finance metallurgical and engineering studies along with additional drilling at Kun-Manie. JORC studies will be carried to update current estimates.

· 2012 exploration programme includes up to 7,000m of diamond drilling in adjacent areas to defined resources and reserves and in new locations. 

· Targets are estimated to contain nickel and copper mineralisation. Key targets are around Maly Krumkon / Flangovy, Ikenskoe / Sobolevsky and Kubuk.

· Analytical results of 2011 exploration works continue to arrive from laboratories. The company will release the details of assays in coming weeks.

· The company plans to carry more scoping studies to optimize the project and future plant design.

Mining this week: 

Shanta Gold (LON:SHG)* - Shanta Gold shares rise on good news from drilling at the New Luika Gold Mine

Randgold Resources (LON:RRS) – Q4 results show record profit and production

Baobab Resources (LON:BAO) – IFC agreed to support the 2012 exploration programme at Tete project, Mozambique, with a contribution of US$1.9m

Coal of Africa (LON:CZA) – BEE companies will acquire a 26% interest in the Chapudi Coal project and related exploration properties

Glencore/Xstrata merger – Glencore may offer a larger than expected premium for Xstrata shares in a US$88bn merger.

The valuation includes other properties owned by the company worth a combined US$2 million and its cash reserves of US$7.5 million, representing a premium to the company’s current market cap of nearly £33 million.

This estimate, however, does not account for the potential of another asset owned by Herencia, the Guamanga copper-gold project in Chile, which is located just 15 kilometres south of Anglo American’s (LON:AAL) large Mantoverde mine.

Last month, Herencia confirmed the existence of deeper drill targets at Guamanga, which are to be tested during the current quarter.

“Given that Guamanga is within a proven iron oxide copper gold (IOCG) belt, likely analogue analysis would suggest there is a prospect of a significant and company making discovery,” said Smith.

“However quantifying the chance of achieving significant exploration success is clearly speculative.”

The company, said Smith, should also benefit from the experience in zinc and Chile of two of its significant shareholders, the world's largest zinc smelting company Nyrstar and Chilean investment fund Megeve.

Heading into the North American open, WTI and Brent crude futures are trading near the unchanged level as market participants await further clarity on debt swap talks in Greece. 

Oil & Gas News:

• Barclays sees WTI crude at USD 112 and Brent Crude at USD 118 in Q2. 

• Exports of liquefied natural gas from the US will likely cause the domestic price of natural gas to increase minimally between 2015 and 2035, an Energy Information Administration (EIA) official said. 

• According to Iranian envoy to New Delhi, India to pay 45% of its oil imports from Iran using INR and that Indian demand for Iranian oil is normal. Adds that Iran has no plans to extend discount on crude sales to India. 

• The oil minister yesterday placed a ban on licenses for foreign companies wishing to develop domestic petrochemical projects in Iran, Mehr news agency reported. 

• Turkey energy official says natural gas flow from Azerbaijan halted on Tuesday, gas flow from Iran has declined. However officials noted that cut in Azeri gas, Iran gas supply decline both due to technical problem. 

Geopolitical News: 

• Some 20,000 marines, seamen and air crews from half a dozen countries, a US nuclear aircraft carrier strike group and three US Marine gunship carriers are practicing an attack on a fictitious mechanized enemy division which has invaded its neighbour. It is the largest amphibian exercise seen in the West for a decade, staged to simulate a potential Iranian invasion of an allied Persian Gulf country and a marine landing on the Iranian coast. Based largely on US personnel and hardware, French, British, Italian, Dutch, Australian and New Zealand military elements are integrated in the drill. 

Corporate News: 

• BP posted Q4 net profit USD 7.69bln vs. Exp. USD 5.57bln. Co. Q4 replacement cost profit USD 7.61bln. Co. has raised its Q4 dividend 14% to USD 0.08 per share. Co. says it expects underlying production in 2012 to be broadly flat, excluding TNK-BP. Co. CEO has said he is prepared to settle oil spill litigation if they can do so on “fair and reasonable terms” but is also “preparing vigorously for trial”. 

• Chinese oil giant PetroChina has exported the first gasoline cargo from its 10 million mt/year (200,800 b/d) Qinzhou refinery in the southwestern province of Guangxi last month. 

• Nigeria’s Oando Energy Services has been awarded a two year contract for its swamp rig OES Passion by Anglo-Dutch supermajor Shell for operations in the Niger Delta. 

• Total has started the second phase of the Ofon field development, off-shore Nigerian, which is scheduled to come on stream in 2014. 

Weather news:

Weather Derivatives forecast sees average temp. in the US for the next 6-10 days to be 2.2% below the average at this time of the year. The data is accurate as of 6th February, 2012. There are no tropical cyclones at this time.

The Thomson and First Choice owner said bookings for next summer were flat compared with a decline of 14% for the market overall.

The group added that UK Winter trading had improved with load factors and late sales margins ahead of the prior year, but the problems in North Africa hit demand and meant losses rose in the three months to December despite higher revenues.

TUI generated revenues of £2.85 billion, up from £2.72 billion, in the quarter but operating losses rose to £131 million from £117 million. 

The higher losses were driven by lower demand for North African destinations, TUI said.

Looking forward, TUI said differentiated products accounted for 64% of UK bookings for the summer, an increase of seven percentage points on the previous year. 

There was also an increase in UK online bookings with 49% booked online for Winter, up ten percentage points versus the prior year and 42% for summer, up six percentage points versus the prior year.

Average selling prices are currently up 8% reflecting cost base inflation of approximately 5% and the continued increase in differentiated content.

Peter Long, chief executive, said: "We are satisfied with the progress in trading since our last update and are particularly pleased with the performance of differentiated product, which continues to book earlier, demonstrating the resilience of our business model.

"Our performance remains in line with our expectations and the flexibility of our business model means that we are able to manage capacity to match profitable demand.  In addition, our business improvement programme is progressing according to plan."

BP (LON:BP.) has increased its dividend as it revealed it was back in profit in 2011.

The oil giant said that replacement profits increased to US$7.6 billion for the fourth quarter (Q4 2010 : US$4.6 billion), which will see the firm posts just shy of US$24 billion in profits for the full year.

It comes after a difficult 2010 in which the Gulf of Mexico oil lead to a near US$5 billion loss. 

Today, BP said that a total of U$1 billion has been committed for the early restoration of natural resources following the Deepwater Horizon accident, while US$7.8 billion has now been paid to meet claims and government payments and a further US$15.1 billion has been paid into the Deepwater Horizon Oil Spill Trust fund.

Meanwhile the company is preparing to go to court in New Orleans on February 27.

"As I have said before, we are prepared to settle if we can do so on fair and reasonable terms, but equally, if this is not possible, we are preparing vigorously for trial," chief executive Bob Dudley said.

BP revealed that it generated around US$22 billion in operating cash flows during the year, which is a 60 per cent increase from last year. And due to high oil prices it expects cash flows will continue to grow.

Cash flows may be as much a 50 per cent higher still by 2014.

Some of the cash will be returned to shareholders. It confirmed today that it will increase the fourth quarter dividend by 14 per cent to 8 cents a share. 

Meanwhile half of the cash will be re-invested, it said. 

In the coming year BP plans to start six major upstream projects. It is also planning to drill twelve exploration wells. 

"2012 will be a year of increasing investment and milestones as we build on the foundations laid last year,” Dudley added. 

“As we move through 2013 and 2014, we expect financial momentum will build as we complete payments into the Gulf of Mexico Trust Fund, restore high-value production and bring new projects on stream."

Xstrata shareholders will get 2.8 shares in Glencore for each they own currently and end up in total with 45% of the enlarged company, which will be called Glencore Xstrata International.

The price values each Xstrata Share at 1,290.10p and the company overall at approximately £39.1 billion or a 15% premium to its value before the merger talks were revealed last week.

Mick Davis, Xstrata’s chief executive will assume that role at the enlarged group with Glencore’s chief executive Ivan Glasenberg to be deputy CEO.

Sir John Bond, the current Xstrata non-executive chairman, will be non-executive Chairman of the combined group.

On a combined basis in 2011, the group would have generated revenues of $209.4 billion and adjusted EBITDA of $16.2 billion.

Davis said the merger was the “logical next step for two complementary businesses, each with an outstanding track record of shareholder value creation, entrepreneurial management and a proven ability to spot valuable opportunities and capitalise on them.”

The deal comes less than a year since Glencore raised £6.8 billion through the largest listing ever seen in London.

Xstrata was formed when it bought trader Glencore’s coal assets in 2002. Since then, it has added interests in copper, zinc, ferrochrome and vanadium.

Glencore Xstrata International will be the world’s fourth largest mining group by market capitalisation, behind BHP Billiton, Brazil's Vale and Rio Tinto.

Observers have suggested it could take a year for the merger to get full competition approval. 

ASIA

JGB prices were lower in early trade with the curve steepening, however, JGB futures are recovering part of their earlier losses steadily, on some brave selling that created good dip-buying opportunities. JGBs now seen trading broadly flat at 142.48. Last price taken at 0630GMT. (RTRS)

Japan’s push to enter a broad Asia-Pacific trade pact known as the Trans-Pacific Partnership faces one of its toughest challenges this week in the form of Washington’s approval. The Japanese pact is opposed by many American manufacturers and unions, but also those who do not believe Japan can deliver on its promises. (WSJ)

Fitch’s Colquhoun has said a Chinese hard landing is potentially the biggest risk for global economy in 2012. These remarks have come following an IMF cut of Chinese growth forecasts to 8.25% from 9.0%. (Sources)

US 

T-notes settled in positive territory yesterday, with talk of leveraged fund buying and short covering in the 10y futures. The lack of progress on Greece PSI talks was touted as one of the reasons for the flows into fixed income, although dealers are likely to remain tentative ahead of tomorrow's treasury note auctions, which start with the 3y auction as the first of this week's three note auctions. At the pit close, t-notes settled at 131.21+, up 11 ticks. Finally the DJIA finished down 0.16% at 12842.10, the S&P 500 finished down 0.06% at 1344.08 and the Nasdaq comp finished down 0.12% at 2902.07. T-notes drifted lower overnight heading into the European session in a quiet session, at 0635GMT t-notes were trading down 5 ticks at 131.16+. (RANsquawk)

President Obama will release his budget plan next week, calling for USD 3trl in deficit reductions over 10 years, including USD 1.5trl in tax increases to fall mostly on the wealthiest Americans. (WSJ)

Senate votes 75-20 to approve the USD 63bln FAA bill setting in place four years of airport construction and repairs as well as an ambitious plan to replace the country’s radar system. (Sources)

EU

According to sources, Greece and the Troika are still to agree on EUR 600mln in 2012 measures. (Sources)

Preceding today’s French December 2011 trade balance data, Le Figaro are reporting the deficit will hit a record EUR 69.6bln for the year. (Le Figaro)

Fitch’s Stringer has said he expects severe contagion across the Eurozone if Greek bailout talks fail, adding that crisis resolution rests on a broad-based Eurozone recovery. (Sources)

Germany and France have agreed to a preliminary framework that would merge their corporate tax structures to avoid double taxation and improve the competitiveness of Europe. The framework is said to be a reduction in French corporate tax to match that of Germany’s, 29.5%. (Sueddeutsche Zeitung)

Citigroup said the risk of a Greek exit from Euro has risen to 50%, having previously seen a 25-30% chance over the next 18 months. The bank added that the costs of a Greek exit to the rest of Euro area would be moderate, and expects a deal on the second Greek bailout, seeing no disorderly default in March. (Sources)

FX

The Japanese Ministry of Finance has said it used JPY 8.072trl in ‘stealth’ Forex intervention on October 31st last year in a bid to rein in the strong JPY. (Sources)

RBA Cash Target (Feb) M/M 4.25% vs. Exp. 4.00% (Prev. 4.25%)

The RBA has kept its benchmark cash rate at 4.25% despite a worsening global growth outlook and signs of domestic job losses. The RBA has commented that it will continue to monitor information and will adjust the rate as necessary for growth and inflation. The Central bank has said the underlying inflation rate stands at 2.5% and will remain around that level over the next 1-2 years. The RBA commented on the strong AUD, saying that the currency’s strength reflects EUR weakness. (Sources)

COMMODITIES

WTI crude futures were seen trading broadly flat heading into the European session at USD 96.93, price taken at 0630GMT. (RANsquawk)

UK BRC Sales Like-For-Like (Jan) Y/Y -0.3% vs. Exp. 0.8% (Prev. 2.2%) (Sources)

UK same store sales have fallen as consumer caution has returned to the UK economy, this caution has been reflected in the second worst January performance since the measure began 1995.

The BoE may put a limit on mortgage ratios. (Telegraph) 

According to Chancellor Osborne, the BoE could cap the maximum mortgages available to borrowers in an effort to prevent another credit crisis. The cap would prevent banks and building societies from offering loans if the buyer puts down only a small deposit. 

Britain’s banks, insurers and brokers must change their attitude if the UK’s shift to a “twin-peak” model of two proactive regulators is to take place smoothly and efficiently. (FT) 

According to the CEO of the FSA, firms must look to a broader perspective rather than “what they can get away with” on an individual basis. 

Insolvencies in the retail sector have pushed average high street vacancy rates up to 14.5% in January. (FT) 

The picture is bleakest in the north-west, where close to 20% of high street shops are vacant, recording a higher proportion of empty shops than that of Athens. 

ASIA

Nikkei average finished in minor negative territory, down 0.13%, however, the Shanghai composite was down 1.7% overnight as investors continue to be disappointed that the PBOC has not yet moved on the RRR. (RANsquawk)

Top performing sectors in Nikkei 225: Utilities (+2.09%), Basic Materials (+0.47%), Financials (+0.46%)

Worst performing sectors in Nikkei 225: Consumer Services (-0.65%), Industrials (-0.36%), Consumer Goods (-0.19%)

Toyota Motor – Co. raises FY 2012 group operating profit view to JPY 270bln, with a FY 2012 USD assumption unchanged at JPY 78. Co. sees FY 2012 group revenue view to JPY 18.3trl. Co. lifts FY global sales outlook to 7.41mln vehicles from 7.38mln.  (Sources)

US

Despite a fairly quiet session in the US, equity markets finished flat as Greek concerns continue to dominate market sentiment, with no solid agreement and delayed talks still the dominate theme. Volumes were down to the lowest in 2012 so far, as is usual in the post-non-farms Monday honeymoon period. Markets look ahead to the rest of the week, including earnings reports from Coca-Cola and Walt Disney today. Finally the DJIA finished down 0.16% at 12842.10, the S&P 500 finished down 0.06% at 1344.08 and the Nasdaq comp finished down 0.12% at 2902.07.

Top performing sectors in S&P 500: Oil & Gas (+1.12%) Telecommunications (+0.28%) Technology (+0.08%)

Worst performing sectors in S&P 500: Financials (-0.45%) Health Care (-0.43%) Utilities (-0.34%)

Yum! Brands - Q4 adjusted EPS USD 0.75 vs Exp. USD 0.74, Q4 Revenue USD 4.11bln vs. Exp. USD 4.03bln, Q4 US comp sales rose 1% vs. Exp. down 1.9%.

The co. says it opened a record 656 new units in China, co. shares were up 1.8% in after-market trade. (RTRS)

Anadarko - Q4 adjusted EPS USD 0.85 vs. Exp. USD 0.62, Q4 Revenue USD 3.84bln vs. Exp. USD 3.27bln. The co. says it recorded a non-cash price related impairment of USD 1.5bln in Q, that received insurance proceeds of approximately USD 138mln associated with deep water horizon events, and has resumed an active deep water exploration and appraisal programme in the Gulf of Mexico, co. shares were up 3.2% in after-market trade. (RTRS)

UK

BP – Co. Q4 net profit USD 7.69bln vs. Exp. USD 5.57bln. Co. Q4 replacement cost profit USD 7.61bln. Co. has raised its Q4 dividend 14% to USD 0.08 per share. Co. says it expects underlying production in 2012 to be broadly flat, excluding TNK-BP. Co. CEO has said he is prepared to settle oil spill litigation if they can do so on “fair and reasonable terms” but is also “preparing vigorously for trial”. (Sources)

Glencore/Xstrata – Co.s agree “all-share merger of equals”. The merger will value Xstrata at GBP 39.1bln, with a Glencore-Xstrata merger ratio of 2.8 new Glencore shares per Xstrata share. The Co.s see annual Ebitda synergies USD 500mln. Xstrata CEO Davis to become CEO of combined group. (Sources)

Xstrata – Co. FY net ex-items USD 5.79bln vs. Exp. USD 5.15bln. Co. says FY Ebitda USD 11.6bln vs. Exp. USD 11.5bln and proposes final dividend USD 0.27 per share. (Sources)

Royal Bank of Scotland – CIMB Malaysia and China International Corp are said to be interested in the co.’s Asia-Pacific assets. The co.’s chief of global banking Asia-Pacific and co-head of markets and head of equities are said to be in Hong Kong working on negotiations. (Australian Financial Review)

GlaxoSmithKline – Co.’s Consumer Health unit is looking for buyout opportunities in India. (Economic Times)

Shire – Co. shares gained yesterday on the back of speculation that co. may be subject to takeover. (Daily Express)

Anglo American – Co. is considered one of the most likely targets among major global mining groups, including BHP Billiton, and Glencore and Xstrata once they have completed their merger deal. (Australian Financial Review)

BAE Systems – Co. has signalled its willingness to reduce the price of the Eurofighter Typhoon to win a USD 20bln Indian tender from France’s Dassault. (FT-More) 

Companies paying dividend: Johnson Matthey (GBP 0.1666)

OTHER UK

TUI travel – Co. says performance remains in line with expectations. (Sources)

Shanks Group – Co. says trading in period in line with expectations. (Sources)

Beazley – Co. says FY pre-tax fell to USD 62.7mln vs. USD 250.8mln a year earlier. (Sources)

Misys – Co. is rumoured to be inline for counter-bid at GBP 3.65 per share. (The Times)

FRANCE 

ArcelorMittal – Co. Q4 net loss USD 1bln, due in part to USD 1.3bln of charges. Co. Q4 Ebitda USD 1.71bln vs. Exp. USD 1.68bln. Co. 2012 1H Ebitda is likely to be higher than 2H 2011. Co. sees 1H 2012 steel shipment volumes similar to 1H 2011 and sees mining output higher than a year earlier. (Sources)

Veolia – Co. wins Paris water treatment contract worth total EUR 777mln. (Le Figaro)

EDF – Co. and Areva are likely to conclude an agreement on uranium mines this week. (Les Echos)

LVMH – Shareholders linked to Bulgari family plan to sell only a very limited part of their stake in co. to finance taxes, other costs. (RTRS)

OTHER FRENCH

Lagardere – Co. say to take losses of EUR 900mln in 2011, reports Q4 sales of EUR 1.951bln. Co. confirms its objective for recurring media EBIT in 2011. (Sources)

Air France KLM – Co. may have to cancel more flights over the next few days because of a strike. Co. January passenger activity was up 3.7% for a 0.6% rise in capacity. (Les Echos/Sources)

GERMANY

Deutsche Lufthansa – Co. is to be taken to court by its cabin crew over plans to use contract workers for flights operating out of Berlin’s new airport. (Sources)

PAN EUROPEAN

Several top European banks, including Deutsche Bank and Barclays, are reported to have declined to borrow from the ECB’s LTRO operation from December 2011 as most co.’s are expected to divulge their participation in the ECB’s December operation in their annual results this month. (WSJ)

European company defaults are widely expected to climb sharply this year despite the recent improvement in credit market sentiment as bank lending cuts and a deteriorating economic backdrop put many smaller or indebted companies under pressure. (FT-More)

European Banks – Chinese banks and companies in Tianjin, China have cut their exposure to Europe due to risks arising in the Eurozone sovereign debt crisis with 11 banks reporting to have halted or reduced short-term loans to European banks. (Sources)

Santander – Co. says sees EUR 2.3bln in new property provision. (Sources)

UniCredit – Co. says it bought back a nominal EUR 1.86bln worth of bonds. In other news Fitch affirmed the co.’s A- rating; outlook negative. (RTRS)

Banca Monte dei Paschi di Siena – Fitch downgraded co. to BBB from BBB+; outlook stable. (Sources)

Banco Popolare – Fitch downgraded co. to BBB from BBB+; outlook stable. (Sources)

Intesa Sanpaolo – Fitch downgraded co. to A- from A; outlook negative. (Sources)

SMI

UBS – Co. reports Q4 net profit of CHF 393mln vs. Exp. CHF 737mln, trading income of CHF 610mln vs. Exp. CHF 751mln. Co. wealth management FY net new money CHF 35.6bln and reiterates intention to propose dividend of CHF 0.10 per share. Co. says capacity for further tactical cost-cutting is limited and sees headwinds for revenue growth and net new money. (Sources)

Swatch Group – FY net income CHF 1.27bln, up 18%. Co. increases dividend 15% to CHF 5.75 per bearer share and says to continue to make “targeted investments” in 2012. FY sales above CHF 7bln for first time, sees further growth in 2012. (Sources)

BROKER MOVES

ASTRAZENECA CUT TO UNDERPERFORM FROM NEUTRAL AT BOFA

CARREFOUR CUT TO NEUTRAL FROM OUTPERFORM AT EXANE

BMW RAISED TO OVERWEIGHT VS NEUTRAL AT HSBC

METRO CUT TO UNDERPERFORM FROM NEUTRAL AT EXANE

JULIUS BAER CUT TO UNDERWEIGHT FROM NEUTRAL AT HSBC

It said its prized beefmaster herd at Movonde totals 1,000 and is achieving US$1,100 per carcass.

A dam project near Movonde will increase the supply of water, therefore supporting the expansion programme. Meanwhile, land clearance at the Dombe Ranch will allow it to increase its capacity. 

Separately, the company’s abattoir at the Mozbife operation near Chimoio is on course to open in August 2012.

The company is acquiring a turnkey slaughterhouse and meat processing plant from the Netherlands. The decision to vertically integrate will make the whole meat business a far more profitable one.

Agriterra director Euan Kay said: “The continued development of our Vanduzi feedlot and abattoir at Chimoio, in addition to establishing butchers' shops, are the key final elements in our vertically integrated beef business, enabling Mozbife to benefit from the full uplift in value for slaughtered and butchered products. 

“With this in mind, as we move into the new financial year, I am confident that Mozbife will contribute a further high margin revenue stream, in addition to our maize and cocoa operations.  

“These, together with the palm oil operations which we are establishing in Sierra Leone, will substantially enhance Agriterra's financial performance and value accretion potential moving forward."

Agriterra’s staple business is processing maize in Mozambique, but it has branched out into cattle and has acquired the rights to the Port of Conakry in Guinea.

Its plans are to become a “field to fork” producer of beef, though it also wants to branch out into other livestock such as chickens and goats.

Last month it outlined plans to expand its Sierra Leone cocoa trading business Tropical Farms Limited to 40 locations this year from 12 currently as part of an aggressive growth strategy. TFL will also extend its focus into coffee and palm oil.

Negotiations are already underway to secure a 15-acre site in the new airport development zone close to the capital Freetown, while advanced discussions are also taking place to acquire a cocoa plantation in the south-east of the country.

The group is well financed to roll out its ambitious plans after raising US$15 million last year from investors at 3 pence a share.

The markets

Market opening: The market could open flat today as talks pertaining to Greece's woes extend for another day, testing investors' patience and stoking fear of an unruly default. FTSE futures were trading 5.5 points higher at 7.00am UK time.

New York: Investors adopted a wait-and-watch approach as Greece's crucial bailout talks inched forward. Consequently, the S&P 500 index closed flat (-0.04%) yesterday. 

Asia: Markets ended lower today reflecting frustration over the inconclusive talks about Greece's debt. The Nikkei closed 0.1% lower, while the Hang Seng was trading at -0.2 % at 7.00 am UK time. 

Continental Europe: Markets remained muted as Greece's negotiations with the troika made little progress. The German DAX closed flat (-0.02%) while the French CAC 40 closed 0.7% lower yesterday.

UK small caps: The FTSE AIM All-Share index closed up 0.4% yesterday.

Today's news

Greek leaders extend talks for yet another day 

Amid strikes by two of Greece's largest labour unions, Greek coalition parties have asked for one more day to accept the tough and unpopular reform terms set forth by the troika of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) as a pre-condition to granting the €130bn bailout package. European officials estimate that unless the deal is finalised by 15th February, completion of the legal procedure for the debt swap before the 20th March redemption date will be difficult. Also, many European countries need parliamentary approval to raise money to bailout Greece. 

Financial Policy Committee nearing completion

Chancellor George Osborne moved a step closer to form the Financial Policy Committee after a second briefing to the Commons about the Financial Services Bill went unopposed. The new independent Bank of England committee would regulate the value-to-loan ratios on mortgages aimed at averting credit bubbles that led to the 2008 crisis. 

Company News:

Easyjet (LON:EZJ)

Easyjet said passengers carried in January changed little y-o-y (-0.4%), but the load factor, representing the seat utilisation for the airline, increased 3.0% to 81.9%. On a 12-month basis, the number of passengers flying with Easyjet increased 10.2% to 55m while the load factor increased 0.6% to 87.7%

Our view: Easyjet's founder Stelios Haji-loannou will table a motion at the Annual General Meeting to be held on 23rd February to block the granting of £8m worth of shares over the next three years as bonuses to the management. According to press reports, the management could turn the increasing public spat into a confidence motion at the upcoming AGM and could lead to mass resignation from the Board. Stelios, whose family owns about 38% of the low cost airline, has been at odds with the management since 2010 over several issues, such as the management's fleet expansion plans and payout to former CEO Andy Harrison when he resigned from the Board following differences over strategy. Winning the confidence motion without the support of Stelios could prove difficult for the management. The company's internal tussle coupled with the detrimental economic scenario, and rising fuel costs pose highly uncertain challenges for the company's immediate future, prompting us to retain our Hold rating.

Randgold Resources (LON:RRS) 

Increased output from the Loulo mine in Mali and Tongon mine in Cote d'Ivoire helped Randgold Resources report a 58% y-o-y increase in gold production to 696,023 ounces in 2011. Increasing prices of gold and stable cash operating cost (at US$641 per ounce) helped profits at the company surge 259% y-o-y to US$433.4m for FY2011. In Q4 2011, profits touched US$136.2m, up 323% y-o-y. The increased earnings prompted the management to declare an annual dividend of US$0.40 per share. The company estimates gold production to rise to between 825,000 and 865,000 ounces in 2012 (up 19% to 24% y-o-y) while keeping the total cash cost below US$650 per ounce. The operating cash costs are expected to decrease to about US$500-US$550 per ounce over the next five years. Capital expenditure is estimated to be US$660m in 2012. 

Our view: The demand for gold as a value-preserving asset is increasing in the current economic uncertainty. Consequently, gold mining companies are set to register record profits. As Randgold's mines attain economies of scale, we believe the company will be able to return shareholder value as a counter-cyclical stock. We reiterate the recently upgraded BUY rating for the stock. (Please refer to our research note "A dozen for twelve" published on 17th January this year.)

Xstrata (LON:XTA) 

Trading house Glencore could buy mining giant Xstrata at a larger than previously expected premium in the US$88bn merger. The miner's investors will receive between 2.7 and 2.8 Glencore shares for every Xstrata share reflecting a premium of about 8%. The details of the deal are yet to be finalised. 

Our view: Xstrata's share prices have soared 53.8% since we recommended the stock at 820p. We believe that Glencore is unlikely to raise its offer further, and the twin risks of an EU probe into the merger as well as the possibility that a relatively small minority of Xstrata shareholders could block the merger if they wanted, make it sensible to take profits now. We are downgrading our recommendation from buy to sell.

Economic News:

UK house prices

House prices in the UK increased 0.6% m-o-m in January, Halifax reported yesterday. However, the average house price at £160,907 is 1.8% lower than in January 2011 and 0.9% lower on a rolling three-month basis. The bank noted that the housing market could stabilise if the domestic economy does not enter a deep recession, which in turn would depend on developments in Europe. 

Our view: The latest numbers once again showed a widening of the north-south divide. A lack of stock and low interest rates is supporting prices. With an expansion in services and manufacturing sectors in January, indicating stability in the economy, prices may be sustained if the economy escapes a prolonged recession. The economy contracted 0.2% in Q4 2011.

German factory orders

Factory orders surged 1.7% m-o-m in December, following a 4.9% drop in November, Germany's Economy Ministry reported yesterday. Factory orders were unchanged from December 2010. Orders from outside the Eurozone jumped 12.3%, offsetting the 6.8% drop in orders from the Eurozone and the 1.4% dip in domestic orders. Factory orders declined 1.4% q-o-q in Q4 2011. 

Our view: This more-than-expected increase in factory orders bodes well for the German economy and suggests that the country may escape the recession that others in the Eurozone may have to suffer. The increase in business confidence to a five-month high in January tends to support this view. Only the dismal retail sales figures for the crucial Christmas season have seriously dented this somewhat rosier picture of the German economy.

UK new car registrations

In the UK, new car registrations were flat (+0.03% y-o-y) in January, the Society of Motor Manufacturers & Traders (SMMT) said Monday. Roughly 128,853 units were sold as private demand for cars increased 2.7% y-o-y while demand from fleet owner increased 0.3% y-o-y. SMMT expects annual demand to shrink 1.1% y-o-y to 1.92m units in 2012 before regaining pace in 2013 when 1.98m units could be sold.

UK employment confidence

The index of job security, which measures Britons' perception of losing jobs, was -24 points in January, gaining 9 points over December's reading. Expectation of inflation dipped 6 points to 59 in January, the lowest since November 2009. The index is compiled by the Lloyds Bank Corporate Markets, a unit of Lloyds Bank. Economists said though the index rose following December's lowest reading since 2004, it remains weak and within the range observed during the last recession in 2008-09.

Mining News    

Amur Minerals Corporation (LON:AMC) announced that it has conditionally raised GBP5,480,800 by way of a subscription by existing shareholders and new investors for a total of 68,510,000 ordinary shares at 8p each. The proceeds of the Subscription will be used to fund bespoke metallurgical and engineering studies to be conducted concurrently with the 2012 drilling season at Kun-Manie. 

Horizonte Minerals plc (LON:HZM) announced that further to the announcement on 12 July 2011, the Company had entered into a definitive agreement with respect to the purchase of the Vila Oito and Floresta nickel laterite projects. Horizonte has now completed this purchase for total consideration of 8.5 million new ordinary shares equating to C$2 million based on the 20 day average price to 10 January 2011. 

Paragon Diamonds Limited (LON:PRG) announced further micro-diamond results from 4 samples totalling 863 kg. A total of 1,641 diamonds (1.90/kg) were recovered weighing 0.9841 carats, equivalent to 1.14 carats per tonne. Samples were taken to extend the reach of sampling along the strike of the Motete Dyke. 

Stratex International Plc (LON:STI) announced that AngloGold Ashanti Ltd and Thani Ashanti have subscribed for additional shares in the Company in order to maintain their equity stakes following the issue of shares for the acquisition of Silvrex Limited. AngloGold has subscribed for 1,375,000 Stratex Ordinary shares at 8.0p raising £110,000. This increases their holding in the Company to 41,785,104 ordinary shares and maintains their percentage shareholding at 11.5%. Thani has subscribed for 260,000 Stratex Ordinary shares at 8.0p raising £20,800. This increases their holding in the Company to 7,983,669 ordinary shares and maintains their percentage shareholding at 2.2%. 

Weatherly International Plc (LON:WTI) presented a progress report on the Tschudi Feasibility Study. The total Resource increased 5% to 50.1mt at 0.86% copper (up from 47.7mt at 0.85% copper) and a maiden open pit reserve of 22.2mt at 0.87% copper has been delineated. The Reserves support an 11 year life of mine producing 15kt copper per annum. The feasibility study is due for completion in mid-2012.

Oil and Gas News

Leni Gas & Oil PLC (LON:LGO) today announced a short delay to the start of drilling operations at the Eugene Island Field ("EI-184") in the US Gulf of Mexico. They don’t anticipate any cost implications to the Company and its partners, but it would be interesting to see how the market reacts to this. The current operator of the Ocean Columbia jack-up rig at Eugene Island-51 has had difficulty in withdrawing the legs from the seafloor.  Silt jetting and dredging operations are ongoing to free the legs so that they can be raised in order to allow the rig to be towed to the new location.  Once the legs have been successfully retrieved the rig will be released by the current operator and moved approximately 55 kilometres to the EI-184 platform to commence operations on the planned A2ST01 sidetrack.

Solo Oil PLC (LON:SOLO) today provided an update on the drilling of the Ntorya-1 exploration well in the Ruvuma Petroleum Sharing Agreement ("PSA") area onshore in Tanzania. The well, which was spudded on the 22nd of December 2011, is now at a depth of 2,500 metres. Sandstone reservoirs were not encountered as originally prognosed at depths between 1,800 to 1,900 metres, however sandstones were encountered at depths from 2,300 metres to the current depth, over which minor gas shows were also observed. Wireline logs and a seismic check-shot survey are now being recorded in order to evaluate the section already drilled and to determine if additional drilling is worthwhile. The Ntorya-1 well is designed to test the high quality Basal Tertiary and Upper Cretaceous sands previously encountered in the Likonde-1 well, 14 kilometres to the north. Ntorya is only the second recent well in the onshore portion of the Ruvuma basin in Tanzania and the Company is clearly still establishing the accurate correlation between the seismic and well stratigraphy.  Although this is not the most positive result one could have hoped for, additional evaluation of these well results should help in unlocking the potential for the Tertiary and Cretaceous hydrocarbon plays within the PSA. 

Sound Oil (LON:SOU) have completed the second tranche of the private placement through Astin Capital Management Limited. The second tranche amounts to £4 million consisting of 262,587,803 shares priced at 1.5233 pence per share (being 90% of the volume weighted average price over the preceding 40 trading days) and 157,552,682 associated warrants exercisable at any time during their three year term at 1.8619 pence per share (being 110% of the volume weighted average price over the preceding 40 trading days).  This results in a total placement, across the two tranches, of £6 million (excluding any warrant exercise) and fully funds the significant Nervesa gas appraisal well. The Company intends to use the funds raised and any additional funds from the exercise of warrants for drilling operations this summer, including the Nervesa discovery in Italy.  Nervesa is an estimate d 21 Bscf gas discovery in Northern Italy with an independently assessed NPV10 success case of US$62 million. Application has been made for the new ordinary shares to be admitted to trading on AIM and this is expected to become effective on 10 February 2012.  Following the issue of the new shares, the Company will have 2,095,787,351 ordinary shares in issue with each share carrying the right to one vote.  

Oilfield Services News  

Technip (LON:TEC):  Technip has been awarded two contracts for the Jubilee project in Ghana worth around €100M, for Phase 1A of the project. The Jubilee field is located offshore Ghana at a water depth of 1,300m. These contracts cover full project management, engineering, fabrication and installation of a new flexible riser, two rigid flowlines and 11 spools/jumpers, as well as the installation of two manifolds and 5km of umbilicals. Offshore installation is scheduled to be completed with the Global 1200 and the Deep Pioneer, two vessels from Technip’s fleet, in the second half of 2012.

This is a good column by Thomas Friedman for the NYT and IHT. Here is the opening, posted without further comment:

AS a journalist, the best part of covering the recent wave of protests and uprisings against autocrats is seeing stuff you never imagined you'd see - like, in Moscow last week, when some opponents of Vladimir Putin's decision to become president again, for possibly 12 more years, hung a huge yellow banner on a rooftop facing the Kremlin with Putin's face covered by a big X, next to the words "Putin Go Away" in Russian.

The sheer brazenness of such protests and the anger at Prime Minister Putin among the urban middle classes here for treating them like idiots by just announcing that he and President Dmitri Mevedev were going to switch jobs were unthinkable a year ago. The fact that the youths who put up the banner were apparently not jailed also bespeaks how much Putin understands that he is on very thin ice and can't afford to create any "martyrs" that would enrage the antigovernment protesters, who gathered again in Moscow on Saturday.

But what will Putin do next? Will he really fulfill his promise to let new parties emerge or just wait out his opposition, which is divided and still lacks a real national leader? Putin's Russia is at a crossroads. It has become a "sort-of-but-not-really-country." Russia today is sort of a democracy, but not really. It's sort of a free market, but not really. It's sort of got the rule of law to protect businesses, but not really. It's sort of a European country, but not really. It has sort of a free press, but not really. Its cold war with America is sort of over, but not really. It's sort of trying to become something more than a petro-state, but not really.

Putin himself is largely responsible for both the yin and the yang. When he became president in 2000, Russia was not sort of in trouble. It was really in trouble - and spiraling downward. Using an iron fist, Putin restored order and solidified the state, but it was cemented not by real political and economic reforms but rather by a massive increase in oil prices and revenues. Nevertheless, many Russians were, and still are, grateful.

Along the way, Putin spawned a new wealthy corrupt clique around him, but he also ensured that enough of Russia's oil and mineral bounty trickled down to the major cities, creating a small urban middle class that is now demanding a greater say in its future. But Putin is now stalled. He's brought Russia back from the brink, but he's

Tim Price: Stop the (printing) press - My thanks to the author for his incisive letter, published by PFP Wealth Management. It is posted in the Subscriber's Area but here is a brief sample:

In a perceptive recent column for the FT, "Low rates: the drug we can all do without", Satyajit Das pointed out that low rates actively discourage savings, "creating a disincentive for the capital accumulation that would reduce overall debt levels". Since we are also trying to navigate through the biggest debt crisis in world history, policymakers appear to be saying to investors that the beatings will continue until morale improves. Artificially low rates are also literally punishing for defined benefit pension funds; Das suggests that for every 1% fall in US rates, pension fund liabilities increase by roughly $180 billion. And low rates feed asset price inflation and fundamentally distort asset prices, encourage mispricing of risk, and create further asset bubbles - like the one currently inflating in, irony of ironies, western market government debt.

My view - There is much to ponder in this paragraph and the rest of Tim Price's letter, which I commend to you. It is a constant reminder that we are navigating in an unstable financial world.

However, we also know that the pace of technological innovation continues to increase. And while standards of living are declining for citizens in some regions, wealth is also being created around the world at a faster pace than at any other time in history. This is not a bad time to be an investor, if we know where to look.

Mike Lenhoff: A justifiable re-rating for equity markets even as earnings lose momentum - My thanks to the author for his interesting letter published by Brewin Dolphin. It is posted in the Subscriber's Area along with my further comments but here is a sample:

Not long ago the judgment reflected in bond and equity markets was that the eurozone sovereign debt crisis had put at risk the stability of the global financial system and with this the stability of the global economy. Recent action, such as the shift towards the higher beta areas of risk assets suggests the judgement has changed.

Indeed, not only have yields in quality bond markets stabilisd but a few of the eurozone's distressed sovereign debt markets - notably those for Italy and Spain - have made up some of their lost ground. With money at one percent for the three-year loans the ECB is making available through its Long-Term Refinancing Operation (LTRO) - the second of two is coming at the end of this month - there are great carry trades here. They are available too in equity markets too where yields are high and where dividends are likely to grow.

For equity markets, it is not just their underlying tone that has improved. The New Year has also seen small and mid-caps outperform large caps, cyclicals outperform defensives and developing markets outperform developed. Accompanying this shift towards more 'beta' has been a re-rating of the valuations attached to equity markets at a time when earnings momentum is fading. Looking at the corporate results and the lower beats-to-misses ratios compared to the corresponding period a year ago begs the question whether the re-rating is justified.

Bernard Tan: Who's a better cash machine - Apple or Microsoft? - My thanks to the author this fascinating item. It is posted in the Subscriber's Area along with my further comments but here is the opening:

Firstly, it seems Apple is being financed by its suppliers. Their accounts receivable is only $8.9bn but accounts payable is a whopping $18.2bn. That's a nett accounts receivable of NEGATIVE $9.3bn. For the layman, this means that Apple owes its suppliers $9.3bn MORE than what its customers owes Apple.

Secondly, have you ever thought about the billions in $$$ in iTunes card sales that have not yet been utilised at the iTunes store? This is buried in deferred revenue item of current liabilities and amounts to $4.9bn. This is cash that Apple's customers have handed over but have not yet claimed the corresponding goods or services.

In other words, if Apple stops being a going concern, about half of the $30bn in cash, equivalents and marketable securities would disappear as Apple has to pay off its suppliers and refund the unutilised iTunes balances.


Independent analysis for hands-on investors - Would this Comment of the Day on Thursday 29th September 2011, recently released to the Public Archive, have helped you just over four months ago?

Or how about this Comment of the Day from Friday 7th October 2011?

You can also hear the Audios from that period (see menu upper left, third item down).



Additional commentary by Eoin Treacy

Mystery buyer in Fortescue seen as Noble This article by Michael West for The Sydney Morning Herald may be of interest to subscribers. Here is a section:

Speculation before Christmas had it that RBS was buying for a "trading company". Sources earlier today were speculating the buyer was either Glencore, Noble or Trafigura.

One source close to RBS told BusinessDay the buyer is Noble. Strategically, this would make sense as the iron ore market is the last commodity that remains dominated by a handful of major producers BHP, Rio and Vale while the trading companies have little presence.

However, a spokesman representing Noble this afternoon denied the group was behind the buying.

There was also strong buying today in Fortescue $5.50 February call options, consistent with speculation of corporate interest in the iron ore producer, which is moving towards 150mtpa of production in coming years.

My view M&A activity in Australia's resources sector has been brisk over the last year, particularly in the coal mining sector. (Also see Comment of the Day on January 4th). It remains to be seen whether the Australian government is as quiescent with regard to iron-ore acquisitions as it appears to be with coal.

Fortescue Mining represents an attractive takeover candidate for a larger company seeking an entry to the tightly knit iron-ore sector. However Andrew Forest still has a 31.5% shareholding and Hunan Valin Iron & Steel, in which Arcelor Mittal has a significant interest, holds 15.05% The share pulled back rather sharply in the first three quarters of 2011 but stabilised above A$4 and broke out of its four-month base today. A sustained move below A$4.85 would be required to begin to question medium-term scope for additional upside.

This section continues in the Subscriber's Area.

Huggies Price Cut Shows Why Bond Market Backs Bernanke QE3 This article by John Detrixhe and Cordell Eddings for Bloomberg may be of interest to subscribers. Here is a section:

Procter & Gamble Co.'s failure to raise the price of Cascade dishwashing soap shows why investors are buying Treasuries at the lowest yields in history, giving the Federal Reserve more scope to boost the economy.

The world's largest consumer-products company rolled back prices after an 8 percent increase lost the firm 7 percentage points of market share. Kimberly-Clark Corp. started offering coupons on Huggies after resistance to the diapers' cost. Darden Restaurants Inc. raised prices at less than the inflation rate as patrons order more of Olive Garden's discounted stuffed rigatoni than it anticipated.

Low inflation has continued to boost demand for Treasuries, keeping rates low as President Barack Obama finances a $1.1 trillion budget deficit to boost an economy still growing at rates below the 20-year average. The Fed set an annual inflation target of 2 percent two weeks ago, and policy makers suggested they may conduct a third round of bond purchases under a policy known as quantitative easing.

Any way you look at it, the Treasury market is still expecting rather benign inflation, and we will be in a low-rate environment for some time, David Ader, head of U.S. government bond strategy at CRT Capital Group LLC in Stamford, Connecticut, said Feb. 1 in a telephone interview.

My view Truly multinational companies such as Procter & Gamble and Kimberly Clark have the breadth to focus their efforts on growth markets when conditions in their domestic market are challenging. In a stagnant US environment, these companies have retained their dividends and continue to expand in the world's growth markets. They remain ideally placed to benefit from the growth of global consumer culture.

This section continues in the Subscriber's Area.

Email of the day (1) on South Africa:

Regarding Friday's commentary on South Africa, I think overseas investors should be a little more concerned about the quality of governance here than they appear to be. I speak as a UK retiree having lived here for the past 8 years. From all manner of sources it is plain to me that overall governance and leadership is deteriorating rapidly. The province of Limpopo has been declared bankrupt recently with debts of over 3 billion rand. Central government has to bail them out. The whole fabric of government administered departments here reek of corruption whether one considers the municipalities , departments of health, education, transport or the environment. You name it. On top of all this you have a leftward leaning ANC which this very week is talking of imposing a windfall tax on mining profits with further talk of wholesale nationalisation. If I were CEO of a mining company I would want to see a clear policy stretching 20 or so years into the future before investing another penny.

My view, for what it is worth, is it is not a question of 'if' foreign investors withdraw their cash, it is a question of 'when'. We will then see what happens to the Rand.

It pains me to say this because my wife I so enjoy living in this lovely country.

My comment Thank you for your informed comments. Corruption and mismanagement are distasteful in any country but perhaps even more so where such potential exists. Rumblings of nationalisation are nontrivial. If they ever come to fruition they would act as a negative catalyst for foreign investment. So far, the ANC has walked a fine line between populist politics and reasonably non-inflationary economic policy. If that ever changes, it could also act as a negative catalyst for investor interest.

This section continues in the Subscriber's Area.

World Equity Index Valuations Tables - The monthly list of 99 global indices ranked in descending order by dividend yield s, then in ascending order by P/E, Price / Book and Price / Cash Flow is posted in the Subscriber's Area.

Email of the day (2 & 3) on additions to the Chart Library:

"Could you possibly add the following stocks to the chart library:

"Delticom GY, Fielman GY, Cafe de Coral HK, Keppel Corp Sing. Many thanks."

And

If possible, could you add these South African ETF's to the chart library:

!The Bloomberg codes (:SJ) are: STX40, STXIND, STXFIN, STXDIV, PTXSPY and PTXTEN. The last two are property trackers. Thank you."

My comment Thank you for these suggestions which have been added to the Chart Library.

Speaking engagements in the USA - I have accepted an invitation to speak to the Los Angeles chapter of the MTA on April 11th. The venue has yet to be confirmed but will be in the Long Beach area. Non-members are welcome to attend. The topic will be "To Hoard or to Horde: risks and opportunities from participating with the crowd."

I have also accepted an invitation to speak to the San Diego chapter of the MTA in the first week of April. A date and time has yet to be fixed but it will take place in the Del Mar area.

I still have some space available on my itinerary. If you would like me to speak to your local chapter or organisation in California or New York please contact your respective chairperson and ask them to contact me.

The Chart Seminar 2012 - Following a sell-out tour to Singapore and Australia last year, The Chart Seminar will be held in San Francisco, New York and London this year. Please be aware that the early booking rate for non- subscribers at the US seminars expires on January 31st.

We are currently taking bookings for our San Francisco and New York dates in April as well as London seminars in May and November. Anyone interested in securing a place at any of our events should contact Sarah Barnes at sbarnes@fullermoney.com.

The date and venues for my seminars so far in 2012 are:

San Francisco - April 16th &17th 2012 Nikko Hotel

New York - April 23rd & 24th 2012 at The Manhattan Club (above Rosie O'Grady's) at 800 7th Avenue

London - May 25th & 25th 2012 at the Radisson Edwardian Hampshire

London - November 22nd & 23rd 2012 at the Radisson Edwardian Hampshire

The full rate is £950 + VAT. (Please note US delegates, as non EU residents are not liable for VAT). The early booking rate of £875 for non-subscribers expires on January 30th for the US seminars. Paid-up Fullermoney subscribers are offered a discounted rate of £850. Anyone booking more than one place can also avail of the £850 rate for the second and subsequent delegates. 

Leni Gas & Oil (LON:LGO) today told investors that its drilling operations have been slightly delayed at the Eugene Island Field, in the Gulf of Mexico.

The delay relates to a problem with the drilling rig’s previous contractor. And LGO says there are no cost implications for the Eugene Island partners.

The current operator of the Ocean Columbia jack-up rig at Eugene Island-51 has had difficulty withdrawing the rig’s legs from the seafloor.  

Work is currently underway to free the legs so that they can be raised and the rig can be towed to the Eugene Island location, which is about 55 kilometres away.  

At Eugene Island, the drilling programme will start with the A-2ST01 well, a sidetrack of the existing A-2 well, which targets mean recoverable reserves of 0.5 million barrels of oil within the Tex X2 target level.

The slightly deeper Tex-X3 reservoir will also be tested by the well. Both reservoirs are productive in other wells throughout the field.

The partners have budgeted a total 16 days for the drilling and evaluation. The net cost to LGO of drilling, logging and evaluating the A-2 sidetrack is an initial US$280,000.

Any incremental production is expected to be realised quickly with a short payback period on the investment.

The upgrade was contained in a report charting the progress of a formal feasibility study of Tschudi, which revealed it contains a maiden open pit reserve of 22.2 million at 0.87 per cent copper. 

This supports an 11 year mine life at 15,000 tonnes of copper a year.

The feasibility study itself is expected to be to be published in the middle of this year. 

Chief executive Rod Webster said: "The progress being made on the Tschudi feasibility study demonstrates that the project is progressing as we had envisaged, albeit with some important enhancements.  

“The fundamentals of the project are very good and we look forward to the prospect of adding an additional mine to our portfolio."

Located near the town of Tsumeb, the Tschudi deposit will be mined using the open-cut method, while the copper will be extracted via a process known as solvent extraction electro winning, or SXEW.

Weatherly also has two producing underground mines in Otjihase and Matchless. 

They started life in the 1970s, were placed in care and maintenance during the economic financial crisis.

Each mine is slated as having a mine life of five to 20 years and it will depend on the long-term outlook for the copper price whether they carry on producing for the next two decades.

Otjihase currently has a reserve base of 3.2 million tonnes at 1.6 per cent copper and a small gold credit. The JORC resource is 11 million tonnes. 

The Matchless reserve, meanwhile, is 700,000 tonnes at 1.9 per cent copper. The cash cost of the mines should be below US$4,000 a tonne by end of the year.

Horizonte entered into definitive agreements to buy 100 per cent of the Vila Oito and Floresta nickel laterite projects in July last year.

The group will pay current owner Lara Exploration about C$2 million in shares for the two sites, which will give the Canadian group a 2.95 per cent stake in Horizonte. 

Lara has agreed to a minimum 12 month lock-up for the shares it will receive from 9 February. 

The 100 per cent owned Araguaia nickel project located to the south of the Carajas mineral district of northern Brazil is its key project.

Last month, the group published a new resource estimate showing more than 100 million tonnes including 39 per cent in the indicated category and totalled 24.2 million high grade tonnes averaging 1.6 per cent Ni.

The group is expected soon to release the results of its metallurgical testing on Araguaia, which will be the basis of a pre-feasibility study.

Horizonte already has two major partners in Canadian group with a 44 per cent stake and AngloGold Ashanti (LON:AGD), which is its partner on the gold portfolio. 

Horizonte and AngloGold Ashanti have a US$5.3 million exploration alliance to generate and develop new and existing gold targets within two areas of Brazil.

Aminex (LON:AEX) and Solo Oil (LON:SOLO) today reported the results of the Ntorya-1 exploration well in Tanzania.

The well has now been drilled to a depth of 2,500 metres. And it did not encounter its targeted sandstone intervals at the prognosed depths of 1,800 to 1,900 metres. However sandstone intervals, containing traces of gas, were encountered at a depth of 2,300 metres.

Further analysis is currently underway using wireline logs and a seismic check-shot survey. This work will help determine whether or not the well will be drilled deeper.

"Ntorya is only the second recent well in the onshore portion of the Ruvuma basin in Tanzania and we are clearly still establishing the accurate correlation between the seismic and well stratigraphy,” said Neil Ritson, Solo Oil’s executive director.

“Additional evaluation of these well results will I am sure be key in helping to unlock the potential for the Tertiary and Cretaceous hydrocarbon plays within the PSA."

Aminex is the operator of the Ntorya well. It has a 56.25 per cent stake in the well. While Solo Oil has an 18.75 per cent stake, alongside fellow JV partner Tullow Oil (LON:TLW) which owns 25 per cent.

Ntorya 1 was drilled in an onshore location in eastern Tanzania. It was drilled to test an area within the Rovuma basin, which is also host to several large gas discoveries offshore in deep waters.

The Ruvuma Basin has become extremely active for the oil and gas industry in recent years. 

Anadarko (NYSE:APC) of the US with partner Cove Energy (LON:COV) have drilled several successful deep water gas wells offshore in the Mozambique sector of the basin. BG (LON:BG) and partner Ophir Energy (LON:OPHR) also made an offshore gas discovery in the Tanzanian sector last year.