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Northland Capital Partners View on the City: dotDigital, Europa Oil & Gas, Victoria Oil & Gas, Rockwell Diamonds and others

Northland Capital Partners View on the City: dotDigital, Europa Oil & Gas, Victoria Oil & Gas, Rockwell Diamonds and others



NORTHLAND UK VIEW: Victoria Oil and Gas (“Victoria”) issued a comprehensive statement yesterday following the sharp share price correction last week and a 57% reversal over the last year. The statement highlighted a miss on this year’s production expectations at the key Logbaba (Cameroon) gas project but gave several reasons to be cheerful with the company approaching operating breakeven. With a significant infrastructure installed, it is set to benefit from positive operational gearing as the ramp up is progressed. The company has been hampered by delays to roll out its capacity and some cost escalation, whilst a number of equity and convertible raises have diluted shareholders. Failure of its partner RSM to pay cash calls resulted in Victoria assuming the latter’s 38% stake (raising its own to 95%) and the matter is the subject of an ongoing arbitration - the outcome is expected on 31st October. The case looks relatively neutral to Victoria that will retain its 95% stake if it wins if RSM wins whilst if it loses will recover back costs from RSM totalling $20m and be allowed to recover additional costs before profit sharing (estimated in 2016). We have long liked this project on fundamentals. The Cameroon government has been supportive, Douala is a local market hungry for gas supply at attractive prices (currently contracted at $12-$15/mcf with blue chip customers) and Victoria is the only supplier in the country.




  • Revenue from operations managed by Rockwell during H114 was up 5% to US$13.2m from US$12.6m in H113.
  • Revenue from beneficiation in H114 was up 67% to CAD$2.5 from CAD$1.5m in H113.
  • Revenue net to Rockwell from contractor operations in H114 was USD$0.4m.
  • Mining and processing costs in H114 were up 8% to CAD$15.3m from CAD$14.1m in H113.
  • LBT in H114 was reduced by 65% to CAD$2.3m from CAD$6.5m in H113.
  • Net debt increased 66% in H114 to CAD$14m from CAD$6.4m in H113.
  • Operational costs at the Saxendrift Mine were lowered during Q214 to USD$8.2/m3 compared to USD$8.9/m3 in Q114. This resulted in a H114 cost of USD$8.5/m3.
  • Operational costs at the Saxendrift Hill Mine in Q214 increase to USD$16.2/m3 compared to CAD$11.6/m3 in Q114. This resulted in a H114 cost of USD$14.2/m3.
  • Forecasts and price target under review.

NORTHLAND UK VIEW: The Q214 results (25/09/13) highlighted the improvement in diamond values at both the Saxendrift and Saxendrift Hill Mines during H114 with revenue from operations managed by Rockwell up 5% year-on-year. Operational cost at the Saxendrift Mine decreased in Q214 compared to Q114 and operational profit at the mine increased to USD$2m in H114 from USD$1.4m in Q114, while the number of diamonds held in inventory from the mine doubled. At the Saxendrift Hill Mine, Q214 was not as positive with the operational costs well ahead of our expectations due to the use of rented earthmoving vehicles, as well as increased fuel and haulage costs associated with the processing of Saxendrift Extension gravels at the Saxendrift Hill Mine. As a result, the operating loss at the Saxendrift Hill Mine increased to USD$1.7m in H114 from USD$1m in Q114. Diamonds held in inventory from the mine increased more than three-fold. Management is confident that during H214 operational costs at the Saxendrift Hill Mine will be reduced significantly and that volumes and grades will improve as the mine has now finished its ramp up. The Niewejaarskraal Mine is still in the ramp up phase as the commissioning process took longer than expected and, as a result, planned volumes for the year are likely to be below our previous expectations. Following these results we maintain our BUY rating but will review our forecasts and price target.




  • Revenue was £4.5m (FY12: £5.1m) was marginally ahead of our estimates (£4.4m). Reported pre-tax profit was £0.4m and, adjusted for exploration write-offs, PBT was £0.6m slightly behind our expectation of £0.8m.
  • Cash at the end of the period was £0.7m with net cash of £0.3m compared to our £0.8m that should leave headroom in debt facilities to finance this year’s drilling commitments.
  • Company recently announced the extension of the Béarn des Gaves permit until March 2017.
  • Kosmos has fast tracked seismic for the Irish Porcupine Basin assets that is currently underway with one permit Fel 3/13 already complete. 
  • Wressle well operated by Egdon (EDR.L) due to be spud by the end of the year.

NORTHLAND UK VIEW: An excellent year from Europa on many fronts is not reflected in the current rating. The Wressle well toward the end of the year brings a 1 in 3 opportunity for upside whilst the extension of the Béarn des Gaves permit was a major boon unrecognised in the share price performance. The speed at which Kosmos has moved on the Irish Porcupine Basin assets is impressive and, whilst ambitious, a 2015 well is talked about to test potentially world class targets. We will revise our forecasts following these results but remain positive on the story and management and reiterate our BUY rating.


Week Ahead (14/10/13)

View from the trading desk

The continuing partial US shutdown, budget stand-off and the looming risk of a technical debt default pushed markets down in the start of the week but the mood brightened on Thursday. Although progress on a resolution has been pretty glacial, opinion firmed that some sort of resolution will be found as criticism has increased from creditors (Japan and China) and funds have started dumping US assets. At the same time, the nomination of Janet Yellen as the new chair of the Federal Reserve and the impact of the impasse on the US recovery seems to have pushed tapering further out. Whilst we have held the view that tapering would be a 2014 event, Yellen has demonstrated a track record for independent thinking and assuming a dovish stance may prove presumptuous.

The huge demand (retail and institutional) for the Post Office IPO has dominated UK headlines and, depending on the initial trading, may result in a further improvement in sentiment towards equities. Given scaling back, a good aftermarket performance is likely to lead to profit taking and a fillip to the economy as investors spend their winnings.

Sales & Research thoughts

TMT – Tuesday sees the bulk of the scheduled TMT updates with an IMS for the first four months of FY14 from NCC (LON:NCC), the provider of Escrow and Assurance services. Newsflow has been pretty light from the company since its prelims back in July. These were below earlier expectations with a number of contributing factors in its US operations. Remedial actions have been taken and we will be looking for progress. An update is also likely on its attempts to gain ownership of the secure generic top level domain (gTLD). The plan is for registrants to comply with a strict code of security conduct with NCC’s Artemis subsidiary providing compliance scanning. A shop window for NCC’s capabilities, this could prove to be a double edged sword.

Second, Lombard Risk Management (LON:LRM), the provider of collateral management, liquidity and regulatory report and compliance software for the financial services industry, has interims on Tuesday. Thursday saw the announcement of a prospective customer win for its COLLINE collateral platform – a fairly unusual step. Demand drivers for the company remain good with ongoing waves of regulation and the wider spread of reporting requirements. The current PER is not demanding but there is substantial capitalised R&D spend to factor in.

Finally, dotDigital (LON:DOTD), managed services to digital marketing professionals, has prelims. August’s pre-close reported that FY EBITDA would be slightly ahead of the £3.8m market expectations on revenue +28% to £12.2m. This reflected ongoing growth in the core dotMailer email marketing product (+28%). Meanwhile the smaller non-core SEO & Web Design business fell 34% as part of a managed withdrawal. Given the growth opportunity and substantial cash balances (£6.1m) management has committed to a substantial investment programme that will likely hit FY14 profitability. An update is expected.

Mining – The US Government shutdown continued to drag on copper and gold prices this week, down 2.5% and 0.8% respectively. Copper was also affected by the World Bank reducing its Chinese growth forecasts for 2013 to 7.1% and 2014 to 7.2% from 7.8% and 7.6% respectively. As China is the biggest consumer of copper globally, a reduced demand is expected simultaneously with a 4% supply increase. This seems likely to lead to a small surplus and declining prices into 2014.

Tin prices have continued to rally this week with the Indonesian Government maintaining its decision that all tin metal has to be traded on a local exchange before it can be exported. Indonesia is the largest global producer of tin and the policy has forced Indonesian smelters to curb exports with only one exchange authorised to trade tin ingots. This has resulted in a bottleneck in global supply, driving prices higher. Combined with shrinking LME stockpiles, a tin deficit is expected in the near term and we expect to see prices continue to rise.


1. Northland Capital Partners Limited (“Northland”) acts as Nominated Advisor and/or Broker to the company.

2. Northland) and/or its affiliates companies do beneficially own 1% or more of any class of the issuer’s equity securities, as of the end of the month immediately preceding the date of issuance of the research report or the end of the second most recent month if the issue date is less than 10 calendar days after the end of the most recent month. 

3. The authoring analyst or any associate of the authoring analyst does maintain a long or short position in any of the issuer’s securities directly or through derivatives, including options or futures positions.

4. Northland, its affiliated companies, partners, officers, directors or any authoring analyst of Northland has provided services to the issuer for remuneration during the preceding 12 months other than investment advisory or trading services.

5. Northland or any of its affiliated companies has performed investment banking services for the issuer during the 12 months preceding the date of issuance of the report.  

6. A partner, director, officer, employee or agent of Northland or any of its affiliated companies is an officer, director, employee or advisor of the issuer.  Disclosures are applicable for all companies

7. The authoring analyst, or any associate of the authoring analyst, has viewed the material operations of the issuer. 

8. The authoring analyst, or any associate of the authoring analyst, received reimbursement for travel expenses.

9. Northland makes a market in the securities of this company.




This document is provided solely to enable clients to make their own investment decisions. It may therefore not be suitable for all recipients and does not constitute a personal recommendation to invest. It does not constitute an offer or solicitation to buy or sell securities or instruments of any kind. If you have any doubts about the suitability of this service, you should seek advice from your investment adviser. This document is produced in accordance with UK laws and regulations. It is not intended for any person whose nationality or residential circumstances may render its receipt unlawful.

The past is not necessarily a guide to future performance. The value of shares and the income arising from them can fall as well as rise and investors may get back less than they originally invested. The information contained in this document has been obtained from sources which Northland Capital Partners Limited believes to be re¬li¬able. The Com¬pany does not warrant that such information is accurate or complete. All estimates and prospective figures quoted in this report are forecasts and not guaranteed. Opinions included in this report reflect the Company’s judgement at the date of publication and are subject to change without notice. If the investment(s) mentioned in this report are denominated in a currency different from the currency of the country in which the recipient is a resident, the recipient should be aware that fluctuations in exchange rates may have an adverse effect on the value of the investment(s). The listing requirements for securities listed on AIM or PLUS markets are less demanding, also trading in them may be less liquid than main markets.

Northland Capital Partners Limited and/or its officers, as¬sociated entities or clients may have a position, or other material interest, in any securities men¬tioned in this report. Northland Capital Partners Limited does not provide recommendations on securities of firms with which it has a corporate relationship. More information about our management of Conflicts of Interest, Investment Research Methodology & Definition of Recommendations can be found at 

Northland Capital Partners Limited is authorised and regulated by the Financial Conduct Authority and a Member of the London Stock Exchange.

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