FROM YESTERDAY: JURISDICTION UPDATE: INDONESIAN CHALLENGE REJECTED
- The International Centre for Settlement of Investment Disputes (ICSID) arbitral tribunal has rejected the Republic of Indonesia’s challenges to the Tribunal’s jurisdiction.
- Shares closed up 22% following the announcement yesterday.
NORTHLAND UK VIEW: This decision now allows Churchill Mining to pursue its claims for damages against the Republic of Indonesia under the respective Bilateral Investment Treaties Indonesia entered into with the United Kingdom and Australia. Churchill’s preliminary estimate for damages was USD$1.054bn, excluding interest and the Company is currently reviewing this estimate. Churchill’s lawyers are now seeking further information on the timing for the submissions and hearings on Churchill’s claim for damages.
MINING: ROCKWELL DIAMONDS (TSE:RDI)
MIDDLE ORANGE SITE VISIT REPORT
NORTHLAND UK VIEW: Our recent visit to Rockwell Diamond’s Middle Orange River operations demonstrated that Rockwell has a quality technical team on the ground that is driving the Company forward. Being on site brought home the scale of the Company’s achievement in bringing online the Saxendrift Hill Complex and Niewejaarskraal Mines in the space of nine months. Even more impressive was the “shoe string budget” that the Company used to build both the plants, only CAD$4.5m. The Company achieved this impressive feat by recycling equipment from previous operations and using the Company’s considerable in-house engineering capabilities. The plants, despite the small construction cost, are by no means substandard and have already proven their quality with Saxendrift Hill generating an operating profit, while Niewejaarskraal is performing well during ramp up. We maintain our price target of 52.8c and have made no significant changes to our forecasts.
PLACING: RAISES £650,000
- Union Jack Oil has raised £650,000 in a placing of 288,888,889 news shares at 0.225p per share.
- The placing was conducted by Northland Capital Partners and Shore Capital Stockbrokers.
NORTHLAND UK VIEW: Union Jack Oil will use these funds to accelerate exploration of the shale oil and gas potential of its four existing licences as well as examining new onshore opportunities in the forthcoming 14th Onshore Licensing Round in the UK, expected in 2014. The Company is also examining two joint venture opportunities one of which has shale oil and gas potential.
TMT: QUARTO (LON:QRT)
PRELIMS: PROGRESS ON RESTRUCTURING AND DEBT REDUCTION
- Revenue -2.5% to $176.3m but underlying PBT +$0.1m to $11.5m. Underlying diluted EPS up marginally to $0.44. Net cash flow from operations of $33.6m (FY12: $28.6m) and net debt reduced $10m to $71m. Final DPS of 4.55p making total DPS of 7.9p (FY12: 7.9p).
- Initial phase of Strategic Review with an exit from non-core assets and business and reorganisations. Net divisional management in UK publishing and ANZ display marketing. Exceptional charge of $5.3m relating to disposal of businesses and assets and restructuring charges.
- Revenue in Publishing business +2% and underlying operating profits +7% with a return to growth in US business. Group inventory down 16% with a turn of 2.0x (FY12: 1.8x).
- Rebranded three publishing businesses under the Quarto name (International Co-Editions, Publishing Group USA and Publishing Group UK).
- Co-Edition revenue down $0.9m to $40.4m but op. profit +$0.1m to $5.1m; Publishing USA revenue +8.5% and op. profit +$0.7m to $7.2m; Publishing UK revenue down $1.1m to $20.8m but op. profit +$0.2m to $3.1m.
- Books & Gifts Direct revenue down 15% to $29.4m and underlying op. profit down $1.2m to $3.0m – difficult year and introduced new management in September and consolidated the two businesses (Lifetime Distributors and Premier Books). Expects recovery in FY14.
- Separately announced a JV with Grupo Nobel, a subsidiary of Brazil Franchising, for the supply of adult illustrated non-fiction titles under the imprint of Quarto Editora.
NORTHLAND UK VIEW: As previously argued, Marcus Leaver as CEO inherited a substantial portfolio of titles including a number of non-core businesses/assets that was assembled through the buy-and-build phase. During 2013, the management team has made considerable progress in rationalising the base with limited disruption to the core operations. The reduction in net debt is also a positive but there is more work to be done. The return to growth in the US is encouraging and the announcement with Grupo Nobel represents a growth opportunity. On the basis of current consensus forecasts, the shares are trading on 5.4x FY14 (roughly double that if debt is factored in) and yielding c. 4%. The substantial backlist remains a key attraction but there is scope for growth.
MANAGEMENT TEAM UPDATE: STRENGTHENED TECHNICAL TEAM
- Savannah Resources has appointed Mr Paul O’Donoghue as Country Manager for Savannah in Mozambique and Dr Durair A’Shaikh as a geologist.
- Both will receive a combination of cash and share compensation to assist in conserving the Company’s cash.
- They will receive 1,500,000 share options some of which are performance related at a strike price of 8.81p, a 35% premium to the 30 day VWAP.
NORTHLAND UK VIEW: Savannah Resources has made some positive appointments that strengthen the Company’s technical team. Mr O’Donoghue is a founder of Matilda Minerals Limitata and a long term resident of Mozambique and he successfully managed the implementation of last year’s Jangamo drilling programme. Dr Durair is an intentionally recognised expert in base metals. His appointment supports the Company’s strategy of becoming a multi commodity focussed exploration and development group.