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Northland Capital Partners View on the City: Savannah Resources, Union Jack Oil, Rockwell Diamonds, Churchill Mining and others

Northland Capital Partners View on the City: Savannah Resources, Union Jack Oil, Rockwell Diamonds, Churchill Mining and others

MINING: Churchill Mining (LON:CHL)

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.

 

OIL & GAS: Union Jack Oil (LON:UJO)

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.

 

MINING: Savannah Resources (LON:SAV)

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.

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.

 

 

DISCLAIMER

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 www.northlandcp.co.uk 

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

Published by/copyright: Northland Capital Partners Limited, 2013. All rights reserved

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