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Northland Capital Partners View on the City: W Resources, Rockwell Diamonds, Alba Mineral Resources, Aveva Group and others

Northland Capital Partners View on the City: W Resources, Rockwell Diamonds, Alba Mineral Resources, Aveva Group and others



NORTHLAND UK VIEW: For some time Rockwell Diamond’s ageing fleet with its reliability issues has resulted in increased unit costs and lower production volumes at Middle Orange River operations, causing the Company to operate at a loss. The issues with the mining fleet continued to affect production during Q1 FY15 with volumes at the Saxendrift, Saxendrift Hill and Niewejaarskraal Mines all below expectations leading to high operating costs. As a result both Saxendrift Hill and Niewejaarskraal operated at a loss and Saxendrift was marginal. Despite a weak start to the financial year from its mines, Rockwell still managed to achieve a Q1 FY15 profit CAD$0.4m compared to a loss of CAD$1.2m in Q1 FY14. This was partly due to the high beneficiation revenue of CAD$5.4m associated with the sale of several large diamonds. Things look set to improve further in Q2 FY15 as the eagerly anticipated upgrade to the mining fleet is now well into its implementation phase. Rockwell struck a shrewd deal to renew its fleet at no capital expense with the vehicle supplier providing full maintenance of the fleet, allowing Rockwell to focus its efforts on mining and recovering its large and high value diamonds. We now anticipate that both volumes and unit costs will begin to improve in Q2 FY15 and we have updated and reinstated our forecasts and price target of 49.4c in light of this, and moved our rating to BUY from HOLD.





  • A total of 10t of concentrate has now been produced from the re-processing of tailings at La Parrilla.
  • The concentrate has an average grade of 59% WO3 with lower levels of impurities than expected.
  • Production ramp-up to 25t per month is on schedule and expected to reach full production by October 2014.
  • The plant will move to 24/7 operations at the end of July.
  • Inaugural shipment of tungsten concentrate is scheduled for later in July.


NORTHLAND UK VIEW: The ramp up of the tailings reprocessing at La Parrilla is progressing well with 10t of concentrated produced to date. Importantly this concentrate has a grade close to 65% WO3, the grade at which tungsten concentrates command a premium price and becomes increasingly sought after by secondary processors and tertiary manufactures. W-Resources were only targeting grades of 50% WO3 during the ramp-up period while it makes refinements to processing plant, the Company is now continuing normal optimisation and fine tuning of the plant with minor upgrades in pump and spiral capacity.




  • Alba Minerals has signed a binding head of terms with Horse Hill Developments Ltd to invest in a UK oil and gas asset.
  • Alba will acquire a 5% interest in Horse Hill Developments Ltd (HHDL), an SPV that has the right to acquire a 65% participating interest in the operatorship of UK PEDL 137. That translates to a read through 3.25% working interest.
  • Total consideration for Alba is £300k, which contributes to the drilling of a planned well.
  • The licence is a 99 square km area in the Weald Basin of Surrey. A previous well in the area encountered good oil shows.
  • Site construction has now commenced for the proposed drilling of Horse Hill 1 well expected to spud later this month targeting stacked oil and gas prospects to a depth of 8.5k feet.


NORTHLAND UK VIEW: This move expands the portfolio of the diversified minerals exploration Company into oil and gas and brings exposure to near term conventional drilling in one of the UK’s more prospective areas. The Company continues to evaluate other opportunities as well as seeking to pursue its activities in lead-zinc-copper (Ireland) and Uranium (through its Mauritanian JCV).


Week Ahead (14/07/14)

View from the trading desk

A decidedly trickier week for European markets (down) and sovereign debt (up) as worries about the Portuguese banking sector spread across the Eurozone. Sentiment was not helped by poor French industrial output data for May that fell 1.7% (against an expectation of 0.2% growth), Italian output (-1.2%) and contractions in German exports and industrial output. The US also saw a couple of down days at the start of the week that took the Dow Jones back down below the 17,000 level before recovering somewhat midweek. But expectations for further volatility seem to be growing and the Portuguese concerns spread to the US on Thursday. After hitting a multi-year low last week, the Vix volatility index has started to climb.

According to data compiled for the FT by Markit, the percentage of stocks that have been borrowed for shorting purposes in the US, UK and Europe has dropped to levels last seen pre the collapse of Lehman Brothers suggesting that hedge funds in general are unwilling to bet against a continued rally. That said, a number of high profile managers continue to warn about prices and there is still scope to make money as evidenced by the collapse of Gowex, the Spanish wireless internet company, following a report by shortseller Gotham City Research. Insurance claims processor Quindell (QPP.L) has yet to recover its poise following a negative note in April.           

Sales & Research thoughts

TMT: Amino Technologies (LON:AMO) is due to announce H1 results on Monday. In June’s pre-close, the company reported that it expects PBT will in line with market expectations with a closing net cash position of £19.7m (FY13: 19.5m) following the £1.3m dividend payment. Revenue expected to be H2 weighted and hence H1 down on H1 FY13 (£20.1m). Recommended interim DPS of 1.15p/share (+15%) and management has committed to a progressive policy to FY16. Current yield is attractive (>4%) but management needs to explore ways to use its cash to help grow the top line or return more non-core cash to shareholders. 

Aveva (LON:AVV) is also scheduled to announce a Q1 IMS on Monday. A core feature of the TMT landscape, its Aveva Everything 3D (E3D) design platform is gaining good traction with its customer base and its international/industry spread (Process, Power and Marine) means it remains better able to weather the varying economic conditions of its end markets. Enterprise Solutions continues to be something of a problem child with FY14 suffering from lengthening sales cycles and the loss of a couple of customer contracts. This was offset by the roll-out at Aveva Net at Chevron as well as projects in China and the Middle East. We will be looking for an update on the ‘One Aveva’ combined sales/delivery model. Bid speculation recently resurfaced.

Computacenter (LON:CCC) will announce interims on Thursday. April’s Q1 update was reasonably upbeat with overall revenue up 9% on a constant currency basis (Services +4% and Supply Chain +12%). UK has been trading strongly across both divisions; Germany has seen a recovery in Services +2% in Q1 and an improving pipeline; but there remains much to do in the French division where Services revenue declined 5%. Management has flagged a restructuring charge of between £7m and £9m.

Oil Price: Further easing of oil price this week (Brent c. $107/bbl/ WTI c. $102/bbl) following recent spikes support our thesis at the start of the year. We had looked for easing but geopolitical events subsequently took over. All things being equal, the price could continue to ease. Geopolitical uncertainty is being offset by the continued growth in US crude with production expected to average 7.4mbopd this year and 9.3mbopd next year (EIA estimates). Supply growth is expected to should surpass demand growth this year but only by around 0.5mbopd and continued production disruptions from OPEC muddy the picture. 

Short term outlook is partly somewhat dependent on Libya where rebels are expected to release the blockading of two eastern ports (Es Sidra and Ras Lanuf) that could return 0.55mbopd to the market. Significant unrest in Iraq is more critical and will have a greater bearing on oil’s direction. The market has taken encouragement from the recent resistance to ISIS and forecasters expect the country to maintain production of 3.3mobod (H114 average rate) for FY14. There have been supply disruptions in Northern regions but core southern regions, accountable for 2.8mmopd, are so far unaffected

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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. 

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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 

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