Broker Roundup: Rockhopper Exploration, Helius Energy, Xstrata, Cluff Gold, Chariot Oil and Gas


Evolution Securities analyst David Farrell said today that appraisal drilling on the Sea Lion discovery will help Rockhopper Exploration’s (LON:RKH) share price recovery, but another discovery would extinguish the Falkland oil commerciality argument,

The explorer revealed that the latest Sea Lion appraisal well has flowed at commercial rates. The 14/10-5 Sea Lion appraisal well - drilled in May - flowed at a stabilised rate of 5,508 barrels of oil per day. The well had a maximum stabilised flow rate of 9,036 barrels a day.

Farrell repeated a ‘buy’ recommendation for Rockhopper, which targets 450 pence a share.

Meanwhile Helius Energy (LON:HEGY), the biomass energy expert, looks ‘fundamentally very substantially undervalued”, according to house broker Numis. It rates  the stock a buy -  with a target price of 37p.

Earlier this month, the firm reported interim results showing a net loss of £1m, slightly higher than Numis’ expectations of £700,000. Cash consumption over the first half at £3.5m was also ahead of the broker’s expectation of around £2.7m.

UBS analyst Olivia Ker cut 2011 earnings estimates for mining giant Xstrata (LON:XTA) to reflect lower realised pricing in coal, higher than expected costs, adverse currency movements as well as lower weather related volumes.

The broker reduced 2011 earnings 15 percent  to US$6,618m (US$2.26 per share) for the firm and maintained its "buy" rating for the company targeting a price of £17 - reduced from its previous price of £17.4.

Broker Collins Stewart analyst John Mcgloin said Cluff Gold (LON:CLF, TSE:CFG) was right to be confident that its Baomahun project will grow in size through an ongoing drill programme.

In a note to clients, the senior mining analyst reflected on a recent visit to the Baomahun mine site.

Baomahun was the main focus of this morning’s pre-AGM statement, in which chairman Algy Cluff highlighted that the project’s bankable feasibility study (BFS) will be completed in about three months time.

A preliminary assessment estimates that the mine will be able to produce 157,000 ounces each year for eight years, at costs of around US$500. Importantly production could be enhanced through drilling because 75 percent of the Baomahun strike has yet to be explored.

But before that Cluff will have raise a significant amount of money, US$195 million, for project financing to get the initial project up and running. The company stressed that all funding options are being reviewed.

Evolution’s Louise Collinge emphasised that the use of alternative financing structures, rather than traditional ones, should be taken as a positive. In a note to clients Collinge repeated a ‘buy’ recommendation, which targets 135 pence a share.

In another note, UBS reiterated its "buy" recommendation for Chariot Oil and Gas (LON:CHAR) and said the firm's recent share price weakness represented a good buying opportunity.

The research arm of the investment giant targeted a price of 510 pence (current share price 155.25 pence) for the stock.

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