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Views from the Trading Floor Tuesday 31st January

Published: 16:43 31 Jan 2012 GMT

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Saints & Sinners 

  

Oil & Gas 

San Leon (LON:SLE) continued its recent run of decent volume, trading almost 3 times the average daily volume yesterday. A theme that continued today, with over 8 million shares changing hands before 11am. The company is due to update the markets on a couple of wells over the next few weeks, so the apatite from the market is there to mop up any potential sellers. By the size of the recent volume, it would not be a surprise to see a holdings update from somebody, any sniff of a seller being cleared and we could see the company testing thin resistance at 11p then major resistance at 13p. Watch this space.

Rockhopper (LON:RKH) look set to try its 52 week high of 351.25p again soon, as the shares were 4% dearer in trading at 342p. All the recent takeover and partnership speculation surrounding the disputed waters, has continued to keep investors interested in the story. We remain very bullish on the story and as a shop we have a 600p price target.

After yesterday’s large volume, Gulf Keystone (LON:GKP) decided to relax a little today. Volumes were back to normal and the shares were 3p better at 280p. If the shares can break major resistance at 282p, a test of the previous high of 314p could be on the cards. Possibly a catalyst for any move higher could be the updates on Shaikan-5 and Shaikan-6 that are due.

Red Emperor (LON:RMP) and Range Resources (LON:RRL) have started to get active again, with volumes increasing in both over the last few trading sessions. Range Resources have recently given the market an update on a partnership with Leni Gas (LON:LGO) in Texas, and the market is now looking for any updates from Red Emperor or Range on how drilling is going in Puntland, Somalia. This will be the main focus of holder over the coming weeks, as any positive updates would get the retail investors chomping at the bit.

I highlighted Nostra Terra (LON:NTOG) yesterday, along with a few snippets from the recent investor presentation, as one to watch. Volumes are continuing to creep higher, and the shares popped 6% to 0.48p before the lunchtime hour today. Holders will continue to watch the news wires for any update about the spudding of Bale Creek, and the anticipation of this news could help keep investors interested in the name.

Gulfsands (LON:GPX) jumped 5% to 175p today, albeit on thin volume of 70,000 shares traded by the end of lunch. The company moved better after it issued an update on operations in Syria that said, Drilling, logging and well testing operations have now concluded at the Khurbet East 102 ("KHE-102") well, an appraisal well which has tested the structural elevation, reservoir quality and reservoir fluids present in the Triassic Butmah and Kurrachine Dolomite Formations on the north flank of the field some 2.3 kilometres north of the Khurbet East 101 well ("KHE-101") drilled earlier in 2011. Originally spudded on October 13th 2011, KHE-102 has encountered gas and oil in the Butmah Formation and the results of the well are interpreted to be generally consistent with pre-drill expectations. The hydrocarbon columns and reservoir characteristics interpreted in the KHE 102 we ll are also seen as broadly confirming the Company's initial estimates of total recoverable hydrocarbon volumes from the Butmah Formation of 19.2 million barrels oil equivalent. Both Khurbet East and Yousefieh oil fields continued to perform extremely well during the year.  Four new production wells were drilled raising oil production to a level in excess of 24,000 barrels of oil per day ("bopd") by August, prior to the impact of European Union sanctions. Later in the year, static pressure surveys conducted on shut-in wells further confirmed the presence of a strong aquifer in both fields, with positive implications for reserves bookings.A total of seven exploration wells were drilled in 2011, four of which were oil discoveries, including Yousefieh East, Al Khairat and the Khurbet East Field Butmah Formation in Syria, and Sidi Dhaher in Tunisia. The potential development of oil and gas accumulations in the Khurbet East Field Butmah formations was declared to be commerci al in December 2011. The Company's hydrocarbon reserves are currently being evaluated for all fields and results will be released in early April 2012. Support at 165p looks like the first major support line here, with 180p being the first area of resistance. We will be keeping close tabs on this one, especially towards the end of March and early April for the next instalment.

A stock I have not mentioned before is Parkmead Group (LON:PMG). Looking through the recent updates from the company does make for an interesting read, as the company said it is now fully funded for its forward programme of drilling, and is well positioned to capitalise on further strategic opportunities. One interesting point I did find was Tom Cross, Executive Chairman of Parkmead comment from the RNS on the 19th of December "We are delighted to be gaining stakes in these attractive licence areas, which are in close proximity to our interests in the Platypus gas field and the Possum prospect. These four blocks contain a number of targets, including the large Pharos prospect which we expect to drill later in 2012, following the next well being drilled at Platypus in 1Q 2012." I will be watching this one closely for any volume increase or update on the well being dr illed at Platypus in 1st Q this year. First line resistance at 15p does look to be the main area of interest on this one.

Enegi Oil (LON:ENEG) moved 2% better to 15.75p just before lunch, after the company gave a brief update. The announcement said “The Company is pleased to note the announcement issued by Shoal Point Energy ("SPE") on 30 January 2012 that a new side track (3K39Z) well will be drilled and approval for the work has been secured. SPE indicates that 3K39Z will be drilled from the existing 3K39 well by setting a whipstock at approximately 1585 metres and drilling ahead to the base of the Green Point Formation. Subject to final regulatory approvals, tests will then be performed to determine the flow potential and reservoir characteristics of unstimulated, fractured Green Point shale’s. SPE expects the program to take up to 60 days to complete. Alan Minty, the CEO said “The drilling of a sidetrack well is a significant undertaking, which clearly shows SPE's belief in the Gre en Point shale’s. We are excited by the prospect a positive result from the sidetrack would have on us and we eagerly look forward to further announcements over the coming weeks". 

On Friday I spoke about Xtract Resources (LON:XTR) and the volume increase, well that rich vein of trading continued today with a massive 23 million shares changing hands before the end of lunch. Shares were 10% better at 2.3p and showing no signs of exhaustion. Holders here could be getting excited about a possible update on the whereabouts of the rig. With huge volume like this, could we be in store for this update soon?

Sirius Petroleum (LON:SRSP) jumped 20% to 6p in trading, on almost 10 times the average daily volume. Bulletin boards were speculating and update may be due, and from a chart point of view, a close above 5.75p would be a very strong sign for the company. We will be keeping a close eye on this over the next few sessions to see what transpires.

Global Petroleum (LON:GBP) gave its quarterly report this morning, that highlighted Total production from the two Eagle Ford horizontal wells (Tyler Ranch EFS #1H and #2H) in which Global has an interest was 64,860 boe (55,679 bo and 55,086 mcfg) for the December Quarter or 705 boepd. Global has a 7.939% working interest (5.95% NRI) in approximately 1,651 acres beneath the Olmos formation including the Eagle Ford Shale. Total combined production from the nine producing Olmos vertical wells in the Olmos reservoir in which Global has a 15% working interest (11.25% net revenue interest) was 54,046 boe (21,089 bo and 197,743 mcfg) or 587 boepd. Shares were 10% easier to 12.5p on 4 times the average daily volume. Support at 12.5p and 11.25p look to be the first two areas of interest here, any bounce could see a test of resistance at 13.5p.

Mining

African Minerals (LON:AMI) dropped 3% to 500p on three times the average daily volume just after lunch. Holders were in two minds after the company gave two new announcements. First thing the stock ran up to 521p then slipped as low at 480p, as holders were playing tug of war. The first RNS announced the launch of a book-build offering ("the Offering") of up to US$350 million of Convertible Bonds due 2017 (the "Bonds" ). The Company intends to use the net proceeds of the Offering primarily for the continued expansion of production at its Phase I Tonkolili iron ore operation to 20Million tonnes per annum. The second said, the Company is also pleased to advise that Standard Bank Group Limited has confirmed that credit committee approval has been received for a refinancing package for US$518m. The refinancing will be used to redeem the existing US$417.7m Secured Loan F acility prior to its anniversary date and continue the existing US$100m Standard Bank Standby Facility. Completion of the re-financing package is subject to satisfaction of customary conditions precedent. Support at 500p and then 460p look to be the main levels on the downside here, with 540p looking to be the head line resistance.

Edenville Energy (LON:EDL) dropped 20% during trading to trade at 0.30p after the African energy focused exploration and development company, said Tuesday it has placed 1 billion new ordinary shares at 0.25 pence per share to raise GBP2.5 million. Placing proceeds will fund the proposed 2012 drill program at the Company's Rukwa coal project in southern Tanzania. Rukwa project is planned to evaluate coal mineralization along strike from the area drilled in 2011 and also to test the down-dip depth extension of the intersections reported last year. It is anticipated that further test work at Rukwa during 2012 will allow a development decision to be made. Proceeds will also fund further exploration and development of the Company's portfolio of earlier stage coal assets in southern Tanzania during the coming year. I guess the line in the sand has been drawn at 0.25p here , and that should act as major support, and the previous support at 0.35p, will be the first line of resistance.

Alecto Minerals (LON:ALO) jumped 15% to 2p mid-price during trading, on almost 10 times the average daily volume. If the stock can break and close above the 2p level, the next line of resistance will be 2.5p. Shares have been looking better since the positive announcement on the 16th of January, and we will be watching closely to see if the stock can take a bite at the 2.5p level over the coming trading sessions.

Metminco (LON:MNC) jumped 9% to 12.5p in trading, after the company gave its quarterly activities report. The announcement highlighted that the Phase 3 drilling program at Los Calatos was completed during Q4 2011.  The Phase 4 drilling program commenced during December 2011.  At time of release, 8 drilling rigs were operating at Los Calatos with over 10,000 metres of the 100,000 metre program having been completed. The mineralised envelope at Los Calatos remains open to the southeast beyond drill hole CD-47 and to the northwest beyond drill hole CD-45, with the length of the mineralised envelope now exceeding 1,200 metres.

A stock we highlighted last week that was running on the back of the move in the underlying metal, was ZincOx (LON:ZOX). Shares were another 6% better at 72.75p in trading, on three times the average daily volume, after the company said  it is pleased to announce the first delivery of feedstock, Electric Arc Furnace Dust ("EAFD"), at its wholly owned recycling plant in South Korea. The arrival of the EAFD will enable the plant to undergo commissioning with actual feed material - so called "Live Commissioning".  The Live Commissioning marks the final stage in the development of the plant and is expected to take about four to six weeks from today.  Production will commence immediately thereafter which is in line with the first quarter schedule previously announced. First line resistance looks to be 75p with a small gap to fill in the historical chart to 78.5p. Previous resistance at 70p will now look to act as support.

Norseman Gold (LON:NGL) continued to push higher again today, pushing 6% better to 6.8p in trading. Shares have jumped from 4.85p to almost 7p now in 3 days of trading. Head line resistance looks to be around 7p, and a break and close above that level, could see the stock test 7.7p. Investors have been chasing the stock since it announced yesterday that the company had requested and been granted a trading halt from its shares on the Australian Stock Exchange pending an announcement with respect to its operations and corporate restructuring at Central Norseman Gold Company Ltd. The Company's shares have not been suspended from trading on AIM. As announced on 22 December 2011, the Company is in discussions with a potential strategic partner looking to take an active role in the development of Norseman Gold. The potential partner has experience in operating at Norseman , and therefore understands the mines, the ore bodies and their potential. 

Sylvania Platinum (LON:SLP) dropped another 7% in trading to 22.5p. Shares have been weak since the company gave its quarterly report and cashflow update. Volumes are light, but the main support levels looks to be 22p followed by 20p. Resistance at 24p will be the first area of interest, should the buyers return to the name.

After the near 60% rally over the last few weeks of trading, profit takers showed up in Thor Mining (LON:THR). Shares were 8% easier to 1.3p which happens to be the first line of support. Should this level break, 1.2p would be the next area to watch for.

From the trading floor

The FTSE resumed its upward trend again today, pushing 33 points higher (+0.57%) by the end of lunch on volume of close to 500 million shares. The AIM All-Shares Index was trading 0.33% better on huge volume of 1.6 billion shares before the end of lunch. The high volume in the smaller companies is a continued theme of late, and is showing no signs of slowing up.

The all-powerful US consumer confidence figures were on the menu across the pond today, with the expectations for a reading of 68 on the index. The market was shocked to get a reading much lower than the expected number, hitting the wires at 61.1. The market did wobble a touch on the back of the data, and traded down a touch from its highs.

Eurozone unemployment in the Eurozone hit a record high at the end of 2011, according to figures from Eurostat. The unemployment rate across the European union was 10.4% in December, equating to approximately 16.5 million people out of work, what was up just over 750,000 on the previous year.

Commodities Corner 

  

Gold – ↑Trading at $1745, up $15 (+0.85%) 

Silver – ↑Trading at $33.98, up 46c (+1.28%) 

Copper – ↑Trading at $8486, up $82 (+0.98%) 

Zinc – ↑ Trading at $2125, up $35 (+1.29%) 

WTI Crude – ↑Trading at $100.98, up $2.21 (+2.24%) 

Brent Crude – ↑Trading at $112.61, up $1.88 (+1.88%) 

Natural Gas (HH) – ↓ Trading at $2.55, down 16c (-9.38%) 

 

FX

GBP vs USD = 1.5788

GBP vs EUR = 1.12006

 

 

Written by Steven Asfour, Sales Trader at Fox-Davies


 

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