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Caza Oil & Gas, Mariana Resources, Gulf Keystone Petroleum, Highland Gold, and others feature at Fox-Davies Newsflash

Last updated: 09:36 10 Aug 2012 BST, First published: 08:36 10 Aug 2012 BST

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Mining News

Highland Gold Mining Ltd (LON:HGM) announced its trading update in respect of the half year ended 30 June 2012; full financial results for this period will be released on or around 19 September 2012. Total gold production for H1 2012 came in at 101,900oz, an increase of 9.5% when compared with H1 2011. The Company remains on track to produce between 200,000 and 215,000oz oz gold and gold equivalents for 2012. Construction of the Belaya Gora stand-alone processing facility remains on track for commissioning in Q4 2012 and there has been a 16% increase in JORC compliant resources, through acquisition and exploration, to 12.9M oz.

Mariana Resources (LON:MARL) has released its Half-Yearly Report and the Quarterly MD&A to the end of June, 2012. The Company finished the period with cash in hand of £3.5M (1Q'12 £4.6M) and recorded a lower loss than the previous period -£1.929M 1H'12 (-£2.07M 1H'11) and -£0.891M 2Q'12 (-£0.932M 2Q'11), primarily as a result of lower professional fees associated with the listing on the TSX in June 2011. However, the devaluation of the Argentinean peso against the USD reduced the impact as larger exchange losses were occurred of -£0.822M 1H'12 (-£0.425 1H'11). Operationally everything remains on track with the resampling at Las Calandrias identifying mineralisation outside the current resource. Planning is now underway to initiate follow‐up exploration in Q3/Q4 of the large land package north and west of Las Calandrias, with promising dome‐related and vein type targets already emerging. At Aguila/ Picadero, the onset of snow put the drill programme on hold until the next field season and in Chile, Mariana elected to dilute further from 22.32% to 21.35% of the Tierra Noble SA joint venture (Cliffs 78.65%) in order to focus on the Company's own properties in Chile and Argentina. 

Sylvania Platinum (LON:SLP) has confirmed that the disposal of its iron ore assets to the Mercury Recycling Group (MRG-LON) is proceeding as announced and should be completed, along with the re-admission of the enlarged Mercury Group to trading on AIM, on 16 August 2012. Mercury today announced that it received a letter from lawyers acting for two individuals claiming to represent a tribe in South Africa. The tribe is purporting to have certain occupancy rights over land subject to the Prospecting Rights which the Company is in the process of acquiring. MRG has obtained legal opinions that conclude that the said tribe does not have any valid entitlements which could impact on the Enlarged Group's rights to prospect. Furthermore, the opinions consider that due process has been followed with respect to the granting of the Prospecting Rights under South African law. This should therefore not impact the proposed acquisition. 

UK Coal (LON:UKC) has released a not unexpected, poor 1H'12 report. Total Group revenue fell 23% to £198.3M (1H'11 £256.1M) as a result of significantly lower sales volumes and poor operating performance at Daw Mill and Thoresby, with reduced total production of 3.3Mt (1H'11 4.1Mt) although some improvements were seen in Q2. Following the renegotiation of sales contracts, the average sales price rose to £2.43/GJ (1H'11 £2.36/GJ). The Company reported a loss after tax and exceptional items of £20.6M compared to a £22.2M, despite property sales of £16.7M in the period. Total net debt, including generator loan/prepayments, reduced by £0.5M to £138.3M, but the Company still has a funding deficit to the Pension Funds of approximately £430M. The Company concluded that debt and the pension fund deficit combined rule out the possibility of Shareholders receiving any return from their equity until these issues are addressed and has now reached an agreement in principle with the Company's key stakeholders. A non-binding heads of terms agreement has been reached with the Pension Trustees, and an agreement in principle with the Generators, which would result in a combined ~£90M of support to UK Coal over the period to the end of 2015 once the proposed restructuring is implemented.  Under the proposed plan the mining business would be left free of bank debt and would have an affordable pension deficit reduction scheme.  Each mine will be restructured into separate legal entities to reduce the risk of any one mine's failure bringing down all mines. This is expected to create a more stable platform to release the value in the mining business.  As part of this arrangement, from 2014 the Pension Funds will receive GBP30M per annum plus any cash in the mining business above a minimum headroom requirement of £50M, after agreeing to defer any deficit contributions in 2012 and 2013. As part of the proposed plan to address the deficit, it is intended that the Pension Trustees will also invest £30M in the property business to enable the release of the latent undeveloped value in the property portfolio. In exchange, the Pension Trustees will receive a direct stake of 75.1% in that business, with existing shareholders being entitled to the benefit of the remaining 24.9%. This stake would be held through a new holding company which would not guarantee the pension liability. In return for the stake, the first £5M of shareholders' dividend income would be paid to the Pension Funds. The terms of the proposed restructuring could mean that shareholders' principal continuing economic interest in the Group will be a minority stake in the long term development potential of its property assets. UK Coal states that it "made strenuous attempts" to secure an option for shareholders to subscribe part of the new equity, but the primary condition of the Pension Funds was to have a controlling shareholding in a separated property business.

Oil & Gas News

Gulf Keystone Petroleum (LON:GKP) - Shaikan Declaration of Commercial Discovery: Today's announcement marks the completion of the appraisal programme at Shaikan field. All eyes are now on development strategy with the Company planning to submit a Field Development Plan within next 180 days with an objective to move to large-scale staged development in 2013. However, GKP's production will be limited to revenues generated by sales into the domestic market which we estimate between 175 - 200m bpd. This would not support the full development scenario for Shaikan field and consequently, the Company will not derive the full value of its assets until such times as there is an effective export route to market. The recent agreement between Kurdistan and Turkey to build new oil and gas pipeline and commence oil and gas trade is a landmark development; the proposed oil and gas pipeline will open up alternate monetization options for the Kurdish oil and gas reserves. We believe that the risks are limited to timing, and that our target price of 350p is an adequate reflection of these risks. Given that the current share price does not reflect the value of the assets as they stand currently, any weakness from these levels presents an ideal buying opportunity.  Consequently, we are reiterating our BUY recommendation.

Caza Oil & Gas (LON:CAZA) The Company continues to increase its hydrocarbon production and revenues in the 2Q'12. Oil and gas production during the period was up 38% y-o-y to 276 boe/d and natural gas liquids output surged 86% y-o-y to 106 bbl/d. On the exploration front, ongoing drilling of exploration wells on the Bradley, Quail and WC 35 field continues to make good progress. Caza has secured a rig to drill Ridge 14 State #3H horizontal test well on its Copperline Prospect in Lea County, New Mexico. Positive updates on the drill results and production volumes will be the key share price drivers in the near term. In this news: 

Caza's revenues from oil and  gas sales increased 30% to $1.09mm for the three-month period ended June 30 2012, from $0.84mm for the  comparative period in 2011. The increase in revenues was primarily due to additional wells being brought on line since the comparative period. 

The average combined price received by Caza decreased 6% to $43.56/boe during 2Q-12, compared to $46.54/boe during the corresponding period in 2011, due to lower commodity prices.

The Company had a cash balance of $4.7mm as of June 30, 2012, as compared to $8.2mm at March 31, 2012.   

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