We’ve had some quite frankly bizarre reactions to news flow in the part of the market we here at Shard train our periscope.
But that’s what makes the AIM interesting and exciting, isn’t it?
I’ve highlighted three companies below – Jubilee, StratMin and EMED – where those of an optimistic disposition may spot an opportunity.
Looking at the market stats, I note there was a 4% decline in the number of mining shares traded on AIM last month. Oil, gas and technology stocks appear to have taken investor focus away from diggers – particularly those who passed significant, potentially value accretive milestones. Our three certainly fit that bill.
Along with the vast majority of investors, we were expecting a significant uplift in the price of the Spanish base metal play with the announcement of the transferring of mining rights on the Rio Tinto copper mine.
This is now de-risked from a permitting perspective and enables EMED to unlock the value of the asset, which remains open to resource uplifts. This news has been seven years in the waiting and to say the reaction to the event came as an anti-climax would be a bit of understatement.
We remain confident that EMED offers long term value at these levels and the reaction gives investors the chance to “top up” at what we believe is an attractive price. The stock has been north of 11p in the last few weeks on the potential of receiving the permit alone. The company still has financing risks, development and production risks and will be sensitive to copper price movement, but now they have the licensing and permitting “sown up” we are backing the new management team to execute their mining development plan.
The Madagascan graphite company announced on Monday they have now started commercial production at their Lohorano licence. They are expecting to produce 100 tons of high grade flake graphite with a carbon content in excess of 90%. The company reported negotiations with a number of potential customers to buy graphite concentrate were underway. In the last 52 weeks the shares peaked at 35p but dropped due to production issues resulting in low grade output. Production risks, geo-political risks of Madagascar and off-take risks must be considered, but the new management team have improved mine efficiency and with grade issues seemingly behind them, we believe there is upside in Stratmin’s shares at the current price.
On March 26 Jubilee release their Interim results showing revenues increasing by 6.5%, a gross profit of £970,000 and a cost reduction of 45%. They went on to announce this week (14.04.14) that a 3rd furnace had been switched on at its Middleburg smelting operation which will produce its first hot metal load by the 17th of April. This was previously delayed due to weather issues and although the price fell on the back of the delay it has not yet rebounded on the back of the completion! The stock is trading at 52 week lows and although it is a high risk mining play and has had delays in the past, we feel that the current price is attractive.
When a sector is out of favour, shareholders and Company Directors can sometimes feel like they are “swimming against the tide”. By identifying companies that have had significant corporate events and yet have been “ignored” by investors, you may find an undervalued situation at a very nice price.
Next Week: Tower (LON:TRP) in focus
Hot off the back of the successful fundraising at 3.5p last Wednesday, Tower Resources shares have risen nicely this week. We are anticipating Welwitschia-1 to be spudded at some stage next week, which is the largest independent drill for some time in Namibia and is operated by Repsol (Spanish Oil and Gas major). According to the competent persons report the well could contain up to 500m barrels of oil and we expect further activity in the next week as AIM investors speculate on the outcome of the high risk, high reward play.
*The views expessed are the views of Shard Capital and should not be construed as investment advice. As we have not accessed your individual suitability for personal investment advice.