Northland Capital Partners View on the City: Chariot Oil and Gas, Entertainment One, Serabi Gold and RapidCloud International




  • FUNDRAISE: The Company completed an accelerated book build to raise $15m by issuing 58.6m new shares at 15p per share, a 14% discount to the previous days close.
  • Fundraise will increase liquidity and allow funds to be deployed on two projects;
- A total of $7.5m of the funds will be used to fund Chariot’s 50% share of the 800km seismic commitment f for the Brazilian assets. 
- The remaining $7.5m is being used to access new assets in one of its four territories (Brazil, Namibia, Mauritania and Morocco),  
  • FARM OUT: The company is in the process completing the 2:1 farm out of 25% of its Brazilian assets (following an unsolicited approach) for a 50% contribution to costs, retaining operatorship. The company started the farm out process for the next stage of the Brazilian licences two weeks ago and would look to maintain at least a 25% share for a carry through the drilling of a well, though this is of course dependent on the quality of subsequent data.
  • REVISED FORECAST: We assume that all of the funds raised are spent in the period so the impact on cashflow is neutral, whilst additional shares reduce LPS.
  • VALUATION: We increase balance sheet intangibles by the requisite amounts. Our valuation reduces given this incorporates a discount to the value intangible assets of 45%. Our revised valuation to 28p also reflects some weakening of the dollar since our last valuation.

NORTHLAND UK VIEW: Given the robust cash position of c. $25m expected at year end, the cash raise came as something of a surprise. However, the funds raised looks reasonable in light of timing issues faced by the company. Chariot’s restricted cash position of $15.6m ($12.9m relating to Brazil) are in the form of bank guarantees that will not be released until completion of work programmes of the equivalent amount and cannot be drawn to fund those work programmes. Given the addition of a farm in partner for Brazil the company wishes to bring forward the 3D seismic programme for those assets to this year as well as pursue another, yet to be identified, opportunity in one of its current areas of operation. In addition, the $13m funds to be received following the recent farm out of Rabat Deep, Morocco to Woodside are not expected until Q113. Thus, at the end of the year the company expects to have around $10m of unrestricted cash on hand (though with no further work commitments), representing around 15 months G&A, ahead of receiving Woodside funds – the same as prior to the fundraise given the new capital is being spent on capex brought forward and a new project. When Woodside funds are received and if it is able to secure additional recovery of back costs cash will improve. We maintain our BUY rating given the good track record of farm outs, and growing inventory of world class, though high-risk exploration opportunities.




  • Q1 revenue +4% on a pro forma and constant currency basis. FY earnings expected to be in line with management expectations. 
  • Intention to release more than 275 films and >300 half hours of television programming with an associated investment in content rights and productions of c. £300m (up 10%).
  • Film revenue down 4% reflecting release timing. Box office takings at $82m (+19%) with 74 releases (+6) and 128 DVDs were releases (+27). Acquired Phase 4, an independent film and television distributor in Toronto, for C$27m.
  • Television revenue up 67% (CCY basis) with 37 half hours of content (+11) and strong Family licensing revenue. Acquisition of Paperny in July, a Canadian factual television production business, for C$29.2m. Five new US licensing partners for Peppa Pig signed and better than expected DVD sales. 
  • Net debt up on Q1 FY14 reflecting increased investment in acquired content rights and productions plus acquisitions.
  • AGM September 11th.

NORTHLAND UK VIEW: Reassuring Q1 update with a strong performance in Television offsetting the decline in Film revenue. That said, the strength of box office takings should flow through to other revenue streams in time. Business remains acquisitive and net debt (FY14: £111.1m (adj.)) remains a feature. Trading on 15.5x FY15 and 14.0x FY16 but we continue to favour its diversification (genre and geographic).





  • Serabi Gold Mining has reached commercial production at its Palito Mine.
  • 3,242oz Au produced from 18,645t at a grade of 8.086g/t during Q214.
  • Surface stock pile of 13,000t at 5.4g/t Au.
  • 32,500t of flotation tailings have also been stockpiled with a grade of over 2.0g/t Au (2,100oz Au), and is awaiting cyanidation treatment.
  • CIP leaching circuit to be commissioned in July with first elution pour in September.
  • The second ball mill now installed and tested expected to be operational in July 2014.

Sao Chico

  • Initial work at Sao Chico has been delayed by the weather. As a result, ramp development has been pushed back from July to early September.
  • This will have a knock-on effect delaying underground development.
  • The surface drill programme has also been delayed due to the weather and is now planned for Q314 with an upgraded resource estimate to follow in Q115.

NORTHLAND UK VIEW: The completion of the ramp up and the commencement of commercial gold production at the Palito Gold Mine, located in Brazil, is a significant achievement for Serabi Gold Mining. The underground development is now comfortably ahead of production and the Company is confident of achieving its targeted throughput from its existing mill of 7,500t per month. The second ball mill will initially be used to process the surface stockpile and in the longer term it will be used to treat ore from the Sao Chico project. H214 production should be significantly higher than H114 and as a result Serabi is confident of achieving targeting 2014 production levels of 23,000-24,000oz Au. This would generate revenues between $30m (£17.5m) and $31m (£18m) at the current gold price of $1,310/oz Au.



  • Conditional acquisition of Exxelnet Solutions PTE, a Singaporean web development firm, for c. £0.95m (half in cash and half in shares with a number of performance hurdles). Expected to be earnings enhancing (post integration costs).
  • In order to fund the cash element and provide working capital, RapidCloud has raised £0.6m (gross) at 54p/share.
  • Exxelnet provides web design, web hosting, search-engine optimisation and application development services. It has >2,000 customers and the business reported revenue of £0.7m in FY13 with a £0.16m PBT. It has 13 employees in offices in Singapore and Kuala Lumpur.

NORTHLAND UK VIEW: Small bolt on acquisition that accelerates RapidCloud’s expansion into Singapore and fits with its geographic growth strategy in South East Asia. Opportunity for cross selling into respective customer bases (RapidCloud with 38,000, Exxelnet 2,000). Business remains small (FY13 revenue of £2.1m) but newsflow has been encouraging with two recent contract wins worth >£1m. Shares were trading on 12.4x FY14 and 10.9x FY15 earnings before the acquisition and placing. 

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