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Beaufort Securities Breakfast Alert - Caledonia Mining, Ariana Resources, Providence Resources, Easyjet,Bovis Homes

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Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 22.40 points up at 7:00 am.

New York: Wall Street closed moderately lower, as investors considered the rejection of the bailout terms in Greece as a potential exit of the country from the Eurozone. The S&P 500 declined 0.4% when it opened after an extended weekend.

Asia: Equities are trading mixed, as investors gauge the effectiveness of China’s market rescue measures. The Nikkei 225 gained 1.3%, as investors purchased value stocks after a week’s decline. However, the Hang Seng was trading 1.1% down at 7:00 am.

Continental Europe: Equities ended sharply lower, as Greece voted ‘No’ to reform proposals of its international creditors, thereby adding uncertainty to the country’s future in the Eurozone. France’s CAC 40 and Germany’s DAX shed 2.0% and 1.5%, respectively.

Crude Oil: Yesterday, WTI and Brent Crude Oil prices decreased 7.7% and 6.3% respectively. The spread between the two varieties stood at US$4.0 per barrel.

UK small caps: The FTSE AIM All-Share index closed 0.72% lower yesterday at 758.51. To read our latest research click here.

Today’s news

Tsipras to unveil new deal proposal today

Greece’s Prime Minister Alexis Tsipras is likely to present a new set of reform proposals at an emergency Eurozone summit in Brussels today. The meeting follows Greece’s rejection of the creditors’ bailout offer and resignation of the country’s finance minister. Meanwhile, Greek banks are expected to remain closed for two more days.

New car registrations in UK surge in June

The Society of Motor Manufacturers and Traders (SMMT) stated new car registrations in the UK rose 12.6% y-o-y to 257,817 in June. For the first half of 2015, new car registrations rose 7% to touch a record high of 1.38 million vehicles. The gain was primarily ascribed to low interest rates and the availability of several new models.

 

Ariana Resources (LON:AAU. 1.18p) – Speculative Buy

Ariana Resources plc announce a positive update from its Kiziltepe Gold-Silver Mine (“Kiziltepe”) following the receipt of forestry approvals. Kiziltepe is the initial mine targeted at the Red Rabbit Gold Project in western Turkey, a JV between Ariana and Proccea Construction where construction is expected to commence shortly.

Highlights:

100% of the freehold land in the tailings dam and process plant sites of Red Rabbit Project has been acquired.
Permission to utilise Treasury (Government) lands within the project area has been granted.
Environmental Impact Assessment area has been increased and granted following an application to the Ministry of Environment and Urban Planning.
95% of total land required for Red Rabbit has been acquired, with remaining land to be purchased in the coming months.
Major contractor bidding process underway.
In addition to the freehold land previously acquired over the Arzu South open-pit area, the JV has now obtained 100% of the required freehold land in the tailings dam and process plant site areas. An application to utilise Treasury properties for the duration of the project has also been granted. The partnership is now focusing on obtaining all remaining land required for the project, which is primarily located along the pipeline route to the tailings dam. In total, 637,902m2 of freehold land has now been acquired by the JV partnership.

An application to the Ministry of Environment and Urban Planning has been granted to extend the Environmental Impact Assessment area designated for the mine site in order to provide additional operational flexibility. The extension to the EIA is located in the vicinity of the waste rock dump and will provide sufficient space to store topsoil for use in later mine site reclamation.

Detailed site surveying work has been completed at the process plant area and for access roads ahead of construction start-up. Geotechnical drilling within the foundations area of the process plant site is due to be initiated once trees have been felled by the Department of Forestry. The timing of start-up is contingent on the felling of trees by the Department of Forestry primarily in the process plant and tailings dam locations. Ariana will update in due course.

Our view: Ariana has now secured over 95% of the surface rights for the project following the receipt of our forestry permit approvals. This is particularly significant progress on the critical path to construction, allowing site works at the tailings dam and process plant sites to be initiated early in the development programme. Meanwhile other project development work is continuing at pace, with site surveys complete and process plant component and mining contractor bidding now underway. Ariana is finalising this bidding process in the coming weeks, in order for long lead items to be ordered and for the mining contractor to be mobilised to site as progress towards planned first gold pour targeted for H2 2016. Speculative Buy

Beaufort Securities acts as corporate broker to Ariana Resources plc

Caledonia Mining (LON:CMC, 53.00p) – Speculative Buy

Yesterday, Caledonia Mining Corporation provided a gold production update for the quarter ended 30th 2015 from its 49% owned subsidiary, the Blanket Mine in Zimbabwe. Gold production for the first six months of 2015 is expected to achieve a target of 42,000 ounces. During the second quarter, the mine produced 10,424 ounces of gold, reflecting a 4.7% q-o-q rise in gold productions but a 7.1% decline on a y-o-y basis. The production is subject to adjustment following third party assays. Caledonia expects to release its second quarter results on 13th August 2015.

Our view: The increased production from the Blanket Mine signifies the management’s control over the grade and tonnage of the mine. The production is expected to increase further towards the second half of the year owing to the completion of the tramming loop on 22 Level in June that would increase the underground haulage capacity and development activity. Further, the company remains on track to commence initial production from January 2016. Recently, the company laid out a revised investment plan to improve the underground structure and logistics of the Blanket mine and also reported improved resource estimates for the mine. The company disposed off non-core operations to emphasize on cost savings. Thus, with an increased production at the mine, we expect a reduction in the cost per ounce as well. On the other hand, the company improved its cash reserves despite a challenging gold price environment in the previous year. The recent reduction in the Zimbabwe royalty rate to 5% from 7% continues to benefit Caledonia. In light of the above, and the improved gold resource, we reiterate a Speculative Buy rating on the stock.

Providence Resources (LON:PVR 22.50p) – Speculative Buy

Yesterday, Providence Resources provided an update on the Frontier Exploration Licence (FEL) 3/04 that is situated nearly 1,500 metre water depth in the southern Porcupine Basin and is around 170 km off the south west coast of Ireland. The company has agreed to acquire Atlantic Petroleum’s 4.0% stake in FEL 3/04. Subsequently, with other ministerial approvals, the company’s equity stake in the license would increase to 20% from 16%. The main Dunquin South carbonate prospect within the FEL 3/04 license is expected to contain 1.4 billion barrels of oil equivalent. Meanwhile, during the 2013 drilling operations, the Dunquin North exploration well encountered a 44 metre residual oil column operated by ExxonMobil operated 44/23-1.

Our view: The above update marks the company’s further expansion in the highly prospective South Porcupine Basin, focussing on its vast and under-explored deep-water. The company has taken a big position in the promising Dunquin South for a nominal consideration. The results of the 44/23-1 well have already de-risked several elements of the petroleum system. Recently, the company recognised several shallow buried Cretaceous four-way dip-closure at the Newgrange prospect and also improved its capital position by raising US$28m through a combination of open and institutional offer. Additionally, discussions are underway over the Barryroe asset with various counterparties that may help in unlocking its true value. Thus in view of the above developments, we maintain our Speculative Buy rating on the stock.

Easyjet (LON:EZJ 1,576.0p) – Buy

Yesterday, Easyjet released its passenger statistics for the month ending June. The company’s number of passengers grew 7.6% y-o-y to 6.56 million compared to 6.10 million passengers In June 2014. Load factor, which is the number of passengers as a proportion of the number of seats available for passengers, grew 0.7 percentage points (pp) to 92.7% from 92% a year ago. On a rolling basis for the 12 months ending June, the passenger traffic saw an increase of 5.9% to 67.11 million and the load factor increased by 1.1pp to 91.2%.

Our view: Easyjet continues to lead the airline market with highest passenger traffic for the month of June. The company delivered on its strategy of easy and affordable travel as is evident from the strong load factor. The company plans to expand their services by increasing its flight offerings. Recently, several strategic routes were launched including Vienna and Basel that are expected to carry 78,000 passengers annually. The company expects to launch five more routes across different countries, later this year. Further it is well placed to benefit from low level of jet fuel prices, with an expected decrease in fuel bill between £60-85 million in the second half of the year. Therefore, in view of the rapid expansion and likely reduction in costs, we give a Buy rating to Easyjet.

Bovis Homes (LON:BVS 1,157.0p) – Buy

Yesterday, Bovis Homes issued a trading update for the six month period ended 30th June 2015. During the period, the volume of legal completions stood at 1,525 against 1,487 for a comparable period in 2014. The average sales price was up 6% y-o-y to £222,000 and the cumulative reservations expected to be legally completed in 2015 are 3,505 homes. Bovis’ consented plots of land across 17 sites were 2,944 for H1 2015. The company also declared an interim dividend of 13.7p, up 14%, for the period. The half yearly results are expected to be released on 17th August 2015.

Our view: Bovis Homes has managed to maintain its impressive performance in the first six months of 2015 with record legal completions for the period. The rising prices of private homes offset the increase in the labour and construction costs. Meanwhile, the residential market looks promising with a fine supply of consented land in the company’s targeted locations and good-quality home buyers. Among the external factors, the rising consumer confidence and the higher number of active housing sites bodes well for the company’s business. Moreover, the UK economic scenario remains conducive for the housing industry with better employment opportunities, rising real wages and access to cost-effective mortgage finance. We remain confident that the asset rich company would reap more benefits and create additional value for the shareholders going forward and therefore maintain a Buy.

Avanti Communications (AVN.L, 213.75p) – Speculative Buy

Yesterday, Avanti Communications issued its pre-close trading statement for the 2015 full year results. The company’s revenues for the period stood at US$80m and the revenues on a constant currency basis were 50% up. The trading for the period remains in line with the company’s guidance in the third quarterly statement. At the end of period, the company’s cash balance stood at over US$120m. Avanti expects to announce its full year 2015 results on 16th September 2015.

Our view: The growth of Avanti’s distribution platform continued in the last quarter of the fiscal. The company won several distribution partners and advanced existing relationships to access the huge latent demand for connectivity in high growth markets. A number of significant contracts, including Broadband, Enterprise and Government sectors, were added to the company’s kitty during the period. Avanti possesses a patent protected, cloud-based flexible customer interface and made a further investment of US$1.2bn in the network capabilities comprising satellites, ground stations, data centres and a fibre ring. Thus, given its competitive positioning and incremental opportunities in the pipeline, we expect the company to maintain its ongoing momentum in the first half of the new financial next year. Therefore, we reiterate Speculative Buy on the stock.

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