The Markets
Market opening: Markets are likely to open higher today. FTSE 100 futures were trading 2.8 points up at 7:00 am.
New York: Wall Street continued to advance for the third consecutive day after an agreement between Greece and its creditors for a third bailout programme, which reduced the possibility of Greece’s exit from the Eurozone. The S&P 500 rose 1.1%, led by the information technology sector.
Asia: Markets are trading mixed, as investors focused on the bailout deal with Greece and a draft nuclear agreement between the US and Iran. The Nikkei ended 1.5% higher, whereas the Hang Seng index was trading 0.9% lower at 7:00 am, tracking a volatile session in mainland China.
Continental Europe: Equities traded higher after a successful deal over a third bailout for Greece. France’s CAC 40 and Germany’s DAX increased 2.0% and 1.5%, respectively.
Crude Oil: Yesterday, prices of Brent and WTI crude oil decreased 2.2% and 2.1%, respectively. The spread between the two varieties stood at US$5.8 per barrel.
UK small caps: The FTSE AIM All-Share index closed +0.34% higher yesterday at 752.39. To read our latest research click here.
Today’s news
Greece reaches cautious deal with its creditors
The Eurozone’s finance ministers agreed on a third bailout plan for Greece, which includes providing €86bn over a period of three years. Although the rescue package contains provisions to reschedule debt repayments, it does not offer any reduction in debt. The bailout is contingent on Greece’s government passing several reforms by tomorrow, including reforms to restructure pensions, increase tax revenue and liberalise the labour market.
Company News
Kibo Mining (LON:KIBO) – Speculative Buy
Kibo Mining, the exploration and development company focused on mineral and energy projects in Tanzania, announced yesterday the details of the final report from an independent airborne geophysical data interpretation conducted on its Haneti Ni-Cu-PGM project in central Tanzania. While the initial findings were released on 24 June 2015, the final report has been received by Kibo with the salient features as follows: confirmation of location, strike extent and internal structure of two newly interpreted composite mafic-ultramafic zones, which has increased the footprint of the Hanti-Itiso Ultramafic Complex (HIUC); the new zones, with strike lengths of 30km (SW zone) and 10-20km (NE zone) occur SW and NE respectively to the 80km strike length of the central HIUC and may represent repetitions through folding and off-set extension of the HIUC; 3D inversion modelling of the magnetic anomaly over the Mihanza Hill drill prospect indicates that magnetic susceptibility increase with depth and prospective rocks extend to a depth of 800m; results of the study will be utilised to assist with geological modelling, ground acquisition and exploration programme design.
Our view: We are encouraged with the results from the geophysical survey interpretation showing the aerial extent of the highly prospective HIUC complex. The results reveal a far greater strike length than previously thought with extensions towards the NE and SW of the central HIUC which has an 80km strike length. Interpretations and modelling also reveal the structural complexity of the ultramafic zones illustrating tight folding and en-echelon patterns. This could have positive implications for the differentiation of nickel sulphide rich magmas and provides a large volume of prospective target rock to test for mineralisation. In view of results to date, we maintain a speculative buy on the stock.
Beaufort Securities acts as corporate broker to Kibo Mining plc
Hummingbird Resources (LON:HUM) – Speculative Buy
Hummingbird Resources, the gold exploration and development company with assets in Mali and Liberia, announced yesterday a positive update from its grade control orientation drill programme recently conducted over the Komana East deposit at Yanfolila. Hummingbird has completed its interpretation of grade control orientation drill programme over the Komana East pit comprising 35 drill holes over a 40m long panel at 5m x 5m intervals representing 1,004m and covering 30 vertical meters (3 benches). Results demonstrate the continuous nature of the higher grade zones (estimated at 12,000t grading 7.7g/t) within the mineral resource model and a 15% increase to the grade (5.24g/t vs 4.57g/t) resulting in a 16% increase in contained ounces of gold (3,330oz vs 2,870oz) compared with the mineral resource estimate over the grade control panel. The Komana East pit contains an estimated 332,500oz of recoverable gold averaging 3.12g/t in the current mine plan before the impact of the positive grade control interpretation and will be the first area targeted for mining at the 1.8Moz Yanfolila gold project. Whilst focused on the near term production at Yanfolila, the company is also committed to the longer term development its Dugbe gold project in Liberia.
Our view: We are encouraged with the results from the grade reconciliation drill programme over a portion the Komana East pit which represents a 68% higher grade compared with the entire Komana East pit that averages 3.12g/t. Hummingbird continues to technically de-risk the Yanfolila project while potentially improving the already robust economics. In addition, we see additional upside from the 4.2Moz Dugbe project on the back the recently signed MDA with the Government of Liberia as well as Hummingbirds’ 5,000km2 of highly prospective exploration ground in Mali and Liberia. As such, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Hummingbird Resources plc.
Northcote Energy (LON:NCT) – Speculative Buy
Yesterday, Northcote Energy informed that that it has divested its 100% interest in South Weslaco Gas Field, located in Texas for the prospect’s year end book value of US$350,000 to Springer Energy Partners. The company in return would receive 48% equity stake in Springer Energy and a cash contribution of US$10,000 for its costs. As per the deal, Northcote will act as Administrative General Partner to Springer Energy and would receive additional fees for its services along with an interest in profitability of the partners. Historically, the gas field has contributed 70.8 Mcf (million cubic feet) per day or, on a 6:1 basis, 11.8 BOE/d (barrels of oil equivalent per day) net to Northcote. For Springer Energy, the deal was facilitated by private US investors who paid US$350,000 in return for the partnership units. Springer Energy plans to invest the cash in oil and drilling projects and has already made its first deal by taking a 7% interest in the on-going Shoats Creek new drilling programme. Springer Energy may also accept further investment with prior approval of Northcote, which may dilute the latter’s current stake.
Our view: Northcote continues its asset disposal plan of non-core assets to aid its long term strategy to focus on its core US properties including the Shoat’s Creek Field in Louisiana, apart from the prevailing prospects in Mexico and Indonesia. The aforementioned transfer is the third one in company’s on-going asset disposal plan. Northcote expects continuous healthy cash flows from the gas field and also reap additional gains on the future investments made by Springer Field to improve the productivity of the gas field. Further, company’s recent Joint Venture (JV) with Gaia Ecologica, a Mexican firm, for the development of its first waste remediation facility is expected to help Northcote maintain growth and remain competitive. In view of the above argument, we reiterate a Speculative Buy rating.
Beaufort Securities acts as corporate broker to Northcote Energy plc.
Fox Marble (LON:FOX) – Speculative Buy
Yesterday, Fox Marble announced the appointment of Ms Candice Sutherland to the Board as the company’s Chief Financial Officer (CFO), following the resignation of Ms Fiona Hadfield with effect from 1st August 2015. However, Ms Hadfield would remain with the company till 1st September 2015 to ensure smooth transition of role and responsibilities to her successor. Ms Sutherland is a chartered accountant by profession and has worked in PwC in South Africa in the Audit and Advisory departments. Further, she has over four years of experience in various mining companies. In her latest assignment, she was working as the Group Financial Controller for Dentsu Aegis Network UK, a multinational media and digital marketing communication firm.
Our view: Fox Marble’s appointment of Ms Sutherland as the new CFO to the board is expected to strengthen the company’s management team as she brings her expertise in the mining sector and audit to the table. The company is expected to benefit from her presence considering her vast experience in diversified fields that is likely to improve Fox Marble’s decision-making abilities on key issues. In addition, the company has recently raised £2.0m through the placement of 10 million new ordinary shares to new and existing investors. The proceeds are expected to improve Fox Marble’s processing facility in Kosovo and the repayment of an outstanding loan. The demand for the polished marbles has been rising and prices remain firm while the labour and transportation costs have remained low. Against this background, we expect the company’s operations to become cash generative very quickly. Thus in view of the overall optimism, we reiterate a Speculative Buy on the stock.
Motive Television (LON:MTV) – Speculative Buy
Motive Television, the technology provider to broadcasters and pay television operators, yesterday announced that it has developed new technology to add Internet-delivered (also known as ‘Over-the-Top’ or ‘OTT’) channels to its TabletTV product. Examples of Internet channels that will be available in the UK include YouTube, BBC iPlayer, STV Player, ITV Player, All4, BT Sport, and Netflix. In the US, for example, a similar selection of the most popular Internet channels will be available. Further to this, TabletTV users will be able to add and customize their individual list of Internet channels based on their viewing preferences. The Internet channels will be made available through the TabletTV Apps as an addition to all broadcast TV channels, making TabletTV the ‘one-stop place’ for all entertainment and information on Apple and Android mobile devices. The TabletTV UK and US apps with Internet channels included will be tested in a Beta version this summer with a group of existing users of TabletTV and made available to the overall market in early autumn.
Our view: Motive is one again demonstrating it has the exceptional ability to both identify and produce software products and applications that should be of significant interest for many international users. The additional functionality created by of including Over-the-Top channels for TabletTV/TPod enhances the offering’s sophistication and confirms Motive’s position as the market leader in mobile free-to-air television viewing. Having said that, however, ensnaring the right distribution/enfranchisement with both hardware manufacturers and broadcasters, still remains the key to the technology’s success. Mass international uptake appears likely to require at least one mainstream tablet producer to start the ‘ball rolling’ by committing to incorporate the tuner into its device and, presumably, embed the TabletTV App into its system after having licensed it or formed some other usage agreement with Motive. This would, of course, require the tablet designer to accept that analogue reception can comfortably co-exist alongside ‘paid for’ digital streaming. In so doing, this should also speed transition of the Group’s business proposal from one dependent on one-off unit sales, to a significantly more profitable subscription or advertising-based model. Elsewhere, with product development now largely paid for, a giant maritime opportunity can be identified for the Group’s BYOD TV, while its Content Express also finds itself positioned to penetrate important new territories. Both of these could accrue new streams of revenue and longer-term contacts within the current year, whereas TabletTV possibly remains hindered by a 2-year or more tablet production cycle before being able to gain significant momentum. Motive’s lowly valuation presently discounts a further round of equity funding in order to support, perhaps, two more years of quite substantial, albeit declining, losses. Beyond this, however, it is possible to perceive quite considerable value within Motive’s IP that is capable of being monetised either through outright sale/licensing of one or more of its different technologies or expansion of product revenues.
Beaufort Securities acts as corporate broker to Motive Television Plc.
Collagen Solutions (LON:COS) – Speculative Buy
Yesterday, Collagen Solutions announced its final results for the year ended 31st March 2015. During the period, the company’s revenues and other income increased to £1.04m compared to £0.02m in 2014. Adjusted operating loss without separately identifiable items widened to £689,816 from £388,269 and the pre-tax losses expanded to £947,246 from £405,229. Consequently, the basic loss per share widened to 1.17p from 1.10p. In December 2014, the company raised £5.4m though an equity placement and the net cash balances at the year end stood at £3.4m. On the operational front, the New Zealand based Southern Lights Ventures 2002 Limited was also acquired by the company and the management teams in Glasgow, San Jose and New Zealand were successfully integrated. The company won business from US-based customers including Globus Medical and Novabone, who use its materials in FDA-approved products. Beyond the period, a new patent was granted to the Sounthern Lights Biomateials for the new processing of pericardium that may provide certain benefits to the heart surgery patients. The company also received the Innovate UK Grant Award with the Electrospinning Company Limited to develop a novel bio-synthetic substance for internal wound healing. In addition, Mr Tom Hyland was appointed as Chief Operating Officer. Other board appointments during period included Mr Geoff Bennett as Chief Business Officer and Prof. Robert Brown, as the exclusive consultant and member of Scientific Advisory Board. The company will hold its AGM on 24th August 2015 in Glasgow.
Our view: Collagen Solutions made considerable progress in the fiscal year gone by following the acquisition of Southern Lights Ventures 2002 Limited, as the latter has a strong customer base that generates recurring revenues. The acquisition comes at an exciting juncture when the company is trying to make a mark, through its fibrous collagen powder, in the field of regenerative medicine, medical devices and in-vitro diagnostics. The other advantages of the tie-up include the surety of supply of high grade collagen from negligible BSE risk sources, and IP and know-how from which strategic value may be created. In addition, the company is also paving the way for strong and long standing partnerships with its customers including Globus Medical and Novabone, by entering into several strategic arrangements at an early stage. Meanwhile, the company continues to invest in people and facilities as it expands its sales pipeline. Eyeing the above, we remain confident that the company is likely to experience significant upside and therefore reiterate a Speculative Buy rating.
Anglo Asian Mining (LON:AAZ) – Speculative Buy
Yesterday, Anglo Asian Mining released an update on the production and operations from its Gedabek gold, copper and silver mine in western Azerbaijan, for Q2 2015 and H1 2015, ending 30th June 2015. The company’s gold production for Q2 2015 increased 19% to 18,745 ounces (Q2 2014: 15,736 ounces) with contributions of 12,214 ounces from the agitation leach plant, 6,525 ounces from heap leach operations and 6 ounces from SART processing. For H1 2015, the gold production stood at 35,938 ounces with contributions of 23,436 ounces, 12,488 ounces 14 ounces from the agitation leach plant, heap leach operations and SART processing, respectively. In addition, the copper production improved to 236 tonnes and 418 tonnes for Q2 2015 and H1 2015, respectively. The silver production levels also soared to 4,527 ounces in Q2 2015 compared to 1,950 ounces in the previous quarter. The company took several measures to enhance its operations and commenced the construction of a small scale floatation plant to improve gold and copper production. The plant is expected to complete by Q3 2015 and is likely to add around 5,000 ounces of gold and 1,200 ounces of copper for the year. In Q2 2015, Anglo’s gold sales were 16,088 ounces at an average price of US$1,193 per ounce and a total of 420 metric tonnes copper concentrate shipments, having approximately 253 tonnes of copper. Anglo also reduced its debt to US$48.9m as of 30th June from US$50.7m (31st March 2015).
Our view: Anglo Asian Mining enjoys the first mover advantage in the Azerbaijan region, and it plans to exploit it through expansion of its operations via additional projects. The company is strongly positioned as the overall production exceeded its forecasts with the gold production reaching an all-time high for the first half of 2015. The company has historically seen better production levels in the second half owing to favourable weather conditions. In view of the same, we expect it to easily meet its production target between 70,000 to 75,000 ounces of gold for this fiscal. Going ahead, the company plans to make necessary modifications to their small scale floatation plant and expects it to be fully operational in Q3 2015. Meanwhile, Anglo is also working to develop its Gadir mine; where 3,000 tonnes of ore have already been extracted and mining is expected to start from the next month. We expect this progress to help the company to soon become a mid-tier gold and copper metal production company and therefore reiterate a Speculative Buy on the stock.
Economic News
UK BRC sales
According to the British Retail Consortium (BRC), the total spending for the month of June rose 2.9% y-o-y. On a like-for like (LFL) basis, the sales were up 1.8% y-o-y from an unchanged reading for the previous month. The economists had expected the LFL sales to improve 0.5% y-o-y in June.