INTRODUCTION
In the news: Gemfields & MYCELX Technologies
Gemfields (LON:GEM) has announced plans to expand internationally. This is unquestionably one of the finest mining companies in the world right now and it is also one of the best performing stocks on AIM. It is acquiring two emerald projects in Colombia, a country that, unlike almost all of its Latin American brethren, has never defaulted on its national debt. Gemfields is spending US$22.5m in total over a number of stages to buy into the Coscuez mine from a local firm that owns the licences, as well as two companies that hold mining applications and concessions covering 20,000 hectares.
When featuring news on Gemfields, we have occasionally included an appropriate picture of Brand Ambassador Mila Kunis. I’ve been doing this for a few years, but I’ve noticed that everybody is now at it. So, instead, I thought that the top management of the company deserve some attention, so below is a picture of the CEO.
Ian Harebottle… with friend
Well, it’s 24 hours in from yesterday’s request for pictures of idled oil rigs in the Firth of Forth. While we’re yet to receive any evidence of actual sightings, Daniel Sullivan at 90 West Asset Management in Sydney has emailed an interesting weblink where you can track shipping in UK waters. You can see this here. It’s a fun watch. He also provided a link to the Aberdeen Porsche Centre’s used car list, which currently stands at 34. Aberdeen is famous for having more Porsches per head than any other city in the world, and considering the state of the market the local dealer is probably being inundated with stock. I’m keeping an eye on prices to see if any arbitrage opportunities arise, but considering the sterling to Aussie dollar exchange rate I think that Daniel can forget about snaffling up a bargain for the time being.
OIL & GAS EQUITIES
MYCELX TECHNOLOGIES (LON:MYXR) *† — Half-year Trading Update — The AIM-listed company offering patented water purification solutions targeted towards the global oil and gas and petrochemicals markets has released its half-year results statement for the six months ended June 2015.
Operating Highlights
- MYCELX carried out two turnaround projects during the period in the Middle East, with a SABIC affiliate in Saudi Arabia and with an integrated petrochemical plant in Qatar. Post period, the company completed a successful trial with an existing customer, which we anticipate should lead towards potential further business in this attractive niche market.
- The company was awarded a lease contract renewal by a SABIC customer in the petrochemicals sector, which should provide a source of ongoing regular lease, media and services revenues for the duration of the contract. The SABIC umbrella serves as a key client group in the Middle Eastern downstream segment, which has become increasingly significant in terms of revenue generating capacity and weighting.
- Paid for trials of the MYCELX system continue relating to Enhanced Oil Recovery (EOR) applications in the Middle East and India, as the company looks to progress towards the conversion of material pipeline opportunities. These EOR trials build on successful installations in Canada and Europe, which have been in operation for over a year.
- In Canada MYCELX completed a successful pilot trial with a major Independent on an EOR application, and received a purchase order for larger-scale trials at an Independent producer’s sites, underlining the rising profile of the MYCELX system within the EOR space.
- Post period end the company also completed its first installation of a complete water reuse and recycling system for a hydraulic fracturing application in the West Texas shale. Having entered a strategic agreement with a major in the industry, the company expects to build on this to accelerate capture of the fast-to-market opportunities offered by the shale space.
Key Financials
- Revenue rose 16% YoY to US$8.7m from U$7.5m, giving a gross profit of US$4.5m at a margin of 52%.
- SG&A costs fell 9% YoY, reflecting the successful initial implementation of the cost control programme.
- Adjusted EBITDA for the period stood at US$0.5m, giving a net operating loss of US$1.25m.
- Cash at the end of the period stood at US$7.2m, following a US$1.7m in payments on the line of credit, reducing the balance by 49% since December 2014 (from US$3.4m to US$1.8m). Net cash at the end of the period stood at US$3.9m.
RFC Ambrian Comment: In terms of outlook, the company guides that expense control measures, which we predict as enabling SG&A cuts of around 30% from start-2014 to FY16, should lead to operating cash neutrality in 2H15 and cash generation in 2016. We understand these forecasts are on a conservative base case scenario, and consider the emphasis on budgetary discipline to be well aligned with current market conditions, and should not affect the company’s ability to convert pipeline opportunities. Operationally, the company’s growing profile in the EOR space is clearly encouraging, and we look towards further newsflow as the company looks to progress from successful trials to contract awards. We also look towards the company capitalising on its entry into the shale space, which we see as having the potential to represent a source of attractive short lead-time revenue opportunities.