Global Energy Development (LON:GED) – CORP: Loan made
Market Cap: £11m; Current Price: 30p
Bridge financing agreement to major shareholder
- Global Energy Development (GED) and HKN have entered into a secured, short-term financing note with Everest Hill Energy Group for the principal amount of $10m (GED: $8m and HKN: $2m). The financing is for six months with an interest rate of 12% pa, payable in cash, monthly in arrears starting in October. GED and HKN will also be paid an origination fee of $200k (GED: $160k).
- The facility is secured on all of Everest’s holdings of GED and HKN securities and the market value of this collateral was c. $15m as at yesterday’s close.
- Everest is an affiliated company of the Quasha family trusts that also have an interest in Lyford Investments, an existing GED shareholder. HKN, Lyford and other concert parties hold shares representing c. 62.4% of GED. As such, this represents a related party transaction.
NORTHLAND CAPITAL PARTNERS VIEW: Global Energy Development has considerable cash resources, following the successful disposal of it Llanos Basin Contract areas in December for $49m (net). As at the interim stage, the company had net cash of $35m and given the persistent low interest rates, the secured loan offers a good short term return.
ValiRx Plc (LON:VAL) – CORP: Subscription and equity swap
Market Cap: £9.2m; Current Price: 30.5p
£2.45m raised in aggregate
- ValiRx announced that it raised, in aggregate, £2,450,000, before expenses, through the subscription by YA Global Master SPV Ltd (Yorkville) of 8,161,637 new ordinary shares at 30.018p per share pursuant to a subscription agreement between the Company and Yorkville.
- The net proceeds of the Subscription will be used to advance the Company's therapeutic developments, biomarker programmes and intellectual property creation and for general working capital purposes.
- In conjunction with the Subscription, the Company has entered into an equity swap agreement with Yorkville concerning 6,430,872 of the Subscription Shares. Pursuant to the Equity Swap, in return for a payment by the Company to Yorkville of £1,000,000, Yorkville shall make twelve monthly settlement payments of £83,333.33 adjusted by reference to a formula related to the difference between the prevailing market price of the Company's ordinary shares in any month and a benchmark price of 34.21 pence.
- Consequently, the net funds received by the Company in respect of the Swap Shares will be dependent on the future price performance of the Ordinary Shares.
NORTHLAND CAPITAL PARTNERS VIEW: ValiRx has successfully worked with Yorkville in the past. This financing round allows the company to continue progressing its drug development programmes.
Paragon Diamonds (LON:PRG) – BUY*: Technical studies and funding update
Market Cap: £14m; Current Price: 5.1p; Target Price: 12.9p
From Yesterday: Studies suggest metric could improved
- The MSA Group has completed technical reports on the Mothae Kimberlite Project, located in Lesotho, that the Company is in the process of acquiring.
- These reports will form components of future feasibility studies and review multiple mining scenarios based the on the simulated progressive cutting of processing costs and should be considered broadly indicative of the expected changes opex that would be associated with a new plant configuration.
- The studies determined the trade-off between the benefit of reducing costs through raising the bottom cut-off screen size (BCOS) and the optimum level of revenue generation, as well as assessing optimum open pit mining scenarios for three principal domains of economic interest that comprise the Main Pipe; Southwest (SW), Southeast (SE) and Southcentral (SC).
- The reports suggests that at a BSCO of 3mm the deposit could potentially have diamond values ranging between US$1,024/ct and US$1,971/ct (Best estimate: US$1,352/ct). The variability depends on the cap applied to the value of +20ct stones with the upside case having a cap of US$11,057/ct and the downside that assumes values 20% below those achieved in the 2012/13 sale of diamonds from trail mining.
- The reports also suggest that either a 3mm or 4mm BCOS is likely to be an optimum scenario with a strip ratio of 1:1 and a 12 year mine life.
- Funding discussions with parties including the original provider ITGT are at an advanced stage.
- As the acquisition has not yet completed, Mothae is not factored into our forecasts and valuation of the Company as a result our forecasts, rating and price target remain unchanged.
NORTHLAND CAPITAL PARTNERS VIEW: These reports indicate that Paragons Diamonds could benefit from significant upside to the current economics for the Mothae Project through changes to the open pit design and the lower bottom cut-off screen size (BCOS), should it complete its acquisition. The revenue model based on a size frequency distribution analysis from a sample of 23,738cts indicates that the average diamond value for the project could be high, with an upside capped scenario suggesting USD$1,971/ct and a downside scenario of USD$1,024/ct at a 3mm BCOS. We maintain our BUY rating and 12.9p price target.
Hummingbird Resources (LON:HUM): Hydro-Electric plant update
Market Cap: £27m; Current Price: 25p
PFS to be finalised in Q216
- A report completed by Knight Piesold Consulting for a proposed hydro-electric power plant in southeast Liberia demonstrates that a number of hydropower options would be beneficial in the development of a lower cost power source for the Dugbe Gold Project.
- Four run-of-river hydropower options from 15MW to 30MW with varying intakes were assessed.
- Pre-Feasibility study (PFS) will be finalised in Q216 on completion of additional hydrological and topographic studies.
- The US$265,000 cost of the PFS will be funded by IFC InfraVentures.
- Forecasts, rating and price target remain under review pending the finalisation of the recently completed technical studies that have indicated an improvement to the projects economics.
NORTHLAND CAPITAL PARTNERS VIEW: If it proves to be suitable hydroelectric power would provide Hummingbird Resources’ Dugbe Gold Project with a low cost and sustainable source of power that will also prove to be a legacy asset for the local communities in the region. With IFC InfraVentures fully funding the PFS, Hummingbird can benefit from any upside that lower cost power has on the Dugbe Projects economics with no financial exposure.
Market Cap: £66m; Current Price: 54p
Profit growth; Pebble Beach performing well; weakness in surveillance
- Revenue down £0.5m to £26.6m on order intake down 15% to £28.2m. Period end order book of £7.1m (FY14: £5.0m). Adjusted operating profit increased 29.4% to £2.2m and adj. operating margin increased 180bps to 8.1% reflecting a higher software proportion. Adj. EPS increased 33% to 1.6p. Net debt increased £0.9m to £1.2m. In June, Vislink replaced its £7.0m RCF and £3m term loan with a £10m RCF.
- Revenue reduction was driven by a £2.9m reduction in Vislink Communication Systems where market conditions were challenging and decision cycles long. This was partially offset by a full 6 month contribution from Pebble Beach Systems (£5.5m) compared with 3.5 months last half (£3.1m). Strong performance continues at Pebble Beach.
- Broadcast revenue increased 5.9% to £22.3m but Surveillance declined 28.7% to £4.3m, H1 FY14 included a Home Office contract order.
NORTHLAND CAPITAL PARTNERS VIEW: Higher software component is benefiting margins and Pebble Beach is performing well. The traditional business is facing more headwinds and revenues declined against a tough comparator. H1 performance somewhat overshadowed by a rather contentious Value Creation Plan that was granted in July for executive directors and a senior manager whereby participants will receive 15.38% of the market capitalisation of the group above a hurdle of £85m at the end of a three year period.