The Markets
Market opening: The FTSE-100 is expected to open around 10-points lower this morning.
New York: Wall Street ended broadly flat, with energy stocks incurring losses following a slump in oil prices. Investors closely eyed the economic data released in China and await key earnings reports. The S&P 500 closed 0.55 points up, with the consumer discretionary sector gaining the most.
Asia: Equities are trading mixed, with renewed signs of a slowdown in China weighing on commodity prices. The Nikkei added 0.4%, whereas the Hang Seng was trading 0.7% down at 7:00 am.
Continental Europe: Markets ended higher after investors assimilated data on China’s GDP. Germany’s DAX rose 0.6%, led by better-than-expected corporate earnings. France’s CAC 40 closed flat after a choppy trading session yesterday.
Crude Oil: Yesterday, Brent and WTI oil prices decreased 3.7% and 2.9%, respectively. The spread between the two varieties stood at US$2.7 per barrel.
UK small caps: The FTSE AIM All-Share index closed 0.32% higher yesterday at 743.45.
Today’s news
Eurozone construction output slips in August
As per data from the Eurostat, the Eurozone’s construction output fell 0.2% m-o-m in August, after a 0.4% increase in July. On y-o-y basis, construction output dropped 6.0%, following a 0.3% fall in July. Slovakia, the UK and Slovenia reported the largest monthly dip in output.
Equiniti Group Share Offer – Now Open!
Equiniti Group, a leading provider of technology and solutions for complex and regulated administration serving corporate and public bodies, has announced its intention to proceed with an IPO on the London Stock Exchange and Beaufort have been appointed as an intermediary for private investors. The Share Offer is now open, but closes at 12:00pm, Friday 23rd October 2015 (THIS FRIDAY) so you need to act fast to make your subscription.
Equiniti Group has announced its intention to float on the London Stock Exchange via an IPO and Beaufort is intermediary broker to the share offer. Fins our more...
Company News
KEFI Minerals (LON:KEFI) – Speculative Buy
Yesterday, KEFI Minerals (KEFI) released an operational update for the third quarter ended 30th September 2015. Prior to the period, KEFI completed a Definitive Feasibility Study (DFS) at the Tulu Kapi gold project (Project), located in Ethiopia. As per the study, gold production remained at 960,000 ounces (oz) over 13 years with an average of 75,000oz per year. Post period, KEFI declared an increase in production to an average of 100,000oz per annum over a period of 10 years. The total costs including operational, royalties, sustaining capital and closure stood at US$780/oz. Post period, the prices were adjusted to US$760/oz based on the terms of contractor bidding. The initial funding requirement remains same at US$120m, with contributions of US$50m from debt, US$50m from gold stream facility and remaining from the Government of Ethiopia. The Project’s NPV at gold prices between US$1,100-1,400/oz to be in the range of US$106-240m, with an IRR of between 33-64%, and payback period of 3-5 years. The company appointed African Mining Services (AMS), a wholly-owned subsidiary of Ausdrill Limited as its preferred contractor for mine establishment and operation. Additionally, Sedgman Limited was appointed as a preferred contractor for plant construction and start-up for the Project. Separately, KEFI completed around 75% of the infill drilling program totalling 5,415 metres at its Jibal Qutman gold project, located in Saudi Arabia. Metallurgical testing has finished on the oxide ore from four potential open cut areas for heap-leach (HL) processing. The company also finished an initial 53-trench surface sampling programme at the Hawiah Project.
Our view: The third quarter has been remarkable for KEFI as it reported good progress on most of its projects. Consistent development at the Tulu Kapi project was primarily backed by the appointments of preferred plant contractor and mining contractor. Contract terms are conducive and enabled KEFI to increase expected gold production to 105,000oz per annum for the first five years. Lowering of estimated all-in sustaining cost to be US$760/oz is also encouraging. We look forward to further updates on finalisation of financing options and any announcements on the Government of Ethiopia’s planned infrastructure funding. The company continues to progress well on Jibal Qutman project, with results showing an estimated potential of 201,600oz of gold. This is higher than the previously estimated gold reserves. Going forward, KEFI plans to submit a mining licence for the Jibal Qutman project and conduct drilling at Hawiah. In view of the overall developments surrounding KEFI, we continue to recommend a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to KEFI Minerals plc
Savannah Resources (LON:SAV) – Speculative Buy
Yesterday, Savannah Resources (Savannah) informed that it raised £339,060 (before expenses) through the issue of 16,953,000 new ordinary shares. The shares were issued to Al Marjan Limited (new investor), at a price of 2.0p per ordinary share. The placing would be complete in two tranches. The company plans to issue 8,946,405 shares in the first tranche, and expects them to be admitted on trading on or around 22nd October 2015. Post the admission of these shares, Savannah’s total issued share capital will total to 265,730,331 ordinary shares.
Our view: To meet its long term goals, Savannah completed the second round of fund raising in October. The aforementioned issue of shares along with the one issued on 7th October takes the total cash raised to £564,060 before expenses. The company plans to use the funds to target early production in Oman and undertake mineral sands initiative in Mozambique. Recently, Savannah commenced with drilling in the Block 4 region, which is prospective for both gold and copper. The company has also identified a new high grade copper mineralization at the Aarja prospect and additional grades of up to 13.9g/t gold at the Salahi 1 prospect. Additionally, the company had found many potential targets, located close to the previously producing copper mines, with production of more than 190,000 tonnes of copper. In view of the findings in the Block 4, we believe the commencement of drilling would probably enhance the company’s resource base and improve its long-term prospects. We are also encouraged with the potential growth tied-up with the recently signed JV agreement with Rio Tinto. Under the agreement, Savannah will be the operator and can earn up to 51% of the combined Mutamba-Jangamo heavy mineral sands project. Therefore, in view of the continuous developments in Savannah’s major projects, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Savannah Resources plc
Ariana Resources (LON:AAU) – Speculative Buy
Yesterday, Ariana Resources (Ariana) informed that it has started a new drilling programme at the Kiziltepe Sector of the Red Rabbit Gold Project. The company started a 3,500 to 4,000m two-rig drilling programme at Kiziltepe and expects it to complete by December 2015. Reverse circulation and diamond drilling are presently focused on various deep holes testing the potential extension of mineralisation along the Arzu South vein.
Our view: The aforementioned update takes Ariana to the next stage of exploration and resource drilling on different prospects in the Kiziltepe Sector. The Red Rabbit Project has a total resource potential of 475,000 ounces of gold equivalent. The company has identified targets along strike and Arzu South vein, and would initially target these regions. Ariana has also planned drilling at the Kizilcukur prospect along with exploration drilling at Kepez Far West. The company’s initiatives to commence drilling across various regions are a part of its plan to enhance its resource potential. Meanwhile, Ariana’s partners Proccea Construction continue to progress well in the construction of the mine. Recently, the company raised £1m, which not only strengthens its balance sheet but would also suffice exploration and development work across its portfolio. With a first gold pour planned in H2 2016 and annual production of 20,000 ounce equivalent per annum over the current planned eight years, we are very excited at the company’s prospects. Therefore, we retain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Galileo Resources (LON:GLR) – Speculative Buy
Yesterday, Galileo Resources (Galileo) informed that it has renewed most of its wholly owned Nevada claims for one year. Sand Springs was not renewed as it is situated close to a town and recreational area.
Our view: The aforementioned renewal provides Galileo an opportunity to avail the huge opportunities in the US holdings. The company has a significant interest in majority of these positions, which are host to a lot of copper and gold prospects. The Gabbs claims located in Southern Nevada is estimated to have up to 4 million ounces of gold equivalent. The Silverton property contains 100 parts per billion (ppb) gold measuring 2.5km by 3km. The company plans to carry a designed programme to test the influence of shear zone on the nearby rhyolites. In addition, Galileo intends to conduct a sampling programme at Crow Springs, which have previously shown highly anomalous molybdenum. The company also plans to enter into a joint venture or commence an exploration programme on the Ferber Property, which is estimated to have large-scale skarn potential. In view of Galileo’s long-term plans to enhance its resource potential, we recommend a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Galileo Resources plc
Yesterday, Carillion informed that it has won a contract for regeneration of Tower Works in Holbeck Urban Village on Leeds’ South Bank. The contract was awarded by the Homes and Communities Agency with a proposed development value of £80m. As per the deal, the company would construct 90,000 sq ft of commercial office space, 24,000 sq ft of retail, restaurant and bar space and a mix of apartments and town houses.
Our view: Inclusion of the above mentioned contract further expanded Carillion’s existing attractive order book of £1.7bn won since 30th June 2015. The company has won a lot of significant contracts in the second half of 2015. In UK infrastructure services, Carillion has been selected by Network Rail for a number of frameworks and expects to generate more than £400m of revenue. While, in the UK Construction, the company has secured contracts and bidder positions with a value of more than £311m. In addition, a Carillion joint venture has been selected as the preferred bidder for the Midland Metropolitan Hospital Public Private Partnership (PPP) project in Birmingham that is expected to generate over £600m of revenue. Furthermore, as per results for H1 2015, the company witnessed higher margins, strong revenue and cash flows. Going forward, we expect Carillion to achieve its target for the year owing to rise in the number of orders, an increase in pipeline contracts and an expected improvement in market conditions. Therefore, we maintain a Buy rating on the stock.