The acquisition of three exploration licences from Sarama Resources is “a neat deal” for Aureus (LON:AUE, TSX:AUE), in the view of Numis Securities.
The acquired licences are contiguous to the company's Bea Mountain mining licence, located close to the New Liberty Gold Mine.
The broker said the acquisition expands “prospective exploration acreage under the head-frame and consolidating the district play around New Liberty”.
Sarama has already proven that the gold in soil anomaly is related to high grade mineralisation, Numis notes, with trenching and drilling confirming the presence of in-situ mineralisation, identified in all but one drill hole to date.
Numis has a ‘buy’ rating on Aureus, with a price target of 40p, which is more than double the current share price of 17.25p, but still 4p short of finnCap’s punchy price target; not surprisingly, finnCap’s recommendation is also to buy the shares.
Shore Capital is also a fan of the stock, and acknowledges that the new licences represent potential upside, albeit still at a relatively early stage compared to Aureus’s existing Gondoja-Leopard Rock corridor.
“The immediate priority has to be ensuring successful completion of commissioning and ramp-up at New Liberty – a first debt repayment is due in January 2016, and it is currently not clear to us whether or not Aureus will be able to generate sufficient cash to meet this obligation,” the broker cautioned.
Results from Egdon Resources (LON:EDR) were a shade below VSA Capital’s expectations, with a combination of soft hydrocarbon prices and a lower production rate leading to reduced revenues.
On the plus side, VSA expects some very important catalysts for the UK shale industry in general this year and next, and Egdon in particular.
Egdon should receive further awards in the second tranche of the Onshore Licensing Round in addition to the seven blocks it was awarded in the first.
Third Energy and Cuadrilla expect planning decisions in 2015 and early 2016, while, more importantly, IGas (LON:IGAS) has submitted its planning application to drill the Gainsborough Trough basin alongside Total and Egdon (EDR), and a decision should be given around February 2016.
“If negative, we expect the company to go through an appeal process. In the positive scenario, the drilling of Springs road could start as soon as April 2016, representing the first unconventional well in which EDR will participate and is potentially a playmaker,” VSA opines.
“While EDR’s investment case is strongly turning into the shale gas business, the company continues to make progress on the conventional side with commercial oil production from Wressle expected for H2 2016 and the drilling of three exploration prospects within the next 12 months targeting 22mboe of gross unrisked resources. We think 2016 will be a determining year for UK shale and reiterate our opinion that EDR is a good investment to access this nascent industry,” the broker concluded.
VSA rates Egdon shares a ‘buy’ and has a target price of 37p.