Drilling continues on the Beruang Kanan Main deposit BK058 zone of Asiamet Resources (ARS) toward completion of conversion of resources to reserves for the BFS. A Total of 30 holes now completed with a further 90 holes planned. All but one hole has struck shallow high grade copper mineralisation with some of the latest assays being:
• 23.0 meters at 1.24% Cu (from 41.5 meters) in hole 10
• 5.2 meters at 1.08% Cu (from 2.3 meters) also in hole 10
• 9.0 meters at 1.17% Cu (from 33.5 meters) in hole 05
Covellite and chalcocite are the copper minerals which globally are highly amenable to solvent extraction and electro-winning (SX-EW) processing and production of copper at very low cost.
We find these assays quite good and as expected from the previous seasons of drilling so no surprises here.
We retain our SPEC BUY recommendation and 6.2p price target.
Results for Randgold’s (RRS) Q2 is a bit of a disappointment with long mill downtime at Tongon and challenges on recoveries from mixed oxide and sulphide ores at Kibali. A better H2 is forecast.
Only US$20 positive difference in the gold price meant that profits were slightly better YoY but down QoQ even as gold output fell to 281,500ozs vs 291,900 QoQ and 300,000ozs YoY. Total cash costs rose 12% QoQ to US$727/oz due to the production issues.
We’re not used to seeing declines in RRS production performance and hope this is not to become a trend. The corporate spend increase on exploration of 46% QoQ to US$13m indicates to us RRS will rely, as it always has, on finding more ounces and bigger deposits to focus on long term fundamentals to offset short term production hiccups.Zambeef Raises US$65m from CDC Group
Zambeef Products (LON:ZAM), the vertically integrated agri-business with operations in Zambia, Nigeria and Ghana, has secured US$65m through the issue of new ordinary shares (US$9.5m) and new convertible redeemable preference (US$55.5m) shares to the UK government Development Finance Institution, CDC Group.
• Proceeds to be used to settle RCL Foods put option (US$23.4m) and to refinance outstanding US$ debt (US$38.2m).
• New ordinary shares to be issued at US$0.18, a 60% premium to yesterday’s closing price.
• New Convertible Redeemable Preference Shares to be issued at US$0.555. Preference shareholders shall be entitled to the same dividend as the ordinary shareholders. If converted within eight years of the agreement, each preference share will convert into one ordinary share. If converted after eight years, each share will convert into 3.0833 shares (i.e. effectively delivering US$0.18 per share)
• CDC will now have a 17.5% shareholding and 34.85% of the voting rights in ZAM.
VSA Comment
This is an extremely significant deal for ZAM. Resolution of the RCL Foods put option has been weighing on investor sentiment (and its share price). Many investors (and ourselves) had assumed that it would be very unlikely to raise either additional debt or carry out the required equity fundraise to settle the deal in cash and ZAM would therefore have to settle the option through the issuance of ordinary shares to RCL Foods, at a share price well below the long-term value of the company, resulting in significant dilution (c50%) for existing shareholders. In contrast, the majority of funding has been raised through the issuance of preference shares and the new ordinary shares are to be issued at a premium of 60%.
Refinancing of its US$ debt is also a very positive move and will free up cash flow to accelerate the roll-out of its macro outlet stores, an extremely fast growing and lucrative area of its operation and clearly the next stage in the evolution of the ZAM business model.
In addition, ZAM now has a long-term supportive shareholder and its poultry JV’s (ZamChick and ZamHatch) will now become 100% owned. It is also likely that dividends will make a return to the story, with the last dividend being paid back in FY 2011.
With considerable uncertainty now lifted from the stock and material upgrades to consensus forecasts likely due to a reduction in future interest payments, we expect ZAM to be much stronger this morning.