Today's edition features:
• Ariana Resources (AAU.L)
• Fox Marble (FOX.L)
• Katoro Gold (KAT.L)
• Obtala Limited (OBT.L)
• ValiRx (VAL.L)
Markets
Europe
The FTSE-100 finished yesterday's session 0.13% higher at 7,322.82 whilst the FTSE AIM All-Share index was up 0.45% at 999.56. In continental Europe, the CAC-40 finished 0.22% higher at 5,293.77 whilst the DAX was up 0.37% at 12,704.65.
Wall Street
In New York last night, the Dow Jones closed 0.18% higher at 22,381.20, the broader-based S&P-500 climbed 0.12% to 2,510.06 and the Nasdaq was unchanged at 6,453.45.
Asia
In Asian markets this morning, the Nikkei 225 was 0.11% softer at 20,341.07, while the Hang Seng was 0.30% higher at 27,503.89.
Oil
In early trade today, WTI crude oil was 0.10% lower at $51.51 per barrel, while Brent was up 0.24% at $57.55 per barrel.
Headlines
Ryanair given deadline to obey compensation rules
Ryanair has been told to correct its compensation policy for passengers by Friday afternoon after thousands of its flights were cancelled. The UK's Civil Aviation Authority says the airline must stop misleading passengers about the option to be re-routed with another airline. The regulator has ordered the budget airline to say publicly how it will re-route passengers who require it. Ryanair must also say how it will reimburse their out-of-pocket expenses. In addition, the airline must promise to help any of the passengers whose flights have been cancelled in the past two weeks, but who may have chosen an unsuitable option as a result of being misled by Ryanair, the regulator said. The demands - which must be completed by 17:00 BST on Friday - cover passengers who were due to fly to and from the UK. The CAA said if the airline did not meet the deadline, it would carry on with the "enforcement action" launched on Wednesday, which could ultimately see the airline taken to court, with the possibility of an unlimited fine. The airline recently cancelled flights affecting more than 700,000 passengers, from now until next March, in two separate tranches, because it had bungled the reorganisation of its pilots' leave arrangements.
Source: BBC News
Latest Video
On Thursday, 28th September 2017 Leon Coetzer, CEO and Colin Bird, Non-Executive Chairman of Jubilee Platinum (JLP.L) presented an update on the company at the Beaufort offices. Click here to see the interview.
Beaufort Securities acts as corporate broker to Jubilee Platinum PLC
Company news
Ariana Resources (LON:AAU, 1.42p) – Speculative Buy
Ariana Resources, the gold-silver exploration and development company, announced its unaudited interim results for the period ended 30 June 2017. Operational highlights for the period include the first gold pour in March with commercial production declared in July. To the end of June, Ariana and its 50:50 JV partner, Proccea Construction, have produced 1,929oz of gold and 14,519oz of silver during the commissioning phase. During the period, Ariana reported its share of losses totalling £153k for the ramp-up operation at Red Rabbit with all income and associated costs capitalised in the accounts of the JV company Zenit Madencilik San. Ve Tic Ltd.
Our View: Ariana's interim results are academic given that commercial production at Kiziltepe (Red Rabbit JV) was declared shortly after the period. With the mine now operating within its design specifications we look forward to Q3 2017 operational results to be announced in October which will provide information on the mine's performance. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Fox Marble (LON:FOX, 7.12p) – Speculative Buy
The dimension stone company focused on marble quarrying and finishing in Kosovo and the Balkans, yesterday announced its interim results for the six months ended 30 June 2017. Revenue from the sale of marble products increased 26 % to €329,607 (H1 2016: €262,000). After administrative costs, the operating loss for the period amounted to €1.309m (H1 2016: €1.494m), leading to a total loss of €1.427m (H1 2016: €1.190m). The Group's cash balance as at 30 June 2017 was €929,429 (H1 2016: €2,686,341). As at 27 September 2017 the Company had convertible loan notes in issue amounting to €1,638,500; in addition, it has put a draw-down facility in place of up to £1m to be called for at its discretion, which attracts an interest rate of 9% per annum on drawn sums. Operational highlights included progress in building Fox Marble into a vertically integrated production, processing and distribution company of quality marble. The new Kosovo factory, for example, is now fully operational, being able to cut, polish and resin marble slabs and tiles in-house to improve economies of scale, quarry yields and profit margins. Following the US$1.8m sale and purchase agreement with Mahadev Marmo PVT ltd signed in February 2017, progress is being made in India with regular block sales to major marble wholesalers here and in Turkey. It also continued to secure offtake, distribution and sales agreements across Europe, US and Asia. More recently, for example in August 2017, it signed a Memorandum of Understanding with Pristine Stone NYC LLC, a natural stone importer and distributor in the USA, to establish a new distribution outlet for Fox Marble products in the United States; in September 2017 Fox Marble signed a sales agreement with OM Enterprises, a leading tile manufacturer based in Kolkata, India, to purchase a minimum of 5,000 tonnes of material over three years. Chris Gilbert, CEO, commented: "We have been encouraged by the progress of marble sales in Q3 2017, which is showing a strong forward momentum with new and returning customers, despite the slower start to the first half of the year in terms of delivered sales".
Our View: Gathering momentum. The critical factor for Fox Marble is to convert its order book into sales and cash. The current order book stands at €5.6m. Very much as already expected, the entry of one of its distributors into administration earlier this year, delays in the completion of the factory and lower than expected production at Maleshevë, means management can now only expects €2.0m of this to be recognised within 2017 financial year (2016: €801,040), compared with €3.4m previously anticipated. The springboard for higher sustained activity, however, is now definitely in place and 'teething' problems dealt with. Its state-of-the-art factory has the capacity to produce up to 440,000 square metres per annum of cut and polished slabs; it also has stockpiled a large number of blocks, which can be cut and processed during the planned quarry winter shutdown to fulfil orders for processed marble. The Group's business model is based around a largely fixed cost operation, meaning higher activity levels will drop significantly to the bottom line. Indeed, Beaufort has long held confidence in Fox's exceptional high grade, multiple type/colour dimensional stone (found on surface while remaining open at depth) effectively provides it with infinite resource to supply to a growing US$10bn+ global market. Positioning itself as a low-cost, high-quality wholesale supplier of choice with elementary open pit workings, low cost labour and excellent infrastructure against a backdrop of Kosovo's prospective EU accession, Fox Marble dispels most of the fears normally associated with such early stage producers. If there has been a problem, however, it is that access this giant, but overwhelmingly fragmented market, depends on reputation, foremost with international distributors, who remain the key 'door openers'. Achieve that, become a default supplier of choice for, say, half an acre of flawless Sivic White for a new corporate headquarters in Dubai, then Fox Marble's quarries could become very profitable indeed. Repeat orders along with the new arrangement with Pristine Stone should ensure the starting point for 2018E is something over €6m. Gross margins are set to make a step improvement, while operational expenses will also start to reduce. While the 2017E should be expected to remain in net losses, with a high level of costs fixed there is finally reasonable confidence that next year will actually produce some (albeit modest) positive earnings. Hurrah!! The recent issue of an 8% CLN will remind investors that Fox has a relatively weak balance sheet, although existing facilities means it could avoid having to resort to further equity issuance to plug the gap. Altogether, there are tangible signs that the Group's extended run of bad luck and disappointing news might finally have run its course. Beaufort gives Fox Marble the benefit of the doubt, repeating its 'Speculative Buy', with a price target of 12p/share.
Beaufort Securities acts as a corporate broker to Fox Marble Holdings PLC
Katoro Gold (LON:KAT, 3.25p) – Speculative Buy
Katoro Gold, the Tanzania focused gold exploration and development company, announced that it has submitted a Mining Licence application for its Imweu gold project to the Tanzanian Ministry of Energy and Minerals ahead of schedule. Katoro has also received results from all geological samples collected from the recently competed drill programme and is currently updating the mineral resource estimate. Work also continues on the Environmental and Social Impact Assessment (ESIA). The Imweru gold deposit has a current JORC-compliant mineral resource estimate of 515,110oz of gold comprising 82% in the Inferred and 18% in the Indicated categories.
Our View: Submission of the mining licence application is an important milestone for the company. Whist recent changes to the mining legislation in Tanzania has had a negative effect on mineral producers, we note that these changes have had limited impact on Katoro given Imweru's early stage of development. We are encouraged with the pace of development at Imweru and look forward to further developments including the resource update and completion of the ESIA. In the meantime, we maintain a Speculative Buy recommendation on the stock.
Beaufort Securities acts as a corporate broker to Katoro Gold plc
Obtala Limited (LON:OBT, 16.25p) – Speculative Buy
Following yesterday's Interims results and Board changes, the African-focused agricultural and forestry company, this morning has released its latest Quarterly Business Update in accordance with management policy of providing comprehensive and regular releases covering the Group's operational and financial progress. In it, the Board details its 'First Quarter of Substantial Revenue and Production Growth', noting Q3'2017 will mark the first quarter of significant production and revenues for Obtala, following the acquisition of WoodBois on 30 June 2017, the commencement of the annual timber cutting period in Mozambique, which was delayed to June, and the harvest period for cash crops in Tanzania. In preparation for this, the Board took the decision to give the forestry (Argento Ltd) and agriculture (Montara Ltd) division their own Boards of Directors, as announced on 28 September 2017. Each Board will report its own P&L, with the forestry division further segmented into Timber Trading and Timber Production, to provide quarterly, interim and annual revenue and profit numbers to the market moving forwards. At the same time, the Board are finishing its global 9-month roll-out of SAGE ERP system custom which is designed to enhance operational visibility and have engaged with transfer pricing and tax consultants to optimise the overall tax position of the Group considering expected revenues and the acquisition of WoodBois.
Our View: Today's low interest rate environment provides the ideal opportunity for Obtala to fund its trading business and to multiply of current levels of revenue and profits. Chairman, Miles Pelham, confirms recent months have cemented his Board's view that the world is on the cusp of a 'super cycle' in timber and agriculture pricing, noting he "was already aware of the strong demand in China for these resources, but having studied WoodBois' diverse customer base and investment opportunities I am ever more aware of the impact with which population growth, and in particular growth in the global middle class, is creating demand for food and housing that is simply not being matched on the supply side. This is seen not only in Asia, but with our customers in Africa, the Middle East, and South America." So the Group's financing focus for the coming quarter will be to secure a substantial trade finance facility for its timber trading division, which has historically enjoyed only limited access to new capital. Under Obtala's 'quoted' umbrella along with its management reputation for successfully securing such access, discussion have been entered with several parties to provide tranches of US$25m in trade finance in order to support its near-term expansion, with one LOI already signed. Meanwhile, construction of the new 100m3 daily capacity sawmill in Mozambique is on track for completion at end-2017, while work also continues on completion of the veneer factory in Gabon, with view to commencing production in 2018. While the investment market will always factor in higher risk for such ambitious geographical plans, it is clear nevertheless that this giant continent is poised to undertake its own green revolution. And Obtala's timing, given projected global demand growth for timber at a time when international efforts to control illegal logging have the potential to create a premium environment in quality hardwoods, looks almost perfect. Modelling Obtala's business opportunity, fair value still appears to be multiple of the current share price, even after applying punitive discount rates. Beaufort retains its Speculative Buy rating on Obtala Limited.
Beaufort Securities acts as a corporate broker to Obtala Limited
ValiRx (LON:VAL, 1.02p) – Speculative Buy
ValiRx, a life science company, which focuses on clinical stage cancer therapeutic development, taking proprietary & novel technology for precision medicines towards commercialisation and partnering, yesterday provided a development update for its Phase II clinical trials of VAL401 for the treatment of non-small cell lung cancer. ValiSeek, the joint venture between ValiRx and Tangent Reprofiling Limited (60:40) developing VAL401, said following the completion of the patient recruitment in June 2017 (8 patients), the company has now collated, verified and analysed the data collected over the first 2 weeks of all patients. The results include the pharmacokinetic measurements recorded for each patient after a single 2mg dose of VAL401. This is carried out by a blood measurement of the active pharmaceutical ingredient in VAL401, Risperidone, and the blood measurements of the known by-product, or metabolite, of Risperidone, 9-hydroxy-Risperidone. This analysis has revealed some significant differences between the absorption and subsequent metabolism of the conventionally formulated Risperidone against company's unique formulation, in line with expectations. Importantly, the trial has demonstrated that this patient population, biologically interacts with the Risperidone in VAL401 to produce 9-hydroxy-Risperidone as expected, demonstrating suitability of its proposed treatment paradigm, as well as demonstrating that the formulation is compatible with drug absorption and behaviour. The absolute values in this pharmacokinetic analysis provides great confidence in the future studies, as the blood levels, even at the lowest 2mg dosage are sufficient to mirror the doses used in the pre-clinical testing models. As 2mg doses have been shown to be broadly safe and tolerated in this patient population, this has been nominated as the preferred dose going forwards. ValiSeek's CEO, Dr Suzy Dilly, commented "It is gratifying to be able to share this early trial data release, and in particular to be able to confirm anticipated dosing levels in preparation for the next trial. The analytical databases are now being continuously populated, and I anticipate analysis from this final database to be available, on schedule, before year end".
Our View: This is a positive news. ValiRx's JV company, ValiSeek, has established that the lowest 2mg dosing of VAL401 is sufficient to provide identical absorption in patients with doses used in the pre-clinical testing models, while also remaining broadly safe and well tolerated across their population. Importantly also, VAL401 has shown "significant and interesting" differences compared to the conventionally formulated Risperidone in terms of absorption and metabolism. These findings enable the Group to advance its clinical trials using this preferred dose. The Phase II clinical trials for VAL401 is currently in the process of final data collection, regulatory submissions for trial completion and ultimately for data analysis, which is expected to be available by the year end. Elsewhere, ValiRx's VAL201 is in the final stage of its Phase l/ll study for the treatment of hormone resistant prostate cancer, with patients receiving the highest dose prescribed by the trial protocol, which is on track to complete during 2017. VAL201 is targeting treatment of advanced symptoms without suppressing sexual and related functions or any of the many other debilitating side effects that alternative therapies present. Given the clinical progress being made to date, valuing a Group with two advanced Phase II cancer trials along with an exciting pre-clinical portfolio at just £1.6m is blatantly absurd, given that they collectively address multi-billion dollar markets and target significant unmet need. Comparisons with peer groups having similar clinical portfolios, or early stage partnership deals with pharma groups seeking entrance into such therapeutic areas (such as licensing agreement signed with Mystic Pharmaceuticals Limited in July), highlights a significant valuation gap. ValiRx shares recognise none of the value created over the past 24 months, nor the depth of its therapeutic pipeline. While it is understandable that the market remains concerned regarding the Group's ongoing funding needs, which are often satisfied through discounted equity placements, it should be remembered that management routinely delivers tangible development progress ahead of any such raise and, also to recognise that a Big Pharma development collaboration for either VAL401 or VAL201 would likely be concluded at a good multiple of the Group's current valuation. Beaufort reiterates its Speculative Buy rating on the shares, while maintaining its price target of 6.5p.
Beaufort Securities acts as corporate broker to ValiRx Plc