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Northland Capital Partners View on the City - Botswana Diamonds, Edenville Energy, Savannah Resources & Management Resource Solutions

Published: 10:08 17 Dec 2018 GMT

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BOTSWANA DIAMONDS (LON:BOD)

SECTOR – MINING

RATING – SPECULATIVE BUY*

MARKET CAP – £2.9m

CURRENT PRICE – 0.62p#

ANALYST – BARRY GIBB

                    

 

Year-end June

2016A

2017A

2018E

2019E

 

Revenue (£m)

-

-

No forecasts provided

EBITDA (£m)

(0.3)

(0.3)

Adj. pre-tax Profit (£m)

(0.3)

(0.3)

Adj. EPS (p)

(0.11)

(0.09)

DPS (p)

-

-

Net Cash/(Debt) (£m)

0.3

(0.3)

P/E (x)

-

-

Dividend yield (%)

-

-

EV/EBITDA (x)

-

-

 

SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited Acts as Nomad and Broker to Botswana Diamonds and therefore this information should be viewed as a Marketing Communication.

 

From Friday: Marange diamond field update

 

NORTHLAND VIEW

§  Botswana Diamonds on 14 December noted reports in the Zimbabwe press that the Minister of Mines  stated that its joint venture partner, Vast Resources plc (AIM:VAST), will be allowed to explore for diamonds in Zimbabwe. In a similar release, however, Vast announced that it had received no official notification of this position.  Both companies stated that they would update the market further as soon as they were in receipt of any official notification. 

§  At Botswana Diamonds’ AGM, which was held earlier on 14 December, all resolution were passed.  Managing Director, James Campbell, noted that work is progressing on ‘the concession in the high-grade Marange Diamond area in Zimbabwe’, with field work already underway and 2019 plans being finalised.  The company also noted that a formal agreement with Vast Resources, as concessionaire, is being completed.

 

This is positive news, although recent experience of other international mining companies planning operations in Zimbabwe (e.g. Premier African Minerals) means investors may reserve judgement until formal agreement is actually received.  Certainly the signs are good, given President Emmerson Mnangagwa’s visit to the 2018 World Economic Forum (WEF) in Davos, which effectively opened a new political chapter and dispensation to Zimbabwe for such investment.  The Marange diamond concession also appears to offer significant potential.  Botswana’s desktop assessment of the Heritage (T1A) property announced last October indicated several targets for modern alluvial diamond placer deposits.   Given the go-ahead, next steps include mapping to investigate the potential of these and older conglomerates on the property.  Assuming positive results, this will be followed a pre-feasibility study comprising drilling, pitting and bulk sampling. 

 

COMPANY DESCRIPTION

Botswana Diamonds is a diamond exploration company with projects in Botswana, South African and Zimbabwe.

 

EDENVILLE ENERGY (EDL.L)

SECTOR – MINING

RATING – CORP*

MARKET CAP – £2.6m

CURRENT PRICE – 0.165p#

ANALYST – BARRY GIBB              

 

 

Year-end Dec

2016A

2017A

 

 

 

Revenue (£m)

-

-

No forecasts provided

EBITDA (£m)

(3.2)

(1.2)

Adj. pre-tax Profit (£m)

(3.2)

(1.2)

Adj. EPS (p)

(0.5)

(0.1)

DPS (p)

-

-

Net Cash/(Debt) (£m)

0.1

0.8

P/E (x)

-

-

Dividend yield (%)

-

-

EV/EBITDA (x)

-

-

 

SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited acts as Nomad and Broker to Edenville Energy and therefore this information should be viewed as a Marketing Communication.

 

Project Update: Solid Progress

 

NORTHLAND VIEW

§  Use of Lind Convertible Agreement Proceeds: The Conditional Convertible Funding Agreement supplied by an entity managed by Lind Partners LLC for US$2.75m and secured against Company assets, has been split into two amounts. An initial US$0.75m was given immediately; the balance may be drawn under mutual agreement between EDL and Lind. A General Meeting will be held no later than 16 February 2019 to seek shareholder approval for the issue and allotment of ordinary shares to Lind under this Agreement.

§  Proceeds of the initial installment have been used for: (1) a second loader for the pre-screen plan and coal delivery trucks, improving efficiency of the plant and stockpile area - management estimates that this second loader increases production of washed tonnes by ~400 tonnes/month, without the installation of the new pre-screen unit; (2) A second excavator to open up the new mining area to the north of current excavations, with approvals expected near-term; (3) mobile in-out lighting for 24 hour/day operation; (4) additional spares package; and (5) working capital.

§  Other Coal Processing Equipment: Construction and commissioning of the Lamella clarifier water treatment plant is now complete and is expected to be operational in the next two weeks. Improved water quality in the plant process and the return pond is expected to increase plant productivity. The pre-screen unit is mostly complete and assembly on the feed hopper and conveyor is expected to be complete within the next 21 days. This unit is expected to remove fine and oversized coal before the main circuit, allowing for increased throughput rates and yields – a target of 100 tonnes/hour through the plant with a washed coal yield estimate of 50% has been set once operational.

§  Coal Production Orders and Volumes: Long-term contracts for 8,000 tonnes/month of washed coal are in place with several other regular monthly orders totaling ~1,000 tonnes of washed and unwashed material. The site improvements and expansion are key to fulfilling this production, and for additional orders anticipated. From 17 Sept to 11 Dec EDL has processed 26,659 tonnes of ROM coal, 6,647 tonnes of washed coal, and 13,022 tonnes of fine coal – this is an average daily throughput of 310 tonnes of ROM coal and average daily sale shipment of 54 tonnes. (Note: these numbers are unaudited).

 

COMPANY DESCRIPTION

Edenville Energy is moving the Rukwa Coal Project towards near-term production and advancing its Coal to Power Project.


SAVANNAH RESOURCES (SAV.L)

SECTOR – MINING

RATING – CORP*

MARKET CAP – £51.6m

CURRENT PRICE –5.85p#

ANALYST – BARRY GIBB

                    

 

Year-end Dec

2016A

2017A

 

 

 

Revenue (£m)

-

-

No forecasts provided

EBITDA (£m)

(1.8)

(2.8)

Adj. pre-tax Profit (£m)

(1.8)

(2.8)

Adj. EPS (p)

(0.46)

(0.53)

DPS (p)

-

-

Net Cash/(Debt) (£m)

0.7

1.2

P/E (x)

-

-

Dividend yield (%)

-

-

EV/EBITDA (x)

-

-

 

SOURCE: Northland Capital Partners Limited estimates. #Priced at prior trading day close. *Northland Capital Partners Limited acts as Nomad and provides commissioned research coverage to Savannah Resources and therefore this information should be viewed as a Marketing Communication.

 

Further Zones Identified at Mina do Barroso Lithium Project, Portugal

 

NORTHLAND VIEW

§    The potential of the Mina do Barosso Lithium Project has been further confirmed by the reverse circulation (RC) and diamond drilling at the Grandao and Pinheiro Deposits, which has returned a series of significant lithium intersections.

§    Grandao Diamond Drilling: The Company has reported that so far results have been very encouraging with 22.9m @ 1.05% Li2O from 84m in 18GRADD010, 29.55m @ 1.67% Li2O from 95.45m in 18GRADD011, and 20.7m @ 1.21% Li2O from 41.5m in 18GRADD017. The results have demonstrated the mineralisation has very good continuity to the west, showing some significant increase in grade at depth.

§    Grandao RC Drilling: The results from the infill drilling have been encouraging with results up to 28m @ 1.17% Li₂O from 15m in 18GRARC118, 27m @ 1.41% Li₂O from 36m in 18GRARC120. The RC rig has also been used to assist in drilling deeper targets that will be completed with the diamond drill rig, which helps to reduce costs and time in getting to the deeper target zone.

§    Pinheiro RC Drilling: Results from the remaining four drill holes have been received. The significant results include: 9m @ 1.05% Li₂O from 39m in 18PNRRC012 and 27m @ 0.91% Li₂O from 57m in 18PNRRC014. Drilling also located another unknown pegmatite further to the east and further work is needed to determine its extent.

RC drilling on the project now total 295 holes for 24,723m. Phase 3 of the metallurgical test-work programme continues and is scheduled to be completed early next year. RC drilling is expected to begin at on the Aldeia ground in early 2019, during which the company expects to drop from three drill rigs on site to work with the RC rig and only one diamond rig. A break in drill operations over the Christmas and New Year holiday period for maintenance and crew is scheduled. Continued progress on the Project is expected to run through 2019.

 

COMPANY DESCRIPTION

Savannah Resources is an energy metals group with copper-gold projects located in Oman, lithium projects in Portugal, and a operates a mineral sands project in Mozambique that is a JV with Rio Tinto

MANAGEMENT RESOURCE SOLUTIONS (MRS.L)

SECTOR – SUPPORT SERVICES

RATING – CORP*

MARKET CAP – £9.95m

CURRENT PRICE – 5.05p#

ANALYST –BARRY GIBB

 

Year-end June

2017A

2018A

2019E

2020E

 

Revenue (A$m)

52,363

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