Friday, 30 April 2010

Wall Street Research sees upside in NuLoch Resources as oil and gas production rises

In a research note to investors, Wall Street Research (WSR) outlined NuLoch Resources (TSX-V: NLR, OTC-QX: NULCF) upside potential and it continues to drill out its acreage which lies within the 4.3 billion barrel Bakken Formation.

Currently, the company is producing approximately 1,000 boepd (barrels of oil equivalent per day), and is focused on actively expanding and developing properties in North Dakota and Saskatchewan - where NuLoch is targeting the Bakken Shale and the Three Forks Sanish formations of the mid-continental Williston Basin.

The Bakken Formation is the largest continuous oil formation ever assessed by the United States Geological Survey, estimated to hold up to 4.3 billion barrels of recoverable oil, and as such it is considered to be one of the best oil plays in the US.

WSR emphasised that as drilling technology evolves, the recoverable oil estimates for the Bakken formation may prove conservative. “This realization has generated a great deal of interest from larger oil companies. North Dakota land values have been rising rapidly”. Consequently, WSR noted that land values (per acre) have been rapidly increasing to reflect the area’s potential.

WSR also noted that NuLoch would benefit substantially from any significant increases in oil prices beyond the current US$80 level.

“Following a series of land and production acquisitions in the past two years, NuLoch currently has a total of approximately 67,000 undeveloped net acres prospective for high-quality light and medium Bakken and Sanish oil, consisting of largely contiguous properties at Tableland in southeast Saskatchewan, and Burke and Divide Counties in North Dakota”.

According to WSR, NuLoch is planning to drill 7 wells in Tableland and 24 wells in North Dakota. “The company’s robust oil-focused drilling program bodes well for intensified interest in NLR shares and an improving valuation reflective of its sizeable land position and growing production in one of the fastest growing oil producing areas in North America”.
WSR has set a 12 month price target of $2.17 per share, based on a 2011 cash flow multiple of 7, based on 2011 production of about 662,000 barrels of oil and 602,000 mcf of natural gas.

Tuesday, 27 April 2010

African Aura Mining says Geneva’s Banque Bénédict Hentsch & Cie joins register with 3.84% stake

African Aura Mining (AIM: AAAM) told investors that a Geneva-based asset manager Banque Bénédict Hentsch & Cie SA has become one of the company’s largest shareholders. The Swiss investor bought 2.7 million shares, representing 3.84% of the company, between 20th and the 22nd April.

Banque Bénédict Hentsch & Cie SA is now African Aura’s fourth largest shareholder, behind CDS & Co (17.25%), JP Morgan Asset Management (9.96%) and OAO Severstal (4.73%). After the Swiss asset manager, in fifth, Collins Stewart owns 3.35% of the company’s shares.

Last week African Aura conducted a private placing with certain institutional and other investors to raise approximately £11.3 million (C$17.5 million), issuing 17.39 million new shares at 65p (C$1.01) each.

The proceeds will fund work across its project portfolio over the next 14 months, including the New Liberty gold deposit and the Weaju deposit in Liberia, and the Nkout iron ore project in Cameroon.

"I am delighted by the response to this oversubscribed placing and I believe that it speaks volumes of the company's positioning and value generation potential for all existing and new shareholders”, African Aura president and CEO Luis da Silva said last week.

“Investors of real pedigree are placing their confidence in the management who in turn are subscribing for more than £450,000 in the placing.  We look forward to delivering on our time lines and demonstrating to the market the full worth of our assets during what should be the most value creative year for African Aura".

Specifically, African Aura told investors that it intends to use proceeds for the completion of a Bankable Feasibility Study (BFS) at New Liberty, with an estimated cost of US$9 million; to deliver a maiden resource statement for Nkout for an estimated cost of US$3.8 million; and to deliver a NI 43-101 resource statement for Weaju which is estimated to cost US$1.1 million. The company intends to use the remaining funds for general working capital purposes.

The newly formed African Aura Mining is the result of a merger between Mano River Resources and African Aura Resources. The merger was completed in October 2009, the enlarged company has a considerable portfolio of projects focused on iron ore and gold deposits in highly prospective, under explored countries of sub-Saharan Africa.

Also last week, in a separate statement, chairman David Netherway commented on the company’s new structure and goals post-merger. “With the merger came a new board with a commitment to good corporate governance and a drive to continue our proactive approach to developing the business”.

“The company has effectively been split into two operating divisions, iron ore and gold with a push to bring both of our flagship projects, New Liberty gold mine and Putu iron ore project, in Liberia into production as quickly as possible.”

Stratex International establishes Turkish JV following US$1m payment

Stratex International (AIM: STI) has received the US$1m purchase fee from its Turkish partner NTF Insaat Ticaret Ltd Sti ('NTF'), and it has now established the NS Madencilik joint venture company. NS Madencilik will now fast-track the development of the Inlice and Altıntepe in Turkey, the two projects currently contain a combined oxide gold resource of approximately 570,000 ounces.

Stratex has now transferred the Inlice Project to NS Madencilik. Through the JV agreement, NTF is effectively earning-into a 55% interest in Inlice.

"This new mining venture with our dedicated joint venture partner NTF is a major step for Stratex in establishing itself as a gold production company as it aims to fast-track the Inlice and Altıntepe projects into production”, Stratex executive chairman David J Hall said.

“With a strong cash position for exploration activities we believe the new venture will allow us to unlock the value in our Turkish exploration portfolio in the future."

The companies initially began their partnership in 2009, and later in February 2010 they signed a definitive agreement, which formalised the terms of the joint venture and NTF’s earn-in requirements. In accordance with the terms of the definitive agreement, NTF is funding the scoping and pre-feasibility studies on the Inlice project and, to a lesser extent, on Stratex's Altıntepe gold project, both located in Turkey. 

NTF has been funding the work since June 2009, through monthly payments of US$50,000, and it is required to fund the Inlice feasibility study up to a total of US$2m. According to Stratex, the partners have made considerable progress towards the pre-feasibility study at Inlice.

To date, a total of 899 metres of infill drilling has been completed, to define the in-situ resource of the Ana East and Gap Zones, and to provide material for detailed metallurgical test work. The drilling has covered 58 drill holes, totalling 835 metres and 104 pits. Five drill holes have been completed for geotechnical purposes, and core samples have been submitted to the Middle East Technical University, in Ankara.

Stratex also noted that the partners have hired Nevada-based engineering and metallurgical consultancy Kappes, Cassiday & Associates (KCA) to manage the feasibility study at Inlice.  

“KCA has a strong track record of taking multiple heap-leaching gold and silver projects into production and both Stratex and NTF are confident that KCA's expertise is appropriate to fast-tracking the development of Inlice”, Stratex stated.

KCA has been contracted to complete the feasibility study within a period of six months, with start-up anticipated in May 2010.

Separately, in parallel with the Inlice project, NTF will continue to finance scoping and pre-feasibility studies at the Altıntepe project, up to US$500,000.  Subsequently, NTF has the option to earn-into Altintepe. Stratex will, assuming satisfactory results of the studies, transfer Altıntepe into NS Madencilik, and NTF can earn an interest of up to 55% of Altıntepe by expending a further US$2 million on a full feasibility study.

Nyota Minerals CEO and FD buy shares

Nyota Minerals (AIM & ASX: NYO) said its chief executive Melissa Sturgess and finance director Mike Langoulant bought further shares in the company.

Sturgess purchased a million shares for £0.1425 per share to take her stake up to 7.8 million shares, while Langoulant bought 220,000 shares for £0.235 per share to increase his interest to 3.49 million shares.

The share purchase comes amid a drilling programme at the Nyota’s flagship Tulu Kapi gold project in Ethiopia, which the company said was currently on track to yield a JORC compliant resource upgrade during Q2 2010. According to Nyota, the Tulu Kapi ore body is larger than first anticipated, and the second batch of assays, covering 16 of the 35 drill holes completed to date, are expected shortly.

The programme has so far identified extensions of the ore body as well as new mineralised zones underlying previously discovered Zones 1 and 2.

Nyota is looking to increase the current JORC resource at Tulu Kapi of 0.69 Moz (million ounces) of gold to 1 Moz, and to upgrade parts of the resource into the measured and indicated categories.

Earlier this month, Nyota told investors that the World Bank, through its International Finance Corporation (IFC) arm, is set to invest £3.43m in the company for a 10% equity stake.

Central China Goldfields identifies five gold-silver targets at Cikoleang property

Central China Goldfields (AIM: GGG) said that field work at its optioned Cikoleang gold property in Indonesia has identified thirteen gold vein prospects and further activities will focus on five most promising targets, where previously taken samples returned grades of up to 26.6 g/t (grammes per tonne) gold and 1,140 g/t silver.
The most promising targets identified at the prospect include the Cimapag, CLK and Cimubui vein zones in the western part and Cikecapi and Cicurug zones in the southeastern part of the project.
Rock samples from ore extracted by artisanal miners returned grades of 0.86 to 22.2 g/t gold and 5.5 to 232 g/t silver. Two samples taken from a quartz veinlet zone returned 1.19 to 1.48 g/t gold and 2.7 to 16.8 g/t silver. A sample of artisanal miners’ ore from a 300 metre long vein zone at Cikecapi returned 18.1 g/t gold and 1,140 g/t silver. A further four rock samples  of vein outcrops returned grades of between 1 and 26.6 g/t gold and 1 to 96.3 g/t silver. Six samples of artisanal miners’ ore from three vein zones at Cicurug returned grades of up to 11.9 g/t gold and 9.9 to 256 g/t silver, while one outcrop sample returned grades of 0.58 g/t gold and 80.4 g/t silver.
Rock samples, each weighing 0.5 to 1.5 kilograms, were processed and analysed by PT. Intertek Utama Indonesia, a subsidiary of FTSE 100 quality and safety services company Intertek (LSE: ITRK).
The company said that the initial results of rock sampling were encouraging and it continued conducting its geological, legal and financial due diligence during its six month option period, which will run until 14 June 2010.
If GGG decides to form a JV (joint venture), it will pay additional US$10,000 upon singing, while its total exposure to the first six month option period amounts to US$75,000.
JV terms include the ownership of 75% of the entity by GGG with Fino holding the 25%. Once GGG funds the initial expenditure of US$2 million, each party will contribute pro rata with their JV proportions.
Should Fino decide against contributing, its interest will be diluted to 12.5% and will be hold constant at that level unless GGG agrees to purchase its stake in the JV company.
The company announced the Cikoleang option agreement in December 2009. Cikoleang represents the company’s first new project since it has shifted focus on Indonesia and the Philippines following the sale of its stake in the China based Nimu copper-molybdenum project and terminated the development of its remaining Chinese project. 

According to Malaihollo, the company is continuing to actively review a number of attractive opportunities in SE Asia and Australasia which match its key core skills.

Lo-Q awarded contract for eleventh Six Flags theme park

Lo-Q Plc (AIM: LOQ) has won another new contract with the Six Flags group, to install its virtual queuing system in the ‘Six Flags America’ park in the Baltimore/Washington, DC region. Lo-Q has a strong relationship with Six Flags, and this deal brings Lo-Q’s Six Flags park installations to 11.

"I am very proud to have added this park to our list of parks using the Lo-Q system”, Lo-Q Chairman Jeff McManus commented. “Many Lo-Q users are repeat customers and we are so pleased that our system helps to give greater enjoyment to visitors to Six Flags".

Through Lo-Q’s Q-Bot and Q-Text products, theme park visitors can join a virtual queue for a particular attraction or ride, instead of physically standing in-line, then once their ride is ready Lo-Q’s systems alert the customer so they can make their way to the attraction. The Q-Bot is a handheld unit which is rented by the park visitors, and the Q-Text uses the visitor’s mobile phone instead of the Q-bot, by sending a simple text.

“This park brings the total number of Six Flags installations to 11 and now allows any guest, at any Six Flags theme park, to rent a Flash Pass to book rides, thus drastically minimizing the time spent waiting in line”, Lo-Q stated.

Lo-Q has installed its systems at most of the major Six Flags theme parks, since first implementing its systems at the Six Flags Over Georgia attraction in 2001.

"Lo-Q has proven to be a solid partner for us, providing exceptional service to guests in ten of our parks ...  We're very pleased to be bringing Lo-Q to Six Flags America, allowing guests to maximize their visit.  By utilizing the Lo-Q system, guests can enjoy their favourite rides and still have plenty of time to catch a show, shop or grab a bite to eat", Six Flags Senior VP of In-Park Services John Bement said.

The latest Six Parks deal is the second new installation contract this month, after Lo-Q sealed its first Q-txt installation for a US theme park. The company signed an agreement to install its Q-txt queue management system at the Lake Compounce Family Theme Park in Connecticut, USA.  Lake Compounce is operated by Palace Entertainment, part of the Parques Reunidos family of parks.

Indeed, in a separate statement, ahead of this afternoon’s AGM, Lo-Q’s Chairman commented on the company’s ongoing expansion. "The Company is in active discussions with a number of theme park operators and is hopeful of adding to its portfolio or parks during the course of the financial year”, McManus stated.

"All parks in which Lo-Q is involved have seen a positive start to this year's selling season with the normal variability between the various locations across the world. Trade has been very encouraging in the European parks, and, all in all, revenue to date is above the level experienced last year”.

Morning news wrap: BP, Imperial Tobacco, ARM Holdings, Petrofac, Lloyds, Segro

In the FTSE 100, oil and gas supermajor BP (LSE: BP) released its quarterly earnings report, saying its profits soared 135% year on year to US$6.08 billion.
Chipmaker ARM Holdings (LSE: ARM) also reported its quarterly figures, saying its revenues in US dollar terms jumped 19% year on year to US$143.3 million.
Part-nationalised bank Lloyds (LSE: LLOY) said it returned to profitability in Q1 on a combined business basis as the business was delivering good income growth.
Imperial Tobacco Group (LSE: IMT) said its interim revenues rose 8% to £13.37 billion.
Commercial property company Segro (LSE: SGRO) has agreed to acquire BAA’s 50% interest in the Airport Property Partnership for £111.3 million in cash.
Oil and gas engineering firm Petrofac (LSE: PFC) has acquired CO2DeepStore Limited, a UK-based CO2 storage company.
In AIM, UK-registered China operating copper and gold miner Central China Goldfields (AIM: GGG) said it had identified thirteen gold vein prospects on the Cikoleang project area.
Australian gold and copper prospector Solomon Gold (AIM: SOLG) has issued 96,197 ordinary shares and granted 1.3 million share options to its COO (Chief Operating Officer), representing 0.67% of its current share capital.
Supplier of virtual queuing systems Lo-Q (AIM: LOQ) has signed an agreement to install its virtual queuing system in another park within the Six Flags group of theme parks.
Westminster Group (AIM: WSG) said its recently acquired specialist integrated provider of 'high end' security solutions CTAC has secured two contracts with a combined value of £1.02 million.

Australian broker RBS Morgans places A$1.10ps target on Discovery Metals

Share Price: $0.90
6mth Price Target: $1.10

RBS Morgans has updated a research report on Discovery Metals (ASX: DML) as it reported its resource base at Boseto of 102.8mt at 1.4% Cu and 17.3g/t Ag.

The resource base would support a 3mtpy operation producing over 30ktpy of copper in concentrate. Drilling is testing other prospects, looking for "another Boseto" in the same stratigraphy.

The reported resource at the Boseto copper project (DML 100%) has increased 70% to 102.8mt at 1.4% Cu and 17.3g/t Ag, with 22.5mt of this in the Measured and Indicated category.

The definitive feasibility study into an open pit operation is due for public release by end-May 2010. A scoping study into underground mining at Zeta, based on a mineral resource of 25mt at 1.4% Cu and 23.1g/t Ag, has confirmed the commerciality of the project, and will assist in determining the optimum open pit depth.

Given the increased resource, RBS Morgans expects the Boseto plant could operate at 3mtpy (2mtpy pre resource upgrade).

DML reports that “less than 328 km of the 1,300 km prospective horizon has been explored” by DML’s first-pass soil sampling programme. In the past quarter, DML tested 108km of this prospective strike, and defined the Nyx anomaly 10km from Zeta, with the initial drilling campaign intersecting comparable stratigraphy, with analytical results pending.

The Notus, Maia and Gaia prospects were also defined, but are yet to be drilled. The Boseto project resource (Plutus and Zeta), together with the Quirinus and Nexus prospects, occupy a third of the 328km of prospective strike tested. Quirinus and Nexus are yet to be fully evaluated.

The realised copper price is critical to Boseto’s value.

RBS Morgans anticipates that the DML share price will move as the Boseto development advances, and with movement in the copper price.

The structure of the funding package for Boseto will determine how much of the value DML can retain, and the equity component and pricing will determine the value per share.

Given the current issued capital and RBS Morgans' projected copper prices (long term US$2.25/lb), RBS Morgan's 50% debt/50% equity model of after-tax cashflow generates A$1.28/DML share after a 1-for-2 issue, which they have further discounted to A$1.10 as their valuation and target price.

RBS Morgans have ascribed only minimal value to highly prospective exploration acreage outside of Boseto.

FTSE 100 seen lower ahead of UK mortgage approvals, corporate data

The FTSE 100 is projected to open 0.3% lower to give away part of the 0.5% gain it made yesterday on a strong session from miners, banks and oil & gas companies.
Chilean copper miner Antofagasta (LSE: ANTO) took the lead among the blue chips, rallying 7%. Engineering firm Invensys (LSE: ISYS) followed, tacking on 4.3%. Royal Bank of Scotland (LSE: RBS) moved up 4%, while miners Kazakhmys (LSE: KAZ) and Eurasian Natural Resources (LSE: ENRC) added 3.5%. Peers Vedanta Resources (LSE: VED) and Anglo American (LSE: AAL) climbed 3% and 2.7% respectively. Temporary power provider Aggreko (LSE: AGK) rose 3.4%.
Broadcaster BSkyB (LSE: BSY) was at the bottom of the pile with a 2.2% loss. Quality and safety services provider Intertek (LSE: ITRK), oil and gas supermajor BP (LSE: BP) and communications group WPP (LSE: WPP) all shed 2%. Published Reed Elsevier (LSE: REL) was the only other FTSE 100 constituent to lose more than 1%, moving down 1.7%. National Grid (LSE: NG) declined 1%.
US stocks had a weak second half of the day, giving up all of the gains made in the morning. The Dow Jones Industrial Average pared gains to finish flat, the broader S&P 500 index declined 0.4% and the technology heavy NASDAQ composite lost 0.3%.
Asian markets were in selling mode today. Hong Kong’s Hang Seng dropped 0.1%, China’s Shanghai Composite Index plummeted 2.9%, South Korea’s KOSPI was 0.15% lower and Australia’s S&P/ASX 200 index was flat, while Japan’s benchmark Nikkei 225 index went against the tide, rising 0.4%.
Oil prices were slightly lower as June Brent Crude declined to US$86.61/barrel and US light, sweet crude declined to US$83.57/barrel.
Precious metals followed the trend. Gold inched lower to US$1,152/oz, while silver and platinum retreated to US$18.23/oz and US$1,736/oz respectively.
Base metals also were in decline. Copper and nickel slid to US$3.48/lb and US$12.06/lb, while zinc dropped to US$1.07/lb.
The economic data that is due out today includes US consumer confidence data and the Case/Shiller home price index, while UK mortgage approvals figures will be released this morning.
UK investors will have plenty of corporate data to digest today, which will include reports from BP, Lloyds (LSE: LLOY), ARM Holdings (LSE: ARM) and Imperial Tobacco Group (LSE: IMT).

Jupiter Energy increases J-50 well net pay by 28% to 55m

Jupiter Energy (ASX: JPR) has provided an operational update on the J-50 well in Kazakhstan.

After more detailed interpretations of the wireline log data, the company has confirmed that logs now indicate a nett hydrocarbon pay of 55m in the Middle Triassic reservoir of the J-50 well.

This represents a 28% increase in the initial 43m net hydrocarbon pay count that was reported last week.

The interpretations show that a 55m interval of nett hydrocarbon pay has been intersected in a gross column of 120m. These results are significantly higher than the company prognosed at the J-50 well location.

The wireline log data and the company’s interpretation has also now been reviewed and confirmed by an independent third party.

The following operations have occurred on the J-50 well since the last update: production casing successfully run and cemented; preparations for running completion have continued; and preparations for well testing are underway.

As at 1200 hours 26th April 2010 (Aktau time) the rig was waiting on cement and preparing to run in hole and clean out production casing.

The main operational milestones are: run in hole and clean out the production casing; make up and run the completion; and perforate and clean up the well.

Jupiter said the key focus for the company in the immediate term is to complete the J-50 well and achieve initial flow rates as the well goes onto its 3 month production testing phase. Flow rates are expected from J-50 towards the end of this week.

On 24 April 2010, the company commenced tendering for turnkey drilling operations on the J-51 well, a step out well from the J-50 location.

Official notification of the tender was published in the local Kazakh press on this date and the closing date for tender responses has been set at 26 May 2010.

Jupiter expects that a decision will be made by the company during June and the results of the tender will be released around 17 June 2010.

The company said it proposes to commence drilling operations on the J-51 well as soon as practicable after 17 June 2010.

Rusina Mining updates European Nickel merger timetable

Rusina Mining (AIM: RMLA, ASX: RML) and European Nickel PLC (AIM/PLUS: ENK) have updated the timetable for the proposed merger of the companies by way of a Scheme of Arrangement in Rusina.

The timetable has been extended due to an unavailability of court dates. The following timetable is indicative only and may be subject to change.

Last day for trading in Rusina shares on ASX and AIM after close of business of the respective exchanges
Scheme becomes binding (Effective Date) - 10 June 2010.

Merger Implementation Date, Scheme Consideration issued to Scheme  Participants - 21 June 2010.

European Nickel CDIs commence trading on  ASX (subject to ASX approval) and New  Shares commence trading on AIM  (subject to AIM approval) - 24 June 2010.

The rationale for the merger is to create a larger, stronger company that will be better able to finance its development projects and grow into a mid-tier nickel producer.

Westminster Group’s newly acquired CTAC business wins significant contracts worth over £1m

The Westminster Group’s (AIM: WSG) recently acquired high-end security business CTAC Ltd has won two significant new contracts worth a combined £1.02 million, just weeks after joining the specialist security group. The two prestigious new contracts see CTAC provide high-security services to bullion storage depots located in the UK.

Less than two weeks ago, Westminster reported the CTAC acquisition, with the expansive security company agreeing a deal worth up to £1.82 million, depending on CTAC’s future performance.

“At the time of our acquisition I stated that I believed the company (CTAC) was at an exciting stage with tremendous growth prospects and was an excellent fit for our business. It is indeed pleasing to be able to issue significant contract news so soon after that statement”, Westminster chief executive Peter Fowler commented.

The Kidderminster-based CTAC provides ‘high end’ security systems and services to a blue chip client base including Brinks, DeBeers LV and Seven Trent Water who operate in operationally critical, high value and high profile fields such as cash handling, bullion storage, jewellery and diamond merchants, chemical storage and utilities.

“I am delighted that our newly acquired subsidiary CTAC has secured these prestigious new contracts, which underpins their reputation in the high security market place and immediately justifies our decision to acquire the business as part of our growth strategy”, Fowler added.

Under the terms of the contracts, CTAC will provide a variety of high-end security equipment to the high security bullion storage sites, including: Intruder Alarms, CCTV, Access Control, Vehicle Blockers, Turnstiles, Fencing, Electronic Fence Detection, Vehicle Strainer Wire and External Electronic Beams.

Westminster expects the contracts to commence shortly and noted that they will both be completed during 2010.

CTAC was founded in 2004 and it has grown ever since. Earlier this month, Westminster highlighted that the newly acquired business has been receiving growing interest internationally, where it has significant market potential.

A key strength of the CTAC business is its 24 hour Alarm Receiving Centre (ARC) which is built, operated and certificated to the National Security Inspectorate (NSI) Gold standard - the highest level of certification in the UK.

The ARC operates as a 24/7 control & command centre and monitors alarm and video signals from over 1,000 systems across the UK, producing a strong recurring revenue stream. According to Westminster, CTAC’s 24 hour Control & Command facility and Alarm Receiving Centre is a major enhancement to the group’s service operations, presenting cross selling opportunities to other group companies and international clients operating across international time zones.

Furthermore, the acquisition also gave Westminster the opportunity to add new services such as 24 hour travel advice, emergency medical & hostile extraction services to overseas travellers and third party remote monitoring & call centre services as well as providing it with a ready built nationwide service team and infrastructure to serve Westminster’s increasing UK customer base.

Following the recent acquisition, the Westminster Group now has four primary operating subsidiaries - Westminster International, Longmoor Security, RM Integrated Solutions and CTAC. Since its floatation onto London’s AIM market in 2007, Westminster has built a considerable global presence operating through established agents in 45 countries, offering a niche portfolio of security, defence, fire and safety products and services.

Yesterday, Westminster reported its FY09 preliminary results, in which it increased revenues by 45% year-on-year to £7.9m. In the twelve months ended 31 December, the company maintained a steady gross profit margin at 34.6% (FY08: 34.9%), and turned into profitability, posting an underlying profit of £217,000 compared to a £47,000 loss in the previous financial year.

During the financial year, Westminster invested heavily in expanding its overseas operations, and it has continued to build its international presence and infrastructure. Crucially, in response to the significant increase in enquiry levels and new orders, in January, Westminster International appointed a dedicated sales director, appointed several other new agents and opened two new offices, in Abu Dhabi and Kuala Lumpur.

“We have made a good start to 2010, with significant contracts being won by all of our operating divisions, the acquisition of CTAC Limited, and the welcoming of three new institutional shareholders to our company through the recent equity placing”, Peter Fowler had commented, adding: “We are confident of a solid performance for 2010 and exciting growth prospects beyond.”

Caledon Resources and Polo Resources agree merger

Polo Resources (AIM: POL) and Caledon Resources (AIM: CDN) have agreed, in principle, to merge the two companies to form a coal-focused natural resources company. If the proposed merger goes ahead, Polo will make an all-share offer for Caledon, paying 11.4 shares for every Caledon share.

Based on the 11.4:1 exchange ratio, and Polo’s 5.4p closing price (26th April), the offer has an implied price of 61.56p per share – representing a 14.53% premium.

"The proposed combination offers diversification for Caledon shareholders through Polo's investments in resource companies and its joint venture in Mongolia, while retaining shareholders' exposure to the upside potential contained within our Cook mine and Minyango project”, Caledon MD Mark Trevan commented.

According to the statement, the proposed merger would create a coal-focused natural resources company with investments in geographically diverse exploration and development projects, and direct exposure to the currently high coking coal prices through the producing Cook mine.

“The combined strength of Polo and Caledon's balance sheets will also reduce the risk inherent in financing the development of the Minyango project (in Queensland, Australia).  Access to Polo's strong management team with particular emphasis on capital markets experience will also be a major benefit", Trevan added.

Polo is already Caledon’s largest shareholder, with 54.4 million shares which represents 25.94% of the company, and furthermore through this significant shareholding it has had two non-executive directors appointed to the board - David Weill and Stephen Dattels (Polo co-chairman).

Caledon noted that its independent directors indicated that they are supportive of the proposed merger, and that they currently intend to unanimously recommend the offer. The independent directors and Polo, both believe that the combination represents a clear and compelling strategic fit.

"The transaction will provide all Polo shareholders with a renewed focus and direct exposure to the coking and thermal coal markets through 100% ownership of the Cook mine and the Minyango project", Polo Executive Chairman Neil Herbert said.

Additionally, Caledon and Polo have today entered into two loan facility agreements, whereby Polo will provide Caledon with £18 million and A$4 million respectively.

Under the first agreement, Polo will provide a short-term £18 million credit facility to be used, if required, to aid the repayment of Caledon's 8.5% convertible loan notes, due 5 July 2010.  The first facility will be available for drawdown in the period between 14 June and 20 July 2010, and it will mature on 31 October 2010. 

Secondly, Polo will provide a A$4 million credit facility for the potential lodgment of a bid bond associated with the Wiggins Island tonnage allocation process.  The second facility is available for drawdown immediately until the 1 June, and it will mature on 30 September 2010.

Each agreement is subject to interest at a rate of 10% pa.

Caledon operates the Cook underground coking coal mine and is working towards a feasibility study of the nearby Minyango coking coal deposit in Queensland.

In 2009, Caledon mined 604,000 tonnes of coal from the Cook mine, up from 548,000t in 2008. Coking coal production amounted to 406,900t against the previous year’s 378,000t, while coking coal sales increased from 397,000t of to 403,000t. The company has produced and sold 79,000t and 76,000t of thermal coal during the year, compared to 66,000t produced and sold in 2008.

Also during 2009, Cook’s JORC compliant resource was increased by 230Mt (million tonnes) to 406Mt and the Minyango Resource by 50Mt to 342Mt. The company intends to increase production from to 700,000t in 2010.

Polo Resources has a number of projects, shareholdings and joint ventures which are split between two resources - coal and uranium. Currently, Polo has three strategic shareholdings with its 25.94% stake in Caledon, a 29.83% interest in GCM Resources (AIM: GCM) and a 9.3% interest in Namibia-operating uranium company Extract Resources (ASX, TSX: EXT).

Earlier this month, Polo’s Co-Chairman Dattels announced his decision to step down as a non-executive director of Extract Resources. Polo recently hired BMO Capital Markets to evaluate strategic options with regards to its Extract shareholding.

Extract Resources is conducting a Definitive Feasibility Study (DFS) at Rossing South, in Namibia, and  last month the company said that the DFS, which is expected to confirm the project's potential as one of the world's largest uranium mines, is progressing well.

Monday, 26 April 2010

Westminster Group reports another solid full-year performance

Specialist security company Westminster Group (AIM: WSG) said it has again produced another solid full-year performance with a significant increase in revenues and a broadening and expanding revenue base, in line with its strategic growth plans.

In the 2009 financial year, the company increased revenues by 45% year-on-year to £7.9m. In the twelve months ended 31 December, the company maintained a steady gross profit margin at 34.6% (FY08: 34.9%), and turned into profitability, posting an underlying profit of £217,000 compared to a £47,000 loss in the previous financial year.

During the financial year, Westminster has invested heavily in expanding its overseas operations, and it has continued to build its international presence and infrastructure. The company has focused heavily on this expansion, and now it has an international distribution network to over 45 countries, offering in-country representation, knowledge and support for its clients.

Through three primary operating subsidiaries - Westminster International, Longmoor Security and RM Integrated Solutions, the company made substantial progress throughout the full year, with a substantial increase in new business.

“Westminster has demonstrated its ability to deliver complex and innovative solutions in its target markets, across a broad range of projects and challenging environments”, Westminster Group chief executive Peter Fowler commented. ”Westminster’s reputation in these global markets is significantly enhanced with each contract delivered”.

Early in the financial year, in March 2009, Westminster was awarded a £1m contract for its newly developed ‘ThruPORT’ rapid deployment, high security scanning portals at airports in Iraq.  The contract was completed before year end.

ThruPORT is a complete self contained scanning product designed by Westminster, utilising a range of overt and covert scanning systems. The rapid-deployment unit is built within a specialised ISO shipping container which can be deployed worldwide. According to Westminster, the ThruPORT can be set up and fully operational within hours.

In April 2009, the company won a €2 million contract to supply and install advanced security across the river Nile, to protect the new Nagaa Hammadi Dam complex in Egypt. Westminster expects the contract to be completed in 2011. 

In Africa, Westminster agreed a £2.72m contract extension for the Juba International Airport project in Southern Sudan. The company was awarded the initial contract in 2008, and the extension relates to the provision of additional security fencing and perimeter detection systems, together with Under Vehicle Surveillance Systems (UVSS), Automatic Number Plate Recognition systems (ANPR) and Vehicle Control Barriers on entranceways and other equipment.

In Ethiopia, Westminster secured a new contract to provide of an integrated security system for the National Bank of Ethiopia headquarters, along with other bank buildings including the country’s mint. The sophisticated IP-Based CCTV installation will include multiple control rooms which simultaneously monitor and record movements 24/7 for security and safety of bank personnel.

Westminster also has a number of significant projects across the globe, with key contracts in the UK & Europe, and it is actively pursuing opportunities in the Asia Pacific region. For the latter region, it  notably signed a deal with Pentagon Protection (AIM: PPR) to become the exclusive agent and distributor for the Pentagon range of blast and solar reflective films and anchoring solutions.

In South America, the company has won a number of valuable smaller orders, and it is currently discussing several major enquiries. Westminster said it believes that the Americas could be a promising market, particularly with the recent launch of a Spanish version of its website.

Across the whole business, the company has won contracts in a broad range of fields within the security sector, including: Perimeter Intruder Detection, Bank Protection, Access Control, Control & Command, Blast Film Protection, Overt & Covert Scanning Equipment, Police Mobile Surveillance, Close Protection, Frequency Jamming Equipment, Explosive Detection Equipment and Fire Prevention.

On corporate level February’s acquisition and integration of the close protection and security consultancy, Longmoor Services Ltd, was one the year’s highlights. Longmoor’s management team has extensive security experience, gained in the Royal Military Police and UK Police forces.

The newly integrated operating subsidiary offers highly-regarded training courses, which have proved increasingly popular among its client base. Indeed, in January, Westminster reported that demand had reached unprecedented levels, and consequently the company expanded the scheduled number of course booking additional revenues in excess of £105,000.

In addition to its training courses, the company also provides its services through specialist protection contracts, a notable contract in the year included a contract to protect VIPs and celebrities attending the 2009 Eurovision Song Contest in Russia.

Most recently, last week, the expansive security firm added a fourth operating subsidiary with the acquisition of blue-chip security specialist CTAC, in a deal worth up to £1.8m. Concurrently, Westminster has placed 747,000 new ordinary shares at 33.5p to raise £250,245 before expenses to supplement working capital requirements – to three venture capital trusts which have agreed a three-year lock-in.

The newly acquired CTAC provides ‘high end’ security systems and services to a blue chip client base including Brinks, DeBeers LV and Seven Trent Water who operate in operationally critical, high value and high profile fields such as cash handling, bullion storage, jewellery and diamond merchants, chemical storage and utilities.

During the current financial year, Westminster has continued to make progress with strong momentum, with a series of new contracts – including a major contract with the UK Ministry of Justice (MoJ) and recently a US$200,000 deal to supply fever detection systems in North Africa.

Crucially, in response to the significant increase in enquiry levels and new orders since the group’s flotation group in 2007, in January, Westminster International appointed a dedicated sales director, appointed several other new agents and opened two new offices, in Abu Dhabi and Kuala Lumpur.

“We have made a good start to 2010, with significant contracts being won by all of our operating divisions, the acquisition of CTAC Limited announced last week, and the welcoming of three new institutional shareholders to our company through the recent equity placing”, Peter Fowler added.  

“We are confident of a solid performance for 2010 and exciting growth prospects beyond.”

Banking reform to impact Barclays?

A glance at the below chart of the FTSE 100 shows that it has been a cautious week for equities, as Goldman Sachs fraud charges, heightened concerns about Greece and the impact of the volcanic ash cloud impact investor’s sentiment.

A glance at the above chart of the FTSE 100 shows that it has been a cautious week for equities, as Goldman Sachs fraud charges, heightened concerns about Greece and the impact of the volcanic ash cloud impact investor’s sentiment.

News of the US Securities and Exchange Commissions (SEC) charges against Goldman Sachs were felt across equity markets earlier in the week, as the prospect of tighter regulation on the financial sector prompted a broad reduction in risk exposure.

The global recovery story was boosted by a wave of positive earnings reports from a range of US bellweather companies. Morgan Stanley, Citigroup, Goldman Sachs, Apple and many others posted a range of better than forecast first quarter results.

Global economic data remains mixed, with the Conference Board’s index of leading indicator’s, a gauge of the likely near term performance of the US economy, rose by 1.4% in February, its twelfth successive advance and the strongest report since the Lehman crisis.

However, UK unemployment rose by 43,000 in the three months to February, which is the highest figure for more than 15 years, according to the Office for National Statistics (ONS). Unemployment is a lagging indicator, but the higher than forecast rise to 8% of the population highlights the fragile state of the UK economy.

Furthermore, British retail sales grew at a slower pace than forecast in March, with a rise of 0.4%, coming in below the 0.7% expected by analysts. Combine this with the disappointing unemployment data and it provides evidence that the much needs consumer recovery remains subdued.

This week’s figures from Eurostat on the Greek budget deficit triggered a fresh bout of nervousness, as it revealed that the country had a deficit of 13.6% of gross domestic product (GDP) in 2009, above the 12.7% previously reported. Greek debt also rose to 115.1% of GDP in 2009 from 99.2% in 2008. Moody’s investor service downgraded its rating on Greece’s sovereign debt this week and warns that further downgrades could be in the offering.

The yield on the Greek 10 year government bond climbed past 8% to the highest level for 12 years, as confidence in the economy continued to decline. Contagion also spread to Spain and Portugal as investors grew more cautious about the heightened fears of sovereign risk default throughout the eurozone.

The technicals have been pointing to overbought conditions for some time and this week’s correction has triggered a few sell signals. The relative strength index (RSI) is trending lower to fresh 6 week lows, indicating a rapid fall in buying momentum.

The moving average convergence divergence (MACD) histogram is also stepping further into negative territory, with the moving averages declining at a sharper rate, suggesting that a new downtrend may be underway. Initial support is seen at 5600 and a break below this could trigger a sharp retracement towards 5400.

In summary, there remain many macro-economic headwinds, which a complacent equity market might be underestimating. I believe the negatives are building and this is reflected by the bearish technical outlook.

The general election is less than 2 weeks away and the outcome is far from certain. Markets do not like uncertainty and at current levels I am inclined to reduce my equity exposure.

In light of the above analysis, I have been focusing on stocks that could be vulnerable in the short term by tighter regulation within the financial sector. The majority of the major US banks have now published their results and the boost this had had on the wider market is likely to be mostly priced in, as the FTSE reached 22 months highs recently. Barclays (Epic: BARC) has risen around 50% since mid-February…

As can be seen from the above chart of Barclays the recent rally has taken the shares back up towards 400p, where they have historically encountered strong resistance and appear to be faltering once again.

Similar to that of the FTSE 100, the technical oscillators have rolled over and appear to be trending lower. The RSI and stochastic have been declining over recent weeks and diverging away from the underlying share price. Both are now trading at fresh short term lows, indicating that the buying momentum is rapidly declining.

After a strong run for equities, I believe the markets are due a short term correction and the uncertainty surrounding the proposed banking reform and escalating sovereign default risk, which many of the banks have exposure too, is likely to impact the financial sector.

Barclays is high beta and given the vulnerable technical oscillators and the close proximity of major historical support, I am inclined to suggest the shares offer a short term trading opportunity to the downside.

At the time of writing the share price is 359.7p and near term targets are seen at 343.5p, 335p and 327.75p, with a stop loss marginally above key historical resistance at 401.5p.

This report was written by Mark Allen – Head of derivatives at Simple Investments Stockbrokers. The writer does not hold a position in Barclays, but client accounts may. The material in this report has come from Simply Charts and Barclays corporate website. 

Atlantic Coal consolidating the niche US anthracite industry

At present, Atlantic owns the open-cast Stockton Colliery in Pennsylvania, the only US state where anthracite is mined. Along with his business partners, UK entrepreneur Steve Best bought the mine from its original owners, the lately embattled Pagnotti family, and reversed it into AIM cash shell Summit Resources in late 2007 to fulfil expansion and consolidation plans.

The mine presently produces around 200,000 tons of anthracite a year. For the uninitiated, anthracite is a hard, very high-grade coal, sold for wider profit margins than other coals – predominantly for heating homes or industrial uses such as making steel and titanium, filtering water, tinting glass and, perhaps most importantly, turning beer bottles brown. On the market anthracite per tonne selling price has been between $115 for industry up to $150 for home use. Atlantic has historically sold around 40% of its output to steel makers, 30% to other industry and 30% for home heating, the highest-margin of the three but only for the colder months from November to March.

Before pursuing its consolidation plans, Best and co aimed to ensure their own mine was running at its most efficient, to make a good impression on prospective vendors. To which end the company has spent the last two years implementing a significant capital investment, with new mine plans, new engineers appointed to ensure the mine runs cost effectively and at maximum efficiency and most recently a new. However, as is typical with such things, it has all taken much longer than expected. The most recent development is a $3.5 million hydraulic excavator that will, according to Kuenzel, ‘significantly increase production and reduce the cost base, helping us get to 400,000 tons per year.’ This is the last piece of the colliery’s $10 million redevelopment and could be assembled in the very near future.

As a result of the new mine plan, Stockton’s remaining reserves have been calculated at around 4 million tons of raw coal, or ‘run-of-mine’ coal (ROM), which, after the washing process that is required to bring it up to saleable quality, equates to approximately 2 million tons of washed anthracite. This gives Stockton a mine life of about 10 years from now.

A market update back in November informed that the company had, in the 4 months from July to October Atlantic, produced 109,257 tons of ROM and 33,070 tons cleaned. From this, it had sold 32,348 tons in the period and received revenues of circa $4 million, up from $3.4 million in the 6 months to June. In its yard it has stockpiled 71,386 tons ROM and 6,365 tons clean. But most importantly, Stockton has become cash flow positive from operations due to the rise in sales and production.

As well as bringing the colliery up to scratch, over the last year Atlantic has been active, though not particularly successful, in its corporate activity. But, while falling at the final hurdle of a pair of potential acquisitions, it has effected two contractual manoeuvres of significant benefit. Firstly, it has renegotiated with the Pagnottis to stop selling the 100,000 tons of ROM coal a year at a fixed price that was written into the original contract, and instead effectively pay a deferred consideration. This, says Atlantic, will save it $10m-plus. Furthermore, just this April, the company negotiated a deal with coal broker Xcoal, which has ‘significant strategic supply agreements particularly with major integrated steel makers in both the Atlantic and Pacific regions’, to supply its anthracite. Says Kuenzel: ‘They are taking 5,000 initially and have agreed to take up to 150,000 tons of clean coal or, if production is great they can take 50% - so if we were to produce 400,000 tons they could take 200,000 of it. This is the first step and we want to continue to build it up as they want more. We see this as a strategic partnership rather than just a one-off contract.’

Of the failed takeovers – one further afield in the US and one in South Africa – Kuenzel says in the former case ‘the price changed and we didn’t want to over-pay’ and in the latter the target wanted an all-cash deal rather than the cash-equity mix offered, though, on the upside, Atlantic made small £85,000 profit from the sale of the stake it has built up. Kuenzel adds that both were bituminous coal producers and the company has firmly decided to stick to its original strategy of consolidating the Pennsylvanian region.

‘Our aim is in the next 12-18 months to add 30-40m tons, which will give us a mine life of around 30-40 years,’ says Kuenzel, adding that the company plans to acquire sites on a royalty basis, and so not risk large amounts of cash up front.

Stockton is the fifth or sixth largest mine in the region, which is proliferated by smaller family-owned collieries. ‘The younger generation have mostly left the region and don’t have an interest in running a small mine in Pennsylvania,’ says Kuenzel. ‘We’re not just focused on smaller ones, there are larger ones that are family run, typically owned by around 50 family members who are used to getting the income but it’s hard for them to run. And there are some sites that are dormant. We have the benefit of being a public company with better access to capital in the UK and North American. We can consolidate and run a more efficient business.’

Atlantic thinks it will be able to pay a royalty to each mine’s owners of around $4 a ton and so still maintain a significant profit.

To begin with, a number of collieries have been indentified within a 10 mile radius that would add ‘around 10m tons’ and remain highly cost-effective as the company could utilise the ‘significant’ excess capacity at its washing plant. Further afield in the state, the is around 300 million tonnes of further probable reserves within a 30 mile radius.

Kuenzel says ‘we have a foot in the door, we know the region and the people. A lot was dependent on us getting Stockton running profitably first. So we have now proved what we said about the site and we can now get on with the consolidation.’

Atlantic, which has a market cap of £8.9 million at the present 0.6p share price, will be releasing annual results in early May.

London Mining to make US$40m from selling non-core DMC stake

London Mining (AIM: LOND) will receive US$24.8m in cash from the sale of its non-core 27.5% interest in Delta Mining Consolidated (DMC), a South African based coal and iron focused resource company. The company agreed the deal with Sable Mining (AIM: SBLM), who currently own approximately 36% of DMC and made an offer for the company’s outstanding equity earlier this month.

"The decision to monetise the non-core investment in DMC allows London Mining to focus its management time and balance sheet on the assets it operates", London Mining chief executive Graeme Hossie said.

London Mining expects to receive a further US$15.2m in respect of guarantees made by certain members of DMC’s management team. In January 2010, London Mining and Heine van Niekerk and Pieter Wiese - DMC’s chief executive and chief financial officer respectively – entered into a private agreement, whereby Van Niekerk and Weise, among others, guaranteed that London Mining would receive total proceeds of US$40m from in the event of the sale of DMC.

As a result of the private agreement, the company is therefore due a further US$15.2m, which London Mining expects to receive in the form of Sable Mining shares, from private investment vehicles of Van Niekerk and Weise.

DMC holds substantial shareholdings in several early stage coal and iron ore assets in South Africa, including the Rietkuil coal project, Springbok Flats coal project, and Limpopo coal project. Additionally the company also has various coal prospecting and exploration rights in Botswana and Swaziland.
In August 2008, London Mining initially bought an initial 39.3% interest in one of DMC’s partially-owned subsidiary, DMC Coal, for a US$16.5m consideration and it also issued a US$18.5m loan to DMC Energy, another DMC subsidiary. Earlier this year, London Mining agreed to convert the loan and the equity stake in the respective subsidiaries, into a 28% shareholding in the DMC parent company.

The company noted that the investment is held on its balance sheet at US$29m.

On the 1 April, Sable Mining made offers to acquire the issued share capital of DMC. It agreed deals with the Avalon Trust and Mikakor CC – holding 490,374 and 25,613 DMC shares respectively - the deals represented 36.5% of DMC’s total equity and Sable paid a combined US$36.9m in shares, 81.5m shares in all.

London Mining has been involved in acquisitions of its own in recent weeks. On 30 March 2010, the company acquired the remaining 80% of Colombian coal producer International Coal Company (ICC).

ICC is targeting production of 250 ktpa (kilo tonnes per annum) of coking coal within 18-24 months and up to 400 ktpa of coke with first production within 12months. The business, which London Mining said would be the development platform for its Colombian coking coal business, was acquired from Pacific Overseas Investments, SIHL Investments International Corporation, Talman Alliance and Executive Players.

ICC consists of three coking coal concessions in the Socha coking coal region of Colombia with an aggregate area of 606 ha (hectares), a contract with Invercoal to develop and earn a 51% interest in a 250ktpa mine as well as land, environmental and construction permits and detailed plans to build coke ovens with a nameplate capacity of 200ktpa, which could go up to 400ktpa.

In terms of its iron ore business London Mining was also boosted significantly merely a day later, on the 31March, when the company announced another big increase in resources at its iron ore portfolio. London Mining continues to delineate big iron ore resources in Sierra Leone, Saudi Arabia and Greenland.

Separately this morning, Ferrous Resources, London Mining’s largest shareholder with 20 million shares (18.3%), announced that it intends to sell its stake in the company via an accelerated bookbuild, carried out by JP Morgan Cazenove and Liberum Capital.

Ascent Resources agrees Swiss assets sale

Ascent Resources (AIM: AST) has sold its 100% owned Swiss subsidiary, PEOS AG, to eCORP Europe International in a cash-deal worth €8 million. Ascent’s Swiss unit held beneficial interests in various permits in Switzerland, including a 90% beneficial interest in the Hermrigen, Linden and Gros de Vaud permits.

Investors likes the news, sending shares up nearly 15 percent in early deals.

Under the terms of the deal, Ascent will retain farm-in rights relating to conventional discoveries made on the disposed permits.

"This is an outstanding deal.  We have realised €8 million from our investment in our Swiss assets, retained without obligation the opportunity to participate in any production opportunities from conventional reservoirs and completely removed the funding risk for these projects”, Ascent MD Jeremy Eng commented.

“Importantly, in this instance, we have achieved a far stronger result than working within a traditional farm-out partnership structure”.

Ascent noted that since 2005, it has actively developed and marketed the Swiss assets. Towards the end of 2009, the company launched a farm-out initiative for the Hermrigen appraisal project.

In addition to the €8 million, consisting of a €5 million up-front payment and a €3 million payment due subject to the completion of agreed commercial conditions, Ascent retains certain rights in respect to eCORP’s future discoveries on the permits.

The company has the right to acquire 45% of any conventional discovery from the Hermrigen 2, Essertines 2 and Linden 2 appraisal wells by paying 45% of drilling costs, post discovery. Additionally, Ascent and eCORP have identified a further three prospects held by PEOS, in relation to these prospects Ascent can acquire 22.5% of any discovery by paying 22.5% of the drilling costs, post discovery.

Furthermore, eCORP has irrevocably committed to drill the Hermrigen-2 appraisal well and permitting is underway for drilling in Q4 2010.

Ascent stated that in both instances the company has no obligation to participate in a discovery, and separately, should eCORP elect not to drill these wells Ascent retains the option to fund the developments in its own right.

According to Ascent, the Swiss projects are estimated, by Tracs International, to contain gross contingent conventional resources in excess of 600Bcf of gas. Specifically, "management estimate gross contingent reserves of potentially 150Bcf in the Muschelkalk and Bunter layers of the Hermrigen prospect", Ascent stated. 

"ECORP is pleased to have the opportunity to control the operations of PEOS on these permits and work at an enhanced pace to bring much needed gas resources to Switzerland through a combination of conventional and unconventional gas development, alongside the potential construction of underground gas storage facilities", eCORP chief executive John F. Thrash said.

ECORP expects to commence site operations to drill the Hermrigen-2 appraisal well in the fourth quarter of 2010, and it is committed to begin drilling before October 2011.

Ascent highlighted that it has some very strong projects within its portfolio, with some in production, some projects nearing production and multiple projects where defined exploration and appraisal is set to add value. This cash deal is expected to benefit its progress elsewhere in its European oil and gas portfolio.

“The additional funds will be used to expand our intensive work programme across our portfolio, which includes our drilling and production programme in Hungary, the exciting prospects of the Anagni-2 appraisal well in Italy, alongside further drilling and exploration work scheduled in Slovenia”, Jeremy Eng added.

“Furthermore, having retained the farm-in option with PEOS, we can also look forward to additional activity in Switzerland and the possibility of confirming the presence of a sizeable reserve." 

Astaire Securities featured the group in its Morning Report, calling today's news "a great deal for Ascent, bolstering the balance sheet with useful additional cash while providing the company with the option to participate in future wells retrospectively should these be successful".
In a further note, Fox-Davies Capital said it welcomed this "positive deal" on the Swiss assets, adding: "Ascent has realised €8m in cash from the assets and keeps some equity in the exploration upside of the licences; however in case of failure there are no associated costs for the company."

The transaction, which is quite different from a traditional farm-out arrangement, therefore seems to have very limited downside and brings Ascent’s Swiss projects back into play, the broker added.

In Italy, earlier this week, Ascent completed operations on the Fontana-1 well in Italy's Latina Valley achieving sufficiently encouraging results to proceed with the permitting of a hydrocarbon appraisal well, Anagni-2.

Fontana-1 was drilled as a geological appraisal well to collect cores from a carbonate platform identified while drilling the nearby Anagni-1 well.  At Fontana-1, a core sample taken from the limestone of the target Carbonate Platform formations contained live oil. Furthermore, Ascent noted that the target formations have been found over 300m shallower than in the original Anagni-1 well.

The Anagni-2 well, located within 1km of Fontana-1, will now target a smaller adjacent structure. At the Anagni-2 location, Ascent expects that the target will be even shallower, at an estimated depth of approximately 300m below ground level.

The company also updated investors on the on-going work in eastern Hungary, on the Penészlek project. At the Penészlek project, Ascent is currently returning to PEN-101 to ready the well to complete remedial work required to ready it for production.

At PEN-101, the company will drill a short sidetrack to bypass damaged cementation. Prior to the short-term disruption at PEN-101 Ascent achieved initial production rates, during preliminary testing, in excess of 1MMscfd (million standard cubic feet per day). Previously, Ascent said this initial production rate is expected to be increased through similar stimulation as used with the currently producing PEN-105 well.

PEN-105 was completed and shut-in in December whilst the company connected it to the main export pipeline, and production subsequently began last month.

Effects of Currency Moves and Market Speculators on Copper

As discussed in ‘Impact of Global Economic Recovery and Chinese Growth on Copper’, the recent gains in copper prices have been underpinned by the broader global recovery, as well as the continued fiscal growth of the world’s number one copper consumer; China. There are two other major factors however, which have not only been helping to spur copper prices to the highest levels in two years, but also act as risk factors going forward, with the potential to at least curb the price appreciation brought about by economic growth i.e. movements in the currency markets, and the impact of speculation and ‘paper accounts’ (those where no physical commodity is held or traded).

Having considered the impact that the rapid growth in China, as well as future implications of any fiscal tightening measures may have on copper prices, there is another factor coming from the Asian giant that is set to have a strong impact on copper prices going forward. This is the recent news that the country may be relaxing price restrictions on their currency, expanding the band it can trade in while pegged with the US dollar. Depending on what measures China uses to curb its rapid growth, the Yuan may feel some upward pressure compared to other global currencies. Any appreciation in the currency will make copper imports comparatively cheaper for Chinese consumers, while at the same time exports comparatively more expensive for the rest of the world. Economically speaking, this trade deficit in copper will be supportive for global copper prices, effectively increasing global demand while decreasing global supply. This does all depend however on the extent to which the Yuan will appreciate, if at all, compared to other currencies. At this stage for example any upward moves in the currency are expected to be limited, with China as yet not giving any indications that they will allow a fully free floating rate this year. However, going forward these currency moves will at least in some small part limit the bearish impact of any economic slowdown in China, in turn limiting any downward pressure felt by global copper prices.

This leads us on to the major currency factor that has been driving gains across commodities, and the one which offers some potential risk to a continued rally in copper prices, and that is the weakening in the US dollar. As with all dollar denominated commodities, the greenback has an inverse relationship with prices (stronger dollar means comparatively more expensive commodities for global economies, and therefore lower demand and lower price).  The Trade Weighted Dollar Index (DXY), a measure of dollar strength against a basket of global currencies, lost around 17% in 2009, almost reaching lows seen at the height of the global recession in 2008. This coincided with the rapid growth in copper prices highlighted earlier, and has been an underlying support for the metal during the economic recovery. The sustainability of this copper rally therefore, and the potential price direction going forward, depend in a large part on what the US dollar does over the next year or so.

Although the full extent of all potential influences on the greenback, fall beyond the scope of this article, there is at least one primary issue that is likely to dominate going forward. As the US economy recovers, the potential for some inflationary pressure to come through gets more and more likely. Recent weakness in the dollar has been helped by the record low interest rates the country has had in place to help spur growth. As this no longer becomes a factor, and the low interest rates actually start to bring some risk to economic recovery, chances that the Federal Reserve will hike interest rates increase, with most analyst estimates now expecting this to come through in the second half of 2010. A rate hike will bring about some strong appreciation in the dollar against other currencies, and naturally make copper comparatively more expensive for those countries, pressuring demand and implicitly, hitting prices. The full effect and extent of any rate hike on the dollar, as well as the knock on impact to copper prices, is hard to judge, however looking at least through 2010, there is a lot of potential for a rate hike to not only remove a key support for the recent copper rally, but in fact begin to pressure prices and at least hinder, the sustainability of the rapid gains in the medium term.

Having considered some of the underlying causes for the copper price growth, both here with the currency market, and in Copper Price Analysis: Impact of Global Economic Recovery and Chinese Growth, with the effects of the economic recovery and Chinese demand growth, we must also consider to what extent market speculation has supported the metal, and therefore would represent a risk to the stability of the gains in copper prices. Using data from the US Commodity Futures Trading Commission (CFTC), we can look at the number of speculative buyers and sellers in the Comex copper market. The latest reports show that the net length of positions in the market, i.e. the number of speculative buyers minus the number of short sellers, is at some of the highest levels seen since 2006. The number of speculative long positions in the market are themselves, at the highest point since 2004, while at the same time, the number of speculative short sellers in the market are holding just above the average level.

The extent to which this is driving price gains, or is in fact a result of the copper rally, is difficult to judge. However looking at the historical pattern of speculative positions in markets which are rallying, would suggest as positions reach ‘overbought’ levels, liquidation of long positions and a subsequent contraction in prices often comes to fruition. This was the case for example in the crude oil market, when the price topped $140/bbl, while at the same time, net speculative long positions in WTI Nymex futures were also at record highs. Looking at the copper market, the net long positions topped out at almost 29,000 contracts earlier this year, and compared with historical levels, the 30,000 area has been a point where paper accounts begin to look overbought, historically seeing some liquidation and a price ‘correction’. The net position in copper in fact only turned ‘positive’, that is to say there were more speculative buyers than short sellers, in the latter half of 2009, just before the copper price began the rally seen during the first quarter of this year. This shows the strong level of paper buyers in the market has undoubtedly been helping to drive copper prices higher, but it is this speculation that now offers the potential for the copper rally to at least stall in the medium term, as traders look to liquidate their positions and in doing so, pressure copper prices for the broader market.

Comparing prices and speculative positions with the underlying fundamental factors supporting copper, one could be forgiven for assuming that this divergence would inevitably lead to a fall in prices. However as John Keynes suggested, “the market can stay irrational longer than you can stay solvent”, and a simple divergence between fundamental factors and price action does not necessarily result in market selling, particularly in the short to medium term. Looking at all these factors however it is easy to see that the recent gains in copper prices will at the very least face some obstacles in the coming year. In the longer run, any gradual and sustained economic recovery will almost inevitably result in copper prices gaining ground compared with the lows seen last year, however the underlying shift in currency markets, as well as the extent to which speculators are driving price gains, at least brings about the possibility that prices will fall somewhat as the year progresses.

Churchill Mining secures a big partner for a big project

Churchill Mining  (AIM: CHL) appointing Credit Suisse as strategic advisor with regard to the development of the East Kutai coal project in Indonesia may have come as a big surprise to many market watchers. After all,  the Zurich-based group is a major player in the Indonesian market and has been involved in some massive deals involving coal assets in the country – and Churchill’s current market capitalisation of just above £100 mln do not put it amongst the largest fish in the pond.

Nevertheless, managing director Paul Mazak, while appreciating that some may be surprised by Churchill bringing this massive player to the table, is adamant that Credit Suisse has good reasons to be attracted to the group: “They agreed because of the quality of Churchill’s assets.” 
The East Kutai coal project currently which has a JORC compliant reserve of 956 million tonnes of thermal coal and resources of 2.481 billion tonnes, is planned as a 20 million tonnes per annum operation. The appointment of Credit Suisse as strategic advisor, announced earlier this week, should help turn Churchill into a major exporter of thermal coal to the expanding Asian energy market.

Credit Suisse will work with Churchill to complete a strategic review process, evaluating options for financing the project, which will include the development of East Kutai with a joint venture partner or the conclusion of a long-term off-take agreement.

Back in October 2009 Churchill appointed Pala investments as a strategic advisor. Pala’s objective was too to assess the company's structure with a view towards increasing its operational and capital-raising flexibility and maximising tax efficiency. Pala’s job is now almost done and Churchill is shifting into a higher gear.

There has been plenty of interest in East Kutai in the past few months.  Mazak said the group has been inundated with proposals for its flagship project, and to streamline this process, Churchill put out to tender the position for a strategic advisor for the development of East Kutai and was approached by 9 investments banks. Enter Credit Suisse, which emerged as the leading candidate through its exceptional expertise in the Indonesian energy markets and impressive track record. “We wanted an outside firm with a good reputation – and we got it,” the MD said.  However he would not be drawn on commenting market speculation that Credit Suisse has agreed only to be paid on a success basis.

Churchill calls Credit Suisse the “market-leading investment bank to the coal sector in Indonesia, working with leading companies such as PT Bumi Resources, IndoCoal, Adaro Energy and others.”

In 2009 alone, the bank acted as sole or joint bookrunner or sole arranger for US$1 billion worth of bond and loan offerings for PT Bumi in four deals and was sole arranger of a US$800 million bond offering for Adaro. It also arranged and advised on a number of loans and acquisitions for resource companies active in Indonesia. In all Credit Suisse has completed over US$13 billion of Indonesia-related coal transactions over the past five years.

Along with the current group of potential investors and JV partners that Churchill has been working with, Credit Suisse will start an open invitation process, funnelling down potential candidates through the different stages, and in the process create competitive tension to help provide the best deal for Churchill shareholders. As interested parties move through this filtration process they will be privileged to more data on the internal economics. Releasing more detailed information on the internal economics is something some UK brokers have criticised Churchill for but in a competitive bidding situation it is in the interest of shareholders to negotiate the best deal.

Credit Suisse with its exceptional reputation and financial clout is in a position to advise both Churchill and the buyers on any transactions. 

In the meantime, Churchill is continuing to advance the project by putting key infrastructure items such as the mine stockyard, overland conveyor, port/ship-loader and power station out to tender. The company said that, to date, the bids received have been well under predicted costs due to the resurgence in global manufacturing and engineering capabilities following the global financial crisis.

The project construction work at East Kutai is expected to take approximately two years to complete.

The company is looking to capitalise on the growing Asian demand. According to Churchill, India will need a minimum of 100 million tonnes per annum of new EKCP-styled coal to meet expected future energy needs. The company’s representatives have recently visited 17 companies on India's East Coast to discuss the project and potential off-take agreements.

Impact of Global Economic Recovery and Chinese Growth on Copper

With the three-month copper contract recently touching $8,000/tn on the London Metal Exchange (LME), the question arises: what is driving the copper rally and how sustainable is it likely to be? The quick retreat of copper prices from these levels already has some suggesting the fundamental picture does not necessarily match what the price action would indicate, and inevitable at least some of the appreciation can be attributed to paper accounts (those which have no physical holdings) and market speculators. To what extent this is the case however needs to be assessed, evaluating what extent the economic recovery, and particularly economic growth in China are having on the price of copper.
As with the broader commodity markets, one of the main reasons for the sharp gains in copper prices in recent months is the global economic bounce, as the world comes out of the trough of recession and into what general consensus now deems, at least the first stages of recovery. As with all commodities, the global recession hit copper prices hard, with the three month LME contract losing two thirds of its price in the last six months of 2008.
Copper has a particularly inelastic relationship with the global economy, because its two primary areas of use, electronic goods and construction, are those cyclical sectors which historically suffer most during an economic downturn. Similarly, they are two of the areas which tend to benefit quickest during economic expansion (or in this case, recovery) and so as global economies continue to show GDP growth, as many have during the early half of 2010, one could expect copper prices to directly benefit, possibly seeing a sharper reaction than the broader markets as a whole (price inelasticity means a small change in GDP growth for example, would lead to a relatively large gain in price).
If we look at copper prices during this year, we can see the three month LME contract is up 166% from its lowest point in December 2008, or seen another way, has retraced around 89% of the losses made during the recession, from the July 2008 peak. If we now compare this with the S&P 500 equity index during the period, a traditional, if somewhat simplistic proxy for the global economy (although unlike GDP and industrial output numbers, this is not a lagging indicator), the index is only up around 71% from its trough in early 2009, suggesting the global economic recovery is somewhat short of what a copper price would indicate.
From its peak in summer 2008 however, this is a retracement of around 85% of its losses made during the recession, coming very much in line with the move made by copper during the period. This would seem to suggest copper is making a ‘reasonable’ recovery in line with global economic growth, however this may not be the full picture. Although copper prices peaked in 2008, the S&P 500 actually saw its top in 2007, not far from the 1,600 mark. Looking at the recent growth as a retracement of the peak to trough losses, it actually only represents around 75% recovery in the S&P 500, and certainly suggests the retracement in copper may be somewhat ahead of itself in terms of the rest of the economy. This itself, opens up the metal to some price depreciation risk in coming months, and coupled with any broader risks to the global economic recovery and the potential for a ‘double dip recession’ (the details of which go beyond the scope of this article), leads to at least some potential that the copper price rally may stall in the medium-term, during 2010,
One of the key drivers behind this fundamental recovery in copper demand is and will continue to be China; the world’s number one copper consumer. The latest GDP figures from this Asian giant showed an 11.9% growth during Q1 2010, largely above expectations in the 8-9% region.
This economic growth brings with it a natural increase in demand for commodities; China acting as a ‘power house’ for copper prices while the country’s consumption needs to be met by global supply. However it is this rapid growth itself which acts as another major risk factor to copper prices going forward. This massive economic expansion in China is increasingly seen as ‘overheated’, and almost all expectations now suggest the country will need to start to instigate fiscal tightening, in order to curb inflationary pressure and match the 8% growth target it set out for 2010. Naturally any slowdown in economic growth will likely bring with it a decrease in demand for industrial base products, such as copper. Analysts at Commerzbank for example, expect copper imports in the country to fall by one third, having peaked at a record high last year; one of the primary reasons they note, for the sharp gains in copper prices during 2009.
However the extent to which this fall in demand will hit copper prices is hard to judge. Coldeco, the world’s largest copper mining company, has suggested recently that it would expect demand growth for copper outside of China, to compensate for shrinking demand in the Asian country. It is also worth noting that any contraction in industrial output in the country, and thus copper demand, is also likely to be mirrored by contraction in copper production from the country. This will at least in some part, balance the supply side with the reduced demand from the country, to an extent limiting the downward pressure associated with a supply surplus. Yet looking at the total exchange stocks of copper as they stand today, the combined stocks at the LME, Shanghai Exchange and the Comex exchange are in fact higher than they were at their height in 2008 (itself a divergence at the time between the fundamental supply side, and the copper price which was then at its peak).
Total copper stocks in these three exchanges currently stand at around 782,591 tonnes, compared to an average in July 2008 of around 166,000 tonnes. This shows the global supply levels already have the capacity to absorb an increase in demand for the metal, or looked at another way; any decrease in copper output from China is likely to be discounted in a market that already has ample supply, while the fall in demand will have a more immediate impact given the tentative nature of the global recovery and global industrial copper demand.
Global economic growth and the continuing fiscal strength of China are two of the key underlying fundamental issues, which have been supporting the copper rally in recent months. Likewise, they offer two of the main risk factors going forward to the extent and sustainability of the copper price appreciation. What happens to copper prices going through 2010 and into 2011 will depend largely on the factors discussed here, but that is of course not the full story. The effects of currencies, particularly the Chinese Yuan and the US Dollar, will also be key to copper price action going forward, Further to this, the extent to which recent gains have been the work of speculators, and what effect this may have going forward, is another area that cannot be ignored. As discussed in our next article: Effects of Currency Moves and Market Speculators on Copper, these have also been key to price gains in copper since the economic recovery began, and will undoubtedly be key to any price action going forward.

Bravo Gold Corp's Next Season could be a Company Maker

Bravo Gold Corp's hopes of finding the next Eskay Creek - one of Canada's richest ever mines - at its Homestake Ridge gold and silver property in Northern BC remain very much alive and kicking after another spectacular year for the company, with successes in the field, in the labs and in the financial marketplace.  With 168 holes now drilled on the property Bravo has continued to publish bonanza intercept grades as it delineates  a second high grade deposit, which is currently open along strike and at depth.  Meanwhile, metallurgical tests on the core have yielded high recovery rates, while a recent airborne radiometric has indicated the district-scale potential of the property and defined six new exploration targets.  The company raised C$15M over the last year, and is currently spinning off its assets in Nevada into a separate, publically traded vehicle, Bravada Gold Corp.
Bravo Gold is now totally focussed on what director Robert Swenarchuk describes as the "ultimate transaction".  Its programme for 2010, which includes publication of an updated 43-101 resource, an aggressive 10,000 -15,000 metre drill programme, further metallurgical work and preliminary economic and design studies, is all designed to take it closer to that transaction by enhancing the saleability and attractiveness of Homestake Ridge.  To date 11 potential suitors – both majors and mid-tier miners – have visited the project and signed confidentiality agreements. 

Background to Bravo and the Homestake Ridge Project
Bravo's background was covered in some detail in a Proactive Investors article written last March.  In brief, the company is one of eight in the Vancouver-based Manex Resources Group, which provides central financial, legal, admin and geological services to the group. Bravo's involvement in the Homestake Ridge property began in 2003 when it signed option agreements with Teck Cominco and a private Optionor.  It has since fulfilled full earn-in requirements and acquired other claims on the project so the company now has 100% ownership of the 27.6 square kilometres project, although there are a number of royalty obligations to be met, including a 2% NSR royalty (see the most recent MDA for full details).

Homestake Ridge lies close to the BC/Alaska border some 35km south of Stewart, 32km from the nearest tidewater and 6km from existing access along a gravel road.  It is 115km from Eskay Creek, which was mined by Barrick from 1995-2008 and, thanks to its remarkable grades (which averaged over 48g/tonne gold, 2000g/t silver, 4% zinc and 0.5% copper), was the fifth largest silver mine in the world despite a relatively small (2.6 million) tonnage.

Like the geologically-similar Eskay Creek, Homestake Ridge is a VMS/epithermal gold vein property. The Main Homestake deposit was the first to be discovered on the property and in 2007, after a 45-hole drill programme, Bravo published its maiden N43-101 resource, an inferred estimate of 11.9M tonnes containing 903,000 ounces of gold (at a grade of 2.36g/t), 5.75M ounces of silver (graded 15g/t) and 27.6Mlbs of copper (at 0.11%).

Since then Bravo have drilled a further 57 holes at the Main Homestake deposit and have drilled 27 holes at the newly discovered Homestake Silver deposit some 700 metres to the southeast.

The recent drilling programme on the Main Homestake deposit was a mix of in-fill and step-out drilling designed to test the extent and geometry of the mineralization and to improve the confidence of the maiden estimate.  Highlights have included:

•    Hole HR08‐87 which returned a 52 metre intercept averaging 21.0 g/t Au including a 7.7 metre bonanza intercept averaging 181.6 g/t Au.

•    Hole HR09-152 which returned an 11.9 metre interval at 13.0g/tonne gold and 19.5g/t silver within a 42 metre interval grading 6.1g/t gold and 11.3g/t silver.

Meanwhile the drilling programme at Homestake Silver was designed to produce the first resource estimate for the deposit. Results have been spectacular, particularly in the more recent holes, and have demonstrated that the deposit has a silver-rich top with a deeper gold-rich core in multiple veins (see the long section diagram below where the red circles denote individual high grade gold assays of +15g/t).  Highlights have included:

•     Hole HR09-146 which returned a 0.7 metre interval averaging 49.0g/t gold and 9027g/t silver within a 3.6 metre interval of higher grade averaging 10.6g/t gold and 1689.6g/t silver, which in turn is part of an overall 22.6 metre interval averaging 2.1g/t gold and 294.3g/t silver.

•    Hole HR09-161 with an intercept of 51.9g/t gold and 2592g/t silver, 2.8% lead and 3.0% zinc over 1.9 metres within a 7 metre interval averaging 18.2g/t gold and 946g/t silver.

•    Hole HR09-164 which intersected 1.2 metres of 12.7g/t gold, 96.1g/t silver, 7.3% lead and 7% zinc within a 10 metre intercept of 4.4g/t gold and 31.6g/t silver.

•    Hole HR09-165 which included multiple high-grade gold intercepts of significant thickness, including 24.4 metres at 12.1g/t gold and 6.8g/t silver, 14.5 metres at 4.8g/t gold and 2.1 g/t silver and 2.7 metres at 10.0g/t gold and 134.3g/t silver.

Results from the drilling programme on both deposits are being analysed by the consultancy firm, Scott Wilson Mining, who will develop a new 43-101 resource estimate for each deposit, hopefully by the third quarter of this year.  Results from metallurgical studies on the core from the Main Homestake deposit have already been published, indicating high recoveries of 87% to 92% for gold, and 59% to 70% for silver.

Long Section of Main Homestake and Homestake Silver Deposits

In addition to the drilling programme, the unusually hot and dry weather last summer enabled Bravo to commission further analysis on the property from a 630 line-km AeroTEM III airborne geophysical  survey.  The survey included a radiometric survey, which measures thorium, uranium and potassium concentrations, which identified strong potassium enrichment in association with mineralization at both the Main Homestake and Homestake Silver deposits.  It also identified a similar but more widespread potassic anomaly to the east of these two deposits. This data, in combination with surface mapping and results from the eighteen holes drilled in other parts of the property, is of great significance as it indicates the project likely hosts other high-grade deposits.  It has also enabled Bravo to identify six new targets for follow-up in 2010 along with planned further work on Homestake Silver deposit.

Nevada Projects : Bravada Gold Corporation (40% owned by Bravo Gold)

Although Homestake Ridge has been Bravo's flagship project for several years, the Group has also controlled properties in Nevada since 2003.  Last year the Group decided that the time was ripe to spin out these projects into a separate vehicle, Bravada, partly because investors had not been crediting the value of these properties in Bravo's share price, partly as a dividend to shareholders, but principally in order to focus more fully on the potential of Homestake and to enhance its future saleability.

A Plan of Arrangement was therefore announced in September 2009 and approved by shareholders in February 2010 whereby Bravo will credit $1.5m to the new company and retain 40% ownership while the remaining 60% is being distributed to Bravo's shareholders as of 31st December 2009 at a rate of one Bravada share for each ten Bravo shares held.

Bravada, which will operate independently, is in the process of listing on the Toronto Venture Exchange.  It currently holds 13 projects in its portfolio, all of which lie on the Battle Mountain-Eureka Gold trend which runs parallel to the world-class Carlin trend.  Although the BM-E is less well explored, it is known to contain a number of large gold deposits; +38M ounces have either been produced or are in resources along the trend to date, with several new discoveries being announced each year. Bravada’s bet is that the BM-E will ultimately rival Carlin.

Bravada's currently holds 946 claims with a total area of 84 square kilometres spread from top to bottom along the BM-E trend.  It is one of the largest junior landholders in the trend. To date the company has identified drill targets on six of its properties and permitting is either complete or in progress. In February, it acquired the NSR project in the Cortez district form Agnico-Eagle, where surface sampling has confirmed the presence of 1g/t gold with Carlin-style geochemistry. Bravada is also looking at other acquisitions in the area.

Bravo's Future Plans

It has been an exceptional year for Bravo.  Drilling results have been excellent, the geophysical survey identified new targets, the Bravada spin-off is now almost complete and the company is well positioned to hit the ground running for the 2010 exploration season (roughly June to October) with plentiful funds in the coffers and a clear exploration programme in place. Specifically the programme will include:

•    the publication of a 43-101 complaint resource, hopefully in the third quarter of the year, on the Main Homestake and Homestake Silver deposits

•    a 10-15,000 metre aggressive drill programme which aims to expand the emerging high-grade gold potential of the Homestake Silver deposit and to explore the six new targets

•    further metallurgical work on the Homestake Silver core

•    field studies in preparation of permitting road access into the project

•    initial economic and engineering studies necessary to develop a mine at the property.

There is sufficient funding in the Treasury to cover the initial budget plans of a $6.5M programme for 2010 season plus the $1.5M investment in Bravada.  However, Bravo's aim is to explore aggressively in order quickly to define the number of ounces and the quality of the ounces that it can bring to the negotiating table.  As Jeff Stuart, Director of Corporate Development, told Proactive Investors, if results continue to merit it then Bravo will revisit the market to raise whatever funds are required. He cited the example of Kinross' friendly takeover of Underworld Resources, a TSX-V listed junior which had successfully defined 1.6M ounces at an average grade of over 2.5g/t at the White Gold Project in Yukon.  Kinross' offer, accepted in March 2010 valued the company at $139M, a 36% premium to the market capitalisation, even though the exploration was still relatively early stage.

Stuart hopes that with eleven shows of interest already Bravo could be next off the block and that the forthcoming season could be prove to be a company maker.  In the meantime there should be plenty of news flow given Bravo's excellent results to date, the quality of the project, the possibility of discovering other deposits and the extensive exploration programme planned.