Wednesday, 30 June 2010

e-Therapeutics reports 'another successful year' as a streamlined and strengthened drug-developer

In its full-year results statement, drug-discovery technology specialist e-Therapeutics (LON:ETX) reported “another successful year”, in which It raised £4.5m in new capital and reduced its operating costs to focus directly on drug development.

"2009 was a positive year for e-Therapeutics, which remains focused on maximising the commercial benefits of our proprietary drug discovery platform. Our technology and expertise position e-Therapeutics at the forefront of the growing and exciting network pharmacology arena”, e-Therapeutics chief executive Professor Malcolm Young commented.

In the reporting period,  the company has streamlined and reinforced its activities across drug development, raised capital to fund e-Therapeutics' growth, developed relationships with key partners and established the infrastructure to execute its development plans.
“The pharmaceutical industry is increasingly recognising that drugs interact in multiple ways with proteins in the body, the medical consequences of which our network technology helps to predict.  We therefore look ahead with confidence, as e-Therapeutics continues discussions aimed at further developing our own drug portfolio and deploying our unique de-risking technology commercially", Young added.

E-Therapeutics has developed proprietary complex systems that can predict the biological effect of interference with one or many proteins in a cell.

According to e-Therapeutics, these very fast processes have been shown to predict biological effects accurately. The company uses its capabilities to search for new drugs across several therapeutic areas; to search for new clinical uses for existing drugs; and to identify the probability of drug-drug interactions and toxicity.

During the twelve months ended 31st January, the company raised a total of £4.5m, with a £2 million investment from Octopus Ventures Ltd in March 2009, and a £2.5 million placing with Gartmore in November 2009. At year-end, 31 January 2010, e-therapeutics had a cash position of £2.88 million, and the company reported an annual burn rate £1.9 million, including drug development expenditure.

In terms of its outlook for the future, e-Therapeutics said it has a broad clinical pipeline, combining mid- and late-stage pharmaceutical products along with earlier stage opportunities. “E-Therapeutics' novel discovery and de-risking platform is becoming increasingly well validated, demonstrating far higher productivity than conventional platforms and enabling e-Therapeutics to continue to deliver many valuable new development candidates to its portfolio."

In the coming year, e-therapeutics intends to remain focused on the progression of its drug development programmes, securing strategically important licensing partners and broadening its pipeline with new, de-risked drug candidates.

“2011 will be an exciting period in the company's growth trajectory and we look forward to reporting further progress with our clinical programmes. We are confident that we can achieve our goal of becoming a strongly cash-generative business in the medium term," the CEO added.

Ferrexpo benefits as London’s only pure Iron Ore producer

It is the nature of the business, that the fortunes of a mining company are inextricably linked with the market for the resources they produce. In times of a weakness, this can often be a negative thing for an otherwise strong company. In bull markets however, a savvy company can ride a commodity rally to strong revenues and profits, building itself a firmer position going forward.

Never is this more so the case, than for smaller and medium mining companies, as well as those producers which focus solely on one resource. Ferrexpo (LON: FXPO) is both. It is a mid-tier miner who focuses exclusively on iron ore production. Lucky for Ferrexpo therefore, that iron ore is in the middle of a strong recovery from losses seen during the global recession.

Ferrexpo is a Swiss based resource company with assets in Ukraine, principally involved in the production and export of iron ore pellets, which are used in steel production. The company focuses mainly on its principal asset, Ferrexpo Poltava Mining (FPM), one of the largest iron ore resources in the world.

It was the first Ukrainian company to be listed on the main board of the London Stock Exchange (LSE), and is in fact the only pure iron ore play (for those looking to gain exposure to iron ore prices via a stock) currently listed on the LSE. It is this focus which gives Ferrexpo the potential to cash in on a bull market in iron ore, and accordingly, increase the company’s value on the back of those gains.

Iron ore prices have been steadily increasing over the past twelve months, having hit a low during the global economic crisis as industrial production around the world hit record lows. As economies begin to recover however, demand for iron ore has begun to spiral ever higher, particularly as the global need for steel (of which iron ore is the main component) rapidly returns to pre-recession levels.

China is the prime driver behind this increase in steel production and iron ore demand, with vast amounts of resources needed to continue to fuel its double digit growth. At this stage, this demand does not look set to falter, and one could expect iron ore demand to remain strong heading into 2011.

One major factor for the iron ore market in recent months has been the move by some of the major producers away from the traditional annual price negotiations, to a quarterly based system. Traditionally, iron ore prices have been negotiated between miners and steel producers once a year, where the first deal between the two groups would act as a benchmark for the wider industry, effectively setting one price for the year. Concurrently a spot market was in place, which although much smaller than the annual market, played a key role and in fact brought about the necessity for a fundamental change in the system.

Earlier this year the world’s three largest iron ore producers, Rio Tinto (LON:RIO, ASX: RIO, NYST:RTP), BHP Billiton (LSE: BLT, ASX: BHP) and Vale (NYSE:VALE), all negotiated deals with their steel producing clients (predominantly their clients based in Asia), to negotiate prices on a quarterly basis. This would allow prices to be more closely linked with the spot market, and allow producers to benefit from a rally in iron ore prices.

Ferrexpo has began a move towards quarterly pricing in line with what has become a broader shift in the industry to this new pricing methodology, although to date around 90% of their sales are still undertook through long term volume framework agreements.

Michael Abrahams, Chairman of Ferrexpo, said “Quarterly pricing has been introduced in some cases but there is, at the moment, no clarity with respect to the frequency with which price settlements will occur going forward.  We currently expect that it will be some time before a generally accepted methodology emerges and the transparency that existed under annual benchmark price arrangements returns”.

So how are these factors for iron ore expected to translate to Ferrexpo’s bottom line? At the company’s annual general meeting (AGM) in May, Ferrexpo told investors that it has seen an increase in iron ore demand from the 2009 lows, with prices in April significantly ahead of the first quarter. The company said it expects to secure significant average price increases for all of its production during the year, and because of this, believes it will realise a strong financial performance on the back on strong iron ore prices, compared to 2009 levels. In the financial year to May 2010, Ferrexpo reported production of iron ore has been 17% higher than in the comparable period of 2009, while concentrate production has been 18% higher and pellet production 24% higher.

According to Edison Investment Research, these gains in iron ore prices are likely to increase ahead of the rising costs of production for Ferrexpo, suggesting it could lead to a 38 pence per share price increase, even taking account of a 13% increase in unit costs on the back of Ukrainian inflation and higher oil prices. Further to this, Edison believes this could go up to an estimated 50 pence per share if the Yeristovskoye deposit is exploited.
Just today, Ferrexpo has released its first quarter results for the three months ending 31 March 2010, and all signs point to the upside. Headline numbers all climbed significantly during the quarter, with revenue up 34% to $188.9 million, earnings before income tax, depreciation and amortization (EBITDA) up 30% to $46.0mln, and with underlying profit up 28% to $26.2mln.
The company say they have seen a “material improvement in demand for our pellets”, with production in the quarter climbing 24%. They also confirmed that prices were still in line with the 2009/10 benchmark, opposed to a more quarterly based fixing, and average cash costs per unit in the period were $38.48 per tonne. The company reiterated that iron ore prices have recovered form their 2009 lows, and expect them to remain above 2009 levels for the rest of the year. They also gave positive guidance for the rest of the year, saying due to the improved pricing environment, they would expect a strong financial performance for 2010.
Kostyantin Zhevago, CEO of Ferrexpo said of the results: “I am delighted to report consistently strong production levels. We are maintaining disciplined cost control and the Group is well positioned to capitalise on current conditions in the iron ore market. As such, the Group is actively engaged in re-evaluating growth project budgets and schedules in order to realise full value for our shareholders".

For any investor looking to gain exposure to iron ore prices, or indeed considering a move into Ferrexpo, it should be noted that the potential strength it will see has not gone unnoticed by the market. Indeed the company’s share price has rallied by around 50% in 2010, predominantly on the back of the stronger outlook in the iron ore market.

That said however, as of yet the risk factors to the iron ore market would still seem somewhat weak in comparison with the broader economic recovery, and compared to ongoing industrial demand for the resource coming from the powerhouse that is China. General consensus is that iron ore prices will continue to recover through the second half of the year and into 2011, and if that does turn out to be the case, the only pure iron ore play on the LSE is destined to benefit.

Pan African Resources hard work pays off as Barberton Mines resource grows to 2.37 million ounces

Two years of drilling at Pan African Resources (LON:PAF) Barberton Mines in South Africa has started to reap dividends for the company.  The junior gold producer confirmed this morning that it has upped the total resources at the mine by 18% to 2.37 million ounces - 11.77 million tonnes grading 6.29 grams per tonne – and that it had also identified and defined a new 500,000 ore-body to be named ‘Royal Sheba’.

Pan African Resources completed the acquisition of Barberton Mines in mid 2007, transforming the company from a largely exploration focused company to a gold producer. Since the acquisition, the company has worked hard to upgrade both the size and confidence in the resources to increase the mine life and visibility of production.

Evidence of this hard work was revealed this morning, with confirmation that two years of drilling had upgraded the total resource by 18%, and more importantly, upgraded the measured and indicated resource by 30% to 1.8 million ounces (9.43 million tonnes @ 5.99 grams per tonne in situ).  The mining reserve also climbed by nearly 7% to 0.661 million ounces (2.31 million tonnes @ 6.29 grams per tonne gold).  The boost in the measured and indicated resource pushed out the Life of Mine by 50% to 15 years based on a depletion rate 100,000 ounces per annum.  This is an important development for the company as boosts confidence in the projected life of the asset.
Part of the resource upgrade was thanks to the discovery of the Royal Sheba ore-body which contains a total resource of just over 500,000 ounces. Pan African further reported that the ore is non-refractory, an averages between 5 and 25 meters in width – well within the boundaries of underground mining techniques. The average grade of Royal Sheba is 2.97 grams per tonne gold.  A pre-feasibility study is underway, but the South African focused producer also noted that the ore should be mineable from 350 meters below surface, and is still open below 800 meters.

"The team's hard work over the past three years coupled with substantial capital allocated by the Board has shown that Barberton Mines has a future that is sustainable in the long term. The team will continue to investigate additional target areas  identified that could have the potential to grow the production profile,”  
Jan Nelson, Chief Executive Officer of Pan African, stated.

A Double Hit for Chinese Steel Makers Brings Pressure to the Baltic Dry Index

Over the past thirty days, the Baltic Dry Index (BDI) has shed over 40% of its value, and has many now questioning if the move in this leading indicator is a forewarning of what is to come in the global economy. To answer this, one has to look at what has been driving the index lower during the month, and take it in context of broader cyclical moves and the relatively high levels of volatility and speculation.

Although some of the weakness undoubtedly comes as the broader global economy is slowing down, I believe the reasoning behind the majority of the move can be summed up in one word: China. During the past thirty days, China has given its national steel makers a double hit on the exports front, firstly announcing it will be removing current subsidies on steel exports, and secondly, a more recent move to decouple the Yuan from the US dollar. The raw materials needed for steel (such as iron ore and coking coal) make up a large weight in the BDI, and the knock on effect of contracting steel exports in China, ripples down the entire shipping chain.

The first move on China’s part was the announced reduction in its subsidies to domestic steel producers, specifically, removing steel export rebates which had been hiked in July last year. The Chinese Ministry of Finance announced that starting July 16 this year, steel export rebates will be removed from hot rolled coil exports as well as some cold rolled coil and galvanized product exports (rebate for hot rolled coils is currently 9%, for cold rolled coils it is currently 13%).

Market estimates are that the removal of the rebate from hot rolled coil for example, will add around $50 per ton to the current price of around $600/t, and in doing so, reducing Chinese steel makers’ competitiveness in the global market.  Although these rebates are still in place, Chinese steel makers are already slowing down their raw material intake in preparation for the anticipated softening in downstream demand. It is worth noting that this contraction in demand also comes amid a general slow down in demand for steel products, with China already implementing some constriction measures on the property market (a key user of steel) earlier this year.

As previously highlighted, dry shipping of the raw materials needed for steel production, such as iron ore and coking coal, are heavily weighted in the Baltic Dry Index (also know as the Dry Bulk Index), and have been responsible for the majority of its declines over the past month or so.

We can evaluate this specifically, because the index is in fact a composite of three sub-indexes that measure different sizes of dry bulk carriers; Capesize, Supramax and Panamax (simply speaking, ‘large’, ‘medium’ and ‘small’ size carriers respectively).

During this recent sell off in the index, the cost of the largest class of vessel, Capesize, which is mainly used to transport iron ore to China, has seen a faster pace of decline than that of the smaller Panamax vessels, which are used mainly for the transport of other commodities such as grains. Again, although a certain lag time is in the nature of shipping raw materials and downstream demand moves, and here undoubtedly a broader contraction in Chinese steel demand has been leading to a contraction in raw material shipping for some months now, the more recent removal of the rebate will likely exacerbate the fall, and as such markets are already factoring in these declines, which is translating to a more immediate move for the BDI.

The second move by China, and one which is seeing many more headlines, is the recent announcement from Peoples Bank of China, that it will be allowing the Yuan (also know as the renminbi) to trade more freely within the previously defined 0.5% band surrounding the currency’s daily peg to the US Dollar. This is the first step from the Peoples Republic towards a much anticipated free floatation of their currency. Although current moves in the Yuan-Dollar rate are expected to have little immediate impact on exports, again it is speculation in the forex markets and some attempts by Chinese producers (steel producers particularly relevant to BDI) to pre-empt the coming fall in exports from China, that is helping to push the fall in the BDI. In effect, many steel producers and market speculators are at least partially pricing in, to one extent or another, a free floating Yuan.

A simple evaluation can show us the impact this is having on the Baltic Dry Index. Although the full impact on the Yuan if it does indeed become free floating, is well beyond the scope of this article, it is general consensus that the currency will strengthen against the dollar when China does not actively depreciate it. This is mainly due to trade imbalances between the two countries, and also more recently on the back of an influx of dollars into China amid both foreign investment, and as the government continues to maintain strong dollar reserves.

As a basic economics lesson would tell you, if a currency appreciates, imports into that country become comparatively cheaper, while at the same time exports from the country become comparatively more expensive for the rest of the world. Naturally, this will lead to a fall in exports from the country and a rise in imports (certis paribus).

China is a powerhouse when it comes to the commodity markets, both in terms of global production and global demand. In recent years, its massive consumption of raw materials has sky rocketed on the back of the double digit economic growth it has been undergoing. At the same time, its massive commodity production capacity has been fuelling global supply of raw materials and resources. Never is this more so the case than with steel, of which China is the largest steel producer in the world.

As discussed previously, any strengthening of the Yuan against global currencies will make Chinese exports, in this case steel, less competitive in the global market and therefore reduce global demand for Chinese goods. This fall in steel exports will, in a similar vein to the removal of the subsidies, filter through the supply chain and end in less raw materials being required on the back of lower downstream demand. As with the removal of the rebate for steel exports, this will lead to a reduction in demand for those materials, such as iron ore and coking coal, which are needed in for steel production, reducing the shipping of these goods to China.

This again brings us to the moves in the Baltic Dry Index. The direct impact of the currency change will take some time to come through, not just because of the normal lag between end demand and raw material requirements, but in this case also because as of yet, appreciation in the renminbi is still limited, and actively managed by the Chinese government. That said however, the BDI has been feeling the effects of the move as speculation and players in the steel market, already take account of the potential future moves in the currency and begin to price in a stronger Yuan. Once again we see the potential impact of a move, itself leading direction a long time before a direct impact comes through.

As a final thought, it is worth noting that the speculation driven pressure on the back of the subsidy removal and currency move, may yet prove to be unfounded, or at least overplayed. It is almost impossible to accurately measure the impact on Chinese steel exports these measures will have, and as time goes on it is likely that the current effect they are having on Chinese demand for raw steel making materials (and therefore the BDI) will reach more of an equilibrium. It is also important to take the current move in context of what is a normal seasonal lull in shipping, such as slowing industrial activity going into the summer and the Indian monsoon season impacting demand for shipments.

Whether the index is truly forecasting an economic slow down is yet to be seen. One thing is for certain however, the impact of China on this key measurement of commodity supply and demand is strong, and any reduced demand for raw material shipments into the Asian giant will hit the index hard.

Deltex: growth from medical consumables

In the manufacturing industry, some of the best business models are focused on what are termed ‘consumables’.

Take photocopiers, for example. Big photocopier manufacturers usually make only a tiny profit on each machine they sell, and often they make a loss, but they can produce a steady, predictable income from selling paper and toner – the consumables that photocopiers need in order to work. In fact, the photocopier manufacturers usually do not produce the paper and toner themselves: they just employ quality control professionals to check the suitability of paper and toner supplied by third parties, before buying these consumables, sticking their brand on them and then charging the end users a hefty margin.

One version of the consumables-focused business model is used by Deltex Medical Group – a medical device manufacturer quoted on London’s Alternative Investment Market. It sells a blood monitoring system that requires a new disposable probe every time the system is used on a new patient.

Deltex’s main product is the CardioQ-ODM system. The system changes the way that doctors care for patients undergoing surgical procedures, helping the patients to recover faster and enabling them to leave hospital sooner and in better health.
CardioQ-ODM (oesophageal Doppler monitor) comprises a monitor and a single-patient disposable probe, which is placed into the oesophagus through either the mouth or the nose with the tip of the probe positioned so that it is close to the descending aorta. The speed of blood travelling down the aorta is then measured by using a low-frequency ultrasound signal.

Being able to measure blood velocity helps patients by enabling doctors to reduce the complications that arise from a medical condition that is common among almost all patients who undergo surgery, as well as many others in intensive care or arriving in an accident and emergency department.

This condition, known as hypovolaemia, is a reduction in circulating blood volume and it arise in surgical patients due to a combination of pre-operative starvation, anaesthetic agents and the blood and fluid losses associated with the surgical procedure itself. The body struggles to get sufficient blood to the tissues and vital organs, which are consequently starved of oxygen, which can cause medical complications including major organ failure that can in turn lead to severe long-term health problems and even death.

Clinical trials have shown that the use of oesophageal Doppler monitoring to guide fluid management in patients reduces complications and the length of hospital stay after surgery. Deltex points out that every randomised, controlled ODM trial has been positive.

By detecting a reduction in circulating blood volume early and in real time Deltex’s CardioQ-ODM product allows anaesthetists to intervene quickly and safely, using a combination of specialised fluids and drugs, before the hypovolaemia becomes serious and potentially life threatening. The company says that the use of CardioQ-ODM leads to fewer patients needing to go to intensive care, while those that do tend to stay there for shorter periods. This in turn means that patient journeys through a hospital are more predictable, so CardioQ-ODM can play an important part in improving the efficiency and productivity of any healthcare system.
Deltex’s products have been used on more than 300,000 patients to date and they have been sold in more than 30 countries.

The UK is identified by the company as the market where some form of system-wide adoption is most likely in the short term. Deltex’s management believes that CardioQ-ODM is well positioned to benefit as the National Health Service’s leadership currently prioritises initiatives to improve the quality of care it provides in order to make more efficient use of its resources.

Encouragingly, the UK’s NICE (National Institute for Health and Clinical Excellence) has selected CardioQ-ODM as one of the first products for review by its newly-established Medical Technologies Advisory Committee. NICE, which was set up more than a decade ago to ensure people in England and Wales get high quality healthcare from the NHS, has indicated MTAC is due to make draft recommendations in September after which there will be a period of public consultation before final guidance is issued in 2011.

“NICE is the global leader in making evidence-based recommendations on the clinical and cost effectiveness of medical technologies: a positive NICE recommendation should not only accelerate significantly the adoption of CardioQ-ODM in the UK but also help us create opportunities for accelerated uptake in many of our export markets,” says Ewan Phillips, Deltex’s chief executive.

But while the UK is currently Deltex’s most developed market, the company sees major growth opportunities in the US.

For example, last month Deltex announced its largest order, to date, for probes from a single hospital in the US. In April the company revealed that its largest single hospital account in that country was consuming more than 200 probes per months – amounting to annualised sales valued at more than $400,000. Now, that same hospital has placed a forward order for probes worth a minimum of $204,000 over six months.

“Our strategy in the USA is to develop a small number of accounts which adopt CardioQ ODM as a base for future national roll-out. This order is a major milestone in delivery of this strategy,” says Phillips.

At the end of April, Deltex also reported that sales in the first quarter of this year were ahead of Q1 2009, driven by increases in both volumes of probes and associated revenues in the UK, US and other international sales territories.

Last year, Deltex reduced its operating loss by £1.1m to £1.5m on sales that had increased by 8% to £5.6m. At the end of December the business had cash of £1.5m.

Unlike some other AIM-quoted medical device manufacturers, Deltex is not dependent on a lumpy revenue stream – where a few months of slow sales of its main product can significantly affect a financial period. Recurring revenue streams, not only from probe sales but also from monitor service and maintenance, accounted for 76% of total group revenues in 2009.

Analysts currently expect the £14m-market cap firm to make a pre-tax loss of £600,000 this year on revenues of £6.8m, with Deltex making a first profit of £0.2m next year on revenues of £8.4m. But investors should look out for news of further probe contracts, such as the one with the US hospital outlined above, since these will have a significant beneficial effect on profitability.

Tuesday, 29 June 2010

Zoo Digital looks to target additional sectors as revenue momentum continues

Shares in ZOO Digital (LON:ZOO) have zoomed higher in recent months, more than doubling from 15 pence per share to 38 pence, driven by a combination of solid results and increasing confidence that the company will continue to deliver good top line growth in the future.

ZOO Digital has developed a suite of software applications that can help large organisations cut costs associated with creating and adapting marketing campaigns for international markets. For the last few years the company’s primary target has been Hollywood studios and other large entertainment companies who spend large amounts of capital not only creating films, but also preparing massive marketing campaigns and adapting those campaigns for dozens of markets all around the world. No longer does Hollywood focus solely on the English speaking parts of the world, instead they attempt to maximise revenues from each production by launching them almost simultaneously into multiple markets.

A classic example of this is James Cameron’s Avatar film.  As little as a decade ago, a film like Avatar would have generated the majority of its box office takings in the United States.  In 2009/10 Avatar took an impressive US$2.7 billion, far surpassing Cameron’s Titantic film. However, while the total gross takings of Avatar are impressive, what was more impressive was that 72.5% of the total came from outside of the United States.  Gone are the days when the major US film studios worry about domestic box-office takings.
This is exactly where ZOO Digital comes into play. The company’s software has essentially automated the process of converting marketing material for one target audience or format and editing it quickly and efficiently to suit all other markets and formats (DVD, digital, broadcast, print).

ZOO Digital’s software not only allows the client to adapt its marketing to any language with the click of a button, but also provides a powerful desktop application which can allow the designer to test, for example, a billboard sized advertisement, in different colours, fonts, languages, shapes and formats, all with the click of the mouse.  No need to send the creative back to the designers if you need a 250x250 web banner adapted for a poster, etc.

The power of ZOO Digital’s software has attracted several studios, including Walt Disney and Sony as clients. In just the last few weeks, ZOO has signed up another (undisclosed) major studio and also recently announced that it had licensed its automated DVD title creation software to CBS Home Entertainment. 

Results from ZOO Digital released this morning underlined that studios are becoming increasingly reliant on ZOO Digital’s applications.  For the 12 months ended 31 March 2010, ZOO reported a 33% increase in revenues to US$15.1 million. This helped lift adjusted EBITDA to $1.6 million and an operating profit (excluding intercompany exchange gains and exceptional intangible impairment) of $0.8 million.

Today, FinnCap said that the preliminary results close a year where momentum has been highlighted by a string of positive news-flow, crowned by April’s trading update which highlighted that the results would be ahead of expectations. “Prelims underlined increasing financial strength ... Investor patience has been rewarded and the momentum is extremely positive”, FinnCap stated. The broker upgraded its forecasts for FY to March 2011, rating ZOO at 8.7x maiden earnings, “highlighting significant remaining upside”.

“2010 has seen new products and new customers, lowering perceived risk and providing the typical opportunity profile of the strong revenue growth generated from increasing run rate after customer sign up and increasing product set adoption”. Like many software providers, ZOO Digital has opted for the licensing model, or Software as a Service (SaaS). Licensing software allows the company to build more regular and predictable cash flow and reduces the reliance on large, one-off contract wins.

So attractive is ZOO Digital’s platform, the company confirmed today that it had cut a deal with Multi Packaging Solutions, a backed supplier of print-based packaging solutions with fourteen production facilities across the United States.

Clearly there is a huge opportunity for ZOO Digital to license its software into this market, and indeed into any other sector were marketing a product is a crucial part of a company’s business (household goods, food, beverages, cosmetics, auto, drugs…).  Perhaps the biggest hurdle for ZOO Digital is simply penetrating these markets where it has opportunities. Today’s proposed commercial relationship agreement - which will see the two companies jointly market ZOO Digital’s products - with MPS at least partially, addresses this.

 “Our technology is relevant to any company that distributes in multiple territories and languages. Our offering scales very well – we can add significant extra revenues at little extra cost. This proposed partnership with MPS provides ZOO with a no-risk way to enter new markets outside of entertainment. MPS’s proposed investment in ZOO at a premium to the market price shows their commitment to this partnership and we look forward to working alongside them and welcoming them as shareholders,” highlighted Stuart Green, CEO of ZOO Digital.

Perhaps most encouraging of all for shareholders in ZOO Digital, MPS has not only entered into an agreement to sell ZOO Digital’s products to its own client base, but has also agreed to subscribe for approximately 2.15 million shares at 40 pence, giving MPS a 9.1% stake.  ZOO Digital has also issued 2.15 million warrants to MPS with an exercise price of 50 pence; if exercised they would double its stake to 18.2%.

This company appears to be on a roll.

Central Bankers believe Gold will be strongest asset class in second half of 2010

At its recent annual seminar for reserve management, investment bank UBS polled over 80 reserve managers from the official sector as to their views on different reserve assets.  One outcome was that gold was expected to be the strongest asset class in the second half of this year, while 22% of those polled thought that gold would be the most important reserve asset over the next 25 years.
This may seem like a long time horizon, but central bankers have to think in the long term as custodians of national wealth (expect, of course, when governments get in the way and insist on, for example, gold disposals with prior publicity).  The view underpins the swing in attitudes towards gold in the official sector that has been evolving.  Clearly the shifting tides in sentiment are informed by increased concern over fiscal imbalances, currency dislocations and sovereign risk, all of which have escalated over the past eighteen months, and which are therefore helping to change a trend of sales that was most-recently re-established in 1989.
Figures from Consolidated Gold Fields (as was) and GFMS Ltd, which assumed responsibility from Consolidated Gold Fields for compiling the Gold Survey when the former company was taken over by Hanson Trust (after a mighty tussle with Minorco) in 1989, show that over the 62 years 1948 to 12009 inclusive, the official sector has been a net seller for 34 years, or 55% of the time.  The sector was a net buyer from 1948 through to 1966, during which time it absorbed almost 8,000 tonnes.  Since then it has offloaded just over 10,000 tonnes, with world holdings, as reported to the IMF, standing at a shade below 30,200 tonnes.  The latest figures for world holdings, which relate to end-March, show a tonnage of 30,463t, reflect a 180t reclassification of Saudi's holdings, while much of the balance of the increase registered to "all countries", some 39 tonnes, comes from the acquisition programmes of Russia and the Philippines, plus, to a lesser extent, Venezuela. 
Annual and cumulative changes in the official sector's gold mountain (metric tonnes) - back to the post-world war II position?

CBGA signatories have, since the first Agreement was signed in September 1999, been responsible for 3,906 tonnes of the official sector's net disposals, equivalent to approximately 90% of the total. CBGA sales have collapsed this year with less than one tonne coming onto the market under CBGA3 so far this calendar year.  The majority of sales into the market since January have come from the IMF, which has sold almost 39t into the open market this year, leaving almost 153t to go.
The implication from official statements from both the CBGA signatories and the IMF itself suggest that any further disposals into the open market (and it would look likely that the balance of the metal will come on-market unless a fresh central bank suddenly appears on the scene) will be worked, at least on a de facto basis, under the auspices of the CBGA.  Once this metal is out of the way then it s entirely possible that the official sector will become a net buyer of gold again for the first time since four years of purchases that amounted to over 630 tonnes (9% of mine supply) in 1985-1988. This was when producing countries were absorbing local production and others - notably Taiwan, amid much publicity, were - wait for it -diversifying away from the dollar....
Courtesy of

Amphion Innovations partner Kromek buys California-based NOVA R&D to add 22 patents

IP commercialisation company Amphion Innovations (LON:AMP) said its partner company Kromek has completed the acquisition of California-based NOVA R&D Inc to add 22 patents in imaging and radiation detection to its portfolio.

Amphion said that NOVA had a number of important technologies and products in the chemical, biological, radiological, and nuclear (CBRNE) space and significant commercial relationships in these vital and growing markets.

The deal is expected to strengthen Kromek’s position in the imaging and detection market and improve its capabilities in the field of electronics and application-specific integrated circuit (ASIC) design as well as provide it with a permanent presence in the UK.
Kromek’s directors are now expecting the acquisition to give the company more freedom to integrate and develop core technologies, helping it confirm its position as “one of the few companies in the world with such technical capabilities and scope".

“The acquisition of NOVA is a major milestone for Kromek, bringing with it an important IP portfolio, relationships, technologies and products.  I look forward to further exciting developments as Kromek continues to develop and implement its innovative technologies,” said chief executive of Amphion and chairman of Kromek Richard C.E. Morgan.

UK based Kromek specialises in the development of disruptive technology products for a range of commercial markets. The company is pioneering the digital colour imaging of x-rays and advanced 3D imaging for the medical, security, industrial inspection and defence markets.

Amphion currently has eight partner companies developing proven technologies targeting substantial commercial marketplaces in excess of US$1 billion.  Each partner company aims to achieve a target exit value in excess of US$100 million.

The Amphion model has been refined to optimise the commercialisation of patents and other intellectual property within the partner companies.  The partner companies collectively own or control over 200 separately identified pieces of intellectual property, a number which grows rapidly each year.

Shares in Amphion were up nearly 4% by midday in an otherwise depressed market.

S&P downgrades AREVA on weakened profitability

After state controlled AREVA SA (EPA:CEI), the world's largest uranium miner, announced last week it would take a 400 million euros (US$491mn) charge due to cost overruns at its Finnish nuclear plant project, Standard & Poor's Monday downgraded the company to a ‘BBB+' rating, citing continued weakened profitability.
In an analysis published Monday, S&P Credit Analysts Sophia Dedemadis and Karl Nietvelt noted, "Depressed profitability at France-based nuclear services provider AREVA is being further strained by the recently announced additional provision of €400 million (US$491mn) for the OL-3 [Olkiluoto-3] Finnish reactor."
"We also think that profitability could deteriorate as a result of the dispute with Electricité de France regarding the commercial agreement with AREVA's Georges Besse nuclear enrichment plant (GB-I)," S&P advised.
"We are therefore lowering the long and short-term credit ratings on AREVA to ‘BBB+/A-2' from ‘A/A-1" and removing them from credit watch," the analysts said. However, they added, "The stable outlook reflects our view that AREVA is likely to be able to successfully execute the remaining asset disposal program and proposed capital increase, thus strengthening its balance sheet."
In their analysis, S&P contend AREVA's profitability "will continue to be depressed over the next couple of years."
"In our view, AREVA's fair business risk profile is negatively impacted by the company's currently low profitability and project executive risks, including OL-3 [The Finnish nuclear plant project]," the analysts advised. ‘Based on the company's own estimates, the operating margin for the first half of 2010 will only be 4% excluding the OL-3 provision, In 2009, AREVA's reported operating income was just €97 million."
The analysts also noted the state-owned company's operating performance "continues to be severely affected by cost overruns related to the OL-3 project (€2.7 billion as of June 2010)." Originally AREVA said it could build the Finnish nuclear plant for €3.2 billion (US$3.9bn) and be finished in 2009. Finnish client Teolisuuden Voima Oyj said the plant will start operations at the end of 2012 rather than the previous June 2012 deadline.
"Furthermore we anticipate that AREVA will incur some additional costs as a result of the dispute with Electricité de France S.A. regarding the offtake until 2012 from the Georges Besse nuclear enrichment plant (GB-I)," they added.
"We note that in response to the delays and profitability pressures, AREVA has undertaken several cost-cutting initiatives as well as reducing, to an extent, its capital expenditures up to 2012." AREVA and its state-owned parent, Commissariat à l'Energie Atomique (CEA) estimates they could raise as much as €4 billion to €5 billion by financial year-end 2010. The two are trying to convince Mitsubishi Heavy Industries and the sovereign wealth funds of Kuwait and Qatar to buy new AREVA shares.
AREVA also has a large, long-term order backlog that is estimated at more than €43 billion (US$53bn) and significant cash flow benefits from new projects which are anticipated to occur from 2012 onward. S&P also suggested the French government "would provide timely and sufficient extraordinary support to AREVA in the event of financial distress."

Canada secures backing from world leaders against the expropriation of First Quantum's Kolwezi Tailings project in the DRC

World leaders at the G8 Meeting this past weekend expressed their concerns about the illicit exploitation of trade in natural resources including conflict minerals, reiterated their support of the Kimberley Process, and took the government of the Democratic Republic of the Congo to task.
Canadian Prime Minister Stephen Harper brought to the attention of the G8 the expropriation of First Quantum Minerals' Kolwezi Tailings copper project by the DRC government last September.
In the official G8 Muskoka Declaration issued over the weekend by the G8 nations meeting at Huntsville, Ontario, the world leaders declared, "The illicit exploitation of and trade in natural resources from the eastern Democratic Republic of the Congo has directly contributed to the instability and violence that is causing undue suffering among the people of the DRC."
"We urged the DRC to do more to end the conflict and to extend urgently the rule of law. We welcome the recent initiatives of the private sector and the international community to work with the Congolese authorities and to enhance their due diligence to ensure that supply chains do not trade in conflict minerals," the communiqué stressed.
"We also urge candidate countries to the Extractive Industries Transparency Initiative (EITI), including the DRC, to complete the EITI implementation process as a mechanism to enhance government and accountability in the extractive sector. The recent inclusion of coltan and cassiterite in the DRC's EITO reporting is a step in the right direction," the G8 noted.
"Further, we welcome the ongoing research and advocacy of international NGOs and local civil society as an important contribution to reducing the conflict opportunities of natural resources," the declaration said.
Last September, the government shut down First Quantum's Kolwezi mine after claiming the Vancouver-based junior copper miner violated parts of its contract. Police sealed off the US$765 million project, which was still under construction.
In May First Quantum Minerals had its mining rights around its Frontier Mine withdrawn by the DRC Supreme Court. The high court ordered that exploration and mining rights for Frontier and Lonshi, an exploration property, be turned over to state-owned company Sodimico, the original owner.
Although First Quantum still operates Frontier and Lonshi mines, the IFC has warned it will not make any more investments in the Congo until the situation is resolved. Canadian officials warned that they could hold up forgiveness of US$11 billion in Congo debt if the DRC government is participating in fraud. However, the Canadians later withdrew their opposition to the cancellation of $1.3 billion and another $1.6 million in DRC debt rescheduling.
First Quantum is a major player in the central African copper belt.
The EITI is a coalition of governments, companies, civil society groups, investors and international organizations, which support an initiative, which increases transparency over payments by mining and oil and gas companies to governments and to government-linked entities, as well as transparency over revenues by those host country governments. The EITI is endorsed by the World Bank, which invests in mining and oil and gas projects in developing nations, such as the DRC.
The finance arm of the World Bank, the IFC, has halted all investments in the DRC and has gone to international arbitration for the first time as a result of the First Quantum expropriation by the DRC government.
The Kimberley Process is designed to certify the origins of rough diamonds from sources which are free of conflict fueled by diamond production. The process was established in 2003 to assure consumers that by purchasing diamonds they were not financing war or human rights abuses.  The Kimberley Process is currently grappling with whether or not to allow Zimbabwe to resume trade in diamonds from the country's Marange fields.

Astaire Securities positive on Telit Communications as M2M market consolidation continues

Astaire Securities has published a note on Telit Communications (AIM: TCM), saying that the ongoing consolidation in the sector was favourable for the M2M (machine to machine) communications specialist in view of the recent acquisition of Cinterion Wireless Modules by Gemalto, which it said showed the attraction of the M2M market as companies “looked to attach more things to the internet".
Cinterion, which is the market leader in M2M space with a 20% share, was acquired for €163 million compared to its 2009 revenues of €145 million and EBIT of €4 million.
Cinterion Wireless Modules GmbG had filed for bankruptcy and financial reorganisation under the German courts in March as it sought refinancing of its considerable debt levels that amount to €180 million. The bidding process started when its largest creditor EQT reportedly made an approach for the company.
The acquisition is expected to be immediately accretive to Gemalto’s EPS and should contribute c. €20 million of operating profit.  Cinterion reported revenue growth of 40% for 2009 with expected growth of over 10% in 2010.
Astaire commented that the acquisition showed the attraction of the M2M market with growth across multiple sectors, including smart metering and telematics. The consideration of 1x annual sales compares favourably with Telit’s current rating, with a market cap/FY10 sales ratio of 0.4x and an EV (enterprise value)/FY10 sales ratio of 0.6x.
“We would also flag that Telit has been consistently gaining market share as previous designs wins come through. Further consolidation in the sector is to be expected,” added Astaire.
Earlier this month, Telit signed an agreement with Bartolini After Market Electronics Services s.r.l. (BAMES), to gain full control of the Telit s.r.l subsidiary. The deal represented the unwinding of a cross-shareholding agreement between the companies, following the successful relocation of Telit’s manufacturing to China. Astaire then said that the relocation to China offered a 20% reduction in costs, and has increased manufacturing capacity.
Astaire emphasised that, whilst the company’s share price has performed well, rising 40.4% in 2010, the broker's rating for 2011 - the first full-year under the Chinese manufacturing arrangement - was “still undemanding for a leading player in a growth market.”
Telit has been gaining increasing sales momentum for its range of M2M communications modules in recent months. The company landed a new contract in May, to supply M2M modules for new Audi infotainment systems.

African Diamonds' A6 project on track for Q4 2010 commissioning

African Diamonds (LON:AFD) said its AK6 diamond project in Botswana is on track for commissioning in Q4 2010 after receiving an updated feasibility study, and added it is negotiating the marketing terms of the mining license with the government of Botswana.

The study proposes a process plant designed at an initial throughput rate of 2.5 Mtpa (million tonnes per annum), which would increase to 4 Mtpa in 4 years. The revised mining plan calls for a smaller number of carats being produced at a higher diamond value.

The indicated resource at a 1.5 mm bottom cut-off, an average grade of 16 cpht (carat per hundred tonnes) and assumes an average diamond price of US$243/carat. The bottom of the open cast pit is 324 metres and will be mined over an 11 year mine life.
Operating costs over the life of mine are estimated to be US$17.20 per tonne of ore treated. The first phase requires a capital investment of US$120 million, including the processing plant, all mine site and off site infrastructure along with a 13% contingency. This is a significant increase over the conceptual level Value Engineering Study, including a 25% increase in throughput representing US$14 million, foreign exchange movements accounting for 37% of the increase, or US$20 million, and scope changes representing US$20 million.

Work is planned to start in July 2010 and the first diamonds are expected to be recovered during the final quarter of 2011.

The company has also reached an agreement with the government of Botswana to allow its JV (joint venture) with the project’s operator Lucara Boteti Mining to sell its entire production of diamonds either through an open tender or negotiated exclusivity contracts.

African Diamonds has said that a number of proposals has already been received from diamantaires and are currently under evaluation.

“We are very pleased that the joint venture board has received the updated feasibility study and that approval has been given to proceed with implementation ensuring that the project remains on track for our Q4 2011 commissioning.  We are also delighted that the marketing terms in the Mining License have been satisfactorily addressed with the (Botswana government) and that sound progress has been made with raising project finance.  We are very pleased to have Ribson leading the Boteti management team,” said managing director of African Diamonds James Campbell.

African Diamonds holds a 40% stake in the project after exercising an option in April.

Whilst progressing AK6, African Diamonds said it also plans to ramp up exploration of its 100%-owned Botswana exploration licences. With the initial focus on AK8, AK9 and BK5, the company believes that they each have the potential to be stand-alone or feeder mines to the AK6.

According to African Diamonds, the drilling may reveal that grades could be higher in AK8 and AK9 and that the size of BK5 may triple, based on a thorough review of data from six years of drilling and prospecting. The extensive 800 hole RC drilling programme is expected to cost approximately $1m, and it will get underway the coming weeks.

Nyota Minerals adds fourth drill-rig to Tulu Kapi work programme

Nyota Minerals (LON:NYO, ASX:NYO) has told investors that a fourth drill rig has arrived at the Tulu Kapi gold project in Ethiopia, to allow the company  to maintain momentum in upgrading the current 1.38Moz Inferred gold resource - based on 25.45Mt at 1.68g/t gold – and to delineate additional resources.

"We are working hard to keep the momentum going and this additional drilling capacity gives us the flexibility to meet all our objectives on schedule to drive the project towards development", Nyota chief executive Melissa Sturgess commented.

The new diamond drill rig will be allocated to drill in-fill and stratigraphic holes, with the specific purpose of upgrading the current Inferred Resource and providing detailed geological/structural data aimed at expanding the geological model. 
Nyota highlight that the three rigs currently on site, are focused on separate but complementary drilling programmes.

One RC rig is completing infill drilling over the Inferred Resource, whilst the second RC rig is drilling a number of high priority prospective targets, which form extensions to the main Tulu Kapi orebody. The second diamond drill rig will multi-task, undertaking drilling to support the other programmes and ensure the schedule is achieved.

The company said that the work is essential, as it will also assist with compilation of data needed to establish conceptual open pit limits. In terms of its operational performance, Nyota said that the current drilling progress is excellent, with cumulative drilled metres exceeding 250m per day. 

In total, since work began at Tulu Kapi, Nyota has drilled 90RC holes for a total of 17,000m and 21 diamond holes for a total of 4,400m. The company’s exploration work supplements the existing34DDH holes, drilled by Minerva, for a total of approximately 6,800m.

Of the 145 holes drilled, 100 have formed the basis of the current 1.38moz inferred gold resource, with assays from the remaining 45 holes yet to be received. The next drilling update is expected during the third quarter of 2010.

In recent months, Nyota has been rapidly advancing the development of its flagship gold project in Ethiopia. In May, Nyota doubled the JORC inferred resource at Tulu Kapi from 690,000 ounces to 1.38 million ounces.

The new JORC resource represents a 38% increase on Nyota's previously stated objective of a 1 million ounce resource target and a 100% increase on the maiden inferred resource announced in September 2009.

More recently, earlier this month, Nyota reported further positive results from the ongoing exploration, as the company discovered a new high-grade structure beneath the current resource, where it intersected 8.7m averaging 8.9 grams per tonne (g/t) gold. Four deep diamond holes were drilled below the current resource, which sits at a maximum depth to date of 200m.The deeper holes have intersected sulphide mineralization in structures stacked beneath the two known lodes, which form the Inferred Resource.

Also, the company has expanded its footprint in the surrounding area, through the acquisition of an 80% interest in a highly prospective land package, totalling over 4,500km2, to the north of Tulu Kapi.

With the acquisition, the company has secured first-mover advantage in an area which has been drawing attention from a number of rival exploration companies, it said in a statement. Nyota initially optioned the property back in April, and following shareholder approval this option has now been exercised.

According to Nyota, the highly prospective ground exhibits the same major geological structure thought to control the mineralisation at Tulu Kapi, which therefore increases the company's confidence of the potential for additional discoveries which could bolster the main Tulu Kapi resource.

Landore Resources to raise £2.575m for Junior Lake exploration

Landore Resources (LON:LND) is set to raise £2.575m through a share-subscription for approximately 35.5m new shares at a price of 7.25p each. The company intends to use the proceeds to finance working capital and exploration expenditure.

The company highlighted that the principal focus of exploration for the second half of 2010, will be on the gold, nickel and iron projects at the Junior Lake property in Ontario.

Landore chairman and director William H. Humphries participated in the subscription, buying 1.4m shares to take his total shareholding to just over 18.5m shares, representing 7.84% of the company.  The subscription shares represent 15% of the enlarged issued share capital.
Earlier this month, in its FY09 results, Landore described 2009 as a year of significant progress in the development of Junior Lake. In 2009, the company discovered the Lamaune gold prospect at Junior Lake, where drilling has delineated a wide gold mineralised zone over 500 metres of strike length and up to 200 metres depth. The results highlight from the southern zone cut 25.50 metres at 0.93 g/t (grams per tonne) gold. Drilling at the Northern vein returned an intersection of 0.5 metres at 46.08 g/t gold. Metallurgical studies have commenced to determine if the mineralisation is amenable to low cost heap leach processing. As a result of the discovery, Landore staked a large area of highly prospective land to the north and contiguous with Junior Lake. The property now extends over 31 km (kilometres) and covers 31,953 ha (hectares).
Independent studies have confirmed that the Lamaune iron deposit has a potential size of a minimum half a billion tonnes of iron ore and, coupled with positive metallurgical studies, showed that the deposit had the potential to be economically viable. In March, Landore identified a 545 Mt (million tonnes) iron ore target at Lamaune.
Exploration work and metallurgical studies carried out at the VW and B4-7 deposits at Junior Lake were “attractive enough” together with the improved nickel price to move to scoping and pre-feasibility studies. Landore added that there was “substantial exploration potential” to increase the area of nickel resource.
Drilling recommenced in January, with over 40 drill-holes completed on the Lamaune prospect in the first five months. In May Landore told investors that the exploration work was confirmed the presence of gold mineralization, and identified two distinct zones.
The first of the two distinct zones, the southern zone, is characterised as a southern broad zone of gold low grade mineralization, which has frequent outcropping at the surface. The results highlight from the southern zone cut 25.50 metres at 0.93 grams per tonne (gpt) gold, in drill-hole 1110-94.

The company said that the southern zone mineralization has now been intersected over a 500 metres strike length, and has been drilled to a depth of 200 metres. Furthermore the gold mineralization is open to depth and along strike to the east and west, Landore stated.
The second zone, the northern vein, is described by Landore as a narrow high-grade quartz vein with simple mineralogy, which occurs as 'native gold'. From the Northern vein, the drilling highlight returned 0.5 metres at 46.08gpt gold.
Drilling is still ongoing at Junior Lake.

Range Resources confirms valuation of Cotton Valley Prospect at US$18m

Oil & gas exploration company Range Resources (ASX: RRS, AIM: RRL) has reported the results of an independent reserves and valuation report on its East Texas Cotton Valley Prospect in Red River County, Texas, carried out by Independent Petroleum Engineers Lonquist & Co LLC.

Range holds a 13.56% interest in East Texas Cotton Valley Prospect, with Crest Resources Inc. as operator. The prospect’s project area covers approximately 1,570 acres encompassing a recent oil discovery.

The reserves report estimates total gross commercially recoverable Reserves (1P, 2P and 3P) of the Prospect as 5.4 mmbbl of oil (attributable to Range – 0.7mmbbls).
The planned multi‐well program is anticipated to move Possible Reserves into the Probable and Proved Reserve categories, with the drilling of a horizontal appraisal well in the field scheduled for Q3 2010.

The independent PW10 discounted cash flow valuation of Range’s net interest stands at US$18m.

Peter Landau, executive director, said "Range is pleased that from an initial investment of US$256k for leasehold acquisition costs, plus an estimated US$220k (Range’s net share) to drill and develop the first well scheduled for 3Q 2010, we have been able to achieve a significant uplift in shareholder value, based on independently assessed reserves and valuations reported on the East Texas Cotton Valley Prospect.”

“We feel that the upcoming appraisal activities will add additional value to Range and complement the company’s existing Texan interests, as we continue to add reserves, production and cash flow to create a balanced portfolio of lower‐risk development and production projects in the US with high potential exploratory prospects in Puntland and Georgia,” Landau added.

Development of the shallow oil reservoir (which is a combination trap type) in the Cotton Valley formation is expected to begin in 3Q 2010, with the drilling of a horizontal appraisal well in the field.

Synchronica lands deal to bundle Mobile Gateway in Asia and FSU, shares soar

Synchronica (LON:SYNC) has signed an agreement with an emerging-markets focused device manufacturer to bundle the Mobile Gateway platform with its handsets.

The deal is worth US$1.28m of revenues in the first half of 2010 and has a guaranteed minimum volume commitment over an 18 month period. Synchronica will receive a number of milestone payments during this period, and the first payment is expected before the end of the year.
Investors liked the news, sending the shares up 20 percent in early deals.

The company noted that the manufacturer is focused on the emerging markets in the former Soviet Union and Asia, and Mobile Gateway will be bundled under the manufacturer’s own brand.
"The Commonwealth of Independent States (CIS) is a key growth market for mobile data services where the number of mobile phone subscribers has now easily surpassed the population, yet fixed and mobile broadband penetration is still considerably lower than the world average”, Synchronica chief executive Carsten Brinkschulte commented.

“This deal will strengthen our position in the CIS where our products are already well established with three mobile operators in live operation.”

According to Synchronica, today’s deal emphasises the company strategy to market Mobile Gateway to manufacturers of mobile handsets as well as the mobile operators themselves.

“By working with Device Manufacturers, we can further accelerate the roll out of Mobile Gateway across emerging markets where there is increasing demand for mobile internet access, but financial constraints have so far prevented mass-market adoption", Brinkschulte added.
Broker FinnCap said in a morning note this contract emphasises Synchronica's strategy to supply both handset manufacturers and MNO's (Mobile Network Operators). Furthermore, the structure of the contract removes some uncertainty over payments and more importantly cash flow for Synchronica.

"Whilst the execution risks remain high for Synchronica, clearly activity levels within its end markets is improving and the frequency and magnitude of contract wins is increasing consistently," FinnCap added.
Synchronica develops industry-standard mobile push email and synchronization products. Its portfolio includes the flagship Mobile Gateway product and the device backup solution, Mobile Backup. Mobile operators in emerging and developed markets use Synchronica's white-labelled products to offer their consumer and business subscribers mobile email, PIM synchronization, and backup and restore services.

The company has started 2010 with a string of new deals, and gathered momentum both for the flagship Mobile Gateway product and for its latest addition to its product range: the MessagePhone low-cost device which was officially launched in February.

Indeed, earlier this month, Synchronica told investors that it has reached an important sales milestone, with the signing of its 40th mobile operator customer. The company currently has 20 mobile operators in live operation, with Synchronica's mobile email and mobile instant messaging products, and its mobile messaging products are currently being deployed to a further 20 carriers with launch dates pencilled in between June and August.

The company highlighted that it has now grown its customer base by 300% since 2007 and its products now have an addressable market of 660 million end-users.

Oxford Nutrascience in exclusive Omega-3 chews collaboration for Europe with Ocean Nutrition

Oxford Nutrascience (LON:ONG) has agreed the terms of a collaboration with the world's largest supplier of Omega-3 EPA/DHA ingredients, Ocean Nutrition Canada Ltd (ONC). Through a 5-year deal, ONC will exclusively supply its MEG-3 branded Omega-3 ingredients for use across the European Union in Oxford Nutrascience's confectionery chews. 

Furthermore, the companies have also agreed to work closely together to cross-sell each other's products to their own customer bases. “[The] collaboration agreement will provide Oxford Nutrascience access to many of the largest food and supplement manufacturers who use ONC's MEG-3 ingredient in their products. This will create a significant marketing opportunity for Oxford Nutrascience to fully exploit its chew technology”, Oxford Nutrascience stated.

Oxford Nutrascience emphasised that ONC is the world’s foremost producer of Omega-3 EPA/DHA from fish oil, and some of its products are the first and only fish oils to achieve United States Pharmacopeia dietary supplement ingredient verification.
Oxford Nutrascience’s soft chew technology uses soluble fibre to allowing functional ingredients, such as vitamins and minerals, to be added without compromising taste, texture and stability. Oxford Nutrascience has also developed a cranberry supplement chew and both chews will be available to consumers during the second half of 2010.

"Having access to the customer base of the world's largest and foremost producer of Omega-3 shows the level of trust Ocean Nutrition Canada has in our chew technology. Being able to reach the major producers of Omega-3 products is a very significant marketing opportunity for Oxford Nutrascience”, Oxford Nutrascience chief executive Nigel Theobald said.

According to Oxford Nutrascience, ONC's MEG-3 powder has a unique molecular construction that locks in the health benefits of Omega-3 and locks out even the slightest taste of fish. It is generally believed that fish oil has a number of health benefits, including in brain and eye development in infants and cardiovascular benefits in adults.

“Together with our manufacturing partner Lamy Lutti, Oxford Nutrascience has already attracted some of the leading companies in the supplement industry having demonstrated our capability to develop and mass produce new, high quality chew supplements. We look forward to the launch of both our new chews to the food supplements market and directly to our own and Ocean Nutrition's customers later this year,” Theobald added.

The products will be promoted as part of the group's own product range and are also being made available to other over-the-counter (OTC) consumer healthcare companies seeking to use Oxford Nutrascience's confectionery technology. 

In terms of the scale of the addressable market, Oxford Nutrascience highlighted the findings of Market researcher Nielsen, stating “Omega-3 products have bucked the recession to record 42 percent growth during 2009 in the US, as consumer interest in healthy eating grows”. Additionally, based on information from Packaged Facts (2009), “Omega-3 enriched foods and beverages have entered an explosive growth phase in the global retail market”, and forecasts Omega-3 sales to be worth about US$7 billion by 2011."

Regal Petroleum reports ‘business-as-usual’ in Ukraine as it discusses legislation with govt

Regal Petroleum (LON:RPT) told investors that it has been assured, by the Ukrainian Ministry of Environmental Protection, that it will not be required to suspend its operations at its Mekhediviska Golotvshinska (MEX-GOL) and Svyrydivske (SV) gas and condensate fields, whilst it discusses an order from the Ministry dated 30 March 2010.

The company revealed that it is in ongoing dialogue with the Ministry of Environmental Protection and the Ukrainian government, after it received a letter from the Ministry of Environmental Protection on 21 May, informing it of the order dated 30 March 2010.

According to Regal, the order identified issues which require rectification, regarding the company's compliance with legislation relating to its operations at the MEX-GOL and SV gas and condensate fields. The initial order required a suspension of operations, however the company has confirmed that this is no longer the case.
The company said it immediately engaged with the relevant governmental bodies to understand the circumstances surrounding the order, and subsequently it entered into a dialogue with the Ukrainian government. Regal believe these discussions will result in the rectification of the issues, and in the meantime its operations continue as normal.

In comments to Reuters, a Regal Petroleum spokesperson indicated that the issues were procedural rather than operational.

At the Svyrydivske (SV) gas and condensate field, Regal reported positive testing results earlier this month. Regal said its SV-66 oil well in Ukraine tested at a maximum rate of 2,821 boepd (barrels of oil equivalent per day) and was unloading fluid and formation gas without assistance following perforation conducted in mid-May. Unloading commenced on 2 June after the well was completed, the rig removed and the wellhead tied in to the surface production infrastructure.

SV-66 has produced the highest initial flow rates from Regal's new generation B-Sand wells, while the flow rates delivered by the first four wells in the development programme have been highly variable.

Early last month, the company said that an independent assessment of its reserves in Ukraine was consistent with its development plan for the B-sands reservoirs, allocating 102.4 mmboe (million of barrels of oil equivalent) to an additional 'remaining possible' category and a further 151.9 mmboe to 'unrisked prospective resources' to the remaining proved & probable reserves volume of 151.3 mmboe.

The total resource for B-sands now stands at 40.9 mmboe in the remaining proved category, 110.4 in the remaining probable category for 151.3 mmboe in the remaining proven and probable category, 102.4 mmboe in the remaining possible category, 253.7 mmboe in the remaining proved, probable and possible category and 151.9 mmboe in unrisked prospective resources.

A thorough review of the completion practices in the MEX-GOL-SV field development was initiated in May 2010. For the B-Sand sequences above 5,500m, attention is focussed on perforation effectiveness, rock-fluid compatibility, and remedial chemical treatment to identify whether revised completion techniques can produce consistently higher well flow rates to complement the improvements achieved in drilling performance. For the deeper sequences, more work is required to evaluate fully the potential and optimal development strategy for those sequences.

This work will include sub-surface studies, well and wellhead design work, facility upgrade studies and the implications of potentially higher individual well production rates for Regal’s capex (capital expenditure) programme.

EMED Mining’s Biely Vrch gold project receives 'exclusive deposit' certificate

EMED Mining’s (LON:EMED) Biely Vrch gold project in Slovakia has been awarded "exclusive deposit" status by the Slovakian State Commission for Classification of Mineral Resources, marking the first statutory step of the permitting process.
The "exclusive deposit" classification gives priority to the land being used for mining activities over all other land uses. The company and its environmental consultants can now proceed with preparing the Preliminary Environmental Impact Assessment.

Furthermore, EMED told investors that its contractor, AMC Consultants, has completed an updated Scoping Study which takes into account community consultation and project refinements, with a new site selected for ore leaching along with the detailed design of the entire site layout. According to EMED the preferred site and its topography will reduce the impact on the community. Also, enhanced environmental protection measures have been incorporated into the design.

"The revised Scoping Study for Biely Vrch has provided a much better understanding of our development options. We are now scheduling the next phase of the permitting process along with the associated community consultation and development feasibility studies”, EMED Mining MD Harry Anagnostaras-Adams stated.
“In parallel, we are continuing to explore our large licence area in central Slovakia and are conducting due diligence on synergistic opportunities in the region."

The company noted that the revised design has increased the capital cost, with the total initial capital cost estimate increasing from US$45m to approximately US$64m. However, operating costs have been also been reduced, from an estimated US$590/ounce to US$530/ounce. EMED highlighted that further operating cost improvements may emerge following the geotechnical drilling, which is currently underway.

EMED sees potential savings if the planned pit slopes can be steepened in part of the designed mine. The company said that steepened slopes would be enable access to additional high grade ore by deepening the planned pit, without a significant increase in waste material.

The revised Scoping Study has re-affirmed the attractive economics of developing a mine at Biely Vrch - based on gold prices of >US$1,000/ounce.

Overall, EMED acknowledged that the Biely Vrch scoping study’s parameters remain essentially unchanged at this stage including: mining 3Mtpa of ore at a waste-to-ore ratio of 1:1; a recovered grade of 0.6 to 0.7g/t gold;   producing approximately 60,000 ounces per annum for 10 years.

The company emphasised that Biely Vrch has additional drill-confirmed potential below the current Mineral Resource - 41.7Mt at 0.79g/t gold, containing 1.1Moz - and this depth potential will be evaluated further after progressing the open-cut mine towards development, particularly  the relatively higher grade core of the deposit, which increases in grade with depth and remains open at depth.

Separately, EMED noted that MD Harry Anagnostaras-Adams and EMED Slovakia MD Dr Demetrios Constantinides have been invited to participate in industry committees as part of The European Association of Mining Industries - Euromines.

Euromines committees provide support for the Raw Minerals Initiative of the European Union to promote and facilitate Europe's access to minerals and the resurgence of the mining industry in Europe.

"EMED Mining has a strong commitment to the responsible development of metal production operations in Europe. The weakening of European economies and of the euro itself enhances the political importance and also the economics of the company's projects. Biely Vrch can potentially be developed safely and responsibly for the benefit of all stakeholders”, Harry Anagnostaras-Adams added.

Elsewhere, in its other operations, EMED is working towards the resrat of the Proyecto Rio Tinto (PRT) in the Andalucía province of southern Spain. The PRT copper mine is slated to re-start in Q4 2010 and with production scheduled to begin in 2011.  The mine has a JORC-compliant mineral resource of 205Mt (million tonnes) at 0.46% copper for 0.95Mt of copper.

Last month, the company updated investors relating to the PRT permitting, being submitted to the relevant regulatory authorities of the Junta de (Government of) Andalucía. These submissions are being finalised in line with the schedule outlined in the permitting roadmap announced in December 2009. This work has involved regular consultation and interaction between the EMED Mining team, its technical consultants and the authorities where appropriate.

The combined efforts of those various experts have led to many improvements being designed into EMED Mining's plans for restarting PRT. The restart submissions will now be based on an extended mine life of 14 years along with commitments to exploration drilling to be carried out in the first three years.  This exploration is targeted at doubling the current ore reserves.

Gemfields and World Land Trust auction raises £667,000 from ‘Emeralds for Elephants’ collection

Zambian-operating gemstone miner, Gemfields (LON:GEM) told investors that a piece of jewellery featuring a 678ct emerald, produced at its Kagem mine, was auctioned for £150,000, with a further eight pieces of emerald jewellery going for £517,000.  The sales were part of a charitable jewellery auction, held at Selfridges' ‘Wonder Room’, in aid of the World Land Trust and Wildlife Trust of India.

Upon launching the collection in April, Gemfields stated: “The aim of the collection is to create awareness of the plight of the Asian elephant and to bring attention to the World Land Trust’s ‘Indian Elephant Corridor’ project which is raising funds to save elephants in India”.

The collection was showcased in Selfridges Wonder Room during May and in mid-June, and the auction was carried out by Sotheby’s. A percentage of profits from each jewel will go towards the World Land Trust’s ‘Indian Elephant Corridor’ project.
According to Gemfields’, its mine-to-market capability guarantees the provenance of every gem, through a full disclosure and certification programme.

In Zambia, Gemfields’ 75%-owned Kagem mine has produced a total of 3.5 million carats of emerald and beryls, from 12,500 tonnes of ore, in the quarter to 31 March. Production for the nine months to 31 March amounted to 11.3 million carats with 42,000 tonnes mined with a grade of 269 cpt (carats per tonne).

In a recent auction, reported in April, Gemfields raised US$7.2 million to take the total revenues from 3 auctions in 9 months to US$18.7 million.

Ocean Equities praises Nyota’s flagship Tulu Kapi gold project, bullish on step-out exploration

Ocean Equities believes Nyota Minerals (ASX, LON: NYO) is set to become a major player in an emerging gold district as its flagship Tulu Kapi gold project in Ethiopia was “rapidly shaping up to become a significant gold project” and could have a 2 Moz (million ounce) resource as soon as in 9 months, which could then go up to 3 Moz.

In a note, the broker has summed up the progress made by Nyota since it initiated coverage in November 2009. This included the receipt of the results of a pre-scoping study that showed that Tulu Kapi could support an economic mine, the investment of the IFC in the project, a resource increase to 1.38 Moz of gold, the confirmation of a third mineralised body beneath the current resource envelope and the acquisition of additional highly prospective exploration ground in the country.

“The progress made by the company since November 2009 has exceeded our expectations, and we believe that this pace of development / news flow is set to continue over the next 6-9 months primarily driven by the aggressive drilling programme which is currently underway at Tulu Kapi and is to commence shortly on other regional targets in Ethiopia,” Ocean Equities said in its note.

Ocean stated that the area surrounding Tulu Kapi controlled by Nyota was considered under-explored and “extremely prospective,” noting that the company has recently acquired 4,500 sq km (square kilometres) to the north of the project.

Tulu Kapi was acquired by Nyota as part of the acquisition of Minerva Resources in 2009 and is a development stage gold project with an inferred resource that has recently been increased from 690,000 oz gold grading 1.58 g/t (grammes per tonne) gold to 1.38 Moz at 1.68 g/t gold.

The broker valued Tulu Kapi’s resource at US$65 per ounce, also attributing US$7/oz to Nyota’s other assets, compared to a US$67/oz for its peer group of African gold developers.

In its report Ocean Equities reminded that exploration spend was no guarantee of success, though this traditional risk was diminished for Nyota’s ongoing infill drilling programme in additional to step-out exploration on new targets. The Ethiopian government’s support for the company and the mining industry in general was also noted as a positive.

Ocean Equities is now anticipating a news flow from further drilling and assay results from the ongoing exploration campaign at Tulu Kapi and in the surrounding area.

European Nickel appoints Polo Resources MD Neil Herbert as non-exec director

European Nickel (LON, PLUS, ASX: ENK) has appointed Neil Herbert as an independent non-executive director, to aid the company as it progresses towards becoming a mid-tier nickel laterite producer. Herbert is the executive co-chairman and managing director of Polo Resources (LON, TSX: POL).
"I am delighted to welcome Neil to the Board. I believe his business acumen and extensive experience working for listed companies will bolster the board and provide invaluable advice as we progress European Nickel towards our ultimate aim of being a mid-tier nickel laterite producer", European Nickel deputy executive chairman Simon Purkiss stated.

The company highlighted that Herbert has over 20 years experience in finance, and he has been involved in the management of mining and exploration companies for over 12 years. Herbert has held a number of senior executive roles, including Finance Director for UraMin Inc, until its acquisition by Areva NC for US$2.5 billion and Group Financial Controller for Antofagasta Plc. 

The company is currently finalising a merger with Rusina Mining (ASX:RML; LON:RMLA). Back in February, European Nickel and Rusina Mining signed the merger deal to form a ‘new and significant nickel development company’. European Nickel is acquiring Rusina through an equity-based transaction which, in February, valued Rusina at approximately £18.1 million and is capped at £27.1 million.
The combined group will have a total attributable resource base of 1.35 Mt (million tonnes) of contained nickel, with forecast production of 45,000 tonnes per annum from its two projects, Çaldağ and Acoje. Earlier this month, European Nickel published an interim statement, in which it said the first half marked “progress on all fronts” after agreeing the merger with Rusina and working to secure sufficient funds to complete project financing of the Caldag nickel project in Turkey and recommence work on the feasibility study at the Acoje nickel propject in the Philippines.

With associated financing deals, will provide the company with £6.7 million of additional funds, which, along with Rusina’s cash resources of US$1.6 million, should be enough to complete the Caldag financing. European Nickel also reported that its discussions with Western banks had progressed significantly, resulting in joint mandate letters with Societe Generale and UniCredit, which will act as initial mandated lead arrangers for the Caldag project financing, targeting completion of the debt funding by the end of the year.

The securing of the Western bank finance allowed the company to lapse the option granted to JXTC to take a 20% equity participation in Caldag for a US$20 million investment and the purchase of 100% of the project’s production, with European Nickel saying that the price was no longer appropriate given the project’s total value of US$285 million.

The company stated that the sale of Caldag’s production to JXTC was still a possibility, though it was also in negotiations with other parties.

Mineral IRL swaps US$1m debt for equity with Resource Capital Fund

Minera IRL (AIM, BVL: MIRL, TSX: IRL) has entered into an agreement with Resources Capital Fund to exchange the US$1 million outstanding principal amount of the RCF Working Capital Facility for the issue of 1.1 million shares at a price of US$0.90 per share.
Following the debt for equity swap, RCF’s interest in the company will amount to 3.9 million shares, or 4.47%.
The share issue is now subject to the approval of the Toronto Stock Exchange (TSX). The transaction is expected to close by 30 June 2010.
Broker Fox-Davies Capital (FD Capital) said this was an “interesting move” that it fully supported, noting that the transaction was made at a price very close to the current market value of £0.59, or US$0.89.
Minera IRL is engaged in development and exploration of precious metals resources in the Andean cordillera of South America.
Earlier this month the company cancelled its proposed share offering due to the recent volatility in the equity markets, opting for another method of financing, by agreeing to a US$20 million finance facility with investment banking group Macquarie (ASX:MQG) to fund principally the ongoing development at its Ollachea and Don Nicolas gold projects.
In mid-May, the company said that drilling results from the new Concurayoc Zone at Ollachea warrant a major follow-up drilling programme, reporting mineralisation in five drill holes over a 500 metre strike length at Concurayoc, including intersections of 20.9 metres of 3.07 g/t (grammes per tonne) of gold, 14 metres of 2.91 g/t gold and 8 metres of 5.08g/t gold.
The Concurayoc zone is relatively close to the Minapampa Zone, where the group has identified an inferred resource of 1.3 Moz (million ounces) of gold.
Don Nicolas currently has an Indicated Resource of 1,078,000 tonnes at 5.8 g/t for 200,700 oz (ounces) of gold and an Inferred Resource of 1,075,000 tonnes at 4.6 g/t for 158,400 oz of gold.
The group operates the Corihuarmi gold mine and the emerging Ollachea as well as Don Nicolas.

Pan African Resources ups earnings forecast for FY-2010

Shares in Pan African Resources (LON:PAF) were up more than 8% after the company reported it expects earnings for its full-year ending 30  June 2010 to be ahead of expectations . The company told investors that its earnings per share (EPS) is expected to rise between 148-158%, from FY09’s 0.4p.

Headline EPS is expected to have risen between 16-26%, from the 0.85p reported for the previous financial year. The company expects to report its audited full-year results on 31 August 2010.

Pan African has two primary assets, the Barberton gold mining complex and the Phoenix platinum project in South Africa. The Barberton mining complex consists of three mines: Fairview, Consort and Sheba. In April 2010, the company raised its production forecast for the second half of the financial year.
Subsequently, the Barberton mines are now expected to produce 97,000 ounces of gold - 318,000 tons at a head grade of 10.40 grams per tonne - for the full financial year 2010, with cash costs below ZAR165,000 (approx US$22,500) per kg.

Previously, in February, Pan African reported an improved financial performance in the first half, in which interim revenues rose 16.5% year-on-year. Revenues for the six months to 31 December rose to £29 million, while EBITDA (earnings before taxes, depreciation and amortisation) stayed virtually unchanged £8.6 million and attributable profit jumped from £2.6 million to £4.5 million as a result of the increase of Pan African’s holding in Barberton Mines from 74% to 100%.

At the Phoenix platinum project, the company is working towards the start of construction in Q1 2011, with first production is scheduled for September 2011. Last month, Pan African completed an updated resource statement, which showed an increase in total resource of 15.8% to 469,000 oz (ounces) of 4E PGM (platinum group metals platinum, palladium, rhodium and gold), while in-situ grade improved by 2.6% to 3.15 g/t (grammes per tonne) PGM 4E’s.

The resource consists of 3.2 million tonnes grading 3.09 g/t 4E for 321,000 oz in the measured category, 618,000 tonnes grading 3.20 g/t 4E for 63,000 oz indicated and an inferred resource of 382,000 tonnes grading 3.15 g/t 4E for 85,000 oz.

The resource upgrade extended the life of the project from 13 to 16 years based on a production of 15,000 oz of 4Es per annum.

Central China Goldfields looks to expand Bullabulling gold resource in 2010

UK-registered copper and gold miner Central China Goldfields (LON:GGG) is targeting an expansion of its resource base and planning extensive work on its flagship Bullabulling project in the new financial year after disposing of its Chinese assets, making a strategic decision to focus on Australasia and entering a JV (joint venture) agreement over Bullabulling with Auzex resources during 2009.

During the “year of transformation and redirection,” Central China disposed of Nimu copper deposit in China due to the adverse local business situation and the negative impact of the global financial crisis. The loss of Nimu was an “immense disappointment” for Central China, though it did strengthen its balance sheet and allowed it to change geographic focus. The project generation and acquisition efforts undertaken in H2 2009 led to the evaluation of a number of gold and copper projects and the signing of a low cost option on the Cikoleang gold project in Indonesia.

An option to acquire 50% of Bullabulling was signed in February 2010 and exercised in April. The acquisition price amounted to US$6 per ounce of gold for 430,000 oz of known measured and indicated resource attributable to Central China. The consideration amounted to US$3 million, consisting of a US$0.5 million option fee and a US$2.5 million payment for the 50% stake.
The company and partner Auzex Resources (ASX:AZX) are currently undertaking work aimed at increasing that resource.

An updated JORC compliant resource estimation is expected to be reported by September/October 2010 following the currently ongoing diamond drilling campaign. The drilling is designed to validate the entire existing drill dataset of over 12,000 holes.

This will be followed by the feasibility study, currently anticipated to commence in Q4 this year.

Meanwhile, Central China, which is set to change its name to GGG Resources, has pledged to continue to expand its asset base in the Australasian region.

“Bullabulling is shaping up to be the main value driver for the company, however we will continue to seek investment opportunities in the Australasian region to expand the Company's asset base. Our work in the latter half of 2009 brought us many leads which we are keen to explore further,” said Chairman of Central China Peter Ruxton.

On the financial front, pre-tax losses from continuing operations for the full year to 31 December 2009 amounted to £0.55 million compared to last year’s £0.52 million.

Bullabulling, in the Yilgarn Craton gold province, has an established resource of 9.3M tonnes at 1.4g/t gold for 431,600ozs.

Drilling at Bacchus previously intersected gold mineralisation with intercepts of 7 metres at 77 g/t (grammes per tonne) gold, 5 metres at 14 g/t gold, 4 metres at 5.08 g/t gold, 3 metres at 4.43 g/t gold, and 3 metres at 9.16 g/t gold beneath the existing Bacchus Pit.

Leni Gas & Oil preparing Hontomin-2 test as CIUDEN starts fully-funded seismic program

Leni Gas & Oil (LON:LGO) has reported that the first seismic program under its joint development deal with Fundación Ciudad de la Energia (CIUDEN), is now underway at the Hontomin oilfield in Spain. The seismic program is fully funded by CIUDEN, with both ultra-sensitive and 3D seismic surveys being carried over an area of approximately 10km2 centred on the Hontomin reservoir.  The program will continue until August 2010. 

Separately, Leni Gas & Oil intends to start preparing an extended well test programme at Hontomin-2, to assess the production potential of the Hontomin reservoir.

The joint development agreement was initially signed in March 2009, allowing CIUDEN to carry out research, testing and implementation of carbon dioxide (CO2) sequestration pilot sites on LGO's Spanish acreage. The agreement also provides for the full bi-lateral sharing of results and data from all programs executed by the Leni Gas & Oil and CIUDEN.
"The joint development agreement with CIUDEN has considerable scope for investigating the potential of carbon capture and storage, and related enhanced oil recovery opportunities within our acreage", Leni Gas & Oil chairman David Lenigas commented.

"The seismic program on Hontomin is the practical start of this agreement to realise this potential and increase the value of this prospect within our Spain acreage.  We look forward to working closely with CIUDEN to maximise the value of Hontomin from this program and our imminent extended well test on Hontomin 2."

Hontomin has mean contingent oil resources of 0.36 mmbo (million barrels of oil). It is anticipated that oil production from Hontomin-2 will be transported to the company's central processing and sales facility, at 38km away at Ayoluengo.

Furthermore, Leni Gas & Oil said that the results of the extended well test program and CIUDEN seismic survey shall input to the company's exploitation strategy for Hontomin, for either conducing further appraisal or converting the exploration permit to a production concession.

In May this year, the company reported strong progress in Spain, with a comprehensive geological re-interpretation of the Ayoluengo oilfield, completed with reprocessed 3D seismic. It has substantially de-risked the future production expansion programs there and led to a major increase in STOIIP (Stock Tank Oil Initially In Place) estimates for the producing Lower Cretaceous and Upper Jurassic reservoirs.

Total STOIIP of the currently assessed prospects across the acreage which can be developed is now 173.8 million barrels of oil Mean, 265.2 mmbo P10 (Possible), 151.4 mmbo P50 (Probable), and 108.3 mmbo P90 (Proved).  Mean STOIIP had previously been 104 million barrels. The field had a historical production of 17 mmbbls of 37 API oil.

Also in May, the company announced the completion of a heads of agreement with BP’s (LSE: BP) Spanish unit to negotiate a crude oil sales agreement to off-take its current and future production to BP's Castellón refinery on the east coast of the country. The planned agreement is for at least five years and shall include Ayoluengo and future production from other development assets across LGO’s petroleum production and exploration acreage in northern Spain which covers an area of over 550 square kilometres.