Tuesday, 26 October 2010

Cairn’s unsuccessful Greenland campaign to cost US$185 million

Cairn Energy (LON:CNE) confirmed disappointing exploration results in Greenland, with none of the three wells finding viable hydrocarbon resources.
The unsuccessful exploration program is set to cost around US$185 million.
The company stopped drilling on the 30 September, as mandated by the Greenland Bureau of Minerals and Petroleum (BMP).
Two wells have been plugged and abandoned, while the other has been suspended for possible re-entry at a later date.
The Alpha-1S1 well encountered oil shows in the ‘volcanic’ section before drilling was halted. The well did not reach the anticipated Mesozoic section before 30 September.
It has now been suspended. Cairn said the well may by re-entered at a later date to either side-track or drill deeper.
Cairn reported that the T4-1 well failed to encounter any significant hydrocarbons and found only thin reservoir sands.
Previously in August, Cairn revealed that the T8-1 well encountered gas in thin sands. However the well did not result in a commercial discovery.
Both T4-1 and T8-1 were plugged and abandoned.
The company said it is planning another exploration program for 2011.
Broker finnCap commented on the news in its 'Morning Note', saying the confirmation that drilling ceased at the end of September and that no commercial discovery had been made will be of limited surprise to the market - the biggest surprise being that the company took 3 weeks to update the market - with the shares off 10-15 percent in recent weeks in anticipation.

"With most of the downside now priced in we retain our 'hold' rating, with a lower target price, but maintain a negative stance given: 1) limited news flow potential; 2) significant reinvestment risk; and 3) the risk, albeit low, that the partial sale of Cairn India to Vedanta collapses," finnCap added.

Cairn stock was trading 5 percent lower in early deals today.

StatPro unveils cutting-edge liquidity risk software

Investment software specialist StatPro Group (LON:SOG) has come up with a product that takes a new approach to measuring the liquidity risk of an investment.
Liquidity risk measures how easy or difficult it is to sell a particular stock or share.
A highly liquid stock might be offloaded in a time of crisis at a minimal loss because there is a ready market for it.
However disposing of an illiquid investment is often problematic, particularly when the volumes involved are large.
The StatPro software differs from the other liquidity risk devices in that it doesn’t solely rely for its data set on observed buying and selling prices of a stock, or particular investment type.
Instead, factors such as market capitalisation, the percentage of ownership of a stock and the size of an issue for a fixed income instrument are taken into account.
“The risk manager can then drill down through every component of liquidity risk, discovering how much is coming and from where, without any previous knowledge of the portfolio,” StatPro said in a release to the stock exchange this morning.
“This tool enables the risk manager to x-ray the liquidity risk of the portfolio, spotting any challenging situations.”
Chief executive Justin Wheatley said says there has been a great deal of innovation in the area of risk, in particular mathematical modelling of the concept of “value at risk”.
However very little research has gone into the liquidity risk, he added.
“The reason is that while measuring market risk you can create models that are calibrated with market data, you cannot do the same for liquidity risk,” Wheatley explained.
“The approach we have developed is a major achievement in measuring market liquidity risk when trading volume and market price information is not available and we are thrilled to offer this enhanced solution to our clients.
“We continue to invest in product development and believe this adds significant value to our offering."

Oxford Nutrascience gets UK patent for chewy confectionery composition technology

Oxford Nutrascience Group PLC (LON:ONG) said it has been granted a 20 year UK patent for its chewy confectionery composition technology.

It is valid from the date of submission, 7 August 2006, and covers the company's technology which allows sugars to be replaced with fibres and for the product to be fortified with vitamins and other nutraceutical ingredients.

An application for a European chewy confectionery patent was submitted on 27 March 2007, and granting of the European patent is expected in due course.
Chairman and chief technology officer Marcelo Bravo said: “The granting of this patent in the UK strengthens the commercialisation of our chews. “This addition to our patent portfolio provides further validation of the company's strategy of developing intellectual property that can be successfully exploited to build a business in the medicine and consumer healthcare sector.”

Two weeks ago, Oxford Nutrascience announced the launch of Chewyz, a reduced sugar, high fibre, vitamin-enriched soft chew which will initially be sold through Tesco Nutri Centre stores.

Each sweet contains 50mg of Omega 3, vitamins A, C, D & E and 35% fibre. So they are healthier than normal soft chews.

Initially Chewyz will be sold into the confectionery market via high street and supermarket outlets.  But eventually they will be rolled out into the global confectionery and healthcare markets, starting with the US next year.

The launch of the chews follows the signing of the manufacturing agreement in May with Lamy Lutti, one of the largest confectionery manufacturers in Europe.

Further chews are due to be brought to market during 2011.

Oxford Nutrascience is gaining traction for its innovative functional food products.

In September it revealed it was licensing out its Chewitab technology to DCC Health & Beauty Solutions.

The agreement is open ended and non-exclusive.

Oxford will earn royalties on any DCC product sold in chewable tablet form, including healthcare supplements.

DCC is a service provider to healthcare and mail order companies and it has an enviable client list, which includes Merck, GSK, Healthspan and Vitabiotics.

Thor Mining shares boosted by update on gold and rare earth assets

Thor Mining (LON: THR, ASX:THR) shares were up around 8 percent in afternoon deals after the publishing of its quarterly update, in which it reflected on progress at the Dundas gold project.
Final assays from initial sampling has identified clusters of elevated gold values, and include five previously unknown gold anomalies.

“The best of these contain the greatest concentration of high gold values encountered in the project to date,” Thor said.

The company has increased its interest in Dundas and it has been actively exploring the project during the three months ended 30 September 2010.
Thor upped its stake in Dundas from 51 percent to 60 percent, after it issued 45 million Chess Depositary Interests (CDI) - tax efficient securities on the Australian Securities Exchange - to the vendors.

Ultimately it can acquire the entire project at its option, subject to successful exploration results.

On the ground Thor is preparing to start drilling, on targets identified by the sampling. Drilling is expected to get underway in the December quarter.

The company also updated investors on its other assets, most notably in relation to the Daicos rare earth prospect in Australia’s Northern Territory.

Thor said that increasing rare earth commodity prices has prompted it to re-evaluate Daicos.

Previously, reconnaissance sampling returned high uranium and rare earth element (REE) values from very radioactive samples.

The best assay had 19.37 percent uranium, 26.52 percent Niobium, 6.25 percent Tantalum and 2.68 percent Yttrium.

Thor also noted that the improvement in tungsten prices is encouraging for the Molyhil tungsten-molybdenum project.

Molyhil’s development is currently on-hold in anticipation of a recovery in Tungsten and Molybdenum prices.

The company noted that the Tungsten price continued to increase and the Molybdenum price has tracked sideways.

However the recent strengthening of the Australian dollar has had a negative impact.

“The fundamental drivers of the project are sound and that prices will in time recover to economic levels leading to the development of Molyhil,” Thor said. 

Furthermore Thor emphasised that it has enhanced the project while it is on hold, as it has identified operating and capital cost reductions.

On a corporate level the company raised A$1.143 million with the issue of 93,336,149 new shares. It also raised a further A$912,000 in the current period.

ImmuPharma's N6L compound valued at 2.5x market cap by Edison Investment Research

Edison Investment Research put the net present value (NPV) of ImmuPharma’s (LON:IMM) IPP-204106 compound at up to £190 million compared to its market cap of £75 million.
In today’s research report, Edison responded to last week’s update from the company, which is planning to file a new cancer compound (IPP-204106, N6L) as a US Investigational New Drug (IND) in the next few months and start a Phase IIb trial in the first half of 2011.
In a statement published last week, the company said it has now dosed six cancer patients, suffering from either breast cancer, lung cancer or bladder cancer, and no serious drug-related adverse events have been reported.
Two patients were rated as having the disease stabilised.
Edison said the update showed steady phase IIa development progress with six enrolled patients and a move to the second dose level as the 1 miligram (mg)/kilogram (kg) dose has passed and the 2mg/kg dose is being tested.
The report noted that nanoparticles formed from N6L and glycosaminoglycan are potentially tenfold more effective in killing cancer cells, which Edison said was an “interesting, very valuable observation”.
ImmuPharma is running a standard Phase IIa study with advanced-cancer patients with various tumour types to find the maximum tolerated dose, which could be up to 20 mg/kg.
The study is designed to show safety and tolerability and assess the maximum tolerated dose.
The next stage of trials, phase IIb, in four cancers could start as soon as next year.
Pancreatic, brain, melanoma (skin) and castration-resistant prostate cancer targeted by the study are all considered to be hard to treat cancers with no current robust treatment options.
In preclinical work, IPP-204106 showed a dual mode of action: anti-angiogenic and arrest of cancer cell growth with possible apoptosis.
This dose can then be used in specific tumour-type Phase IIb studies to give an initial indication of efficacy.
A US IND (investigational new drug application) might be filed in 2011 to start US clinical work.
The research house gave N6L a risk adjusted of £190 million, or 230 pence per share, compared to an enterprise value of about £50 million.
Edison will revaluate IPP-204106 once the Phase IIa data is released.
The report noted that ImmuPharma remains sensitive to exchange rates as about 75% of its cash is held in US dollars.

GGG Resources’ Bullabulling gold project has significant exploration upside - Collins Stewart

Collins Stewart called GGG Resources’ (LON:GGG) key Bullabulling gold project in Australia a very interesting asset with a significant exploration upside.
Following today’s appointment as GGG’s new corporate broker, Collins Stewart gave a summary of the company’s projects.
The broker gives GGG’s flagship asset a valuation that eclipses its current market cap.
Collins Stewart said that GGG’s 50% owned Bullabulling has a net present value (NPV) of US$178 million, with US$89 million, or £57 million, attributable to GGG, compared to its market cap of £31 million. GGG's joint venture partner is Auzex Resources (ASX:AZX)
Within 3 months of acquisition, the JORC compliant resource increased from 432,000 oz to just under 2 million ounces (Moz) of gold at 1.5 grammes per tonne (g/t).
According to Collins Stewart, the exploration upside is significant with the overall mineralized structure over 14 kilometres in length, while the infrastructure is “excellent” with the deposit being located just 5 kilometres (km) from the town of Coolgardie, meaning availability of cheap power.
This as well as substantial ‘sweet spots’ of mineralisation close to the surface, with grades of over 2 g/t and simple ore metallurgy typical for shallow deposits in gold fields in the area with 90% recoveries makes Bullabulling an “interesting project,” according to Collins Stewart.
The feasibility study at Bullabulling is commencing with a view to move the project into production in Q1 2013, which the broker said was “realistic and achievable”, citing the example of the Edna May gold project, which has been successfully commissioned this year by Catalpa Resources (ASX:CAH).
The broker used similar projects in Western Australia were used as a benchmark, stating that the “technically simple nature” of Bullabulling inspired greater confidence in valuation than its peers.
The key input assumptions were capital costs of US$157 million, a 15 year life of mine, an annual steady state production of 130,000 ounces (oz), cash costs of just under US$600/oz and a long term gold price of US$1,100/oz, which is significantly below the current US$1,340/oz.
“At $41/resource ounce, GGG Resources is one of the outstanding value propositions in the sector.
"As Bullabulling gets closer to production, we expect the gap between the project NPV and the company valuation to narrow significantly," concluded Collins Stewart.
GGG today said that Westhouse Securities will continue as its nominated adviser.

Beowulf shares rise as the drilling begins on Kallak South

Beowulf Mining (AIM: BEM) announced today that drilling has begun on its Kallak South iron ore deposit in northern Sweden with assay results expected by the end of the year.

The programme will consist of 32 holes over a total length of 3,500 metres and will be carried out by local firm Ludvika Borrteknik, which is using two light moveable rigs. 

It will allow the company to compile a JORC-compliant resource.
In order to assess the quality of ore relative to that of the neighbouring Kallak North deposit, the company is planning to commence bench scale metallurgical tests.

The tests will be conducted by the Minpro research laboratory in StrĂ¥ssa, central Sweden, on selected large samples of ore grade drill core sections of the deposit.

And they will be directed towards the production of a high grade magnetite pellet feed product for use by potential clients, the company said.

Chairman Clive Sinclair-Poulton added: "We are delighted to confirm that drilling has now commenced on the Kallak South deposit where we believe that there is considerable potential.

“The drilling programme is designed to confirm the quantity and quality of the iron ore in the licence area to then enable a JORC compliant resource estimate to be obtained.

“The initial assay results from the Kallak North drilling programme were very positive and the Kallak South deposit has the potential to be a significantly larger resource. We look forward to receiving the results."

Separately, the Beowulf has signed a letter of intent with Ludvika Borrteknik to begin a 4,000 metre drill programme on its Ruoutevare project area, also in northern Sweden.

Sinclair-Poulton believes Beowulf is destined to be a “major player in the European iron ore sector”.

The market seems to agree. The shares jumped 2.25p, or 14 per to 18p cent in early trade and have advanced 160 per cent in the past month.

Again today the stock inched a little higher – it is up 10 per cent after an upbeat appraisal of its Kallak iron ore project.

Today’s news confirmed “extended mineralisation” at Kallak North, which has an estimated resource of 150 million tonnes, with grades above 30 per cent.

However more interesting was the company’s preliminary assessment of Kallak South. 3D modelling revealed it is a “substantially larger” iron body than the northern deposit.

The company said the “Kallaks” may form a combined potential resource of several hundreds of million tonnes of iron ore.

Put together with the 140 million tonnes at Ruoutevare, which is 60-odd kilometres up the road, and one can understand why the chairman and the market are getting quite exited.

Earlier this month the group raised £400,000 via a placing of shares at 5.75p each to continue its aggressive drilling programme.

As well as Kallak and Ruoutevare, the company has a half share of the Balleck copper-gold project in northern Sweden as well having uranium, gold and molybdenum assets.

Baobab secures £5m for drilling at Tete iron-vanadium-titanium project

Baobab Resources (LON:BAO) has secured a three year equity line facility (ELF) of up to £5 million, allowing it to accelerate the current drilling programme at its Tete iron-vanadium-titanium project that has produced “encouraging results”.
The ELF with Dutchess Opportunity Cayman Fund offers Baobab ongoing access to capital as it enables the Company to obtain funding from Dutchess at any time during the next three years via share subscriptions.
The subscriptions will be priced at a discount of just 6% to the market price and will take place at timings and intervals and in sizes determined by Baobab.
Under the terms of the ELF, Baobab will be able to specify a minimum acceptable price for each tranche to prevent shares being sold in the market at an “unacceptable discount”, allowing it to protect the stock price.
Baobab called the facility a “cost effective solution for some future financings with management being in control of the timing on accessing capital”.
The company’s main asset is the Tete iron-vanadium-titanium project in Mozambique, which currently has an inferred mineral resource of 47.7 million tonnes (Mt).
The company is currently working on bringing a second rig to the South Zone of Tete to accelerate its drilling campaign, having completed 3,000 metres of reverse circulation (RC) drilling at the South Zone as of last week.
Broker Astaire Securities called the progress achieved by Baobab at Tete “encouraging” as they have successfully identified priority areas at Chimbala for the 2011 drilling campaign.
“At a time when the company is consolidating its position in Tete the facility will assist in the acceleration of drilling programmes where warranted and better enable the company to participate in opportunities that may arise,” said chairman of Baobab Resources Jeremy Dowler.
In consideration for the ELF, Baobab agreed to pay First Columbus LLP a commitment fee through the issue of 0.66 million shares, while issuing Dutchess and First Columbus LLP 0.44 million warrants with an exercise price of 16.88 pence, which is a 50% premium to Baobab’s closing price on 20 October 2010.
In response to today’s news, Astaire said that the equity drawdown provides some security for the company as it progresses Tete and the flexibility to expedite the drilling programme, should it choose to do so.
Astaire also noted the “modest” 6% discount and the threshold price floor, preventing the arrangement from being “unduly dilutive”.
The news was met with a positive reaction in the market as shares climbed 2.5%.

Westminster Group secures £1 mln new funds from high net worth investor at a premium

Security equipment and services specialist Westminster Group (LON:WSG) has secured a £1 million investment from a high net worth individual at a premium to the current share price.
The company has issued 4 million new shares, or 16.49 percent of the enlarged capital, at 25 pence per share.  The stock started today’s session at 21p, and rose more than 7 percent in early deals to 22.5p.
Chief executive Peter Fowler said: “This investment in Westminster by a high net worth investor, at a premium to the current share price, is a significant endorsement of our business.  The international profile of the group and the successful project installations of the last few years have firmly established Westminster as a respected force in the bespoke global security and defence solutions markets.
We are focused on delivering significant growth and this investment will assist us in furthering our growth plans accordingly, whilst at the same time giving us the option, if needed, to reduce the group's borrowings significantly."
The group also updated investors on progress regarding its announcement alongside interim results, when it informed the market that one of the loan note holders of the convertible loan notes issued in June 2009 had requested early redemption.
The loan notes were repayable by Westminster or convertible into shares in 2014. The group announced today that it has agreed to use its best endeavours to redeem these loan notes early.
Westminster's principal activity is the design, supply and ongoing support of advanced technology security solutions, risk assessments and close protection services worldwide.
These can range from product only assignments, such as the supply of specialised scanners, to the design and implementation of an integrated system solution such as a border detection and surveillance system. The majority of its customer base, by value, comprises governments and government agencies, non-governmental organisations and blue chip commercial organisations.

Goldplat's positive drilling results confirm Nyieme project's potential

Goldplat (LON:GDP)shares were boosted this morning with positive drilling results confirming the potential of the Nyieme gold project in Burkina Faso.

The company released results from an 11-hole infill program, which will form part of a maiden JORC resource for Nyieme. Five holes returned grades over 4 grams per tonne (g/t) gold, with the highest reaching 19.1g/t.

"These excellent results reinforce the prospectivity of the Nyieme project, with drilling intersecting high grade quartz veins and confirming the potential of the target structure,” chief executive Demetri Manolis said.
Shares climbed over 6% in early trade to reach 13.25 pence. Exploration is a relatively new business area for Goldplat but it is providing a boon for its traditional metal recovery business. The development of Nyieme and the Kilimapesa gold project in Kenya is being supported by Goldplat’s cash generative gold and platinum processing plants in South Africa and Ghana.

At Nyieme, Goldplat is compiling the results, along with results from previous owners Sanu Resources, in order to produce an initial JORC-compliant resource.

Importantly the results successfully tested the projects ‘payshoot’ model.

Goldplat said the predicted payshoots on the quartz vein were verified and their depth extensions were confirmed.

Also Goldplat is now planning to extend its exploration programme following the positive results, to test other target areas on the licence.

“We have identified additional targets on the project and we are now designing the next stage of exploration,” Manolis added.

This exploration programme will get underway in January 2011.

The new exploration targets include an area of artisanal mining activity, as well as a continuation of the geophysical anomaly that defines the current prospect area.

These targets are generally focused on a 5 kilometre long north-south trend.

Gulfsands' Khurbet East-18 reveals Syrian field extends further north than first thought

Gulfsands Petroleum  (LON:GPX) said drilling on the Khurbet East-18 well uncovered the second-thickest oil bearing reservoir in the area.

It also confirmed the Syrian field extends further north than previously thought.

Gulfsands hit the reservoir 12 metres higher than anticipated as it drilled to 1,926 metres, which equates to a vertical depth of 1,535 metres.
Analysis of the wire-line logs revealed that oil column was 45.8 metres gross, or 35.6 metres net. Porosity was 20.2 per cent, while the average oil saturation was 86.9 per cent.

The logs also indicated the presence of significant secondary or "vuggy" porosity that is associated with a “karst-type reservoir“, which exhibit excellent flow properties elsewhere in the Khurbet East field.

The reservoir was flow tested and produced at a stable rate of 2,385 barrels per day of oil, which was 26 degree API.

Gulfsands produced “minor volumes of water” during the flow test. However this is thought to be lost drilling fluids and not production of reservoir formation water, it added.

The impact of the KHE-18 result on field oil-in-place and recoverable oil volumes will be calculated as part of the annual year-end reserves estimate. This will be available during the first quarter of 2011.

Gulfsands chief executive Ric Malcolm said: "The extension of the crest of the Khurbet East field to the northwest with high quality karst reservoir is very encouraging. 

“The well will now be tied back to the early production facility and become the tenth producer in the field. 

“With two rigs now operational, we have a very active exploration programme that includes three wells to be drilled before year end".

The Crosco 401 rig being used on the KHE-18 well will now move to seven kilometres to drill the neighbouring Twaiba-1 exploration well.

The location was selected based on interpretation of 3D seismic data acquired during 2009.

“The key exploration risk on this prospect relates to the presence of adequate reservoir quality; however this is mitigated somewhat by the presence of an anomalous seismic amplitude observed at the target location,” Gulfsands revealed in an update to investors

“The interpretation of this anomaly is supported by Acoustic Inversion processing of seismic data, which suggests the presence of an effective reservoir at the Twaiba location.”

Meanwhile, on the Syria-Turkey  border  the Zahraa-1 exploration well spudded on October 21.

Two days earlier the Yousefieh South well was acidified and flow tested under nitrogen lift conditions.

However, only minor non-commercial volumes of 16 degree API oil and water were recovered to surface.

The well will be plugged and abandoned.

Gulfsands also said that the 2010 3D seismic programme on the Greater Khurbet East area is now 75 per cent complete and will be finished by the year-end.

Monday, 18 October 2010

Nighthawk shares rise after it secures £25 million funding package

Nighthawk Energy (AIM: HAWK and OTCQX: NHEGY) shares advanced 8 per cent this morning after the company announced it had secured a £25 million funding package and set a deadline for farm-in bids for its oil project in Colorado.
Nighthawk has agreed an equity drawdown facility (EEF) that allows it to “negotiate from a position of strength” with potential partners carrying out due diligence on the Jolly Ranch shale-oil exploration area.
Consultant Macquarie-Tristone is charge of the marketing process, which began over the summer. And while a number of firms have been given access to the company’s data room, nobody has yet tabled a formal offer.
Nighthawk will call time on negotiations at the end of the year if it can’t broker a deal. And it will begin a new drilling programme on the site.
Chief executive Tim Heeley told Proactive Investors: “We don’t have to be a forced seller of anything.
“We can use the money as a backstop. It immediately removes that question about whether you have funding, because we do have the funding now.
“It removes the element of doubt and gives us flexibility and optionality.
“(The equity drawdown facility) means we can talk from a position of strength, which is not something we’ve necessarily been able to do before.
“We’re encouraged by the facility and provided we use it correctly we can kick on from here.”
The funding package is being provided by Darwin Strategic, part of the Evolution Group.
And it gives the firm the financial wherewithal to carry out the work needed to “deliver a commercial project” with the added bonus of some near-term production.
“There is a lot of work we can undertake that will add value,” Heeley explained.
“And it is interesting that a number of institutions we speak to in regard to Jolly Ranch think it is too early to (look for a farm-in partner).
“They ask: ‘Why would you want to do this at such a low level when you can do the development yourself?’ I think it has been encouraging over the last few weeks to hear this.
“Let’s not place too much attention on the (negotiations with partners). That wasn’t the intention in the first place.
“What we want to do is make sure we can add value.
“Clearly at this stage if we were to receive some sort of offer it might not be at the right value to our shareholders. So let’s get on with it ourselves.”
Nighthawk has appointed Gaffney Cline & Associates to undertake a reserves and resource assessment of Jolly Ranch.
It is expected to be completed by late this year or early 2011 and will build on the reservoir simulation model of Schlumberger.
Nighthawk can use the equity drawdown facility any time in the next three years, though it is under no obligation to do so.
The subscription price will be at a five per cent discount to an agreed reference price determined during five, 10 or 15 trading days following delivery of a subscription notice.
Nighthawk has also granted 3 million warrants to Darwin that can be exercised any time in the next three years at a price of 20p (current price 17p).  Darwin will get 1.5 million warrants exercisable at 10p if the price paid for shares is less than £5 million, or certain circumstances where the equity drawdown is terminated.
“These are the only open fees Darwin gets,” Heeley said.
“There are no other upfront fees. Over the course of the next three years of the facility they can subscribe to 3 million shares in lieu of compensation for their efforts.
“They are making this capital available to us.
“They are very supportive. Darwin is backed by Evolution and it is the third (equity drawdown) they have done. They need it to succeed as much as we do.
“We are hugely encouraged by it, they are excited. What we have to do now is use that money wisely.”
At 11.15am, the shares were trading at 17p, up 1.25p or 8 per cent on the day.
Followers of the company are heartened by the latest developments at Nighthawk.
David Hart, oil and gas analyst at City research firm Westhouse, told his clients: “The announcement removes a great deal of uncertainty regarding Nighthawk’s ability to pursue development activity at its core Jolly Ranch project.
“In addition, it does so while giving the group great flexibility in the timing and amount of funds required, which has the potential to be less dilutive and better priced than attempting to raise the funds in a single placing.
“We are also encouraged that completions and recompletions will be pursued first, as these offer the most immediate avenue to increased production levels, while also learning more about the optimal completion technique for the play.”

Mariana Resources removes another layer of risk from Patagonia project

Mariana Resources (AIM: MARL) this morning removed another layer of risk from its promising Las Calandrias gold-silver project by acquiring the freehold surface rights to the licence area in Patagonia.
The purchase also gives the  company more  flexibility in  the future to fast-track  the exploration and development of the site.
The surface rights cover all of the known Mariana gold mineralised zones at Las Calandrias as well as those areas considered to be the highly prospective for new gold discoveries.
The agreement allows the former owner occupy and farm livestock on all vacant land at but prevents him interfering with any exploration and future mining operations.
Mariana has a project office on site as well as two new  core sheds and the recently purchased new camp  facility.
This will cater for 36 people and is fully operational now that a 10,000 metre drill programme is underway to define a maiden resource at Las Calandrias.
Mariana's  Chairman John Horsburgh  said: "The purchase  of the freehold surface rights  demonstrates our commitment to our flagship Las Calandrias project as we continue  to advance the project through the development cycle and up the value curve.  
“The purchase not  only secures our  access to the  project but gives us future   flexibility  to  optimise  further  exploration  work  and  development infrastructure.
"Mariana  is continually  engaging local  communities and  has maintained a very good  relationship with  the previous  owner which  we hope  to build upon as we develop  the  Las  Calandrias  project.  
“We  believe this purchase demonstrates Mariana's commitment to the project, local community and the Santa Cruz Province as  a  place  where  junior  explorers  can  add wealth for shareholders through discovery and development."
The company’s broker FinnCap said the freehold purchase is a positive step in the development of the Argentinean project.
Analyst Joe Lunn said: “It removes the risk of a third party delaying the project in the future by demanding a high level of compensation in return for relinquishment of these rights. We expect the assay results of the first holes at Las Calandrias shortly.”
The project is located in the Deseado Masif, the up-and-coming area in Argentina for gold and silver discoveries.
It is divided in two – Calandria Sur and Calandria Norte – and the licence is 100 per cent owned by Mariana.
Around a year ago Sutcliffe and his team drilled 1,350 metres of holes around Norte and came away with very little.
“We got a few metres with a few grams of gold,” managing director John Sutcliffe told Proactive Investors recently.
However he had better luck when he began a second round of drilling to 70 metres that struck bonanza grades of gold between 338 grams and 443 grams per tonne.
“It is pretty amazing. But both intersections are very narrow - in one case one metre and the other 80 centimetres,” Sutcliffe says.
The first programme, completed in October 2009, did find a very viable target at Sur, which the Mariana MD says is “stacking up to be bulk minable”.
The grades here range between 0.9 grams per tonne and 2.4 grams, but are spread over a much greater area.
However Sutcliffe reckons the drill programme is yet to uncover Sur’s full potential.
“Calandria Sur is a bowl with the gold like a soup at the bottom of the basin,” he explains.
“The gold is spread out over a large area. What we are looking for is where the gold came from, because it didn’t just appear in that rock. It didn’t form that way. It has got to have come from some sort of feeder zone.
“I think the feeder zone is something like Calandria Norte, which is a vein of a high-grade multi-ounce feeder zone.
“Perhaps what we haven’t found at Calandria Sur is what could actually be the future if the project.
“It is going to be hard to find (the feeder zone) and we may not find it in this round of drilling. If we don’t find it then this project is still going to have legs.”
While Mariana continues to look for the source of the gold at Sur, the drilling is also designed to help it compile a resource estimate, which it hopes to publish by the “first part of next year”.
However Mariana isn’t a one project play.
Drilling at Sierra Blanca, in Argentia, will begin by the end of the year with the potential for silver-gold discovery. Mariana owns 70 percent of Sierra Blanca, though it has an option to a buy the remaining 30 per cent from IAMGOLD.
“We have got on the surface some very exciting silver numbers,” says Sutcliffe.
One particular 11 metre intersection contained 386 grams of silver per tonne coupled with a not-to-be-sniffed at 3.4 grams of gold.
“The numbers are really interesting, but we’ve not been able to nail it in the drilling,” Sutcliffe explains.  "This is mainly the result of drilling problems – difficult ground and loss of water circulation.”
In Chile the group has joint ventured all its iron oxide copper gold (IOCG) projects there with Cliffs Natural Resources. The earn-in agreement could see the American group take a 70 per cent stake in Mariana’s Northern Chile properties.
But it will only do so if it invests US$3 million developing them. Cliffs has committed to a minimum spend of US$500,000.
FinnCap analyst Lunn reckons this is a very sensible approach.
“We view the decision ... as an excellent way of unlocking the potential value of this world class exploration ground while maintaining shareholder exposure in the event of a discovery,” he said.
And he points out that while there is the potential for a major copper discovery in Chile, he also notes that a “substantial amount of geophysics” needs to be carried out before drill targets can be determined.
Back in Argentina, and just two kilometres from Calandria Sur, is the El Nido prospect, which barely rates a mention in the Mariana literature and certainly isn’t included in the company’s current valuation.
FinnCap’s Lunn has taken a stab at valuing Las Calandrias and reckons it is worth 41p a share based on a resource of 600,000 ounces of gold. However his matrix gives an upside case of 91p.
“We think that the enlarged mineralised footprint at Calandria Sur, proved up by the recent drilling campaign, has the potential to contain up to 500,000 ounces of low grade, bulk tonnage mineralisation,” Lunn said in a note to clients shortly after the summer fundraiser.
“But our re-rating of the shares is primarily due to the bonanza gold grades encountered at Calandria Norte, located 700 metres away.
“Although only two ore grade holes have been drilled so far, we believe that Calandria Norte has the potential to become the standout discovery at Las Calandrias.”

Rising gold price, upbeat site visit prompt Numis upgrade to Anglo Asian

A positive site visit and a rise in commodity prices have prompted Numis analyst Andy Davidson to raise his price target for Anglo-Asian Mining (LON:AAZ).
It moves to 70p a share from 50p - well above the current price of 43p.  And it values AAZ at a middle-of-the-range 1.25 times NAV.
Anglo has taken Azerbaijan’s first modern day gold project into full production - at Gedabek, in the west of the former Soviet republic. It poured its first gold last year.
Total production was 40,000 ounces in the first year of production and in the last six months AA has produced 28,500 ounces of precious metal. 
That puts it on course to hit its target of 60,000 ounces predicted for 2010.
“Having delivered on production, we believe management’s attention will now re-focus on exploration to deliver the next the next stage of growth both at Gedabek and in the region as Anglo looks to exploit its first mover advantage,” Davidson said in a note to clients.
The spectre of a second round of quantitative easing (QE2) and worries the global economic recovery could falter have sent investors scurrying for gold.
This has driven the price up to over US$1,300 an ounce and led to a re-appraisal of companies such as Anglo, where valuations were made base on some very conservative forecasts for the price of the precious metal.
At the same time investors are now looking at some of the junior miners – particularly that have made the transition into production – as an alternative to directly investing in gold or gold ETFs.
“We believe AAZ is a good play on the gold price with solid management and good growth potential,” Numis analyst Davidson told clients.
Away from Gedabek, the group is making good progress with its Gosha gold licence, which should be extended beyond April 2011.
And the company is confident that it will extend the Ordubad licence area, which is up for renewal 2011 and which will allow it to further develop the property to fast-track towards a discovery.
For the producing Gedabek mine the company has a production sharing agreement with the Azerbaijan authorities.
This is an almost exact facsimile of the deal the Azeris have with the established oil companies operating in the country.
The agreement allows for the group to recover 75 per cent of the cost associated with Gedabek, though the government will take 12.75 per cent of revenues during that claw-back period.
After that the Ministry of Ecology and Natural Resources is entitled to 51 per cent of the "remaining proceeds".
"However, for the next three years we will be recovering around 87 per cent of the revenue.
"We can recover against historic and capital and operating costs, plus charge an imputed rate of interest on those outstanding cost.
"However as a low cost producer we will make a decent profit margin,” chief financial officer Andrew Herbert told Proactive Investors recently.
"For many mining companies there are better arrangements. On the plus side we have a reasonably low costs base and constructive relations with the government. Overall it is a good environment in which to do business."
Those close links with Azerbaijan have been fostered by the company’s chairman, Khosrow Zamani, a former director of the International Finance Corporation, and chief executive Reza Vaziri.
Vaziri has close ties to the country as a founder of the US-Azerbaijan Chamber of Commerce, which channelled investment into the nation after the collapse of the Soviet Union.
"We have got good relationship with the Azeri government, "Herbert said.
"Our CEO is on good terms with the Government of Azerbaijan.

Japan holds the key for a revitalised Hydrodec

Three weeks ago the tide turned decisively in favour of green-tech minnow Hydrodec (LON:HYR), after it successfully completed a £3 million placement of new shares.
The cash injection should provide the group with the financial headroom to pick up the pace of its growth after two years of grind.
Its main markets are also recovering (and growing) and it has signed a joint venture deal in Japan that could utterly transform its prospects.
That partnership – with an off-shoot of the Kobe Steel Company no less – is down to the firm’s pioneering technology.
It has invented a way of re-cycling oil used in electricity transformers that removes cancer causing PCBs (proper name polychlorinated biphenyls), used for their coolant properties.
Although PCB’s were banned under UN laws in the 1980s, billions of barrels of  PCB-laced  oil are thought to be stockpiled worldwide  because it is very expensive to dispose of or hard to degrade.
However Hydrodec’s alchemy not only provides a practical solution for this legacy environmental problem but has also opened a global market for it to refine both non-PCB and ordinary, used transformer oils.
Moreover, the process is already being applied at commercial scale in its two operating refineries in Australia and America.
Investor attention is likely to perk up soon if, as expected, the US Environmental Protection Agency approves its unique process to recycle toxic transformer oil in the US.  
Meanwhile, in Japan, there is a massive clean-out going on where these PCBs are being removed from all areas of industry and it is backed by strict government enforced regulation. But we will talk more about this later.
Let’s take a step back and look at the fundraising of September 24. It removes the shackles from Hydrodec, which has struggled through the global financial meltdown, but is now starting to gain a bit of traction.
It placed 50 million shares at a price of 6p each. The injection of funds will see the company through to a position where it is generating a sustainable flow of cash from its operations – which should happen in the first part of next year - and also to profitability, which ought to occur at the same time.
A number of factors, including a US supplier withdrawing credit, meant the company was “cash tight”, chief executive Mark McNamara says.
He told Proactive Investors: “Although we are trading at an acceptable level, and we are gradually going into profit as we speak, the rate of cash generation is still a constraint on the company.
“We have a lot of growth ahead of us. Things are starting to come up good and we need to unlock the company.”
The proceeds from the fundraiser will do just that. At the same time demand from is very definitely turning in favour of Hydrodec, which began building its US  refinery  in September 2008,  just as  the economic cycle was peaking.
“We couldn’t have timed it worse to the day,” admits McNamara, although things are shaping up quite nicely now.
The group’s profit margins from the US and its first plant in Australia are shaping to surpass the 60 cents-a-litre needed to break even.
In the States, the group is now seeing demand outstripping the supply of its branded, re-processed transformer oil.
This means it can replace lower margin customers with ones who will pay a more economic rate for the product and order more regularly.
The upturn in trading conditions were reflected by strong first half results reported last month.
Crucially,  EPA approval  would  for the first time also enable it to source PCB-contaminated oils as feedstock , providing a further fillip for margins. (At present its US refinery is only allowed to handle non PCB waste oil)
McNamara admits the  upgrade of  its customer list  may take “six months, a year or even longer” to complete. “But we are now in a progressive margin improvement phase,” he adds.
The recovery story is an interesting one, but the growth potential lies in Japan, although the agreement with Kobe also covers South Korea, India, China, Taiwan and Vietnam.
As I said earlier, the Japanese lead the way in eradicating PCBs to the point there is strict regulation and legislation that governs the removal of these man-made carcinogens. In March 2010, its process received exclusive approval by the Japanese environmental ministry, effectively  giving  the joint venture a monopoly to recycle PCB toxic oil for the local electricity generation sector.
Hyrdrodec’s technology, the result of an eight-year research and development project between Australia’s Commonwealth Scientific Industrial Research Organisation and the nation’s power industry, is the only re-processing technique in the world that removes PCBs from transformer fluid.
There is  little risk to this 50-50 partnership with Kobe. Hydrodec provides the scientific and technical know-how to build a refinery and the steel giant stumps up the cash to build the plants, which cost around US$20 million to construct.
The partners have identified two sites in Japan, with a third under consideration. First revenues from the partnership are expected to materialise in the second part of 2011.
“We have been given quite a substantial red carpet run in to the market,” McNamara says.
“We allow them to achieve a regulatory objective that can’t be reached without our technology.
“We have a regulated market that coincidentally is designed for our technology. And we have a partner in the Kobe Steel Group that has the resources and capacity to deliver that Japanese marketplace.”

Getting under the bonnet of clean energy specialist Camco

Camco International (LON:CAO) describes itself as an emissions to energy project developer.
Yet this barely scratches the surface of what it actually does.
The group, which is listed on AIM, has so many moving parts it is difficult to put a proper label on it.
It is at the cutting edge of carbon emissions and carbon project development, but is also a project manager and has a world recognised green consultancy.
And it is this seeming complexity that appears to have so foxed investors that they have missed some fairly obvious value triggers.
The business is split into three distinct units.
The first and biggest is the carbon division. It works with power generators and large industrial companies reduce their emissions of the greenhouse gas, often to meet regulatory requirements such as the United Nation’s Kyoto Protocol.
But instead of managing these projects for so-called “compliance buyers”, Camco will develop them “at risk”. This means working with the project owners and sharing the profits in much the same way a traditional property developer might.
It will then earn its payback from revenues generated by the scheme, or bank valuable carbon credits.
The carbon business has a second leg: one that creates and commercialises carbon credits. Please don’t confuse this with trading carbon credits.
It actually makes the products the dealers buy and sell and it does so for its clients – those so-called “compliance buyers”. The market for carbon credits might be in its infancy, but Camco’s capabilities in this area are advanced.
Away from carbon emissions, the group also invests in clean energy projects from agricultural methane in the US to industrial energy efficiency in south-east Asia.
Here it doesn’t risk balance sheet equity, but has capital available to invest.
In the US it has a US$30 million draw-down facility with a specialist energy fund. And in South East Asia it has US$30 million available from a joint venture with the sovereign wealth fund of Malaysia.
It is only involved in activities it understands intimately, which means its developments are very similar to each other.
The value of this part of the Camco business should have been underlined by a joint venture deal the company struck with the Malaysian sovereign wealth fund - Khazanah Nasional - which will see the model rolled out locally and regionally.
An initial spike in the share price suggested the market had picked up on the importance of the joint venture.
Unfortunately the stock has since given up most of those gains. We will discuss this in detail later in this piece.
Finally, Camco has a profitable energy and carbon advisory operation that also helps the company understand and shape the regulatory environment in which it works. Clients include governments in Africa, the EU and China.
Having considered the various working parts of the business it is worth looking at just how it is valued and perhaps what the market might have missed in the blur of all that information.
With around £16 million of cash on the balance sheet, Camco has an enterprise value of just £10 million, or just over two times EBITDA.
However even that doesn’t really tell the full story here.
Take for instance the tie-up with Khazanah Nasional, which KBC Peel Hunt, conservatively values at £7.7 million, but says could be worth £15 million.
Then there are 15 million unsold carbon credits bought for about 8 euros per credits and currently trading at 13.75  and another 15.5 million on which it will receive a 15-30 per cent revenue share when they are sold.
Peel Hunt analyst Andrew Shepherd-Barron reckons the fair value of the company is £50 million or 28 pence a share.
In a research note focusing on the Malaysia deal, he said: “Camco’s partnership with the government’s investment arm crystallises significant value and gives transformational credibility to CAO’s strategy of building a broader long-term business.
“The shares trade at a 50 per cent discount to our revised fair value, and this is unwarranted.”

Rockhopper delays key report on Falklands oil discovery

Rockhopper Exploration (LON:RKH) shares spiked around 25% lower in early trading, after it warned of a delay to a key report on the Sea Lion oil discovery in the North Falkland Basin.
The company had hoped to complete a Competent Persons Report (CPR) by the end of 2010, but due to a lack of data the report is now expected in the second half of 2010.
Rockhopper told investors that new data is required as a CPR based on the data gathered so far, would cut both the existing oil in place and contingent resources reported in a ‘volumetric’ update in June.
The resource figures might reduce by around 30%.
“This would not reflect the board's view of the prospectivity of Sea Lion,” Rockhopper stated.
“The Board is comfortable with the existing range of contingent resources as contained in the preliminary volumetric update.”
Rockhopper is now preparing new work programmes to gather enough data for the new CPR.
Crucially it is discussing a new drilling contract with Diamond Offshore Drilling to keep the Ocean Guardian rig in the Falklands for at least three more wells.
The company will also have options to extend the contract for further five wells.
Also new 3D seismic programme is being planned. The seismic work is slated for January 2011, subject to contacting.
Rockhopper said it is evaluating its funding options for the new work programmes. A fundraising may include an equity issue.
After a sharp fall in opening trading on London’s AIM market, Rockhopper shares have bounced somewhat and were last trading at 384p, down 16.5%.
In this morning’s Fox-Davies ‘Daily Monitor’ the analyst highlighted that whilst the news is likely to un-nerve the market it intends to hold firm with previous guidance. "We would see it as short-term jitter and see no reason to change our forecasts,” Fox-Davies said.
Similarly Westhouse Securities oil and gas analyst David Hart acknowledged the "significant adverse impact" of today's news, but remained positive in his overall outlook.

“We believe this is overdone ... there remains significant upside associated with Sea Lion, which will be unlocked following additional work”.

“For now, assuming a more conservative resource estimate of 170mbbl for Sea Lion, we have reduced our target price to 495p but retained our BUY recommendation.”
The high profile Falklands oil story has featured a number of peaks and troughs, with the initial challenges in getting a rig to the remote location, mixed results from initial drilling and a number of technical hiccups.
However just a glimpse at the charts for AIM’s North Falkland explorers quickly tell their own story.
The high level of investor interest and buoyant share prices have been driven by Rockhopper’s Sea Lion discovery back in May.
Since the discovery Rockhopper shares have risen from just 35p to hit a new high of 549p in September.
Rockhopper’s peers Desire Petroleum (LON:DES) and Argos Resources (LON:ARG) have also performed well in the market.
Desire is currently drilling the Rachel exploration well in the North Falkland basin, and it had mixed success with earlier joint venture drilling alongside Rockhopper. Since May the shares have advanced from 39p to reach 170p earlier this month.
Argos joined the AIM market in July, bringing its earlier stage assets near Rockhopper’s Sea Lion to investor’s attention. With the growing profile of the Falklands play the Argos share price has risen particularly strongly.
After floating at 31p in July it more than doubled to hit 71p in September. This morning Argos was last trading at 51.5p per share.

Tuesday, 5 October 2010

Fusion IP promotes CFO Gardiner to the board

Intellectual property company Fusion IP (LON:FIP) has promoted current chief financial officer Tony Gardiner to the main board as finance director.
Gardiner, who has previously held senior financial positions with Eversheds LLP and KCOM Group, also presently serves as a director at Fusion IP Sheffield Limited, Fusion IP Cardiff Limited, Fusion IP One Limited, Fusion IP Two Limited, all part of the Fusion IP Group.
Gardiner’s past directorships within Fusion IP Group were at Magnomatics Limited and Mesuro Limited.
“Tony has made a significant contribution to the company over the last few years and his promotion to the main Board is much deserved recognition of this fact.
“I look forward to continuing to work with Tony,” said chief executive David Baynes.
Fusion IP, previously called Biofusion PLC, was established in 2002 to commercialise university-generated intellectual property. Fusion IP has signed long term agreements with the University of Sheffield and Cardiff University, giving a combined R&D spend attributable to Fusion IP of approximately £185 million a year.
Last month, Fusion’s Sheffield-based partner Absynth Biologics signed a licensing and collaboration agreement with MorphoSys, which will generate antibodies using its proprietary HuCAL PLATINUM antibody library which Absynth will test in relevant disease models.
Absynth will receive an upfront payment with further milestone payments and royalties.

Epistem upped revenues by 45% in FY

Epistem (LON:EHP) published a strong set of results with rapidly growing sales, revenues and product lines.

The company reported a substantial 45% year-on-year increase in sales to £5.7 million (FY09: £4 million), which boosted net profit to £0.3 million (FY09: £0.1m). Earnings per share (EPS) was up strongly to 3.8p (FY09: 1.1p).
"I am delighted to report significant growth and ongoing improvement in Epistem's results,” Epistem chairman David Evans said.
“Whilst market and trading conditions have remained volatile, the company continues to invest in and strengthen its foundations and enjoyed a further exceptional year in difficult times.”
Epistem is transforming itself into a diverse and profitable biotechnology and personalised medicine group. The company is made up of three distinct divisions - Contract Research, Personalised Medicine and Novel Therapeutics.
Evans highlighted that each divisional business increased sales during the year, and each division is establishing itself for growth.
Novel Therapies upped sales by £1.4 million to £2.4 million, Personalised Medicine’s Biomarker sales increased 19% and Contract Research sales were up 10%.

And with the outlook for the expanding group increasingly positive, Evans expects the company to advance quickly in current financial year.

The company highlighted that it has already made a solid start to the new financial year.
Epistem’s momentum continued into the current year, with revenues 15% ahead of last year's comparatives.
“A strengthening operational and financial position confirms our belief that the year ahead will continue to generate substantial increases in our forecast revenues and growth ambitions,” Epistem chief executive Matthew Walls said.