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Forecast and valuation update
Companies: HUR HUT HRCXF
Anglo Asian Mining is an AIM listed precious and base metals producer running flagship Gedabek operations in western Azerbaijan which include open pit and underground mining facilities and a processing complex fit for different types of ores. Production runs at ~70-80kozpa GEO (~90% gold) with low operating costs status allowing the Company to generate FCF for organic growth opportunities within the highly prospective +1,000km2 land package and potential value accretive transactions over targets outside Azerbaijan as well as offer a generous dividend yield.
Companies: Anglo Asian Mining PLC
Shanta Gold (AIM: SHG) has announced this morning its production and operational results for the quarter ended 30th September 2020 – see Fig 1. Overall this was a robust performance (from one of the most consistent operators in the sector) in the face of the pandemic and a very busy quarter for the company at corporate level. QoQ production fell to 19,973 oz and AISC rose to $883/oz – both caused by a temporary drop in grade – but the ongoing strength in the gold price resulted in a 16% and 46% increase in EBITDA QoQ and YTD respectively. There was an increase in net debt to $5.1m which can be explained by the $7.1m cash outlay for the West Kenya projects as well as the reduction in the hedge book (they also have $5.9m of gold dore in the gold room). The company remains on track to hit its full year guidance of 80-85koz of production at an AISC of $830-880/oz which would make it the third year in a row they have hit their unaltered guidance for the year. This would be a remarkable achievement for a major gold miner operating in a developed market let alone one operating in the South West corner of Tanzania. Likewise the fact the company has recorded zero lost time injuries makes it nearly three years in a row with no LTIs. With the greenlight for Singida and a scoping study completed for the West Kenya Project during the quarter, the company can look forward to leveraging this operational expertise across a larger and longer life production base (c.220Koz of annualised production). We continue to believe the market is still to wake up to this given a market cap of US$219m, next to no debt and EBITDA annualising at $90m.
Companies: Shanta Gold Limited
Oil posted a small weekly gain on tentative signs that demand is picking up even as a new wave of coronavirus cases casts a shadow over the market.
Futures in New York edged lower on Friday, but still managed to record an advance of 0.7% this week on shrinking US crude stockpiles and signs of improving demand in China and India. Gains were capped by record new virus cases from Germany to Portugal and the biggest surge in US daily infections in two months.
Crude futures in New York have clung close to the $40-a-barrel mark since September amid uncertainty around a demand recovery as the virus rages. Meanwhile, OPEC producers and allies see a risk of an oil surplus next year if Libya's production rises and demand remains depressed.
At the same time, the market's structure continues to strengthen, with the spread between Brent's nearest contracts at its narrowest since late July. For West Texas Intermediate futures, the prompt spread rallied to its tightest contango in a month.
West Texas Intermediate for November declined 8 cents to settle at $40.88 a barrel.
Brent for December settlement lost 23 cents to $42.93 a barrel. The contract rose 0.2% this week.
Prices pared earlier losses on Friday after American retail sales and consumer sentiment indicators topped estimates.
The Organization of Petroleum Exporting Countries and its allies are facing pressure to postpone their plans for tapering output cuts. Given the uncertainty over the oil demand outlook, the right course of action is to wait for now, JPMorgan analysts including Natasha Kaneva wrote in a report. The move to add another 2 million barrels of day onto the market in January could be postponed by a quarter, the report said.
OPEC+ is also contending with the unexpected return of Libyan oil output, which hit 500,000 barrels a day this week. The group forecasts that global oil supplies could increase by 200,000 barrels a day next year if Libya manages to revive supply and the pandemic hits demand harder than expected, according to a document seen by Bloomberg.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Trifast has released an interim trading update which highlights trends that have continued from the AGM statement in September with trading slightly ahead of the Group's base case assumptions for FY21 of revenue down c.16% YoY. September was the strongest month in the Group's first half and the press release indicates that October has also started well for sales and orders. The trading update indicates resilience in the business considering the tough trading environment.
Companies: Trifast plc (TRI:LON)Trifast plc (25D:BER)
GeoPark (GPRK US)C; Target price US$20 per share: Drilling at CPO-5 has started - The 3Q20 operating update did not contain any surprises, with overall production increasing by 5% vs the previous quarter, reflecting higher sales in Brazil, Argentina and Chile. Importantly, gross production at Llanos-34 is back to 60 mbbl/d with some work-over backlog and development drilling having restarted. Overall net production (across all of GeoPark’s assets) was 40 mboe/d at the end of September and FY20 production guidance of 40-42 mboe/d has been reiterated (2H20 capex guidance of US$25-35 mm). Drilling at CPO-5 (GeoPark WI: 30%) has now commenced with the Indico-2 appraisal well. With the Indico-1 well still producing 5,169 bbl/d since first oil in December 2018, Indico-2 could add 60% to CPO-5 overall production by YE20 in a success case. GeoPark will publish its 2021 capex budget on 4 November. We view this as an important event as this will provide further visibility on a very exciting drilling programme with 5-7 wells at CPO-5 and 1-2 wells in Ecuador. The exploration program for 2021 will likely test the continuity of the Guadalupe play encountered on Llanos-34 into CPO-5.
Tethys Oil (TETY SS)C; Target price SEK75.00 per share: Initiating coverage - Tethys Oil is a well-funded, dividend-paying, Sweden listed US$160 mm market cap E&P with ~25 mmbbl 2P reserves in Oman and ~10 mbbl/d WI production. The company stands apart from its peers in three principal ways: (1) It has achieved “textbook” execution, turning what was initially a small uncommercial onshore discovery on a tiny portion of Blocks 3&4 into a large field that has already produced ~100 mmbbl with a further ~120 mmbbl 3P reserves. (2) The production is very cash generative even at US$40/bbl. At US$45/bbl, even at the currently OPEC constrained production rate, operating cashflow funds all development plus some exploration activities and allows Tethys to pay a 5% dividend. (3) Tethys is conservatively run with US$60 mm in cash and no debt. Historically, the story was about steady y-on-y production, reserves and dividend growth. While these features are still present, an investment in Tethys now also offers diverse exposure to high impact exploration with drilling activities on recently acquired onshore blocks expected to start before YE20. Our target price of SEK75 per share reflects ReNAV and implies over 70% upside.
IN OTHER NEWS
Alvopetro (ALV CN): Production update in Brazil – 3Q20 sales were 1,764 boe/d at the Caburé Project.
Maha Energy (MAHA-A SS): Production and capex guidance update – FY20 production (mostly in Brazil) is expected to stand at 3,700–4,000 boe/d (4,000-5,000 boe/d previously). The FY20 capex budget increased by US$8.7 mm to US$24 mm. YE20 production is expected to be 5,200 – 5,700 boe/d.
Pantheon Resources (PANR LN): Resources update in Alaska – The Kuparuk formation at the Talitha project is estimated to contain 1.4 billion bbl of oil in place (OIP) and a Prospective Resource of 341 mmbbl as a most likely case.
Touchstone Exploration (TXP LN): Discovery in Trinidad – The Chinook well encountered 589 net feet of gas pay in three unique thrust sheets in the Herrera sands. Additional natural gas pay of ~20 net feet was encountered in the shallower Cruse formation. Completion and testing of the well is expected to be undertaken in 1Q21.
Trinity Exploration and Production (TRIN LN): 3Q20 operational update in Trinidad – 3Q20 production was 3,135 bbl/d. The company held US$22.2 mm in cash as at 30 September. FY20 production guidance remains 3,100-3,300 bbl/d.
Aker Bp (AKERBP NO): 3Q20 update in Norway – Aker BP produced 201.6 mboe/d in 3Q20. The FY20 production guidance of 205-220 mboe/d is reiterated.
UK Oil & Gas (UKOG LN), Angus Energy (ANG LN) and Egdon Resources (EDR LN): Onshore UK licence relinquished – Long-reach/shallow wells at the Holmwood prospects are neither technically viable nor economically feasible. The licence has been relinquished.
FORMER SOVIET UNION
Caspian Sunrise (CASP LN): Operating update in Kazakhstan – Production at the MJF structure averaged ~1,340 bbl/d. The completion of maintenance activities, the return to production of Well 141 and the installation of a pump at Well 151 are expected to increase production capacity to 2,200 - 2,500 bbl/d.
Enwell Energy (ENW LN): Ukraine update – 3Q20 production in Ukraine was 4,629 boe/d. The company held US$55.7 mm in cash at the end of September.
Kosmos Energy (KOS US/ LN): RBL Redetermination – Kosmos’ RBL credit facility has been redetermined with US$1.32 billion, a reduction of US$130 mm from the previous drawn amount of US$1.45 billion. Repayment of the reduction in borrowing base will be made from available liquidity in 4Q20.
EVENTS TO WATCH NEXT WEEK
20/10/2020: Touchstone Exploration (TXP LN) - Webinar
Companies: TXP ALV ALVOF A6Y DETNOR AKERBP DETNOR DETNF ARC RO1 CASP ROXIF GPRK KOS 7M7 0GEA MAHAA PANR P3K PTHRF TETY TETY UKOG 0UK UKLLF
Central Asia Metals (CAML LN) reported strong copper results for Q3 2020, up 14% QoQ to 3.9kt enabling a 3.7% increase in our 2020F production forecast to 13.9kt, in line with new guidance of 13.5-14kt. YTD copper production of 10.5kt was broadly flat YoY. This does imply a marginal YoY increase overall for 2020F, however, as well as realised grades being ahead of expectation, we expect CAML to push hard at Kounrad to offset Sasa disruption as much as possible. Kounrad has been out of focus recently, however, with copper prices up 10% YTD and with a strong fundamental outlook, the asset’s low cost base continues to underpin the CAML investment case.
Companies: Central Asia Metals Plc
Despite the absence of new drilling activity, Trinity's Q3/20 production has remained robust, averaging 3,135bopd - an 11.3% YoY increase (Q3/19: 2,816bopd). YTD 2020 average production volumes have averaged 3,232bopd, a 9.8% YoY increase (YTD 2019: 2,943bopd), with 2020 production guidance remaining unchanged at 3,100-3,300bopd. Oil price realisations YTD 2020 have averaged US$37.3/bbl and, as a result, no Supplemental Petroleum Tax (SPT) will be payable in respect of the first three quarters of 2020. Cash as at 30 September 2020 was US$22.2m (30 June 2020 US$19.7m). Elsewhere, we view the proposed Budget reforms to the SPT regime as an important step forward by the Trinidad and Tobago Government and a recognition that SPT needs reforming. The proposed reforms will enhance cash flows between US$50-US$75/bbl and therefore allow companies to invest to grow production and deliver attractive returns for shareholders. We update our valuation and reiterate our price target at 31p per share, a 250% premium to the current share price.
Companies: Trinity Exploration & Production Plc
Trans-Siberian Gold's (TSG) Q320 results show improved year-on-year and quarter-on-quarter top line results, despite a reduced operational performance, largely due to higher gold and silver prices and increased tonnages. Gold grade and silver grades from the Asacha Gold Mine for the first nine months of the year are slightly lower than we had expected [due to Q1 performance]. Production levels above are expectations, which has negated the impact of the lower average grade for the first 9 months. We raise forecasts and our target price to 184p.
Companies: Trans-Siberian Gold PLC (TSG:LON)Trans-Siberian Gold PLC (UJ1:FRA)
Goldplat the processor of gold-bearing wastes and residues from mining operations today reports on its first quarter ending Septe2020. As expected the company continues to maintain robust operating profits from its South African operation (£1.12m, up from £1.07m in the same period last year) and an increased operating profit from its Ghana operation (£0.28m up from £23k). Goldplat is in the process of selling its Kilimapesa gold mine in Kenya which contributes small operating losses to the Groups overall performance with the sale expected to finalise by the end of December.
Companies: Goldplat plc
Valeura Energy (VLE CN/VLU LN): Selling Turkey shallow – Valeura is selling its producing shallow conventional gas business to TBNG for a cash consideration of US$15.5 mm, plus royalty payments of up to an additional US$2.5 mm.
Increased estimates of of gas discovery offshore Turkey – The Tuna-1 discovery in the Black Sea is now estimated to hold 14.2 tcf (up 3 tcf compared to previous estimates).
FAR Limited (FAR AU): Financial update – FAR continues to be in default with regards to its obligations in Senegal. The company is in a default position of US$29.6 mm (excluding interest). FAR had US$59.0 mm unrestricted cash at hand at 30 September 2020.
Tullow Oil (TLW LN): Approval to sell Uganda – Tullow has received government approvals with regards to the sale of Uganda to Total. The transaction is expected to close in the coming days.
EVENTS TO WATCH NEXT WEEK
27/10/2020: Bp (BP LN) – 3Q20 results
29/10/2020: Royal Dutch Shell (RDS LN) – 3Q20 results
29/10/2020: Aker Bp (AKERBP NO) – 3Q20 results
29/10/2020: Repsol (REP SM) – 3Q20 results
30/10/2020: Lundin Energy (LUNE SS) – 3Q20 results
30/10/2020: Seplat Petroleum (SEPL LN) - 3Q20 results
Companies: FAR VLE TLW
Bushveld is an integrated vanadium mining, processing and technology businesses. The South African group owns 74% of Vametco and 100% of the Vanchem. Bushveld Energy (84%) is developing vanadium redox batteries for grid use in SA. Bushveld FY 2019 figures are dominated by the positive revaluation of the acquisition of Vanchem (100%) for US$55.8m in November 2019.
Companies: Bushveld Minerals Limited
Lithium in London with a focus on European projects
This corporate sector note on lithium will comment on the European lithium raw material sector and how the advanced projects being developed by Savannah Resources, European Metals Holdings and European lithium fit into the European-regional picture. Lithium production from these projects, once commissioned, will go some way to creating a domestic supply of this critical metal within Europe.
• Savannah Resources – Developing the Mina Do Barroso project in Portugal as a producer of spodumene concentrate. The project is in Feasibility.
• European Metals Holdings – Developing the Cinovec project in the Czech Republic as an integrated producer of lithium hydroxide / carbonate. The project is in Feasibility.
• European Lithium – Developing the Wolfsburg project in Austria as an integrated producer of lithium hydroxide. The project is in Feasibility.
Companies: KDNC EMH SAV
Oil posted its first back-to-back weekly loss since April's rout with the end of the summer driving season and concern about OPEC's production compliance weighing on prices.
Futures in New York edged up on Friday, but prices fell 6.1% this week coinciding with a retreat in U.S. equities. Traders are also examining data indicating the United Arab Emirates since July has been regularly exceeding its quota under a deal between the Organization of Petroleum Exporting Countries and its allies.
The uncertainty over how much supply OPEC+ is returning to the market adds another wrench in the recovery for oil prices still reeling from the pandemic-driven blow to consumption. While U.S. supplies had grown tighter in past months and producers were expected to restrain production amid a weak financial backdrop, stockpiles rose again last week for the first time since mid-July.
Companies: 0R1M 0J50 JSE 88E ADV CAD CHAR ECHO ENOG EME I3E PMG RBD SQZ SOU TLW VGAS WTE PHAR
Proposed merger with Chrysaor
Companies: Premier Oil plc