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
Solid State is a manufacturer of computing, power and communications products, and value added distributor of electronic components. This morning, the group has provided a further update on trading in light of the present COVID-19 backdrop, ahead of full year results to 31 March 2020 due to be released on 30 June.
Cadence today provides and update on the Amapá iron ore project in Brazil. The Amapá JV (EV Mineração S.A.), in which Cadence can earn an initial 20% of the project, is understood to be on track to begin shipping stockpiled iron ore from late Q2 / early Q3 2020. Finalisation of the negotiation with the secured creditors still needs to be reached, but the Amapá JV partners are engaging constructively. In preparation for shipping, a trucking contractor has been hired to move key equipment to site and a shipping manager and shipping broker have been engaged.
This morning's update from CSSG confirms the positive direction of travel highlighted when the company published H1 results in March. With comparators still challenging (because of one-off work in the prior year), and “light” Covid-19 impacts in recent months, the expected £1.6m EBITDA flagged by the company seems a creditable number, still within touching distance of historical performance in both EBITDA and PBTA terms. Net cash, moreover, even after three months of the Covid-19 crisis, is reported to still be higher than the £2.4m which the company reports it had at the start (which in turn represents an increase on the £2.3m as at 31 December 2019). Not surprisingly, having suspended payment of the dividend a couple of months ago, the Board is now proposing to have another look at this question, at least in relation to the half year dividend.
PTY's announcement this morning flags a change in the CFO role with the new appointee benefiting from extensive experience in developing digital businesses to their full potential, both in overall and in financial leadership positions. His arrival follows on from highly proactive action led by the previous finance director, delivering a platform for growth once the current uncertain circumstances have abated.
Companies: KDNC CSSG PTY SOLI
A month on from JIM's last update to the market, this morning's RNS fills us in on developments post-Covid-19, highlighting (1) robust implementation of disaster recovery plans, with safe working taking place for the most part off-site, (2) the post-election increase in trade volumes continuing in recent weeks on the back of Covid-19-inspired volatility, and (3) interim dividend to be paid, as previously announced, around June 11th.
In some potentially game-changing news released today by Cadence – DEV Mineração S.A. (“DEV”), the owner of the Amapá iron ore project in Brazil has been granted permission to commence iron ore exports from stockpiles at the ports (estimated at 1.4Mt grading 62%Fe). Permission was granted by Brazil's Commercial Court of São Paulo as a result of a petition filed by DEV which was supported by a judicial trustee and creditors committee.
Companies: Cadence Minerals Plc Jarvis Securities Plc
Cadence Minerals (KDNC) – Corporate – Reinstatement of Railway concession at Amapá
Companies: Cadence Minerals Plc
DNEG Limited One of the world's leading digital visual effects, animation and stereo conversion companies for feature film and television.The Offer will be comprised of new Shares to be issued by the Company (to raise expected gross proceeds of £150m). Admission is expected to take place in November 2019.
Zaim Credit Systems— Zaim currently provides loans of up to Russian Roubles 30,000 (£375) to retail customers through its network of just over 95 sites predominantly in Moscow. Looking to raise £2.6m. Mkt cap £10.9m. Due 4th Nov. 2018 net interest £10.1m, PBT £835k.
Companies: THR CPT CCS INTO PPH PRM BST SAE LEK KDNC
Cadence Minerals is at a crossroads with an extraordinary opportunity to gain a significant share in an advanced brownfield restart of an iron ore mine. The move from Investment Company to a company holding a JV in an operating mine (generating significant revenue, profits and cash flow) could be transformational for the fortunes of this AIM-listed junior. The Amapá iron ore mine was previously closed after a port failure during the last decline in iron ore prices. Before this it had been operating well, producing significant quantities of premium iron ore products and had returned profits to its owners. The new Amapá JV (Cadence option to own 27% initially) has a plan, backed by the regional judiciary and government at all levels, to sell stockpiled iron ore, reinvest the money from this into studies to restart the mine which could, in short-order, be producing upwards of over 5Mt/a of premium iron ore for the far east and China. The current Cadence share price is underpinned by its investments in lithium and REE projects and companies, but the potential for Amapá is not yet factored into what we believe could be a bright future for Cadence. Following the addition of this transformation project to its portfolio, we reinitiate on Cadence and see fair value at 44p/sh.
A busy summer for Cadence sees it at the point where it can begin to see the restart of the Amapá iron ore mine project in Brazil. The Judicial restructuring plan (JRP) was passed by over 90% of creditors present and now accredited by the commercial court of São Paulo the JV will own 99.9% of the Amapá Project. This will also unlock Cadence’s investment of $2.5m for a 20% stake in the JV, to be followed by a further $3.5m investment to take its stake to 27%. There are ready stockpiles at Amapá (1.4Mt grading 61.2%Fe) which will be sold into the iron ore market and at an iron price of $80/t could net the JV $60m (after costs) – the current iron ore price is above this at over $90/t. In our opinion, the achievable plan could see first sales by the end of the year with a more ambitious plan to restart the iron ore mine by the beginning of 2022. If all goes to plan, Amapá could be a company maker for Cadence.
Cadence Minerals (KDNC LN) – Yangibana rare earth joint venture signs second offtake MOU with Schaeffler AG | Strategic Minerals* (SML LN) – AGM, presentation and shareholder evening at Rutland Arms next Tuesday | Thor Mining* (THR LN) – Pilot Mountain metallurgical tests
Companies: SML THR KDNC
Caspian Sunrise (CASP) – Corporate – Operational Update | Cadence Minerals (KDNC) – Corporate – Binding agreement on Amapá
Companies: Caspian Sunrise Plc Cadence Minerals Plc
Renold plc—a leading international supplier of industrial chains and related power transmission products, announced that it will cancel the listing of the Company from the premium segment and apply for admission on AIM. Expected 06 June 2019.
Companies: MSYS BRH SUN RENX MYN AAOG PHSC KCR KDNC
Cadence Minerals (KDNC) – Corporate – Agreement to acquire interest in Amapá iron ore mine in Brazil
Techniplas –global producer and support services company providing highly engineered and technically complex components, making the supply chain to original equipment manufacturers more efficient. FYDec17 rev $515m.
Circassia Pharma (CIR.L) - specialty pharmaceutical company focused on respiratory disease transferring from the Main Market. No funds being raised. Due 4 Feb. Mkt Cap c.£185m.
Greenfields Petroleum (TSX-V:GNF) production focused company with operated assets in Azerbaijan seeking AIM dual listing including $60m private placement. Mkt cap $12.6m CAD. Expected late January 2019.
Chaarat Gold Holdings—RTO, the Company intends to acquire Kapan Mining and Processing CJSC, which owns the Shahumyan medium-sized polymetallic mine in Kapan in the Republic of Armenia. No raise, market cap of £110.1m, due early Feb
Companies: JHD RNWH MPAY ERIS STM R4E ING TRMR RWI KDNC
Walker Greenbank (WGB) – Corporate – AGM update; trading remains challenging but anticipated outturn unchanged | UK Oil & Gas (UKOG) – Corporate – HH-1 Testing to Commence | i3 Energy (I3E) – Corporate – Grant of exclusivity to a potential farminee | Cadence Minerals (KDNC) – Corporate – Earn in into advanced lithium project in Zimbabwe
Companies: WGB UKOG I3E KDNC
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We currently have 23 research reports from 5
In H1, 2020 and the period directly following (Q3, 2020), EQTEC has made substantial operational progress, significantly boosting its project pipeline and strengthening its balance sheet with an over-subscribed £10m fund raising in July 2020. Revenue generation in H1, 2020, however, was constrained due to the impacts of Covid-19 and severe fires in California. We now forecast revenue of €2.4m in 2020E, compared with our previous forecast of €7.0m. Importantly, no projects have been cancelled. Delayed revenue is expected to flow into 2021E. Select new projects, having been secured in 2020, are expected to reach financial close in 2021E and 2022E, in addition to those existing projects under development in those years. As a result, we are increasing our 2021E and 2022E forecasts.
Companies: EQTEC Plc
Talitha Shelf Margin Deltaic LKA resource report
Companies: Pantheon Resources Plc
The stock was up 12% on Friday, 25/09, sparked by the positive outcome on Vodafone’s dispute with the Indian tax authorities. This is encouraging for Cairn, but note that both cases differ. While the tax authorities simply erased Vodafone’s tax bill, they owe up to $1.4bn to Cairn, and could offer more resistance.
Companies: Cairn Energy Plc
Adriatic Metals* (ADT1 LN) – Annual results and review of exploration | AfriTin (ATM LN) –– H1 report highlights production ramp-up at the Uis mine | Ariana Resources* (AAU LN) – US$30m partial disposal of Turkish Assets | Anglo Asian Mining* (AAZ LN) – BUY – Gedabek continue unaffected by the Nagorno-Karabakh conflict | Cornish Lithium (Private) - Cornish Lithium looking to bring the EV supply chain closer to home | IronRidge Resources* (IRR LN) – FY20 results: well positioned to continue de-risking portfolio projects with A$7.3m in the bank | Kavango Resources (KAV LN) – Resuming field exploration of the Kalahari Copper Belt, Botswana | Power Metal Resources (POW LN) – Exploration gets underway on Botswana joint-venture | Rambler Metals and Mining* (RMM LN) – Interims and refinancing of debt and planned restoration of mine production at higher copper grade | Renascor Resources (RNU AU) – Offtake agreement with Chinese anode manufacturer highlights China’s dominance of supply chain | Trans-Siberian Gold (TSG LN) – 8c interim dividend declared reflecting robust FCF and strong outlook | Versarien* (VRS LN) – New Advisory Panel brings together global leaders in graphene within Versarien
Companies: ADT1 ATM AAU AAZ IRR KAV POW RMM RNU TSG VRS
Central Asia Metals (CAML LN) reported robust interim results in the context of the H1 2020 backdrop; solid production and the company’s fundamentally low cost base meant that CAML remained profitable despite the sharp pullback in commodity prices during the period which led to a 17% YoY decline in revenue to US$70.8m. Consequently, EBITDA was down 25% YoY to US$42.5m despite a decline in unit costs of 6% YoY at Kounrad and 9% YoY at Sasa to US$0.48/lb and US$0.43/lb respectively which cushioned the impact of the weaker the top line. With no significant one offs in the period, EPS of US$0.10/sh. was 33% lower YoY.
Companies: Central Asia Metals Plc
H1 2020 results; progress on concept selection
Companies: Jersey Oil & Gas Plc
Another set of record results from Iofina, with H1 2020 benefiting from improved iodine pricing, solid cost controls and robust operational performance. Some of the shine will be taken off by the cautionary tone over the impact of COVID-19 on current iodine demand and pricing. Nevertheless, these results on top of the recent debt refinancing again demonstrate the continued improvements Iofina is delivering both operational and financially. It now has a solid platform of diversified low cost iodine production from five plants, a range of iodine and non-iodine specialty chemicals products, an improved balance sheet and a new lending partner with which to deliver its ‘prudent growth’ ambition.
Companies: Iofina Plc
Jersey Oil & Gas has announced that it has selected a greenfield four-legged platform to develop the Greater Buchan Area which will utilise existing export pipeline infrastructure. We see near-term scope to increase materially our fair value estimate from 268p. We believe that today's news is price material and that it sets the scene for a near-term catalyst rich outlook for the company. It is an opportune time, in our opinion, to gain exposure to the Jersey Oil & Gas investment opportunity.
H1/20 has been a highly successful period for United Oil & Gas, during which time it has successfully transformed into a full-cycle E&P company. Key to this success has been the Abu Sennan acquisition, with net production increasing to 2,700boepd at the end of June. The significant production and reserve additions delivered as part of the 2019-20 drilling campaign emphasises the considerable upside that still remains in the block. Post period, United were granted a 100% operated working interest and an 18-month extension to the Walton-Morant licence, offshore Jamaica. At 229mmbbls, the Walton-Morant licence has the potential to have a major impact on United, which we value at US$724.3m or 76.8p/share unrisked. We update our valuation, increasing our price target to 19.1p/share, a 549% premium to the current share price and reiterate our BUY recommendation.
Companies: United Oil & Gas Plc
Chariot’s interims represent something of a line in the sand for the new management team, with historic oil-focussed deepwater exploration spend written-off, demonstrating its recent corporate and strategic ‘reboot’, which has ushered in a more entrepreneurial approach. Strategy has shifted away from higher-risk frontier exploration in favour of opportunities that better fit the energy transition. With the annual cash burn cut 45% to US$2.5m, no remaining work commitments and period-end cash of US$5.8m, management has a clear path ahead to deliver on its ambitions.
Companies: Chariot Oil & Gas Ltd.
Hargreaves’ FY20 results are very solid indeed. As previously reported, the only noticeable impact from COVID was in the slippage of Blindwells’ land sales, which were due to conclude during the lockdown period. Site activity has resumed and sales remain on track to conclude in the current year. A final dividend of 4.5p has been declared and the outlook statement is measured but confident. We reintroduce forecasts today, effectively reinstating our pre-COVID expectations. Hargreaves is well positioned to deliver a period of significant, renewed growth with the prospect of a double digit dividend yield from FY22 as HRMS profits are distributed.
Companies: Hargreaves Services Plc
Ready to steppe it up – initiating coverage
Companies: Enwell Energy Plc
Three day CMD to detail how BP will redeploy hydrocarbons’ capital into renewables. The latter are expected to grow by 12% CAGR by 2030, which surely is more exciting than oil. Returns do not compare though, but BP intends to make good use of its trading division to bridge part of the gap. Lowering the dividend took care of the rest. Overall, BP diversifies its risks early, which might prove right if oil stays under $50.
Companies: BP Plc
EQTEC announced (last Friday afternoon) an extension of the exclusivity period of the Billingham MOU until 22 November 2020. The extension of the MOU exclusivity period is with the aim of finishing the preparation of a legally binding option agreement with Scot Bros. which, if agreed, will grant EQTEC and its partners the right, but not the obligation, to purchase the entire issued share capital of Billingham EFW Limited (the project SPV) from Scott Bros. subject to an agreement on consideration and other terms.
GeoPark (GPRK US)C; Target price US$20.00 per share: All eyes on CPO-5 - We see the CPO-5 block becoming a key area of focus in the next 18 months and the main reason behind the acquisition of AMERISUR in January 2020. By YE20, GeoPark will drill two wells on the highly prospective CPO-5 block. This will include an imminent development/appraisal well in the Indico light oil field followed by an exploration well. The only existing well in the Indico field is still flowing naturally at >5 mbbl/d since first oil in December 2018. The implied very strong reservoir performance and the fact that the oil pool boundaries have not been encountered yet suggest the field offers production and reserves upside that could start to be unlocked with upcoming drilling. In 2021, GeoPark could drill an additional 5-7 wells at CPO-5 comprising a combination of exploration, delineation and development wells. According to the latest CPR, 3-4 new Indico wells could add 7.5-12.5 mbbl/d gross production (2.5-4.2 mbbl/d net to GeoPark) in 1-2 years. The exploration program for 2021 will likely test the continuity of the Guadalupe play encountered on Llanos-34 into CPO-5. The share price trades at ~55% discount to our Core NAV of ~US$17. Overall there could be 350-700 mmboe gross prospective resources across the Llanos blocks (including CPO-5) that GeoPark is imminently starting to explore. Our target price of US$20 per share reflects our ReNAV. It represents ~150% upside to the current levels.
IN OTHER NEWS
Gran Tierra Energy (GTE CN/LN): Production update in Colombia – During 3Q20 to date, production has averaged ~18.700 boe/d increasing to an average of 21,250 boe/d during September, reflecting the resumption of production at the Suroriente and PUT-7 Blocks in the southern Putumayo region, as well as at several minor fields, and by the recommencement of workover activities at the Acordionero oil field. As of August 31, 2020, Gran Tierra has collected total VAT and income tax receivables of ~US$51 mm; the company expects to collect approximately another US$25 to $35 mm before YE20. FY21 WI production is expected to be >30,000 boe/d.
Pantheon Resources (PANR LN): Resources update in Alaska – The SMD horizon at the Talitha prospect is estimated to hold 302 mmbbl prospective resources. 91 wells would be required to develop the field that would reach 90 mbbl/d peak production. Pantheo holds 89.2% of the project.
IGas Energy (IGAS LN): 1H20 results – 1H20 net production in the UK was d ~1,940 boe/d. Cash balances as at 30 June 2020 were £2.6 mm with net debt of £11.2 mm. IGas reiterated its FY20 production guidance 1,850 - 2,050 boe/d, with underlying cash operating expenses anticipated to be $34/boe.
Royal Dutch Shell (RDSA/B LN): Selling assets in Norway – Shell is selling its interests in the Kvitebjørn and Valemon fields in the North Sea to PGNiG.
UK Oil & Gas (UKOG LN): Updated volumetric at UK asset – The Loxley Accumulation is now expected to hold 23-70 bcf recoverable resources. ~78% of the overall Loxley gas accumulation's gas resource are interpreted to lie within the Company's PEDL234 acreage.
MIDDLE EAST AND NORTH AFRICA
Genel Energy (GENL LN): Receives payment from the KRG – Genel has received a total net payment of US$10.8 mm for sales at Tawke and Taq Taq in August.
Maha Energy (MAHA-A SS): Oman entry – Maha has been awarded 100% WI in the onshore Block 70 that includes the shallow undeveloped Mafraq heavy oil field. The Block is located in the middle of the oil producing Ghaba Salt Basin in the central part of Oman. The Mafraq oil field was discovered by Petroleum Development Oman in 1988 and was further delineated by four wells and 3D seismic in stages until 2010. The Mafraq field is estimated to contain between 185 – 280 mmbbl of original oil in place. The productive reservoir is located at approximately 430 m below ground level.
Africa Energy (AEC SS/AFE CN): Private placement – Africa Energy has raised US$28 mm of new equity priced at SEK3.00 per share.
San Leon Energy (SLE LN): 1H20 results – Gross oil sales at OML-18 were 25.2 mbbl/d during 1H20 with gas sales of 39.1 mmcf/d. Production downtime and “losses” were respectively 15% and 20% over the period. San Leon held US$22.6 mm in cash as at 18 September (US$6.8 mm is held in escrow for the Oza transaction).
Companies: GENL GPRK MAHAA RDSA UKOG