Altus Strategies* (ALS LN) 31.5p, Mkt Cap £22.1m – Sale and royalty agreement on Cote d’Ivoire gold properties | Arc Minerals* (ARCM) - Drilling starts at new Fwiji target in Western Zambia | Caledonia Mining* (CMCL LN) 1280, Mkt Cap £138.3m – Increased quarterly dividend | Oriole Resources (ORR LN) 0.35p, Mkt cap £2.6m – Drilling underway at Senala gold project | Phoenix Copper* (PXC LN) 29p, Mkt Cap £16.2m – Empire mine metallurgical results
Companies: ALS ARCM CMCL ORR PXC
Gold – Robust pricing, improved returns and increased interest
The robust gold price, currently sitting comfortably above $1,700/oz, has been one of the bright spots of the current COVID crisis, although the roots of the price increase were seen well before from mid-2019 on geopolitical and trade concerns. Gold mining companies have been reaping the rewards of the higher price with forecast profits and cash expected to grow significantly. The increase in gold price has been reflected by share price appreciation for most of the gold-mining sector; gold miners, those companies developing gold projects and even gold explorers have all seen an uptick in share prices. Those companies in production should see considerably higher profits and we expect the level of dividends back to shareholders to rise.
The rate of M&A in the sector might also increase, as in previous high price periods, with some companies assuming that these prices can be sustained – however, they will have to be careful as a rash of M&A in previous cycles has shown that there may be a price to pay later on and the industry can ill afford a return to eye-wateringly large write-downs on the other side of this cycle. Gold miners will also have to behave prudently as there will, of course, be a temptation for higher throughput and production, regardless of grade, to generate more cash – a decreasing profit margin perhaps, but a lengthening mine life; as in everything there is a balance to be made to ensure sensible returns.
We are most heartened by a renewed interest in the previously (seemingly) ignored junior explorers which we think is a theme that will develop and continue.
Companies: AURA CMCL CNG GDP JLP ORR
Arkle Resources* (ARK LN) – Raising £250,000 to fund August drilling programme at Stonepark | Beowulf Resources* (BEM LN) – Testwork continues to show good results on graphite projects in Finland | Centamin (CEY LN) –2019 results confirm 2020 production and cost guidance intact | Cora Gold* (CORA LN) – FY19 results highlight progress at the flagship Sanankoro gold project | Oriole Resources (ORR LN) – £165,000 HMRC rebate | Vast Resources* (VAST LN) - £0.9m raised to accelerate Baita Plai drilling programme and metallurgical work
Companies: ARK BEM CEY CORA ORR VAST
Jarvis' announcement this morning that at 11p, the overall DPS for Q2 is being raised 69% YoY (Q2-2018A: 6.5p) follows on from last week's double-digit earnings upgrades which were the result of strong trading so far in the first half of 2020. Strong volumes fuelled our upgrades then, and this morning's RNS again references these powerful drivers for the business in the current environment. This remains unpredictable, but market activity is a positive for Jarvis in whichever direction.
Oriole today announces that it has expanded its proposed drilling campaign to 2,000m at the Bakassi zone at Bibemi in Cameroon. A further 3 holes, for a total of 17 holes, are planned to test a mineralised stacked vein system which was identified during an exploration programme at the end of 2019, beneath high-grade surface samples (up to 36g/t gold).
Companies: Jarvis Securities Oriole Resources
BlueRock Diamonds* (BRD LN) – Closure of Kareevlei mine for 21 days due to national shutdown | Bushveld Minerals* (BMN LN) – South Africa government orders underground miners and smelters to shutdown for 21 days | Oriole Resources (ORR LN) – Final Results | Rio Tinto (RIO LN) – Production curtailed at Richards Bay for 21 days | Vast Resources* (VAST LN) – Baita PLai and Chiadzwa Community Diamond update
Companies: BRD bmn ORR RIO VAST
Pittards is a specialist producer of technically advanced leather and luxury goods for retailers, manufacturers and distributors. The group has this morning released full year results to 31 December 2019, which illustrate continued progress against a challenging global market backdrop. FY 2019A revenue declined by 21.8% to £22.3m, reflecting a reduction in orders against weaker market demand. This was offset by an increase in the gross margin of 580bps in the year, benefitting from lower raw material prices and product mix.
Oriole is a West-Africa focussed gold explorer which today releases its final results. The results are in line with previous announcements and have been modified by several important post-period events: licence renewal in Senegal, drill target selection in Cameroon, minority stake sales (sale of Tembo for £172k), reinvigoration of exploration in East Africa though a 12% holding in Thani Stratex Djibouti (following a $2.5m investment by AMED) and a £0.25m equity raise. Cash at December 2019 was £163k, which has since been supplemented by a £0.4m inflow.
Companies: Oriole Resources Pittards
Oriole today announces that IAMGOLD will carry on earning into Oriole's Senala project in Senegal. IAMGOLD has an option to earn up to 70% by spending $8m on this prospective licence adjacent to its own Boto project which is being considered for development. IAMGOLD has spent $1.5m since it signed the option, with a plan to spend a further $1m this year. The licence over Senala was recently renewed for a further 10 years.
Companies: Oriole Resources
Oriole Resources (ORR LN) – Iamgold to start drilling at Senala project, Senegal | Rambler Metals* (RMM LN) – Agreement for possible utilisation of Nugget Pond gold circuit | Metal Tiger (MTR LN) – Metal Tiger terminates acquisition jv in Thailand | Talga Resources* (TLG AU) – Talga joint venture with Faraday may have some similarity with Samsung solid state battery development
Companies: ORR RMM MTR TLG
Bushveld Minerals* (BMN LN) – Agreement with redT energy plc to supply electrolyte for Vanadium Redox Flow Batteries | Aura Energy* (AURA LN) – Issue of shares | Greatland Gold (GGP LN) –Havieron project update | Metals Exploration (MTL LN) – Unable to extend the Standstill Agreement, stock suspended | Oriole Resources (ORR LN) – Thani Stratex Djibouti | Orosur Mining* (OMI LN) – Orosur receives US$0.5m from Newmont as part of Anzá project earn-in agreement
Companies: bmn AURA GGP MTL ORR OMI
Oriole Resources (ORR) – Corporate – Update on further Oriole investments – Gold exploration in Djibouti
Market Cap £2.2m Share Price 0.3p
Oriole today announces progress in Thani Stratex Djibouti (TSD) – in which Oriole has an 11.8% holding. TSD was spun out of Thani Stratex Resources in November 2019 holding the rights to explore gold projects in Djibouti. As part of this update it has also announced that Oriole CEO, Tim Livesey, will join the board of TSD, giving Oriole a seat at the table in strategy and priorities, with Tim being supported by the significant shareholding of Capital Drilling Limited and Resource Capital Funds. This next phase of work is being made possible after African Minerals Exploration & Development Fund III (‘AMED Fund III') invested an initial US$2.5m via convertible loan notes to fund exploration.
Croma Security Solutions (CSSG) – Corporate – Underlying growth continues, new framework agreements
Market Cap £13.6m Share Price 91.5p
H1 results from CSSG this morning suggest that the company has continued to progress the underlying business while letting go of one-off projects. Overall EBITDA at £1.1m is marginally below last year's £1.2m, albeit benefiting from IFRS 16; however within this overall picture Systems and Locksmiths activities experienced double digit growth. Generating £0.7m of PBT overall, the company succeeded in growing the gross margin, while posting a progressive dividend (0.75p, +7%).
Oriole Resources (ORR) – Corporate – Placing and other funding
Market Cap £2.1m Share Price 0.3p
Oriole, the West African focussed gold explorer, today announces a placing to raise £0.25m via a private placing (70m shares @ 0.35p plus 35m warrants @ 0.6p exercisable any time over the next two years.). This placing runs hot on the heels of the sale of Oriole's 12.3% stake in Tembo Gold Corp (a non-core asset) for £0.17m announced on Wednesday 25th February.
Companies: Croma Security Solutions Group Oriole Resources
FRP Advisory Group, UK professional services firm specialising in restructuring advisory. Raising £80m (£20m primary). Expected market cap £190m. Compound annual growth of 16.4 per cent. in revenue and 10.9 per cent. in operating profit since the beginning of FY17.o Strong average EBITDA margins of 51 per cent. over FY17 to FY19, and consistently strong cash conversion
Companies: IRR SAE MTPH BKS CSSG SSTY TEK GROW ORR REDX
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Robust, cash-generative production from mining waste
Jubilee operates several chrome-Platinum Group Metal (PGM) operations in South Africa and is constructing a zinc-lead (vanadium) plant at Kabwe in Zambia after already commissioning the copper and cobalt circuits (the ‘Sable' refinery). The company has a growth pipeline identified and significant opportunities to find new projects in Africa (or globally); more specifically, Jubilee announced that it is looking to increase its copper (cobalt) production in Zambia aggressively to make full use of the Sable Refinery. Jubilee also owns the Tjate PGM project in South Africa, which is currently on hold. The company model is to treat its own waste materials and to supplement these with third party ores and wastes where possible. This year has been nothing if not eventful for Jubilee, but further progress and material catalysts are expected over the course of 2020. Jubilee has a high-margin business with cash on hand, and we see plenty of opportunities for Jubilee to capitalise on its robust business model through the global Covid-19 crisis and beyond. We initiate with a fair value of 11.2p/sh
Companies: Jubilee Platinum
Companies: Hurricane Energy
Central Asia Metals (CAML LN) announced robust Q2 2020 operating statistics which highlight that there were no COVID-19 related interruptions, in part due to stringent measures put in place by the company. Q2 2020 copper output of 3.4kt was down 6% YoY, up 6% QoQ, however, H1 2020 total production was flat at 6.6kt indicating the company is on track for our 13.4kt 2020F target. Q2 Lead and zinc production of 7.5kt and 6.1kt were up 3% and 5% YoY although both were down 1% QoQ respectively. For H1 2020 12.2kt of zinc and 15.1kt of lead were up 5% and 6% which was primarily due to higher throughput.
Companies: Central Asia Metals
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
Caledonia's Q2 2020 production from its 64% owned Blanket mine in Zimbabwe was 13.5koz gold. This was an increase over the same period last year of 6.2%, leaving Caledonia with a first half production of 27.7koz – well ahead of this time last year (24.7koz) and on track to meet its 2020 full year guidance of 53-56koz (WHI etc. 55.5koz).
Spectra Systems Corporation is a provider of machine-readable high-speed banknote authentication, brand protection technologies and gaming security software. The company has announced that it has executed a new contract with a major world central bank to ‘enhance existing authentication sensors to detect a unique type of counterfeit notes'.
Companies: Spectra Systems Caledonia Mining Corporation Plc Com Shs Npv
Companies: Premier Oil
Jubilee today takes us through its H1 2020 numbers, which, importantly, cover the critical COVID-19 initial lockdown period in South Africa. The numbers continue to show growth and progress, with headline H1 2020 operational earnings up 54% to GBP 12.8 million – the sixth consecutive, six-monthly period of double-digit growth. The cash position increased to £10.8m despite settling the final payment of £1.4m for the acquisition of additional PGM and chrome rights as well as settling historical debt of £2.5m, all while commissioning the Zambian Sable Refinery.
Following the appointment two months ago of new CEO Rob Richards, VDTK's newsflow has been encouraging in recent weeks, and we view this morning's announcement as a further affirmation of the company's renewable energy solution. Today's RNS highlighting a contract to supply ultra lightweight, flexible solar panels to Black Tulip Minerals SA, of Peru, is, at over €200,000, the latest in a string of recent positive announcements, while also taking the company into a completely new sector which it had announced as a target area.
Image Scan is a specialist in the field of X-ray imaging for the security and industrial inspection markets. The company has announced, as part of its organic growth strategy, a new partnership agreement with a major security technology company that will lead to the launch of a new range of security X-ray screening systems for the international market. Competitively priced, and leveraging Image Scan's IP and direct and indirect international channel partners, the new system will be a high performance, competitive conveyor X-ray machine, suitable for security checkpoints in government and commercial buildings around the world. Importantly, these systems will also allow the company to increase its recurring service and support revenue.
Companies: IGE JLP VDTK
Stable platform agreement approved by creditors
U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France.
The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet.
The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries.
The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month.
Elsewhere, crude oil dipped but remained on track for a weekly gain.
Companies: TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ROSE RDSA UKOG TRIN
InfraStrata has raised £9m in gross proceeds via a share placing (subject to the approval of shareholders), which will be used to provide growth capital to execute on the company's pipeline. The proceeds will also be used to repay high-cost short-term debt (leaving the group with a c£4.5m net cash position). Given the significant earnings potential of H&W, along with that of the group's other infrastructure assets as they mature, we consider the company to be significantly undervalued and reaffirm our Buy recommendation.
PetroTal (PTAL LN/TAL CN)C; Target price £0.45: 1Q20 results/Bretaña expected to restart in July – 1Q20 financials are in line with expectations and 1Q20 production had been reported previously. At the end of 1Q20, current trade and other payables had been reduced to ~US$45 mm compared to ~US$55 mm at YE19. Most importantly. PetroTal continues to expect the Bretaña field to be re-opened this month. The contingent liability with Petroperu is estimated at US$25 mm at the current oil price and the company has entered into a financial swap for 0.46 mmbbl of oil with an ICE Brent reference price of US $40.58/bbl to cover the upcoming sale by Petroperu at the Bayovar port. This is a recovery story that we continue to like. It offers a combination of value, production and cash flow growth and reserves upside. We anticipate that the imminent reopening of the field with be an important catalyst to the share price.
i3 Energy (I3E LN): Reveals takeover target in Canada | Maha Energy (MAHA-A SS): Production update | Aker BB (AKERBP NO): 2Q20 update in Norway | Energy (RRE LN): Recommended offer by Viaro Energy | Spirit Energy: Dry hole in Norway | Enwell Energy (ENW LN): Ukraine update | JKX Oil & Gas (JKX LN): 2Q20 update in Ukraine and Russia | Pharos Energy (PHAR LN): Operating update in Egypt and Vietnam | Sound Energy (SOU LN)C: Terms of Moroccan licence renegotiated | Tethys Oil (TETY SS): June production in Oman | Victoria Oil & Gas (VOG LN): Gas sales contract with ENEO in Cameroon terminated
EVENTS TO WATCH NEXT WEEK
14/07/2020: Aker BP (AKERBP NO) – 2Q20 results
15/07/2020: Premier Oil (PMO LN) – 1H20 update
13-17/07/2020: GeoPark (GPRK US) – 2Q20 update
Companies: I3E MAHAA JKX PHAR EQNR AKERBP ENI HUR PTAL REP RRE SOU TPL VOG OMV
• 1Q20 financials are in line with expectations and 1Q20 production had been reported previously.
• At the end of 1Q20, current trade and other payables had been reduced to ~US$45 mm compared to ~US$55 mm at YE19.
• Most importantly, PetroTal continues to expect the Bretaña field to be re-opened this month.
• The contingent liability with Petroperu is estimated at US$25 mm at the current oil price and the company has entered into a financial swap for 0.46 mmbbl of oil with an ICE Brent reference price of US $40.58/bbl to cover the upcoming sale by Petroperu at the Bayovar port.
Recovery, value and cashflow
PetroTal is a recovery story that we continue to like. It offers a combination of value, production and cash flow growth and reserves upside. PetroTal’s shares continue to trade at around one quarter of our Core NAV of £0.47 per share and at less than half of the company’s value based on its 2P reserves only (2P NAV of £0.28 per share). This reflects Brent price assumptions in line with what BP, Shell and ENI are using. This is important because the commodity prices assumptions of the Majors have often been more conservative than those used by smaller companies that could see PetroTal as an acquisition target. On flat production, PetroTal’s share price implies EV/DACF multiples of 1.0x in 2021 turning negative in 2022. In 2021, we forecast PetroTal generates ~US$90 mm cash flow with ~US$35 mm cash capex (incl. servicing the payables). Our target price of £0.45 per share (~our Core NAV) represents 4.5x the current share price.
Looking beyond the restart of the field
We anticipate that the imminent reopening of the field will be an important catalyst to the share price with 4Q20 production expected to be over 12 mbbl/d. This is however just a first step and there are multiple areas of additional value creation. (1) The story would strongly benefit from a further increase in oil prices. At US$50/bbl for Brent, the Petroperu US$25 mm contingent liability would be reduced to
Oil rebounded as a new virus treatment showed promising results, but rising Covid-19 cases continued to weigh on the market.
Oil gained 2.4% in New York on Friday but is still down for the week. The market followed stocks higher after Gilead Sciences Inc said its remdesivir treatment cut Covid-19 mortality risk by 62%. Still, the coronavirus pandemic is far from easing around the world and the International Energy Agency said a jump in cases could derail the market recovery.
Crude has struggled to extend a recent rally as traders weigh fresh outbreaks of the virus. California, Texas and Florida have recorded some of their biggest daily gains in cases and deaths this week. There is a growing risk that a resurgence will impede efforts to reopen the economy.
While the IEA said demand should rebound sharply over the next three months as economic activity resumes, the agency also warned a flare-up of the virus, which is raging across several US states and re-emerging in Asia, is “casting a shadow over the outlook”.
West Texas Intermediate for August delivery rose 93 cents to $40.55 a barrel in New York.
Brent for September settlement gained 89 cents to $43.24 a barrel.
Heavy Louisiana Sweet crude rose 30 cents to $2 a barrel above Nymex. That is the highest premium since May.
Supply could also become more abundant as Libya's National Oil Corp announced it would lift force majeure on all exports following months of near-zero shipments. The Kriti Bastion tanker has started loading 730,000 barrels of crude at Es Sider, with the cargo heading to Italy, according to port operator Waha Oil Co. Rigzone.
Companies: FOG PVR 88E DGOC EME TRIN UOG
AFC Energy to Charge Inaugural Extreme E Championship Race Vehicles
AFC Energy announced that it is collaborating with Extreme E to supply zero emission, hydrogen fuelled, off-grid power to Extreme E's inaugural electric SUV racing series commencing in early 2021. We believe the development is a high-profile endorsement of AFC Energy's technology. AFC Energy has not disclosed the amount of revenue they expect to generate through this one-year contract. We expect AFC Energy will benefit materially from the publicity associated with this global and high-profile Championship. We expect the shares will trade positively on this news.
Companies: AFC Energy
On 14 July Powerhouse’s shareholders approved the proposed acquisition of former development partner Waste2Tricity (W2T). This clears the way for Peel Environmental to lead the engagement with all potential end-customers in the UK seeking to deploy Powerhouse’s distributed modular generation (DMG) technology as well as developing DMG plants on its own sites. Peel is targeting the development of at least 30 DMG plants across the UK, each of which will potentially generate £0.5m in annual licence fees for Powerhouse.
Companies: Powerhouse Energy Group