Antofagasta (ANTO LN) – 2019 final dividend hit by Covid19 | Arc Minerals* (ARCM LN) – Arc raises stake in Zaco to 72.5% from 52.5% | KEFI Minerals* (KEFI LN) – Central bank approves Tulu Kapi debt funding | OXiS Energy* (Private UK-based) – Agreement to build world’s first Li-S manufacturing plant with Mercedes Benz Brazil | Rainbow Rare Earths* (RBW LN) – Geological studies identify 57 exploration targets at Gakara in Burundi
Companies: ANTO ARCM KEFI RBW
Ferro Alloy Resources (FAR LN)– Vanadium pentoxide production rises in Q1 despite COVID-19 shutdown | Metals Exploration (MTL LN) – Quarterly update | Orosur Mining (OMI LN)– Orosur appoints mining analyst as new non-executive director | Rainbow Rare Earths* (RBW LN) – Work continues at the Gakara mine in Burundi with maiden JORC Resource due within weeks | Petra Diamonds (PDL LN) – Partial reopening of S African operations and update on financial restructuring | Tekcapital Plc* (TEK LN) – New funds raised £925,000 (US$1.15m) at 10p/s
Companies: FAR MTL OMI RBW PDL TEK
Anglo Asian Mining* (AAZ LN) - BUY – 18.2koz produced in Q1/20 with 75-80koz FY19 guidance on target | Ariana Resources* (AAU LN) 345p, Mkt Cap £35.0m – Q1 Production report | Atalaya Mining (ATYM LN) 119p, Mkt Cap £154.5m –Production ramps to design capacity at Proyecto | Riotinto Bluejay Mining* (JAY LN) 3.87p, Mkt cap £36m – Exploration Licences in South Greenland offer great potential | Chaarat Gold* (CGH LN) - BUY – Proposed equity raise | Highland Gold (HGM LN) 231p, Mkt Cap £842m – Strong FY19 with a third interim dividend announced by the Board | Rainbow Rare Earths (RBW LN) 2.03p, Mkt Cap £7.7m – Export of another 100t of rare earth concentrate | Strategic Minerals* (SML LN) 0.47p, Mkt Cap £7.7m –Cobre magnetite sales | URU Metals* (URU LN) 120p, Mkt Cap £0.9m – Permitting update for the Zebediela project in South Africa
Companies: AAZ AAU ATYM JAY CGH HGM RBW SML URU
Anglo American (AAL LN) – De Beers diamond sales | Atalaya Mining (ATYM LN) –Operations suspended at Proyecto Riotinto | Caledonia Mining* (CMCL LN) – Seeking exemption from virus mitigation measures | Cora Gold* (CORA LN) 4.5p, Mkt Cap £5.9m – Commencement of drilling at Madina Foulbe, Senegal | Gemfields (GEM LN) – Suspension of operations | Pan African Resources (PAF LN) – Operations under lock-down | Rainbow Rare Earths (RBW LN) 1.5p, Mkt cap £5.7m – Doubling production to 20,000tpa for >20 years reiterated in interim statement
Companies: AAL ATYM CMCL CORA GEM PAF RBW
Cora Gold* (CORA LN) – Sanankoro drilling extends mineralised envelope | Firestone Diamonds (FDI LN) – Q2 operations and proposed cancellation of AIM listing | Rainbow Rare Earths* (RBW LN) – US$1m loan from Pipestone Capital
Companies: CORA FDI RBW
Anglo American (AAL LN) – De Beers diamond sales | Centamin (CEY LN) – Limited progress on the Endeavour Mining offer | Cora Gold* (CORA LN) – Sanankoro Scoping Study update | Europa Metals Limited (EUZ LN) – Metallurgical results from Toral zinc, lead, silver project in Spain | Rainbow Rare Earths (RBW LN) – Drilling highlights high-grade Rare Earth from surface | Renascor Resources Ltd (RNU AU) – BUY, Valuation A$0.09/s – Joint Development Agreement with Battery Anode Company | Vast Resources* (VAST LN) – Atlas convertible facility update
Companies: AAL CEY CORA EUZ RBW VAST
Arkle Resources* (ARK LN) – Considering options for Stonepark | Condor Gold (CNR LN) – Metallurgical test results confirm PFS findings | KEFI Minerals* (KEFI LN) – Tulu Kapi development update | Kodal Minerals* (KOD LN) – Approval of ESIA for Bougouni project | Ormonde Mining* (ORM LN) – Initial concentrate sales from Barruecopardo | Rainbow Rare Earths (RBW LN) – Drill results at Kiyenzi show hi-grade Rare Earth Oxides in significant intersections | Scotgold Resources* (SGZ LN) – Clarification on the exploration programme | SolGold* (SOLG LN) – BHP to invest $22m into SolGold
Companies: ARK CNR KEFI KOD ORM RBW SGZ SOLG
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
Companies: ABBY AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CDM CSRT TIDE CYAN DTG DEMG ELM EMR FPO FDEV GTLY GENL GHH GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR IBPO IOG INDI JHD JOG KAPE KEYS KWS KCT KGH LAM LIT LOK MACF MANO MOD OXIG PCA PANR APP SRE PHC PMO RBW RMM RBGP REDD RSW RNO ROR SUS SCPA SEN SHG SOLG SOM SUMO TM17 INCE TWD TRAK TRI VNET VTC ZOO ZTF
Erris Resources (ERIS LN) – Scandinavian exploration update | Rainbow Rare Earths (RBW LN) – Annual results and strategic review | Strategic Minerals* (SML LN) – Redmoor acquisition payment
Companies: ERIS RBW SML
In January, we provided a list of 11 stocks for 2019 that we believed would perform strongly with attractive catalysts that could lead to material outperformance. In this Quarterly Research Outlook, we revisit these views, analysing what has happened and how the remaining six months of the year could play out.
Companies: AMS ANX ARS ATYM AVON BLVN PIER BUR CGS CAML CALL CSRT TIDE CYAN DTG DEMG ELM EMR FPO FST GTLY GENL GRI GEEC GKP HMI HAYD HEAD HILS HTG HUR HYR IBPO IOG INDI JHD JOG KAPE KEYS KCT KGH LAM LIT LOK MACF MANO PCA PANR PXC PHC PMO RBW RMM REDD RSW RNO RKH RBGP ROR SUS SCPA SHG SOLG SOM TWD TRAK TSG TRI VNET VTC ZOO ZTF
Bushveld Minerals* (BMN LN) – Vanadium rental / leasing structure to accelerate value creation. Vanadium forecasts adjusted. | Highland Gold (HGM LN) – Tax concessions secured for Kekura and Klen projects | Keras Resources* (KRS LN) – Keras to distribute more than its market capitalisation value in Calidus shares | Rainbow Rare Earths (RBW LN) – Proposed £4m fundraising | Talga Resources* (TLG AU) – Drilling results from Niska | Thor Mining* (THR LN) – Work plan for Jervois Vanadium project | Vast Resources* (VAST LN) – All focus on Baita and Heritage
Companies: bmn HGM KRS RBW TLG THR VAST
Rainbow Rare Earths Ltd listed on the LSE in 2017 at 10p per share and has a 90% stake in the Gakara Rare Earths Project in Burundi. This boasts some of the highest grades of Rare Earth Elements (REEs) on the planet. A recent maiden JORC compliant resource statement outlined 1.2Mt on just a small part of this vast 39km² licence area, confirming the true scale of the deposit for the very first time. Investor excitement sent the shares to 23p, but recently the stock has been oversold due to production delays and financing concerns.
Companies: Rainbow Rare Earths
Rainbow Rare Earths has released its Q3 Production Update. RBW has secured a new funding agreement with Pella Ventures (its largest shareholder), of an unsecured 12-month loan for US$0.7m in order to function as a bridge for RBW’s operations. In addition to this, RBW has agreed to pause any further tranches under the existing equity drawdown facility, the Lind Partners. The new funds will be used for general corporate purposes whilst Rainbow considers the most appropriate and efficient structure required to finance Rainbow’s proposed new fleet and mining areas but is intended to convert into equity, along with interest at 15% per annum on a straight line basis, in due course on equivalent terms agreed with any new investors.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Rainbow Rare Earths.
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Oil fell, paring a weekly gain, as investors weighed improving supply fundamentals against doubts surrounding China's economic growth.
Futures in New York slid 2% Friday but notched a 13% increase for the week. Major producers continue to scale back production. US explorers laid down another 21 oil rigs, bringing the total to the lowest since 2009. Beijing abandoned its economic growth target for this year due to “great uncertainty” over the coronavirus, triggering concerns over a demand recovery.
Yet, output cuts by major producers have helped shrink inventories globally at the same time that OPEC+ works to implement its pledged reductions. The alliance's programme this month is on the way to trimming 9.7 million barrels of daily crude output -- roughly 10% of global supplies and stockpiles at the storage hub at Cushing, Oklahoma, shrank by the most on record last week.
West Texas Intermediate crude for July delivery dropped 67 cents to settle at $33.25 a barrel.
Brent for July settlement fell 93 cents to end the session at $35.13 a barrel on the ICE Futures Europe exchange.
Gasoline futures fell 0.7% to $1.0382 a gallon.
China's oil demand earlier this month was probably at 92% of levels at the same time last year, IHS Markit said, and full-year consumption is likely to be around 8% lower than in 2019.
Companies: FOG PVR 88E DGOC EME TRIN UOG
Anglo Asian Mining is an AIM listed precious and base metals producer running flagship Gedabek operations in western Azerbaijan which include three producing mines and processing facilities. The Company targets 75-80koz GEOs in 2020 with low cost operations providing capital for organic growth opportunities within the highly prospective +1,000km2 land package, with the potential for additional attractive targets outside Azerbaijan as well as 25% of FCF dividend programme.
Companies: Anglo Asian Mining
Falcon is uniquely placed in the current challenging commodity price environment with its strong cash position (US$11.5m at 31 March 2020), fully funded drilling programme and high quality assets. Following the farm down of a 7.5% participating interest to partner Origin Energy in return for an A$150.5m increase in the gross cap carry, we believe Falcon is fully funded through one of the greatest periods of uncertainty the oil and gas industry has ever faced. At a time when many in the industry fight for their very survival, we believe Falcon has managed to secure a fantastic deal for shareholders, which should see the Company through to the potential monetisation of its 22.5% participating interest. We maintain our price target at 40p, a 426% premium to the current share price and reiterate our BUY recommendation.
Companies: Falcon Oil & Gas
Savannah Energy is an AIM-listed E&P company with two sets of assets: (i) in-production gas and oil fields and a regional monopoly gas distributon network in South East Nigeria (well away from the risky Delta area); and (ii) licenses over 50% of a prolific oil basin in Niger.
Companies: Savannah Energy
Companies: Hurricane Energy
Sylvania's share price has fallen 53% since its peaked on the 21st Feb, as the global economy hit the brakes. The short term demand outlook for PGMs is miserable, with supply chains breaking down as both luxury goods and car sales sales collapse.
Companies: Sylvania Platinum
In this note, we analyze the indebtedness of 35 international E&Ps publicly listed in the UK, Canada, Norway, Sweden and the USA. For each company, we look at (1) cash position, (2) level and nature of debt (including covenants), (3) debt service and principal repayment framework and (4) Brent price required from April to YE20 to meet all the obligations and keep cash positions intact. We also estimate YE20 cash if Brent were to average US$20/bbl from April to YE20. While the oil demand and oil price collapse are of unprecedented historical proportions and the opportunities to cut costs much more limited than in 2014, most companies (with a few exceptions) entered the crisis in much better position than six years ago, with stronger balance sheets and often already extended debt maturities. In addition, this time around, many E&Ps have already been deleveraging for 1-2 years and are not caught in the middle of large developments that cannot be halted. The previous crisis also showed that debt providers could relax debt covenants for a certain period as long as interest and principal repayment obligations were met. This implies that as long as operations are not interrupted and counterparties keep paying their bills (Kurdistan), the storm can be weathered by most for a few quarters.
With (1) Brent price of about US$50/bbl in 1Q20, (2) reduced capex programmes, (3) material hedging programmes covering a large proportion of FY20 production at higher prices and (4) limited principal repayments in 2020, we find that most companies can meet all their costs and obligations in 2020 at Brent prices below US$40/bbl and often below US$35/bbl) from April until YE20 and keep their cash intact, allowing them to remain solvent at much lower prices for some time. In particular, Maha Energy and SDX Energy are cash neutral at about US$20/bbl. When factoring the divestment of Uganda, Tullow needs only US$9/bbl to maintain its YE20 cash equal to YE19. Canacol Energy, Diversified Gas and Oil, Independent Oil & Gas, Orca Exploration, Serica Energy and Wentworth Resources are gas stories not really exposed to oil prices and Africa Oil has hedged 95% of its FY20 production at over US$65/bbl.
Companies: AKERBP AOI CNE CNE DGOC EGY ENOG ENQ GENL GKP GPRK GTE HUR IOG JSE KOS LUPE MAHAA OKEA ORC.B PEN PHAR PMO PTAL PXT RRE SDX SEPL TETY TGL TLW TXP WRL
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
Another impressive year for Iofina, which has reporting a second consecutive year of record iodine production and EBITDA. It also launched its new CDB extraction division, reduced debt through a successful fundraise and delivered the next phase of expansion in its core iodine business with the start-up of IO#8 on time and within budget. Weak oil prices have affected brine water supplies to this plant, causing it to be idled. However, management is optimistic IO#8 will restart in H2 as oil prices recover. We are reinstating estimates that assume a gradual restart from August, and have set a new DCF-based price target of 32p/sh, down from 35p previously.
An independent resource audit by Gaffney, Cline & Associates (GCA) has significantly increased the resources at the Mako gas field following the JV's highly successful drilling campaign in Q4/19. GCA have increased the 2C gross recoverable dry gas volumes when compared to its previous resource assessment (in January 2019) by 79% to 495Bcf, slightly ahead of the internal 493Bcf assessment. In the upside case, the 3C resources have increased by 108% to 817Bcf, significantly higher than the 3C internal resource estimate of 666Bcf. Following the GCA resource upgrade, the Mako field has been proven to be one of the largest gas fields ever discovered in the West Natuna Basin and is believed to be the largest undeveloped resource in the region. Located close to existing infrastructure and well established markets, we believe Mako is an attractive proposition, which we currently value at US$18.3m or 3.2p using a US$6/mcf long term gas price.
Companies: Empyrean Energy
April 2020 production payment
Companies: Gulf Keystone Petroleum
Petropavlovsk PLC (LSE: POG) have released their FY2019 results and Q1 trading update this morning. The company had already released production numbers for last year. Overall the numbers reflected a strong operational performance although various financial/other parameters thwarted positive changes below the EBITDA line. Conversely net cash from operations reduced by 43% due to lower cash from prepayment as part of the group’s forward sale facility with the banks, yet net debt came down to $561m. . We show the key figures in Table 1.
An independent resource audit by Gaffney, Cline & Associates (GCA) has significantly increased the resources at the Mako gas field following the JV's highly successful drilling campaign in Q4/19. GCA have increased the 2C gross recoverable dry gas volumes when compared to its previous resource assessment (in January 2019) by 79% to 495Bcf, slightly ahead of the internal 493Bcf assessment. In the upside case, the 3C resources have increased by 108% to 817Bcf, significantly higher than the 3C internal resource estimate of 666Bcf. Following the GCA resource upgrade, the Mako field has been proven to be one of the largest gas fields ever discovered in the West Natuna Basin and is believed to be the largest undeveloped resource in the region. Located close to existing infrastructure and well established markets, we believe Mako is an attractive proposition, which we conservatively value at US$18.3m (risked) or 3.2p using a US$6/mcf long term gas price, unrisked our valuation of Mako increases to US$25.2m or 4.3p per share. We value Empyrean as a whole at 19.0p per share a 280% premium to the share price and reiterate our BUY recommendation.
Valuation – We have updated our Mako model, with gas first in 2023 (previously 2022). Using a long term gas price of US$6/mcf, and a 10% discount factor we value the 42.1Bcf of net 2C resources at US$18.3m (risked) or 3.2p per share. We include a 30% risking to account for any potential commercial risks (including political and fiscal changes), cost risks (associated with potential development cost variations) and timing risks (to allow for any project delays). Unrisked our valuation increases to US$24.7m or 4.3p per share.
A key sensitivity to our valuation is the gas price, at US$8/mcf our valuation of Mako increases to US$31.0m or 5.3p per share (risked), US$44.3m or 7.6p per share (unrisked) and at US$10/mcf our valuation increases to US$40.8m or 7.0p per share (risked), US$58.4m or 10p per share (unrisked).
Combined, we value Empyrean's portfolio at 19p per share, a 280% premium to the share price.
Oil posted its biggest monthly advance on record, just a few weeks after prices made a dramatic plunge below zero. Crude surged about 88% in May, with US futures on Friday rising above $35 a barrel for the first time since March, driven by massive supply curbs by producers across the world. Still, prices are well below levels at the start of the year, and demand that was crushed by the coronavirus crisis may need to show a sustained improvement for the rally to extend further.
For now, the outlook for consumption looks bleak, though it is on the mend. While virus-related lockdowns are easing, demand is not yet roaring back in the US Fuel sales that were clobbered in European nations such as Spain and Italy will take time to recover. China is a bright spot, but the rest of Asia is still struggling.
The number of rigs drilling for oil in the US fell for the eleventh week, stemming the massive glut of crude that flooded the market. Yet there is a risk that oil's advance could tempt producers to turn on their taps again.
US crude futures fluctuated Friday, as Federal Reserve Chairman Jerome Powell defended aggressive action to shield the economy as the coronavirus pandemic took hold. Prices surged at the close, with West Texas Intermediate oil settling 5.3% higher at $35.49 a barrel, after falling as much as 4% earlier in the day. Futures posted the biggest monthly jump in data going back to 1983.
Brent crude for July, which expires Friday, rose 4 cents to $35.33, closing below WTI for the first time since 2016. The global benchmark has rallied almost 40% this month. The more active August contract rose 5% to settle at $37.84.
Meanwhile, US President Donald Trump is poised to sign a measure that would punish Chinese officials for imprisoning more than one million Muslims in internment camps, as he looks to rebuke Beijing over its crackdown in Hong Kong and its response to the coronavirus. He has also discussed putting targeted sanctions and trade measures on China's financial sector.
More on the oil market:
As the fallout from crude's historic plunge continues, the Securities and Exchange Commission and the Commodity Futures Trading Commission have both opened probes into the $4.64 billion United States Oil Fund ETF.
As China's demand recovery outpaces the rest of Asia, falling fuel exports from the refining giant are providing a much-needed buffer for other processors in the region still grappling with lowered consumption and poor margins.
An early look at Saudi Arabia's crude exports for May shows that historic production cuts have done little to squelch the kingdom's flood of oil to China, which is just getting back on its feet from the coronavirus.
Shearwater sells resilience and today's trading update shows us how resilient demand has been for its products and services. The Group has swung to EBITDA profitability and cash flow is well ahead of expectations. The macro themes of cyber security and remote working are supportive of robust demand levels going forward. We are maintaining our forecasts. Buy.
Companies: Shearwater Group