Small Cap Wrap: Month: October 2010

AIM Breakfast - Archive

19 October 2010

This week: Lighthouse shows the way, Lipoxen demonstrates it’s not to be sneezed at

African Minerals (AMI 450p/£1226.59m)
The AIM-listed iron ore company, developing a project in Sierra Leone, West Africa has announced that, further to its July press release, it continues to work with Cape Lambert Resources Limited (ASX: CFE) regarding CFE’s planned US$45m investment in the Marampa/Pepel rail and port infrastructure. Documentation of the (investment) agreements is still progressing but was not finalised by 14th October as originally planned. The parties have now agreed a revised long-stop date of 31st January 2011 for completion of said documentation. The Company will provide further updates in due course.

Ascot Mining (ASMP.PL 22p/8.78m)
Gold production has recommenced at Ascot Mining’s Chassoul Mine in Costa Rica.  Following an upgrading of the mill from 50tpd to 150tpd, the Company is targeting 1,200 ounces of gold per month from the Chassoul  Mine, once a 14 day commissioning period has been completed. Further increases are planned by trucking ore in from the Company’s other gold mines nearby. There is little doubt that Ascot Mining is working hard to maximise its existing gold mining projects in Costa Rica; whilst at the same time also seeking opportunities in other jurisdictions where the management is in negotiations. The recent trading statement was able to report that Ascot Mining continues to make progress in its discussions with Toronto-quoted Mineral Hill Industries (MHI) towards concluding a final agreement on a business combination that would quickly not just expand its portfolio of exploration and development projects but also strengthen its management team. Ascot has been seeking a quotation in Canada and to this end in July were able to announce that the NI-43-101 technical reports together with an independent valuation had been completed which will form the basis of its application for the Canadian reporting issue status. Certainly the Canadian equity markets are home to a larger number of gold explorers and producers operating in Central and South America; which the Board believe would allow for an improved understanding and a higher valuation to be placed on Ascot Mining. At the current gold price, with production costs of well under $500 an ounce, the Company could make a $1m a month after costs, which makes the market capitalisation of £8.8m appear woefully inadequate.

Avacta (AVCT 0.7p/£10.04m)
Avacta has announced that Curidium, the personalised medicine company that it acquired in 2009 has completed its strategic research alliance with Takeda Pharmaceutical Company Limited. Curidium entered into a major research project with Takeda late 2007 following a strategic investment by Takeda’s venture arm, Takeda Research Investment, Inc. with the aim of tailoring drug treatments for people with depression. Depression is a leading cause of disability worldwide affecting around 15 per cent of the population in developed countries. Through the use of its proprietary technology platform Homomatrix, Curidium is able to classify patients into subgroups characterised by distinct underlying disease mechanisms, potentially leading to the identification of highly valuable assets for drug developers. The research project has recently been completed and the discovery of patient subgroups by Curidium’s analysis is a validation of Homomatrix which will support Curidium in its efforts to expand its activities and revenue generation in this rapidly growing area of personalised medicine.

Cove Energy (COV 74.75p/£253.14m)
The upstream oil and gas company, focused on East Africa, has announced that it has received consent from the Government of Kenya giving all permissions and approvals for the acquisition by the Company of a 15 per cent participating interest in the Production Sharing Contracts covering five deepwater blocks offshore Kenya from Dynamic Energy Exploration & Production Corporation (DEPCO). The acquisition is now unconditional and the transfer has been completed.
The blocks cover an area of 30,682 sq km (7.5 million acres) – nearly three times the size of the Company’s offshore Mozambique block (Rovuma Offshore) and are located over an extensive Kenya deepwater zone from the Somalia border in the north to Tanzania in the south. As part of the consideration for the acquisition (announced in July 2010) DEPCO has received 4,415,123 new ordinary shares in Cove which are subject to a lock-up until 11th April 2011. The remaining consideration is US$10.5m in cash.  Cove is heading out to test Kenya’s deep waters citing similarities with its interests in Mozambique where a new discovery has just been announced.

Encore Oil (EO. 125p/£365.31m)
EnCore has announced that the drilling on the Varadero prospect west of the Catcher discovery is slightly delayed because of inclement weather; however the Transocean rig Galaxy II will be on its way shortly.

Imperial Innovations Group (IVO 465p/£278.03m)
If you would like to have exposure to venture capital in your portfolio, but are unable to invest directly in a venture capital fund, Imperial Innovations Group (Innovations) may be the solution.  Innovations has exclusive access to scientific and technological developments originating from Imperial College London and has accumulated a portfolio of more than 80 companies.  Similar to venture capital firms, Innovations is able to invest at a very early stage and at very low valuations.  In contrast, Innovations also benefits from having a more flexible and long term time horizon as well as additional income streams such as corporate finance and intellectual property management fees and licence and royalty revenues.  Innovations recently announced preliminary results for the year ended 30 July 2010 that showed an increase in net asset value of £5.5m (or 4.4 per cent per share).  Portfolio highlights included net realisations of £9.9m including £9.5m gross cash from the sale of Respivert to Centocor, representing a 4.7 times return on a three-year investment.  An interesting feature of Innovations’ portfolio is the long tail of revenues, even after a realisation.  In addition to cash payments, the company will often receive deferred payments and this is not fully reflected in the balance sheet. Innovations’ portfolio is focused on opportunities in healthcare, energy, engineering and cleantech.  Several portfolio companies have very high potential and Innovations is pleased to observe excellent progress during the year.  The ownership percentage in each company is typically high, which should give a “big bang for the buck” if and when successful.  The high valuation does not make this a trading stock or a suitable short-term investment, however inclusion in a long-term investment portfolio such as a SIPP could provide excellent and unexpected results.

ITM Power (ITM 42.75p/£44.88m)
The rising share price is keeping pace with the increasing number of participants that sign up to the Hydrogen On Site Trials (Host) of ITM’s transportable high pressure refueling unit (HFuel) – with the Scottish Police Services Authority being the latest. The SPSA manages a fleet of 350 vehicles across its business areas. To assist in the HOST programme, SPSA intends to trial the hydrogen-fuelled vehicles to support facilities management at the Scottish Police College. Graham Cooley, CEO, stated “the signing of this agreement marks our entry into this important sector, and the involvement of SPSA allows us to evaluate our proposition to store renewable energy as a clean fuel for decarbonising return to base fleet vehicles.”

Jubilee Platinum (JLP 32p/£81.7m)
Jubilee Platinum has made cautionary announcement- in Jubilee’s year-end results published on 4 October 2010 it advised that the Company had purchased a 51 per cent stake in the power generation company Power Alt (Pty) Ltd, though it should be noted by shareholders that the Company is still in the negotiations stage of the acquisition which if successfully concluded may have a material effect on the price at which the Company’s shares trade on the JSE Limited.

Kryso Resources (KYS 16p/£27.85m)
Kryso Resources, the mineral exploration and development company with gold and nickel-copper projects in Tajikistan, has announced the results of the bankable feasibility study (“BFS”) completed for the Company’s 100 per cent owned Pakrut gold.
Whilst the estimates prepared by BGRIMM for the BFS are not compliant with a standard recognised by the London Stock Exchange, the BFS currently anticipates a 14-year mine life commencing in the second half of 2012, with total production over the life of the mine estimated to be 857,000 ounces of gold and 123,000 ounces of silver. Average annual gold production over the first four years of mine life is projected to be 82,000 ounces per annum.
At a gold price of $897/oz the project would have NPV (10 per cent) of $121m, IRR of 40 per cent and payback period of 3 years. At a $1,250/oz gold price the project would have NPV (10 per cent) of $227m, IRR of 58 per cent and payback period of 2.7 years. The life-of-mine average operating costs of the project are estimated at $377/oz. Total capital required for development is approximately $108m. Further optimisation of the project prior to construction is expected to result in improved project economics.

LiDCO Group (LID 18p/£31.3m)
A larger number of hospitals will now find it easier to incorporate LiDCO’s minimally-invasive hemodynamic monitors due to the development of a new communications link between LiDCO monitors and GE Healthcare’s Centricity Clinical Information Systems which is a very widely used platform.  Connecting LiDCO’s monitors with key medical technology infrastructure will improve hospital workflows and productivity, providing a second interface from which physicians can access patient data. The technology will be attractive to hospitals looking to streamline operations and improve efficiencies across technology platforms.  Keep an eye on the company’s persistent improvements; high tech connections or monitors not needed.

Lighthouse Group (LGT 9.625p/£12.29m)
The Company, which is one of the largest financial adviser groups in the UK and the current holder of the Financial Adviser award for Large IFA of the Year, has announced its intention to create a new national IFA brand in order to simplify its network branding and to reduce the number of regulated entities within the group. The expectation is that by combining a better focus on growing the group’s activities allied to harmonizing the expertise within the operating entities, the service and operating efficiency levels will be improved and will put the Company in a better position to implement changes brought about by the Retail Distribution Review.
The Group’s two existing national brands (with a total of over 250 advisers), LighthouseTemple and LighthouseGP will merge to form a single new brand, Lighthouse Financial Advice and will combine the growing business volumes from the members of affinity groups, unions, large employers and other specialist organizations. The merger will be completed on 1st December 2010.
In addition to this change, advisers across the Group, currently regulated by Falcon Group Plc and LighthouseXpress, will be regulated by a single entity to be called Lighthouse Adviser Services Limited. As well as reducing the number of regulated entities, this will combine various Group-wide income collection systems and remove any competing technologies which together will ensure consistency of service levels whilst removing any duplication in underlying processes. Lighthouse seems to be leading by example in its industry, a beacon for is peers.

Lipoxen (LPX 6.62p/£11.74m)
Lipoxen has announced positive efficacy results for its novel influenza vaccine using its liposomal co-delivery technology ImuXen and is accelerating plans to get the drug into the clinic. The formulation induced protective immunity against challenge with live virulent virus after a single vaccination in a mouse model and importantly, the formulation did not require an adjuvant and contained considerably less protein antigen than current flu vaccines. A spray dried version of the vaccine was still efficacious after storage at 37°C for 6 weeks indicating that potentially it could be stored outside of a cold storage facility. The results of this project have led the Company to seek directly EU grant funding to assist in meeting the costs of undertaking a full programme ahead of Phase 1 (safety) studies in man, with a clinical trial programme targeted in Q4 2012.

Mariana Resources (MARL 45.25p/£71.71m)
Mariana Resources Ltd, the AIM quoted exploration and development company focused on Argentina and Chile, has purchased the Estancia La Calandria and thereby the freehold surface rights to the 23,400 hectare area  of  its  flagship  Las  Calandrias  gold and silver project located in the Deseado Massif gold district in southern Argentina. The purchase gives the Company more flexibility in the future to fast-track the exploration and development of the project. 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.
Additionally, Mariana announced three new high gold intersections from follow up drilling at the Calandria Norte target.  They highlight the potential for high grade vein-breccias at Las Calandrias and Calandria Norte in particular, in addition to the bulk tonnage style gold mineralization at Calandria Sur.

Motive TV (MTV 1.09p / £8.37m)*
Further to the announcement on 17 September 2010 that we commented on, last week Motive announced that all of the conditions to the acquisition have been satisfied or waived. Admission to trading began on AIM at 8.00am on 15 October for this AIM quoted media investment company specialising in television technology. This follows the completion of the reverse takeover and a fundraising to raise £4.75m. In the last few weeks, the Company’s share price has more than doubled, unsurprisingly at the success of the transaction. We look forward with great anticipation for further updates, and feel there are potentially large gains for this rapidly evolving company. On Monday this week, a further and additional £3m went on the market cap as the share price soared on news of its 67.7 per cent owned subsidiary, Adecq Digital, having signed an agreement, anticipated to be worth approximately $1.1m in the first year, with one of Europe’s leading television technology suppliers. Giuseppe Flores d’Arcais, Director of Motive and President and co-founder of Adecq, said:”We are now well positioned to further accelerate our international expansion and consolidate our position to become the leading provider for On Demand television and new advertising solutions and services.”

Nighthawk (HAWK 16.25p/£53.57m)
The US-focused oil and gas development and production company has announced a three year Equity Finance Facility of up to £25m with Darwin Strategic Limited, a part of the Evolution Group. The funds will be used to continue the development of the Company’s asset base. The immediate operational focus is the completion and recompletion of a number of wells that have already been drilled to get a better understanding of the completion techniques required to deliver a commercial project with the added benefit of increased near-term production.
At the same time, the Company continues its efforts to find a farm-in partner for a proportion of the Jolly Ranch project. A number of firms have viewed the data but no offer has yet been received. The board has stated that if a suitable transaction is not in prospect by the end of the year, the Company will withdraw from the process (of finding a partner) until they have a better understanding of the drilling and completion techniques best suited to the Jolly Ranch project. The Company has appointed Gaffney Cline & Associates to undertake a Reserves and Resource assessment of Jolly Ranch. The report is expected to be completed late Q4 2010/early Q1 2011. Nighthawk may not see clear daylight until a farm-in starts the Jolly.

One Media Publishing Group (OMPP 2.45p/£2.24m)
PLUS quoted One Media Publishing Group, which is involved in Business to Business music and video rights, pleasingly announced that they are now eligible for the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT). Both schemes, which encourage investment into small companies by offering highly appealing tax reliefs, serve to make One Media Publishing all the more attractive as an investment opportunity, especially when considering that this is possibly one of the first digital record labels be granted such status.Given the positive updates released over the last few months, we feel there are further gains to be had by a Company that has developed a penchant for signing digital content. Music to One’s ears.

Red Rock Resources (RRR 6.12p/£41.38m)
Red Rock Resources plc, the gold mining and exploration company with projects in Kenya and Colombia, and interests in steel feed and uranium, reported on progress at Jupiter Mines Ltd’s Tshipi Kalahari Manganese Project (“Tshipi”). Red Rock currently has a 22.64 per cent shareholding in Jupiter Mines Ltd, which will reduce to 5.23 per cent on completion of Jupiter’s acquisition of a 49.9 per cent interest in Tshipi. Closing of the Tshipi acquisition is imminent with the Tshipi Bokone prospecting permit now being approved by the Department of Mineral Resources.  On completion of the acquisition of its 49.9 per cent stake in Tshipi, Jupiter will have 1,602,150,501 shares in issue, capitalising Jupiter at approximately A$528 million at its closing price today of A$0.33 per share.

Rockhopper Exploration (RKH 336.75 / £648.38m)
Rockhopper’s shares have skidded into a distinctly greasy patch. It turns out that the data from the successful Sealion drilling shows the structure holding the oil is more complicated than first assumed. So because the information to map it all is still lacking – and needs to be obtained through further drilling and seismic shooting –  the independent consultants assessing the size of the field are having to be more cautious. They have ‘downgraded’ their initial estimates by some 30 per cent, at the same time as Rockhopper has announced a further, expensive, drilling and seismic programme to fill in the gaps.  On top of that Desire Petroleum has announced that its nearby Rachel exploration drill has encountered neither oil nor gas. But, it has learned enough about the structure to warrant diverting its drilling to broaden its knowledge. To further confuse the picture, Rockhopper has said that it has identified ‘further attractive targets’.
So the oil techies will now have a field day, at the same time as investors will have to resort to the chartists or soothsayers and endure a nail-biting roller-coaster, until further definitive exploration results are available – perhaps not until half-way through 2011. En route, we wouldn’t be surprised if investors had to cough up more funds. In the meantime, Rockhopper’s share price has fallen by 73 per cent over the past month.
Late breaking news is that Rockhopper has raised £206m in a placing at 315p (increasing shares in issue by 34 per cent). Even though at a big discount to the 450p seen only a few days ago, there must be relief that this has been got away before what will be a long wait while the proceeds are spent to gain more knowledge of Sealion’s potential.

Solomon Gold (SOLG 38.75p/£87.71m)
Solomon Gold, the gold and mineral exploration company, provided an encouraging update for its operations, with the announcement of the assay results from the gold and silver prospects, Homestead and Kauffmans (part of its 100 per cent owned Rannes Project in Queensland, Australia). All the results from Homestead and Kauffmans have been received and the best results from Homestead were from drill hole HOM43,30 meters at 2.83g/t gold equivalent, including 14 meters at 5.17g/t gold equivalent, from a depth of 32 meters. The Kauffmans results are particularly encouraging in that there are several shoots that could potentially be incorporated into a single open-pit mine design; KAU13,86 meters at 1.50g/t gold and 15.1g/t silver, from a depth of 2 meters and KAU6,40 meters at 1.69g/t gold and 25g/t silver, from a depth of 26 meters. There is current target of 1.0 million oz gold equivalent at Rannes, and the current drill plan involves drilling closely around areas of previous sets of good drilling results in order to increase the resource estimate. Meanwhile, work at Cracklin, the adjacent prospect, and Fauro continue, with results for these due to be retrieved soon.
This is an encouraging update that has seen the Company’s share price increase 7.3 per cent to 37.2 pence. Solomon has a number of interests that it continues to provide positive operational updates on, and a third exploration campaign is due to take place to explore the Piru and Masa Masa Islands (northern prospects). The fact that gold continues to benefit from the flight of investors to hard assets provides further comfort in the jewel that is Solomon.

Stellar Diamonds (STEL 6.62p/£9.23m)
AIM quoted diamond mining and exploration Company focused on West Africa, issued an operational update for the third quarter of 2010 covering the Bomboko trial diamond mine in South East Guinea. During the period, the mine produced 576 carats of diamonds (significantly lower than during the prior quarter, which saw the production of 1,510 carats, due to seasonal rains), whilst it sold 1,664 carats at an average price of $115 per carat, therefore generating $191,000 for the Company.
Intertestingly, whilst the mine has so far produced 5,116 carats of diamonds, the inferred resource estimate stands at 41,000 carats, though further work is being conducted across potential resource areas to grow this estimate. Mine plant equipment is currently undergoing improvements- Karl Smithson, Chief Executive Officer, commented:
¨… The interruption of operations by heavy seasonal rains has provided the Company with the opportunity to install improved equipment and undertake modification to the mining process which are anticipated to improve diamond recoveries once production resumes. With the plant upgrade complete, our focus will be to expand the resource at Bomboko in order to deliver sustainable production over a number of years.”
Stellar Diamonds recently raised £1.9m through a share issue, which attracted a high level of interest not only from existing shareholders but also from a number of new investors. Whilst it continues to seek new opportunities (such as Droujba), it appears to have avoided the age-old problem of neglecting its current interests and demonstrates sound reasoning in improving equipment at its existing mines. Rich pickings, perhaps, for Stellar Diamonds.

Synchronica (SYNC 19.5p/£18.16m)
Synchronica plc, the international provider of push email, instant messaging and social networking services, has announced that the acquisition of iseemedia Inc. has been completed. This deal results in increasing the number of contracts with large mobile operators in India and extending the contracted addressable market to 853m subscribers. Moreover, Synchronica’s product will be enhanced with the integration of iseemedia’s patented document transcoding technology.  The Company has also obtained and has listed on the Toronto Stock Exchange (TSXV), complementing the listing on the London Stock Exchange (AIM). Synchronica has to date acquired 86 per cent of iseemedia’s ordinary shares and will acquire the remaining 14 per cent on the same terms before the end of the year.
The transaction represents a key step in Synchronica’s aim of becoming the leader in next-generation mobile messaging in high-growth emerging markets.

Tristel (TSTL 55.5p/£18.39m)
Tristel, the manufacturer of infection control, contamination control and hygiene products, announced a strong set of final results for the year to 30th June 2010. The Company announced a 28 per cent increase in revenue for the period to £8.75m, and a 34 per cent increase in profit before tax to £1.72m. Basic EPS improved by 12.2 per cent to 3.84, though this was held back by an issue of shares during the period (6m). Tristel appears to have done well from the acquisition of Medichem, and has successfully integrated the manufacture of Medichem products (approx 290) into the Newmarket production facility, which has certainly benefited the top line. The Company’s balance sheet appears healthy too, with net assets having grown significantly from £0.7m in 2009 to £1.4m in 2010.
Tristel’s lead technology is the chlorine dioxide based disinfectant, which is typically used in hospitals for infection control, and is safe to use because whilst being powerful it will kill all organisms. Whilst the Company has a strong foothold in the UK, international sales are becoming an increasing focus for the Company in it’s expansion path, having recently started sales in the German market, and having gained regulatory approval for sales of a number of its products in China. With healthy performance for the year and a strong balance sheet, Tristel looks to be in a good position to capitalise on its plentiful opportunities, and we have no doubt that its regulatory approval in China is a core constituent of these.

*A corporate client of Hybridan LLP

The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week.  Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.

12 October 2010

This week: OMG! A new superhero franchise, Designs on Europe, TyraTech re-order, Cheers! Shepherd Neame breaks records and Summit makes progress in a difficile market

African Eagle (AFE 5.38p/ £20.68m)
African Eagle Resources last week announced an important resource update. The Company has seen a 13 per cent increase to 917kt in contained nickel metal of the JORC inferred resource at Dutwa Project. There is a 6 per cent increase in average Ni grade to 0.93 per cent Ni and 4 per cent increase to 0.96 per cent in nickel equivalent grade after cobalt credits. Resources in each different ore type are delineated for the first time. There is also potential for a further 8-10m tonnes of ore at Ngasamo. The drilling for the bulk ore sample is well ahead of schedule. Whittle optimisation and revision of project economics is now underway. Comprehensive, second-stage metallurgical test work on the bulk sample is expected to commence in December.

Allied Gold (AGLD 31.75 p / £330.24m)
Allied Gold is a fast growing Pacific Rim gold producer with production, exploration and development projects in Papua New Guinea (including the Simberi gold mine) and the Solomon Islands (the Gold Ridge mine).  Simberi is an open-pit operation with a 2.2Mtpa processing plant that produced over 64,000 oz Au in the year to 30 June 2010, with 75,000 oz to 80,000 oz expected this year. Gold Ridge, which was effectively acquired at the end of 2009, is undergoing development works with the aim of producing 120,000 oz Au in the year to end June 2012. Allied Gold has just released its September production level of 18,000 oz Au, in line with management guidance. The throughput at the mill during the quarter was 560,000 tonnes at a grade of 1.09 g/t, a recovery rate of 91.3 percent and a cash cost of US$660 per ounce (subject to inventory adjustment and final review). The quarterly numbers and full production report will be published within the next couple of weeks. Although production costs per ounce cannot be described as cheap, the management’s projections for production increases over the next few years should ensure an avid investor following.

Beowulf Mining (BEM 10.5p/£16.78m)
The Company (listed on AIM and in Sweden) is a traded mineral exploration company which owns several exploration projects in Sweden has announced the first complete assay results for the 15 holes drilled as part of the programme on its wholly-owned Kallak (North) Iron Ore deposit in northern Sweden. The results confirm extended iron mineralisation, with several 100m sections having iron mineralization of over 30 per cent Fe. They also have planned diamond drilling over 35 holes at Kallak south due to commence in mid-October 2010 with the first assay results expected by the end of Q4 2010. JORC classification will be sought for the Kallak South deposit following completion of the drilling programme. Recent ground magnetic 3D models indicated substantially larger presence of mineral iron ore resource at Kallak South the at the north deposit.

Company chairman, Clive Sinclair-Poulton says that, with the results from the north deposit and the anticipated results from Kallak South along with the 140m tones so far recorded at Ruoutevare gives the Company confidence in Beowulf becoming a “major player in the European iron ore sector”.
Last week the Company announced a placing (of 6,956,521 shares) at 5.75p per share, raising £400,000. The net proceeds will be used to further finance the planned drilling campaign at the Company’s two major iron ore projects, Kallak and Ruoutevare, the assessment of potential opportunities for commercial expansion and general working capital purposes. The shares were placed with both new and existing investors.

Designcapital (DESC 11p / £6.89m)
AIM listed Investment Company dedicated to high-end contemporary furniture design has made a few announcements over the last few weeks; first its results for the six months ended 30 June 2010 and second Michael Hosie has joined the Board of the Company after having acted as CFO since the Company’s shares were admitted to trading in January 2008. This high-end furniture play put out results that were markedly improved on the previous year; having reduced the operating loss to £1.2m (30 June 2009: £2.4m), the performance was in line with the Board’s expectations. It would appear that the commercial restructuring is progressing well with a growing sales pipeline in line with management’s expectations for 2011. We look forward to the opening of the first international showroom of Artelano in Mayfair, London. Designcapital aims to become a major pan European design focused investment company.

Electrum Resources (ECR 1.42p/£4.73m)
The latest announcement from the Company (the ‘old’ Mercator Gold – MCR) gives details of their projects in Argentina– Sierra de las Minas and Los Aquirres. ECR holds a 100 per cent interest in both.
Sierra has a number of small-scale historic gold mining areas and shows potential for relatively near-term production. Historic results showed values of up to 153.9g/t gold and 9.4 per cent copper. Sampling found nearly half of c.350 samples to be anomalous in gold. Previously gathered data is being used for the evaluation programme (recommended by MPH Consulting Ltd of Toronto) with ground activities expected to commence “within four weeks”. The Company is also in negotiation to acquire additional concessions in the Sierra area.

Los Aquirres is much smaller but both projects are considered to be gold-prospective with possibility of the presence of other base metals.
Both areas have good infrastructure connections already in place.
Patrick Harford, MD, says that Argentina remains relatively unexplored and adds “we are very excited about the potential of the (two) projects and a rapid work up of exploration targets potentially appropriate for accelerated progression to the mining stage will commence shortly”.

Epistem (EHP 352.5p / £27.97m)
UK biotechnology Company last week announced its preliminary results for the year to the 30 June 2010. The 2009/10 financial year saw Epistem continue to build on last year’s strong performance. The year’s results saw an impressive 45 per cent increase in year-on-year turnover to £5.7m (2009: £4.0m) and a growth in after tax profit to £0.3m (2009: £0.1m). Cash reserves at the end of the period were £5.4m (2009: £3.7m). Epistem’s fee for service revenues grew by 10 per cent to £2.5m (2009: £2.3m).

Its Biomarker revenue growth was marginally increased over the year at £0.8m (2009: £0.7m). To boost this division, the Company announced rebranding Biomarkers to Personalised Medicine (biomarker and diagnostic technologies) which expands on the Biomarker technology to provide a newly created Point Of Care offering. At an Analysts meeting, Epistem unveiled its point of care molecular diagnostic platform Genedrive, which targets a rapid molecular diagnostic assessment (sub 30 minutes) for use in clinics, hospitals and surgeries. Validation of the new Genedrive system is now underway, with beta site clinical testing expected to start towards the end of this year with the launch of the device anticipated in the first half of next year.  Epistem would like to see its Genedrive become the gold standard of diagnostics, initially in oncology and sexually transmitted diseases.
The Novel Therapies division’s collaboration with Novartis continued to develop over the year with the division reporting its first full year revenue of £2.4m (2009: £1.0m). New drug targets are continuing to emerge, with the Novel Therapies division positioning itself to create a pipeline of early stage development targets.  Matthew Walls, CEO, cautioned on the Novartis collaboration at the Analyst meeting saying that the timing was difficult to judge in terms of the general progress of the license and development opportunities and that such an agreement “takes time”.
In our view, Epistem is a well-managed biotech that develops drugs and biomarkers and provides contract research services to drug development companies. We like the model of a fee-for-service business that pays for its own in-house R&D. We look forward to Epistem’s next update in February 2011.

Gulfsands Petroleum (GPX 317.5p/ £384.74m)
The oil and gas production, exploration and development company with activities in Syria, Iraq, Tunisia, Italy and the U.S.A., has provided an update on the Company’s operations at Block 26, Syria, where Gulfsands holds a 50 per cent interest and is operator. Analysis of the core along with the wire-line logs in Yousefieh South indicates that the well encountered a gross 11.5 meter (net 10.8 meter) column of oil bearing reservoir within the Massive formation. Drilling and evaluation of the new Khurbet East Field development programme well is expected to start anytime now and requires approximately 30 days to complete. Combined production from the Khurbet East and Yousefieh fields has reached approximately 21,000 bopd. Moreover, due to the large remaining drilling inventory in Block 26 the Company has signed a contract for a second drilling rig. Commissioning of the 22 km oil pipeline linking the Khurbet East EPF with the oil export facility at Tal Adashas has been completed and oil is now being transported to Tal Adas via the new pipeline.

Kenmare Resources (KMR 18.97p/ £455.94m)
On Friday 8th October 2010 a settling pond adjacent to the Kenmare Moma Mine breached its southern wall. This caused a non-toxic discharge of water, sand and clay that flowed through part of the nearby village of Topuito. As a result of the accident, mining operations have been suspended. Currently, the Kenmare team, local community and Government officials are working together to locate the missing child, make the area safe, assist with evacuation of the affected population and assess any possible injuries or damage caused. It is believed that approximately 115 households have been impacted by the flow of water, sand and clay. Kenmare will fully investigate the incident and will also co-operate with the authorities in this regard.

Landkom International (LKI 7.38p/ £32.08m)
Ukrainian producer of agricultural commodities last week announced its harvest results for wheat and the completion of its rapeseed planting campaign. The Group has harvested 9,882 tonnes of winter wheat from 3,278 hectares (ha) of its core land in the western Ukraine, losing 18 per cent of its winter wheat cultivated area. The Group has also harvested 8,478 tonnes of spring wheat from 2,797 ha, incurring losses of 21 percent of its cultivated area. The Group announced costs for winter and spring wheat being an estimate of $420 per ha (ex VAT) and $400 per ha (ex VAT) respectively.  Therefore, the Group needs to obtain sales prices per tonne of $165 (ex VAT) and $158 (ex VAT) for its winter and spring wheat to achieve a neutral gross margin on its wheat plantings.

Rapeseed planting has been successfully completed with a total of 12,862 ha being planted in the Group’s western and central modules. The overall result of the wheat harvests are in line with the Board’s expectations given the adverse weather conditions in the latter part of the harvest period.

Norseman Gold (NGL 59.25p/ £117.08m)
Australian based gold production and exploration company Norseman Gold has raised £11.25m in a private placing of 25,000,000 new ordinary shares at a price of 45p each. This represents a 13 per cent discount to the shares’ closing price previous day of 51.75p. Monies raised will be used to bring its North Royal Open Pit into production in December. Chief Executive Barry Cahill said that the open pit operation at North Royal in Western Australia will begin producing small amounts of ore in January 2011 and should add about 20,000 troy ounces of production in the financial year ended June 2011, bringing Norseman’s total production for the year to 105,000 ounces of gold.

OMG (OMG 26.75p/ £18.27m)
The AIM listed technology group has announced a contract win with Guardian Media Entertainment (GME) to develop animated content for a new superhero franchise. GME will produce the Guardian Project franchise; compelling tales of good vs. evil based on 30 superhero guardians (one to represent each NHL team) told across a variety of content delivery mediums including television, print, social media, Jumbotron and more. They work in collaboration with Stan Lee- creator of many legendary franchises including Spiderman, Iron Man, The X-Men, The Incredible Hulk, The Fantastic Four and others. In order to accommodate a challenging delivery schedule, HOM chose to render final animation in the Unreal Game engine which generated a tremendous volume of effects very quickly and also provided an incredibly high quality output.

Shepherd Neame Limited (SHEP 832.5p/ £95.38m)
PLUS quoted Kent-based brewer and pub operator, announced preliminary results for the year ended 26 June 2010. Turnover is up 5.4 per cent to £115.4m (2009: £109.5m), profit before tax is up 25.5 per cent to £8.7m (2009: £6.9mand EPS are up 11.6 per cent to 49.9p (2009: 44.7p).  Net cash inflow before financing is £9.4m.  The Company benefited from recent investments in new pubs, bottling line and new IT systems. Key sales indicators are strong:  total beer volume up 4.8 per cent; own beer volume up 3.8 per cent to 233,000 brewer’s barrels; same outlet like-for-like managed sales up 0.7 percent and average income per tenanted pub up 1.3 per cent.

The Company’s achievements were recognized by winning the Coutts Family Business of the Year Award for companies with a turnover of more than £25m. This has been a successful year for Shepherd Neame. They have achieved record turnover, record beer volume and strong net cash inflow against a background of a weak UK economy and challenges facing the industry.

Summit Corporation (SUMM 2.5p/£4.16m)*
The Company released its financial results for the half year to 31 July 2010 demonstrating a tight control on costs and highlighting further advances from a number of its compounds and the Seglin Technology Platform. On the results, the bank balance of £4.5m compares with a reduced cash burn rate of c. £260k per month going forward before taking account of any revenue or grant awards (which amounted to £430k in the first 6 months of this financial year). The business is funded until at least the end of 2011. Discussions are in progress with a number of household names amongst the pharmaceutical companies regarding the development partnering and potential commercialization of SMT 19969 (targeting C. difficile) and SMT C2100 (malignant melanoma), as well as advance conversations under CDA concerning the licensing of Seglins from Summit’s Seglin Platform. The future looks very encouraging for revenue generation going forward.

Summit also released a very positive update detailing the establishment of proof of concept in non-clinical efficacy studies for SMT 19969 and the demonstration of its superior position in relation to existing treatment options in the fight against C. difficile. This Wellcome Trust funded proprietary programme to develop a new class of antibodies to treat the life-threatening bacterium that is responsible for 5 times more deaths than MRSA has made significant progress. SMT 19969 has shown it has “the potential to become a front line therapy, with superiority over existing treatment options”. The Company could be well on track for its first major pharmaceutical success.

TyraTech (TYR 25p/£11.6m)
TyraTech, which develops pesticides for human, animal and environmental health has announced a “significant” re-order of the Company’s co-branded Terminix Safeshield product from Terminix International, the largest professional pest control company in the world. This is the second re-order received under the relationship (with Terminix) announced in February of this year. (This is consistent with our note in the Wrap of 6th July where we stated that “we expect to see increasing revenues from the Company’s partnering model this year….”.) This will represent a significant increase in product volume from 2010 and shipping will commence in Q4 2010 and will continue through 2011. Chairman Alan Reade sees the order as a “step change” in volume sales for TyraTech and builds on the success of the product in the US.

In our Small Cap Wrap of 21st July 2010 we wrote “Trading in TyraTech shares has been somewhat cumbersome due to their Regulation S status which restricts their marketability and requires physical settlement.  There is now good news for current and prospective owners of TyraTech as the company is creating a second line of stock that will be unrestricted with trading symbol TYRU.  All eligible shareholders will be contacted and invited to convert their holding to the new line which should start trading around the end of August with settlement through the CREST system.  One less irritation should help increase liquidity in TyraTech’s shares.” The first line of unrestricted stock (479,117 shares) listed on AIM on 27th August 2010.

ValiRx (VAL 0.35p / £1.20m)*
Further to the announcement towards the end of September concerning the sale of its Belgian subsidiary, the Company has confirmed its completion and the receipt of the first installment (of four equal amounts, 90 days apart) of US$100,000.

William Sinclair (SNCL 111.5p/£18.46m)
William Sinclair announced a good trading update on 7 October. Despite the level of rain in July and August (that may have dampened investors’ enthusiasm) the Company has comfortably built up stock levels ahead of the sales season as its efforts to develop peat drying capabilities have obviously borne fruit.  Further, margin improvements have been achieved through both the efficiency programme and the growth in sales of the peat-free product, sold under the Horizon brand.  The demand for Sincroboost Plus, the peat substitute, is outstripping supply and so production is being increased. All in all, a good growth story.

Nickel Price (US$23,750/t)
The Nickel price has begun to show some legs of late, with the price per tonne reaching US$25,000 before falling back a little to US$23,750 currently. The reason appears to be that the concern at the beginning of the year that rising stocks would keep a lid on prices has given way to an increasing view that forecast production levels previously announced by a number of companies (and Vale New Caledonia and Sherritt International in particular) will prove optimistic. Both these companies are endeavouring to employ high pressure acid leaching (HPAL) to produce the metal from nickel laterite ore bodies, but are encountering continuing problems. Commentators have voiced reticence with regard to HPAL as an attractive and economic method of nickel production, despite the billions of dollars that the industry has spent trying to perfect the process. Whilst we are of the view that HPAL will eventually succeed, we would prefer to point investors towards nickel sulphide plays. Amur Minerals of course is the Company we know best that fits this bill.

*A corporate client of Hybridan LLP

The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week.  Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.

05 October 2010

This week: Cluff glisters, the nickel price is Russh’n ahead for Amur, contracts are a win win for Angel Biotech and Datum International, but delays hold up Ceres Power
Amur Minerals Corporation (AMC 6.62p/ £13.96m)*
The Company announced its interim numbers on 30 September along with a résumé of its progress over the last six months or so. The highlights included the discovery of the two significant new drill targets that could expand the resource at Kun-Manie and also the extension to the exploration licence through to 2012. The cutting of administration costs along with an inflow of funds from a share placing, a sale post the half year end of its illiquid investment in Grafton for $363,000 and an aggressive pursuit of VAT refunds has allowed Amur to embark on a field campaign, that has already borne fruit.
The upward share price performance has resulted in additional payments being payable under the performance contract entered into with the cornerstone investor that participated in the fund raise in the summer. With the nickel price now at c. $23,500/t (approximately $10.50/lb) increasing the value of its historic resource base and news expected soon on the issue of a mining licence, investors should not be surprised at the recent market interest shown in the Company, as demonstrated by the increase in the daily volume of shares traded.

Angel Biotech (ABH.PL 0.21p / £4.41m)
Aim listed biopharmaceutical contract manufacturer yesterday announced the signing of a consultancy contract with Materia Medica Holding, a leading pharmaceutical company in Russia.  The contract, valued at circa £100,000, is for regulatory consultancy and brings to a total of 5 contracts for regulatory support signed with Materia Medica. At these prices, and given that most of 2010 budgeted business has been signed and a large proportion of the business budgeted for 2011, Angel is well worth a punt.

Ceres Power Holdings (CWR 70.75 pence / £60.97m)
The listed alternative energy company announced its preliminary results for the year ended 30 June 2010. Ceres is focused on the delivery of its core residential Combined Heat and Power (CHP) programmes, with British Gas continuing to be the Company’s main target customer. The timeline for commercialisation of the product has however faced a setback as a result of product reliability issues that have required hardware and software modifications. As a result, the Company’s loss for the year increased to £11.7m (2009: loss of £8m), which is also partly due to increased investments in people and facilities. The balance sheet did however demonstrate an improvement to £40.6m (2009: £21.4m), largely through a fund raise.
Ceres expects initial sales of CHP to occur in mid-2012, and expects to ramp up volume soon after. In anticipation of this, it has made significant progress in developing the CHP product to meet British Gas specification requirements, whilst building a manufacturing fuel cell capability to help the volume launch. Ceres has also raised £30m (in December 2009) which is also to be used to facilitate volume sales. Although the timeline for introduction of the CHP has suffered something of a setback, the preparations being made, and the continued support of British Gas, renews our belief that Ceres is one hot stock.

Clean Air Power (CAP 13p/£9.62m)
Clean Air Power, which develops and commercialises Dual-Fuel technologies for heavy vehicles, announced its results for the 6 months to 30 June 2010. Revenue for the period fell to £2.3m (2009: £3.3m), whilst losses after tax increased by 20 per cent to £1.2m. This was mainly as a result of a reduction in demand from a US government defence contractor; though a slight improvement in the gross profit margin to 56 per cent (2009: 53 per cent) is due to the increased weighting of the component and emissions business. A £2.25m fundraise was completed in September 2010. T he cash position in the period to June 30th fell to £1.3m from £2.9m.  The Company made a number of important developments during the period including a supply and developments agreement with Volvo Powertrain, a concept development with Volvo Bus Corporation and a concept development with Navistar. The first of these represents an interfaced vehicle solution dual fuel system which is designed to reduce emissions and fuel costs, and testing will commence later in 2010. The Navistar deal is intended to develop an engine to achieve the US Environmental Protection Agency emissions standard, with a Concept Ready Phase expected to be obtained by Q4 2010. Whilst the Components division of the Company (which manufactures and supplies components used in the Company’s Dual Fuel technology) faced a decline in sales due to reduced demand from a US government contractor (as mentioned above), which brought revenue down to £1.12m (2009: £1.65m), the Emissions Reduction Division that provides solutions to stationery diesel engines won an order to supply Catalytic Converters to Emissions Solutions Inc. These positive developments during the period should help the Company power ahead in the second half of the year.

Cluff Gold (CLF 111.5p / £136.88m)
The West African focused gold mining group announced its interim results for the 6 months to 30 June 2010. The Company made profit after tax of $6m (2009: loss of $29.5m), whilst EBITDA totalled $18.4m (2009: loss of $1.5m). Such performance helped improve the Company’s balance sheet position to a healthy $8.1m (2009: $2.3m). Much of these improvements have come about as a result of strengthening operating activities, with first half gold production now breaching the 50,000 ounce mark- the combined output of the Company’s Kalsaka and Angovia Gold Mines. While these 2 mines continue to unfold and remain the main contributors to Cluff’s performance, activities at Baomahun are of great interest, with exploration activities thus far resulting in inferred resource estimates of 1,030,000 ounces. Results from the bank feasibility survey of Baomahun should surface in 2011.

Cyprotex (CRX 4.88p/£10.90m)
Cyprotex’s push into the toxicology marketplace has continued with the announcement of the official opening of their new toxicology facility at their Macclesfield headquarters. The additional laboratory space houses a Thermo Scientific Cellomics ArrayScan® VTI High Content Screening Reader – the very latest technology in multi-parametric automated fluorescent imaging and cellular analysis – considered to be a breakthrough in in vitro toxicity testing.  This facility will allow the Company to continue to improve its technologies, product capabilities and customer services.  With drug toxicity reported as being responsible for around 30 percent of all drug failures in preclinical and clinical assessments, it is no surprise that this area is receiving increased attention from pharmaceutical companies.

Datong (DTE 40.5p/£5.6m)
Datong issued a trading update at the time of its AGM on 30 September in which it stated that “recovery continued in line with management expectations, culminating in the Group delivering a substantial improvement in trading on last year. Strong progress has been made in all geographic territories resulting in record levels of order intake and sales revenue for the 12 months to 30 September 2010.” This very positive statement was accompanied by the Board’s expectation of both Group expansion and continued profitable growth. One to watch, definitely.

Datum International (DATP.PL 10p/£5.09m)
Last week PLUS quoted software Company Datum announced a new contract with the Association of Chartered Certified Accountants valued at £325,000 over the course of 12 months. Datum will supply an intelligent document capture and management solution to help the ACCA manage member based information within the customer services group.  David Hornsby, Chief Execs said: “…This deal demonstrates the technical excellence of our subsidiary Root 3 and is clear validation of the rationale for the acquisition of Root3 in March 2010 and it is encouraging to see the early fruits of this transaction.”  We believe that the company will be looking for more acquisitions; either complementary technology or a business with stable and recurring revenues. Despite a preponderance of clients in the public sectors, such as hospitals and county councils, Datum should benefit from cost cutting since its products work on a localised level and are cost saving. We look forward to the Company reporting ongoing profitability and good results.

Encore Oil (EO. 135p/£392m)
EnCore, who seems to be drilling faster than we can write, has announced very encouraging results from the second side-track of well 210/29a-4Y on the Cladhan discovery.
Initial results indicate a 258 feet gross hydrocarbon reservoir with 108 feet net pay.  The well was drilled to a depth of 11,530 feet.  The next steps involve wireline logging, downhole sampling and pressure measurements to confirm the LWD data as well as further analysis to determine the next drilling location for when a rig becomes available sometime over the next five months.

Focus Solutions Group (FSG 76p / £22.61m)
AIM listed leading provider of multi-channel distribution software to the global financial services industry was yesterday up more than 40 per cent as it announced that it had won a new contract with a major global bank. The contract is worth approximately £10m and in addition, Focus Solutions anticipates that the contract will be worth up to an additional £10m over the following five years from annual support and maintenance fees, transaction fees, and additional implementation services. The Bank has selected Focus Solutions 360° multi-channel distribution to provide a single platform to support every customer engagement for financial advice made through the Bank’s branches, call centres and on the internet. The solution will support over 1,000 advisers and administrators, as well as providing a ‘direct to consumer’ channel for 5 million account holders.  The Bank is expecting to improve customer service by enabling a seamless interaction across all its advised and direct channels as well as providing an online portal through which its customers can purchase products online. In addition by implementing a single platform, the Bank is aiming to gain a single view of the customer, enabling it to understand the overall value and risk of that individual. Richard Stevenson, CEO of Focus Solutions, said: “Following our recent contract extension with HSBC, we are delighted to be working with yet another major global bank to help realise their vision of a truly customer centric, multi-channel distribution solution.”

ImmuPharma (IMM 81.25p/£65.89m)
The Company announced on 30 September its half year numbers showing an expected operating loss of approximately £2.5m versus an operating profit in the first half last year of just over £13.7m. This reflects the nature of milestone payment receipts from customers – with 2009 benefiting from the $30m payment by Cephalon Inc for the exclusive worldwide rights to Lupuzor. The Company continues the advancement of its other programmes including the Phase IIa study in patients of 1PP-204106, the promising new anti-cancer compound, along with three other earlier stage programmes in pre-clinical development for inflammatory disorders, moderate to severe pain and serious hospital infections. With the next announcements expected to be on the preliminary results of the Phase IIb trial for Lupuzor and the Phase IIa study of 1PP-204106, the next six months could be a very exciting period for the Company.

SeaEnergy (SEA 22.75p/£15.72m)
AIM listed offshore wind company announced results for the 6 months to 30 June 2010. Losses from continuing operations for the period, after tax, came in at £4.2m (2009: £2.5m), whilst cash levels fell to £1m (2009: £2.8m), though loans and borrowing fell by £0.5m to £1.5m. SeaEnergy has experienced a number of positive key events over the last year, in particular, the intention to dispose of all, or part, of its 80 per cent stake in SeaEnergy Renewables Limited (SERL) which signaled a bold restructuring initiative. Whilst the sale of the division has remained a focus, the Company has continued to make progress within the division, with continued support from The Crown Estate in the development of the Inch Cape Project. The refocused business will seek to provide long-term services and support to the offshore wind industry through the Marine Services business component.  Other operational highlights for SeaEnergy include the signing of two important agreements for the Marine Services business (a letter of intent with Ulstein for the X-Bow vessel design and an exclusivity agreement with Ampelmann for their bridging system), significant work having been completed at the Beatrice Offshore Wind Farm (with Geotechnical work set to commence shortly, and the Landsdowne Oil and Gas interest (SeaEnergy holds 32.95 per cent interest) successfully securing two year extensions to three of its Irish Licences.  An extension of loan facilities demonstrated a degree of positive sentiment in the Company last week, a loan facility made available by LC Capital Master Fund has been increased back to £3.8m, with LC taking security in the form of a share pledge over SeaEnergy’s shares in SERL. The extension is to the date of 31 December 2010 or completion of the SERL process, whichever the sooner. Whilst the Company faces a number of uncertainties, this extension  offers some comforting news.

Shanta Gold Limited (SHG 29.25p/£52.29m)
Shanta have raised approximately $20m with the placing of just over 51 million new shares at 25p per share. As part of this placing, the cornerstone investor Export Holdings Limited (in which the non-executive director Ketan Patel has a 50 percent interest) acquired just under 6.4m shares taking its holding to 27m shares, representing 15.15 percent of the Company.
The Company has also announced a joint venture option agreement with the Saza Village Council to enable Shanta to evaluate (and if economic) develop a plant for the re-treatment of around 500,000 tonnes of tailings left behind when the New Saza Mine closed in 1956. The tailings dump is 7km from the New Luika Gold Mine – construction of which is due to begin in Q4 2010. If the tailings do turn out to be economic, then they will be able to be hauled and treated at a low cost, producing additional profit for the proposed New Luika Mine whilst making a significant contribution to the welfare and quality of life of the Saza Village through the elimination of the current pollution caused by the dump eroding into nearby streams and Lake Rukwa. Such a result would definitely be a win-win for both the village and the Company.

Touch Group (TOU 1.75p / £2.83m)*
At its AGM last week, AIM listed international business-to-business publishing group’s Executive Chairman, Vincent Isaacs, made the following statement: “We are putting every effort into building and developing our revenues. Reporting our progress for the first five months of our fiscal year in sales based revenue, we have achieved in excess of 35% over the same period last year.  However, this is not yet enough – we need a further increase to achieve profitability. Whilst the figures we are now achieving are sales based they are contracted orders; down the line they transfer into statutory revenue, which will reflect in our future Report and Accounts.”
Mr Isaacs also drew attention to Touch’s important capital asset in the form of a portfolio of branded medical journals which have been established over the years. Touch produces in total 62 journals, 44 of these have been produced for over three years. Taking just these 44, the average period that they have been in production is over six years.  The total “averaged” annual revenue figure for these 44 journals is in excess of £2.7m.  In addition, Touch is generating reprint revenue from these journals which this year alone will be in excess of £750,000. We keep watch for further updates on the Company’s trading, certainly the worst is behind it, and it can look forward with renewed confidence.

Transense Technologies (TRT 4.38p/£5.78m)*
The Company reported its interim figures on 30 September showing that whilst advances have been and continue to be made, the lumpy nature of the underlying contracts make it very difficult to predict accurately short term progression. The Management had hoped to have been able to release details of orders from significant customers during the period, but as these have not yet been finalised, this news will have to wait. The second generation of the Translogik tyre data collection tool is almost complete, with potential customers awaiting the opportunity to put it through its paces and, along with the evaluation of the Company’s TPMS by OTR and heavy truck operators continuing, it can surely only be a matter of time before Management will be able to announce the expected surge in the top line. The pressure is on the management, but we expect them to come through with flying colours.

ValiRx (VAL 0.36p / £1.26m)*
Last week AIM listed cancer therapeutics and diagnostics company announced its interim results for the six months ended 30 June 2010. Highlights included successfully continuing with the GeneICE preclinical development with the Eurostars grant, securing funding and a partnership agreement for ValiBio, raising an additional £500k through an equity placing, concluding sales and distribution licence agreements for the SELFCheck range of products and finalising the analytical validation of the HPV prototype kit and starting the clinical sample validation. Dr Satu Vainikka, Chief Executive, commented that: “The personalised medicine approach is increasingly required within the marketplace and we believe that ValiRx is well placed to deliver better and targeted therapeutics and diagnostics to more safely and effectively meet the needs of clinicians and cancer patients.”
Administrative expenses for the six months were £336k (2009: £717k). This reduction in administrative costs resulted from a significant and sustained effort to reduce overhead and salary costs while maintaining R&D activity. The group reported a reduced loss after tax of £293k (2009: £681k), in line with the Board’s expectation. Last week, ValiRx announced that it had entered into an agreement for the sale of its wholly-owned Belgium subsidiary ValiBio SA to Singapore Volition Pte. Limited for $1,000,000, of which $400k will be received in staged cash payments, with the balance in shares. As a result of the disposal of ValiBio, the group’s operating costs have been substantially reduced and ValiRx is now a leaner business with the main focus on moving forward its anti-cancer therapeutics, which continue to show potential in pre-clinical studies to drive value. The Directors believe that the divestment of ValiBio together with grants from Eurostars and other incomes provide adequate working capital to take its therapeutics to the next stage of development.
The Company having disposed of ValiBio has two main divisions going forwards, as well as the retained ongoing value in ValiBio. The first is diagnostic test kits. ValiRx has a portfolio of ten retail products in the market. The latest new product, which checks for Chlamydia in about 10 minutes at home, is expected to be significantly cheaper to the consumer than existing products, and which is now available to consumers. We like the diversified risk profile of ValiRx; the second division is completely different and is a platform technology – GeneICE – which is funded by European grants and where ValiRx has two compounds in pre-clinical studies. We think now is a great time to invest in this exciting Company. ValiRx remains far from fully valued at these levels.

*A corporate client of Hybridan LLP

The Hybridan Small Cap Wrap is a weekly review of some of the most interesting small cap stories of the past week.  Our review will usually be of those companies whose market capitalisations are less than £50m although we may occasionally cover larger companies.