15 December 2010
This week: A company that wants to Bglobal, positive communications from Avanti and Sarantel sounds encouraging
African Aura Mining (AAAM 167.75p/£144.02m)
Established exploration and development company listed on the TSX as well as on AIM announced the filing of its 43 101 resource statement detailing 1.51 million ounces of gold at 3.78 g/t Au including 5,599,000t at 4.17 g/t (for 751,000 ounces) in the indicated category and 7,040,000t at 3.40 g/t (for 762,000 ounces) in the inferred category, with the deposit remaining open at depth and along strike. The entire indicated resource is within potential open pit depth from the surface and management is targeting a production profile of approximately 100,000 ounces per year for the open pit material – at a no doubt very attractive extraction cost per ounce.
African Eagle (AFE 11.25p/£43.29m)
Following our recent positive comments on the Company, we were not surprised by the announcement that Anglo Pacific PLC has increased its holding to 17.275m shares (4.49 per cent of the issued share capital). Anglo Pacific is a very well respected and successful investor in mining companies and investors could do worse than follow their lead.
Avanti Communications (AVN 712p/£604.85m)
Following on from the announcement of contract wins last week, Avanti has signed a 3 year managed services contract with the Spanish service provider NASSAT – Network & Satellite Systems de España – which provides satellite communication services mainly to enterprise and media customers and also has specialist contracts with fire services and television stations. We expect there to be further news of additional customers in the not too distant future.
Beacon Hill Resources (BHR 14.25p/£67.04m)
The AIM listed resource company, announced that BHR Mining Limited, the Company’s subsidiary, has acquired 100 per cent ownership and control in the Minas Moatize coal mine in Mozambique and remains fully funded ahead of the development of producing coal from the planned large open pit mine by Q1 2012. Given the unique geological location of the mine and the potential of the Tete province, Management is expecting promising results from the project.
Bglobal (BGBL 41p/£40.79m)
Provider of smart metering solutions to the energy market announced its interim results for the 6 months to 30 September. The results were most impressive with revenue increasing 114 per cent to £12.46m (2009: £5.82m), though this was in part due to the acquisition of Utiligroup during the financial year- stripping this away, Bglobal saw a 79 per cent increase in revenue to £10.42m. Gross margins, too, were strong at 44.6 per cent (2009: 33.5 per cent), and adjusted operating profit (before acquisition costs and amortisation of acquired intangibles) came in at £1.1m, half of which is from the Bglobal Metering business and the other half of which comes from the Utiligroup business- encouraging signs of its integration into the main business.
Bglobal operates a model of ‘securitising’ its contracts with clients- these are packaged up and sold to Barclays/Macquarie, thereby de-risking the Company’s revenue stream.
Going forward, one of the main opportunities is in penetrating the international markets- the Far East and Asia in particular are showing much promise, though Bglobal has indicated that this is very much a long term strategy and would possibly seek to find a partner to collaborate with on the distribution side of any service provision in the region. A global strategy therefore for the smart meter company.
Datong (DTE 64p/£8.85m)
Datong released its final results for the year to 30 September 2010 (a new year end) showing revenue up 80 per cent to £14.06m (2009: £7.82m) and adjusted earnings per share of 6.38p (2009: loss per share of 2.47p). Net cash was £2.58m (2009: £1.70m). The confident statement highlights signs of recovery in its core US market and the launching of well-received new products should give investors comfort and cheer at this time of the year.
Electrum Resources (ECR 1.92p/£7.18m)
Electrum Resources has announced a placing of 100m new ordinary shares at 1.4 pence per share raising up to £1.4m before costs. The proceeds of the Placing are to be applied to the continued development of the Company’s projects, the evaluation of new opportunities and for working capital purposes. The Company also announced another change of name to ECR Minerals plc in light of a trademark issue that has arisen in the USA.
Equatorial Palm Oil (PAL 20.25p/£23.80m)
The Company is convening a general meeting to gain shareholder approval for the previously announced Joint Venture Agreement with BioPalm Energy Ltd. The Joint Venture Agreement provides for equity investment in Palm Developments, the Joint Venture Company, of US$7.5m from PAL (via its Guernsey subsidiary) and US$22.5m from BioPalm Energy (which holds approximately 28.5 per cent of the issued share capital of PAL). Furthermore, BioPalm Energy will arrange and guarantee an additional US$30.0m loan facility to the joint venture company.
PAL will be the operator of Palm Developments and use the resulting US$60m to accelerate its strategic development plan in respect of its c.169, 000 hectare land position at Palm Bay, Butaw and River Cess, with the aim to nearly double its previous planting targets each year from 2011 to 2014. The accelerated planting schedule will increase harvesting rates, requiring faster investment in the associated infrastructure and palm mills to process palm fruit into CPO, palm kernel oil and palm kernel cake. The accelerated planting rates should also bring forward revenues generated from expected sales of CPO and other palm products. We agree with Management that this should have an overall positive impact on shareholder value.
European Nickel (ENK 21p/£48.74m)
The Board of European Nickel has had enough of waiting for the re-issue of a forestry permit for the Çaldag project in Turkey and decided to put the whole thing on care and maintenance. The technical team will be flying to the Philippines after Christmas where they will be fast-tracking the definitive feasibility study at the company’s Acoje project on Luzon Island. A pre-feasibility study confirmed an economically viable nickel heap leach project. As time is money, we believe European Nickel’s priorities are right.
Fusion IP (FIP 30.5p/£16.54m)
Seren Photonics, a company in Fusion IP’s intellectual property commercialisation portfolio has announced that it has raised £475,000. The funding will enable Seren to build its first pilot scale ultra high brightness LEDs that will be used as demonstration products to showcase the technology to larger high brightness LED manufacturers, some of whom the Company is already having discussions with. Seren’s technology has the potential to advance the development trends of LEDs by years in terms of efficiency. The technology allows for dramatically increased efficiency of light conversion, which implies that either much brighter lamps can be produced or that the power consumption of state-of-the art lamps can be further reduced. This may be of interest not only for the fast growing use of white LEDs for back lighting of laptop computers and TVs, but may also enable new market sectors such as domestic lightning where the reduced need for cooling will make it a realistic alternative to incandescent bulbs. Seren is not the only bright light in Fusion’s portfolio; a number of other companies are seeing very positive progression which will allow Fusion to record some significant value uplifts. In addition, Fusion’s share price is trading well below net asset value so investors may benefit from appreciation in both.
Hutchison China MediTech (HCM 501.5p/£259.45m)
Chi-Med, the pharmaceutical and healthcare company based primarily in China, has announced that it intended to increase its indirect ownership in Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited. Chi-Med’s wholly-owned subsidiary, Hutchison Chinese Medicine Holding Limited has entered into agreements to increase its equity interest from 75 per cent to 80 per cent for a cash consideration of approximately US$2.7m. The directors at Chi-Med consider the transactions are fair and reasonable to all shareholders.
ITM Power (ITM 51p/£56.36m)
Amey (which is a leading public services providers and infrastructure manager employing around 11,000 people across 200 UK locations and operating a fleet of approximately 4500 vehicles) and the RAC (which has a fleet of some 1,700 vehicles) have signed agreements to participate in the Hydrogen On Site Trials (HOST) of ITM Power’s transportable high pressure refuelling unit (HFuel). This is an important step for the Company in demonstrating the applicability and practicality of green hydrogen in everyday vehicles, whilst also displaying considerable interest in the Company’s technology.
Kea Petroleum (KEA 12.5p/£63.58m)
New Zealand based oil and gas exploration company with six petroleum exploration permits in Taranaki and Northland Basins, has announced that it has signed a legally binding heads of agreement to establish an alliance with Methanex New Zealand Ltd to facilitate exploration in the Taranaki Basin in New Zealand. Both companies will provide 50 per cent of the funding requirements, and in return Kea will be entitled to all oil and gas condensate income. Methanex on the other hand will be entitled to a percentage of accounting profits and the opportunity to purchase any gas produced at a price using a predetermined formula similar to that used for the Beluga Gas Offtake Agreement. This is a very positive early step in the exploration process for Kea, and we look forward to further updates.
Motive TV (MTV 0.72p/£8.65m)
Digital television technology, software and services provider announced that since the first half results announcement, significant progress has been made integrating into the group the two acquisitions previously announced, Adecq Digital S.L. and NXV Limited. During the nine months to 30 September 2010 Adecq’s total sales were €707,000, compared with €260,000 in the same period in 2009, an increase of 172 per cent. As previously announced Adecq has now signed a second major supply agreement, anticipated to be worth approximately US$1.1m in the first year revenues, with one of Europe’s leading television satellite equipment providers. The Board is confident that this combination of disruptive technologies position Motive as a solution provider that can offer TV Anywhere, anytime to the industry.
Oilex Ltd (OEX 22.25p/£48.97m)
Oilex has announced the conditional placing of 30m new shares (approximately 12 per cent of the enlarged share capital of the Company) at a price of 20p pence each resulting in gross proceeds of £6.0m. The proceeds of the placing will be applied primarily to further drilling on the Cambay Production Sharing Contract Eocene reservoirs in Gujarat, India, and for working capital. This drilling will be in addition to the Company’s first proof-of-concept horizontal well on the Cambay Eocene reservoirs planned for Q1 2011.
Polo Resources (POL 5.26p/£124.38m)
The Chairman of GCM, in which Polo owns 29.83 per cent, issued a statement at the time of its Annual General Meeting giving an update on its various interests – the most important of which is the Phulbari Coal Project. A telling extract, should investors wonder if the project will ever get off the ground was “…there is almost universal acceptance that coal has a unique role to play in meeting the country’s energy requirements. Similarly, it is now accepted that open pit mining is the only feasible means of delivering the volumes of coal required in an economically, socially and environmentally acceptable way.” As the most advanced coal project in energy-starved Bangladesh, logic would indicate that it can only be a matter of time before its Government gives the go-ahead to mine the coal to produce the much needed electricity. The future looks bright for GCM and Polo.
Red Rock Resources (RRR 15.25p/£103.02m)
The gold mining and exploration company with projects in Kenya and Colombia, and interests in steel feed and uranium, reported that it has found 2 drillable sulphide targets from a VTEM airborne electromagnetic survey over the Macalder mine in south Kenya. On this basis, the Company will now test these targets for Copper, other base metals, gold and silver mineralisation through a programme of up to 10 holes and 2 trenches. This has the potential to become a significant opportunity for the Company.
Regal Petroleum (RPT 26p/£82.78m)
The Company has announced that it has received a number of approaches in relation to a potential offer for the Company and confirms that it is in final-stage discussions in relation to a possible all-cash offer for the Company at a price of 24.0 pence per share.
Sarantel Group (SLG 1.38p/£4m)
The leading manufacturer of revolutionary filtering antennas for mobile and wireless devices, has announced the terms of a proposed placing of 110,000,000 shares at 1.25 pence per share, to raise £1.375m gross. The cash will provide Sarantel with additional working capital to allow the Group to expand its sales and marketing efforts and invest further in research and development. The directors and senior employees participated in the placing, which is always a sign of confidence.
Sareum Holdings (SAR 0.265p/£3.38m)*
Specialist cancer drug discovery business announced on Monday that it is encouraged by the quality of data that its cancer research programmes have generated in 2010 and is encouraged by the number of discussions currently in progress regarding their commercialisation. Encouraging results have recently been generated in pre-clinical cancer models which are on-going. The Board looks forward to fully analysing this data and announcing the results in the first quarter of 2011. In addition, the Company announced it has raised £250,000, at 0.20p per share. Sareum intends to use the proceeds of the placing primarily to progress its cancer research programmes. Sareum is well positioned to fund and execute its ongoing business plan of further development and commercialization of its drug cancer programs.
SQS (SQS 209p/£56.98m)
Software Quality Systems , the German-based provider of software testing and quality management services, has announced three new Managed Services contracts and extended three existing ones, such that the order intake for the Managed Services division has exceeded €50m in the year to date. This is over a 10-fold increase from 2009 and illustrates that the Management is well on the way to reaching its goal of 50 per cent of group revenues being derived from this area. The new contracts are with a German logistics company, a European telecommunications company and Specsavers. We would expect the Company to continue to expand the Managed Services area and so keep your eyes peeled for further similar announcements. Certainly one to watch!
Sunkar Resources (SKR 33.25p/£53.15m)
Sunkar has announced an update on operations and development of its Chilisai Project highlighting a revised 2010 mining target of 1 million tonnes of ore earlier than planned. To date, 236,000 tonnes of P2O5 concentrate has been produced as a feedstock for the existing milling complex and the Company is currently commissioning the new milling and loading complex. Work on the Bankable Feasibility Study is progressing with preliminary results expected before the end of 2010. With the Company actively negotiating with farmers in Kazakhstan and Russian fertilizer plants on phosphate rock sales for 2011 and the submission of an application for the inclusion of Chilisai direct application rock in the Kazakh subsidised fertilizer list, Management are certainly not letting grass grow under their feet with regard to revenue generation.
Synchronica (SYNC 18p/£16.76m)
Following on the heals of the announcements at the end of September and November that a major Latin American operator group has mandated that device manufacturers certify their products with Synchronica’s IM infrastructure, the Company has declared the third order from a top-10 mobile device manufacturer to certify and license its IMPS instant messaging for its mid and entry level devices. In addition, Synchronica expects to receive additional orders from other device manufacturers that wish to sell their devices to the operator, repeat orders as device manufacturers launch new models of their handsets and also expects to see an increase in the uptake of its Instant Messaging service by the carrier’s subscribers, which ultimately translates into increased revenues for the Company.
Toledo Mining Plc (TMC 31.25p/£12.98m)/European Nickel (ENK 21p/£48.74m)/ Amur Minerals Corporation (AMC 8.5p/£21.28m)*
We have commented in the past on Toledo Mining and European and it is interesting to note that Toledo has announced that it has received a bid approach – and this is after the signing of a MOU in July with Jinchuan Group Limited, the largest nickel producer in China, pursuant to which Jinchuan intend to subscribe for 29.9 per cent of Toledo shares at 42p per share. European Nickel has a 7.7 per cent interest in Toledo plus 23.7 per cent of the Berong project – Toledo’s main investment, in which TMC has a 56.1 per cent economic interest. The news should bode well for investors in both companies and should highlight the attractiveness of other nickel plays, such as Amur Minerals*– where it is worth noting that the deposit is nickel sulphide and not, as at Berong, which is nickel laterite and therefore difficult and more expensive to process. This news and Amur Minerals also announcing that it had received an update from Rosnedra relating to its application for a mining licence on its Kun-Manie nickel – copper exploration licence, has had a positive impact on Amur’s share price. Three of the four external agencies included in the licence approval process have approved the application and the Company anticipates that the fourth agency, the Ministry of Economic Development, will provide its affirmative input and approval in due course.
Tower Resources (TRP 4.48p/£46.19m)
The oil and gas exploration company with interests in sub-Saharan Africa, provided an update on its current operations in each region. In the Namibia regions, Licence 0010 showed some promising results. In terms of the Uganda region, final interpretation studies over Licence EA5 may indicate significant oil generation and good reservoir in the area. Following the £660k placing on 2nd November 2010, the Company is looking for third party interest in funding the remainder of the Uganda commitment operation.
Zytronic (ZYT 206p/£30.30m)
AIM listed specialist manufacturer of internationally award-winning touch sensor products, announced its preliminary results for the year ended 30 September 2010. The results were pleasing with revenue up by 16 per cent to £18.5m and orders for the year up by 30 per cent to £19.8m. The Company also performed well in its historically strong market – the ATM market, with ATM optical filter unit sales up by 36 per cent. Profit before tax increased by 27 per cent to £2.9m while gearing reduced to 11 per cent compared with 31 per cent in 2009. With sufficient working capital for future periods, the Management believes it’s time to reward its investors with a dividend of 7p per share.
Zytronic’s leading touch sensor products are based upon its unique projected capacitive technology (PCT), which is similar to the technologies used on iPhone but PCTprovides better durability and stability and works better on large screens (min 6” screen). Zytronic has completed a few Research & Development projects during the year and is looking to enhance its manufacturing facilities through the purchasing of new equipment and the refurbishing of its clean-room facility for increased manufacturing capacity and efficiency. With export accounting for 90 per cent of sales this year, the Company now has 39 countries covered and is looking forward to expanding its distribution channel into the Far East and at the same time to consolidating its existing sales network in Europe and the Americas.
*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.
07 December 2010
This week: Deltex keeps its finger on the pulse, hope… then less desire, mobilised and on the Ascent, and William Sinclair grows in aggregate
African Copper (ACU 4p/£32.94m)
Following the restarting of its copper mine in Botswana and the progress towards commercial production levels, African Copper has announced that it has secured a loan of $7.5m from its (82.16 per cent) controlling shareholder ZCI Limited. The funds will enable exploration drilling on the Company’s Matsitama Exploration Project and Mowana North deposit and the completion of a scoping study for the Makala deposits along with some plant enhancements. Although investors will obviously be hoping for the Mowana mine to achieve commercial production levels, the Company’s share price in the medium term will in our view depend more on the results of its exploration activities and we would not be put off by the existence of its majority shareholder.
The Company also announced its interim results for the six months to 30 September highlighting the increased production (with August being the highest month ever at 561 tonnes of Cu at Mowana Mine), with improvements to production bottlenecks, revenues of US$1.8m and the expectation of a full mining licence during December 2010 for the Thakadu deposit.
Allocate Software (ALL 74p / £46.57m)
Allocate Software, a major supplier of workforce optimisation solutions to global organisations with large, multi-skilled workforces continues to pursue revenue growth with the appointment of Martin Jeffries as Director of International Marketing. Jeffries appears well suited to the role having held senior international marketing roles in public companies including GlaxoSmithKline, Virgin Media Business, Ignetica Ltd and in his most recent corporate role, as Head of Strategy & Programs for Dell across EMEA. We look forward to the progress that this international marketing appointment will hopefully provide.
Ascent Resources (AST 7p/£36.38m)
We write on this AIM traded oil and gas exploration and production company for the first time with news that a rig for the Company’s Pg-11 evaluation well in Slovenia is being mobilised and that it’s expected that drilling will commence on or around the 16th December 2010. Ascent operates in Hungary, Slovenia, Italy, Switzerland and the Netherlands, performing a combination of exploration, appraisal and development activities. The well is the first to be drilled by Ascent on the Petisovci Lovaszi project, which has been the focus of attention for the Company across 2010, and in which the Company recently announced an independently verified P50 estimate of gas-in-place of 412 billion cubic feet. Ascent also secured up to £9.1m in funding in November (£2.1m loan and a £9m equity line of credit) for the evaluation of the well. The evaluation of the well is being implemented to collect sufficient data for the development, planning and calibration of the 3D Seismic. Ascent’s Managing Director Jeremy Eng said, “Pg-11 in Slovenia is an important well and whilst the main effort is in the evaluation of the Miocene gas reservoirs, we expect that it will be completed as a producing well and then brought into production as soon as possible.”We look forward to good news flow on this particular exploration company.
Ascot Mining (ASMP 43p/£22.46m)
PLUS quoted Costa Rican Goldminer announced last week that it poured 40.1 ounces of gold ore from its newly expanded mill. The company has made some significant progress since we last wrote on 2nd November 2010 when Ascot Mining commenced its gold production in Costa Rica. The expanded plant is now fully functioning as planned and the Company obtained clear title to the Mine. The Company is pleased with the result and is now intending to accelerate production to the initial targeted 1,200 ounces per month in Q1 2011. Ascot is clearly drawing back some investors’ attention with its recent news.
Avanti Communications (AVN 700p/£594.66m)
Following our last comment on the Company where we indicated that Avanti would take off should it achieve a successful launch of its satellite, we join the Company in celebrating its latest news of HYLAS 1 which reached the correct orbit after its launch from the Kourou Space Centre on an Ariane 5 launcher on Friday 26th November. In evidence of the commercial prospects, Avanti has announced that it has signed a five year contract worth $15.5m, with the international satellite service provider TigrisNet, the leading VSAT (Internet via Satellite) provider in Iraq, providing a range of services that covers clients from every sector and size, including Government bodies to SMEs and local ISPs. Avanti also announced the signing of a 5 year agreement with BT for the provision of satellite broadband services via the HYLAS 1 satellite, as part of a recently announced £132m next generation access project in Cornwall and the Isles of Scilly, of which BT is a major partner. The estimated contract value is £1.2m and with the prospect of further contracts, it looks like the sky’s the limit for the Company and investors alike! The Company also released its results for the half year to June 30 2010 – the main item of interest was the closing cash balance of £34.18m (2009: £24.62m) that was subsequently augmented by a share placing producing £70m gross and so cash burn should not be a concern for the foreseeable future.
Baobab Resources (BAO 11.25p/£17.95m)
The Company has recently announced preliminary drilling results at the South Zone on its Tete iron/vanadium/titanium project, after completing 4,100m out of 7,000m of exploration, highlighting significant intercepts. Four holes produced intercepts of 43m, 62m, 67m and 119m containing an Fe percentage ranging from 55 per cent through 62.3 per cent, plus valuable concentrations of vanadium oxide. The next round of drill results are expected later this month and through into the New Year. Christmas looks as though it could be a promising time for investors.
Bioventix (BVXP 180p/£9.05m)
PLUS listed specialist in the development and commercial supply of high-affinity monoclonal antibodies for applications in clinical diagnostics, announced a significant breakthrough in the creation of a unique antibody to vitamin D – vitD3.5H10. The company expects considerable commercial potential for vitD3.5H10 given the importance of vitamin D and the difficulty of producing such an antibody.
Charaat Gold Holdings (CGH 56p/£82.34m)
Charaat has announced some very prospective results resulting from its 2010 exploration programme of the Tulkubash project, including 14.8m @ 5.66g/t Au, 10.0m @ 10.09g/t Au and 7.2m @ 6.05g/t Au. The 2010 programme comprises 42 holes over a total of 4,923 metres, including 100 metres of underground development and 414 metres of trenching. Only two holes in the programme remain to be completed. It is anticipated that drilling and assay analysis will be available in the next few weeks and that a revised resource for the Tulkubash project incorporating the new drilling information will be completed during the first quarter of 2011.
Cluff Gold (CLF 111.5p/£146.33m)
Following its recent share placing, Cluff has announced exploration results (including 10m at 3.22g/t from 70m depth and 14m at 4.25g/t from 75m depth) and its new strategic plans for the Kalsaka mine in Burkina Faso. The strategic plan includes a number of regional scale exploration activities to define further the drilling targets for the 2011 programme. The results from the geochemical and geophysical surveys will assist in the planning of an aggressive 63,000m drilling programme which is expected to commence in Q1 2011. Is it time for investors to dig deep too?
The Company also announced seven new drill targets resulting from the airborne electro-magnetic survey of its wholly-owned Baomahun asset in Sierra Leone. All targets are interpreted as having strikes and dips similar to mineralisation in the existing resource area in which 1.4Moz of measured and indicated resources, and 1.0Moz of inferred resources have been delineated to date. The Company plans a targeted and accelerated 6,000m diamond drilling programme focusing on these seven new targets commencing in January 2011 as part of the Company’s $12m programme at Baomahun in the 2010/11 season.
Deltex Medical Group (DEMG 16.25p/£21.43m)
Following the National Institute for Health and Clinical Excellence (NICE) guidance in October endorsing CardioQ-ODM for use with patients undergoing surgical procedures who would otherwise require invasive cardiac monitoring, the share price has outperformed strongly. The recognition by the medical profession of the Company’s technology continues as evidenced by the successful NHS National Technology Adoption Centre (NTAC) project on ODM that has been recognised in two annual Awards processes. We believe that the Company’s technology will continue to gain recognition and usage – which can only benefit patients and investors alike.
Desire Petroleum (DES 67.25p/£230.19m)
The ‘fun’ continues in the Falklands, not least with DES. On 2nd December the Company announced to the market that it had discovered oil at the Rachel North well off the coast of the Falkland Islands. They said tests would be carried out to obtain more information on the quality of the reservoir and other factors to assess the significance of the discovery. The Company also said that the discovery confirms their belief that the eastern flank of the North Falklands basin, where rival Rockhopper (RKH) also made a discovery called Sea Lion, is highly prospective and more oil fields will be found there, according to Desire Chairman Stephen Phipps. That was on the 2nd December and the share price gushed up to above 150p on the news. On the 6th December, the Company announced that sampling of the main sand showed that the hydrocarbons are residual and that the mobile fluid is water. On the back of the latest announcement the share price sank from a Friday closing level of 133.25 to a Monday morning trading low of 50p before settling mid-morning at 75p, down 44 per cent.
Frontier Mining (FML 6.75p/£61.92m)
The gold and copper exploration and development company focused on Kazakhstan has announced the completion of a resource estimation by independent consultant Wardell Armstrong International on the Benkala copper deposit in Kazakhstan, in which Frontier has a 50 per cent interest. The report shows nearly 1.5m tones of copper in the region and supports Frontier’s oxide estimates. With the $4m loan facility signed last week, Frontier is ready to move forward its plans to complete exploration and to fully define the deposit.
Herencia Resources (HER 2.08p/£20.20m)
Herencia has announced a placing of 270,678,452 new shares at 1.75p per share raising approximately £4.7m from new and existing shareholders including the wife of Michael Bohm, the Company’s MD. The funds raised from the Placing will be used to advance the Company’s 70 per cent owned Paguanta Project, including the Feasibility Study for the proposed Patricia Mine (Zn-Ag-BP-Au), at the ‘Doris’ Copper-Silver prospect and the ‘La Rosa’ porphyry-copper target, and infill/step-out drilling of the ‘Patricia’ Mineral Resource.
Ithaca Energy (IAE 139p/£354.34m)
Ithaca Energy has announced the awarding of contracts for the installation of subsea equipment and the installation of the FPSO mooring system for the Athena development to Bibby Offshore Limited. The Company continues on its journey towards its first production from the field planned for Q3 2011.
ITM Power (ITM 48p/£53.04m)
ITM’s Hydrogen on Site Trials (HOST) gets larger by the week with the current participants being joined by VolkerHighways. With HOST now becoming what appears to be the beta trial of choice for many organisations, the weight of support for the technology must bode well for its commercialisation and for shareholders.
Mariana Resources (MARL 41.5p/£66.07m)
Mariana announced a £6.2m share placing to investors in North America (we presume predominantly, if not all, in Canada) and the UK at a price of 40 pence per ordinary share – and subsequently due to investor demand, increased the size of the share placing to £8m. The net proceeds from the placing will be used to accelerate the exploration of the Company’s project portfolio in Argentina and Chile, with the Company’s primary focus to fast-track exploration drilling at its flagship Las Calandrias gold discovery in the Deseado Massif gold district to define a resource and evaluate the economic potential of the project, and for general corporate and working capital purposes.
Max Petroleum (MXP 19.75p/£89.27m)
In our Small Cap Wrap of 2nd November we wrote that MXP would be moving their rig to drill the Sekir West prospect. Last week (2nd December) the company announced that drilling has commenced at the SEKW-1 exploration well on the prospect in Block A, the 7th of 13 post-salt exploration prospects scheduled to be drilled by the company on Blocks A&E. The total depth of the well will be approximately 600 metres. In Block E the rig has arrived on location to drill the ASK-1 well but drilling will be delayed until early January 2011, pending the arrival of additional equipment. In addition, the Borkyldakty Field Infill Seismic programme is expected to be completed by December 31st and processed and interpreted by February 2011. The 3D seismic survey will enhance the ability to map the existing Triassic reservoirs in the Borkyldakty Field, identify additional appraisal and development well locations and evaluate an adjacent structure to determine if it is a drillable prospect.
Minera IRL (MIRL 86.5p/£103.39m)
Following on from our positive comments last month, Minera has released drilling results from six drill holes on the new Concurayoc Zone, in its Ollachea Project, Southern Peru. All six holes intersected potentially economic zones of gold mineralization – including an intersection in one hole of 33 meters grading 4.57g/t gold that included 12 meters grading 8.66g/t gold. Minera will continue drilling and plans to produce an inferred resource estimate towards the end of the first quarter 2011. The Company also released a resource upgrade at the contiguous Minapampa and Minapampa East Zones representing approximately an 80 per cent conversion of Inferred into Indicated Resource. The Company has understandably increased its resource objective at Ollachea to plus 2m ounces. As mentioned before, we expect continuing updates from the Company’s assets over the forthcoming months and are excited by the prospects of the news flow.
Monitise (MONI 20p/£139.68m)
Monitise, which provides an end-to-end solution enabling banks and their customers to undertake banking transactions via mobile phones, announced last week that the Central Bank of Nigeria has granted a licence to the Company and its partners to introduce payments by mobile phone across the country. This represents a sizeable opportunity for the Company to utilise its existing platform to provide financial services over the mobile phone as well as the first deployment of the Monitise Mobile Wallet Solution. The project will be funded in part by the $1.5m from the Africa Enterprise Challenge Fund that was awarded to Monitise in 2009. Lee Cameron, Chief Commercial Officer of Monitise, said: “In conjunction with our local partners, we are delighted to be able to offer Monitise’s technology in to this well regulated environment, empowering the millions of Nigerians who cannot access, or simply do not have, a conventional bank account – what we know as the ‘unbanked’ – to enjoy the security and benefits of inclusion within the Financial world.” Prateek Shrivastava, Managing Director of Monitise Africa, said: “Of Nigeria’s 149 million strong population, 19 million have bank accounts, but 75 million have mobile phones – which amply illustrates the potential of mobile payments services across the country.”
Motive TV (MTV 0.74p / £8.95m)
AIM listed digital television technology, software and services provider has successfully completed the technical pilot of its Bestv technology with Antenna Hungaria. The technical pilot was a first step in the evaluation of Motive’s technical platform for potential commercial introduction by Antenna Hungaria. Antenna Hungaria and Motive will continue to discuss the commercial introduction of the technology in the New Year.
OMG (OMG 40.5p/ £27.66m)
AIM listed technology group announced preliminary results for the 12 months to 30 September 2010. Revenues for the Company grew by 19 per cent to £31m (2009: £26m) and pre tax profits increased by 67 per cent to £1m. The Company paid a final dividend of 0.3p per share (2009: 0.15p) on the back of an improvement in performance. Much of the improvement seen by OMG over the period is as a result of a rebound in sales in North America, as well as having achieved a number of positions of strength in an increasing number of markets across the globe. Vicon, which is OMG’s motion capture division, saw revenue growth of 25 per cent, and this was bolstered by the recent news that the division’s Revue Camera had won Popular Science’s ‘Best of What’s New’ Award in the gadgets category. With the period also seeing the Company signing its biggest ever deal, (the Yotta division sealed a four year contract with the Welsh Assembly Government to carry out a comprehensive survey of the country’s roads), we look forward to seeing how this Company will evolve over the coming year.
Ovoca Gold (OVG 34.5p/£30.5m)
Ovoca has given an update on its current gold exploration activities in the Magadan region in Russia where it has obtained a two year extension (to 2013) of the Rassoshinskaya exploration license. More importantly, the update reminds us of the fact that Ovaca is in fact an undervalued gold investment vehicle that contains a diversified portfolio of gold mining equities, a substantial holding in Polymetal (the Russian gold and silver mining company) and $9 million in cash. In addition there is the optionality from three gold and silver exploration licenses. Ovoca intends to commence a share buy back programme of up to 10 per cent of the share capital before year end.
Plethora Solutions Holdings (PLE 10.5p / £4.65m)*
UK-based speciality pharmaceutical company last week announced a proposed placing to raise £700,000 and an update on business performance. The most advanced projects in Plethora’s development portfolio are now embedded with partners. PSD502, for the treatment of premature ejaculation, has completed its clinical development and is now controlled by Shionogi. PSD503, a potential treatment for stress urinary incontinence, is under option to a major global pharmaceutical company. Plethora has in the past twelve months founded The Urology Company based on its depth of knowledge of urology, gynaecology and sexual health conditions to establish a revenue generating, profitable and cash flow positive speciality pharmaceutical business targeting the UK market. This should provide a financial balance to the intermittent but substantial income from milestone and royalty streams generated from partnered development assets. The Group’s objective was to ensure the launch of between 6 and 9 products by the end of 2010; it has launched nine and in addition, anticipates up to 2 additional product launches in the near term which will exceed the 2010 target.
Plethora also announced new clinical data confirming the effectiveness of Hyalofemme and a supply and distribution agreement with a national UK pharmacy retail chain for this product. The retailer will launch the product as an own label product and Plethora anticipates that the product will be available to customers nationwide from the beginning of 2011. We like the highly derisked model: speciality pharma products selling on the market coupled with blue sky upside from already partnered drug development programmes, at no further cost to Plethora. The strong and experienced management team has a strong track record of product identification and development. Plethora is well funded and we believe will continue to provide good news flow in the short and medium term.
Plexus Holdings (POS 55p/£44.10m)
Plexus has released an AGM statement and vote result confirming the payment of an increased final dividend of 0.39p per share for the year ended 30 June 2010. Within the statement CEO Ben van Bilderbeek highlighted new customer wins in new territories and that trading in the first half of 2011 thus far is performing well and is ahead of management’s expectations. In addition, following a dialogue regarding friction-grip technology with the American Petroleum Institute and the completion of a successful independent evaluation by Det Norske Veritas of its technology, the Company has begun to market its range of POS-GRIP friction-grip wellhead equipment as being available in compliance with specified API Spec 6A standards, and the equivalent ISO 10423.
Polo Resources (POL 5.25p/£125.46m)
With a net asset value per share significantly above the current market price, it should not be a surprise to investors to read of the Company’s purchase for cancellation of 25,000,000 of its own ordinary shares at a price of 5.205 pence per share. In addition, with the new focus on iron ore investors should be cheered by the projected increase in iron ore prices of around 9 per cent in the next quarter following price rises resulting from the reduction in exports from India and expected delays for some iron ore projects in Australia. Investors may take the lead from the Company and follow its example to purchase shares at this level.
Prologic (PGC 46.5p/£4.65m)
AIM provider of software, services and consultancy to the fashion and lifestyle sector announced interim results for the 6 months to 30 September 2010. Revenue for the Company increased by 3 per cent to £4.94m (2009: £4.81m), operating profit was up to £84,000 (2009: £14,000) and, on the balance sheet, the Company had £1.56m of cash (2009: £1.30m). Prologic operates in the highly dynamic fashion and lifestyle sector, and has a number of high profile bluechip clients including Paul Smith, Ted Baker and TM Lewin. The Company develops its technologies and platforms in-house, thereby avoiding the licensing structure that many of its competitor’s operate whilst also enabling a more comprehensive technical support structure to be offered to its discerning client base- particularly important during high volume periods such as Christmas. Multi-channel business systems, planning, supply chain management systems, e-commerce, consultancy, support and reporting form the comprehensive package of solutions that Prologic offers. With the e-commerce solution that was installed for Ted Baker delivering positive results, having successfully been operated across a 12 month cycle, the Company is seeking to grow this area of the business and see’s its pipeline of clients growing. Post period end, Prologic secured its first SaaS based contract with Pretty Green (Liam Gallagher’s fashion label) demonstrating confidence by start-up companies in Prologic’s products. Whilst the results appear reasonable, the opportunities for this Company going forward are most encouraging, and we therefore we think there’s some logic to keeping your eye on this.
Red Rock Resources (RRR 14.5p/£97.95m)
Ascot Mining plc, a Red Rock investee company has announced the completion of its purchase of 100 per cent of the Chassoul Gold Mine. Ahead of schedule Ascot has made the final payment due in January 2011 having developed and brought the Chassoul mine into production. Following the successful completion of expanded capacity, targeted near term Gold production is 1,200 ounces per month. We continue our positive stance on Red Rock.
Regal Petroleum (RPT 15.5p/£49.35m)
The Company said on 1st December that the District Administrative Court of Kiev ruled in favour of the Ministry of Environmental Protection, adding that it is awaiting the written decision of the Court in the appeal and upon receipt will consider its position further with its lawyers, including any further appeal of this decision. This all related back to June 28 when the company advised that it had received an order on May 21, but dated Mar 30, signed by the Minister of Environmental Protection identifying certain matters requiring rectification in relation to Regal’s compliance with certain legislation in the Ukraine. These matters related to its operations at its Mekhediviska Golotvshinska and Svyrydivske and condensate fields, and required a suspension of operations whilst such matters were rectified. As a result of the court’s injunction order, the company’s drilling and production operations may continue, as they have done, throughout these events without any interruption of gas supplies to OJSC Ukrzakordongeologia. On 17th November the Company said it would immediately commence the shut-in of its operations at its MEX-GOL and SV fields, thereby suspending production, due to the ongoing dispute and following the 1st December announcement the fields remain shut-in.
ReGen Therapeutics (RGT 1.75p/£1.37m)
ReGen Therapeutics, a healthcare product developer announced on 1st December that they have signed an agreement with LG Life Sciences (LGLS) to be the exclusive distributor of its nutritional supplement Colostrinin in South Korea. LGLS is the leading pharmaceutical company based in Seoul, Korea, committed to promoting health and well-being of patients and customers. Its key therapeutic areas include metabolic and cardiovascular diseases as well as well-being. LGLS has a capability to develop and market nutraceutical products and has a plan to distribute Colostrinin through various shopping channels. The appointment is conditional upon LGLS securing import and regulatory approval for the product. An approval application should be submitted before the end of Q1 2011 but approval may take some time to achieve. LGLS will also be developing their own formulation of Colostrinin specifically tailored to the retail market in South Korea. The ReGen board regards this to be a significant step as it provides entry into the major growth area of the world economy.
Serabi Mining (SRB 3.92m /£17.57m)*
AIM-traded gold exploration company announced a placing with warrants to raise gross proceeds of £3.54m on Friday last week at a price of 3.515 pence per share. The net proceeds are intended to be applied to Serabi’s on-going exploration activities at and around the Palito mine and in the evaluation of the wider 60,000 hectare Jardim do Ouro tenement holding that surrounds the Palito Mine, and for general corporate purposes. Serabi intends to take the steps required to apply to dual list the ordinary shares on a Canadian stock exchange in early 2011. Serabi is also seeking shareholder approval at a General Meeting for a consolidation of the ordinary shares on the basis of 1 new ordinary share for every 10 existing ordinary shares. Eldorado has conditionally subscribed for 2,500,000 Special Warrants and will have a beneficial interest of 26.44 per cent of the enlarged ordinary shares in issue following the automatic exercise of the special warrants.
The Board’s view is that the introduction of a wider investor base and a dual listing in Canada therefore should assist in creating greater liquidity in the ordinary shares, which in turn should provide all shareholders with greater flexibility to trade ordinary shares. The Company intends to undertake an exploration programme over the next 18 months with the objective being to substantially increase the current resources in and around its existing Palito mine from the current level of approximately 650,000 ounces (gold equivalent). The Company’s target is to establish a resource of 1.5m ounces (gold equivalent). Investors can continue to look forward to an interesting series of news flow over the foreseeable future.
Solomon Gold (SOLG 31p/£87.12m)
Solomon Gold has announced the assay results following recent drilling at Brother, Cracklin Rosie and Crunchie Prospects (Rannes) and the Bania Prospect (Mt Perry). The best results from Brother was 10m at 2.9g/t from surface (indicating a significant resource discovery), from Cracklin Rosie was 6m at 1.37g/t Au and 8.88g/t Ag from 8m and 14m at 0.75g/t Au and 10.00g/t Ag from 32m, and from Bania was 62m at 1.03g/t Au, including 24m at 2.08g/t Au, from a depth of 16m. The full announcement includes very positive comments and indications from Management and we can understand their enthusiasm for the Company’s prospects.
Sunkar Resources (SKR 33.25p/£53.15m)
Sunkar has announced that ATF Bank Kazakhstan, a member of the UniCredit Group, has approved a credit line for the Chilisai project. The credit line envisages ATF providing up to $15m in debt financing for a term of up to 3 years. On signing of the documentation, $5m will be available for drawdown and a further $10m will be available for drawdown on achieving certain sales of direct application rock and securing off-take agreements for certain levels of its DAR. The credit line proceeds are to finance fixed assets and working capital for Temir-Service LLP, the 100 per cent owned subsidiary of Sunkar, holding the subsoil use rights for the Chilisai phosphate deposit.
Synchronica (SYNC 15.75p/£14.67m)
International provider of push email, instant messaging and social networking services has received a $975,000 order for additional Mobile Gateway Licences from a tier-one pan-African mobile operator group, which is in addition to an initial order of $752,000 place in October by the operator. With mobile data playing an increasingly important role in situations where fixed line infrastructure is poor, Synchronica is well positioned to take advantage in this growing space- African mobile subscriptions have risen from 54 million in 2003 to 350 million in 2008, whilst mobile data in the region is forecasted to bring in $2.2bn of revenue in 2014. The Company’s acquisition of iseemedia, which was reported on in October, increased Synchronica’s addressable user base by 43 per cent, and this together with the news just announced suggests a very interesting period ahead.
ValiRx (VAL 0.26p / £1.3m)*
AIM listed life science company with a focus on cancer diagnostics and therapeutics for personalised medicine last week reported on eighteen months of progress and the continued successful attainment of a number of milestones in its awarded €1.2m Eurostars programme, to develop its GeneICE technology. This progress report, which is necessary for obtaining the next tranche of ValiRx’s awarded Eurostars Grant, has now been submitted. As far as the exploitation of the GeneICE programme is concerned, completion of the in-vitro efficacy testing will provide a data package for ValiRx and its partners to begin exploring commercialisation opportunities for GeneICE as a suite of gene down-regulation molecules. Among other opportunities, it is hoped the data package will address a specific data wish list provided to ValiRx by a leading global provider to the life science community and that it will provide discovery and development tools for biopharmaceutical companies. ValiRx’ current share price does not adequately reflect the near term potential for its commercialized and growing diagnostics business and seems to discount the innate value of its drug discovery business. We believe that ValiRx deserves a substantially higher valuation based on the prospects for its already and soon to be launched SELFcheck and screening products and the embedded value in its budding pipeline.
William Sinclair (SNCL 127.5p/£21.11m)
William Sinclair has announced the acquisition of the assets and trade of Monro Horticulture Limited’s premium decorative aggregates business in what the Management believe will be a modestly earnings enhancing transaction complementing the Company’s recent acquisition of Growing Success Organics, the market leader in specialist, environmentally friendly, garden care products. The Company expects Growing Success Organics will generate sales of approximately £3m in the year ended 30 September 2011. With further acquisitions sought, there is no doubt that the Company is growing ahead of its peers.
*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.