23 March 2011
This week: A round of applause for EnCore, Angel spreads its wings and Solid State exhibits strength
Amur Minerals Corporation (AMC 12.62p / £31.61m)*
AIM listed exploration and development company focused on Far East Russia announced on Tuesday that it has it has entered into a subscription agreement to raise £2,500,000 by way of a placing of 25,000,000 ordinary at 10p each to Lanstead Capital L.P. an institutional and current investor in Amur. The funds are being raised for general working capital purposes and to undertake and accelerate additional exploration and engineering works at Kun-Manie, the Company’s main nickel copper exploration project. A previous investment by Lanstead worked very well for the Company as it received more than 230 per cent of the expected amount from prior Lanstead placings without issuing any additional shares. Work continues with the Russian agencies to obtain the mining licence on the Kun-Manie project. The shares are up on the day, a rise of 0.375p or 3.06% from the previous night’s close.
Angel Biotech (ABH 0.5p / £13.40m)*
Biopharmaceutical contract manufacturer announced that as a key part of its growth strategy, it has secured a fifteen year lease, with an option to break after five years, on a GMP manufacturing facility in Cramlington, near Newcastle upon Tyne. The facility, which the Company knows well, will increase Angel’s manufacturing capacity approximately five-fold when re-commissioned. The Board expects the facility to be operational before the end of 2011. Under the terms of the lease agreement, ownership of the plant and equipment will be transferred to Angel and the first two years’ leasing costs have been negotiated on advantageous terms. The cost of the re-commissioning to cGMP standards and the MHRA licensing of the facility is fully funded following the Placing of £1.9m in January 2011. The Company recently also announced the appointment of Lorna Peers to the Board of the Company as Finance Director, having spent nine months as Group Financial Controller. She will continue as Company Secretary. The influx of enquiries from US companies has the potential to add further diversity with new clients and new technologies. The market looks forward to further comment on how Angel progresses as it adds the extra capacity it needs. The shares moved up on the news.
Bahamas Petroleum (BPC 23.5p / £257.88m)
Following Bahamas’ successful seismic survey the Company has raised £45.6m in a share placing. The funds will be used to accelerate Bahamas’ exploration programme and will also allow for greater flexibility to review additional opportunities in The Bahamas. The Company will immediately be able to move forward with the technical work needed to prioritise and rank drill-ready prospects in its southern licences and to advance exploration of previously defined leads. Analysis of the recently acquired seismic data is expected to be completed during this summer.
Baobab Resources (BAO 39.25p / £68.68m)
Baobab Resources, an iron ore, base and precious metals explorer with projects in Mozambique, on Monday reported that independent consultancy Coffey Mining Pty Ltd has estimated an iron and phosphate exploration target of 200Mt to 250Mt to an average depth of c.40 metres, the limit of previous drilling at the Monte Muande magnetite/phosphorus, base and precious metal project. The exploration target includes lower and higher grade material types. It also includes 3Mt to 5Mt of eluvial material grading between 45 per cent and 55 per cent Fe which could potentially be upgraded to a DSO (Direct Shipping Ore) product. A high level review of available metallurgical data indicates that a magnetite concentrate containing 67 per cent Fe could be generated via a simple, cost-effective process of coarse grinding and magnetite separation, followed by a re-grinding and a flotation circuit to recover a phosphate rock concentrate containing 36 per cent phosphorous pentoxide (p2o5).
Bglobal (BGBL 37p / £36.89m)
AIM listed smart metering company announced an agreement with Dignity plc for the supply, installation and servicing (together with data collection and energy consultancy services) of smart electricity meters. Dignity is a provider of funeral services and this latest agreement adds to the spate of recent positive news announcements by the Company, including an agreement last month for a similar supply, installation and servicing of smart meters for Opus Energy Limited’s UK customer base (Opus having been awarded Independent Energy Supplier of the year in 2010). A clear demonstration of the expansion path Bglobal continues to follow.
Caza Oil & Gas (CAZA 37.5p / £57.75m)
Caza has decided to plug and abandon the Marian Baker #1 well on the Arran prospect due to disappointing log data. Caza has a number of other prospects that it will be exploring near term.
Coolabi (COO 7.75p / £4.30m)
Coolabi, the media company which is focussed on the ownership and creative management of intellectual property assets, posted final results for the 12 months to 31 December 2010. Whilst revenue continued at similar levels £2,856,000 (2009: £2,828,000), the Company made a profit after tax of £0.28m (18 months to 2009: loss of £1.12m)- a first for the Company, though a large portion of this is as a result of a decrease in amortisation on intangibles and the fact that there are no exceptional items in the current period. On an operational level the Company had pre-sold the Poppy-Cat tv series to 16 territories, with the UK series to air in May 2011, and a US broadcast dealing having been secured with Sprout, a 24-hour pre-school television channel. US and UK consumer response to the series would be a good indicator as to the long term success of the brand and we look forward to observing the response once the series goes live.
Dominion Petroleum (DPL 6.65p / £105.72m)
On Monday, Dominion Petroleum Limited, the Africa-focused oil and gas explorer announced the award of Block L9 of the Lamu Basin, offshore Kenya. The Company last week concluded negotiations with the Government of the Republic of Kenya by executing heads of agreement (HoA) which define the terms for Block L9. The award is subject only to the signature of a Production Sharing Contract (PSC) by Dominion and Kenya’s Ministry of Energy, currently scheduled to take place next month in Nairobi. Block L9 represents one of the last, best new licensing opportunities along the whole of the deepwater East African margin and has many geological similarities to the Company’s Block 7 offshore Tanzania. DPL will operate L9 with a 60 per cent working interest. Due to the amount of interest expressed by potential partners in Block 7 to date, DPL may now seek to include L9 in any subsequent “farm out” process and try to coordinate exploration activities between the two blocks.
Following signature, the Initial Exploration Period of the PSC will last for two years. During this time, a gross minimum work commitment of $6.15m inclusive of the acquisition of 500 square km of 3D seismic data is required.
EnCore Oil (EO. 114.75p / £335.87m)
EnCore has encountered a gross gas column of 78 feet and a gross oil column of 420 feet in the Upper Tay and Lower Tay sandstones in the Burgman well on block 28/9-4. The hydrocarbons are of good quality with 24 degree API oil. EnCore, who is operator and has a 15 percent interest, will now drill an immediate side-track from the current well to target an area in the Lower Tay that seismic data suggest is more thickly developed. Results are expected within the next ten days. The Carnaby prospect will not be drilled this time with the jack-up rig but at a later time with a semi-submersible rig. With the well having encountered 22 feet of net hydrocarbon pay, the Transocean Prospect semi-submersible rig is now in place and ready to drill the appraisal well 210/30a-4 down into the Cladhan structure. This drilling which may take up to 40 days is to the south east of the original 2008 discovery and subsequent 2010 side-track wells and is done to discover deeper oil in the structure.
Frontier Mining (FML 5.38p / £100.02m)
The AIM listed gold and copper E&D Company focused on Kazakhstan, has announced that Tauken-Samruk, the Kazakhstan Government owned mining company, has taken the key decision to waive its pre-emptive right to acquire Coville Intercorp’s 50 per cent interest in Benkala. As reported previously, the Company is awaiting the approval of the Ministry of Industry and Trade of Kazakhstan (MIT) to complete the acquisition. The transaction had been referred to Tauken-Samruk; a government owned mining Company, for review and subsequent ruling on whether or not it would like to be a part of the transaction. Tauken-Samruk has now completed this review and its Investment Committee ruled that it does not wish to exercise its pre-emption right. Tauken-Samruk’s decision will now be sent to the MIT and subsequently presented to the next Inter Ministerial Committee. Frontier is hopeful that there will be a meeting in March or April 2011, whereupon its application for the acquisition will be presented for final approval. The decision from Tauken-Samruk is a key milestone for the Company. Hopefully one can now expect rapid and straightforward progress towards receipt of final approval so that Frontier can complete the acquisition and consolidate 100 per cent of the Benkala Project.
GGG Resources (GGG 31.25p / £45.44m)
GGG Resources announced that David McArthur has been appointed to its Board as Finance Director. David Maxwell McArthur has been the Chief Financial Officer of GGG Australia, the Perth based-wholly-owned subsidiary of GGG Resources for the past six months. He was responsible for setting up GGG’s new office in Perth, Western Australia, following the Company’s acquisition of the Bullabulling gold mining property in May 2010. David’s appointment and the opening of offices in Perth are indications of the Company’s commitment to grow GGG in Western Australia and become a significant gold producer in the greater Kalgoorlie district.
Instem Life Sciences Systems (INS 222p / £26.01m)
Instem, a leading provider of IT applications to the global early development healthcare market, this week announced its maiden financial results for the year ended 31 December 2010. Revenues were steady at £10m whilst operating profit before amortisation and non recurring costs increased to £2.23m. In addition to maintaining its leading position in the niche Early Development Safety Assessment market it has expanded its addressable market through the launch of a new product suite, Centrus. More fundamentally, the AIM IPO in October 2010 has enabled the company to embark upon their M&A programme which is intended to augment organic growth. The first acquisition, following closely on the heels of the IPO, was announced earlier this month when the company acquired BioWisdom Limited. BioWisdom provides software solutions for extracting intelligence from R&D related healthcare data and broadens and strengthens Instem’s recently launched Centrus product suite.
Leni Gas and Oil (LGO 2.58p / £23.67m)
Leni Gas & Oil, the international oil and gas production, development and exploration company, announced last week further details regarding its operation in Northern Spain and Trinidad. Its wholly-owned Spanish subsidiary, Compania Petrolifera de Sedano is ready to start work aimed at increasing production rates at wells on the Ayoluengo and Hontomin fields. Following the planned work programme, production is expected to increase to at least 300 barrels of oil per day (bopd) and is hoped to reach in excess of 500 bopd. In the year to date, the Ayoluengo Field has averaged 122 bopd. The Company said it will work on a minimum of six oil wells in the Ayoluengo Field and the producing Hontomin Field well. In addition, four further Ayoluengo wells have been planned as contingent targets should the core programme wells be completed quickly or be judged inaccessible or show better than expected results. Operations on the wells are expected to resume in Q3 2011.
In Trinidad, pending a final decision by PriceWaterhouseCoopers and Primera Oil and Gas Limited on the sale of the 50 per cent working interest in Icacos held by Primera, the new 20-year operating licence has yet to be signed. Field operations have continued under the existing arrangements and only limited well intervention work has been undertaken. Gross field production during 2011 has averaged 34 bopd. The Company is continuing to seek additional opportunities to participate in field development, reactivation and exploration projects onshore in Trinidad and has active discussions with several groups to acquire and operate several existing and new leases.
LiDCO Group (LID 17.88p / £31.10m)
LiDCO, the cardisovascular monitoring company, announced a marketing collaboration with US medical device company Argon Medical Devices. Under the agreement LiDCO will take full sales and marketing responsibility for the existing business of Argon’s critical care products in the UK and Ireland. These products, which complement and strengthen LiDCO’s existing offering, are well established in the UK and will be sold to LiDCO’s current customer base in the intensive care and surgery markets. More details on this collaboration will be provided in the preliminary results announcement in April. A trading update in February reported that the Board expected revenues for the year ended 31 January 2011 to be up 16 per cent. on the previous year at approximately £6.2m. This growth in revenue reflects continued progress towards profitability with year end cash balances of £1.4m.
Netcall (NET 19.38p / £23.69m)
Netcall, a leading provider of customer engagement software, announced its interim results for the six months ended 31 December 2010. Revenue for the six months increased to £6.4m reflecting the five month contribution of £4.1m from new acquisition Telephonetics which was acquired in July 2010 alongside a placing to raise £4.25m. The Company reported that the integration of the Telephonetics, including reorganisation and the creation of a new management team, had progressed well with net annualised saving of £1.5m in line with original forecasts. With cash at £4.8 m at the period end, the Company will continue to pursue both an organic and acquisitive growth strategy in its fragmented market to achieve greater presence and efficiency.
Petroceltic (PCI 11p / £221.58m)
Petroceltic International, an upstream oil and gas exploration and production company focused on the Middle East, North Africa and the Mediterranean, announced on Monday that it has completed logging and drilling of well AT-5 on the Isarane permit in Algeria, adding that the overall hydrocarbon pore volumes encountered were significantly in excess of the pre-drilling forecasts. The well reached a depth of 2,049 metres and mud losses while drilling, together with core, conventional logs and image logs from AT-5 all indicate the interval is potentially highly fractured with some of these being open natural fractures. Logs at AT-5 showed the target Ordovician reservoir to be fully gas bearing and a gross gas column of 75.5 metres was logged, with no gas water contact seen in the well. After completion of coring, drilling, logging and borehole image logging of the near-vertical AT-5 pilot well, the well has now been sidetracked as originally planned (AT-5Z) and a horizontal section of up to 500 metres is currently being drilled to explore for high natural fracture density associated with a series of tectonic faults. These faults have been interpreted from 3D seismic data and the horizontal well is oriented to intersect fractures which are expected to be open.
Premier Management Holdings (PMA 2.92p / £12.96m)
Premier Management, the Central Asia focused natural resources investment company, this week announced that it had raised £2.1m to pursue acquisitions in the natural resources sector. The Company reported that it was making good progress in identifying gold resource opportunities in Kyrgzstan and has an option to acquire Central Asia Resources Limited which is investigating, and has signed protocols on the Cholokkaindy Project gold exploration licence.
In the event that the Company exercises its option, proceeds from the placing would likely be applied to the development of Cholokkaindy as well for the acquisition of controlling stakes in other natural resources companies with a specific focus on mining projects in Kyrgzstan.
Range Resources (RRL 19.88p / £276.94m)
International oil and gas exploration, development and production Company, Range Resources announced that the fracture stimulation program has recommenced on the North Chapman Ranch project, with the arrival on site of leading fracture stimulation specialists Frac Tech. The largest zone (second from top) on the Russell Bevly well is currently being fracture stimulated with initial results looking promising. Once successfully completed, Frac Tech will move across to the Smith number 1 well and frac the upper zone. Frac Tech will then move off site and look to return in the comings weeks to complete the fracture stimulation of any remaining zones in the Smith and Russell Bevly wells. This program is expected to add to the success of the lower two zone frac’s of the Russell Bevly well and further improve flow rates and recovery, which may significantly increase cash flow from the field.
SeaEnergy (SEA 32.5p / £22.46m)
SeaEnergy announced that the Strategic Environmental Assessment and public consultation process by the Scottish Government had been completed and its Beatrice and Inch Cape sites are amongst the sites identified as suitable for developing offshore wind under the short term option (2010 – 2020) by the SEA. Work has already commenced on both Beatrice and Inch Cape. Joel Staadecker, CEO of SERL, said: “We are delighted that the strategic environmental assessment has confirmed that the Beatrice and Inch Cape sites are suitable for development. Together they represent almost 2 GW of renewable power, which will make a significant contribution to meeting the UK’s targets for carbon-free electricity generation.”
Seeing Machines Limited (SEE 3.38p / £13.77m)
Seeing Machines, a developer of advanced vision based industrial systems, announced a new contract win for their DSS product and appointment of a Channel Partner for Chile, Argentina and Peru. The contract is with a large global gold and copper resources company to pilot the installation of the DSS system in 16 haul trucks at a North American Mine, with the potential to roll out to 350 units globally if successful. The Channel Partner of choice for Chile, Argentina and Peru is of GTD Chile Ingenieria de Sistemas S.A. (GTD), who have worked with Seeing Machines for the past 12 months, and will continue help develop and support the business- this follows on from the appointment of Booyco Electronics as the Company’s African Channel partner last year.
Sefton Resources (SER 1.88p / £4.78m)
US onshore oil and gas play Sefton Resources made the most of the increased interest in its stock to raise £841,000. These funds will be used to advance both sides of the business- oil in California and a contrarian gas play in Kansas. In California, this new money will help fund further work on the steam flood development of the Tapia field that the Directors believe could lead to a significantly increased production. The proceeds will also be used to develop Sefton’s gas pipelines and leasehold projects in Kansas – where the Company has been buying up and refurbishing exiting gas pipelines which gives them a strangle hold over a large area of conventional gas as well as coal bed methane. Whilst gas prices have been under pressure in the US, the Company has been making a series of opportunistic investments at down to earth prices. The latest move is the signing of a $200,000 binding Purchase and Sale agreement with Cholla Production LLC for leases, wells and equipment plus technical data near the Cholla pipeline that was acquired late last year. This move gives Sefton a gas production potential which it can deliver to market along its pipelines along with gas from third parties. Just looking at the oil alone, Sefton has 3.8m barrels of proven oil reserves in and a year-end 2010 Present Value of $80.6m (£50m). There does appear to be a lot going on in the Company despite the lowly market cap.
Solid State (SSP 96p / £5.91m)
Solid State, the supplier of battery products, specialist electrical components and industrial/rugged computers to the electronics market, issued a trading update for the year ending 31 March 2011. The Board expects that the performance for the second half of the year will be comparable to that of the first half ignoring certain exceptional costs. The Company also reported its open order book remains strong and that its subsidiary Steatite has just been announced a £1.2m order from a leading global defence, security and aerospace company for command and control for the defence market.
*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.
15 March 2011
This week: AbFab from Abcam, good work from the bunch at Brady, dot hits the spot and a healthy prognosis for Chi-Med
Abcam (ABC 376p / £679.11m)
AIM listed rapidly growing bioscience Company that markets antibodies via its own online catalogue last week announced its interim results for the six months ended 31 December 2010. Sales in the half year increased 23.7 per cent to £39.4m (H1 2010: £31.8m) and the profit before tax increased 35.4 per cent to £15.2m (H1 2010: £11.2m). The net cash position at 31 December 2010 was £47.0m, whilst there was an increase of 33.8 per cent in the interim dividend to 1.45p per share and a proposal to raise the annual dividend distribution ratio to 40 per cent of profit after tax for the 2010/11 financial year. The share price spiked above 400 pence on the day of the results. China and Hong Kong based business is becoming more important to Abcam, along with new products added to the catalogue beyond antibodies; peptides, proteins, and secondary antibodies. We got the sense at the Analyst meeting that Abcam has the cash and the desire to be on the M&A trail.
African Eagle (AFE 10.62p / £43.47m)
African Eagle Resources, a nickel exploration company, announced on Monday that it has received the second iteration of the feasibility study economic model for its Dutwa nickel project in Tanzania from independent engineering consultant Simulus. The latest model evaluates both of the ore process routes available to the Company; heap leaching as well as atmospheric agitated tank leaching and includes ore throughputs of up to 5m tons per annum (Mtpa). The capex estimates are $550m for heap leach and $600m for tank leach. The capital payback for both methods is between 3 and 5 years. The cash operating cost estimates are $3.56/lb for heap leap and $3.37/lb for tank leach. Working towards first production in Q1 2015, the milestone targets are: Q2 2011 commencement of the Environmental and Social Impact Assessment; Q2 2011 completion of the JORC indicated resource estimation; Q3 2011 completion of the Pre-Feasibility Study; Q4 2011 commencement and completion of the Definitive Feasibility Study; during 2012 seek project financing; 2013-2014 construction of the plant and other infrastructure.
Atlantic Coal (ATC 0.72p / £28.05m)
Atlantic Coal, the open cast coal production and processing company with activities in Pennsylvania, USA, announced on Monday that it has secured an option to buy a 158-acre anthracite mining property located in the boroughs of Duryea and Hughestown in Luzerne County, Pennsylvania. The asset could consist of up to 12m tons of colliery spoil, estimated to contain 10-15 per cent of recoverable sized coal and in excess of 1m tons of coal silt on surface, as well as 2.5m tons of subsurface coal reserves recoverable by open cast mining. These resource details have not yet been reviewed by a qualified person and this review will form part of ATC’s due diligence on the asset. The asset is part of the Bankruptcy Estate of Kenneth J Nowakowski which is pending before the US Bankruptcy Court for the Middle District of Pennsylvania. Under the terms of the order granted on the 8th March 2011 by the Court, ATC has committed $700,000 to be held in escrow for a 90-day period, during which the Company will complete its due diligence investigation. After the 90 days, ATC has the option to either purchase the asset by releasing the escrow funds to the Court and funding additional acquisition costs (not exceeding $1.2m) or having the escrow funds returned.
Brady (BRY 74.5p / £40.04m)
Brady, a leading provider of trading and risk management software to the worldwide commodity and energy markets, announced a year of growth in its preliminary results for the year ended 31 December 2010. Year on year sales revenues increased by 36 per cent. and basic earnings per share before exceptional items increased by 13 per cent. At the operational level 12 significant new contracts were signed and 15 successful integrations or upgrades completed. During the year the company also completed a £14.25m fundraising resulting in net cash at 31 December 10 of £9.8m to fund future growth, including by acquisition. The Company is optimistic that the rebound in the Company’s underlying markets and the powerful market drivers, including the industry focus on risk and governance, will provide a strong market opportunity.
Cluff Gold (CLF 96.5p / £126.85m)
Dual AIM/TSX listed West African focused gold mining company, announced an exploration update at its wholly-owned Baomahun gold project in Sierra Leone. Highlights include two further drilling rigs currently completing the in-fill drilling programme as part of the feasibility study at the Baomahun deposit. From May 2011, these rigs are then scheduled for exploration work to further accelerate the drilling programme based on drilling results. It seems that the major part of the Company’s strategy is to enhance value at Baomahun and prove the significant potential for mineralisation along strike from the existing resource. With five drill rigs due to be operating at Baomahun during Q2 2011 Cluff is on the move.
Discovery Metals (DME 64.75p / £283.03m)
Discovery Metals, a copper exploration and development company focused on the emerging Kalahari Copperbelt in northwest Botswana, has announced that the Zeta deposit, part of the 100 per cent owned Boseto copper project, is currently being constructed and is scheduled to start production in early 2012. The planned production is 36,000 tons of copper and 1m ounces of silver per annum over a minimum 15-year mine life. The results reported so far are from ten holes drilled along 2.7km of strike, to intersect the target mineralised horizon at 200-300 metres below surface, beneath the area planned for open pit mining. An 11-hole preliminary programme has now started at Plutus to test the underground mining potential. A Bankable Feasibility Study is now underway, with a target completion date of the end of Q3 2011. The key goal for DML this year is to investigate the potential for increasing production levels beyond those already planned for at Boseto.
dotDigital (DD.P 7.375p / £19.30m)
PLUS quoted digital marketing company announced results for the 6 months to 31 December 2010. A most impressive performance was recorded, with both revenues and profit after tax up by 48 per cent to £4.1m (2009: £2.8m) and £0.8m (2009: £0.5m) respectively. During the period the Company signed up 700 new clients for the Group’s services, and integration of the Netcallidus acquisition appears to have been conducted with a great degree of success. The Company has also announced its withdrawal from PLUS (25 March 2011) and admission to AIM on 28th March 2011. dotDigital is a mature and well managed business that is seeking to continue and build upon its highly ambitious plans.
Frontier Mining (FML 4.88p / £90.72m)
AIM listed gold and copper E&D Company focused on Kazakhstan, announced an informative update on the status of its acquisition from Coville Intercorp of its 50 per cent interest in the Benkala Copper Project and 100 per cent interest in the Maminskaya Gold Project. As announced previously, the Company is awaiting the approval of the Ministry of Industry and Trade of Kazakhstan (MIT) to complete the acquisition. The essence of that approval is a written statement by the MIT that the Government of Kazakhstan will not exercise its pre-emptive right to acquire Coville’s 50 per cent interest in Benkala. This is positive news for Frontier for its plans of expansion.
Fusion IP (FIP 27.5p / £14.92m)*
Fusion IP, the manager of a university intellectual property commercialisation portfolio, informed the market last week that EiRx Therapeutics is currently considering possible investments into several of Fusion’s portfolio companies. Such investments will obviously contribute to those companies’ development and means that more milestones may be met faster and consequently enhance valuations. Already many of Fusion’s holdings are seeing very positive progression which eventually 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.
GGG Resources (GGG 35.12p / £51.08m)
GGG Resources announces its intention to make an off-market scrip offer for all of the issued shares in Auzex Resources. Auzex, which is listed on the Australian Stock Exchange, participates in an unincorporated joint venture with GGG, with each company owning 50 per cent of the Bullabulling Gold Project in Western Australia. GGG proposes to make an offer of seven GGG shares for every five Auzex shares held. This values Auzex at approximately A$0.87 per Auzex share, total equity value of circa A$94.9m. A combination of GGG and Auzex will consolidate the ownership of the Bullabulling Gold Project into a single corporate group and rationalise future decision-making processes to become more efficient and timely for the benefit of a like-minded single group of shareholders rather than two separate groups of shareholders.
Goldstone Resources (GRL 6.38p / £14.18m)
The exploration company focused on gold in West Africa, provided an update on its operations in Ghana and Senegal. With regards to the Company’s flagship Homase/Akrokerri project in Ghana, the Company has received verbal approval from the Environmental Protection Agency of Ghana (EPA) to commence drilling operations at Homase and will begin site preparation immediately. The Company expects to receive the EPA certificate for its Homase Licence in the coming weeks. Following receipt of the certificate, which is paid for, drilling is planned to commence subject to drill rig availability. If drilling does commence as planned the Company expects the first drill results to become available during the third quarter of 2011. Hopefully the drill results will place Goldstone is a stronger position.
Group NBT (NBT 356p / £92.16m)
Group NBT, the global supplier of domain name management and associated services, announced interim results for the 6 months to 31 December 2010. The period saw small performance improvements, with revenue up by 4 per cent to £22.6m and 5 per cent growth in underlying pre tax profit to £4.24m. Interestingly, a proposed interim dividend of 1.68p represents a 20 per cent increase on that for the prior period, demonstrating a committed belief in the future of the Company. The balance sheet also demonstrated some improvements, with a 7 per cent increase in net assets- whilst liabilities during the period increased by £7.5m, the Company also recognised £12m of goodwill (most of which was from the acquisitions made) which helped push assets up by a total of £10m. A steady performance for the Company.
Herencia Resources (HER 3.12p / £39.41m)
The Company announced that Major Drilling have completed their mobilisation to site and drilling has commenced on the Doris prospect, at the Company’s 70 per cent owned Paguanta Project in northern Chile. Progress seems underway at Herencia.
Hummingbird Resources (HUM 160.5p / £85.64m)
Hummingbird Resources announced an update to the market on its exploration programme following its admission to AIM in December 2010. Since its establishment in November 2005, the Company has been active in Liberia, West Africa and is currently the holder of the largest area of mineral exploration ground in the highly prospective Birimian geological region of Eastern Liberia. Its most advanced gold project is Dugbe F in the Birimian domain of South Eastern Liberia. The CEO commented that the company was extremely encouraged by the initial results of their 2011 drill programme at the Dugbe F project and also the results from various field programmes focused along the length of the Dugbe Shear Zone which continue to add weight to their model that the Dugbe F deposit is a small part of a much larger mineralised system.
Hutchison China Meditech (HCM 450p / £232.84m)
Chi-Med last week announced its final results for the year ended 31 December 2010. Revenues were up 21 per cent to $134.5m (2009: $111.0m) and the net loss was reduced by 22 per cent to $6.9m (2009: -$8.7m), whilst a solid cash position of $45.3m was maintained. Christian Hogg, Chi-Med CEO, said: “Our China Healthcare Division delivered further strong organic growth with revenues up 18 per cent and net profit up 36 per cent. We are benefiting from the continued substantial increase in the healthcare spending of the Chinese government, the strength of our brands and commercial operations as well as the deep representation of our products on government reimbursement lists. Our Drug R&D Division significantly expanded its clinical activity and demonstrated its ability to attract third party private finance to advance its pipeline of oncology and auto-immune disease drugs. We expect to partner our lead drug candidate HMPL-004 and start global Phase III trials during the first half of this year. The sales of our Consumer Products Division surged as it successfully took initial steps towards its aim of becoming a major, health oriented consumer products business. The growth potential for Chi-Med is considerable. We view 2011 with optimism and look forward to delivering significant growth in shareholder value.” The message at the Analyst meeting was very much that there is no limit to the growth in their business that Chi-Med is well poised to be very successful and that a deal would not be being promised for HMPL-004 if the Company thought that it could not deliver. That being said, the share price has fallen by 50 pence since the results were announced.
Kalahari Minerals (KAH 275p / £674.92m)
Kalahari Provides an update on the Extract position on the possible offer from CGNPC. Extract notes that CGNPC Uranium Resources has stated that it intends to seek relief from the Australian Securities and Investments Commission (ASIC) to acquire an interest in more than 20 per cent of the issued voting shares in Extract. In order to ensure that the best interests of all Extract shareholders are protected, the directors of Extract intend to make submissions to ASIC that any such relief should either be granted on condition that CGNPC offer for Kalahari only proceeds if all Extract shareholders are not disadvantaged in any way or not be granted. In the meantime, Extract intends to continue with its existing activities, which include progressing with the Definitive Feasibility Study for the Husab Uranium Project and the planned exploration programme. Extract will also continue to explore and evaluate all options to enhance the value of the Company through the partnership process, which remains ongoing. Extract seems to remain positive through the offer bid of its largest shareholder.
Landkom International (LKI 4.62p / £20.12m)
The Ukrainian producer of agricultural commodities announced the sale of 5,000 tonnes of its 2011 rapeseed crop for $600 per tonne (excl. VAT). Whilst the purchaser has not been named, it is thought to be a major international grain trader, and represents a 75 per cent increase on 2010 sales on a comparable CPT (carriage paid to black sea ports) basis. Vitaliy Skotsyk, Landkom CEO said: “I am delighted to lock in a 75 per cent increase in rapeseed price with this forward sales agreement which is well ahead of our internal budgeting and is more than double the average price achieved in 2009. This is very encouraging and demonstrates the potential for our upcoming 2011 harvest.” This is good news for the Company and we look forward to the announcement of final results next week.
MediaZest (MDZ 0.92p / £2.29m)*
Creative digital out-of-home advertising company and audio-visual integrator yesterday announced a significant contract win. Touch Vision Limited, a wholly-owned subsidiary, has secured a contract for the value of some £300,000 for the supply and installation of audio-visual equipment to a large UK University, under the terms of an existing tender contract. The orders will be fulfilled during the first quarter of the Group’s new financial year which begins 1 April 2011. MediaZest share price has doubled since its announcement last November of having separately tendered for a number of specific Lots under the following Inter-Regional AV Equipment Framework Agreement and since the recent fundraise. MediaZest is focused on sales and a more realistic and commercially focused product range, all aimed at producing profits from the business.
Medicsight (MDST 5.88p / £9.14m)
Industry leader in the development of Computer-Aided Detection (CAD) and medical image analysis software last week gave a business update ahead of its preliminary results. The Company saw an increase in CAD revenue in Q4 2010 and is hopeful that this will continue in to 2011. While the MedicCO2LON insufflator product did not achieve anticipated orders in Q4 2010, the Company expects to see an increase in orders in 2011. The Company continues to make progress toward finalising its regulatory approvals in the US and Japan.
Nighthawk (HAWK 8.7p / £32.89m)
Nighthawk Energy the US-focused oil development and production company, has announced it has four new wells planned, targeting the Pennsylvania Atoka and Cherokee Shales, with up to a further three shallower wells in the Middle Mist area of Jolly Ranch, targeting the younger Cretaceous-aged Niobrara Shale formation and ‘J’ sands, based on the results of 3D seismic. These formations are currently the target of numerous wells by other operators in the northern part of the Denver Basin.
Ormonde Mining (ORM 10.25p / £30.21m)
The mineral development and exploration company provided an update for the Salamanca and Zamora provinces of Spain. The Company has decided to separate, and fund accordingly, the Company’s ground holdings into both gold-tungsten and gold-only prospects, the latter of which will be funded through a joint venture with Aurum Mining Plc. Towards the end of last year, the Company conducted a full assessment of all historic data on the gold-tungsten prospects, with drilling now anticipated to commence shortly at Bollo (where previous grab sampling returned average gold grades of 8.3g/t from 30 samples). The JV allows Aurum to potentially earn a 60 per cent interest in two permits in the Zamora Province and a 54 per cent interest in a further two permits in the Salamanca Province by spending €500,000 over the course of the next 18 months, though Ormonde will act as manager and be responsible for all work programmes. An interesting update that demonstrates the continued progress being made across the Company’s projects.
Summit Corporation (SUMM 4.12p / £6.94m)*
UK drug discovery company yesterday announced positive non-clinical efficacy results for SMT C1100, an orally available drug that has the potential to be a disease modifying treatment for the fatal disorder Duchenne muscular dystrophy (DMD). Summit is pleased to report that new results from studies evaluating the effect of SMT C1100 on dystrophin deficient muscle cells taken from DMD patients have been positive. Dosing of these human myoblast cells with only low concentrations of SMT C1100 resulted in increased utrophin protein levels, which if translated into DMD patients, are anticipated to be of significant therapeutic benefit. These new data supplement a compelling data package generated from a range of earlier studies, including those conducted in the ‘gold standard’ in vivo model. Summit is seeking a new partner to financially support the continued development of this compound. We look forward to Summit reporting of results of ongoing studies involving the use of Seglin based technologies.
Synchronica (SYNC 24.75p / £24.25m)
The AIM listed company which develops and provides mobile device management and synchronisation solutions issued financial results for the year to 31 December 2010. An 85 per cent increase in revenue to $10.9m and a 45 per cent increase in gross profits to $2.9m helped the Company reduce its EBITDA loss by 65 per cent to $0.8m. Having made a number of acquisitions over the course of the last 12 months, and increased the number of mobile operators that it works with from 21 to 83, Synchronica has made some large strides in taking advantage of what is clearly a substantial addressable market for the Company- 1.3bn compared 300m in 2009. The fact that the Company’s main product, Mobile Gateway, is designed for both smart and non-smart phones should serve it well as global trends continue to evolve.
TEG Group (TEG 26.5p / £20.20m)
The TEG Group, the green technology company which develops and operates organic composting and energy plants, delivered an upbeat set of preliminary results for the year ended 31 December 2010. Full year revenue for 2010 increased by 35 per cent. to £20.7m; group operating losses were reduced by 45 per cent. to £398,000 with cash balances standing at £3.4m at the year end. TEG provides an in-vessel composting technology, which is one of the few approved technologies capable of treating animal by-product (ABP) waste and is now providing an anaerobic digestion (AD) technology to produce power from food waste. The TEG processes are an economic alternative to landfill. Statutory targets for the diversion of waste from landfill increase annually through to 2020, increasing TEG’s market opportunity year on year.
*A corporate client of Hybridan LLP
A full archive of previous week’s Small Cap Wraps can now be viewed on www.hybridan.com
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.
08 March 2011
This week: Music to the ears from One Media, Belgravium captures a good year of performance and Horizonte aquires horizontally
3D Diagnostics Imaging (3DD 6.5p / £11.08m)
3D Diagnostics, which owns the protected rights to a technology platform with a number of significant potential commercial products, announced results for the 6 months to 31 December 2010. Whilst the Company generated £566,000 of revenue over the period (2009: nil), losses before tax came in at £980,000 (2009: loss of £478,000), much of which is possibly due to costs associated with the move to AIM completed by 3D in November 2010. At the same time the Company raised £2.7m which should serve it well in expanding the business- having signed distribution agreements with Patterson Dental last year, early sales of the CarieScan Pro device into the US and Canada have been promising and we look forward to further updates on trading in those territories.
African Eagle (AFE 11.88p / £48.59m)
African Eagle Resources, an exploration and development company, announced last week that the Whittle Optimisation report for the Dutwa nickel project in Tanzania has shown that mining costs will be low, with a strip ration of 0.5 to 1 and concluded that, on current evidence, the Dutwa Project is likely to be economically viable, irrespective of whether agitated tank leach or heap leach is eventually chosen as the process route. The optimisation will be revised when the resource model has been upgraded from inferred to indicated or measured category under the JORC code, as better geotechnical data becomes available and as confidence improves in the capital and operating cost estimations. Because the Dutwa deposits are at the surface, mining will be relatively straightforward and the waste to ore strip ratio very low, between 0.45 and 0.53 to 1.
Belgravium (BVM 5p / £5.05m)
Belgravium, the designer and supplier of mobile data capture systems, announced its preliminary results for the year ended 31 December 2010. The Group manufactures and installs complete systems incorporating both hardware and software for real time data capture in the logistics, petrochemical and mobile retailing markets. The chairman reported another year of increased profit before tax on steady sales – as well as a substantial reduction in the net debt position from £1.4m to £260,000.
The tone looking forward was one of cautious optimism as the company reported entering the New Year with a better order book than for the past three years and having made real progress against its key strategic objectives. The chairman concluded that provided the increased financial confidence amongst customers, accentuated by three years of restraint in capital expenditure, remains, the company expects to return to growth in 2011.
Educational Development International (EDD 197.25p / £111.17m)
EDI, which provides regulated assessments for accredited education and training programmes, announced an agreement with Pearson Plc for a cash offer of 200p per share by Pearson for the entire share capital of EDI. The offer represents a 61 per cent premium to the 124p closing price on 4th March, and places a value on the Company of £112.7m. The acquisition is intended to complement Pearson’s existing work-based learning business and will create a group that can provide a range of vocational and academic services to the UK and international markets, rivalling competitors such as City & Guilds and Edexcel. This demonstrates the continued level of activity in the market, and we look forward to seeing how the acquisition will be integrated by Pearson.
Eleco (ELCO 22.5p / £13.65m)
Eleco, the construction software and building systems group, announced its interim results for the six months ended 31 December 2010 and with it a change of strategy for the group. The board plans to concentrate on expansion of its Software and service operations while reducing the current emphasis on the Building Products division and the currently loss making Precast Concrete division. Software has delivered strong growth in the period, is profitable and now represents 23 per cent of the group’s turnover. This strategy will also significantly reduce the financing requirements of the group’s Building products and Precast Concrete interests while facilitating the planned expansion of the group’s Software interests, both in the UK and internationally.
European Nickel (ENK 16.5p / £43.23m)
Higher commodity prices have enabled European Nickel to strike a deal with DMCI Mining Corporation to recommence Direct Shipping Ore operations at the Acoje project in the Philippines after a long break. European Nickel will receive a royalty fee on each shipment made based on the LME nickel price and grade of ore sold whilst DMCI takes on all financial risk, operations and marketing associated with the mining and sale of the nickel laterite ore.
This arrangement will provide European Nickel with much needed and low risk cash flow as it is working on the Acoje bankable feasibility study and the operation of the heap leach trial facility.
Frontier Mining (FML 6.12p / £113.98m)
Frontier Mining announced that it has assembled a project team to complete a Bankable Feasibility Study (BFS) of its Benkala copper project in Kazakhstan.
As most of the engineering and procurement has been sourced or completed, it is expected that the Bankable Feasibility Study will be finalised within the next 60-70 days. Positive results from the BFS will bode well for Frontier’s prospects.
Goldplat (GDP 10.12p / £16.92m)
Goldplat, the gold producer, on Monday announced a rise in H1 profit and said it believes 2011 will be a period of growth for the Company. Pre-tax profit for the 6 months ended 31st December was £1.36m (2009 £1.15m). Operating profit increased 17.13 per cent to £1.44m (2009 £1.22m). EPS 0.90 pence (2009 0.60 pence). During the period the Company raised £5.5 million to develop Nyieme and Banka Gold Project. The Company now has over £6.4m in the bank. GDP defined a maiden resource at Nyieme gold exploration project in Burkina Faso of 685,000 tonnes at 2.61 g/t Au for 57,000 oz Au. It signed an MOA to acquire Banka Gold Project, located in the premier gold district ion Ghana where historic data highlights gold prospectivity. The Company was also granted permission in February 2011 to commence operations at Kilimpaesa Gold mine in Kenya. It is also investigating establishing gold recovery bases in Tanzania, Burkina Faso and Mali to collect by-products to process at South African and Ghanaian gold recovery plants.
Horizonte Minerals (HZM 24.38p / £68.14m)
The AIM quoted E&D Company focused in Brazil, announced positive results for the year ended 31 December 2010.
In the 2009 annual report, the Company stated that they were actively seeking opportunities to consolidate their position within the emerging Carajás nickel belt in northern Brazil that hosted their existing Lontra nickel project. In July 2010 they completed a transformational deal with Teck, whereby they acquired the advanced Araguaia nickel asset adjacent to their Lontra project which has created the potential for a 100m tonne resource with grades comparable to other leading nickel plays. In completing this transaction, the value of the Company increased significantly both on an asset and corporate level. Early in 2011, they also further consolidated their position in the potentially world class nickel district by signing an option to acquire the adjacent Vila Oito and Floresta nickel laterite projects from Lara Exploration.
Horizonte’s investment case is evident; the board now believe the newly enlarged Horizonte is now a leading nickel and gold focused E&D Company in Brazil, with a world class nickel laterite project and an exciting portfolio of gold exploration assets.
Instem Life Sciences (INS 222p / £26.01m)
Instem Life Sciences, a leading provider of IT applications to the global early development healthcare market, last week announced the acquisition of BioWisdom Limited. BioWisdom is a leading provider of software solutions for extracting intelligence from R&D related healthcare data for an initial enterprise value of £900,000 and was acquired for a maximum total enterprise value of £1.5m, subject to certain performance criteria. The acquisition is expected to be earnings enhancing in the first full financial year of ownership.
Kalahari Minerals (KAH 285p / £699.46m)
Kalahari announced it was holding discussions with Extract Resources, in which Kalahari holds an approximate 43 per cent interest, to explore various different options that might simplify the Extract/Kalahari shareholding structure to facilitate a combination of Extract’s Husab Uranium Project with the neighbouring Rössing Uranium Mine owned by Rio Tinto.
The Company further confirms that it is in talks with CGNPC Uranium Resources who are offering £756m for the Company. There is also speculation that Rio Tinto may put in an offer seeing as they own 14 per cent of Kalahari. Discussions are continuing and a further announcement will be made soon. Kalahari is in a strong position with its holdings in Extract, it has come as a surprise that a takeover is being presented. Worth keeping an eye on this.
Oilex Ltd (OEX 28.5p / £71.9m)
The oil and gas exploration and production company based in Perth Australia provided an update for the WA-388P permit in offshore Western Australia. Whilst drilling was initially expected to commence in mid February significant cyclone activity had delayed the programme, but the operator of the permit (Apache Northwest) has now proposed a start date of April 2011. This is a sizable prospect, with early indications suggesting a potential size ranging from 0.3 to 2.8 trillion cubic feet of gas resource. News of a revised drill date was well received by the markets with the share price up 16.6 per cent on the day.
One Media Publishing Group (OMPP 3p / £1.30m)*
PLUS listed consolidators and acquirers of music and video rights yesterday announced its preliminary results for the year ended 31 October 2010. Highlights included increased turnover by 53 per cent to £1,217,901, pre-tax profits were up 279 per cent to £249,732 and in the period One Media acquire seven new music catalogues and extended its digital distribution deal with The Orchard. One Media also bought back 52 per cent of the Company’s shares and gained EIS and VCT eligibility, as well as appointing a new non-executive director. One Media states that it will continue to experience strong growth in its core business of digital sales. Its intention is to continue its successful policy of acquiring further digital rights within the main stream of easy listening and/or nostalgia music which has been its main source of revenue. OMP separately announced that the Board has approved a new share option plan for directors and employees under which options may be granted over shares representing up to a maximum of 10 per cent of the Group’s fully diluted share capital. The share option plan is designed to further align the interest of employees with those of shareholders. OMP also announced that it has granted warrants over 500,000 ordinary shares in the Group to Roman Poplawski, a Non Executive Director of the Company. A great set of results from an active small cap that knows how to do deals in its space and that we believe will continue to build its portfolio.
Plexus Holdings (POS 54.75p / £43.90m)
Oil services company Plexus has signed an agreement with Statoil Petroleum to provide the POS-GRIP High Pressure/High Temperature wellhead technology for gas exploration activities in the Norwegian Continental Shelf. After the recent BP disaster in the Gulf of Mexico there is an increased awareness and demand in the industry for safer and improved operating practices, and Plexus’ innovative wellhead engineering technology is seen as a solution. The contract is worth approximately £700,000 and follows a similar deal with Apache Energy Australia.
Polo Resources (POL 5.36p / £127.91m)
Polo Resources Limited, the mining and exploration investment company with interests in coal and iron ore, last week announced that it has signed a Letter of Intent (LOI) with Earth Coal Resources Limited to procure coking coal projects in Indonesia. Under the terms of the LOI, Polo will advance up to $3m in the form of a convertible loan to a newly incorporated Indonesian company, Polo IndoCoal, to fund due diligence and related project development costs in Indonesia, led by Polo’s partner in Indonesia, Earth Coal. The loan can be drawn down in several tranches and shall bear no interest.
Red Rock Resources (RRR 10.5p / £72.24m)
Red Rock Resources, a gold mining and exploration company with projects in Kenya and Colombia, plus interests in steel feed, uranium and rare earths, has entered into an option to earn-in to and explore iron ore deposits in North-West Greenland. RRR signed an agreement on 2nd March 2011 whereby it will pay $60,000 to North Atlantic Mining Associates Limited (NAMA) for a two month option to enter into an earn-in agreement with NAMA over exploration concessions held by its subsidiary NAMA Greenland Ltd (NGL) at Thule, Greenland. During this two month period RRR will carry out further due diligence, including a site visit, while NAMA will carry out preparatory work for the exploration programme. RRR may exercise the option by making a payment of $250,000 (or issuing an equivalent value of Red Rock ordinary shares), upon which it will enter the earn-in and be obligated to fund the 2011 exploration programme. The programme is expected to include airborne geophysics, drilling and the definition of a JORC or equivalent resource. Upon fulfilment of the programme, RRR will be entitled to a 25 per cent interest in NGL. Under the earn-in, RRR may elect to earn a further 35 per cent interest in NGL by making a further payment of $250,000 (or issuing an equivalent value of Red Rock ordinary shares) and funding the 2012 exploration programme, also to include definition of a JORC or equivalent resource. The aggregate cost of the 2011 and 2012 exploration programmes is $5m, exclusive of taxes. The concessions held by NAMA Greenland are unexplored but are considered by the Company to have possible gold potential.
ReNeuron Group (RENE 5.81p / £36.01m)
Last week, ReNeuron provided an update on progress with the PISCES clinical trial of its ReN001 stem cell therapy for disabled stroke patients. The PISCES study (Pilot Investigation of Stem Cells in Stroke) is the world’s first fully regulated clinical trial of a neural stem cell therapy for disabled stroke patients. Stroke is the third largest cause of death and the single largest cause of adult disability in the developed world. The Company is pleased to report that the first two patients treated in the clinical trial are both well. The final patient in the first dose cohort has consented to treatment and, assuming a successful pre-treatment evaluation period, is expected to be dosed in May. On this basis, the Data Safety Monitoring Board would be expected to review data from the first dose cohort in August and, all being well, give approval for the trial to move on to a higher dose cohort at that time. The Company therefore expects that this higher dose cohort of three further patients would have been treated by the end of this year assuming no significant recruitment delays. The remaining dose cohorts in the PISCES trial are expected to be treated in 2012, at which point the Company intends to have discussed and agreed its subsequent clinical development strategy for ReN001 with the relevant regulatory authorities both in the UK and beyond. ReNeuron also separately announced that it will be participating at a number of key UK stem cell and life science conferences over the course of March. Angel Biotech (ABH 0.54p / £14.19m)* The Company is producing the stem cells used in the trial at its Edinburgh facility. Angel has been ReNeuron’s manufacturing partner for over three years and enjoys a strengthening relationship.
Sareum Holdings (SAR 2.08p / £30.10m)*
AIM listed specialist cancer drug discovery business last week announced positive results from pre-clinical in-vivo efficacy studies from their joint research collaboration with Cancer Research Technology Limited (CRT) and The Institute of Cancer Research (The ICR). A recent colon cancer pre-clinical model study carried out by The ICR demonstrates that the combination of a collaboration Chk1 inhibitor, dosed via the oral route, in combination with a chemotherapeutic, gemcitabine, demonstrates a greater than two-fold reduction in cancer growth rate compared to treatment with the same dose of gemcitabine without the Chk1 inhibitor. Further pre-clinical in-vivo studies for the programme show that the collaboration Chk1 inhibitor, dosed alone, can reduce cancer growth in models of AML (acute myeloid leukaemia) and neuroblastoma (a childhood cancer). Certain cancers, such as these, are believed to be dependent on Chk1 for survival. The joint research collaboration with the ICR and CTR targets Chk1 (Checkpoint Kinase 1). Chk1 is important in controlling a cancer cell’s response to DNA damage, which may be a consequence of the cancer itself, or intentionally caused by chemotherapy or radiotherapy. Sareum has had a great year data and share price performance wise thus far, its share price has risen ten-fold, and is well positioned to fund and execute its ongoing business plan of further development and commercialization of its drug cancer programs.
Sefton Resources (SER 2.25p / £4.56m)
Sefton Resources has been attracting media attention as it begins steam flood operations at its Tapia Field in California. Alongside Tapia Canyon (heavy gravity oil) and Eureka Canyon (medium gravity oil) in the East Ventura Basin of California, both 100 per cent owned, Sefton’s other main interest is in East Kansas covering 45,000 acres of the Forest City Basin where coal bed methane, as well as conventional oil and gas deposits are targets. Latest news is that Sefton has commenced a continuous steam injection pilot of the Hartie #10 well which is part of an ongoing steam study being conducted by well-respected heavy oil expert Dr Farouq Ali. Steam is used to heat up the oil to reduce the viscosity thereby improving the recovery rate and boosting production. Sefton has already demonstrated that steaming works well in this area and have achieved very low lifting rates; and Dr Ali will be monitoring the affect of steaming the Hartie #10 well on each of the surrounding six producing wells. This data will be fed into the steam flood simulation model developed by Dr Farouq which will allow Sefton to ascertain the best methods and injection patterns for the steam flood across the whole field. As yet the buoyant oil price seems to have done little for the share price of this stock despite some compelling fundamentals. Sefton has proved reserves in California totalling 3.8m barrels of oil. Steaming is planned to increase the recovery factor which will thereby increase the proved reserves ahead of any future drilling. Last week the Company has just announced a twelve month extension of its reserved-based revolving credit facility of $10m with a declining balance borrowing base of $6.8m which provides funds for exploration, development as well as the acquisition of oil and gas properties. All in all, there looks to be value here for investors as this stock is currently capitalised at just a shade over £4m.
Sunkar Resources (SKR 32.5p / £51.95m)
Sunkar Resources announced that the Government of the Republic of Kazakhstan has ratified the changes to the Company’s Subsoil Use Contract (SUC) and work programme commitments to develop the Chilisai phosphate deposit. The major changes are a reduction in the Company’s obligations on ore extraction, and a revision to the commitment to meet associated cumulative development expenditure of $115m by 2020. The changes to the SUC have been ratified to align the development of the mine within the Company’s planned timeframe for the development of the Chilisai phosphate fertilizer project. More importantly, the new 2011 and 2012 mining commitments are in line with the existing production capability. Sunkar seems to be gaining much support from the Kazakhstan authorities.
*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.
01 March 2011
This week: Beacon to Shine, Craneware lifts profits, Pizza to go in Poland and USA tunes into Symphony
Agriterra (AGTA 3.72p / £25.82m)
The AIM listed group focussed on the agricultural sector in central and southern Africa, announced a positive set of results for the six months ended 30 November 2010. The Company started the period with a strong maize stock pile, following a record buying year in 2009, which enabled them to manage the processing and sales of the product in-line with the recent favourable pricing environment. The sale of 17,250 tonnes of maize meal and bran, from both the DECA and Compagri facilities during the period, resulted in record turnover for the maize businesses, with revenue totalling US$5.2m; more than double that of the corresponding period in 2009. This increase in revenue, coupled with the completion of construction and bedding down of the Tete facility, has enabled the grain processing branch of the Agriterra business to swing into profit at an operational level.
The Company also experienced an 82 per cent pregnancy rate and 100 per cent survival rate of all calves in their beef ranching business. This was a tremendous achievement for Mozbife, and underpins the quality of their beef stock and high veterinarian standards. This successful breeding programme is critical both to the continued growth of the herd and the improvement of animal quality.
Agriterra’s wholly owned subsidiary, Agriterra Guinée SA has signed a Concession Agreement with Port Autonome de Conakry for the construction and operation of a 30 hectare industrial and commercial terminal in the East Zone of the Port of Conakry in Guinea. The 20 year Concession Agreement is part of the Company’s strategy of expanding its operational activities within the agricultural and logistics business in Africa. It is anticipated that the terminal, when complete, will contain grain storage silos, a processing unit, a preparation unit, a logistics depot, a fuel depot, freight hangars and food storage silos. This is a fantastic complementary opportunity for Agriterra to expand its activities and utilise its African focussed agricultural and logistics experience to capitalise on the commodity resource boom in West Africa.
Angel Biotechnology Holdings (ABH 0.54p / £14.33m)*
AIM listed GMP manufacturer of advanced biological yesterday announced its audited final results for the year ended 31 December 2010. Angel was off 7 per cent on the day, no doubt some investors taking profits as the share price has doubled over the past three months. Most importantly Angel reported a pre-tax profit of £193,291 (2009: loss of £753,730) and revenue of £2.9m (2009: £1.47m), a 100 per cent increase. 15 new contracts and 17 contract extensions were signed with a total value of £5.3m representing a 40 per cent increase on 2009. Angel has post the year end raised £1.94m in order to provide the funds to enable Angel to focus on providing significant additional manufacturing capacity to meet the growth in the regenerative medicine market that it is seeing. The influx of enquiries from US companies has the potential to add further diversity with new clients and new technologies. The market looks forward to further comment on how Angel is progressing in adding the extra capacity it needs.
Anglesey Mining (AYM 80.75p / £127.71m)
Iron ore miner Anglesey Mining’s 41 per cent owned subsidiary, Labrador Iron Mines Holdings, has signed an agreement with Tshiuetin Rail Transportation Inc for the carriage of iron ore produced during 2011. The agreement provides a part solution to the logistics of the project, in which an estimated 2 million tonnes of ore is expected to be transported along the TSH railway- a line which connects the Schefferville Area District Shipping Ore Project to Emeril Junction, though negotiations are yet to be concluded for onward transportation to the final destination of the Port of Sept-Iles. A rehabilitation of the TSH is required, with LIM agreeing to pay $3.5m to help expedite the program and enable transportation of iron ore produced in 2011.
Beacon Hill Resources (BHR 17.25p / £109.33m)
AIM listed Resources Company provided a coal production update for the Minas Moatize coal mine in Mozambique. A drilling campaign to expand and further define the 33Mt resource has now been completed, with a revised resource to be announced shortly. Stockpiling from production is currently taking place ahead of first export shipments and pre-stripping of the initial open pit mine is nearing completion with coal production planned to commence in March. Interestingly, the Company has also made significant progress in logistics, having secured facilities at the Port of Beira and is currently progressing negotiations for rail tariffs and access agreements on the Sena Rail line. An action packed update that we hope is well continued.
Bloomsbury Publishing (BMY 119.75p / £88.43m)
Yesterday, Bloomsbury announced good results for the twelve months ended 31 December 2010 and the share price was up 3 per cent on the day. You may better know Bloomsbury for its well known back titles and authors JK Rowling “Harry Potter” and Hugh Fearnley-Whittingstall “River Cottage” series, or post the period end more recently for authors such as Amy Chua “Battle Hymn of the Tiger Mother”.
Revenue increased 4 per cent to £90.7m from £87.2m and the Company delivered earnings per share of 4.61p (2009: 6.77p). The net cash position is £34.1m and the Company proposed a second interim dividend per share of 3.91p, an increase of 7 per cent on the 2009 final dividend of 3.65p. The intention is to announce a further dividend for the 2 month period to 28 February 2012. Bloomsbury US performed well and Berlin Verlag made an operating profit in the second half. Bestsellers across the Group included “Eat, Pray, Love” – Elizabeth Gilbert and “The Finkler Question” – Howard Jacobson – winner of the 2010 Man Booker Prize. Bloomsbury acquired Bristol Classical Press for a total consideration of £1.1m in the period. E-book sales have grown eighteen fold in 2010 over 2009 from $131k to $2.3m and the Group made major online initiatives. The E-book industry will continue to grow, with Kindles, iPads and Nooks making headway into our lives. Indeed, post the year end, the market (which is usually quiet in Jan and Feb) remained buoyant thanks to e-book sales. Last week Bloomsbury also announced that Wendy Pallot will be joining the Board as Group Finance Director. She is a graduate Chartered Accountant who qualified with Coopers & Lybrand and was Group Finance Director for GCap Media plc and of GWR Group plc.
Going forwards, all eyes will be on its new strategy One Global Bloomsbury – Four Worldwide Publishing Divisions for Adult; Children’s and Educational; Academic and Professional; and Business Development which will be the basis of future management structure and reporting. Streamlining the business by product and not geography enables Bloomsbury to compete globally within the highly competitive publishing industry. We see it as making the right moves by going global, by focusing on online initiatives and look forward to the growth that the Company should continue to enjoy as it heads towards celebrating its 25th Birthday later this year.
Central Rand Gold (CRND 1.96p / £31.35m)
In the Small Cap Wrap of 8th February 2011 we highlighted the issue of Acid Mine Drainage (AMD) and the problems faced by CRND if no resolution was forthcoming in Q1. On 24th February a report was released to the Inter-Ministerial Committee on AMD and the Company welcomes the overall direction and funding commitment from the South African Government to the issue of AMD and is currently reviewing the report. The Company will be meeting with the Government to clarify the content of the report. The main topics of discussion will be the actual pump and pump station design, the cost allocation between Government and the Witwatersrand-based mining companies for the implementation of the pumping station and related pumping costs and the level at which the pumps will be situated below surface level. Obviously this doesn’t resolve the immediate problem of the flooding but it is a positive move at least.
Cove Energy (COV 94.5p / £463.99m)
Cove Energy, the upstream oil and gas company is pleased to note the announcement made by its co-venture partner Pancontinental Oil & Gas NL (ASX – PCL) in respect of exclusive negotiations with the Kenyan Ministry for Energy for Production Sharing Contracts (PCSs) for Blocks L10A and L10B offshore Kenya. On execution of the PCSs Cove would have 25 per cent of Block L10A and 15 per cent of L10B. The consortium making the application consists of BG Group plc (who will have 40 per cent of L10A and 45 per cent of L10B), Premier Oil (20 per cent and 25 per cent), Cove and PCL. The PSCs are to be negotiated over the coming weeks. A fast-track seismic and drilling programme has been proposed.
Craneware (CRW 579p / £150.34m)
Craneware, the Edinburgh headquartered provider of automated revenue integrity solutions for the US healthcare market this week reported strong revenue and profit growth for the six months to 31 December 2010 – a 25 per cent increase in revenues and 35 per cent increase in revenues compared to H1 2010. Its solutions help hospitals and other healthcare providers more effectively price, charge and code for services and supplies associated with patient care. The CEO commented that although debate continues as to the shape of healthcare reform in the US the drivers for the company’s products will be strong because of the greater levels of healthcare sought by the ever-growing US population at a time when the overall healthcare costs need to be managed.
DP Poland (DPP 73p / £14.44m)
DP Poland which has the exclusive rights to develop and operate Domino’s Pizza stores in Poland has announced that its first Domino’s Pizza store has opened its doors for business this week, on Monday 28th February. The store is located in the affluent Mokotow district of Warsaw, south of the city centre, with a high density of apartments and a vibrant business district. The plan is to open 12 stores in Warsaw by the end of 2011 and a further 15 in 2012 and the plan remains on track. It is good to see the Company achieve its first store opening, on time and to budget, following the untimely death in October last year of Richard Worthington, one of the main driving forces behind the plan.
Encore Oil (EO. 120.5p / £352.70m)
The Transocean Prospect semi-submersible rig is now in place and ready to drill appraisal well 210/30a-4 down dip into the Cladhan structure. This drilling which may take up to 40 days is to the south east of the original 2008 discovery and subsequent 2010 side-track wells and is done to discover deeper oil in the structure.
Frontier Mining (FML 6.88p / £127.94m)
The AIM listed gold and copper E&D Company focused on Kazakhstan, announces that it has today received $4m, the second tranche of a loan facility from HSBC Bank Kazakhstan for its Benkala project. The first tranche was also $4m and was received in late November 2010.
HSBC and Frontier have an indicative agreement of a total value of $15m loan facility provided that the Company achieves certain conditions and requirements of HSBC, and subject to HSBC’s usual lending requirements. The loan is solely tied to being used to purchase capital equipment for the Benkala project by KazCopper. These loans will play a crucial role for the investment into the Benkala project.
GETECH Group (GTC 16.25p / £4.75m)
The geosciences business specialising in the provision of data, studies and interpretation services to the oil, gas and mining exploration sectors, announced that trading has been in line with expectations, and continues the recovery seen in the previous two half-years. First sales arising from the Iraqi data marketing agreement (announced in December) were made within days of signature of the agreement and global data sales in general have continued to strengthen.
In addition the second phase of their Equatorial Atlantic study, which covers both the West African and South American sides of the Atlantic, has proved to be very attractive and has sold well. The strength of the oil price is encouraging for GETECH and likely to underpin the demand for exploration data, studies and services with existing and new clients.
GoIndustry-DoveBid (GOI 136p / £13.33m)
GoIndustry-DoveBid, the global provider of asset management, disposition and valuations services for industrial and financial clients, announced that it expects adjusted pre-tax profits for the year ended 31 December 2010 to be in line with market expectations. The Company reported that it has continued to gain momentum in 2010 achieving adjusted pre-tax profits in both the first and second halves of 2010.
Whilst it is still early in the financial year, trading in the year to date reflects further progress.
Kalahari Minerals (KAH 259p / £635.65m)
The AIM listed resource Company, provided an update published by Extract Resources in which Kalahari’s subsidiary, Kalahari Uranium Limited, holds a 41.08 per cent interest (this will increase to 42.79 per cent following the completion of the recent Extract share placing), regarding chemical assay results from its world-class Husab Uranium Project. The Husab Uranium Project in Namibia continues to yield positive results. The scale of the project continues to increase; with results from Extract’s exploration programme identifying a further two highly exciting target zones beyond the Rössing South anticline, at Middle Dome and Pizzaro. Kalahari considers the size and significance of these new target zones to be extremely important, providing further potential uplift to what is already the world’s largest new uranium discovery.
Oxford Catalysts (OCG 88p / £56.16m)
Oxford Catalysts this week announced the successful conditional placing of shares to raise £21m (gross). The Company designs and develops technology for the smaller scale production of clean synthetic fuels from conventional fossil fuels and renewable sources such as biowaste. After more than 15 years of development which began at two of the world’s leading research organisations and US$250m of investment, primarily from investment partners, the directors believe the company is on the cusp of commercialising its technology – and the Company intends to use the net proceeds of the placing to accelerate the company’s transition from a research and development organisation to a commercial product company. The fundraising represents a vote of confidence from a combination of new and existing investors.
Sagentia (SAG 69p / £28.79m)
Sagentia, the AIM listed international technology consulting company, reported a year of substantial and significant change in its results for the year ended 31 December 2010. Sagentia provides outsourced R&D consultancy services from market analysis, through product development to transfer-to-manufacturing for the medical, consumer and industrial sectors. Following the sale by a longstanding major shareholder of its holding to Martyn Ratcliffe, the new chairman, the company has experienced a corporate evolution including a restructuring of the board and an institutional placing to strengthen the balance sheet. This culminated in the company profit before tax of £2.2m (against a loss in 2009 of £3.5m) and net funds of £8.6m (a net debt of £2.7m in 2009).
Sefton Resources (SER 2p / £4.05m)
Despite a strong oil price, Sefton Resources seems to have been left behind although it has considerable oil reserves onshore in the US. In all, proved reserves in California total 3.8m barrels of oil. Sefton’s main areas of activity are in the East Ventura Basin of California where it owns 100 per cent of two oil fields. Tapia Canyon (heavy gravity oil) and Eureka Canyon (medium gravity oil) and East Kansas with 45,000 acres in the Forest City Basin where coal bed methane, as well as conventional oil and gas deposits are targets. The business is well-managed as is evidenced by lifting costs as low as $11 a barrel and so it’s little surprise that Sefton is already profitable. At Tapia Canyon, the team is to use steam to heat up the oil underground which helps reduce the viscosity of this heavy gravity oil thereby resulting in higher production and improved recoveries. The smart move here is that by demonstrating improved recoveries allows reserves to increase which pushes up the valuation. The steam flood operation that is planned at Tapia Canyon is part of a continuous steam injection pilot study being conducted with well-renown heavy oil expert Dr Farouq Ali which should result in a more thorough steam flood design for the entire reservoir. Currently Sefton trades at a market capitalisation of £4m and there would appear to be upside given its activities.
Serabi Mining (SRB 35.5p / £15.94m)*
AIM-traded gold exploration company, last week released good results of further geochemical work performed around the Piaui drill target at Palito. The Piaui anomaly is currently being drilled and is the first of nine targets that will be drilled in the Company’s initial 7,500m discovery drilling programme which commenced late last year. A programme of 8 diamond drill holes has been designed to test the depth extent of these trench intersections and target the centre of the modelled IP chargeability anomaly. Mike Hodgson, Chief Executive, commented: “This trenching work is very encouraging and has further enhanced the prospectivity of this robust anomaly at Piaui. The ground induced polarisation survey that we undertook earlier this year allowed us to create 3-D wireframe models for chargeability, resistivity and conductivity anomalies respectively. Piaui is one of the targets where significant chargeability anomalies were identified of a similar tenor to that of the known Palito Main Zone mineralisation. Further trenching and deep geochemistry programmes are underway and will continue on the remaining prospects, in parallel to the current drilling programme.” The Company’s target is to establish a resource of 1.5m ounces (gold equivalent).
Solomon Gold (SOLG 28.25p / £79.60m)
The gold and mineral exploration company announced a Maiden Resource Estimate at its Kauffmans-Homestead Prospect in Rannes of 203koz of gold and silver. The estimate was completed over a prospect of 500m strike length and total inferred mineral resource stands at 404koz based on a 0.35g/t gold equivalent cut off grade. Furthermore multiple prospects have been identified near the Kauffmans project over a 1.5km strike length which provides significant potential for expansion, whilst a drilling campaign in 2011 on targets close to Kauffmans-Homestead has doubled to 24 km. Such expansion could be a real driving force behind the value of the project and prospects for the Company.
Sunrise Resources (SRES 3.82p / £11.90m)
The diversified mineral exploration and development specialist has announced that its exploration licence for the Cue Diamond Project in Western Australia has now been granted. Exploration Licence 20/727 has been granted for an initial 5 year period and covers diamondiferous kimberlite dykes at the Cue 1 and Soapy Well prospects. The Cue region was explored by De Beers in the period 1994-2001 (before De Beers withdrew from Australian exploration) during which they discovered a number of kimberlite dykes in two separate areas within the Company’s licence area. At the Cue 1 locality, a kimberlite dyke outcrops and was reported by De Beers to be 2-3 metres wide. At Soapy Well, 7km to the west, at least 3 closely spaced kimberlite dykes up to 3 metres wide were encountered in two drill traverses spaced 400 metres apart. De Beers reported positive diamond sampling results from both localities. In addition, soil sampling and ground geophysics identified multiple drill targets for kimberlite at Fennels Well, 2.5 km along strike from Cue 1. The Company will now initiate the usual Aboriginal heritage surveys and further drilling is being planned for Q2 2011, subject to the successful completion of the heritage surveys and drill rig availability. The objectives of the first drill programme will be to obtain samples from the known kimberlites to evaluate their diamond content/characteristics and to test kimberlite targets at Fennels Well and Soapy Well.
Symphony Environmental Technologies (SYM 16.5p / £19.37m)
Symphony Environmental, the specialist in advanced plastics technologies including controlled-life and anti-microbial products, has announced that it has signed a 25-year distribution agreement with Timothy Murtaugh (T/A Symphony Environment USA) for its d2w and d2p additives and products in the US. Under the agreement the distributor will exclusively distribute and market the Company’s additives in the USA (other than to certain existing SYM customers) and the distributor is also appointed as a non-exclusive distributor of certain agreed finished products. During the 9 months following the signing of the agreement, SYM will carry out a nationwide PR and Marketing exercise in the US, focusing on building brand awareness and recognition of plastic products incorporating d2w. The campaign will be co-ordinated by Burson-Marsteller, one of the most established PR agencies in the USA. The costs of the campaign will be shared equally between SYM and the distributor. The agreement also provides that within 6 months the distributor will purchase or hire SYM’s latest d2detector quality control and anti-counterfeiting device (the launch of which was mentioned in the Small Cap Wrap of 25th January 2011).
Vatukoula Gold Mines (VGM 159.5p / £132.44m)
The AIM listed gold producer announced a positive set of final results for the year ended 31 August 2010. 2010 Turnover was £40.4m; compared to a turnover of £18.8m in 2009. This increase is attributable to a significant increase in production and higher gold price received. Gross profit of £12.3m rose from £1.4m in 2009. This increase is attributable to efficiencies leading to a decrease in unit costs. In addition, overall underground operations produced over 243 thousand tonnes was at an average grade of 7.43 grams per tonne during the year, representing a 29 per cent increase over 2009. These results are a further vote of confidence in the Company’s long-term prospects and the region’s exploration potential.
Wasabi Energy (WAS 2.62p / £55.45m)
Results for the 6 months to 31 December 2010 were announced by Wasabi last week. Losses for the period came in at $2.5m (2009: $3.3m), and whilst only a small amount of revenue was generated (2010: $380,000, 2009: $360,000) one must bear in that this could quickly turn around as the Kalina Cycle continues to be commercialised. Post period end we have seen (and written on) a contract win with FLSmidth, as well the acquisition of the Husavik Geothermal Kalina Cycle power plant in Iceland, an increased shareholding in Global Geothermal Ltd to take it from being 97 per cent owned to 100 per cent, commercialisation by the 50 per cent-owned AquaGuardian group for its AquaArmour water conservation product, a successful listing on AIM and a further raising of £3m from institutional investors. Wasabi continues to demonstrate its commitment to realising the full potential of its Kalina technology, and if successful, could carve a niche in the green energy space.
*A corporate client of Hybridan LLP