Small Cap Wrap: Month: August 2011

AIM Breakfast - Archive

09 August 2011

This week: Beacon shines, broadening the Range, and sound news from Silence.

Small Cap Wrap will be on holiday for the 23rd and the 30th of August. Back on 6th September after the holidays, but see you next week.

The economic volatilities continue, with the FTSE 100 dropping some 10.9 per cent last week and the AIM All Share dropping 13.6 per cent. Whilst progress has been made in raising the US debt ceiling, a downgrading of US government debt to AA+ and the contagion debt crisis across Europe, which includes Spain and Italy, have continued to trouble the markets this week. Looking ahead, the rest of the week sees the US Federal Reserve Policy announcement, The Bank of England quarterly Inflation report, as well as the July inflation figures from China which going forwards are anticipated to be affected by possible declines in US demand.

AFC Energy (AFC 36.5p / £66.92m)
AFC Energy, a developer of alkaline fuel cells, announced that the HAZOP study relating to its commercial-scale fuel cell system (Beta system) has now been successfully completed. Improvements highlighted by the study have been incorporated into the Beta system which is currently being commissioned at the Company’s premises in the UK. Further news on this commissioning is expected shortly, according to Ian Balchin, Executive Deputy Chairman. None of these improvements have involved any significant redesign work and the Company is on track with its plans to deploy a Beta system in the field for testing.

African Eagle (AFE 7.12p / £29.19m)
African Eagle Resources, a mineral exploration company, announced that progress on drilling at the Dutwa nickel deposits in Tanzania and laboratory work in Perth and Johannesburg continue ‘unabated’. Resource upgrade drilling is now underway and metallurgical test work to investigate upgrading is progressing well. Drilling is now complete for Bulk Ore Sample 2 (BSO2), with 34 holes for 1,513 metres at Wamangola and 15 holes for 991 metres at Ngasamo, making a total of about 14 tons of core sample. BSO2 will be shipped to laboratories in Australia for pilot-scale metallurgical test work. Results from this testing will contribute to the detailed plant design and costing for the definitive feasibility study as well as provide product samples for off-takers. Results from the test work on BOS1 will form a key element of the prefeasibility study which is expected to be completed before the end of the year. A new track-mounted drill rig, designed to operate safely on the relatively steep slopes of Ngasamo Hill, has arrived on site and begun a programme of resource drilling. Although the mineral resources at Dutwa have been almost completely defined to JORC standards, some drilling is still needed, mostly at Ngasamo, to extend the resource and upgrade it from inferred to indicated category.

Beacon Hill Resources (BHR 8.12p / £70.80m)
Beacon Hill Resources, the AIM listed coking coal producer, is making good progress at the wholly owned producing Minas Moatize mine, with the first of the trucks of coal having departed for the Port of Beira. However, the Company’s exclusivity agreement with Global Minerals & Metals Pte Limited with regards to the acquisition of License 1165L in the Moatize coal basin in Northern Mozambique has been extended for a further 60 days to 3rd October 2011. This acquisition is an opportunity for the Company to “significantly expand” the Company’s acreage and resource base. The delay, though unavoidable, is a chance for the Company to conduct further due diligence on the property, including a small drill programme.

Chariot Oil and Gas (CHAR 124p / £224.18m)
Chariot Oil and Gas Limited, an oil and gas exploration Company, has announced that its wholly-owned subsidiary, Engima Oil and Gas Exploration has signed a farm-out agreement with Petroleum Geo Services (PGS), a leading seismic company. This agreement will see PGS acquiring 10 per cent of Chariot’s Central Blocks, which cover 16,801 km2 in offshore Namibia. The interest will see PGS funding 50 per cent of its planned 3D ‘Geostreamer’ seismic programme. Chariot will retain a 90 per cent equity ownership of the licence following completion of the farm-out. This agreement is ideal for Chariot, as it reduces a significant proportion of its risked expenditure whilst retaining maximum equity in the offshore blocks. The agreed 3D seismic programme is a continuation of Chariot’s previous work program; in April 2011 the Company completed a $140m fund raising to enable it to participate in the drilling of a minimum of two wells and conduct a 5,000km2 3D seismic program across areas of interest. The farm-out agreement with PGS releases a substantial portion of these funds and reflects their aggressive exploration investment. The current program covers previously 2D seismic data, which is located in areas where Klipspringer, Hartebeest and Oryx leads have been identified. The survey covers 2,500km2 of the block at a cost of $25m. The program will commence in Q4 2011 and takes 75 days to complete. The final processing and interpretation of this information will take at least six months and will be available in Q2 2012.

Eckoh (ECK 6.88p / £13.73m)
I will say this only once; the UK’s leading provider of customer service solutions using speech recognition, is pleased to announce that a leading UK logistics organisation (they list ParcelForce as one of their customers) has signed a combined contract renewal for the provision of automated tracking and redelivery services. Eckoh’s service utilises advanced speech recognition and caller identification software using a unique consignment number to provide 24/7 parcel tracking and redelivery service capability. The platform recognises repeat callers and offers relevant, up-to-the-minute delivery status information.

Epistem (EHP 380p/ £30.15m)
Biotechnology and personalised medicine company on AIM last week announced a pre-close trading statement for the year ended 30th June 2011. Following a positive year during which all the Company’s business units made good progress, the Company announced that trading over the full year is expected to be profitable and broadly in-line with market forecasts.

Escher Group (ESCH 170p/ £29m)
Escher, a leading provider of outsourced, point of sale software to the postal industry this week announced its admission to AIM. The Company’s core software, Riposte, provides a solution for postal authorities which are seeking to counteract a decrease in traditional mail volumes by widening their service offering, reducing cost and increasing efficiency. Substantially all of Escher’s existing customers are national postal authorities including An Post in Ireland, Austria, Deutsche Post, Norway’s Posten and SAPO in South Africa. Long licence and maintenance contracts and repeat business from quasi governmental customers give the Company good visibility of earnings. As at 31 May 2011, the Company had $29m of contracted revenues whilst continuing EBITDA for 2010 was $4.3m.   The Company raised approximately $25m (£15.4m) before expenses for its continued development giving it a market capitalisation of approximately $ 47.1m (£29m) on admission.

GGG Resources (GGG 18p / £29.83m)
The mineral resources exploration company provided an operational update in which it announced that mineralised zones at its Bullabong Project are offering predictable results and definition. The Company has found that the zones are unusually continuous, and has already initiated Phase 2 infill drilling, which will be done using the wider drilling spacing with more than 25,000m already completed. Interestingly, the Company now only requires a further 45,000m of infill drilling to convert the resource to the Indicated category of JORC resource, which can now be completed at a reduced cost, with drilling expected to be completed by the end of 2011.
Last week, GGG resources announced that it had received the final payment of $3, 273, 000 from the sale of the Nimu Project. With total payment of this disposal coming to $7.4m, the Company no longer has any assets or obligations in China. Currently, the Company’s sole geological asset is its 50 per cent interest in the Bullabulling Gold Project in Western Australia, which is seeing the development of three rigs. The drill programme continues to confirm the resource model, with deep drilling to test below the current resource limit being assessed by the JV. The Company also has an 8.4 per cent interest in its partner Auzex Resources.

Imperial Innovations Group (IVO 317.38p/£316.27m)
AIM listed technology commercialisation and investment Company, has led a £40m investment in Nexeon, a battery materials and licensing company which is developing silicon anodes for the next generation of lithium-ion (Li-ion) batteries.  Innovations will hold a 40 per cent stake in Nexeon.  Nexeon’s unique and patented silicon anode technology increases a battery’s energy density, creating longer lasting batteries for the same size of battery or smaller batteries for the same performance. The new funding will be used to scale-up the production of Nexeon’s silicon anode materials to commercial levels and to provide application development and support to customers.  The new manufacturing facility is expected to be on stream in 2013. Nexeon has signed Material Evaluation Agreements with a number of leading battery manufacturers. Li-ion batteries are widely used in consumer electronic applications such as laptops, mobile phones, and tablet computers, and in electric and hybrid vehicles.

Leni Gas and Oil (LGO 1.82p/£16.78m)
During the last few weeks, operations at the Company’s Hontomin-2 well in Northern Spain have focused on cleaning the well and the perforating of an additional reservoir zone shallower than the previously producing interval. These operations have been successfully completed and the well returned to production. A total of 13.5 metres of perforations were opened between 1,349.5 and 1,365 metres including 7.5 metres in new reservoir zones which were identified on wire line logs run earlier in July. The well is producing approximately 180 barrels of fuel per day (bfpd) and the water cut has been falling. During the 24-hour period to 4th August the well produced 15 barrels of oil and production is expected to continue to rise significantly as the static fluid level in the well is reduced and the new perforations contribute to oil flow. The Company-owned Cardwell rig has now been returned to the main Ayoluengo field where several wells from the recent well intervention programme will be returned to production. Wells Ayo-22 and Ayo-32 are expected to be brought back on production within the next few weeks. Further routine maintenance work to other producing wells, including Ayo-18 and Ayo-40, also requiring the Cardwell service rig, will be undertaken and this is expected to lead to further improvements in overall production rates. Design work, for chemical stimulation in order to treat the scale and wax found in wells during the recent work-overs and further enhance production, is progressing and field trials are planned for the autumn. Neil Ritson, LGO’s Chief Executive, expects production from Spain to exceed 400 bopd in the next few months.

Lipoxen (LPX 8.12p / £14.42m)
The bio-pharmaceutical company specialising in the development of high-value differentiated biologic drugs and vaccines, last week had a series of transformational transactions. SynBio LLC invested money into Lipoxen an issue price of 11 pence per share, to raise £12.19m. The Placing is being carried out at a premium of 18.9 per cent to the closing mid-market price on 3 August 2011. SynBio is a newly-formed Russian company whose majority shareholder will be the multi-billion dollar Russian state-owned nanotechnology investment company, Russian Corporation of Nanotechnologies. Lipoxen entered into a comprehensive Co-Development Agreement with SynBio. Through this agreement Lipoxen will license into Russia six product candidates to efficiently exploit its technologies and establish human proof of concept in advance of initiating EMA/FDA clinical trials.
The Company also intends to acquire the entire issued share capital of SymbioTec GmbH for a total consideration of £8.8m, which is to be satisfied by the issue of 80 million new ordinary shares in the capital of the Company. SymbioTec is a company registered in Germany and has a portfolio of patents around a naturally occurring platform technology, histone, which has potential application across a broad spectrum of cancers. SymbioTec is in clinical development for its patent-protected lead drug candidate, OncoHist, a treatment of acute lymphocytic leukaemia and acute myeloid leukaemia, which has been granted orphan drug status by both the FDA and the EMA. SymbioTec’s license partner is currently conducting a Phase IIb clinical trial in Russia involving up to 120 patients in late stage relapsed or resistant AML. The Company hopes that Phase IIb clinical trials will be completed by the end of 2013.
Lipoxen has also entered into a Master Agreement to consolidate and refine the Company’s commercial arrangements with the Serum Institute of India. This will include the surrender back to the Company of the development rights of up to 14 drug candidates, and uplift the Company’s economic interests in ErepoXen. The Serum Institute of India is subscribing for 2.5m new ordinary shares in the capital of the Company at an issue price of 11 pence per share. Following completion of the Placing and Acquisition, the Company is proposing to raise up to approximately £1.95m through a proposed Open Offer to existing shareholders. Funds from the Placing, Serum Subscription and Open Offer are expected to raise up to £14.4m and are expected to be sufficient to fund the Company’s drug development initiatives and operational requirements for two years following implementation of the Proposals. The Directors believe that the Proposals represent a transformational step forward for Lipoxen and, as such, the Company proposes to change its name to Xenetic Biosciences plc.

Lombard Medical Technologies (LMT 0.82p/ £33.27m)
Lombard Medical, a medical devices company focused on device solutions for the abdominal aortic aneurysm repair market, this week announced that it had filed the final clinical module for its lead product, the Aorfix stent grant, with the US FDA. Lombard Medical has now filed all six PMA (Pre-Market Approval) modules required for its FDA submission and three of these have been approved by the FDA. The Company continues to anticipate FDA approval of Aorfix between the second and third quarters of 2012.

Max Petroleum (MXP 11.5p /£106.15m)
Max Petroleum, the oil and gas explorer focused on Kazakhstan, reports that the exploration well in the East Kyzylzhar 1 prospect has discovered seventeen metres of oil, adding that the reservoir quality appears to be excellent. Oil was found in two locations in the well at depths ranging between 987 and 1,251 metres. The Company will now put casing inside the well to prepare it for test production in around sixty to ninety days.
The Company also announced that the UTS-2 confirmation well in the Uytas Field has reached a total depth of 820 metres, with electric logs indicating twelve metres of net oil pay. An additional six metres of net oil pay was identified in Jurassic reservoirs at depths of 350 metres. Significant oil shows were recorded continuously from depths of 36 metres to 150 metres, which appear to confirm the oil column seen in the original UTS-1 discovery well. As a consequence, the Company extensively cored the UTS-2 well over the interval from 39 metres to 160 metres to allow further study of reservoir properties within this vertical column, with results from the coring analysis expected by early Q4 2011. The Company is currently running production casing in the well which will be completed and tested using a work over rig after obtaining the requisite governmental approvals.

NCC Group (NCC 645p/£220.22m)
NCC Group, the Escrow and Assurance services business, announced that last week it had completed an acquisition to complement its range of website performance services. Axzona Limited, a Scottish website monitoring company, has been acquired for consideration of £1.2m cash and a further 2 payments totalling £0.5m based on performance related targets being reached over the next 24 months. NCC already owns Site Confidence, which offers UK website performance services, and sees Axzona as an opportunity to add to Site Confidence’s portfolio by incorporating the newly acquired monitoring technology. Last month the Company provided preliminary results for the year to 31 May 2011 in which Group revenue improved 49 per cent to £71m, and adjusted profits were up 21 per cent to £17.3m. Assurance testing presents a number of opportunities for the business to grow according to the Company, given the rise of malicious and illegal activities across the internet, and the development of its website performance adds to the Company’s repertoire.

Oilex Ltd (OEX 21.5p /£54.46m)
Oilex completed the first stage of a large volume multi-stage fracture stimulation program of the horizontal Cambay-76H well successfully, with the second stage under way. Oilex achieved the first of its major objectives in assessing the potential of the “tight” reservoirs by drilling and completing the 76H “proof of concept” horizontal well. There are indications of porous hydrocarbon-bearing intervals with elevated gas readings throughout the Eocene tight reservoir horizontal section. At the end of the June quarter, Oilex has cash of A$19.1m, with no debt.

OMG (OMG 22.75p/£16.23m)
The mobile motion capture (mobile mocap) technology group will this week showcase a range of technologies at the SIGGRAPH conference in Vancouver. The technologies offer new and exciting ways to make motion capture a possibility in real-world situations, not just in a studio environment. The centrepiece of their mobile motion capture technologies is a small, lipstick sized camera capable of capturing 720p (1280×720) footage at 60 frames per second. This camera not only has potential application in the medical industry and military surveillance but also in the entertainment sector for less obtrusive, more accurate facial animation data. Prototypes of the technology have already been used in such a way, helping to provide the facial capture for Jim Carrey in Disney’s “A Christmas Story” and for Jeff Bridges’ performance in the movie “Tron Legacy.”

Oxford BioMedica (OXB 6.38p / £60.24m)
Leading gene-based biopharmaceutical company last week announced positive interim data from the on-going Phase I/II trial of ProSavin for the treatment of Parkinson’s disease (PD).  The first three patients in the current six-patient cohort were treated with a 5x dose of ProSavin, the scaled equivalent to the maximum dose in pre-clinical studies, and have reached their three-month assessment. A favourable safety profile with no serious adverse events related to ProSavin or its method of administration was seen and the Data Monitoring Committee (DMC) supports the current planning for randomised studies. The highest average motor function improvement of 29 per cent at this time point, with a maximum of 49 per cent improvement in one patient; and a reduction in average daily dose of L-DOPA “equivalent” therapy was seen. John Dawson, Chief Executive Officer of Oxford BioMedica, said: “…We look forward to the full cohort 4 three-month results and the six-month primary end-point assessment later this year and are confident that ProSavin will continue to demonstrate its potential to transform the prospects for Parkinson’s disease patients worldwide.” The on-going Phase I/II study is designed to assess the safety, efficacy and dose evaluation of ProSavin in patients with mid-stage PD who are experiencing reduced benefit on L-DOPA “equivalent” therapy.  Planning is well underway for a sham-controlled Phase II study and, subject to the DMC opinion, Oxford BioMedica expects to submit regulatory applications to the EU and US agencies by the end of the year.

Plexus Holdings (POS 52.5p / £42.10m)
Well, Well! … In a deal worth £1.7m, Plexus, the oil and gas engineering company has agreed to supply Gaz de France (GDF) with two more of its patented POS-GRIP Well-heads for use in the North Sea.   With evermore scrutiny on offshore safety procedures and a growing tax burden on North Sea production, there is likely to be increasing interest in Plexus’ proprietary technology and expertise, which offers increased safety and potential cost savings over more traditional well head technologies. Plexus’ business model outsources manufactures and focuses on the higher value areas of sales; design; assembly and maintenance. This produced a useful EBITDA margin of 26 per cent in FY 2010 and could improve with more deals like this.  As many of their assets outlive their depreciation so there could also be some balance sheet value building as well.

Range Resource (RRL 12.5p / £213.36m)
The International oil and gas exploration, development and production company, Range Resources Limited, has announced a well-drilling program two-months after its successful Trinidad acquisition. Its first successful internationally operated well, the MD 247, represents an important milestone for RRL, and inaugurates an ambitious drilling program aimed at increasing production and cash flow in Trinidad. The first of the 21 wells planned, the MD 247, was recently drilled in the Morne Diablo Block, to a depth of approx. 900ft revealing the presence of 145ft of net oil pay, a net pay zone far exceeding the company’s expectations. Currently, casing is being run in the well in preparation for production testing. The company has announced a second and third rig to be planned in order to begin the exploitation of producing reservoirs.

Seeing Machines Limited (SEE 2.75p / £11.24m)
Seeing Machines, a developer of advanced vision based industrial systems, announced a new contract win this week for its Driver State System (DSS). Toll Mining Services, Australia, which is part of Asia’s leading provider of integrated logistics solutions (Toll Group), has mandated Seeing Machines to provide the DSS for its mining trucks at the CapCoal German Creek mine in Bowen Basin, Queensland. DSS has been a staple offering for Seeing Machines, offering a strong source of business, expansion and presence across a number of key territories. Having recently appointed a new CEO, Ken Kroeger, the Company continues to demonstrate progress, having also recently announced the use of its faceAPI technology (the underlying technology is also integral to the DSS), and we continue to look forward to news from the Company.

Silence Therapeutics (SLN 1.7p / £9.8m)
Leading global RNA interference (RNAi) therapeutics company announced that the US Patent and Trademark Office has issued the Company a notice of allowance on a patent application directed to the fundamental technology involved in AtuPLEX, one of Silence’s proprietary small interfering RNA (siRNA) delivery systems. The allowable subject matter is directed to AtuFect, the specific proprietary lipid that serves as the basis for the AtuPLEX delivery system, and provides proprietary protection for one of the RNAi industry’s most clinically advanced and promising delivery technologies. These claims will cover the delivery system incorporated in Silence’s lead clinical compound, Atu027, as well as a number of the Company’s other RNAi therapeutic candidates. At the 2011 American Society of Clinical Oncology annual meeting recently, Silence presented interim Phase I clinical study results that showed promising antitumor activity associated with Atu027, as well as demonstrating that the treatment is well tolerated with no observed dose-limiting toxicities or evidence of cytokine activation. The Company expects to make significant further progress in reinforcing its patent portfolio during 2011.

Software Radio Technology (SRT 32p/£33.88m)
SRT announced that it has entered a strategic partnership agreement with Elcom Marine Services Pvt. Ltd (Elcom) of India. The agreement is to target the Indian market with SRT’s range of vessel mounted AIS transceivers.  Following the terrorist attack in November 2008 when gunmen arrived in Mumbai in a hijacked fishing boat, the Indian authorities have commenced the implementation of a nationwide coastal security programme, which includes the fitting of all vessels with a tracking device monitored from a shore based network.  This programme will require up to an estimated 300,000 vessels to be fitted. This agreement provides a clear framework of terms and conditions under which SRT will jointly co-operate to secure the available business in India in the coming months and years.

Surface Transforms (SCE 10.5p/£3.35m)
Surface Transforms, one of the world’s two manufacturers of ceramic brake discs for the aircraft and automotive industries, last week announced its results for the year ended 31 May 2011. The Company reported a 7.3 per cent. increase in revenue to £863,439 (2010: £804,800) but losses after taxation of £870,961. Following a fundraising of £1.2m (net of expenses) in November 2010, cash at the 31 May 2011 stood at £615, 145.  Highlights of the year include the signing of a Development Agreement with a major US manufacturer of wheels and brake systems for the aircraft industry. The Company reported that with lower overheads, increased productivity and programmes to reduce unit product costs, current estimates indicate that cash breakeven occurs at approximately £1.5m with the current product mix.  It anticipates lower losses for both the first half and also for the full year compared to the year ended and that increasing the revenues from its existing client base will take the Company to cash break even. The high performance and race automotive sector in Europe is expected to dominate the revenue profile in 2012.

Tristel (TSTL 40.5p / £16.19m)
AIM listed manufacturer of infection control, contamination control and hygiene products, announced that it has received a substantial tax refund. The Company received a refund of £350,000 as a result of retrospective research and development, which should help bolster the Company’s cash position, together with its expansion strategy. Last month Tristel announced that it anticipated full year adjusted pre tax profit to be greater than £500,000, exceeding expectations at the time of the April announcement, and this recent tax refund is a strong point of note on this basis. Tristel also announced last month that it had been granted a patent from the Chinese Patent Office for its Tristel Wipes: Traceability System, with full approval expected by the end of the calendar year. This is in addition to the numerous recent announcements on the expansion of the Company operations, and we therefore look forward to news on how this company develops.

Vectura Group (VEC 94p / £309.72m)
Vectura Group, which develops inhaled therapies principally for the treatment of respiratory diseases, last week announced that it has signed a US collaboration, development and licence agreement for its VR315 product with a US division of an undisclosed leading international pharmaceutical company. VR315 is a combination therapy for asthma/COPD delivered using Vectura’s proprietary technology. Under the terms of this agreement, Vectura’s partner will be responsible for the commercialisation and manufacture of the product together with clinical development. Vectura will provide support for the US development of VR315, for which it will receive an initial payment of $10m and up to $35m upon achievement of pre-determined development milestones. In addition Vectura will receive a royalty from all VR315 US sales.
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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.

02 August 2011

This week: A new Angle on cell separation, Supergroup’s Good Energy, Patsystems spreads the risk

Small Cap Wrap will be on holiday for the 23rd and the 30th of August. Back on 6th September after the holidays, but see you next week.

Angle (AGL 27.5p/£8.37m)
ANGLE, which focuses on the commercialisation of technology, last week announced its audited results for the year ended 30 April 2011. The company reported continued progress with its portfolio of companies of which the highlight has been Parsortix, its 80 per cent. subsidiary.
Parsortix has developed an innovative cell separation platform technology for the isolation of blood cells, including cells which occur in very low numbers. This technology was previously proven in the separation of intact foetal cells from peripheral maternal blood but the company has now decided to focus resources on investigating whether and how Parsortix’s separation device could be used to capture cancer cells in blood. Successful initial findings were announced on 28 June 2011 and a fundraising of £1.25 m was announced on 15 July to provide funding to validate the initial findings and progress development of the separation device. If successful, the company believes that it will have a major opportunity to develop a patent protected cancer diagnostic device for the capture of circulating tumour cells in cancer patients, which will address a key medical requirement.
The other portfolio companies (Acolyte Biomedica, Geomerics, NeuroTargets and Novocellus) have also made steady progress and have been structured so that they can develop but with the company’s ongoing investment commitment being minimal. The management services division continues to face challenges with pressure on UK government contracts and uncertainties in the Middle East, but reported increased profits before tax of £0.3m (2010: £0.2m) on revenues of £2.4m (2010: £2.4m). This leaves the company in the position of being able to focus resources on the development of Parsortix, whilst knowing that it has other potential streams of income.


Anglesey Mining (AYM 56p/£88.57m)
Anglesey Mining has a 33 per cent interest in Labrador Iron Mines Holdings Limited (LIM, 10.93p/ £588.64m); a TSX quoted Canadian company with 39m tonnes of compliant direct shipping hematite iron ore and 125m tonnes of historical resources near Schefferville in Canada, where production and processing of iron ore is now underway. The market value of the group’s investment in LIM at 31stMarch 2011 more than doubled from £75m in 2010 to £156m at 31ST March 2011. The first of the LIM’s iron ore deposits has been brought to production. The Company is awaiting development of its 100 per cent stake of the Parys Mountain copper-lead-zinc project in North Wales with a total historical resource of 7.76m tonnes at 9.3 per cent combined copper, lead and zinc.


AorTech International (AOR 187.5p/£9.06m)
AorTech, the biomaterials and medical device development company, this week announced its preliminary results for the year ended 31 March 2011. The company’s Elast-Eon technology is the product of more than 10 years of research into biologically stable materials with the aim of providing a wide range of high performance materials for use in medical devices; Elast-Eon materials are patented, high silicone content, polyurethane co-polymers and are currently used in cardiac cannulae, pacemaker leads, implantable sensors, urology catheters and stents.
During the year the company implemented its plan to relocate the company’s manufacturing facility from Melbourne, Australia to the Minneapolis/St Paul area in the United States. The two primary factors driving this strategy were the significant appreciation of the Australian dollar against the US dollar and the proximity of the business to its customers. The company reported that the process of relocation is ongoing but is on schedule and on budget. In the meantime, the move has been positively welcomed by the US customer base.
The company reported increased group turnover of £1.6m (2010: £1.4m) but also increased pre-tax losses of £2.5m following the relocation of the manufacturing operations to the US and the strengthening of the Australian dollar (the currency of the existing manufacturing cost base) against sterling (the currency of the financial results reporting) and the US dollar (the currency of sales revenues).


Central Rand Gold (CRND 0.8p / £12.88m)

The South African miner reported that it has ordered two submersible pumps, at a cost of €3.5m, to dewater and to restore the Company’s resource base in the Central Rand Basin. The pumps also form part of a larger proposed plan to stop and partially treat Acid Mine Drainage through the establishment of a submersible pump station, which would be constructed at the South West vertical shaft. The pumps have the capacity to pump 1,500 kilolitres of water per hour. Each of the pumping units has an overall length of 13.5 metres and a mass of 18 metric tons and is designed to pump water from 400 metres below surface. They are constructed from a special duplex stainless steel to ensure long-term resistance to the dilute sulphuric acid water. For now, the pumps will remain in Germany while clarity is obtained with regards to the final technical solutions and project timelines. If the pumps don’t get used for the submersible pump station, the Company intends to sell them.


Dominion Petroleum (DPL 4.12p/£65.50m)
Dominion Petroleum has announced the award of Block L15 of the Lamu Basin, offshore Kenya, with Dominion serving as operator with a 100 per cent working interest. This award follows on from the award of Block L9 in March 2011. The award is subject only to the signature of a Production Sharing Contract (PSC) by Dominion and Kenya’s Ministry of Energy, scheduled to take place in the coming weeks in Nairobi. Following signature, the Initial Exploration Period of the PSC will last for two years. During this time, a gross minimum work commitment of $2.85m inclusive of the acquisition of 250sq km of 3D seismic data is required. With this addition, DPL holds a leading exploration portfolio in the deepwater East African margin by now operating three blocks in Tanzania and Kenya. The Company can now adopt a partnering strategy for these assets in terms of moving toward the drilling of this expanded portfolio.
In addition, the Small Cap Wrap of 28th June 2011 reported that DPL had entered into an Execution Agreement with Mediterranean Oil and Gas to farm in to a 75 per cent operated working interest in the production sharing contract for Offshore Malta. Following the Shareholder General Meeting on 25th July 2011, which failed to approve a number of resolutions, DPL has given notice to terminate the Execution Agreement and will not be completing the transaction. Under the Execution Agreement, Dominion agreed to pay a sum of $225,000, which is non-refundable upon such termination.

Enegi Oil (ENEG 11.75p / £11.46m)
Enegi Oil announced that a programme for the next stage of the workover of its PAP No.1 ST No.3 well, offshore Newfoundland, has been submitted to the Department of Natural Resources DNR). Once approval to start the programme is obtained from the DNR, the programme should start within two weeks and take a maximum of four weeks to complete. The first phase of the workover has increased the pressure recovery rate and improved reservoir connectivity and the results have encouraged the Company to undertake a second phase in the hope of achieving further improvements. In the second phase, the proposed workover will: flow the well for a 3-day period to gather data to confirm the full effects of the first chemical soak; squeeze paraffin solvents and dispersants, followed by dead crude, down the well; shut in the well to monitor pressure recovery over 60 hours and flow the well for a further two-day period to gather data before squeezing further chemicals, dead crude and acid down the well. Depending on results from this initial period, the Company may shut the well in for a further period, flow it back or prepare to re-acidise. (Acidising – the injection of various acids into perforations, fractures, and reservoir rock permeability to remove contaminants and the effect of wellbore damage caused by drilling and completion operations or to increase permeability beyond the original values which existed prior to disturbing the reservoir by drilling.) Once complete and again dependent upon results, the workover programme will be followed by an extended well test, during which the parameters for production from the well will be determined and preparations for production, including applications for all necessary approvals will be completed. The results of the programme will be accounted for in a revised resource estimate for the Company’s assets in the region, currently being undertaken by AJM Deloitte of Calgary.


Elektron (EKT 37.25p/£39.64m)
AIM quoted Technology Company based in Cambridge last week announced a trading update and proposed change of name. Sales and pre-tax profits for the half year to 31 July 2011 are in line with expectations, and the Group remains on track to meet market expectations for the full year. The Board proposed to shareholders at its AGM that the company name is changed to Elektron Technology Plc to reflect the priority of the Group. Elektron expects to release its interim results on 15 September 2011.


Forte Energy (FTE 4.05p/£28.17m)
The uranium and rare earth elements (REE) company has received the final REE assay results taken from historical drilling samples at the Firawa Project in Guinea.  The results are in line with management’s expectations and show a positive correlation between the uranium and the REE contents.  Forte now plans to announce an initial REE resource in the coming months to complement the existing uranium resource at Firawa.


GGG Resources (GGG 22.75p/£37.71m)
The Phase Two resource drilling programme which commenced in mid May 2011 has been expanded to 90,000m of infill and exploration drilling which is planned to be finished in the next six months. This increase was signed off at the recent JV meeting held at Bullabulling on 11th July 2011, with the development of Bullabulling, of which GGG has a  50 per cent interest in this gold project, continues with three RC rigs. A total of 58,598m in 374 drill holes since project acquired in May 2010, with 96 drills holes totalling 17,121m finished in May, June and July of 2011. The programme continues to substantiate the current resource model, with deep drilling to test below the current resource limit being assessed by the JV.


Good Energy Group (GEGP 80p/£6.3m)
PLUS-SX quoted renewable energy business last week announced a major 100 per cent renewable electricity supply contract with international clothing retailer SuperGroup Plc. Good Energy will supply Supergroup’s 72 retail stores and all UK warehouses and offices; as well as providing equipment and software to facilitate better energy management across the company. Chas Howes, Group Finance Director of SuperGroup Plc said: “Good Energy offered us value in a way that fulfils our need for competitively priced energy with meeting our desire to become a more sustainable organisation. This agreement represents a paradigm shift for us as we move from being the customer of a large utility to being the partner of a renewable energy provider.”


Hutchison China Meditech (HCM 441.5p/£228.45m)

Hutchison China Meditech, the China-based healthcare and consumer products group, this week announced its interim results for the six months ended 30 June 2011.  The group comprises a China Healthcare Division selling OTC and prescription drugs, a Drug R&D Division with its own drug pipeline and a Consumer Products Division selling “healthy living” focused consumer products.   The group reported sales up 14 per cent. to US$83.3m (H1 2010: US$73.2m) and reduced net losses after interest, tax and minority interests down 9 per cent. to $1.4m (H1 2010: -$1.6 m).
The China Healthcare Division grew its revenues 14 per cent. to $76.0 m  and net profits after interest, tax and minority interest by 27 per cent. to $11.0 m while managing significant price spikes in certain raw materials. These prices are expected to normalise over the next year to eighteen months and underlying growth in the China pharmaceutical market remains strong.
The Drug R&D Division has strengthened its portfolios with multiple new small molecule cancer drugs now in Phase I trials in China and has continued to progress HMP- 004, its lead drug, towards Phase III. Partnering for co-development of HMPL – 004 remains under discussion.
The chairman concluded by saying that the prospects for each of the group businesses are strong and as a result they remain positive on the outlook of the company for the full year and beyond.

Ideagen (IDGP 11.50p/£8.0m)
PLUS-SX quoted Ideagen last week announced the Company’s preliminary results for the year ended 30th April 2011. Revenue was up by 133 per cent to £2.25m (2010: £0.97m), basic adjusted EPS was up by 60 per cent to 0.93 pence (2010: 0.58 pence), whilst cash at bank and in hand was £0.76m (2010: £0.22m). Ideagen has net assets of £3.07m (2010: £0.86m), and a recurring revenue base, of £1.7m at the yearend covering 70 per cent of the fixed cost base. In March 2011, Ideagen raised £1.7m to acquire Ideagen Software and went on to successfully integrate Ideagen and Root 3.David Hornsby, CEO of Ideagen, commented: “We have made strong progress during the year both strategically and financially. Despite considerable investment in our products and sales team and the successful integration of two acquisitions we exceeded market forecasts….We are securing ever larger contracts and have strong recurring revenues and contract renewal rates. Current trading is positive and in line with management expectations and the Directors are confident of further progress going forward.”

 

Landkom International (LKI 7.62p / £33.17m)
The Ukrainian producer of agricultural commodities has completed the harvest in the Group’s southern operations with dramatically improved yields.  The winter barley yield for the south was up 110 per cent to 4.03 tonnes per hectare (ha) (2010: 1.9 tonnes per ha), with the winter wheat yield up 50 per cent to 3.23 tonnes per ha (2010: 2.2 tonnes per ha).  The substantially improved yields were obtained due to more efficient harvesting equipment completing the harvest within the optimum time period. The harvest in the west, Landkom’s largest region, and the central region is now well underway.  Weather conditions in the West are currently good, following some poor weather last week, which caused a limited amount of damage to approximately 7 per cent of the rapeseed crop.

 

Nostra Terra Oil & Gas (NTOG 0.59p/£11.48m)
Nostra Terra Oil & Gas announced that drilling has begun on its initial well in the Verde prospect, located in south-eastern Colorado. The Company has a 16.25 per cent working interest in the Verde prospect. The initial well will be drilled to a depth of approximately 5,300 feet. The drilling is expected to be completed by the end of August, depending on operations and possible formation tests. Drilling will be followed by completion and initial production testing.

 

Patsystems (PTS 21.25p/£39.68m)
Patsystems, a trading and risk management solutions provider to the derivatives industry reported half year figures and announced a 10 per cent hike in the dividend payment. Along with the results presentation they also spoke about the recently announced (21st July) agreement to acquire Mixit Inc, a US-based developer and vendor of sell-side Order Management Systems (OMS) and Execution Management Systems (EMS) for equities and option trading. The deal benefits highlighted included: it adds further product and asset classes to the Group, particularly equities; increases scale; increases Group percentage of recurring revenue; provides cross selling opportunities for the Mixit product through the PTS international sales network and the deal is expected to be earnings accretive in the first full financial year of ownership. Three of the founders and principal shareholders of Mixit are “extremely excited” about the deal and are very likely to stay with the business beyond the earn-out period. The whole process (of the acquisition) took six months which gave PTS time to get a better insight into the Mixit product offering. Mixit comes with no debt and a small positive cash position. David Webber, CEO of Patsystems said: “Mixit has rapidly established itself as a significant vendor in the North American equities OMS market. I am excited by the growth opportunities that the Group will see from repeating Mixit’s success globally and leveraging the combined strengths of our technology and connectivity offerings.” The complementary nature of the businesses certainly does make for a strong-looking Group and we look forward to seeing the fruits of the deal.

 

Sarantel Group (SLG 0.88p/£7.35m)
Sarantel, a leader in the design of high-performance miniature antennas for portable wireless applications, has received its largest military contract to date from the US Army through General Dynamics.  The order is for 190,000 of the rugged GeoHelix GPS antenna for use in the Rifleman Radio and could generate in excess of $6m in revenues for Sarantel over the next five years.

 

Silence Therapeutics (SLN 1.93p/£11.13m)
AIM listed global RNA interference therapeutics Company yesterday announced a reorganisation of the Group in order to consolidate and streamline the Company’s operations. The Company confirmed that the Redwood City office in the US closed yesterday and in addition Silence is reducing headcount in its Berlin facility from 32 to 27. The headcount reductions will not affect the Company’s R&D capabilities in Berlin and will not have a material impact on the Company’s cash position. Dr Haworth, who is based in Redwood City, resigned as planned and in the interim period, Max Herrmann, CFO of Silence, is temporarily assuming Dr Haworth’s executive duties. The Board has further decided to reduce the number of Non-Executive Directors from five to three.


Sirius Minerals (SXX 8.77p/£90.56m)
The Company has announced that drilling of the first hole has commenced at the York Potash Project. The drilling programme has been designed to reduce impact at each drill site. During the first phase of each hole it is planned that a top-hole rig (which will drill to approximately 750 metres) will only operate on a 12-hour day shift basis. The coring rig will however operate 24 hours a day. The time taken by the top-hole rig is expected to be approximately the same as the time required by the coring rig for the coring of each hole. This should result in a relatively seamless handover of each hole from top-hole rig to the coring rig. The first hole is anticipated to take 60 days to completion. It will then be around 3 weeks before Sirius receives the assay results. PR Marriott Drilling Ltd has been appointed to undertake the drilling programme, following a competitive tender process. Marriott is the largest onshore drilling contractor based in the UK.


Surgical Innovations Group (SUN 9.88p/£38.98m)
Designer and manufacturer of innovative medical devices announced it has signed heads of terms to enter into a five-year exclusive distribution agreement with CareFusion (NYSE:CFN), a leading, global medical device company, for its new advanced Pretzel-Flex(R) laparoscopic retractor. Surgical Innovations will manufacture the device for CareFusion and will be marketed in the U.S. under the CareFusion brand. SI retains the right to manufacture and distribute the device, under the SI brand in all other markets.  The patented Pretzel-Flex(R) has been developed by SI for the effective retraction or repositioning of large organs, such as the liver, to provide proper access and visualisation during complex minimally invasive surgery. The second-generation innovative design gives added strength to the flexible segment technology that SI originally developed for its leading EndoFlex(R) retractor that was previously licensed to CareFusion. Greater strength has become a necessary requirement for retractors and SI has met the challenge of creating a retractor that meets the opposing demands for smaller devices, such as 3mm percutaneous instruments, and for the ability to gently reposition organs that have become steadily larger in obese patients over recent years.


Tantalus Rare Earths (TAE 36.245p/£81.819m)
Tantalus Rare Earths, a German company exploring an extensive, secondary rare earth mineralisation at surface and a primary, near surface bedrock rare earth mineralisation in north-western Madagascar (the TRE Project), has results from their pitting programme on Target 4, the Caldera Target. COO and Chief Geologist Wolfgang Hampel, says that: “These results are a very important step forward in order to define a very high tonnage, low grade REE resource. They further confirm our assumption that in fact most of the 170 km² sized area underlain by alkaline intrusivecould be covered by an almost continuous layer of REE bearing argillaceous laterites. Given the huge tonnage, the other target elements could also constitute valuable by-products. The thorium and uranium grades are so low, that we will face no environmental issues with these radioactive elements.” With the current pace of exploration activities, the Directors expect to publish the first NI 43-101 compliant resource estimate in early Q4 of this year, with the hope of giving a resource estimate for 50 per cent of total surface area overlain by Rare Earth Elements (REE) bearing clays by the end of the 2011.

Toumaz Technology (TMZ 7.12p/£44.85m)
Toumaz,  a company pioneering low cost, ultra low power wireless communications and broadcast technology, last week published  a half year trading update for the six months to the end of June 2011. The company achieved significant milestones during the first half and has traded in line with expectations. As reported in the SCW dated 12TH July 2011 the Sensium disposable digital plaster received 510(k) from the FDA in early July and at the same time the company established  a new joint venture with California Capital Equity LLC to continue development, commercialisation and distribution of the Sensium plaster.   As at 31 June 2011 the company had cash balances of £3.3 m (£2.9 m as at 31 December 2011).

*A corporate client of Hybridan LLP

 

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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.