These are shares I am tipping but please also do your own research and not just rely on my tips.
Gulf waits on Shaikan-2 results
While full-year cash losses narrowed appreciably for Gulf Keystone Petroleum, the focus is on how quickly the company can commercialise its huge oil reserves in Kurdistan. Gulf's activities last year were primarily devoted to the Shaikan Block in the Kurdistan region of northern Iraq, where independent analysis confirmed a prospective resource in the range 1.9bn to 7.4bn barrels of oil.
The company is currently upgrading well-head facilities, while evaluating the practicalities and cost benefits of building a dedicated pipeline through the region. The Shaikan-1 discovery well commenced limited production last October, although this was largely undertaken to assess its viability in commercial terms.
Gulf reports that it has taken out an injunction in the English Commercial Court against Excalibur Ventures - an advisory services firm - which restrains it from pursuing the International Chamber of Commerce arbitration proceedings instituted against Gulf last December. The English Court will now rule on the validity of Excalibur's claim to a 30 per cent share in Gulf Keystone's assets in Kurdistan.
Daniel Stewart has a target price of 200p a share based on the company discovering a further resource of 800m barrels of oil.
African Minerals moves towards production
The full-year results for African Minerals cover a period when the Aim traded miner’s principal asset - the Tonkolili iron ore project in Sierra Leone - moved through its development phase towards planned commercial production by the fourth quarter of this year.
The company successfully raised $1.1bn (£678m) from equity and debt markets last year, enabling it to fully fund stage 1 of the Tonkolili project, which is projected to result in a capacity of 12m tonnes in 2012, around 50 per cent higher than original estimates. According to broker Cannacord, this should translate into annual cash profits of $900m on completion.
The development of the rail and port support infrastructure for Tonkolili is progressing well, although phase one capital costs have risen by $100m on initial estimates to $1.2bn. The mine is already producing ore and processing equipment is now on-site, but the bulk of the transport links need to be completed prior to the commencement of the rainy season in August/September.
Based on expected phase 1 production Canaccord have a near-term net asset value-derived target price of 650p a share.
Lok 'n Store still looks undervalued
Self-storage company Lok'n Store nearly doubled operating profits to £0.85m in the first half as it managed to increase rents and reduce costs without choking off demand. In fact, occupancy level were up 2 per cent year-on-year despite average price increases of 3.5 per cent.
Chief executive Andrew Jacobs says the group's 7,000 customers – 63 per cent of them are households – are "not particularly price-sensitive", placing greater emphasis on convenience and security than on cost. That and short tenancy periods makes him optimistic he can continue to increase rents and revenues, even in a dull economic environment.
Property values were pretty flat over the six month period, albeit 3.3 per cent higher than a year ago, with the group's total estate valued at £81m. Net debt looks modest by comparison, though Lok'n Store's main facility with RBS expires next February. Great clarity on a new facility is expected at the time of the full-year results.
The group is currently the fourth largest self-storage player in the UK, with 22 stores. It does have four further sites to develop when clearer signs of growth emerge, but for the moment Mr Jacobs remains cautiously focused on driving cash flow rather than expansion.
Brokerage Arbuthnot expects adjusted year-end NAV of 239p (2010: 224p).
MATRA PETROLEUM'S INVESTORS AWAIT NEW UPDATE FOR A12 & A13,WHICH COULD BRING UP TO 1500 BOPD
Said production has started on both of its wells in the Sokolovskoe field.
Neither well has yet stabilised and, as expected, both will either require acid stimulation or pump installation, or both, to maximise production rates.
Well 13 is currently producing around 65 barrels of oil per day (bopd) and well 12 somewhere between 100 and 150 bopd, though flow rates on both wells are fluctuating significantly.
"Well-12 side-track is producing at broadly similar rates to the original hole prior to acidising and the data from forthcoming pressure surveys should allow us to confirm the potential to improve production substantially. Whilst it is not possible to comment on ultimate production rates at this stage, the original well demonstrated an eight-to-ten fold improvement after acid,” Matra’s managing director, Peter Hind, said.
The company said that adverse weather conditions have delayed the demobilisation of the company’s sidetrack rig in Orenburg. The snows have started to thaw now and this will limit heavy load transportation during April while the snow melts and clears.
“We are currently planning to mobilise a coiled tubing unit to the well sites to ensure the proper clean up and to undertake acidisation as appropriate. This work will commence once the road restrictions associated with the annual thaw are removed,” Hind said.
Independent assessment of Matra's resources
is reassuring and confirms that Sokolovskoe is
a viable commercial development with
potentially material upside. Matra has been
awarded a long-term production licence and
expects to be producing 600-700 barrels of oil
per day (bopd) in H1 2011. We expect to see
short-term news flow validating the technical
case and providing comfort on the timing of
development activities. At a $90/bbl oil-price
assumption, our total risked valuation and
target price is 9.4p a share, suggesting around
130% potential upside.
http://www.matrapetroleum.com/docvault/Matra%20Petroleum%2011.01.11.pdf
Kibo Mining* - Speculative Buy at 3.375p with a 10p target price |
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Kibo Mining has an extensive portfolio of gold interests in Tanzania in the Lake Victoria Goldfields, the home to a number of world class gold projects and in the newly emerging goldfields in eastern Tanzania. The understanding of gold occurrences in Tanzania has been turned on its head in recent years following the discoveries made by Canaco Resources in the East of the country. The realisation that gold is now being found in younger rocks echoes what has been found in Western Australia at the Tropicana Deposit (5 million ounce gold resource) which was discovered in 2006. In recent presentations the board has pointed out the apparent parallel between Tanzania and Western Australia; and in both these countries gold has been found in Proterozoic rocks on the edge of older Archaean rocks. The potential is good in Tanzania as the country remains under explored compared with areas like the Yilgarn Block and the surrounding regions in Western Australia. The company is expected to list on the Johannesburg Stock Exchange in May which will put Kibo on an exchange at the heart of Africa where investors probably best understand the opportunities in Tanzania. The company quietly slid onto AIM last year without raising any funds but with a total JORC resource of in excess of half million ounces gold in the Lake Victoria Goldfields at the Itetemia and Luhala projects. The Itetemia project lies just 5 kilometres away from African Barrick's Buyanhulu Gold Mine which has a gold resource of around 12 million ounces. Kibo's focus of attention at Itetemia is the Golden Horseshoe Reef Gold Deposit which has been shown to be economically viable as a stand-alone open pit project at current gold prices; although the economics become far more compelling when using second hand equipment and further still by trucking the ore to Bulyahulu should such an arrangement be negotiable. On this basis the Net Present Value is $28.7 million (~£18 million) and the Internal Rate of Return leaps to almost 85% using $1,300 an ounce gold and a fairly tough 12% discount factor. Since its IPO, Kibo has made solid progress. Last September the company raised £250,000 at 2p in September, new directors were appointed, and there was further evaluation of the Itetemia project together with successful drilling on the Luhala project. There was also on-going work at the Haneti and Morogoro projects. Recently, Kibo has begun to make waves with a transformational deal whereby Kibo has more than doubled its licence area in Tanzania to over 18,000km² and in this move gained strategic positions in both the Lake Victoria Gold Fields and the emerging gold district in eastern Tanzania; as well as bringing in a powerful strategic partner in the shape of the Mzuri group which already has a successful record of mineral exploration in Tanzania. There is little doubt that Mzuri can offer the company the benefit of its business network and infrastructure within the country. Now that the pieces have been assembled to create an impressive enlarged business, the stock begs the attention of investors. There are plenty of good reasons to buy the shares now. Firstly the board is highly experienced and consists of proven mine finders including Christian Schaffalitzky, Louis Coetzee and Des Burke and, secondly, Tanzania is one of the most politically stable places in Africa; and not only is the country highly prospective for a variety of metals but also there is a real chance of turning an exploration licence into a mining licence as is evidenced by the number of operating mines that have come on stream in the past twenty years. Thirdly, the company has a big ground position in the traditional good greenstone territory near producing mines and infrastructure. And to cap it all, Kibo enjoys a strategic position in a new gold area in eastern Tanzania which looks to be where the future of gold exploration is in the country, and after the experiences of Canaco Resources, Morogoro looks like an awfully good address. Looking ahead it is possible for projects in this new emerging gold district in eastern Tanzania to be awarded quiet racy valuations even at a pre-JORC resource stage. There has been a scramble for licences in this area on the back of discoveries made by both western companies and artisanal miners. Active in this region is Canaco Resources which trades on an Enterprise Value of £523 million and although it has yet to define a JORC resource, has announced some staggering drill intersections. This does illustrate the level of interest that exploration work in the East of Tanzania is attracting; but at this stage we have approached the matter of valuing Kibo's interests in this area from a more cautious stand point. Going forward a good intersection could really captivate the imagination of investors. GE&CR's valuation of Kibo is largely based on its JORC resources in the Lake Victoria Goldfields using peer group comparisons. The sum of the parts valuation works out at £34.1 million which equates to a price per share of 10p (based on 341.259 million shares). Our stance is speculative buy with a 10p target price.
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Solo Oil plc Greets Ausable #5 well in south-western Ontario.
Oil and gas exploration and development company Solo Oil plc reported 'extremely encouraging' results from the Ausable #5 well in south-western Ontario.
Petrophysical analysis by its joint venture partner Reef Resources showed the presence of 72m of net hydrocarbon-bearing pay - oil, natural gas liquids and natural gas - in the main producing intervals, exceeding expectations.
Further core analysis was planned and Ausable#5 would be completed as a production well. The results of the production test results and the full analysis of the cores would be announced once available.
Solo executive director Neil Ritson said, 'These results, with over 70m of net hydrocarbon pay, are extremely encouraging and the Ausable #5 well has a high probability of being productive.'
The result contributed significantly to the field development plan and to the knowledge necessary to optimise the enhanced oil recovery (EOR) scheme.
'The well, financed by Solo's participating loan, adds further encouragement that the EOR scheme will be commercially successful.
Strong buy
Lipoxen: Initiate Coverage at 11.25p with a Target Price of 30.7p and Recommendation of Buy |
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Lipoxen is an AIM listed UK biopharmaceutical company that uses proprietary and comprehensively patent protected technologies to discover new therapeutic candidates as well as to develop or re-profile and reformulate existing drugs in the fields of vaccines and protein drugs.
The company's core discovery and development technologies are PolyXen® for protein drug delivery and ImuXen® for DNA, protein and polysaccharide vaccines. These technology platforms use naturally occurring compounds within the body to act as each drug candidate's delivery mechanism, which improves efficacy and targeting while minimising rejection. Despite its modest size, Lipoxen has worked with some of the leading global biopharma groups on a very wide range of drugs. Lipoxen has drug development collaborations with shareholders, Serum Institute of India Ltd (India's largest biotech company and one of the world's largest vaccine companies) and Russian companies, FDS Pharma and Pharmsynthez. The clinical data generated through these collaborations on potential blockbuster candidates have been very encouraging. Also Lipoxen has a US$75 million license agreement with the global pharmaceutical giant, Baxter International (the company's 3 rd largest shareholder), for making bio-superior blood clotting agents (Factor VIII) and two additional drug candidates. Moreover, Lipoxen has achieved all this with limited recourse to equity capital markets and we estimate the company held about £1.0 million at the end of the 2010 financial year. Valuing any biopharma is a highly speculative exercise because they are usually a bet on one or two very early stage drug candidates making it to market or securing a late-stage clinical trial partner before the company runs out of cash. Lipoxen, however, is different because its management team is financially and commercially focused; its technology are generating increasing numbers of candidates in therapeutic areas of high unmet need; and it operates a low risk clinical development strategy. Nevertheless, we have adopted a cautious approach to prospective revenue generation in our model that extends out to 2021, and after applying very demanding discount rates (WACC of 20% and 40% discount rate to generate the NPV, which is then further discounted by 60% for investment risk) indicates an initial target price of 30.7p per share. Therefore, with the shares trading at 11.25p we initiate coverage with a BUY recommendation.
Hambledon Mining* - Solid First Quarter Results and New Infrastructure on the Way. Speculative Buy with an 8p Target |
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Releasing its quarterly report on the 12th of April, Hambledon Mining saw tremendous progress compared to the same period last year in what is undoubtedly its most challenging operating period. In addition to improving open pit production, the company is on track for extracting gold from its underground mine by the end of the year and thus further enhancing its production figures this time next year.
Hambledon again experienced some severe weather conditions in the 3 months to 31st of March 2011, but the combination of newly installed equipment (including the replacement of key crushing and screening equipment) and the implementation of phase 1 of its winterisation programme saw year on year quarterly output figures improve across the board at Sekisovskoye's open pit. Compared to the 3 months to 31st March 2010, this quarter's milled tonnes were up 36.2% to 141,317, gold grade up 20.8% to 1.16g/t, contained gold up 64.2% to 5,268 ounces, gold recovery up 4.5% to 84%, recovered gold up 72.5% to 4,449 ounces and recovered silver up 16.8% to 7,510 ounces. Production in 2011 continued to come predominantly from the main open pit with a modest contribution from the north pit.
Progress on the underground deposit's access decline continued as planned, while underground equipment purchases began with a Load Haul Dump loading unit. Two short listed vendors are currently bidding for the five year plant, machinery and maintenance agreement. Existing contractors will be employed for construction work, but ore extraction will be performed by Hambledon's own fleet and staff. Engineers from Golders Associates have commenced their detailed underground studies for expanding the project and will benchmark their analysis against other Kazakhstan mines.
The first 8 holes from Hambledon's underground drill programme were also recently announced with average in situ grades of 5-6 g/t gold and 6-7 g/t silver. Not only do these results support the current JORC resource, but early indications suggest good resource expansion possibilities.
On the infrastructure front, Hambledon raised £8.6 million net through the issue of equity at 4p per share in March. £2.6 million will be used to install a plant waste management system at Sekisovskoye, £1.3 million for upgrading some of the plant process systems, £1.1 million to establish dual high voltage electrical infrastructure to the project site, and £0.6 million for the expansion of engineering workshops. The remaining money will be used for corporate development and accelerating underground exploration work. Already budgeted for is construction of the third tailings impoundment facility which is on track for completion in the third quarter of this year. In addition, the forth tailings facility has been designed and construction will follow on from completion of number 3.
Having produced impressive year-on-year quarterly gains at the beginning of 2011, Hambledon will do well to replicate these advances during the remainder of the year. However, with new infrastructure investment and the prospect of underground mining by the end of the year, there is every reason to believe the company can replicate these results. Speculative buy with 8p target price.
Buy Shaft Sinkers (SHFT) at 188.5p
South Africa based mining shaft developer Shaft Sinkers is a recent addition to the equity markets, having listed on the Main Market of the London Stock Exchange on 23rd December last year. Along with the IPO the firm raised £30.6 million at 124p per share, £24.1 million of which was used to acquire stakes from minority shareholders. The company specialises in the sinking of particularly deep and/or wide vertical shafts, decline shafts and the development of other underground infrastructure such as pump house stations. The company's services are particularly important to the mining industry, in particular platinum miners, but the firm has also worked on applications for the hydropower industry, with other potential applications including underground transport access, underground storage and nuclear waste disposal. Based in South Africa, the firm is currently engaged in seven of nine vertical shafts deeper than 350 metres being sunk in the country. In total it is working on fourteen projects for customers, including Impala Platinum Limited in South Africa, OJSC MHK EuroChem in Russia, and Teesta Urja Limited in India. The company has the ability to sink shafts through all types of rock and in 49 years of existence has sunk over 165 kilometres of vertical shafts and excavated over 400 kilometres of tunnelling around the world. This includes the deepest ever South African shaft, which was dug to a depth of 3,131 metres. Current Trading Shaft Sinkers has grown exceptionally well in the past few years, with revenues in the three years to December 2009 up by 269% to £147.9 million. A loss of £1 million in 2007 was turned into an operating profit of £14.3 million in 2009, with a pre-tax profit of £12.46 million being posted. Trading has continued to be strong since then with the year to 31st December 2010 showing revenues up 24% at £183.1 million and profit before income tax up 34% at £16.7 million. Meanwhile, the firm ended the period with net cash of £11.1 million, compared to net borrowings of £6.6 million in 2009. Similarly encouraging is the company's forward order book, which totals £488 million over the next four years. During the period, the group secured a significant new contract at Styldrift with Anglo Platinum and Royal Bafokeng Nation, which is expected to be worth around £95 million over four years. Also in Africa, the firm's contracts at Anglo-Gold Ashanti's Moab shaft performed well and will be extended into 2011. Meanwhile, results for 2010 were boosted by a one-off payment of £1.8 million arising from the group's disposal of its stake in the Eureka mine in Zimbabwe. Elsewhere, the sinking of a shaft in Russia at OJSC MHK EuroChem's Volgakaly potash mine moved into the main sink phase but faced delays due to technical and administrative difficulties. A contract at Teesta Urja Limited's hydroelectric project in India has neared conclusion of the first tunnel and work progresses well on the second tunnel. Two projects for Impala Platinum are said to be progressing well, with all other projects remaining on track. The group reports that it has established a solid footing for 2011 and is so far performing in line with expectations.
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The ReThink Group* - Finals in line with expectations. Strong trading continuing into 2011. Re-iterate BUY stance with a target price of 14.8p
The ReThink Group, (ReThink) the IT recruitment and consulting business, released final results on 7th April, for the year ending 31st December 2010. These were in line with previously upgraded expectations as per the company's trading statement and our note, both issued on 8th February.
Revenues rose by 13% to £56.4 million but even more encouragingly gross profit rose by 17% to £12.8 million driven by a 46% increase in permanent fees and 5% growth in contract margin from ReThink's recruitment businesses. Given the operational gearing within the business this growth is amplified the further one moves down the P&L towards the bottom line. Operating profit doubled to £1.22 million and pre-tax profit more than trebled to £0.92 million. Basic earnings per share grew by 192% to 0.69p and the Board has recommended a final dividend of 0.134p bringing the full year payment to 0.188p. Cash flows from operations more than doubled to £1 million. However net debt has increased by £1 million to £5.2 million reflecting the growing levels of business. Within that figure are included advances on invoice discounting up from £4.4 million to £6.3 million, a tool which the business uses to fund its payments to contractors. The Group renewed its £10.75m invoice discounting line during March 2011. The businesses recruitment businesses have been performing well in both the contract and permanent markets. Despite the reduction in demand from some public sector clients, underlying growth of contract revenues remains at around 10%. ReThink expects the coming year to be one of further sizeable growth for contractor related revenues. The RPO business has continued to strengthen and has benefited in the year by the addition of a major high street retailer as a significant customer. The Board is confident that there will be further additions in this division in the coming year. We welcome the company's expansion abroad, which should diversify its revenue streams into economies with greater growth prospects than the UK. The Board is encouraged by the progress of its business in the Gulf region, which has continued to build on a solid start in 2009, and expects its new operation in Singapore to be trading in the second half of 2011. In February ReThink guided that that current trading has started well with contractor numbers continuing to grow, permanent revenues ahead of management's expectation and a positive start from the IT & Business Consulting division, Aiimi Limited. We are glad to note that this progress has been maintained. However the Board cautions that economic outlook remains unpredictable. ReThink continues to keep a close watch on the political and economic environment but is currently experiencing strong demand in all of its business units.
buy with a target price of 14.8p |
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