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Gulf Keystone Petroleum, Noventa, Tertiary Minerals, Range Resources, and others feature in Fox-Davies Newsflash

Last updated: 05:02 23 Jul 2012 EDT, First published: 04:02 23 Jul 2012 EDT

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Mining News

Diamondcorp (LON:DCP) has announced that as part of the approval for the R280M (~ $33.6M) of loan funding from the Industrial Development Corporation ("IDC") announced in May, the IDC has completed its due diligence and Eskom approval for a power upgrade at the Company's 74% owned Lace Diamond Mines has been approved. As a result the final loan documentation and terms to be prepared for approval are expected to be completed and signed by mid September 2012. The loan is to fund underground development and the purchase of mining equipment required for completion of a 1.2 Mtpa block cave mining operation on the 47 Level (470m) at the Lace mine. If rates remain unchanged, the Company will be paying an interest rate of 10.5% (i.e. the South African Prime Rate plus 2%). 

Metminco (LON:MNC) has announced an increase in the resource at its Mollacas Copper project in Chile. The total resource is now 34.3Mt @ 0.39%Cu and 0.16g/t Au. This includes the final resource estimate for the oxide and secondary sulphide zone which now comprises 11.2Mt @ 0.55% Cu and 0.12g/t Au classified as Measured and 4.3Mt @ 0.41% Cu and 0.14g/t Au as Indicated. A mineral resource has also been estimated for the primary and transitional sulphide zones. This includes 8.2Mt @ 0.30% Cu and 0.22g/t Au classified as Measured; 5.1Mt @ 0.27% Cu and 0.18g/t Au in the Indicatedcategory and an Inferred Mineral Resource of 5.5Mt @ 0.26% Cu and 0.15g/t Au. Whilst the primary sulphide and gold resource provides the Company with additional optionality in the development of the project, the focus remains on the oxide and secondary sulphide zones and met test work is progressing to optimise the process design for the Copper Leach Project. 

Uranium Resources (LON:URA) has released further high-grade intercepts at its Mtonya Uranium Project in Tanzania as part of its on-going 20,000m drilling programme. The intercepts confirm the continuity of uranium mineralisation in Tier 1 roll-fronts at depths between 120m and 220m which are the Company's primary targets. Seventy wide-spaced diamond drillholes totalling approximately 16,500m have beencompleted to date over Tier 1. Twenty drillholes intersected uranium mineralisation and sixteen drill holes encountered grades over 100 ppm U3O8. The highlights include  992 ppm U3O8 over 1.0 m from 145.3 m in Hole 081; 1,869 ppm U3O8 over 0.8 m from 157.8 m in Hole 090; 841 ppm eU3O8 over 1.3 m from 174.1 m in Hole 097; and 650 ppm eU3O8 over 1.8 m from 68.0 m in Hole 208. Three rigs are currently operating at Mtonya with a fourth due in August. The Company is expecting to release a maiden resource in 1Q'13 and believes the project will be amenable to low cost in-situ leaching. 

Tertiary Minerals (LON:TYM) has raised £500,225 through the placement of 11,770,000 shares at 4.25p per share to a small number of institutional and professional investors. This was at a sharp discount to Friday's closing 5.88p per share. The Company will use the funds for the continuing evaluation of its Storuman and Lassedalen fluorspar projects and for general working capital purposes. 

Noventa (LON:NVTA) which is currently looking for US$35M in additional funding, has decided after speaking to existing and potential investors that an equity fund raise is not feasible due to the market conditions and limited interest from investors. As a result it is focussing on agreeing the terms of a secured loan from a syndicate of lenders, including its existing lender and largest shareholder, Richmond Partners Master Limited. The Company hopes to agree terms with Richmond to extend the existing Facility, while they negotiate a longer term loan. If the Company is unable to agree terms for the extension of this Facility and/or secure longer term additional financing, it is possible that the Company may become insolvent. 

Nord Gold N.V. (LON:NORD) has announced that it has entered into an additional lock-up agreement with a significant minority shareholder of High River Gold Mines Ltd. Nordgold currently owns 630,627,472 shares or ~75% of HRGM and has now secured lock-in agreements with ~29% of the remaining shares it doesn't hold. Under the terms of the proposed offer, eligible High River shareholders will have the right to elect to receive either 0.285 Nordgold global depositary receipts or C$1.40 in cash for each share held. 

African Barrick Gold (LON:ABG) has entered into an agreement with Aviva Corporation Limited to acquire all of the outstanding share capital of Aviva Mining (Kenya) Limited. This will provide ABG with a number of licences in West Kenya subject to approval by Aviva's shareholders and the consent of the Kenyan Competition Authority. Through the acquisition, ABG will acquire AMKL's 51% interest in a joint venture with Lonmin plc and AMKL's right to earn up to a 75% interest in a second joint venture with TSX listed Advance Gold Corporation. ABG will initially pay A$20M in cash with a further cash payment of A$10M to Aviva upon declaration by ABG of an National Instrument 43-101 compliant Indicated resource of 3Moz of gold on the Properties. 

Bellzone Mining (LON:BZM) has released a DFS for its Kalia Iron ore Project. The DFS includes both an accelerated and a deferred development plan with substantially different funding requirements. Both plans have an initial oxide phase which expects to commence production in 2015 at a rate of 5.9Mtpa ramping up to a rate of 25.9Mtpa in 2018 (linked to infrastructure operations).  However, the accelerated development plan proposes that production of magnetite under phase 2 would commence in 4Q'17, ramping up to 19.2Mtpa in 2019, whereas the deferred plan would see production starting in 4Q'19, ramping up to 19.2Mtpa in 2021. The Accelerated plan has an US$7Bn NPV12 with an IRR of 53.1% compared to US$5.5Bn NPV12 with an IRR of 57.1% for the deferred plan. However, capex would be US$1.7Bn compared to US$570M. In both cases, the project would become cash flow positive after three years of operations with further optimisation possible and has an average full production operating cost of US$41.57/t.  Bellzone expects to release the rail and port DFS in 4Q'12 and Project finance negotiations will start with China International Fund Limited and third parties on delivery of the rail and port DFS. 

Aquarius Platinum (LON:AQP) has released marginally improved 4Q'12 production results to 30 June 2012. Total attributable production for the fourth quarter increased slightly quarter-on-quarter to 98,143 4Eoz, with stronger production from Kroondal (41,1064 Eoz attributable). The company expects Kroondal will continue to improve but has placed Marikana and Everest mines placed on care and maintenance during the quarter. Aquarius finished the quarter with US$180M in cash which is sufficient to fund operations for the next 12 months and believes its new operational configuration will enable it to survive the current downturn. However, it expects further industrial action caused by inter-union rivalries will continue to be a concern with intermittent unlawful industrial action impacting Kroondal's Kwezi Shaft in July.

Oil & Gas News

Range Resources (LON:RRL) & Red Emperor (LON:RMP) The news that the mini well test has flowed water opposed to oil is certainly a disappointment, but not yet the killer that it sounds like it is; it must be remembered that the target horizons are significantly deeper and drilling will now continue to these deeper target horizons. So, while this news is disappointing, it is not yet a "kill" for the exploration well. We are still maintaining our BUY recommendations on the stocks - especially given the prospective "appraisal" CBM acreage in Georgia, and in respect of Range Resources its Trinidadian operations - and retain Target Prices of 27p for Range Resources and 65p for Red Emperor.   

Sterling Energy (LON:SEY) The Company is still in hiatus as management redirects the its strategy, but on the face of it, these results underline the position that it is in, and given the current illiquid environment, the $114mm that it has will go a lot further then it would otherwise have done. Whilst progress on the existing assets is disappointing, there is nonetheless momentum building.        

Cash as at 30 June 2012 of $114.4 million ($112.9 million net of partner funds), no debt. $7.1 million expected in July from sale of Chinguetti cargo lifted in June.

Group turnover increased to $14.0 million (H1 2011: $9.5 million).

Profit after tax of $4.7 million (H1 2011: $6.5 million).

Average net Group production decreased to 501 bopd (H1 2011: 626 bopd) as a result of two unplanned production shutdowns.

Cash flow from operations of $0.7 million (H1 2011: $5.8 million). 

Gulf Keystone Petroleum (LON:GKP) Spudding of a fourth exploration well on the Akri-Bijeel block (20% WI) in the Kurdistan Region of Iraq demonstrates the Company's endeavour to extensively explore all four of its blocks in the region. The operator estimates P50 resources for the Bijell discovery at 2.4 bn bbl oil-in-place. Completion of the four well exploration programme on the block will be followed by three additional appraisal wells. We believe that the current share price does not reflect the value of the assets as they stand currently, especially given the promising developments with respect to exports to Turkey and entry of western oil majors, and thus any weakness from these levels presents an ideal buying opportunity. Following this news, we are reiterating our Buy recommendation and 350p price target. 

Gulfsands Petroleum (LON:GPX) The Chorbane exploration permit has been extended for a further period of three years to July 2015. Given the obligation of drilling just one exploration well during the extension period, we don't expect much activity on this block. We believe the Company needs to "move the needle on the exploration programme" to infuse enthusiasm in the stock. Nevertheless, this news is welcome as it provides some hitherto lacking solidity to the Company's drive towards providing for an additional potential revenue stream. While a resolution in Syria will be the single largest step change in the Company's revaluation, we welcome this news as it clearly demonstrates management's strategy towards diversifying risks. We maintain our HOLD recommendation and 200p Target Price. In this news 

Circle Oil (LON:COPToday's news should bode well for the share price as it continues to underline the Company's progress towards unlocking value within the NW Gemsa accumulations. With the AASE-12X ST1 well now placed on production, attention will shift towards appraising the Al Ola-3 well, and the expansion of the reserve base. Operationally the Company continues to make good progress, and as a result, we are maintaining our BUY recommendation and 95p Target Price. In the news: 

The AASE-12X ST1 well encountered 15.5 ft of net pay in the Kareem Shagar sand, with oil bearing sands present to the base of the reservoir

The well has been completed as a Shagar sand producer and flowed oil and gas on test at an average rate of 2,595 bopd and 4.7 MMscf/d respectively

The well has now been placed on production at an initial flow rate of 1,038 bopd

Al Ola-3 well is set to be drilled as an injector well targeting the Kareem sands

Currently production from the AASE, Geyad and Al Ola fields is approximately 9,300 bopd (gross) 

Exillon Energy (LON:EXI) The Company took another step towards the monetization of its East EWS I field resources with the preliminary results of the Well 52 ("EWS I-52 well"). Well 52 is the third development well drilled from Pad 5 following the success of exploration Well 50 in 2011. The drilling of the second development well, Well 54, was completed in June this year, but it will be completed and tested after Well 52. Success here should enhance the Company's upward trajectory. In the news: 

The well flowed water-free oil naturally to the surface with a test flow rate of 692 bbl/day

The well encountered the Jurassic P reservoir at 1,865 metres, confirming 21.7 metres of effective vertical net pay. 

GeoPark Holdings (LON:GPK) The Company has made good progress year to date across its portfolio. Q2 net production is up 66% y/y to 11,625 boepd (compared with Q2 2011), led by a steep rise in production from Colombia and Chile. New discoveries in Colombia and Chile are other significant achievements for the Company. We believe the remaining period of 2012 will be critical for the Company as it embarks on trying to monetize its growing portfolio. We will be looking out for the updates on activities across the Company's inventory. In this news: 

New Oil and Gas Discoveries in Colombia and Chile

Increase in Oil and Gas Production

Tierra del Fuego Work Start-Up

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