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Archipelago Resources, Enegi Oil, Cove Energy, Oracle Coalfields, plus others feature in Fox-Davies Newsflash

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Mining News

Alexander Nubia International inc. (CVE:AAN) announced results from a mapping program at its Hamama gold‐zinc volcanogenic massive sulphide (VMS) deposit in Egypt. The discovery of lenses within the footwall of the principal VMS horizon suggest the presence of at least six stacked layers of VMS material within an open‐ended zone traceable along strike for 2,000 metres. These new VMS lenses have been flagged for deep channel surface sampling.

Archipelago Resources plc (LON:AR.) announced its inaugural production results for Q1 2012. The Company processed 427,859 tonnes at its Toka Tindung, gold mine in Indonesia at an average head grade of 2.44 g/t Au. Recoveries were 91.2%. This produced 32,189 ounces of gold. This was in line with the Company's expectations for the year to date and the Company is confident that it will meet its 2012 full year production guidance of 135,000 to 145,000 Au Eq oz at a cash cost of $540 to $590 per oz.

Highland Gold Mining Limited (LON:HGM) announced its final audited results for the year ended 31 December 2011. Total production of gold and gold equivalents amounted to 184,102 oz (2010: 200,028 oz) derived from MNV, Novo (48.3%) and Belaya Gora. The total cash costs were US$594 per ounce, up from US$513 per ounce in 2010. The Company achieved a 29.6% increase in EBITDA to US$157.1 million (2010: US$121.3 million) reflecting higher realisations on gold sales. Cash and cash equivalents totalled US$126.7 million as of 31 December 2011 (2010: US$222.5 million).

Nord Gold (NORD) has also released a disappointing 1Q'12 production report with mechanical bottlenecks at both Taparko and Berezitovy causing gold production to fall by 11% YoY to 155.7koz. Head grade was maintained with the fall in production entirely caused by reduced throughput during the quarter with ore mined and ore milled down 7% and 12% respectively. Full year guidance remains unchanged at 800-850koz as the Company believes these bottlenecks have now been identified and will be rectified during the current quarter. At Taparko, a regrind mill and two additional leach tanks are expected to be commissioned and at Berezitovy the installation of the secondary crusher and a new penion is on track all by the end of June. The Company expects production to improve in 2H due to the commissioning of the heap leach at Berezitovy, generally better recoveries from all heap leach operations during the milder weather, by mining higher grade zones at Lefa and a material increase in mill productivity with a launch of a pebble crusher.

Oracle Coalfields (lon:ORCP) has released its final results for FY'11. There is nothing material in the results other than the cash position of £1.6m, sufficient for the Company's short term working capital requirements. We expect the Company will have to raise additional funds to progress the existing feasibility study to a standard required to raise debt finance. Post year end the Company received a mining licence for its planned lignite mine in Sindh province, Pakistan and the Company is currently in discussions with international mining contractors for a cost-effective mine development plan and is "evaluating" debt and equity funding options. The Company is planning to build an eventual 5Mtpa lignite operation (gross CV 3,182k calories per wet kilogramme) for use in power generation. The Company also needs to carry out further work on the feasibility of a power plant upon which many of the existing mine study assumptions rely. Expected capital costs for the mine are US$610m, which we believe would be difficult to achieve if the Company was forced purely to rely on the equity markets.

Trans-Siberian Gold (LON:TSG) released a disappointing production update from Asacha. Initially plant through put was impacted by ore not being crushed to a suitable size, power supply problems in March, significant issues with dilution in the first two months and a lack of truck availability meant that ore was not being brought to surface and the Company had to blend material from the low grade stockpile. The net impact of this was a slight decrease in ore processed to 28,877t down from 30,308t in the previous quarter, but more significantly a marked reduction in average grade from 9.36g/t to 6.97g/t. Total gold in Dore fell to 6,689oz from 7,836oz and refined gold fell to 6,281oz. The Company has now adjusted its mining method and increased the onsite laboratory to help grade control and decrease dilution. A new crushing unit has now arrived on site and the Company are currently in discussions to acquire a new truck. As a result it expects the plant production to improve in the next quarter. Whilst this is only the second quarter of production, it is still far below the planned production levels originally envisaged of 84koz Au and 160koz Ag pa over the projects 7 year mine life.

Oil & Gas News

Cove Energy (LON:COV) Just because the Board thinks it's a good offer, the owners must think it is a good offer too. PTT was interested enough in the first place to make an offer, so now that it knows what the price is to be, might there be an alternative? Either way, the management team has delivered value to shareholders, and despite the final sale price likely to be less than $1/mcf net to Cove, the fact that any realistic valorisation route would involve LNG, which is expensive and has a significant lead time, means this is a pretty good offer; it is after all 50% of the prevailing market price for gas in the US currently.

JKX (LON:JKX) So Much More than Revenue: While only flowing at nominal amounts (see below), the importance to the Company is more profound than just the additional revenue that it will generate. The commissioning of this well is a watershed for the Company that sees it put the issues of the past behind it, and look forward. It should also allow the Company to successfully reset its tax and operational cost base, as it is worth mentioning that the new resources tax base that the Company faces is permanent, gone is the low tax operation that existed previously. We believe that the Company has now stabilised, and with agood run, we will see the value of its shares start to reflect the intrinsic worth of its assets. In this news:

Well M-53 33% beneficial interest to JKX 

o Owned by the state company Ukrgasvydobuvannya

3.8mm cfpd of gas and 1.1bpd condensate

Production now tied back to test separator and sold

Exported into the Ukrainian gas pipeline network

Hardy Oil (LON:HDY) Today's news on the relinquishment of Block D9 shouldn't come as a surprise, as the Company had been toying with this idea for a few months. Following the KG-D9-A2 natural gas discovery in July last year, it has been unable to drill the fourth and final exploration well within the remaining exploration period, and with the block's hydrocarbon potential deemed low, divesting out of this block should sharpen the focus on the highly prospective D3 exploration licence. Now all that remains in the near term is to get the PY3 licence back up and running. In this news:

Relinquishment of the KG-DWN-2001/1 (D9) exploration licence

Main reasons being low potential following results of the three exploration wells, including the KG-D9-A2 natural gas discovery

D3 remains the main focus

Valiant Petroleum (LON:VPP) The Company took another step forward towards the monetization of the permit resources in Tybalt as it announces a Farm Out Agreement. The Company continues to make steady progress across its portfolio, and this year looks promising as its recent development programme starts to deliver on management's expectations. Farm Outs, approvals, acquisitions, and most importantly opportunity for growth at the drillbit, means the Company is now well positioned for an active drilling campaign this year. In the news:

Farm Out Agreement with Agora Oil and Gas (UK) Limited ("Agora") in respect of the Tybalt appraisal well

Agora increases its interest in Tybalt to 40% in return for a partial cost carry.

The Tybalt drilling results are expected in May

Enegi Oil (LON:ENEG) The commencement of four cased hole tests at Green Point Shale play in EL1070 is positive. Over the next one month we can expect a series of regular updates as all tests are likely to be completed within the next 35 days. In this news:

Testing has commenced on their Shoal Point 3K39 well, which was drilled to target the Green Point Shale play in EL1070.

SPE indicates that four cased hole tests have been planned for the Shoal Point 3K39 well, with the first already commenced. 

o SPE further indicates that all the tests will be completed within the next 35 days.

AJM Deloitte, an independent geological consultant, has been engaged by Enegi to produce a report to assess the extent of the Green Point Shale on the Company's acreage

Jupiter Energy (ASX:JPR) - Commences trial production from the J-50 and J-52 wells: Commencement of trial production from J-50 and J-52 wells in Kazakhstan is a big step towards monetization. It reduces technical risk associated with the asset to a large extent, hence re-rating of the asset valuation. Today's news will aid in building investor confidence and lays the platform for revenue growth as Jupiter focuses on unlocking the values within the Kazakhstan assets. In the news:

Trial production from the J-50 and J-52 wells has now commenced. Aggregated daily production from the J-50 and J-52 wells is initially expected to be ~600 bpd

Jupiter is transporting oil from the field by road-tanker to a 3rd party storage base

Both wells can be produced under Trial Production for a maximum of 3 years and during this time oil is sold into the domestic market

The Company intends to move these wells from trial production to full production (and therefore from domestic to export oil sales) sooner than this maximum 3 year period

Oilfield Services News

Saipem (BIT:SPM): Q1 results were in line with market expectations with net income up 8.5% to EUR231M. The order backlog is healthy, standingat EUR20,401M of which EUR7,100M is due to be realised in 2012. The Company has stated that the strong results so far and substantial backlog enable the group to confirm its 2013 guidance as announced in February 2012: revenues EUR13Bn, EBIT around EUR1.6Bn and net income of EUR1Bn. Overall, while the results are unexciting themselves, they do indicate the continued favourable trading conditions for the OFS sector as a whole in particular the engineering focussed stocks (Kentz, Petrofac and Wood Group).

 

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Price: 43.665 USD

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