Exploration Insights by Robert Tyerman
Article Date: Oct 06 2008Gold’s crisis-provoked impressive recent spurt from below $780 to above $860 an ounce brought some cheer to a confused resources sector, but institutions remain chary
Many companies find themselves friendless at the moment, at least where bids are not in progress. However, value still exists. Deals are being discussed and some accomplished, if sometimes at disappointing prices.
Rio backs Kalahari
Mining giant Rio Tinto is poised to emerge with 16.5 per cent of merging Namibian metals play Kalahari Minerals, after buying RAB’s stake for £9.5 million.
Rio has paid 38p a share for its stake in AIM counter Kalahari, which is merging with Extract Resources. This Rio-backed company is interested in the potentially promising Rossing South project, near Rio Tinto’s major Rossing uranium mine.
Kalahari boss Mark Hohnen says the merged company will have copper in the ground worth around £700 million and suggests Kalahari will establish a potential uranium resource of 50 million lbs early next year. Thereafter his target is 200 million lbs, with an eventual 400 million lbs on the cards, adding to the speculative potential.
Green light for Heritage
The Tanzanian government has approved Heritage Oil’s farm in to Dominion Petroleum’s Kisangire project. AIM-quoted Dominion first agreed in April to give fully listed Heritage majority stakes in four licences at Kisangire in eastern Tanzania. Heritage can earn 55 per cent of the Kisangire and Lukuliro licences by funding seismic data and drilling one well, and take that to 70 per cent by funding 87.5 per cent of a second well.
Heritage can earn more by funding further exploration. At 15.75p, Dominion’s shares remain unloved, down from their 64.5p peak last year, while Heritage, at 231.5p, down from 350p June, has a fairer wind behind it.
Highland goes native
Valery Oif, a director of Roman Abramovich’s Millhouse investment vehicle, is replacing Henry Horne as chief executive of Highland Gold Mining. Millhouse paid nearly £100 million in January at 151p to take its stake in Russia-focused Highland, a dire AIM performer, to more than 40 per cent and won the right to appoint a new chief.
Shares in Highland, which hopes to produce around 160,000 oz of gold this year from its Mnogovershinnoye project and has other projects in hand, fell recently to 27.25p – against 2002’s 190p float price and a 332p 2006 peak. At 44p, Highland may now be better placed to play by Russia’s opaque rules.
Elixir’s North Sea hopes
Oil and gas punt Elixir Petroleum is excited about prospects for its 40 per cent-owned Mulle prospect in the Norwegian North Sea, whose potential reserves could be in the order of 17 million barrels of oil equivalent, with Elixir entitled to 6.8 million.
AIM-quoted Elixir, which says it expects £425,000 cash flow a month from two of its wells in the Gulf of Mexico, expects seismic data in the new year from its promising Block SL-4. MD Andrew Ross is keenest on Mulle, where analysts suggest Elixir’s stake could be worth £80 million and the company is looking for partners to share the cost of a £40 million appraisal programme. Elixir’s shares, which hit 46p in early 2006, have collapsed all the way to 4p, which seems grudging.
Coal boost for Hargreaves
Energy, mineral and waste sectors supplier and miner Hargreaves Services has increased annual pre-tax profits 86 per cent to £17.9 million. The company lifted turnover 69 per cent to £405 million in the year to May and claims a ‘strong order book and forward revenue visibility’.
Highlighted by Growth Company Investor at 390p two years ago, Hargreaves shares (which hit 644p in July 2007) now trade at 603.5p, valuing the company at £159 million. Further progress is on the cards, if sector support does not evaporate entirely.
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