After last week’s very successful One2One investor forum, broker Northland Securities has very kindly passed on its assessment of all four of the companies that presented – Anglo Asian Mining (LON;AAZ), Equatorial Palm Oil (LON:PAL), Leyshon Resources (LON:LRL) and Strategic Natural Resources (LON:SNRP) (see below).
This week, two gold companies and a gas company are on the agenda, so come along and judge for yourself the progress Ariana Resources (LON:AAU), Gasol (LON:GAS) and Lydian International (TSE:LYD) are all making.
Proactive Investor Forum on 25th October
Equatorial Palm Oil (10.6p/£13.8m)
Northland UK view: The Proactive Investor Forum included a number of interesting propositions including Equatorial Palm Oil. The company looks to have secured good territory in Liberia for a key strategic commodity.
Palm Oil is increasingly prevalent in FMCG applications as a healthier alternative to hydrogenated fats. Equatorial has commenced palm oil production from existing mature plantations with a ramp up in capacity to be financed largely from existing debt facilities and an expected uptick in plantation activity in train to drive future yields.
Whilst it may take around five years to achieve critical mass, management looks to have built up significant latent value in a key strategic asset. This could suggest value will be a multiple of the current rating. Importantly, whilst significant profits may be some way off, assuming delivery of business plan, larger industry competitors are likely to appreciate the value proposition well ahead of this.
Leyshon Resources (11.3p/£28.3m)
Northland UK view: Of a similar strategic nature, Leyshon Resources offers cash backed exposure to Central China’s unconventional gas exploration.
The company will commence drilling the Shanxi target in China’s Central Ordos basin (Shaanxi Province) on 2D seismic alone which is high risk but somewhat mitigated by Sanijaobei, a major adjacent gas discovery (est.12 TCF GIIP). The group has installed a highly competent technical team that drilled many of the Sanijaobei wells and is partnered by China supermajor PetroChina. Leyshon will risk around $5m of its $50m (£34m) cash pile to drill 3 wells.
Leyshon is trading below cash so, in this sense, represents a relatively low risk ‘option’. The key attraction to the project is that if gas is discovered there is significant installed infrastructure and the gas feed in pipeline will come to Shanxi with no initial capex outlay (cost will be amortised out over revenues). With wells costs of only around $1.5m per well, gas pricing at over $7/mcf represents very attractive margins.
Strategic Natural Resources (27.3p/£46.4m)
Northland UK view: Having followed Strategic Natural Resources (“SNR”) since inception, it is pleasing to see such strong progress this year. The company is uniquely positioned with its Elitheni Coal project the only substantial operating mine in the Eastern Cape, one of South Africa’s poorest regions, excellent BEE representation (including a serving member of RSA parliament) and a ready route to the export market with two accessible, competition free, ports.
Originally conceived to deliver coal to a mine mouth power station, this management has transformed the operation to successfully develop an export option. It is encouraging to see the power station potential return for the longer term but with or without that option, SNR is an attractive proposition. An upcoming reserves report, expected in due course, provides a significant catalyst. Shipment of first ores represents a major milestone.
Anglo Asian Mining (53.75p/£60.0m)
Northland UK view: Anglo Asian Mining is a profitable, un-hedged gold producer with three key Azerbaijan projects; Gedabek (producing), Gosha (pre-production); Ordabad (exploration). Anglo Asian has profitable production of around 50k ounces per year on a global resource of around 1moz Au low grade (1g/t) deposit. The company is robustly profitable with a significant reserve and first mover advantage in Azerbaijan (that is predominantly an oil producer). The onset of its new Agitation pad next year will markedly improve recoveries extending the mine and allowing reprocessing of tailings some of which are at a staggering 1g/t. A second mine Gosha (narrow vein/high grade) to come on stream next year, could raise production by 10-15k tonnes per annum, whilst there are additional exploration activities. Valuation looks undemanding in light of resource, infrastructure and recent track record.
This week’s One2One forum event is again being held at the Chesterfield Hotel in Mayfair, London from 6 pm on Thursday November 1.
To register please email events@proactiveinvestors.com or phone 0207 989 0813.
You can also register on the website here.