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Views from the Trading Floor - Featuring Afren, Providence Resources, Sefton Resources and Berkeley Mineral Resources 25th April

Last updated: 02:50 26 Apr 2012 AEST, First published: 01:50 26 Apr 2012 AEST

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Saints & Sinners: Oil & Gas

 

Afren Plc. (LON:AFR) slipped 4.5% to 136p during afternoon trading after the company said the Nunya-1x exploration well in the Keta block offshore Ghana has encountered thick and high quality water bearing reservoirs. Objective of the Nunya-1x exploration well was to explore a large four-way dip closed Upper Cretaceous prospect in the Keta block, located offshore Ghana. Well intersected 153 meters of very good quality sandstone reservoirs, however they were interpreted as water bearing. Well was drilled with the Marianas semi-submersible drilling rig to a total depth of 4,550 meters in a water depth of 1,687 meters. Afren has a 35% carried interest in the Keta Block and is partnered by Eni SA (ENI.MI)-35% and operator; Mitsui-20%; and GNPC-10%. Afren continues to make excellent progress with wider exploration program, which has already yielded two significant discoveries year to date. Ebok North Fault Block exploration well has been spudded in Nigeria and is drilling ahead towards target. First line support looks to be around the 135p area, so it will be interesting to see how the long term holders react to that level.

 

Providence Resources (LON:PVR) pushed 3% to 550p during early trading today. The oil and gas exploration and production company, recently said that initial technical evaluation of Licensing Option 11/12 located in the Slyne Basin, Ireland, has revealed the presence of the "Kylemore" and "Shannon" prospects which are similar in age to the nearby Corrib gas field. Kylemore prospect is interpreted as a mid-basinal inverted four way dip-closed anticline based on a combination of 2D and 3D seismic data. Most recent mapping of the Kylemore prospect indicates that it is structurally directly analogous to the Corrib gas field. Volumetric analysis based on available Kylemore prospect maps indicates a potential gas in place of up to 228 BSCF. Shannon structure, which is fully covered by 3D seismic data, warrants a complete re-evaluation in the context of any remaining resource potential. Providence (66.66%) operates LO 11/12 on behalf of its partner First Oil Expro Limited (33.33%). The shares bounced nicely off of the support at 530p during early trading, and with volumes steadily increasing once again, they could be on course for a retest of the 52 week high at 581p.

 

Sefton Resources (LON:SER) are sitting right on long term major support at 2.2p. The last few times the company have hit this major support we have seen a small bounce. The next line of support behind this would be the 2p area. The last update on the 12 of March said that the findings of an Independent Competent Persons Report produced by Dr. Nafi Onat which assesses and values the company's potential oil and gas resources in Kansas and said the report gives an updated estimated valuation of the group's interests in Kansas. Report estimates the PV10 value of Sefton's potential oil and gas resources in Kansas and anticipated pipeline revenues at this time of $140.0 million; This is a 40% increase on the valuation reported in May 2011. The report includes Mississippian related prospective oil resources of 1.97 million barrels; shallow CBM related possible, contingent and prospective gas resources of 55.78BCF; and assumes an anticipated pipeline revenue with flow rates of 10MMCF/d of gas over a 20 year period. The evaluation excludes the prolific Mississippian related McClouth and Burgess sand producing areas, until a more comprehensive geologic/engineering study has been completed.

 

Aminex Plc. (LON:AEX) jumped 12% to 4.55p on almost 3 times the average daily volume. The last update back on the 11th of April said the company had not found gas reservoir potential at its Ntorya-1 exploration well in the Ruvuma Basin onshore in Tanzania after deepening it to 3,000 meters. The well will now be plugged back to the base of the 7-inch liner and completed for testing the gas pay interval. A test program will be carried out after the rig has been moved off location. On Feb. 27 Aminex reported that a gas discovery had been made in a 25 meter gross sand interval between 2,660 meters and 2,685 meters with a 3 meter net gas bearing pay zone in sandstones having 20% porosity at the top and a 16.5 meter thick lower sandstone interval with further possible gas pay. Aminex owns 75% of the project and Solo Oil PLC (SOLO.LN) 25%. Aminex sees significant further exploration potential for the Ruvuma block, in particular the offshore portion of the PSA which is largely unexplored. Possibly the market is getting ready for another update from the company on testing of the gas pay interval.

 

Zoltav Resources (LON:ZOL) jumped 8% to 3.35p at the mid-price during afternoon trading today. Holders here are sitting waiting for an update from the company regarding the purchase of assets in the Former Soviet Union (FSU). The last time the company gave any sort of update on assets was back on the 18th of January when they said they had sold its holdings in the following companies: Rosneft - US$ 271,994.76 - Gazprom ADRs US$ 259,997.63 - Lukoil OAO ADRs US$ 165,892.39. The proceeds of these investment sales will be used to fund future investments and for general working capital purposes. Following these realisations the Company holds investments in three natural resources companies. The Company continues to actively manage its portfolio in accordance with its investing policy. Possible the market is getting ready for another update, or possibly this was nothing more than a bounce off of strong support at 3p. Big brother is watching!

 

HaiKe Chemical (LON:HAIK) pushed another 10% to 40p at the mid-price today. Possibly the market is running the stock into the final results that are due in early May. An interesting point to remember here is that Zhang Zaizhong, the chief executive officer and director of the company, purchased 15,000 shares in the company at a price of 38 pence per share on Jan 20. Only a small purchase in the grand scheme of things, but it is always interesting to see the directors buying shares.

 

In yesterday's note, I highlighted the fact that Serica Energy (LON:SQZ) were back at the major support at 29p, and today holders decided to continue to back the company at that level and pushed them to trade as high as 32p during early trading. We will continue to watch these closely, as they are back to the level they were trading at prior to the BP Farm-In announcement.

 

Volumes in Leni Gas & Oil (LON:LGO) jumped considerably today, with well over 11 million shares changing hands before the end of lunch. The last update on the 26th of March said "The A2ST01 sidetrack was designed to test the Cranberry Creek prospect at the Tex-X2 reservoir level at a depth of approximately 13,000 feet subsea. The Tex-X2 reservoir was encountered slightly high to prognosis and was found to be water wet. Logging while drilling results show a 5 foot thick hydrocarbon pay zone at a different level within the well, however, this is not considered by the operator to be sufficient to justify installation of a production completion. This sidetrack from the A2 well is being plugged. With the new data obtained, which will require study and integration with the existing well and seismic data, and the need to release the rig due to its sale by Diamond Offshore to Hercules the operator Marlin Energy LLC ("Marlin") was not able to drill and complete the second well and has therefore released the rig back to the owners. When a suitable rig is located the operator will commence drilling of the planned 2(nd) well." Possibly the market is expecting an update on the location of a suitable rig? We will be watching the newswires for any updates.

 

A lot of people have been commenting on cash shells recently, as a number of them have finally started to roll assets into them. The two that have caught the eye recently are Creon Resources (LON:CRO) and Oak Holdings (LON:OAH). Creon Resources are sitting at 2.95p at the mid-price as holders await news on any potential assets purchases or reverse takeovers. Oak Holdings are sat at 0.2p at the mid-prices and have only recently relisted after the company raised £1 million and has disposed of all of its assets. The company also raised an additional £700,000 by way of a placing due to further demand from professional and institutional investors. The interesting similarity between Creon and Oak Holdings is the Non-Executive director Aamir Quraishi who's CV looks pretty impressive, and is a non-exec at both companies. Peter Redmond is also a Non-Executive director at Oak Holdings, and this chap also has his fingers in a number of pies, including Leed Resources (LON:LDP) and IGAS (LON:IGAS). Both of these chaps look like interesting characters, so holders will sit patiently waiting to see how both of these cash shells play out.

Saints & Sinners: Mining

 

International Ferro Metals (LON:IFL) jumped 10% to 16.5p during early trading today after the company said that it achieved alloy sales of 52,930 tons in the quarter ended March 31, down 9% from the previous quarter but up 9% on prior year corresponding period. Moved back into overall profitability on a monthly basis for March, operations cash generative. Eskom-related furnace shutdowns reduced ferrochrome production to 48,762 tons for the quarter, down 10% on previous quarter and down 5% on prior year corresponding period. Sky Chrome mining operations produced 122,000 tons run-of-mine ore for the quarter, flat on previous quarter. Co-generation plant produced 7.6GWh, or gigawatts, of electricity for the quarter, 3.8% of total requirement ramping up to 10% in March. UG2 Chrome Recovery Plant delivered 10,000 tons of concentrate in March.

 

With the recent goings on surrounding Zambian mining licences Berkeley Mineral Resources (LON:BMR) has been hit from just over 5p to the current level of 4p in just over a week. Historically the 4p level has been a very strong support line, so we will be watching closely to see how the long term holders react to the stock being back down at this important level once again.

 

Ortac Resources (LON:OTC) has started to rebound after its recent slip from 0.94p to 0.69p, and volumes have slowly started to increase once again. The last update from the company was back on the 21st of February that said "the company is pleased to report further encouraging drill results from its turec gold-silver project located in central Slovakia, with consistent high grade intercepts and encouraging widths. All holes reached targeted depth with good overall core recovery. Borehole STOR-3.11 demonstrates that there are significant high grade structures present that haven't been extracted during previous underground mining activities; considerable potential to follow these high grade structures to the south and deeper into previously unexplored areas. Turec deposit suitable for modern open pit mining with low strip ratios. Preparation of an updated geological model incorporating the 2011 drill results and the findings of the Scoping Study will start; anticipated that the updated model will be completed during Q2 2012." Possibly the market is getting ready for another update on the last line of that statement.

 

Toledo Mining (LON:TMC) jumped 7% to 20.75p on just over 3 times the average daily volume during early trading today. The market seems to be trying to bottom fish on this one as the share prices has been in free fall since the end of February, falling from a high of 30p to the recent low of 18.5p.

 

West African Minerals (LON:WAFM) pushed almost 11% higher to 28p during afternoon trading after the company reported Positive results from Aeromagnetic Survey, highlighting 27,000 line km of aeromagnetic surveys targeting potentially high tonnage, 60-65% Fe content, hematite-rich mineralisation completed on WAFM's six exploration properties in Cameroon. 30 discrete demagnetised zones covering over 100km(2) in total area have been initially identified as potential DSO targets. Seven of the anomalies on the south-eastern permits have geophysical signatures similar to other major DSO deposits in the region. Board approval given to Phase Two of the exploration programme which will comprise of approximately 400 fifty metre holes (20,000 metres in total) to target DSO material overlying magnetite banded iron formation (BIF) bedrock. Government assurances given that the Company will be given equal access to proposed new port and rail infrastructure being built in the country.

 

It was no surprise to see a few profit takers show up to the recent rally on Athol Gold and Value (LON:AHG) today, with the shares lipping 10% to 0.2p during early trading. Holders here are waiting on a couple of snippets of news from the company, including an updates Net Asset Value (NAV) for the company. The last NAV update was back on the 1st of February where the company highlighted that as of the 25th of January the NAV for the company was 0.33p.

 

Another stock that has slipped right back to the long term support is Sunrise Resources (LON:SRES). The shares have slipped from a high of 2.55p back towards the end of January to the current level of 1.1p. Major support for the company has historically been around the 1p area, so it will be interesting to see how the long term holders react to this level once again.

 

Nyota Minerals (LON:NYO) slipped another 8% to 5.45p during afternoon trading today, and are now sitting right back at levels not seen since the end of last year. The 5p level has historically been a decent enough support line, so we will continue to watch these closely as the shares slip closer to that support.

From the trading floor

 

The FTSE 100 somehow managed to rally by 13 points to 5722 (+0.22%) by the time the US market had opened, even though the GDP data out in the UK today showed we were officially in a double dip recession, not seen since the 1970s. Volumes were a little on the light side with only 450 million shares changing hands before the US opening bell. The FTSE AIM All-Share Index was 0.35% higher on volume of 682 million shares.

Commodities Corner

 

Gold - ↑Trading at $1642, up $2 (+0.09%)

 

Silver - ↑Trading at $30.85, up 3c (+0.05%)

 

Copper - ↑Trading at $8210, up $62 (+076%)

 

Zinc - ↑Trading at $1991, up $1 (+0.11%)

 

WTI Crude - ↑Trading at $103.81, up 28c (+0.27%)

 

Brent Crude - ↑Trading at $118.46, up 29c (+0.25%)

 

Any questions please don't hesitate to contact me at steve.asfour@fox-davies.com or visit www.viewsfromthetradingfloor.com or www.fox-davies.com 

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