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Archipelago Resources, GoldStone Resources, Hardy Oil, Salamander Energy, and others feature in Fox-Davies Newsflash


Mining News

Continental Coal Ltd. (LON:COOL) announced that the Penumbra Mine decline development is almost two thirds complete and advanced to a total combined length of 474m as at 10 August 2012. The completion of the twin declines and first coal production is forecast for 30 October 2012 with ramp up to full 750,000 tpa ROM production by 30 June 2013. The Penumbra Mine is fully funded and remains on budget with over two thirds of the Project contract expenditure placed. Thermal coal mining operations continue to perform well with monthly ROM production and sales in July 2012 exceeding the previous quarter's monthly average.  

Alba Mineral Resources PLC (LON:ALBA)
announced its half-yearly unaudited results for the six months ended 31 May 2102. The Group made a loss attributable to equity holders of the parent after taxation of £99,663 for the period. The basic and diluted loss per share was 0.1 pence. The Group had cash balances of £36,475 at the period end.  Work continues on the Company's Limerick zinc-lead-silver licence (PL3824) in the Republic of Ireland. Since signing a joint venture agreement with Teck Ireland in November 2011, a comprehensive appraisal of all previous exploration has been undertaken, which resulted in ground geophysical surveys (gravity and VLF) being completed in early 2012. Four diamond drill holes (totalling 956.7m) have been drilled by Teck Ireland in 2012. The holes were drilled to test the stratigraphy of the licence and the mineral potential within Lower Carboniferous limestone close to younger mafic lavas and intrusions (as present at Teck's Stonepark project 8km to the north). Drillhole TC-3841-3 intercepted 6m of semi-massive and disseminated pyrite between 508 and 514m within the target limestone. A 2m mineralized interval within the aforementioned interval contained 0.575% Zn, and trace amounts of lead (208 ppm). The presence of pyrite is encouraging since it often indicates the presence of base metal sulphides at other properties in the Limerick basin. Exploration is continuing on the licence. 

Archipelago Resources PLC (LON:AR.) announced its half-yearly unaudited results for the six months ended 31 June 2102. Revenue generated from mining operations was $97.0M, earning a net profit of $17.1M, compared with a loss of $3.6M for H1 2011. The company reported an operating cashflow of $35.4M. Production amounted to 60,386 Au Eq oz for H1 2012, compared to 8,800 Au Eq oz for H1 2011. 2012 full year guidance remains 135,000 to 145,000 oz. Cash costs came in at $753 per Au oz for the period (with 2012 full year guidance being $580 to $640 per Au oz, based on higher head grades and lower strip ratios expected in H2 2012).

Goldstone Resources Ltd (LON:GRL)
announced its final results for the year ended 29 February 2012. It reported a net loss of US$5.69M for the period. The operational highlights included a 24% increase in the Homase/Akrokerri Resource with the prospect of further expansion based on yet to be received assay results and a 65% interest in Homase licence after spending US$1 million on exploration.

North River Resources PLC (LON:NRRP)
announced a positive update from the its 100% owned Namib Lead-Zinc Project ('the Namib Project') in Namibia. Following the completion of dewatering in March 2012, encouraging channel sample results have been returned from work programmes centred on the previously producing underground Namib Lead-Zinc Mine ('NLZM'), which was in operation between 1965 and 1992. North River Managing Director David Steinepreis said, "These further encouraging results from the NLZM, including channel sampling results of 20% Zn, underpin the prospectivity of this previously producing asset. The discovery of a fully developed 20% Zn stope still in situ reinforces our confidence that the previous mining operation did not cease due to the exhaustion of mineable resources." Final tests of the preliminary metallurgical testwork programme being completed will be incorporated into a conceptual engineering study with delivery expected in September 2012. 
Oil & Gas News

San Leon (LON:SLE)
- Cream On Top: Any amount of oil in these the wells will only serve to lower the commerciality threshold for the gas, which is the well's principle target. While the formation will have to be tested, and the volumes assessed, this is an exciting development, but given that the primary target is gas, until both hydrocarbons have been assessed, we are going to maintain our current 60p Target Price. However, in the longer term, once a declaration of commerciality with respect to the gas horizons has been made, any amount of liquids produced will only serve to be the cream on top of the cake. We are reiterating our BUY recommendation. In this news:

    Lelechow-SL1 well drilled to a depth of 1,167 meters TVD
        Nowa Sol Concession targeting the Main Dolomite trend in the Southern Permian Basin
        First of a two well exploration programme
        Initial evaluation of the results from core and wireline logging results indicate the primary target in the Zechstein Main Dolomite is highly fractured and contains moveable oil.
        Oil was recovered to the surface during initial clean out of the well.
        Final completion of the well will incorporate an electrical submersible pump to continue to clean out the well and maximize oil flow rates during production.
        Testing to be resumed in the next few weeks pending final completion of drilling operations.
        Well completion is being designed for near-term commercial production from the well.
    Rig being mobilised to drill the Czaslaw-SL1 well, the second well in the Nowa Sol Concession, also targeting the Main Dolomite.

Hardy Oil (LON:HDY) - Near Term Outlook Uncertain. Management Review…: PY3 field production (sole producing asset) remains suspended since July 30th, 2011, due to expiry of the leases on the production facilities. Prolonged delay over non negotiation of dispute is severely impacting the Company's financial performance and has been the major headwind for the stock progress. Surrender of D9 exploration block by the operator - Reliance Industries - was another setback. CY-OS/2 arbitrationwith the government for the extension of field appraisal expiry period continues and judgement is now expected by year end. However all is not lost: GS-01 declaration of commerciality (Dhirubhai 33 discovery) has been accepted by the Management Committee and the joint venture will submit a development plan by year end. Also, D3 exploration programme is progressing per schedule; the consortium will drill fifth and final exploration well on in H1-2013. Hardy has a moderate balance sheet with cash of $30.9mm and no debt.

There is so much to want to shout about with Hardy, and the underlying assets are a real boon to the Company. But, a much hyped review of operations has delivered nothing so far other than a HQ that is a greater distance from its operations and $1mm of cost savings. That this has been couched as a move to be "closer to the expertise and resource base in designing, planning and executing complex offshore hydrocarbon projects" is weak. For a Company that has lacked a strategic direction, bringing on board personnel that have operational experience you would think would resolve the key production issue on PY-3, so that they could generate cash flow… but no. We do not currently expect any production for 2012, and only 3 quarters next year, so in that respect, the Company's disappointing lack of progress is not unexpected.

These results and this announcement have left us feeling underwhelmed. That is the cloud, now for the silver lining. That this is not the result of the comprehensive review provides us more confidence that the scope will be far ranging, which it will need to be. On that basis, we remain optimistic that the value within the portfolio will be unlocked. Consequently, and with no little faith being put in new management, we are reiterating our BUY recommendation and 250p Target Price. In this news:

    The Company operated PY-3 oil field; located in the Cauvery Basin (18% WI) ) remained shut-in during the six months ended 30 June 2012 (H1 2011: 438 bbld).
    The Company recorded a loss of $5.6 million during the first half of 2012 compared with a profit of $1.7 million in the same period in 2011.
    The Company recorded total comprehensive loss of $7.2 million for the six months ended 30 June 2012 compared to a total comprehensive loss of $1.1 million for the same period in June 2011.
    The Group's capital expenditure during the six months ended 30 June 2012 amounted to $1.2 million compared to $4.3 million incurred for the same period in 2011.
    Unsuccessful exploration cost of $5.4 million was expensed due to the surrender of the Company's 10 per cent interest in the D9 exploration block.

Salamander Energy (LON:SMDR) - Positive Interim Results and update: The Company is making good progress across its asset base. The construction of the Bualuang Bravo Platform on Greater Bualuang, Offshore Thailand, has been completed on schedule and within budget. The company expects to commence development drilling from the end of October which is good news for the investors. Commercialization of certified 161.9bcf of contingent resource on the Kerendan field is also progressing per schedule. Of the four planned developments wells, the first well has already been spudded. Production declined to 10,700 boed (H1 2011: 19,600 boepd) during the period due to disposal of low margin production in H2 2011. However we expect production to increase in the near term led by commencement of development drilling at on Greater Bualuang and Kerenden field. The successful appraisal of the Tutung gas-condensate discovery through Tutung Alpha-3 appraisal well during H1 2012, marks the beginning of new phase for the company's Bontang PSC (100%, Indonesia). With a series of significant news flow expected over next six months, this company is on our watch list. In this news:

    Average daily production of 10,700 boepd (1H 2011: 19,600 boepd) following disposal of low margin production in 2H 2011.
    Revenue of $179.4 million (1H 2011: $ 187.7 million)
    Pre-tax profit of $15.9 million (1H 2011: $62.4 million)
    Net debt as at 30 June of $82.5 million (FY 2011: $210.1 million) with cash and funds of $206.0 million  (FY 2011: $85.8 million)
    Successful appraisal of Tutung and Dong Mun discoveries; now focused on development plans.
    Ocean General rig contracted for exploration programme in North Kutei to commence 4Q 2012
    DrillCo-1 rig mobilised to Kerendan field, commenced development drilling in 3Q 2012
    Atwood Mako rig mobilising to Gulf of Thailand, drilling will commence September 2012

Quick facts: Archer Daniels Midland

Price: 46.13 USD

Market: NYSE
Market Cap: $25.64 billion

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