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KEFI Minerals, Nighthawk Energy, Sunrise Resources, Vatukoula Gold Mines and others feature in Fox-Davies Newsflash


Mining News

Avocet Mining (LON:AVM) has released is 3Q'12 unaudited results which show an improvement in gold production and costs at Inata although the planned expansion of production through the construction of a second processing plant is on hold until further reserves can be defined as the increased operating costs and lower recoveries will lead to a downgrade in the current reserves. Overall operational improvements at Inata resulted in an increase in mining volumes of 11% with Gold production of 33,067 oz. (Q2 2012: 32,917 oz.) at cash costs US$937 per oz (Q2 2012: US$1,006 per oz.). Net cash generated by operating activities was lower at US$1.4 million (Q2 2012: US$20.7 million) due to timing of supplier payments. EBITDA of US$6.3 million (Q2 2012: US$8.7 million), as gold inventory reduced by US$5.6 million over the quarter. US$8.9 million was invested in capital expenditure, the bulk of which was on the second tailings facility at Inata, and only US$4.9 million on exploration. The Company finished the period with cash of US$62.0 million, with external debt reduced to US$11.0 million. Inata's existing project finance facility with Macquarie Bank should be fully repaid by March 2013 and discussions are in progress with various lenders, including Macquarie Bank, with a view to replacing the existing facility. A new financing facility would be used for standby and Inata development purposes, although the amount required will depend on the results of the current technical studies.

Black Mountain Resources (LON:BMZ) has released is 3Q'12 Quarterly Activities and Cash flow Report. During the quarter high grade silver results from drilling completed at the Conjecture Silver Project were received with a new mineralisation structure identified with high grades close to surface on Conjecture Shear Zone. Further anomaly targets were identified for further test work by geophysical work programs at Conjecture Silver Project and New Departure Silver Project. Mine development on-going at both Conjecture and New Departure with production scheduled for 1Q'13. During the quarter the Company spent A$1.641M on operating expenses and finished the quarter with cash of A$3.149M after raising A$2.213M.

Coal of Africa (LON:CZA) released its 3Q'12 activities and cash flow reports. Against a decline in coal prices and strike action this was never going to be an easy period for the Company. Overall export sales from the Matola Terminal decreased to 224,972 tonnes from the previous quarter's 411,005 tonnes, due to softer market conditions as well as and delays in unloading trains due to mechanical issues and reduced throughput capacity at the Matola Terminal. Coal sold to the inland market remained relatively constant at 187,499 tonnes (FY2012 Q4:187,500 tonnes). Sales to Eskom declined 23.3% due to the deferral of coal deliveries until negotiations for a new off‐take agreement were completed in August 2012. The Company and Eskom agreed to a new one year 1.14 million tonne off‐take agreement during the quarter on more favourable terms and, the delivery of coal under the new contract commenced during August 2012. Operationally the strike action at Mooiplaats Colliery which experienced a 6 week wage related strike and allowed the Company to declare "force majeure" looks like being a blessing in disguise. The challenging geological conditions at Mooiplaats continue to impact production and led to a 20.3% decrease in ROM production to 274,943 tonnes (FY2012 Q4: 344,832 tonnes). CoAL is continuing its discussions with Vunene Proprietary Limited to resolve the double granting over approximately 128ha of the mining area which is included in the Mooiplaats Colliery and Vunene NOMR. As part of the initiative to address the long term viability of the operation, various strategic restructuring alternatives including, "but not limited to, potential partnerships or mergers that may create synergistic value are underway". At Woestalleen less coal was processed 719,138 tonnes (FY2012 Q4: 808,613 tonnes), due to the Company being able to increase raw coal available for sale to Eskom from Vuna. The Company continues to evaluate potential options to extend the life of the Woestalleen complex in anticipation of the depletion of the available ROM from the Vuna Colliery North Block by April 2013. Eskom recently announced an initiative to redirect approximately 20.0 Mtpa of coal currently transported to the power stations by road, which will in future be transported by rail, reducing the cost of transport and the secondary impact on the national roads. To date, 37 trains have been loaded on behalf of Eskom as part of the pilot study and initiatives are underway by Eskom to increase the throughput volumes at Woestalleen. Total operating cash flow for the period was -A$44.625M with revenues of A$45.023M against production and logistics costs of -A$41.382M and -A$14.840M respectively. The Company ended the period with US$30.139m in cash against planned expenditure of US$65.77M in the next quarter and will have to make further drawdown of its available debt funding.

Forte Energy (LON:FTE) Non-Executive Chairman has bought 3.5m shares at 1.2p in an off-market transaction which should give the shares a lift this morning. The Company also released its 3Q'12 Quarterly Activities & Cash flow Report. During the quarter exploration works recommenced in Mauritania, following seasonal summer stoppages with the high resolution ground magnetic and radiometric survey completed over the A238 prospect which confirmed a structural control to the mineralisation in the Zednes shear zone with the main share zone now extending to the south of over 3.5km below the sedimentary cover and continuing to the north over 2km, near to the surface and outcropping. As a result a Reverse Circulation (RC) drilling programme is scheduled to start in November to test the areas to the North and South. As part of the preliminary economic assessment (PEA) study, environmental base line and social impact assessments were completed during the quarter on the 286 Legleya licence in Mauritania. Little work was carried out in Guinea other than preparatory works for ground studies at the Bohoduo project. Over the quarter Forte's total expenditure was A$1.149M and the Company finished the quarter with A$2.01M in cash after raising A$1.395M.

Kefi Minerals (LON:KEFI) has announced that options for 2.5m shares which were due to expire on 11th December have been excised at 3p per share.

Scotgold Resources (LON:SGZ) has released it 3Q'12 activities and cash flow reports. During the period the infill drilling programme which re-commenced in January was completed and the results of 14 holes were received over western section. Currently drilling is on-going to further infill portions of Inferred Resource in the eastern section and an updated resource estimate has started. This will form the basis of the definitive mining plan and the Cononish Project Development Study which will be carried out by AMC. It is anticipated that this work will be complete in early 2013 and at this point Scotgold will be in a position to determine the optimum debt capacity of the project. Subject to concluding the financing arrangements; the Company envisages a project go-ahead decision in April 2013 with a start of construction in June 2013 with first gold production early in 2014. Scotgold spent A$626,198 during the quarter on exploration (to update the reserve) and administration costs and ended the period with A$1,031,445 after receiving Pre-development funding of A$1,787,448 from RMB Australia Holdings Ltd.

Stonehenge Metals (ASX:SHE) has released its 3Q'12 quarterly activities report and cash flows. During the quarter land access agreements were obtained across the Daejon project and local government approval for drilling is currently being sought. Applications for the seven new Mining Exploration Right applications submitted and fifteen new Exploration Permits granted across the Daejon Project Area. In addition greenfield exploration has started looking at graphite, base metals and precious metals and a number of prospective targets have been identified and field reconnaissance has begun. During the quarter Stonehenge spent A$628k in operating and investing activities and ended the period with A$3.145M in cash.

Sunrise Resources (LON:SRES) has released a downbeat update on its Derryginagh Barite Project. The results of the scoping study by Wardell Armstrong International Ltd, shows that "a significant increase in the tonnage of defined mineralisation is required to demonstrate the financial viability" of the project based on current cost estimates and product pricing assumptions. However the mineralisation is open to expansion which means the Company must carry out further drilling to increase the resource base and further metallurgical test work must be carried out before it can continue to look at development of the project. Metallurgical test work to date indicated a more complex plant design than originally envisaged which would increase capex costs.

Vatukoula Gold Mines (LON:VGM) has signed a new subscription agreement with Zhongrun International Mining Co. Ltd. whereby Zhongrun has subscribed for 20,000,000 new ordinary shares in the Company at a price of £0.33 per share, to raise £6.6 million. This will give Zhongrun approximately 17.01% of the enlarged issued share capital of the Company which with its existing holding will take Zhongrun's holding to approximately 24% of the enlarged issued share capital of the Company. All relevant regulatory approvals have been granted and as such the Company envisages that the Subscription Agreement will complete by the middle November. In conjunction with the Subscription Agreement, the Company has agreed that Zhongrun will be entitled to propose four nominees for election as Directors at the next Annual General Meeting, subject to the approval by the Nominating Committee and election by shareholders.

Zanaga (LON:ZIOC) Iron Ore has released a Maiden Ore Reserve Statement estimated by CSA Global. The maiden Probable Ore Reserves are 2.5 billion tonnes at 34% Fe. This was derived from the 6.8 billion tonne 32% Fe Mineral Resource and Pipeline Pre-Feasibility Study. On this basis the Ore Reserves support planned 30Mtpa initial development phase of operations over 30 year mine life.

ZincOx Resources (LON:ZOX) has announced a conditional placing of 14.36 million new Ordinary Shares at a price of 45p per share to raise approximately £6.5M before expenses. The Company anticipates that the Placing proceeds will enable the Company to complete the ramp-up of its first recycling plant, KRP1, to begin to progress the expansion of the KRP2 and projects in other parts of the world, and to provide working capital.

Oil & Gas News

Nighthawk Energy (LON:HAWK): Stage set up for steep production growth - The third well (Knoss 6-21 well) will be put into commercial production this month and is expected to produce above 200 bopd. This is encouraging news, and now we expect year end exit production rate at ~450 bopd compared to 230 bopd earlier. Q3 production volumes averaged just 76 bopd. The fourth well has been successfully drilled, logged and cased and testing will commence shortly. Fifth and final well of 2012 is also expected to be spudded this month. Investors can expect significant news flow over next couple of months. Strategy announcement for 2013 would be key share price driver.

In this news:

The Knoss 6-21 well has been successfully completed in the Cherokee formation using the same completion techniques that brought the successful John Craig 6-2 well on-stream in September 2012. This involved perforation of three intervals of the Cherokee and mild acidisation of the formation under moderate pressures.

The Steamboat Hansen 8-10, the fourth well in the drilling programme has been successfully drilled to its target depth of 8,500 feet, well below the Cherokee formations. The well has been logged and cased.

The drilling rig is now on location at the Whistler 6-22 site and drilling is well underway. This is the final well in the 2012 drilling programme and is targeting similar 3D seismic defined structures and zones to the Steamboat Hansen 8-10 well.

Soco International (LON:SIA): Balance Sheet Strong but Exploration is missing link - Production for 3Q was up 400% y/y to 13.7m boepd driven by production commencement from the second platform on Te Giac Trang field and we are confident of company meeting its full year production target of 16m boepd. On the exploration side, outlook appears muted, we don't see major exploration activities on any block in the near term. The Company needs to expedite exploration activities and acquire few assets to secure medium term growth. With positive operating cash flow and Net cash of $170.0mm, Soco has comfortable liquidity position.

In this news:

Production for the three quarters ended 30 September 2012 was approximately 400% higher than the same period in 2011 and averaged 13,755 boepd net to the Company's working interest (18,824 BOEPD week ended 26 October).

Net cash as at 31 October 2012 was approximately $170 million (30 June 2012: $178.0 million and 31 December 2011: $113.5 million).

The Te Giac Trang ("TGT") H4 Wellhead Platform ("H4-WHP") commenced production a month ahead of schedule in July 2012, increasing total field production to average above 50,000 barrels of oil per day ("BOPD") since start up; peak production reached over 60,500 BOPD; production for the last 24 hour period reported (30 October) was 58,867 BOPD.

In July 2012, the Company announced and completed the acquisition of the outstanding 20% non-controlling interest in SOCO Vietnam Ltd for cash consideration of $95 million.

Lideka Marine East Well 1 is expected to spud offshore the Republic of Congo before the end of 2012.

Circle Oil (LON:COP): Operating Update - As planned, an exploration well has been spudded and commenced drilling in the South West Belli area of the Grombalia Permit. The BAB-1 well is targeting the Eocene Bou Dabbous Formation and the Late Cretaceous Abiod Formation, the main oil-producing formations in the north-eastern part of Tunisia. We believe that the Company's overall portfolio has an increasingly balanced feel to it, and one that investors can feel comfortable with being exposed to explosive upside, while the downside risks are progressively being reduced by increasing production from producing fields.

Essar Energy (LON:ESSR): Positive news flow after few seatbacks - Stage 1 clearance from the Environment ministry for Mahan coal block in Madhya Pradesh, is a major boost to the Company's aggressive Power expansion plans in India. Stage-1 clearance is for pre-mining activities and will help the Company to secure fuel supply for the 1,200 MW Mahan phase-I power project which is expected to commence this year. Availability of captive mines significantly reduces pricing and execution risk. Essar Power, subsidiary of Essar Energy has six operational power plants in India and one operational power plant in Algoma, Canada. The current total installed generation capacity is 3,055 MW and Company plans to scale up capacity to 4,510 mw by the March 2013 and to 6,700 mw by March 2014.

Quick facts: Archer Daniels Midland

Price: 39 USD

Market: NYSE
Market Cap: $21.66 billion

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