Petro Matad to begin production in Mongolia in October

UK Investor Magazine
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Petro Matad to begin production in Mongolia in October

Petro Matad is set to begin production in Mongolia more than a decade after first discovering oil at the Block XX field.

Investors will be delighted to learn Petro Matad has received approval from the Ministry of Industry and Mineral Resources to reclassify oil production well pads, eliminating the need for construction permitting.

This has allowed the company to commence construction of long-term production facilities at Heron-1, with production expected to start in October. The company is finalising a cooperation agreement with the Block XIX operator for transport, processing, and export operations.

In addition, preparations are underway to test the Heron-2 well, with results expected in early November. The company aims to bring this well online in November if the test results are positive. The removal of construction permitting requirements has improved the chances of getting Heron-2 into production this year.

Today’s announcement contained a slight negative in terms of Gobi Bear exploration activities, which could have yielded a more upbeat outcome than the decision to suspend operations there for the time being.

The Gobi Bear-1 exploration well has been drilled and logged, showing potential hydrocarbon presence. However, due to ambiguous results, the well has been cased and suspended pending further evaluation and a likely well test to determine its production potential.

“The last few weeks have seen a lot of activity and some significant progress,” said Mike Buck, CEO of Petro Matad.

“We are extremely grateful to the recently appointed Ministers of Mining and Construction for their support in reclassifying oil production well pads to avoid the unnecessary burden of construction permitting regulations that were not designed for works of this kind. Our focus continues to be getting Heron-1 on stream as soon as possible and hopefully Heron-2 can also be brought onstream during the 2024 operational season.

“The Gobi Bear-1 result is a teaser but if oil is present in these well-developed reservoirs at such easily and cheaply drillable depth that could be a very significant result for the Company. As such, suspending the well allows us to gather data to refine our understanding and determine how best to get a definitive answer.”

Director deals: Main move could provide additional fuel for the Gamma Communications share price

Andrew Hore
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Director deals: Main move could provide additional fuel for the Gamma Communications share price

Gamma Communications (LON: GAMA) executive chair Martin Hellawell has acquired 6,000 shares at 1648p each. This is his maiden share purchase.

It has taken him a while. He was appointed on 1 July 2023. The share price was not much more than two-thirds of the level of his purchase price and it was still around the same level following the 2023 interims.

Business

Gamma Communications joined AIM on 10 October 2014 when it was valued at £181m at 187p/share. There was £82m raised at that time. The share price has risen to 1666p, valuing the company at £1.6bn.

The company supplies busine...

Prospex Energy plans Polish expansion

Andrew Hore
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Prospex Energy plans Polish expansion

AIM-quoted oil and gas company Prospex Energy (LON: PXEN) is applying for exploration licences in Poland. This will be funded by income from existing production.

The award of licences is based on geological and geophysical work programmes and commitments. The licence awards should happen in the first quarter of 2025. There is a favourable regulatory environment in Poland and the company has expertise from previous experience in the country.

Prospex Energy is signing a letter of intent with AGH University of Krakow, which will give access to the expertise of the Department of Geology.

There are existing investments in Spain and Italy, so Poland potentially provides a third country. This is part of the strategy to broaden the geographic exposure to a country with known gas reserves.

Initial results from the Vlura-1B development well in Northern Spain are positive. Drilling intercepted significant gas shows and that confirmed the high quality reservoir. This well will be connected up and first production should be by November. The acquisition of the 7.2% stake in the Vlura gas field was completed at the end of August.

The operator is extending the well by 200-300 metres to appraise the Utrillas-B formation. This could cost Prospex Energy up to €2m.

Currently, VSA expects production to reach 12mmcf/day by the end of the year.  

During the summer, Prospex Energy raised £4.2m from a placing and oversubscribed retail offer at 6p/share. The share price has fallen back to 5.75p.

Aquis weekly movers: Good Life Plus raises £2m

Andrew Hore
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Aquis weekly movers: Good Life Plus raises £2m

Adsure Services (LON: ADS) shares rose 17.1% to 20.5p ahead of its AGM on Wednesday.

Valereum (LON: VLRM) had net cash of £47,000 at the end of June 2024. A gain on financial assets meant that there was a swing from loss of £244,000 to a pre-tax profit of £323,000. There was still a cash outflow. The share price increased 10% to 8.25p.

Brewer Shepherd Neame (LON: SHEP) grew full year revenues by 4% to £172.3m and underlying pre-tax profit improved from £7.6m to £7.9m. NAV is 1217p/share, while net debt is £80m. Like-for-like retail sales were 4.9% ahead with the growth dominated by drinks offsetting a fall in accommodation income. Beer volumes declined 12% with own-brewed volume 17% lower. Brand refreshes are planned. Beer volumes continue to decline, while like-for-like retail sales for the initial 13 weeks of the new year are 3.8% higher. The share price edged 0.83% higher at 605p.

FALLERS

TruSpine Technologies (LON: TSP) lost £702,000 in the year to March 2024, down from £853,000 because of a reduction in R&D spending. Three directors are not putting themselves forward for re-election at the AGM. The share price fell 23.5% to 0.65p.

Wishbone Gold (LON: WSBN) reduced its interim cash outflow from operations from £770,000 to £468,000. Since June, £360,000 has been raised via a placing. The share price slid 23.5% to 0.325p.

Investment Evolution Credit (LON: IEC), which provides loans under the Mr Amazing Loans brand,  is holding a general meeting to gain approval to raise up to £2.5m from share issues. Paul Mathieson is being replaced as chief executive by Marc Howells. Former director Sam Prasad is loaning £200,000 to the company, which replaces a previous £100,000 loan. The share price declined by one-fifth to 40p.

Prize draw operator Good Life Plus (LON: GDLF) has increased the number of paying subscribers by 90% to more than 40,000 in less than a year. Management says that it might exceed expectations for the current financial year. Good Life Plus is raising £2m at 2.5p/share. Earlier this year, £2m was raised at 2.25p/share. The cash will finance customer acquisition and signing up new partners. The share price slipped 15.5% to 2.45p.

Aquaculture technology developer OTAQ (LON: OTAQ) reported a 16% decline in interim revenues to £1.5m because of a delay to a £350,000 order. The company continues to lose money. A forecast full year loss of £1.3m is similar to 2023, including a £150,000 benefit from cost reductions, and it could be halved in 2025 as the full benefit of cost savings show through. The share price slipped 14.3% to 3p.  

Talks with potential investors in Quantum Exponential Group (LON: QBIT) have been terminated. The documentation has not been signed and the potential investor did not pay the £200,000 towards costs that it promised. Trading in the shares will end on 30 October. The share price decreased 12.5% to 0.35p.

KR1 (LON: KR1) had net assets of 57.27p/share at the end of August 2024. The income in the month was £590,000.  The share price is down 9.43% to 48p.

Voyager Life (LON: VOY), which has an option to acquire M3 Helium, has changed its name to Mendell Helium. The admission document is being prepared and the option should be exercised by the end of January. The company had £163,000 in the bank at the end of March. The share price is 7.69% lower at 3p.

Marula Mining (LON: MARU) reported a reduction in interim loss from £1.51m to £1.37m. NAV was £1.29m at the end of June 2024. The share price fell 3.23% to 7.5p.

AIM weekly movers: Tower Resources near to financing for Cameroon well

Andrew Hore
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AIM weekly movers: Tower Resources near to financing for Cameroon well

Shares in oil and gas company Tower Resources (LON: TRP) soared 150% to 0.0325p. Management believes that the completion of the financing for the NJOM-3 well in Cameroon is near. The well could be spudded in early 2025. There is also outside interest in the PEL96 licence in Namibia. An increase in receivables helped to generate $270,000 in cash from operating activities in the first half of 2024. There was $1.02m spent on exploration. The share price rise led to the exercising of 140 million warrants at 0.018p each.

EnergyPathways (LON: EPP) has secured a £5.1m loan facility for the Marram Energy Storage Hub (MESH) clean energy storage project. This should enable the project to reach final investment decision by the end of 2025. Global Green Asset Financing is providing the facility and has to raise additional cash via a placing of loan notes to provide it. The minimum commitment for the facility, which lasts three-years, is £2.55m and the interest rate is 12.5%/year. The share price increased 79.4% to 3.05p.

Tavistock Investments (LON: TAVI) is raising up to £37.75m from disposals, which is more than treble the market capitalisation before the sale, with nearly £11m payable on completion and a further £11m from discharge of intragroup debt. The rest is payable based on performance. The two businesses made a pre-tax profit of £1.5m in the year to March 2023. The cash will be used for working capital and acquisitions. There could also be share buy backs. Chief executive Brian Raven bought 830,000 shares at 3.55p each. The share price rose 74.4% to 3.75p.

AO World (LON: AO.) is acquiring musicMagpie (LON: MMAG) for 9.07p/share, which values the pre-owned products supplier at just under £10m. There are irrevocable undertakings and letters of intent totalling 54% to accept the offer. AO World believes that the two companies have complementary online models, and a technology trade-in service will enhance its product offering. AO World says that the musicMagpie disc media and books business should not require significant investment. The musicMagpie share price improved 49.6% to 8.6p.

FALLERS

Ceramic disc brake technology developer Surface Transforms (LON: SCE) increased interim revenues by 58%, but growth is still not meeting expectations even though there is further growth in third quarter revenues. There are delays to installing additional capacity. Full year revenues are expected to be £11m, compared with previous expectations of £17.5m. There was £5m in cash at the end of June 2024. Odd Asset Management reduced its stake from 5.13% to 2.58%.The share price dived 74.1% to 0.3275p.

RBG Holdings (LON: RBGP) executive director Tania MacLeod stepped down from the board, although she is staying as a director of subsidiaries and as senior partner of law firm Rosenblatt. Delays in projects have hit the prospects of the legal services company and Singer has withdrawn forecasts. The company is fully using its loan facility. The share price slumped two-thirds to 2p.

Premier African Minerals (LON: PREM) has raised £550,000 at 0.0315p and this will be spent on operational activities at the Zulu lithium and tantalum project. Management is hopeful that it will soon resolve problems with the processing facilities. The company says that options for the Zulu project including selling it or part of it. The share price fell 43.1% to 0.031p.

Mercantile Ports & Logistics (LON: MPL) did not recognise the forecast level of revenues in the six months to June 2024. There have been delays to permits required for the container cargo business. The forecast full year revenues have been slashed from £12m to £5.7m. The 2024 loss is expected to be around £12m this year and net debt will be around £50m. The share price dipped 32.1% to 1.325p.

Tekcapital’s Microsalt gears up for global expansion with Chinese patents

UK Investor Magazine
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Tekcapital’s Microsalt gears up for global expansion with Chinese patents

Tekcapital’s Microsalt has made an important step forward in the expansion of its global patent portfolio as the distribution of its low-sodium salt ramps up.

In half-year results released last week, Microsalt revealed increased demand from major B2B partners, and today’s news shows the company is gearing up for additional orders by protecting its technology in more jurisdictions.

The Tekcapital portfolio company has secured a Certificate of Invention Patent in China for its “Improved Low Sodium Salt Compositions” technology, now registered as Chinese Patent No. CN114206133.

Further developments include a Notice of Allowance received in Mexico for a similar patent application, with the final patent expected to be issued upon completion of fee payments. In Australia, MicroSalt’s patent application has entered a three-month opposition period, after which the company anticipates the patent will be granted if no objections are raised.

These international patents are all based on MicroSalt’s innovative low-sodium salt composition, which involves salt adhered to carrier particles through a specific production process. This technology is already patented in the United States under Patent No. 11,992,034.

MicroSalt is not stopping there, as the company revealed it has additional patent applications pending in several other countries, including Canada, Hong Kong, Chile, Japan, and various European nations.

“We are very pleased to witness the expansion of our intellectual property portfolio into some of the largest sodium markets in the world. We have made commercial inroads with customers in Asia, Europe and Australia and we see this development as very timely,” said Rick Guiney, CEO of MicroSalt.

FTSE 100 erases losses after bumper Non Farm Payrolls report

UK Investor Magazine
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FTSE 100 erases losses after bumper Non Farm Payrolls report

The FTSE 100 rebounded on Friday after a blowout US Non-Farm Payrolls for October and erased early losses to trade broadly flat at the time of writing. One would expect further choppiness throughout the session.

The US economy added 254,000 jobs in September, far more than the 150,000 predicted by economists. The big question for investors is whether this good news for the economy will be good news for stocks.

Such a strong beat is undoubtedly a major positive for the US economy and will go a long way to dispelling fears about a US slowdown. However, traders had been eyeing a potential 50bps interest rate cut at their next meeting. This now looks very unlikely with US growth appearing to be in good shape.

“While focus remains squarely on the employment side of the dual mandate, Chair Powell’s recent assertion that the Committee is “not in a hurry” to cut quickly, along with today’s incredibly solid data slate, means that a return to a more normal cadence of 25bp cuts is likely at the November meeting, and at each meeting beyond that, until the fed funds rate returns to a neutral level next summer,” said Michael Brown, Senior Research Strategist at Pepperstone.

“That said, the data-dependent FOMC will respond if labour market conditions weaken, with larger 50bp cuts on the table particularly if unemployment rises north of the 4.4% median forecast for this year and next.

“For sentiment, the forceful ‘Fed put’ should see the path of least resistance continuing to lead higher for equities over the medium-run, though conviction in the short-term could well be somewhat lacking, owing to ongoing geopolitical risks in the Middle East.”

The initial reaction to the jobs report was a jump in stocks and bond yields. S&P 500 futures were firmly higher and the dollar soared. There was also a jump in the FTSE 100, which recovered losses after a soft start to trade on Friday.

In the UK, rising oil prices didn’t provide much support for BP or Shell, leaving the index vulnerable to domestic constraints. However, the initial general optimism around the jobs report lifted all boats, taking London’s leading index back to flat on the session.

“Oil prices continued their ascent, rising another 0.8% to $78.21 per barrel and putting the commodity at its highest value since August. This is good news for oil producers but bad news for millions of companies and consumers as they face higher energy and transport costs,” said Russ Mould, investment director at AJ Bell.

JD Sports was the top faller as investors continued to checkout of the stock following worrying news from Nike, it’s largest supplier of sportswear.

Vietnam Holding outperforms again with peer group leading NAV increase

UK Investor Magazine
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Vietnam Holding outperforms again with peer group leading NAV increase

If it’s not already, Vietnam Holding is fast becoming the UK’s leading vehicle for investing in Vietnam. For many years, VNH has outperformed its peers, and full-year results reinforce the investment trust’s dominance, both in terms of overall outperformance of the benchmark, and outperformance of its peers.

Vietnam Holding may not be the largest Vietnam specialist, but it is certainly the best performing. Over the past 52 weeks, Vietnam Holding’s NAV has increased 16.9%. The closest competitor has only produced an increase of 11%. One peer produced just 6% over this period.

Vietnam Holding has been voted as the best single country Investment Trust by UK Investor Magazine readers and CityWire users and the annual report released this week highlights why.

In the financial year to 30 June 2024, VNH’s Total NAV return was 23.6%, outperforming the benchmark by over 14%. VNH has now outperformed the index on a 1, 3, 5, 10 and 15 year basis.

Vietnam’s rapid expansion has been a significant tailwind for VNH’s performance, but it is VNH’s stock selection process and approach to Vietnamese equities that has generated peer group beating returns.

VNH has established key investment themes including industrialisation, urbanisation and digitalisation that run through the portfolio. The trust’s outperformance of peers is the result of a high-conviction strategy implemented by an investment team on the ground in Vietnam with intimate knowledge of the themes they pursue.

For example, the management team have decided technology company FPT deserves 14% of the trust’s NAV. This decision has rewarded investors by FPT gaining more than 50% year to date.

FPT is at the forefront of Vietnam’s digitalisation demonstrated by a strategic partnership with Nvidia to build AI research centres in Vietnam and data centres in Japan.

High conviction selections such as FPT have been integral to VNH’s success and this strategy and selection process was explained by the management team in their annual report.

“The portfolio remains concentrated, with the top ten holdings accounting for 63.2% of the portfolio’s Net Asset Value,” explained Craig Martin, Chairman of Dynam Capital, the manager of Vietnam Holding.

“This is the direct result of our active portfolio construction. Initial position sizing is based on our conviction-led approach to investment decision making. We often start a new position at a modest conviction level of roughly 2% of NAV, increasing to a midlevel of 4-6% and then high conviction level of 8% when we become more comfortable with the company and more assured about the sustainability of its strategy.

“The portfolio is comprised of 24 companies, all of which have been thoroughly researched. At any one time there are another 12-20 companies that we monitor closely and review on a regular basis, looking for catalysts for new growth. We also research promising newer companies, albeit our investment bar is extremely high, as we seek companies with acceptable valuations, strong growth prospects and a desire to engage with us on a journey of improving governance, investor relations and sustainability reporting.”

When Vietnam Holding was at 370p in March this year, we published an article outlining why we thought Vietnam Holding had further to run. With shares in the trust now above 400p, the factors that made VNH look attractive in March are still intact and point to further NAV appreciation.

AIM movers: Versarien pipeline and Good Energy solar acquisition

Andrew Hore
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AIM movers: Versarien pipeline and Good Energy solar acquisition

EnergyPathways (LON: EPP) rose a further 31.1% to 2.95p following yesterday’s announcement it has secured a £5.1m loan facility for the Marram Energy Storage Hub (MESH) clean energy storage project and today’s launch of a new interactive corporate website. EnergyPathways believes that the project should reach final investment decision by the end of 2025.

Graphene technology developer Versarien (VRS) has an opportunity pipeline of £4.7m. Earlier in the week it signed an agreement with Balfour Beatty to develop 3D-printable mortars for civil construction. It will formulate three types of mortar. This follows the disposal of AAC Cryoma for £550,000 payable in 15 instalments. The share price is 11% higher at 0.0605p.

MicroSalt (LON: SALT) has expanded its international patent portfolio. The latest low sodium salt patents are in China, Mexico and Australia. The share price increased 5.88% to 36p.

Good Energy (LON: GOOD) has acquired Lincolnshire-based solar installer Amelio Solar for an initial £5.5m. This broadens the geographic spread of the energy services division. The focus of the business is the education and public sector. In 2023, revenues were £7m and pre-tax profit is £1.4m. However, there have been lower levels of activity in Good Energy’s existing installation business. Canaccord Genuity has left its 2024 pre-tax profit forecast of £6.7m and it has only edged up its 2025 forecast from £10.7m to £10.8m because the weakness offsets the additional contribution. The share price improved 5.77% to 275p.

FALLERS

RBG Holdings (LON: RBGP) executive director Tania MacLeod stepped down from the board yesterday afternoon, although she is staying as a director of subsidiaries and as senior partner of law firm Rosenblatt. Delays in projects have hit the prospects of the legal services company and Singer has withdrawn forecasts. The share price slumped a further 29.2% to 2.125p and is down nearly two-thirds on the week.

Woodbois (LON: WBI) has raised a further £1m via a subscription at 0.28p/share. The share price slipped 22.2% to 0.315p. The timber company will use the cash to fund exports and provide working capital. The cash is provided by Axis Capital Markets clients.  

David Crichton-Watt has increased his stake in Steppe Cement (LON: STCM) from 16.97% to 17.3%. The share price dipped 5.36% to 13.25p.

Abingdon Health (LON: ABDX) is reporting results for the year to June 2024 on Tuesday 8 October. The share price declined 2.7% to 9p.

Hummingbird Resources – Big Changes Underway Could Prove Transformational For This Gold Producer, Broker’s Speculative Buy Price Aim Is 17p, For Shares Now Just 6.7p 

Mark Watson-Mitchell
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Hummingbird Resources – Big Changes Underway Could Prove Transformational For This Gold Producer, Broker’s Speculative Buy Price Aim Is 17p, For Shares Now Just 6.7p 

Generally, news that a company is about to undertake an operational, financial and strategic review is not seen as a good omen. 

So what is going to happen at Hummingbird Resources (LON:HUM) – which late last week announced that it had just received another $20m loan from CIG SA, its largest shareholder? 

It is also about to launch a comprehensive group-wide review, aimed at delivering operational improvements and realising the company’s potential as a multi-asset, multi-jurisdictional gold producer. 

The Business 

Hummingbird Resources is a leading multi-asset, multi-jurisdiction gold producing company, a member of the World Gold Council and founding member of Single Mine Origin. 

The £54m capitalised group’s stated vision is to continue to grow its asset base, producing profitable ounces. 

It currently has two core gold projects, the operational Yanfolila Gold Mine in Mali, and the Kouroussa Gold Mine in Guinea, which will more than double current gold production once at commercial production.  

The company also has a controlling interest in the Dugbe Gold Project in Liberia that is being developed by joint venture partners, Pasofino Gold Limited.  

The final feasibility results on Dugbe showcase 2.76Moz in Reserves and strong economics such as a 3.5-year capex payback period once in production, and a 14-year life of mine at a low AISC profile.  

However, it is believed that the company is looking at potentially divesting its non-core assets including the Dugbe Gold Project in Liberia, where it holds a 53% stake in Pasofino, which is an owner of Dugbe. 

Hummingbird has already engaged in informal, non-binding discussions with several parties regarding the sale of certain assets including the Dugbe Gold Project in Liberia. 

The Loan Facility 

The group secured a loan facility of $30m from CIG SA, including that new $20m loan and a consolidation of a previously announced $10m short-term loan.  

The loan, which is unsecured, carries a 14% interest with an initial maturity of December 2024.  

The company anticipates transitioning this loan into a longer term fixed-rate, gold-linked loan note, details of which are currently being finalised.  

There are several opportunities to increase the size of the ‘Gold Loan’ due to additional interest, with the company making further updates in due course. 

The company is bringing in third-party consultants to review its corporate structure with a view to identify cost efficiencies and improvements in governance including Board and management changes.  

Management Comment 

Chairman Dan Betts stated that: 

“As we continue to navigate the challenges at Kouroussa, we are committed to taking decisive actions to strengthen Hummingbird’s operational foundation and unlock its full potential as a multi-asset, multi-jurisdictional gold producer.  

The Group-wide review is an important step towards optimising our production capabilities and enhancing shareholder value. 

While Kouroussa’s ramp-up has been affected by various unforeseen factors, we are focused on reaching commercial production in Q4-2024.  

Whilst we are confident of commercial production in the coming quarter, it is dependent on us and our partners delivering meeting our production plan and expectations.    

Our focus remains on sustainable growth, securing additional financing, and completing leadership transitions to ensure the successful delivery of our ambitious growth objectives to deliver 200 Koz pa of gold. 

After 17 years of building Hummingbird from a grassroots exploration company to a gold producer with an annual run rate exceeding 200,000 ounces, I believe the time is right for a new leadership team to guide the Company through its next phase.  

I am proud of what we have achieved and will continue to focus on strategic opportunities and key relationships as Chairman of Hummingbird.” 

Analyst Views 

Tim Huff and Alex Bedwany, at Canaccord Genuity Capital Markets, now have a Speculative Buy Price Objective of 17p on the group’s shares, based on a 50/50 weighting of their longer term NPV (at 1.0x) of 28p, and their near-term EV/EBITDA weighted value (at 4.5x) of 6p. 

Prior to the results of the Review, the analysts have estimates out for the current year to end-December to show an EBITDA of $38.5m ($11.2m), leading up to a massive $206.0m EBITDA next year, worth $11.92 per share in earnings. 

In My View 

The company believes that this latest support and new Review will help to capitalise on the strong platform that it has built to date, while enabling it to evolve into a robust mid-tier gold mining company. 

Four years ago, the shares were up to 43p and have been down to a low of just 4p since then. 

The question now is whether the shares, at just 6.7p, are ‘option money’ on some very big returns in due course? 

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