Premier African Minerals shares were weaker on Wednesday as investors continued to digest the terms of the new lithium offtake agreement with Canmax.

Premier African Minerals shares closed down 12% yesterday and were down a further 8% at the time of writing on Wednesday.

The new agreement avoids the worst-case scenario after Canmax issued a termination notice, but the terms of the new agreement put significant pressure on Zulu’s production.

Premier African Minerals have agreed to a series of production targets that, if not met, could see Premier African Minerals make penalty payments of up to $4m per month from June 2024.

Should Premier African Minerals not meet production targets of 1,000 tonnes per month on a monthly average rolling basis, Canmax is entitled to charge interest of up to 12% and be issued new shares in Premier African Minerals.

If the production targets are not met, or Premier African Minerals fails to make settlement payments by the long stop date of 1st April 2025, Canmax has the right to take a direct interest in the Zulu project at a valuation of $200m, should Canmax not elect to take to new shares in Premier African Minerals.

Under the revenue-sharing terms of the new agreement, Canmax shall receive 25% of gross lithium sales from 1st November 2023 until 30th May 2024. From 1st June 2023 and until the Advance Purchase Amount plus accrued interest has been settled, Canmax will receive 50% of all lithium sale gross proceeds due to Premier.

The long and short of it is should Premier African Minerals fail to meet production targets, Canmax can impose crippling penalties on Premier African Minerals, which will erode shareholder value.

Canmax could take $1.5m in new shares in Premier African Minerals from November this year if they do not produce 1,000 tonnes monthly.

The move lower in Premier African Minerals shares over the past two trading sessions may represent investor confidence in their ability to meet the required production targets.

The Zulu plant is currently being upgraded and the company says it should be ready to meet the November deadline.

Premier African Minerals have bought themselves time, but long-term shareholder value creation hinges on ramping up production in the short term. The pressure is on.

Belluscura shares jumped in early trade on Wednesday after announcing they had received orders for 6,500 DISCOV-R portable oxygen units worth in the region of $15m.

Belluscura shares were 20% higher at 44.5p at the time of writing after hitting highs of 49.75p. This is a significant update for Belluscura and represents a step change in order flow and revenue generation.

Belluscura’s revenue for the year to 31st December 2022 was $1.5m. Today’s announcement suggests Belluscura’s revenue could grow to many mutliples of this given the 6,500 orders worth $15m were from online retail sellers and medical equipment distributors only.

Belluscura said they have received similar interest from healthcare providers. Should this interest convert into orders, it could represent orders worth and additional $15m.

“We are very excited about the overwhelming interest in the DISCOV-R by online retail sellers and other medical equipment providers. Following the pre-market launch of the product and the patient usability study in June, initial feedback suggests we will receive the same or greater level of interest from leading home healthcare providers once it is launched commercially,” said Bob Fary. Sr Vice President of Global Sales, Belluscura.

In addition to announcing $15m worth of DISCOV-R orders, Belluscura annnounced ‘substantial’ progress on X-PLOR distribution and proprietary NOMAD biometric app.

Belluscura notes progress in acheiving CE and UKCA registration mark application for its X-PLOR® portable oxygen concentrator and that 1,500 X-PLOR units were on the way to the US from China.

The company is also working on the next generation of their proprietary NOMAD biometric app to drive innovation in telemedicine by utilising artificial intelligence. The NOMAD app will allow users of the DISCOV-R to track performance data on their concentrator and through devices such as an Apple Watch or FitBit.

“We believe the DISCOV-R, combined with our proprietary NOMAD app, will be transformational to the portable oxygen industry and patient outcomes,” said Bob Rauker, Chief Executive Officer, Belluscura.

“This is reflected by early demand for the product prior to its full commercial launch, which is expected to take place later this year. The significant number of orders received demonstrates the substantial appetite for this product and we anticipate adding several more of these providers to our distribution network as we balance the high demand with production expectations over the next twelve months.”

Belluscura was founded by Tekcapital before listing on AIM in 2021 raising £17.5m. Tekcapital holds an 11.16% stake in Belluscura.

Markets have been waiting for China to take action to support their economy, which was finally delivered last night in the form of a 15 bps cut to interest rates.

Investors, however, are not impressed.

Historically, Chinese stimulus has been bullish for risk assets, including cyclical equities and you’d expect a rally immediately after China announced stimulative measures.

Not only did the rate cut fail to buoy London’s-leading index heavily weighted to China-focused stocks, but investors also continued to offload miners and financials, including Standard Chartered, HSBC and Prudential, with substantial operations in Asia.

There is a feeling the rate cut did not go far enough, and China’s economy would continue to slow. The FTSE 100 was down over 100 points to 7,404 at the time of writing.

The FTSE 100’s descending triangle technical formation we discussed yesterday remains intact and the index looks set to test 7,300.

UK wages

Piling pressure on UK equities on Tuesday, UK wages grew at the fastest pace since records began in 2001 in July. Faster wage growth is not conducive to falling inflation, and futures markets quickly priced in higher UK interest rates.

Sterling rose against the dollar, further dragging UK equities.

“Alarm bells are ringing on UK inflation once more as the latest figures from the Office for National Statistics show record wage growth,” said AJ Bell investment director Russ Mould.

“This builds pressure on the Bank of England and has prompted an increase in sterling and gilt yields, as well as a big fall in UK stocks, as it suggests inflation is becoming increasingly entrenched in the economy. However, it is a fine balance. Other elements of the ONS data show signs the labour market could be cooling, with an increase in unemployment and a drop in the number of vacancies.

“Previous rate hikes are likely to have a lagged impact and this data covers an April to June period which is very much in the rear-view mirror now. It all adds up to a very tricky situation for the brains trust in Threadneedle Street which might only be further complicated by the CPI release tomorrow.”

FTSE 100 movers

The aforementioned China-focused financials and miners were among the biggest losers on Tuesday. Still, the selling was broad, with only two of the FTSE 100’s constituents trading positively at the time of writing.

Investors sold Legal & General shares after the group reported lower operating profit and a sharp drop in assets under management. This is a problem experienced throughout the sector, and Schroders, abrdn and Pheonix Group were also weaker on the day in sympathy.

The prospect of more interest rates as wages soar hit the housebuilders, and the recent rally in the sector continued to break down.

PHSC (LON: PHSC) has commenced a further share buy back of up to 1.18 million shares for up to £200,000. The share price jumped 32.4% to 24.5p. If the share price held at this level then not all the shares could be acquired.

Abingdon Health (LON: ABDX) is launching the Salistick saliva pregnancy test in 298 Tesco stores. It is already sold in 400 Superdrug stores. Abingdon Health has the UK and Ireland distribution rights to Salistick, which was developed by Salignostics, and is also contract manufacturer. The share price increased 25.7% to 11p.

Verditek (LON: VDTK) has signed a memorandum of understanding with Net Zero Valley and this will form the basis of a 50/50 joint venture agreement that will invest in a 1GW ultra-lightweight solar panel manufacturing plant in Southern Italy. Verditek will source machinery, provide know-how and set up and operate the plant. The share price is one-fifth higher at 1.2p.

Evgen Pharma (LON: EVG) has revealed final data from a Phase 1b healthy volunteer study showing that the enteric coated tablet formation for SFX-01 is safe and well tolerated. Along with partner Stalica, Evgen Pharma will work on a regulatory submission for a Phase 2 trial in autism spectrum disorder, which would trigger a $5m milestone payment. The share price is 10.4% ahead at 2.65p.

FALLERS

Amur Minerals Corporation (LON: AMC) has reminded investors that trading in the shares will be suspended on 7 September if it does not secure a reverse takeover. The share price fell by one-fifth to 0.12p.

The full year figures of Victoria (LON: VCP) have been delayed, but the floorcoverings manufacturer has published a comprehensive set of unaudited figures. EBITDA was at the bottom end of expectations at £196m, up from £162.8m. The inclusion of rug maker Balta reduced margins, but restructuring will improve these. The period was hit by higher polypropylene and gas prices, but these have subsequently eased. There was capital spending on restructuring the business that should pay off this year, although it is not likely to be until the second half. Although net debt is £658.3m, the major capital investment has been made and around £100m of cash could be generated this year. The share price is 7.31% lower at 596p, although it is still nearly 24% ahead so far this year.

MTI Wireless Edge (LON: MWE) had a mixed first with delayed defence contracts offsetting improved contributions from the antennas and Mottech water management divisions. Interim pre-tax profit was flat at $2.1m, but Allenby still expects full year pre-tax profit to improve from $4.32m to $4.79m. One of the delayed contracts has already been completed and the other should be finished this year. The outlook for defence is still positive, while 5G demand from India is difficult to predict. The share price is 3.53% lower at 41p.

Instem (LON: INS) annualised recurring revenues were 27% ahead at £41m. The pharma software company is trading in line with expectations. Interim revenues are expected to be around 10% higher at £29.7m. Cash is £8.4m. The share price dropped 2.82% to 602.5p.

Legal & General has suffered a further reduction in assets under management in the first half of 2023 as operating profit fell.

The Legal & General Investment Management unit suffered the biggest fall in operating profit on a percentage basis with profits falling 29% to £142m. Their retail business suffered a 22% drop in operating profit.

Legal & General was a victim of the mini-budget debacle last year and there have been questions about the health of the business ever since.

Group assets under management were around 10% in the half year to 30th June with Legal & General Investment Management AuM falling to £1.15bn from £1.29bn.

Despite the poor performance, Legal & General increased their dividend by 5%. The company now yields in the region of 8%.

Legal & General shares were down 4% at the time of writing.

“Life insurer Legal & General may be on track from its own perspective as it beat expectations but the reaction of the market suggests investors aren’t fully on board. The company is one of the biggest investors in the UK stock market and what may be creating disquiet is the material drop in assets under management,” said AJ Bell investment director Russ Mould.

“This is a result of both market conditions but also net outflows. As a domestic facing stock Legal & General could also be vulnerable thanks to the latest wage growth data suggesting inflation is becoming more entrenched. 

“Rising interest rates are a double-edged sword for Legal & General. Higher rates have led to an improvement in the funding situation of final salary pension schemes and this has enabled them to offload their pension risk to insurers like Legal & General through what is known as a bulk annuity agreement more readily. This is helping to generate growth in this part of Legal & General’s business.”

Marks & Spencer was the FTSE 350’s best performer at the time of writing on Tuesday after increasing their profit guidance for the year following a period of strong performance.

M&S has reported strong sales growth in the first 19 weeks of the year, led by its Food business. Food has been an area of strength for M&S for years and investors will be pleased to see the momentum continues.

Like-for-like Food sales grew over 11%, helped by price investments in its ‘Remarksable Value’ range.

Clothing & Home sales also grew by over 6% like-for-like. Growth was higher in stores compared to online. The company said sell through rates have been strong and less stock is going into sales than planned.

While M&S said economic uncertainties remain, they now expect full-year profits to grow compared to 2022-23. The interim results are also expected to show significant improvement versus previous expectations.

M&S said operating margins were being supported by strong performance and its store rotation programme.

“Following on the heels from Next’s recent profit upgrade, M&S has also announced that it expects profit for the year to be above expectations. This is evidence that the UK consumer is still spending, despite the gloomy economic headlines,” said Charlie Huggins, Manager of the Quality Shares Portfolio at Wealth Club.

“The results are also testament to the group’s progress against its strategy, launched last year. This aims to improve brand perception and designs, reduce discounting, and improve the online offering, while taking a knife to costs and instilling a more entrepreneurial culture. Today’s trading update suggests this plan is resonating with consumers with M&S continuing to increase its market share in clothing and home.

“M&S cautions that there are still “considerable uncertainties about the economic outlook”. 

“Nevertheless, there are more reasons for optimism now than there have been for some time.”

PHSC shares were sharply higher on Tuesday after the health and safety consultancy and services company commenced a £200,000 share buyback programme.

Under the terms of the buyback, the company can repurchase up to 105% of the average share price over the previous 5 business days prior to the announcement. The program will run until September 27, 2023. This is the day before the company’s Annual General Meeting where the buyback authority is expected to be renewed.

The company stated the program will be reviewed on September 27 to determine if it should be extended. A further announcement will be made at that time if the program is continued.

PHSC said the buyback program aims to return value to shareholders by reducing the number of outstanding shares.

PHSC shares were 35% higher at the time of writing on Thursday.

The £28m capitalised Canadian Overseas Petroleum Limited (LON:COPL) group has announced its Second Quarter 2023 Operational and Financial Highlights to end June.

COPL is an international oil and gas exploration, development, and production company actively pursuing opportunities in the United States with operations in Wyoming.

The company operates two production Units: Cole Creek 100% Working Interest, Barron Flats Shannon (Miscible) 85% WI and in addition to 85%-100% WI non-unitised lands between the production Unit boundaries.

The company’s Wyoming operations are one of the most environmentally responsible with minimal gas flaring and methane emissions combined with electricity sourced from a neighbouring wind farm to power production facilities.

The Q2 Update

The Q2 2023 Highlights stated that the upgrading of its gas gathering system, which was the subject of debottleneck restrictions at certain well locations, is now functioning and was commissioned on time and under budget in July 2023. 

Q2 crude oil sales before royalties averaged 1,103 bbls/d as compared to 974 bbls/d in the first quarter of 2023.

Petroleum sales net of royalties were $5.6m as compared to $5.2m in the first quarter of 2023. The increase is due mainly to the increase in oil production partially offset by a reduction in the realised sales price of oil of $71.75/bbl as compared to $74.94/bbl in the first quarter of 2023.

There was a realised hedging gain of $0.1m on butane hedge contracts as compared to $0.5m in the first quarter of 2023.

The Q2 operating netback was $20.93/bbl, before the net realised gain on butane hedge contracts as compared to $17.19/bbl, in the first quarter of 2023. The Q2 figure was boosted by a reduction in operating expenses of $6.98/bbl.

Additionally, the group started several general and administrative cost reductions in Q2, worth $1.9m as compared to $2.3m in Q1. Further cost reductions are expected to be made in the balance of the current year.

Overall, these various improvements have resulted in a growing cash position, some $5.2m at end June compared to the end December 2022 $4.0m.

But still no more news of the special JV

In late July the company announced that it was preparing the basis of a Joint Venture with an established energy company to develop and exploit its oil reserves and resources at its Cole Creek project in Converse and Natrona Counties Wyoming, but which it does not include the company’s Barron Flats Shannon miscible flood EOR project.

As yet we have no further indication of the unnamed JV suitor.

In the late July announcement about the possible JV the group’s President and CEO Arthur Millholland stated that: 

“We have been working on this project for some time. We first identified the potential at Cole Creek before completion of our Atomic acquisition in March 2021. Our acquisition of the complimentary assets of Cuda in July 2022 gave our company full control of the Cole Creek project.

This Letter Of Intent is the first step completed in a process initiated in October of last year after the Cuda acquisition.

The company that has entered into the LOI with us is the best partner we could have of the ones we have considered. We look forward to updating our stakeholders when able as the process proceeds.”

The group’s shares opened 3% better at 4.20p after this morning’s news.