DIGEST: topical themes from Dunedin Income Growth

Aberdeen Investment Trusts
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DIGEST: topical themes from Dunedin Income Growth

When are defensive sectors not defensive?

Ben Ritchie, Samantha Brownlee and Rebecca Maclean, Investment Managers, Dunedin Income Growth Investment Trust PLC

Stock markets have been volatile since the start of the year, with the Ukraine crisis and interest rate rises combining to unnerve investors. At Dunedin Income Growth Investment Trust (DIGIT), we were already cautious in our positioning, and these developments do little to make us shift our views. However, we also need to be careful that our defensive companies are truly defensive. 

For some time, defensive stocks have been traditional industries such as healthcare, where demand does not vary with the economic cycle. However, in this recent period, energy has also proved defensive as oil prices have risen due to geopolitical uncertainty. Equally, it is harder to argue that technology is as cyclical a sector as it once was. For many companies, technology is a crucial part of how they service clients, how they create efficient operations and how they manage their costs. 

Against this backdrop, this sector-based view on defensive assets is less useful than it has been in the past. In reality, resilience comes from the characteristics of individual companies rather than their sector classification. Companies within the same sector can have very different demand drivers. 

In our view, ‘defensiveness’ comes down to a company’s competitive differentiation and sustainability. Companies need pricing power, a strong economic moat and barriers to entry (such as its relationships with its customers). A strong balance sheet is also important. Some of these will be in traditional sectors such as healthcare – AstraZeneca, for example, has patents to protect its revenue streams and its demand does not vary significantly through the cycle. However, we can find these characteristics in other sectors as well.  

More recently this has meant adding to companies such as RELX, the information and data publishing business which sits within the media sector, but is a very defensive business in our view. It has a large subscription-based revenue stream that is diverse and recurring. Its service is critical to its users, which translates into tremendous visibility and strong cash flows. This has funded consistent growth in RELX’s dividend alongside generous buybacks with surplus cash. 

A crisis for ESG? 

The recent market volatility has seen many so-called ‘sin’ sectors perform better, including traditional fossil fuel and defence companies. This has led to some suggestion that fund managers re-think their adherence to ESG (environmental, social and governance) metrics when making investment decisions. 

The weight placed on ESG considerations depends on the investor’s time horizon: if it is less than a year, the company’s performance is much less relevant, only whether the stock is mispriced. However, if an investor wants to own a company through the ups and downs of the cycle, it is vital to consider how it manages its ESG risks. 

Recently, there has been strong performance from companies with a weak ESG focus. It is inevitable that there will be times when certain companies do well, but these same companies still face some considerable risks, both in terms of environmental policy, and over social and governance issues. This could exert a drag on returns. For example, defence companies are doing well today, but in the longer term they may have challenges in terms of pricing long term supply contracts effectively, handling government interference and managing bribery and corruption risk, quite aside from the moral implications of their products.

If anything, the developments in Russia and Ukraine highlight the importance of incorporating ESG considerations into investment decision-making. In the short-term the crisis has been good for companies that sell hydrocarbons, but in the longer-term it will accelerate the shift towards renewables and low carbon energy in a way that policy focused on climate change has not yet delivered. 

If we look at social elements, the change in attitudes has been remarkable. The pressure on corporates to do the right thing has never been greater and many have pulled out of Russia wholesale. Showing the importance of “doing business in the right way” to ensure support from key stakeholders and customers. It has shown also the more old-fashioned importance of doing business with the right people in the right places and managing the essential governance risks effectively.

Effective engagement

While many of the ‘sin’ sector stocks remain off-limits to us, given the range of exclusions we have on the DIGIT portfolio, there will be some companies where the ESG score is middling and where we believe we can make a real difference to a company’s performance. This is where our engagement programme comes in.  

We meet corporate management frequently. Discussions on ESG factors are integrated into those meetings. These factors have become intertwined with the day to day running of businesses in all sectors and are crucial to the risks and opportunities they face. We also have regular dedicated meetings with board members on governance – including remuneration, board structure, senior non-executive appointments, plus voting at AGMs. 

There is a layer of engagement beyond this, where we look to drive certain outcomes in companies and improve the way they’re run. For our priority engagement list, we set out a clear process showing those companies what they need to do to improve. We work with ESG specialists internally to set those priorities and help companies respond. 

One recent engagement was with Total Energies, a company where the transition to a lower carbon future is critical. We engaged with the company, along with third parties such as Climate Action 100, to ensure progress to limiting global warming to 1.5 degrees. The fabric of the company and its ESG footprint are intertwined and it’s one of the few global energy companies whose efforts on decarbonisation enable us to own it in the portfolio. 

The health of the corporate sector

Volatile stock markets belie a relatively positive picture from the corporate sector. Earnings expectations have been moving higher. In their first quarter reports, companies continue to report a tricky environment, but say they are managing it well by putting up prices and managing costs.

There is still a positive annualisation effect from Covid in 2021, particularly for some of our consumer-facing companies which last year were dealing with markets that were locked down. Companies in the DIGIT portfolio are generally navigating the environment successfully and we have had few negative surprises from this quarter’s earnings season. This gives us confidence in the resilience of future dividends and earnings from the portfolio companies today. 

Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.

Important information:

Risk factors you should consider prior to investing: 

  • The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested. 
  • Past performance is not a guide to future results. 
  • Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
  • The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV. 
  • The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares. 
  • The Company may charge expenses to capital which may erode the capital value of the investment. 
  • Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss. 
  • There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value. 
  • As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen. 
  • Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
  • Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.

Other important information:

Issued by Aberdeen Asset Managers Limited, registered in Scotland (No. 108419), 10 Queen’s Terrace, Aberdeen AB10 1XL. Authorised and regulated by the Financial Conduct Authority in the UK. An investment trust should be considered only as part of a balanced portfolio.

Find out more at www.dunedinincomegrowth.co.uk or by registering for updates. You can also follow us on social media: Twitter and LinkedIn. 


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Alien Metals confirms DSO grade iron ore at Hancock project

Natasha Doris
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Alien Metals confirms DSO grade iron ore at Hancock project

Alien Metals announced the completion of its metallurgical test work which produced an initial flow sheet of crushing and screening for its Hancock iron ore.

The metallurgical test work reportedly confirmed the Hancock product was of Direct Shipping Ore (DSO) grade, with Pilbara Fines product confirmed at a grade of 62.7% iron from the initial bulk sample from its Ridge C resource.

Alien Metals added that the product had very low impurities, consistent with excellent quality product including silica content at less than 4.1%, aluminium content at less than 2.7% and phosphorus content at less than 0.1%.

The test work also indicated a potential for a Lump yield which is capable of commanding a premium price over the fines above 62% iron.

The mining group said marketing samples had been prepared and were being dispatched to potential customers in a precursor to potential offtake agreements for their own internal testing.

“These results from the initial bulk sample on Ridge C are another significant positive step in the progress of the Hancock project further confirming the excellent quality of the product as well as providing a simple initial process flow sheet showing only simple crushing and screening is required prior to shipping, a key element in keeping Capex and Opex to a minimum thus minimising environmental and energy usages once in production,” said Alien Metals CEO and technical director Bill Brodie Good.

“Returning higher than 62% Fe with associated low grade deleterious materials from a 2.5 ton bulk sample provides even more confidence in the overall quality and grade of the resource at C and only spurs us on to maintain the development of the project.”

“With the DSO Grade Iron Ore price moving back up, the quality of this product continuing to be proven and the remaining large potential for more discoveries on the tenement we are looking forward to the future of this project.”

Alien Metals said it was motivated to advance its Hancock project by the recent rise of iron ore to $145 per ton at 62% Fines spot price, linked to better demand prospect in metals due to easing Covid-19 restrictions and stimulus for demand from China.

FY 2021 financial update

Alien Metals reported $13 million in total assets by the end of the year, with $6.4 million in cash reserves.

However, the mining group confirmed widened losses as it invested in its Hancock project and its new prospects in west Australia. Alien Metals mentioned an operating loss of $2.3 million from a loss of $1.2 million in 2020 linked to its acceleration of work at Hancock, which produced a maiden JORC resource.

The company mentioned total liabilities of $800,000 from $300,000 the last year.

Alien Metals commented that a share placing in November 2021 had secured it a strong funding position to progress its operations and examine future opportunities for portfolio expansion in acquisitions.

It currently has a solid portfolio of advanced exploration assets in western Australia and Mexico, and reported progress at its key Elizabeth Hill, Donovan 2 and Hamersley projects.

ASOS shares tumble on lowered profit guidance as customers return clothing in bulk

Natasha Doris
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ASOS shares tumble on lowered profit guidance as customers return clothing in bulk

ASOS shares tumbled 27.1% to 844.6p in late morning trading on Thursday, after the fast fashion brand reported a lowered pre-tax profit guidance of £20 million to £60 million for FY 2022.

The company highlighted a UK sales climb of 4% to £983.4 million in Q3 2022, excluding Russian operations and the effect of exchange rates.

Sales in the UK experienced a boost on the back of higher demand for occasion wear driven by holidays, weddings and events, although purchases were slightly offset by an increase in return rates due to rising cost of living pressures.

“Expectations were relatively low for online retailer ASOS, and the group confirmed the market’s fears this morning with a profit warning for the full year,” said Hargreaves Lansdown equity analyst Laura Hoy.

“With return rates ballooning, the group’s expecting to lean on promotional activity in order to clear its warehouses. The news wasn’t a complete shock, management warned that this may be coming down the pipeline at the half year.”

ASOS confirmed a 21% growth in US sales to £141.9 million against £117.5 million, as a result of support from Topshop brands, targeted promotional activity and rising demand for occasion fashion.

Meanwhile, EU sales dipped 5% to £294 million compared to £310 million as return rates climbed above pre-pandemic levels, and sales in the rest of the world fell 20% to £115.7 million from £144.3 million except for Australia, which returned to growth as delivery propositions improved and Premier was reactivated.

ASOS highlighted a 69% increase in Topshop brands, with 350 new style drops per week and increased speed to market.

The firm reported continued progress on its Nordstrom partnership, with the launch of ASOS Design in 11 stores across the US and an expanded collection released on Nordstrom.com.

The group also mentioned the launch of a trial partnership with clothing resale business Thrift+, alongside the launch of its second circular design collection.

ASOS commented it expected sales between 4% to 7% as a result of increased market volatility and a higher returns rate, and a net debt in the range of £75 million to £125 million linked to lower profit and higher inventory levels.

“The question now is how long until shopping trends return to normal. Retail’s been arguably one of the last sectors to feel the pinch of inflation as consumers continue their post-covid wardrobe refresh,” said Hoy.

“Plus with holidays and events finally on the agenda again, there’s still a need for occasion wear. But these demand drivers are getting flimsier.”

“ASOS is one of the first retailers to warn on shifting customer behaviour, but it’s unlikely to be the last.”

Halfords shares sink on lowered profit guidance for FY 2023

Natasha Doris
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Halfords shares sink on lowered profit guidance for FY 2023

Halfords shares sank 16.2% to 165.5p in early morning trading on Thursday, after the company warned of lowered profits in FY 2023 in its financial results.

Halfords reported a FY 2022 revenue growth in FY 2022 of 6% to £1.4 billion compared to £1.2 billion in FY 2021.

The company highlighted a 3.7% drop in its retail revenue to £1.001 billion against £1.039 billion year-on-year, however its autocentres revenue climbed 45.7% to £368 million compared to £252 million.

The firm said its motoring business had experienced positive growth while its cycling sector had declined as a result of strong comparators and supply chain disruption.

It credited its autocentre success to improved efficiency as it utilised its Avayler software, along with strong demand for its Halfords Mobile Expert vans proposition with a 44% growth compared to FY 2021 as its fleet grew to 253 vans, 14 hubs and over 230 technicians.

The company also saw an increase in electric vehicle servicing, with the number climbing 140% since the previous year.

“We are continuing to play a key role in helping consumers to choose electric forms of transport and are constantly investing in the training and upskilling of our technicians in this critically important area,” said Halma CEO Graham Stapleton.

“Sales of e-bikes, e-scooters and accessories were up 74% on two years ago, and servicing for electric cars in our garages was up 140% year-on-year.”

“We have also rolled-out free electric bike trials to encourage customers to make the switch and are the first mainstream retailer to offer an end-to-end EV charging solution for the home.”

Halma mentioned a gross margin rise of 10% to £721.7 million from £656.3 million the last year.

The group confirmed an underlying EBITDA decrease of 11.1% to £207.1 million compared to £233 million, alongside an underlying pre-tax profit slide of 9.7% to £89.8 million against £99.5 million the year before.

Halma announced a total pre-tax profit surge of 49.8% to £96.6 million compared to £64.5 million in the previous year.

Lowered Profit Guidance for FY 2023

The group commented that its guidance for FY 2023 included the consideration of challenges such as lowered demand for big-ticket items on the back of a higher cost of living, alongside cost inflation in its supply chain impacting its financial performance.

Halma said it expected a FY 2023 lowered pre-tax profit between £65 million to £75 million, however it caveated its outlook by stating that the current macroeconomic environment made any estimations uncertain in the near-term.

“All eyes today will be fixed on the outlook statements, where management point to lower demand and significant cost inflation as the reason profits are expected to fall 23% next year, and markets have reacted badly,” said Hargreaves Lansdown equity analyst Matt Britzman.

“With a cost-of-living crisis hitting consumer wallets, demand for higher ticket items is heading for trouble and we’re seeing a continued unwind of some of the lockdown tailwinds, such as the cycling boom that helped performance last year.”

The firm also said it would spend FY 2023 investing in its customer proposition and carefully maintaining its cost base. The company stated it currently believed itself to be in a good position to deliver relatively strong growth in the coming year.

“While rising inflation and declining consumer confidence will naturally present short-term challenges for any customer-facing business like ours, we remain confident in Halfords’ long-term growth prospects due to our service-led strategy and the enduring strength of our brand, people, products and services,” said Stapleton.

The company noted an underlying basic EPS drop of 14.9% to 35.5p against 41.7p and a proposed final dividend of 6p per share for the financial year.

BooHoo falls out of fashion with 8% revenue fall to £445.7m

Natasha Doris
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BooHoo falls out of fashion with 8% revenue fall to £445.7m

Boohoo shares were down 12.8% to 56.4p in early morning trading on Thursday, after the fast fashion group announced an 8% fall in group total revenue to £445.7 million in FY 2023 against £486.1 million in Q1 2023.

The company reported falling revenues across most regions, with the USA taking the most significant blow with a 26% drop year-on-year to £95 million compared to £131.9 million.

Boohoo’s UK sales dropped for the first time ever by 1% to £272.1 million from £274.6 million, alongside a 7% decline to £49.6 million against £54.4 million in the rest of Europe.

However, sales grew 15% to £29 million compared to £25.2 million in the rest of the word.

Boohoo revenue was up 75% on Q1 2020, with lockdown habits remaining entrenched as a driver for online sales.

“I am pleased with the progress we are making towards our strategic priorities, which is already having a meaningful impact operationally within the business,” said Boohoo CEO John Lyttle.

“We have seen promising signs from the Group’s sales performance in the UK, which has improved month-on-month in the period and we are looking ahead towards our key summer trading season as holidays ramp up and customers look to the latest fashion from across our brands.”

“Looking forward, we will continue to focus on optimising both our financial and operational performance to ensure the business is well placed to take advantage of future growth opportunities.”

The company reported a tightly controlled inventory over the term, with lower levels of stock compared to year end and improvements across inventory turn and supply chain flexibility.

Boohoo further commented that its overheads continued to be tightly managed despite significant inflation.

The fast fashion company has its work cut out for it as inflation soars to record-breaking heights, with the US at 8.6% CPI and the UK at 9% in May, placing customers on thinner margins as the cost of living continues to devour consumer savings.

The firm said it had made progress on key projects, including the automation of its Sheffield project scheduled to go live in HY2 and a lease for a new distribution centre in Elizabethtown, Pennsylvania signed to support international growth, projected to go live in mid-2023.

Boohoo confirmed its outlook for FY 2023 remained unchanged, with revenue growth expected in the low single-digits with a return to growth in Q2 and improved growth rates in HY2 2023.

The fast fashion brand estimated adjusted EBITDA margins between 4% to 7% in line with guidance, as a result of continued costs within its supply chain, offset to some level by the financial benefits of its strategic priorities and leveraging of overheads.

“The sales challenges are compounded by sky-high freight rates and raw material cost inflation. Boohoo is now faced with the challenge of increasing prices in a promotionally driven and highly competitive market,” said Third Bridge senior analyst Harry Barnick.

“Our experts say Boohoo will have to find creative ways to reduce costs. Improving purchasing costs through fabric consolidation and production locations are key to the success of this cost reduction strategy.”

“Shein could take market share from Boohoo in the UK market given its broad offer and attractive price position.”

Halma reports record £1.5bn revenue, record £304m profits

Natasha Doris
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Halma reports record £1.5bn revenue, record £304m profits

Halma shares were down 1.9% to 1,952p in early morning trading on Thursday, despite a 16% revenue climb to a record level of £1.5 billion in FY 2022 against £1.3 billion in FY 2021.

The life-saving technology firm reported an adjusted pre-tax profit increase of 14% to £316 million compared to £278 million in the previous year, along with a statutory pre-tax profit growth of 20% to £304 million from £252 million, representing the company’s 19th consecutive year of record profit.

Halma noted its statutory pre-tax profit included its £34 million gain on its Texecom disposal.

The technology group completed 13 acquisitions in FY 2022 for a total maximum consideration of £164 million, alongside one additional acquisition since the period end for £37 million. Halma confirmed a healthy acquisition pipeline across all sectors.

Halma announced a 20.7% return on sales from a 21.1% return year-on-year, with a 14.6% return on total invested capital compared to 14.4% the year before.

The group mentioned a slight increase in net debt to £274.8 million against £256.2 million in the last year.

“This was a year of notable achievements for Halma, with revenue exceeding £1.5bn and profit £300m for the first time,” said Halma CEO Andrew Williams.

“Halma’s Sustainable Growth Model enabled our companies to act with agility to address new market opportunities and to respond rapidly to the multiple operational and economic challenges they faced during the year.”

“Our strong performance reflects huge credit on the dedication of our people across the business, and was underpinned by our empowering purpose and culture, our focus on niche markets with long-term, fundamental growth drivers and the high value of the solutions we provide to our customers.”

New CEO

Halma announced the resignation of Andrew Williams as CEO, following 18 years in the position.

Williams is set to be succeeded by CFO Marc Ronchetti, who has been appointed as chief executive designate. Ronchetti has confirmed he will remain in his role as chief executive designate and CFO until his successor has been appointed.

“I am delighted to have been selected as Halma’s next Group Chief Executive. I am excited by the opportunity to lead such a fantastic and talented team, and to continue Halma’s long track record of creating value through our Sustainable Growth Model,” said Ronchetti.

Williams will remain with the company to guide Ronchetti in the role until he takes over for the group on 1 April 2023.

“It is testament to Halma’s long-term approach to succession planning and the quality of the Halma senior leadership team that the next Group Chief Executive comes from within the business,” said Williams.

“Marc is an outstanding leader and I look forward to working with him to ensure a smooth handover.”

FY 2023 Guidance

The group added it had a strong order book going into FY 2023, with order intake in the year-to-date ahead of revenue and in line with its intake in the same term in FY 2022.

The company said it expected single-digit percentage organic constant currency revenue growth and a return on sales similar to HY2 2022.

“We have made a positive start to the new financial year. We are well positioned to make further progress in the full year and in the longer-term,” said Williams.

Dividend

Halma confirmed an adjusted EPS rise of 12% to 65.4p against 58.6p and a statutory EPS growth of 20% to 64.5p compared to 53.6p.

The company reported a dividend per share uptick of 7% to 18.8p compared to 17.6p for the financial year.

Record order book for Severfield

Andrew Hore
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Record order book for Severfield

Structural steel supplier Severfield (LON: SFR) has a record order book worth £486m. There are inflationary pressures, but management expects the business continue to grow.

There are a range of customers. Stadia and leisure, transport and industrial and distribution are areas where the order book has grown over the past year. Nuclear is a potential growth sector and demand from office construction is recovering.

The business is being reorganised into three divisions: commercial and industrial, nuclear and infrastructure and products and processing, which includes the modular product range.

In the year to March 2022, revenues increased from £363.3m to £403.6m, while pre-tax profit improved £24.3m to £27.1m. The final dividend is increased from 1.8p a share to 1.9p a share, taking the total to the year to 3.1p a share.  

Contracts normally include clauses that mean that steel price rises are passed on to the customer at zero margin, although that does affect the operating margin. Increased steel inventories to satisfy contracted demand were part of the reason that the group moved into debt with net borrowings of £18.4m at the end of March 2022. There is a £50m revolving credit facility that lasts until the end of 2026.

The joint venture in India returned to profit and the order book is also at a record high of £158m. A new site will be secured to build a new facility to expand capacity. That may require a cash injection to fund the purchase of the land.

Progressive Equity Research forecasts 2022-23 pre-tax profit of £31.2m on revenues of £460m. the share price rose 2.2p to 62.2p, which means that the prospective multiple is less than eight and the forecast yield is 5.3%.

Eckoh profits rise 5% to £25.4m, expects higher revenues in FY 2023

Natasha Doris
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Eckoh profits rise 5% to £25.4m, expects higher revenues in FY 2023

Eckoh shares increased 3.8% to 40.5p in late afternoon trading after the company announced a revenue growth of 4% to £31.8 million in FY 2022 against £30.5 million FY 2021 and a gross profit uptick of 5% to £25.4 million compared to £24.2 million.

Eckoh mentioned a US secure payments ARR surge of 82% to £11.9 million from £6.5 million, with a total ARR rise of 48% to £25.2 million compared to £17 million on the back of market opportunity and an ongoing shift to the cloud.

The company noted an adjusted EBITDA increase of 7% to £6.8 million against £6.4 million, alongside an adjusted operating profit growth of 10% to £5.2 million from £4.7 million following its finalised exit from UK and US support, which added £2 million.

However, Eckoh highlighted a pre-tax profit fall of 34% to £2.3 million compared to £3.5 million linked to £1 million in transactional costs from the acquisition of Syntec, and £900,000 in one-off restructuring costs.

The firm said its current order levels were substantially above its Q1 2022 result, with its business pipeline significantly strengthened in Q1 2023 including significant opportunities with blue-chip companies.

Eckoh commented that its first client was deployed and currently live on its new Azure cloud platform, and signed a new three-year contract valued at $1.4 million for voice security and an additional contract worth £600,000 to secure live chat agents with digital payments.

“Eckoh has made significant progress in the last 12 months. We have shown the resilience of our business model, with growth in revenue and operating profit and improved quality of earnings with the completed exit from our Support activity,” said Eckoh CEO Nik Philpot.

“Our momentum is underpinned by fast-growing recurring revenues, with an excellent performance in our US business and a return to growth in the UK.”

The firm reported an expected FY 2023 revenue and profit at substantially higher levels than FY 2022, driven by strong ARR growth, operational efficiencies and the addition of synergistic benefits of the Syntec integration.

“We have started the year strongly, and looking ahead the Board expects FY23 revenue and profits to be significantly higher than FY22, reflecting our ongoing organic growth, continued momentum in the US market, a sustained recovery in UK trading, and the integration of Syntec,” said Philpot.

“In addition, we expect our progress to be supported by long-term structural growth drivers and increasing cloud adoption, coupled with the benefits of new products and operational gearing.”

Eckoh announced an adjusted EPS uptick of 5% to 1.5p compared to 1.4p and an adjusted diluted EPS drop of 8% to 1.3p against 1.4p year-on-year.

The group reported a proposed final dividend of 0.6p per share against 0.6p in the last year for FY 2022.

Kefi reports progress at Tulu Kapi Gold Mine project

Natasha Doris
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Kefi reports progress at Tulu Kapi Gold Mine project

Gold and copper exploration company Kefi announced an update on its Tulu Kapi Gold Mine Share Company joint-venture project in Ethiopia, reporting advancement on its multi-party project financing activities and early development works.

Kefi confirmed it had maintained the full funding syndicate for the project, and said it intended to sign the funding “Umbrella Agreement” in June 2022 to demonstrate the full funding agreement.

The mining group reported that it would evidence the full funding capacity of each syndicate member to the Ethiopian Ministry of Mines in order to keep its progress on track.

Kefi added that it would clearly set out any outstanding conditions for execution of the underlying definitive agreements between the respective individual counterparties to the Umbrella Agreement.

The company said it planned to trigger full project construction in the Ethiopian dry season from October 2022.

Kefi has undertaken a slate of activities in the last month, including the receipt of a final pricing proposal from the mining contractor which is currently under review, commissioning additional refinements of the process plant construction contract and pricing, and collaborating with the local authorities to implement the first stage of resettlement and compensation under the set protocols according to World Bank IFC Performance Standards.

The mining firm also executed a series of community and local-authority engagement meetings and presented at the Mine Africa Forum in Toronto to promote Ethiopia prospects for mining development.

“We continue to accelerate activities in preparation for signing the financing syndicate Umbrella Agreement this month, then signing individual definitive agreements over the following few months, enabling full Tulu Kapi construction to commence from the end of the wet season in October 2022,” said Kefi executive chairman Harry Anagnostaras-Adams.

“Kefi has significant momentum as we progress our three advanced projects in two countries that are now overtly pro-development.”

“These three projects provide the opportunity for the Company to establish itself as a production leader in the Arabian Nubian Shield, having already established itself as an exploration leader with a now-established Mineral Resources of c.4.7 million ounces gold-equivalent in Ethiopia and Saudi Arabia.”

BP acquires 40.5% stake in ambitious green hydrogen energy project

Natasha Doris
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BP acquires 40.5% stake in ambitious green hydrogen energy project

BP announced its acquisition of a 40.5% stake and operatorship of the Asian Renewable Energy Hub (AREH) green hydrogen energy project in Pilbara, Western Australia on Wednesday.

The project is one of the largest renewables and green hydrogen energy hubs in the world, and is set to support the development of up to 26GW of combined solar and wind power generating capacity.

According to BP, AREH could potentially produce 1.6 million tonnes of green hydrogen, or nine million tonnes of green ammonia per year at full scale.

The AREH intends to supply renewable power to local customers in the Pilbara region, which is the largest mining sector in the international market.

The project is also set to supply green hydrogen and green ammonia for the domestic Australian market and export the resources to major international users.

BP confirmed that the operation currently has plans to develop onshore wind and solar power generation in several phases to hit its 26GW goal, representing the equivalent of over 90 terawatt hours per year or one-third of all electricity generated in Australia in 2020.

“AREH is set to be one of the largest renewable and green hydrogen energy hubs in the world and can make a significant contribution to Australia and the wider Asia Pacific region’s energy transition,” said BP executive vice president of gas and low carbon energy Anja-Isabel Dotzenrath.

“It truly reflects what integrated energy is – combining solar and onshore wind power with hydrogen production and using it to help transform sectors and regions. It also reflects our belief that Australia has the potential to be a powerhouse in the global energy transition, benefitting from both its existing infrastructure and abundant renewable energy resources.”

“We believe AREH can be a cornerstone project for us in helping our local and global customers and partners in meeting their net zero and energy commitments.”

https://twitter.com/bp_plc/status/1536982031086788608

The AREH project is estimated to abate approximately 17 million tonnes of carbon in domestic and export markets per year, which equates to around 0.5 gigatons of carbon savings over the lifetime of the operation.

BP is scheduled to assume operatorship from 1 July 2022, with other partner shareholders maintaining a 26.4% stake for InterContinental Energy, 17.8% by CWP Global, and a 15.3% investment held by Macquarie Capital and Macquarie’s Green Investment Group.

“This is an incredibly exciting development, and we are looking forward to working closely with our partners, InterContinental Energy, CWP Global, Macquarie Capital and Macquarie’s Green Investment Group, as well as the Nyangumarta people,” said BP Australia president Frédéric Baudry.

“BP brings a broad range of capabilities to help bring the project to fruition, with extensive experience in constructing and operating facilities of this scale in remote locations in close collaboration with local communities and leveraging our global shipping and trading businesses.”

“We also have the benefit of deep experience in working with customers looking for decarbonization solutions and delivering low-carbon energy to the global market.”

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