Cora Gold – Ops underway

 

Cora Gold IPO’d on AIM just a over a week ago and based on today’s news, they are not hanging about and putting their £3.45m cash raise to work with speed.

The West African focused gold exploration company, announced it has entered into a contract with Target Drilling SARL for drilling services at its Sanankoro gold discovery, in Mali.

Jon Forster, CEO of Cora Gold says, “Target Drilling has a track record of working in partnership with exploration teams and we look forward to a productive relationship. We are eager to commence exploration at the exciting Sanankoro gold discovery as soon as is practical as we believe it has the potential for a standalone mine development.” END.

Mr Forster will know only too well that he’s going to need at least 1 million ounces of in-situ gold to create a standalone mine. That’s certainly possible but it’s not the end of the world if they fall short of that commercial tier as Hummingbird Resources have Yanfolila production / processing facilities nearby. Just like the recent AGG deal signed with Hummingbird, materials can be trucked economically (tbc upon AGG deal completion) from the pit to HUM’s processing facilities. Investors that follow HUM will also know that HUM owns approx 34% of Cora Gold after spinning the exploration assets out of a previously owned 50:50 venture. In reality, the upcoming exploration phase at Sanankoro is in fact ‘resources’ in the making or waiting for Yanfolila. Of course, it may end up that Sanankoro delivers over 1 million ounces but even then the economics are going to be tight compared to the cost savings potentially involved by simply using Yanfolila. An interesting stock to watch whether you are a HUM investor or not. Cora Gold has plenty of merit as a standalone investment and with a market cap of circa £9m there is room for upside should the exploration phase prove successful. More importantly, the route to commercialisation is there for all to see. And that’s ‘potentially’ a huge USP for a small miner like Cora.

The drilling programme is expected to commence at the end of November 2017 with a total of 15000m, made up of aircore, reverse circulation and up to a further 1000m of diamond core. Drilling is expected to conclude towards the end of Q2, 2018.

Current share price 15.75p. Market cap circa £9m. Current cash approx £3m+.

Anglo American – Another Porsche in the making?

Anglo American (AAL) is a heavyweight FTSE100 player. Historically, these big conglomerates with market caps of multi-billions would swing around with commodity prices (as you would expect) but also on broader market sentiment. But if you take a look at the last 2 years, the story for AAL looks more like an AIM listed penny share. It’s worth taking a closer look purely to understand the huge money flows involved and to appreciate just how crazy today’s markets have become.

Starting off, lets look at the 5 year chart below. Also for comparison, FTSE100 chart below.

In the good old of days of 2011, AAL reached circa £34 a share. Then the commodity bubble popped around 2012 and by 2013 the stock was trading at circa £20 a share. As the slump continued, the stock dipped to £10 per share in mid 2015. By Early Jan 2016, the stock was at 220p a share. For a mammoth company like Anglo, the fall was massive. That’s £34 down to £2.20 a share in the space of 4.5 years. So if you needed a valuation example to understand just how bombed out the commodity sector is then look no further than this bellwether. In comparison the broader FTSE100 index falls were modest although clearly there is a defined relationship, which is kind of what you would expect.

Now, lets look at the declared ‘short positions of 0.5% or more’ chart as below:

As you can see, the short positions were relatively low in the periods from 2013 to late 2015. That’s a little odd as on a comparable basis AAL dropped from £20 to £10 per share. A spike in short interest kicked in around Nov/Dec 2015 and lasted for about 3/4 months. During this period, AAL traded from around 750p a share to a low of 220p a share in early Jan 16. As shorts closed out, the price rebounded to 800p a share. Not far off a 3 bagger. Not bad for a multi billion pound company. That’s about £6bln in cash exchanging hands (and that’s being conservative) unlike the £60m type level swings on an AIM stock.

Now here’s the interesting part. Between March 2017 and today, short exposure (above 0.5%) has increased from 1.5% to a whopping 9%! That’s twice the level of short exposure used in Dec 2015 which helped pushed the price down to 220p.

So how how has that worked out for the shorters over the last 6 months? Answer: Not very well at all. Infact, it looks terrible. Anglo has risen by roughly 35% and that’s against a huge shorting campaign. Just imagine where it would be if it hadn’t had 9% of it’s stock shorted? Here’s some numbers… in the last 6 months Anglo has seen a massive increase in short exposure to 9%+ (just the 0.5% or over positions, there will be more smaller short positions in the market). In cash terms, that’s close to £2bln on the line here. Compare this to the 35%+ rise that has ocurred and it’s not far off £700m in potential losses. I say ‘potential’ because the trades are still open and who knows what awaits around the corner? But for the moment, you have to blink a few times just to take the numbers in here. For a FTSE100 player, it makes many AIM minnows look sedentary. It’s not the only example. Glencore (double the size of AAL) has pretty much the same story although short exposure on GLEN is near zero today. The mind boggles, but ti wouldn’t be the first time the cty shorters got caught out with massive losses. Porsche/VW is still one event that many remember fondly and others not so well.

It will be interesting to see how the short situation unfolds over the coming months. But as more short weights are added, the price keeps doing the opposite and just goes on rising. That’s got to be hurting a few. Now… if another conglomerate was to bang in an offer for AAL of £30 a share tomorrow, then that really would be a Porsche event repeated and one that would make toast of quite a few of the below:

In summary, the AAL case example helps provide some insight into how the market gets it right and wrong. But more importantly, it shows the commodity bubble low point and the recent recovery. Metal prices and Oil prices have risen strongly. So it is no surprise to see Glencore and Anglo recovery. But what about the midcaps? The Tullow’s, Petrofac’s, Enquest’s and Premier Oil’s are all trading at levels signifcantly below March 2017. Here’s an example:

March ’17 AAL share price 1130p (approx) Oct ’17 AAL share Price 1466p (+30%) And that’s with 9%+ short 0.5% or above weighting.

March ’17 TLW share price 280p (approx) Oct ’17 TLW share Price 188p (-33%)
With 7.7%+ short 0.5% or above weighting.

March ’17 PMO share price 60p (approx) Oct ’17 PMO share Price 65p (+8%)
With 8%+ short 0.5% or above weighting.

March ’17 ENQ share price 41.5p (approx) Oct ’17 ENQ share Price 25.5p (-38%)
With 8%+ short 0.5% or above weighting.

So watch out for the midcaps/smaller caps. They are long overdue a recovery to rival their bigger bellwether peers. But equally, you can’t write off shorters being correct and AAL retraces back to 0% levels or worse. In an event like that I would expect the FTSE100 to take a hefty hit too. And with Santa rally season not far away, that’s looking hard to imagine in a market that does like a christmas bonus. Finally, the smaller miners are showing a touch of the AAL’s or GLEN’s about them of late with strong interest returning and share price’s multiplying like it’s 2009 again. It’s certainly a market of ‘opportunity’ out there right now. Not without significant risks of course.

Columbus Energy Resources – Gets a bit of nitro from Schroders

News out this morning from CERP’s announcing an institutional placing agreed with Schroders for £3m at 5p a share. An open offer has also been launched to ensure all shareholders can partake in some form on a 1 for 31 basis (although you may get more than your quota via excess applications).

I don’t normally get excited by placings which come at a 17% discount to closing price. But getting a large respected holder like Schroders on board is no small feat for a small cap. It’s testament to the management team and the chairman in particular that they have managed to secure these funds.

It wasn’t that long ago that management were discussing the prospect of being cash flow positive. This was being driven by boosting small field production of which there are around 160 wells which can be ‘boosted’. Thus far, the company has increased production from some wells by 10 fold. Yes we are talking small stuff from the outset but taking a 6 barrel a day well and turning it into 60 barrel a day producer is massive for a company with such low barrel costs (roughly $5pb, although additional opex and G&A need to be considered). If CERP can do this across their licence with 160 wells, just imagine the production increases and cash flow potential. And that’s just one licence. The company has deep prospects as well as other resource potential in other licences.

Prior to this placing deal, it may have taken the company several months before being able to accelerate the production and ops program. Positive cash flows would have enabled a slow development of the wells. With £4m+ in the sky rocket (pocket) CERP is now super charged to enhance production with greater speed and potentially drill a deep well which could deliver sizable increases in mmboe resource.

Columbus Energy is certainly reborn. The future looks bright indeed.

Current price 5.8p.

CERP.L previously given the ‘heads up’ on thesharehub 3 weeks ago at 3.9p a share. See previous post here.

Hummingbird Resources CEO Interview

Great interview today from Dan Betts, CEO of Hummingbird Resources. The potential cash generation from this company is incredible considering the current market cap. If Gold stays firm, Hummingbird has every chance of being £1+ a share in 2018. Historic first Gold pour is set for Dec 2017. Just under 3 months to go! Should Gold get a jog-on in 2018 to $1500oz (and there are a bucket load of global risks out there) the cash flows are mind blowing. Great hedge play for every investor against volatile market or global events. That said, Gold does not always strengthen or react to risk events as many expect, regardless of the ‘flight to safety theory’ – hence no guarantees of course! Usual Risks apply.

Hummingbird Resources is part of TheShareHub top ten picks for 2017.

https://www.ig.com/uk/market-insight-videos?bctid=5597597035001&bclid=3671160850001

Amerisur Resources – Ops and Production Update

Mixed bag of news from AMER this morning (Full RNS below). Whilst the ‘Holy ones’ visit to Colombia was flagged up by the company some weeks ago, the actual production numbers for Sept are on the lower side of expectations. AMER management have created a reputation for blaming their missed targets on anything from weather, to social unrest and now it’s all down to the lord’s messenger. Colombia is a highly populated Catholic region so any ‘event’ which involves the Pope will cause disruption to day to day events. It’s certainly not an excuse I expect AMER BoD’s to roll out again anytime in the future. So lets not dwell too long on this. On a brighter note production (currently) is running at approx 7400bopd. That’s more like it! The stand out news comes from Plat-21 (PAD2N). Roughly 8 weeks ago test production was running at around 400bopd. News of commercial rates at 1000bopd should warrant a headline by itself. It’s impressive and is circa 250% better than pre-drill estimates. This whet’s the appetite ahead of Plat-25 results. Should the latter deliver anywhere near those numbers, then AMER will be in danger of smashing their 7500bopd y/e targets. Add to this the impending test production on Mariposa-1 and the company could be delivering 10kbopd sooner than many thought possible. The latter is trucked via northern routes so cost per barrel is nearer $25pb than $15pb, but that still leaves circa 7500bopd going through the OBA at $15pb all in costs. With PoO looking ready for the $60’s more than the $40’s, the cash generation for AMER looks strong. Considering the company’s current position the share price has some catching up to do. Watch out for Plat 25 news around mid Oct and Mariposa-1 test production news looks ripe for the same period.

With up to 16 wells planned over the next 15 months, AMER looks ready to get those bells ringing again. Praise the lord!

Current sp 19.75p. TheShareHub y/e 2017 target 37p. 2018 target – 50p.

……………………………………………………………………………………

RNS Number : 3400S
Amerisur Resources PLC
02 October 2017
Amerisur Resources Plc

Monthly Production, OBA Throughput and Operational Update

Amerisur Resources Plc, the oil and gas producer and explorer focused on South America, is pleased to provide unaudited Platanillo Field production and OBA throughput data for the month of September 2017 (the “Period”).

Production

   --     Total production was 120,662 barrels of oil ("BO") during the Period.

— Average production per calendar day was 4,022 barrels of oil per day (“bopd”) during the Period.

   --     Average production per operational day was 6,033 bopd during the Period. 
   --     Peak daily production was 7,397 bopd during the Period. 
   --     Current production is approximately 7,400 bopd.

OBA Export

   --     Total export volume was 122,352 BO during the Period. 
   --     Average throughput per calendar day was 4,078 BO during the Period. 
   --     Average throughput per operational day was 6,117 BO. 
   --     Peak daily throughput was 7,137 BO during the Period.

This data will vary month on month as development, appraisal and exploration operations continue, and also due to the factors involved in operating in the Putumayo region of Colombia. These factors include inclement weather, social issues with drilling and oil transportation and planned and unplanned shut downs for technical works undertaken among others. This data has not yet been approved by the Colombian Agencia Nacional de Hidrocarburos (ANH) or national customs and tax authorities DIAN and may be subject to revision.

Platanillo-21, located on Pad 2N was placed on commercial production at approximately 1,000 BOPD on 29 September. On Platanillo-25, currently being drilled from pad 2N, 9.5/8″ casing has been cemented at 5,682ft. This well, a southerly step out well from Pad 2N, is expected to be logged in mid-October.

The Company has been informed by the Operator that the well Mariposa-1 will be placed on Long Term Test (LTT) in mid-October.

John Wardle, CEO commented: “The disruptions to production caused by social issues and the Papal visit were regrettable but are behind us now and I am pleased that both our production and OBA throughput continue to grow so strongly. Platanillo-21 was a very good result which confirms further the production and reserves potential we have developed at Pad 2N. I look forward to the results of our next well on that pad during October. I also look forward to the commencement of the Mariposa LTT, which I am sure will add further material production to Amerisur. ” ENDS