Hybridan Small Cap Wrap: Something new for Imperial, Bright news for Sirius, Summit ready to climb

This week: Something new for Imperial, Bright news for Sirius, Summit ready to climb

Small Cap Wrap will be on holiday for the 23rd and the 30th of August. Back on 6th September after the holidays, but see you next week.

Gold Prices and Gold Miners

As the budget cuts stalemate in the United States takes over from the Greek default crisis as the focus of investor attention around the world, the risk appetite continues to weaken. The main beneficiary of this is gold which reached a new record of $1,622.5 per ounce before falling back to $1,614 per ounce. If these issues are resolved, gold prices may reduce slightly, but this is by no means certain and buying, particularly in China and India, is expected to remain strong. Yet while the dollar price of gold bottomed in 1999 and has taken off strongly since 2005, prices of gold mining shares have tended to lag behind that of the yellow metal as “company specific” issue de-link the prices. However the long prices remain at historic highs with little risk of downward movement, the more likely those gold producers will produce increased earnings and gold explorers will benefit from improved discounted cash flow valuations of their projects. We watch companies like Avocet Mining (AVM 230p/£458.96m) in West Africa, Centamin Egypt (CEY 136.4p/£1,489.30m) in Egypt, and Pan African Resources (PAF 13.25p/£191.34m) in South African and Mozambique, with interest.

Angel Biotechnology Holdings (ABH 0.3p/£8.07m)* 

Angel yesterday announced the appointment of expert engineering company WH Partnership Ltd. (WHP) of Newcastle-upon-Tyne as a key milestone in the ongoing re-commissioning of its GMP bio-manufacturing facility in Cramlington near Newcastle-upon-Tyne. The facility will increase Angel's manufacturing capacity approximately five-fold when fully re-commissioned. Under the contract WHP, who is an acknowledged expert in the field, will supply the specialist engineering support and services required for the next phase of the facility re-commissioning, taking it to GMP status. The Board expects the facility to be operational in early 2012.

Angel Mining (LON:ANGM) (ANGM 2.08p/£15.64m)

Angel Mining has observed good progress with the construction of the cable car upper terminal at the Black Angel Zinc/Lead Mine. As the Company’s primary asset, the mine consists of a JORC resource of 4.425 million tonnes of high grade zinc lead ore. The Black Angel Mine has  one of the highest quality ore bodies around as it contains very low levels of impurities. The Company is a now a producing mining firm, and as Angel Mining increases gold production there is a potential to decrease future capital requirements.  

Arian Silver (LON:AGQ) Corporation (AGQ 39p/£117.46m)

Arian Silver, a silver exploration, development and production company with interests in Mexico, announced an 86 per cent increase in resource tonnage along the San Jose Vein from the August 2008 mineral resource estimate. With 34 per cent of the resource currently in the indicated category, there remains several intercepts of high grade silver and base metal mineralization within the existing SJV resource area, all of which remain to be completely quantified.  Nearly 5 kilometres of SJV strikes remained to be drilled, and the Company has begun a Phase-4 drill programme to continue evaluating the various untested mineral systems. Commenting on the operations update, CEO Jim Williams said: “Today’s updated mineral resource confirms the potential for large scale silver mining at San Jose.”

Discovery Metals (LON:DME) (DME 89.5p / £391.22m)

Discovery Metals, an ASX/AIM/BSE listed copper exploration and development company focused on the emerging Kalahari copper belt in northwest Botswana, has reported encouraging drilling results which confirm copper-silver mineralisation in the Mid-Kalahari Zone.  DME is progressing its strategy of building a resource base in the Mid-Kalahari Zone in order to develop a new, stand-alone mining operation. The assay results from drilling at the Ophion Prospect in the Zone confirm the presence of copper-silver mineralisation over long strike lengths. The results (for 26 holes) show that 22 holes intersected copper-silver mineralisation at depths of between 45 and 150 metres below surface along a strike length of approximately 28km. Included among the results is one intercept showing 3m @ 2.1 per cent Cu and 20g/t Ag, one of 1m showing 2.6 per cent Cu and 20g/t Ag and another 1m intercept showing 2.2 per cent Cu and 29g/t Ag. 

E-Therapeutics (LON:ETX) (ETX 36.5p/£50.42m)

e-Therapeutics, the drug discovery and development company, this week announced its preliminary results for the year ended 31 January 2011, together with an update on its progress and future plans. The Company has a pioneering position in a novel approach to drug discovery known as network pharmacology, which can be used to anticipate the effectiveness of a drug against a diseased cell or pathogen and to see whether it can have unacceptable side effects in healthy tissues. The clinical effort is now focused on four commercially attractive candidates spanning cancer, infections and psychiatry and is well funded following an equity placing to raise £16.6m (net of expenses) in March 2011. The Chairman concluded that: “with numerous trials set to report over the next two years and the prospect of new outputs from our discovery platform, we believe we are well placed to generate substantial value both in the near term and beyond”.  

Hutchinson China MediTech Limited (HCM 445p / £230.26m) 

Hutchison Whampoa Guangzhou Baiyunshan Chinese Medicine Company Limited, one of the three companies which comprise the China Healthcare Division of Chi-Med, will invest approximately US$3.2m for a 60 per cent equity interest in a Good Supply Practice (GSP) drug distribution company, Nanyang Baiyunshan Hutchison Whampoa Guanbao Pharmaceutical Company Limited (NBHG). Until now the national over-the-counter drug commercial team of HBYS has been limited by its business license to only selling products manufactured by HBYS.  The establishment of NBHG changes this and enables the HBYS commercial team to also sell third party products in all provinces in China. Christian Hogg, Chi-Med CEO said: “This strategic investment widens the scope of our existing OTC drug business and immediately lets us start leveraging our commercial strength to help build complimentary third party OTC products.  In broadening the portfolio of products that it sells through NBHG, HBYS will gain major scale synergies and improved efficiency in commercial operations.” 

I-Design (LON:IDG) Group (IDG 57.5p/£8.11m)

i-design, the developer and supplier of leading customer engagement software and advertising services for banks and  ATM customers, last week issued a positive trading update. The positive revenue trend reported in the interim results to 31 March 2011 (released on 23 June) has continued into the second half of the financial year. This upward momentum is anticipated to be maintained such that the Board expects that the reduction in the company’s loss before tax for the year ending 30 September 2011 will be significantly ahead of market expectations.

Instem Life Sciences Systems (INS 227.5p/£26.65m)

A leading provider of software applications to the global early development healthcare market, announced that Battelle has purchased its Provantis® and submit™ preclinical software solutions to automate processes within its preclinical facilities. Battelle is the world’s largest independent research and development organisation. Provantis is a modern, fully integrated software system for single users and global organisations engaged in preclinical evaluation studies. Part of the Centrus solution suite, Instem’s submit™ software supports the US FDA sponsored Standard for Exchange of Nonclinical Data (SEND) initiative. Submit is the only fully integrated solution in production today for companies using SEND for the exchange, review and submission of research data. Phil Reason, CEO of Instem, commented, “We are delighted to have secured this contract with Battelle, the world’s largest independent research and development organisation. This is a strong competitive win for Provantis and an excellent early win for our newly launched Centrus suite. We continue to win the majority of new business placed in the early development healthcare market and look to the future with confidence.”

Imperial Innovations (LON:IVO) Group (IVO 352.5p/£351.27m) 

The UK’s leading technology commercialisation and investment company has made a £4m investment in Stanmore Implants, a specialist in the design and manufacture of patient specific implants for complex orthopaedic reconstructions. The proceeds will be used to expand Stanmore’s US and UK sales forces for its current products including the Juvenile Tumour System, a non-invasive extendable implant, and to support Stanmore’s development of its innovative and differentiated new technologies; the Savile Row System, the world’s first fully personalised early knee replacement surgery system, and ITAP, a novel approach enabling the direct attachment of an exoprosthesis to the skeleton of amputees. Susan Searle, Imperial Innovations’ CEO, said: “This is an ideal opportunity for us to invest in a more developed business where we know and understand the value creation opportunities, particularly as some of the original IP emanated from two of the four universities on which we are focused. We have worked closely with the Stanmore management team for some time and with our extensive knowledge of their business we are well positioned to support them as they enter the next stage of their development.” 

Leni Gas (LON:LGO) & Oil (LGO 2.6p/£23.90m)  

Leni Gas, an international oil and gas explorer has signed an agreement to farm-in to the Advance Oil Company (Trinidad) Limited (Advance) North Moruga area leases and plans to work-over existing, producing wells and drill up to nine new wells on the leases.

The Heads of Agreement (HoA) with Advance sets out the framework for a full farm-in agreement and joint operating agreement by which LGO will: take over operatorship of the Advance leases; reactivate production from the existing wells on the leases; drill a minimum of three exploration and up to six development wells; obtain an immediate 33 per cent interest in net production revenues; on conclusion of the farm-in work programme and depending on the number of wells drilled, earn between 33 and 49 per cent interest on the Advance leases. A signature bonus of $39,000 has been paid to Advance and gives LGO exclusivity to conclude the definitive agreements and assignment of interests envisaged under the HoA. Advance has held the North Moruga leases for a number of years and has already drilled three exploration wells. They have also acquired the environmental baseline data necessary to facilitate the permitting of further new wells. The leases lie less than 5km east of the West Moruga Field, which has produced 25 million barrels of oil and 3.5km west of the Innis, Antilles and Trinity Fields, which have produced around 15 million barrels of oil.

Max Petroleum (LON:MXP) (MXP 15.5p/£143.08m) 

Max Petroleum announced last week that ZMA-ET1 well has been connected to temporary production facilities for long-term production testing and is currently producing at a stable rate of 650 bopd. The production is from perforations in the T4 Triassic reservoir, at depths of between 1,282 and 1,288 metres. The current production rate has been restricted to 650 bopd while the Company monitors the level of gas production from the well. The Company has also perforated the ZMA-ET2 appraisal well, successfully flowing 48 degree API oil at an equivalent rate of 450 bopd from perforations in the T5 Triassic reservoir from depths of between 1,315 and 1,321 metres during a limited flow-back period. The well will be connected to temporary production facilities and brought onto long-term production testing in August 2011. The Company expects the well to produce at a stabilised rate of 500 bopd. 

Metals Exploration (LON:MTL) (MTL 17.5p / £94.55m) 

A natural resources exploration and development company, Metals Exploration, said that the extension of the Runruno gold mineralisation south of the proposed pit is confirmed by additional step out drilling. The potential of the Magnetite Creek area for porphyry copper-style mineralisation is confirmed by drilling mapping and sampling. Drilling also confirmed the potential for the Bocboc area for Runruno-style gold mineralisation. In addition, molybdenum recovery test work continues to be positive using synthetic solutions and this test work is to be continued. The planning for early works at Runruno is going well. The Company anticipates the issue of the Declaration of Mining Feasibility during Q3.

Proximagen (LON:PRX) (PRX 116p/£66.56m) 

Proximagen, which focuses on the treatment of disorders of the central nervous system, this week, announced its interim results for the six months ended 31 May 2011. The financial year started positively with the acquisition of two neurology drug development programmes from GlaxoSmithKline bringing the company’ pipeline up to 14 programmes. Of the four clinical stage programmes in the pipeline, two advanced significantly during the period; in particular, Naluzotan, a candidate treatment for temporal lobe epilepsy began its phase II clinical trials in partnership with the US National Institutes of Health. The Company is also benefiting from a lower than expected cash burn as its partners on the two clinical programmes shoulder the clinical development costs and the balance sheet remains strong with a cash balance of £44.7m.  

Sirius Minerals (LON:SXX) (SXX 7.91p/£81.68m) 

The Company, a globally diversified potash development group, has announced the approval by the North York Moors National Park Authority of two additional planning applications for drill sites for the York Potash Project. Following the successful early completion of the preparation work at its first drill site near Hawsker in North Yorkshire and procurement of critical components, Sirius expects the first drill rig to be on site this week. We expect an update to announce that drilling has commenced. At that time, the Company will also provide an expected schedule for completion of the first hole. Site preparation has also commenced at the second drill site near Ugglebarnby, North Yorks.

Summit (LON:SUMM) Corporation (SUMM 8.12p/£13.67m)* AIM listed drug discovery company announced yesterday that it has raised £1.35m through a placing at 8.0 pence per share, a discount of 9.9 per cent to the closing mid-market price of 8.875 pence on 22 July 2011.  The offering was oversubscribed and the shares were placed with existing and new institutional investors. Summit continues to progress confidential discussions with leading international pharmaceutical and biotechnology companies for its key programme assets and Seglin technology platform.  The raising of these additional funds will strengthen the position of the Company during these discussions as Summit seeks to conclude deals and evaluate and further develop new opportunities that generate optimal value for shareholders.

Sunkar Resources (LON:SKR) (SKR 18.25p/£30.09m)

Sunkar Resources recently conducted pilot plant re-confirmation tests and acid post treatment tests, all of which produced results the Company was expecting. The Board is confident that its phosphoric acid technology is valid for phosphate rock collected from various areas of the large deposit.

Synchronica (LON:SYNC) (SYNC 16.75p/£16.43m)

Synchronica, the international provider of next-generation mobile messaging solutions, has received an expansion order from an existing mobile operator customer based in the Middle East. This is the third order of this magnitude for the Company from this region in just seven months. This order for additional Mobile Gateway user licenses, with value of $740,000 comes after an initial $1.5m order received in December 2010. Mobile Gateway allows the operator to offer mass-market messaging services including push email and instant messaging. According to CEO Carsten Brinkschulte, this market leading product for mobile messaging in emerging markets provides subscribers access to various Internet communities, regardless of mobile phone type.

Victoria Oil and Gas (VOG 4.27p/£91.33m) 

Victoria Oil & Gas has increased its working interest in the Logbaba gas and gas condensate field in Douala, Cameroon to 95 per cent after the serving of a Notice of Forfeiture on 18 July 2011 on RSM Production Corporation (which previously held 38 per cent interest in the Logbaba Concession). RSM failed to deliver on a cash call made on 15^th July 2011, and a default notice was served 2^nd July 2011. With several legal agreements between VOG’s 100 per cent subsidiary Rodeo Developments Limited and RSM, RSM’s failure to rectify the default resulted in a Forfeiture notice as per the operational agreements between RDL and RSM. RSM is required to withdraw from the Agreement and transfer RSM’s former interest to RDL. Societe National des Hydrocarbures, has indicated that it intends to take a 5 per cent participation in the Logbaba Concession.

Tertiary Minerals (LON:TYM) (TYM 8p/£9.51m)

The diversified mineral explorer announced that drilling of ten holes at the Storuman Fluorspar Project was due to commence and also added that the Metallurgical test work programme at Lassedalen project in Norway has been awarded to Wardell Armstrong.

The Storuman drill project will test immediate extensions to the recently announced Mineral Resource and more speculative distal (outer) extensions to fluorspar mineralisation. The secondary objective of the drilling is to sterilise potential plant and tailings sites. The programme awarded to Wardell Armstrong aims to produce acid grade fluorspar from drill samples and provide data for preliminary economic evaluation. This test work is expected to take six months to complete.

Tristel (LON:TSTL) (TSTL 46p/£18.39m) 

Manufacturer of infection control, contamination control and hygiene products yesterday gave a trading update ahead of the publication of its preliminary results for the year to 30 June 2011. Since the Licence Delays and Trading Update announcement of 28 April 2011, Tristel has now secured the licence to sell the Stella decontamination system in China and the VAH listing for the Wipes System in Germany. In the final quarter of the financial year, ended 30 June 2011, sales in Germany have increased significantly each month in percentage terms and sales of the Crystel products, sold into the pharmaceutical and personal care market, have commenced.  In June 2011, 30 Stella System upgrades were also sold to its Chinese distributor network.  The Board is pleased to report that it now anticipates pre-tax profit (before share based payments) will be greater than £500,000, exceeding its expectations at the time of the April announcement. The Company continues to pursue its expansion plan and remains debt free.

Tristel also announced separately and today that it has been granted a patent from the Chinese Patent Office for its Tristel Wipes: Traceability System. Tristel's Wipes System is widely used worldwide for the decontamination of small and delicate medical instruments used in hospital departments such as ear, nose and throat (ENT), cardiology and ultrasound.  The Wipes System is now going through the registration process with the Chinese authorities to enable it to be marketed.  Full approval of the Wipes Systems is anticipated by the end of the calendar year.

*A corporate client of Hybridan LLP