Saturday, September 30th 2023

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Shareholders look to South Africa, South East Asia and the South East of England for value catalysts

While Boris Johnson’s supposed Brexit deal stole most of the generic news headlines and currency highlights this week – there’s also been company news demonstrating genuine progress and making good on promises.

Take the gem trade for example, ‘A Diamond is Forever’ has been the iconic slogan for De Beers since 1947.   In 2019 the slogan for Blue Rock Diamonds might just be ‘Nothing less than US$50,000.’ Last month the owner and operator of the Kareevlei diamond mine in the Kimberley region of South Africa said it had sold six diamonds this year at a price higher than that magical figure.

With operations now, 365 days a year, and a strategic review which heralded the appointment of a new CEO, Blue Rock Diamonds chairman Michael Houston is confident the company will meet its target of profitability in the second half of 2019. His confidence was palpable in this week’s investor update which revealed a record quantity of gems had been discovered in the third quarter.

Kareevlei is one of the top ten highest value per carat diamond mines in the world.  Two of the stones discovered weigh over 20 carats. The most recent came in at 20.72 carats and the sale price will be announced following the completion of the October tender. The stock has tripled since its year low of 41p, and traders are saying with higher grades comes greater profit and Blue Rock must now be looking to expand beyond a single mining operation with the logical step being a new operation within the next three to five years.

Houston says the company has seen record levels of income and lowered unit costs of production thanks to the consistently high values per carat of diamonds produced in the last quarter. But remember ladies and gents CUT determines the sparkle of a diamond NOT carat weight. From the diamond mines of South Africa to the company with mid-cap oil producer aspirations in the South of England.

We’re talking UK Oil & Gas, and on Tuesday squeamish investors retched while reading the latest Horse Hill update which described oil “bleeding profusely from core throughout the sweet spot,” in the Upper Portland’s most porous permeable and productive vertical zone within the oil pool.

“We can now confidently proceed ahead to drill the HH-2 horizontal trajectory wholly within the most oil productive part of the Portland, the zone capable of delivering the significant flow rates we seek.” It was exactly one year ago the company officially declared the Horse Hill Portland oil field as “commercially viable,” and traders are now comparing company prospects to football legends.

Billboarder ‘Petercraigscot’ made this simple and brilliant analogy: “Lionel Messi at 16 years of age had the potential to be a good player but was unproven, his value was relatively low. By age 25 he was widely regarded as the greatest player of all time and his value was immense (buyout clause of several hundred million Euro). But even at 25 he still had the potential for several more years of top performance. Now nearing 33 years of age, he’s still performing at a world-class level and his value is still high, but not as high as it was when he was 25.

What would’ve Man United paid for him at aged 16 had they known his future abilities? A heck of a lot of money.

We have a similar situation here with UKOG, developing nicely into a good producer, but with potential to be a great UK onshore player. In 25 years’ time, it may have had excellent results and folks would wish they had a time machine (oil-powered of course).

Each small step marks a giant stride forward for UKOG. 25 years production at HH. Let’s see the results. Some are still scouting, whilst others like me are already bought in.

If UKOG delivers at HH, GB, IoW, Dunsford, BB, and other future sites, then the current price will seem incredibly cheap. UKOG, concludes Petercraigscot, will be a great UK player, but cannot be compared to oil giants BP and Shell.

In southeast Asia meanwhile, Coro Energy’s ambitions are immense. It provided an operational update about its drilling campaign in the Duyung Production Sharing Contract in the West Natuna Basin, offshore Indonesia, in which Coro holds a 15% interest. CEO James Menzies was thrilled Coro’s first well in Indonesia had delivered a significant result. ‘We believe the quality of the reservoir found will convert significant volume from the 3C to the 2C resource estimates for the field and add material value to the asset. Focus now switches to the next step in the campaign, we look forward to the results of the well testing programme and thereafter further appraisal and exploration drilling will follow which we see as further significant value catalysts.”

At 2.8p, with a market cap of £22.48 million, the stock has recovered from its 52-week low of 1.78p with no immediate calls for cash if you believe Menzies’ caveat in Tuesday’s announcement. “The next step in the drilling campaign is an extensive DST programme, which will take place over the coming days. Further announcements will be made, as appropriate. Coro remains fully funded for its share of costs associated with the drilling campaign.”

Menzies has been described as having the ‘Midas touch’.  Remember he was the co-founder and CEO of South East Asia focused Salamander Energy from 2005 to 2015 when it was acquired by Ophir Energy for $US850 million.

And the pen is poised to make the magic happen for Vast Resources.  Tantalisingly at the end of last week investors were told to prepare for a signing of its joint venture agreement with Zimbabwe’s government-owned Zimbabwe Consolidated Diamond Company.   The joint project will be known as The Chiadzwa Community Diamond Project and has been established to mine the Heritage concession in the Marange Diamond Fields.

But for Marange read ‘Manana’ at least until the deal’s been done.


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The author was remunerated but does not hold shares in any of the companies covered