Exploration Insights by Robert Tyerman

Fundraising still remains a key issue in helping to bolster businesses. However, there is a glimmer of hope as the nature of currencies works to restore the balance.

Gold’s recent strength against the debt-ridden US dollar has brought some cheer to an otherwise sombre sector, as has oil’s latest rally in the direction of $50 a barrel. While Rio Tinto contends with institutional opposition to its planned capital injection from Chinese aluminium giant Chinalco, deals and possible deals are stirring interest among smaller companies.

Oil and gas exploration play BowLeven enjoyed a rally from a December low of 25.5p to 104p in the wake of a bid approach at 150p, at one point thought to be from a Chinese source.

Northern Petroleum, mentioned last month, still languishes at a depressed 81p, in spite of interesting potential in both Holland and Italy. Yet, significant production is in sight and the company need not be cash-hungry.

Reserve hike at European Goldfields
Balkans-focused European Goldfields has upped gold reserves to above ten million oz, while losing an annual $11.6 million pre-tax, though tax credits of $16.6 million produced a net profit of $5 million. European, which produces zinc, lead and silver in Greece, as well as gold tailings, and is developing a gold and copper project in Romania, blames lower metal prices for a 30 per cent fall in sales last year to $60 million (£43 million).

Production at the company’s Stratoni mine rose 26 per cent.

A feasibility study on the Certej project in Romania extended its mining life to 16 years and European spent $37 million (£26.4 million) in 2008 on future projects.

Late last year, chairman Dimitrios Koutras increased his holding to 9.7 per cent, shrewdly buying after the shares were well on their way down from 350p in early 2008 to October’s low of 64p. They have rallied to 168.5p, valuing the company at £295 million and valuing Koutras’s holding at some £30 million.

Finders finds its money
Copper and gold play Finders Resources is raising £2.7 million to complete the feasibility study into its Wetar copper project in Indonesia. Aussie micro-cap investor Acorn Capital is backing the placing and becoming a significant shareholder, while the terms show how tough fundraising has become in today’s markets.

The placing, in two tranches, is priced at 9p. That compares with a current 11.75p, 2007’s high of 58p and January’s low of 10.5p.

Still, if, as chairman Russell Fountain argues, this funding enables Finders to accelerate development of a 20,000 tonne-a-year copper project at Wetar, it might provide investors with some cheer – eventually.

Stakebuilding lifts Serabi
Mining entrepreneur Steven Poulton has bought nearly 4 per cent of bombed-out Brazilian gold play Serabi Mining. Shares in AIM-quoted Serabi have doubled to 1.05p following the purchase of 9.5 per cent of the company by Barclays Stockbrokers for clients. These clients include Poulton, founder and former boss of another AIM counter, Ariana Resources, and director of Stellar Diamonds, a subsidiary of yet another AIM company, West Africa-focused Mano River Resources.

Poulton now holds 3.64 per cent of London-based Serabi, which needs about $5 million (£3.6 million) to resume underground mining at Palito in Brazil’s Jardim do Ouro district, according to chairman Graham Roberts.

Roberts says Serabi is talking to ‘several parties’ about raising the required funds and suggests that an eventual deal may be ‘at the asset level’, rather than a corporate transaction. Floated at 30p four years ago, Serabi shares reached 54.5p in 2006 before their disintegration to 0.43p.

Described by Roberts as ‘a decent option on the gold price’, they remain essentially speculative.