Exploration Insights by Robert Tyerman

Despite the less-than-ideal economic climate, some encouraging signs from the resources sector continue to whet the speculative investor’s appetite.

Korea National Oil Corporation’s hostile £1.7 billion move for Dana Petroleum, Britain’s largest independent North Sea oil producer, is another welcome sign of corporate activity in the resources sector, though Dana insists its shares are worth between £22.70p and £24.65p, against the Koreans’ £18 opening bid price. At £18, against our 2009 recommendation at £10.65p, the shares may not have much further to go without a better Korean bid or a rival offer.

Indian oil play gushes
India-focused Oilex has pleased investors with a hefty reserve upgrade to between 248 billion and 591 billion cubic feet of gas at Cambay in Gujarat. Based in Western Australia and listed Down Under and on AIM, the company says this is the estimated range of net recoverable reserves attributable to its 45 per cent stake in the Cambay field.

Steered by entrepreneur Dr Bruce McCarthy, a former Cairn Energy luminary, Oilex has taken advice on the Cambay reserves from two North American experts, NuTech Energy Alliance and Morning Star. The company says it expects to submit data shortly for an independent certification of these reserves early next year.

After falling from 83p in 2006 to a mere 4.75p within the past 12 months, Oilex’s volatile shares have since rallied. Highlighted by Growth Company Investor at 7.5p recently, they bounced to 17p before slipping to 13.25p, and retain speculative promise for the medium term.

GGG on track
GGG Resources has increased its estimate of inferred gold resources at Bullabulling in Western Australia by 450 per cent to 1.98 million oz. The AIM-quoted company, formerly Central China Goldfields, says it can move this estimate, at a low potential grade of 1.5 grammes of gold per tonne of ore, from the tentative inferred category to the more confident measured and indicated categories by twinning ‘a number of historic drill holes’.

Recently, GGG, steered by managing director Dr Jeffrey Malaihollo, raised £1.12 million at 3.8p from resources investor Baker Steel Capital Managers and others to develop Bullabulling. Highlighted by Growth Company Investor at the time at 4.10p, the shares have now reached 6.13p. Hold on.

Copper bottomed
Discovery Metals hopes to start producing copper from 2012 from its Boseto project in Botswana, after a bankable feasibility study suggested it had a net present value of £251 million (£162 million) and could yield a two-year payback. The AIM-quoted company, based in Brisbane, has established an initial copper reserve of 313,300 tonnes, part of an estimated potential measured, indicated and inferred resource of 1.4 million tonnes of copper at 1.4 per cent and 57 million oz of silver at 17.3 grammes a tonne.

Recommended by Growth Company Investor at 15.5p last year, Discovery shares now trade at 52.5p. They stand to make further medium-term progress.

Anglo Asian turnaround
Central Asian gold producer Anglo Asian Mining has turned a $2 million (£1.28 million) interim loss into $6.2 million first-half pre-tax profits. In the six months to June, the AIM-quoted company produced 28,493 oz of gold from the Gedabek mine in Azerbaijan at an average cost of $372 an ounce. It sold 24,360 oz of gold at an average price of $1,155 an ounce, chalking up first-half turnover of $28.4 million.

Chief executive Reza Vaziri says the company is now targeting gold production of 60,000 oz for 2010. Anglo Asian, whose formal estimated resources in 2006 stood at 702,000 oz of gold, 37,500 tonnes of copper and 6.1 million oz of silver, all in the comparatively tentative 'indicated' and 'inferred' categories, suggests an imminent report from consultant SGS could show a 25 to 30 per cent uplift.

Highlighted by Growth Company Investor at 16p last year, the shares – which had at one point fallen from 2005's 77p float price to a mere 3p – have rallied further to 28p and retain some speculative appeal for the brave.