Exploration Insights by Robert Tyerman

People are still striking interesting deals in the resources sector. One that should appeal is AIM shell Chalkwell Investments (CORE)

Chalkwell Investments has agreed a reverse-takeover deal with US-focused Core Oil and Gas and raised £1 million at 45p. New boss Bruce Evers claims that Core has gas assets in the Gulf of Mexico and Michigan potentially worth nearly £59 million and will need a funding after the deal.

Now suspended at 60p, Chalkwell, renamed Core Petroleum, will be the UK holding company for Delaware-based Core Oil and Gas, with an interest in Mustang Island, a shallow oil and gas prospect near the Texas coast. Core is ready to sign a deal on another prospect, Budde Ferry in Michigan, and Evers is keen to look at opportunities elsewhere.

Hampshire-based oil play Egdon Resources, steered by adroit Mark Abbott, is expanding its onshore UK interests by taking 50 per cent of two licences, PEDL 180 and PEDL 181, in Lincolnshire from Valhalla Oil & Gas, covering 100 sq km, next to its existing PEDL 182 licence in exchange for a 10 per cent net profit interest.
Recommended by Growth Company Investor at 12.5p in November, shares in Egdon, which turned £83,523 losses into £235,417 pre-tax profits last year, have hit 20.75p and could motor further.

Gems in vogue
Diamonds continue to regain their appeal, on buying from the East and new production sources hard to discern. AIM-quoted Petra Diamonds is anticipating a move to the Full List by doubling output with the purchase of De Beers’ Finsch mine in South Africa for £126 million and has raised £205 million at 150p.

Finsch should produce more than 1.5 million carats – worth an estimated $135 (£85.4) a carat – in a full year, bringing a diamond resource of 48.1 million carats, taking group output to a likely
2.8 million carats. Petra targets three million carats next year, with 5.4 million the goal for 2019.

Recommended by Growth Company Investor at 61p last March, the shares have now reached 176.75p. There should be scope for further useful gains.

Hitherto lacklustre Firestone Diamonds intends to spice up life with prospective production from Liqhabong in Lesotho, acquired when it bought Kopane Diamonds. With 90 million tonnes at 34 carats per hundred tonnes (at an estimated average value of $86 a carat), worth a gross $2.7 billion (£1.8 billion), Firestone estimates annual revenues of $29 a tonne and current costs of $12 a tonne. This could revive interest in the shares at 31.75p.

West Africa-focused Paragon Diamonds has raised £2.9 million from Henderson and others at 34p to expand. The AIM-quoted company’s Zambian subsidiary recently won the 'Kaplamp' exploration licence in an area where gem giant De Beers had previously found ‘significant’ numbers of diamonds. Recommended by Growth Company Investor at 22p in November, Paragon has now reached 38p. Hold.

Wheeler-dealer John Teeling hopes has brought Botswana Diamonds to AIM with exploration assets from his former company African Diamonds, which he sold to tycoon Lucara Diamonds in a £45.5 million share deal. The Lucara deal valued Botswana Diamonds at 7p a share. Now 6.5p, the shares should have speculative appeal.      

Alluring anthracite
Pennsylvania miner Atlantic Coal has ‘dramatic new development targets’ in its sights, while seeking to double existing anthracite production. The AIM-quoted company (1.2p) plans to double open-cast production of premium-priced anthracite at its Stockton colliery to 250,000 tons a year, with potential margins of around $40 (£26) a ton, and has larger projects in mind.

London-based Atlantic reduced losses from $2.6 million (£1.6 million) to £1.5 million in the first half of last year on turnover up 41 per cent to $4.8 million. Analysts think it could reach break-even this year and make worthwhile profits in 2012, with dividends potentially in prospect.

Shareholder Blackrock has more than doubled its stake in Atlantic to 7.24 per cent in a placing at 0.4p. Since then the shares have reached 1.42p, against our 0.68p recommendation last month. Buy.