Exploration Insights by Robert Tyerman

Financial markets ring with debates between those who insist commodities such as gold, oil and copper have had their run and those who, with equal authority, say the ‘super-cycle’ is still moving higher. The arguments do not change much, but investors, while seizing the opportunities still presenting themselves, should be ready to change tack if the bears show signs of prevailing.

Meanwhile, Botswana-focused copper play Discovery Metals, first highlighted here two years ago at 15.5p, continues to please at 85.5p, with encouraging infill drilling results from its Zeta deposit, as does Medusa Mining,recommended here at 27p in 2006 and at 460p last month and now 512p, with good gold grades and costs at its Co-O operation in the Philippines. Hold on to both for now.
                    
Don’t fling Highland    
The same applies to Russia-focused Highland Gold Mining at 166.5p, which continues to expand after upping pre-tax profits 65 per cent to $144.3 million (£90 million, on turnover increased 48 per cent to $244 million in 2010, as it boosted production 22.5 per cent to 200,000 oz at its flagship Mnogovershinnoye (MNV) mine. Cash costs rose by $10 to $496 an ounce, against current market prices of more than $1,500 an ounce. The company ended the year with $167.6 million cash and will fast-track key projects.

Australia-based Range Resources is lifting its stake in onshore Trinidad oil assets with a possible 26.9 million barrels to 90 per cent. The company recently raised £20 million at 17p and may also accept an oversubscription of £5 million. It has entered into a heads of agreement to pay $52 million (£32 million) and issue shares worth some £7.2 million to SOCA Petroleum for a ninefold increase in its present 10 per cent stake in the two licences.

Once these blocks, which Range says hold probable and possible oil reserves of 6.9 million barrels and estimated undeveloped prospective resources of another 20 million barrels, start to produce at the rate of 1,250 and 2,500 barrels a day respectively, the company will issue more shares worth some £3.6 million, taking its total payment to £42.8 million.

Range also has interests in Texas and the Republic of Georgia, but its key long-term aspirations lie in 20 per cent of two licences in the ‘highly prospective’ Dharoor and Nugaal valleys in Somalia’s autonomous Puntland region.

Range shares, which soared during the past year from 3.4p to a 25p high, now trade at 19.5p and still have speculative possibilities.

Egdon eyes growth
Hampshire-based Egdon Resources has made an interim £4.4 million pre-tax profit, thanks to selling some French assets, and is looking for fresh expansion. During its first half-year, AIM-quoted Egdon lifted production from its onshore UK assets 56 per cent to 17,671 barrels of oil. First production from its 40 per cent-owned Kirkleatham gas well in Yorkshire was temporarily held up and its 10 per cent-owned Ceres well in France will only start producing this month, which should also bring the restart of the UK Keddington field.

 This year should bring the testing of the Markwells Wood discovery in Sussex by its operator, Northern Petroleum. Egdon ended January with 30 licences in the UK and France and estimated prospective resources of 290 million barrels of oil equivalent, though the company fears a French political moratorium on oil shale drilling will stop work at its Mairy permit in the Paris Basin.

With year-end cash up from £1.5 million to £5.3 million, Egdon continues to keep its eyes open for acquisitions, of assets or companies, and asserts that it could make money from its existing onshore assets even if oil fell from to $40 a barrel.

Recommended by Growth Company Investor at 12.5p last November, Egdon shares now trade at 20.75p and could go further.