Exploration Insights by Robert Tyerman

Amid the significant volatility in oil prices, promising prospects are still attracting big companies to smaller fry.

Oil majors are talking to Bahamas Petroleum, up from our 2.25p recommendation in 2009 to 15.75p now, about its extensive licences between the Bahamas and Cuba; and AngloGold Ashanti, the world’s third-largest gold producer, is taking 11.5 per cent of Ethiopia and Turkey-focused explorer Stratex International through a £3 million private placement at 7.72p.

This will help accelerate exploration in the Afar epithermal gold province straddling Ethiopia and Djibouti, where Stratex has recently taken encouraging high-grade rock samples from its Blackrock licence. Stratex is seriously considering spinning off its East African assets within the coming six to 12 months, says chairman David Hall.

The company claims total present resources of 1.31 million oz of gold and 3.2 million oz of silver in Turkey, where it has a strategic agreement with major copper producer Antofagasta and an option/joint venture deal in central Turkey with Canadian mining group Teck Resources, a major Stratex shareholder.

Highlighted by Growth Company Investor at 5.3p last July, Stratex shares now trade above the AngloGold placing price at 8.6p. Hold on.

Cheer for Falklands fans
Rockhopper Exploration says its 14/10-5 well in the North Falkland Basin has shown ‘commercially viable’ flow rates. The AIM-quoted company reports that tests on the well, in its Sea Lion discovery, have produced a daily flow rate of 5,508 standard tank barrels of oil and 940,000 cubic feet of gas over a 48-hour period, with a maximum stabilised oil flow rate of 9,036 standard tank barrels a day.

Rockhopper became an AIM star when its shares soared from 2005’s float price of 42p to more than £5 on the discovery of Sea Lion, though subsequent delays and setbacks later sent the price down to 202.5p. Highlighted last year at 189p and now 275p, the shares value the company at £710 million and offer speculative potential.

Chile-focused Herencia Resources has secured £2.8 million at 2.25p to develop copper, gold, silver, zinc and lead projects.

Broker WH Ireland raised the money from several sources, including major metals group Nyrstar, the AIM-quoted company’s largest holder with 10.15 per cent, and Chilean family investment fund Megeve Investments.

West Australia-based Herencia says it will use the placing proceeds to prepare its Guamanga copper-gold project for initial drilling later this year, explore a new vein around a high-grade zinc, silver and lead intersection at another prospect, Patricia, and drill a deep exploration hole at its La Rosa porphyry target.

Highlighted by Growth Company Investor at 0.74p last year, Herencia shares now trade at 2.43p. Partial profit taking might be prudent, while keeping a chunk for potential further growth.

Avocet project grows
Avocet Mining says drilling shows its West African Inata gold project in Burkina Faso is ‘much larger’ than current 2.12 million-oz resource estimates suggest. The AIM-quoted company cites highlights from its latest drilling results, including 45 metres at 2.77 grammes of gold per tonne of ore, 26 metres at 7.35 grammes a tonne, nine metres at 10.3 grammes a tonne and one metre at 21.6 grammes a tonne.

Progress to a formal upgrade of current gold reserves of 1.08 million oz and the present 2.12 million-oz resource will be delayed as a result of recent labour unrest. But chief executive officer Brett Richards insists ‘we are confident of achieving the goal of doubling the mineral reserves’; and Avocet has completed the sale of most of its South East Asian assets as part of a $200 million (£125 million) disposal deal.

We recommended Avocet shares at 73.75p in 2009, before suggesting partial profit taking at 200.25p last month. Now 190.75p, the remaining shares could gain renewed popularity.