Rat's Rant: Stocks that are hot, not and... 'The ASX Guy'

By Rat's Rant. Published at Sep 11, 2019, in Market Wrap

Did you know that this day in 1977 marks the last time a person was executed in France?

Hamida Djandoubi was also the last person to be executed by guillotine. Djandoubi was convicted and sentenced to death for the murder of 21-year old Elisabeth Bousquet. And as Chuck Norris would say, good riddance.

What's hot

Winchester Energy Limited (ASX:WEL)

Winchester Energy Limited closed up 29% yesterday to finish at 5.8c on $1.3 million stock traded. The reason for the spike was the announcement they have recovered significant oil following the fracture stimulation of the lower two of four intervals of the Lower Cisco Sand at the recently drilled Arledge 16#2 well, which is located over in sunny Texas.

Following the frac, swabbing initially recovered fluid with a 60 - 70% oil cut.

The fluid level remained at 1,400 feet indicating good permeability and, after 15 runs, the well began to flow 90% oil through a wide open choke at a rate of 30 barrels per hour.

It's nice to see an oil and gas stock be rewarded by the market, as it seems as if they are few and far between at the moment. Perhaps the times are a changing.

I've met the boys from the company before and I am pretty sure one or two of them are still read this newsletter, so if you read this John, Neville or even Larry - keep up the good work and producing that black gold.

Some details on the news are listed below:

Significant Oil Recovered from Arledge 16#2 Lightning Prospect, Permian Basin, Texas

Highlights

  • Fracture stimulation has been completed in the lower two of four intervals in the recently drilled Arledge 16#2 (100% working interest) well targeting the Lower Cisco Sand unit.
  • After fraccing, the two Lower Cisco intervals were swabbed, with the well initially flowing through a wide open choke at a rate of 30 barrels of fluid per hour with a 90% oil cut.
  • To avoid reservoir damage, a small 16/64ths (quarter inch) choke was applied, through which the well flowed 103 barrels of oil in 20 hours, a rate equivalent to 125 barrels of oil per day (bopd).
  • Winchester will be adjusting the choke size gradually to optimize the flow rate.

Arledge 16#2 Initial Frac Results – Lower Cisco Sands (Winchester - 100% Working Interest)

Winchester Energy Limited (Winchester), as operator, has recovered significant oil following the fracture stimulation of the lower two of four intervals of the Lower Cisco Sand at the recently drilled Arledge 16#2 well.

Prior to the frac, Intervals 1 and 2 of the Lower Cisco Sands (from 5,075 - 5,131 feet) were perforated and acidized returning a combined swabbing rate from the two intervals of approximately 80 bopd. Intervals 1 and 2, totaling 41 feet, have now been fracture stimulated.

Following the frac, swabbing initially recovered fluid with a 60 - 70% oil cut. The fluid level remained at 1,400 feet indicating good permeability and, after 15 runs, the well began to flow 90% oil through a wide open choke at a rate of 30 barrels per hour.

To avoid any damage to the reservoir the well was then placed on a small 16/64ths (quarter inch) choke, flowing103 barrels of oil in the following 20 hours (a rate of 125 barrels of oil per day (bopd)) along with some as yet unmeasured gas. The flow rate will gradually be increased through opening of the choke in order to optimize the flow rate of the well.

The initial flow rates, although under the influence of higher pressures due to the frac, are extremely encouraging. The initial absolute open flow of 30 barrels an hour indicates strong permeability. There remains 1,400 barrels of load water (frac fluid) to recover.

Liquefied Natural Gas Limited (ASX:LNG)

LNG closed up 26% yesterday to finish at 24c on $3.5 million stock traded. There was no news in the market, but the oil price was up quite strongly overnight on the back of inventory falls and a declining rig count over in the US.

There has been a fair bit of bullish chat around from some of the simple folk that I hang out with and I just hope they are right as I don't have a car and am super long on a few oil and gas stocks.

Earlier this month, it was announced that LNG would drop out of the ASX 300 but that hasn't seemed to worry too many at this stage.

Some details on what they do are listed below:

ABOUT LIQUEFIED NATURAL GAS LIMITED

LNG is an ASX listed company (Code: LNG and OTC ADR: LNGLY) whose portfolio consists of 100% ownership of the following companies:

  • Magnolia LNG, LLC (Magnolia LNG), a US-based subsidiary, which is developing an 8 million tonnes per annum (mtpa) or greater LNG export terminal, in the Port of Lake Charles, Louisiana, USA;
  • Bear Head LNG Corporation Inc. (Bear Head LNG), a Canadian-based subsidiary, which is developing an 8 – 12 mtpa LNG export terminal in Richmond County, Nova Scotia, Canada with potential for further expansion;
  • Bear Paw Pipeline Corporation Inc. (Bear Paw), which is proposing to construct and operate a 62.5 km gas pipeline lateral to connect gas supply to Bear Head LNG; and
  • LNG Technology Pty Ltd, a subsidiary which owns and develops the Company’s OSMR® LNG liquefaction process, a midscale LNG business model that plans to deliver lower capital and operating costs, faster construction, and improved efficiency, relative to larger traditional LNG projects.
Yeah PHIL!

CML Group Limited (ASX:CGR)

CGR closed up 21% to finish at 50.5c on $769,000 stock traded. The reason they were up was because they have entered into an agreement to purchase 100% of the shares in Classic Funding Group (CFG) for $11 million and will be funded by a new $25 million facility and CML’s existing equity on balance sheet.

CFG is an Australian owned financial services company with over 25 years’ experience in providing asset finance solutions to a broad range of customers across both Equipment Finance and Invoice Discounting, but they have never discounted any of my invoices which is annoying.

Value add is zero from here on in but some details on today's acquisition are listed below:

Strategic Acquisition to Accelerate Growth Strategy

Key Highlights

  • Heads of Agreement to Acquire Classic Funding Group for $11m
  • Acquisition to underpin strategy to grow Invoice Discounting and Equipment Finance businesses and increases both divisions funds advanced by 5x
  • EPS accretive in FY’20 with further synergies expected in FY’21
  • Acquisition to be funded by a new debt facility (conditionally approved) plus existing cash reserves

Invoice Discounting

  • Increases CML’s Invoice Discounting Funds Advanced by ~5x
    • CFG’s Invoice Discounting division is financed through a $45m warehouse facility provided by a major Australian Bank
    • The loan book is currently $30m+ and will add approximately 40 clients and $400m+ of annual invoice turnover compared to CML’s loan book of $6m and a portfolio of 7 clients and $100m of turnover (FY’19 run rate)
    • The addition of CFG’s client base and experienced staff will bring forward CML’s strategy to build volume in Invoice Discounting

Equipment Finance

  • Increases CML’s Invoice Discounting Funds Advanced by ~5x
    • CFG’s Equipment Finance division is financed through a separate $130m warehouse facility provided by a major Australian Bank
    • The loan book is currently $100m+, with a long history of strong credit performance and wellestablished channels to market
    • The addition of CFG’s Equipment Finance book will add critical scale to CML’s business and take Funds Advanced from $20m to $120m+
    • In addition, the improved funding structure within the CFG Equipment Finance division brings forward CML’s plan to transition to significantly cheaper funding for its Equipment Finance product and will enable CML’s Equipment Finance growth strategy.

Transaction Details
The CFG acquisition, which is conditional on consent from CFG’s funder to transition its warehouse facilities to CML is expected to be completed by mid-October 2019.

The acquisition will be funded by a new facility that has been conditionally approved, plus CML’s existing equity on balance sheet. The new facility of $25 million will also be used to replace existing CFG Mezzanine debt with a cheaper solution.

The purchase consideration of $11 million includes approximately $6 million in Goodwill.

Centaurus Metals Limited (ASX:CTM)

CTM closed up 18% to finish at 1.3c on $1 million or 1 brick of stock traded. The reason they were up, believe it or not, was because they announced a $10 million capital raise @1c, which was done by the good girls at Bell Potter with Orimco Pty Ltd who were a Co Lead Manager.

The share placement received strong support from a number of small-cap institutional investors in Australia and overseas, including clients and affiliates of the Sprott Group, as well as new and existing sophisticated high net worth (HNW) investors and they were kind enough to offer me donuts in the raise sadly.

The funds raised are to underpin an aggressive exploration and development program at the recently acquired Jaguar Nickel Sulphide Project in Brazil.

Some details on today's news are listed below:

$10M CAPITAL RAISING TO ADVANCE NICKEL SULPHIDE EXPLORATION

Key Points:

  • $10m raised via strongly supported placement at $0.01 per share.
  • Several new Australian and international institutional investors to join CTM register.
  • Company now fully funded for exploration, resource definition and pre-development activities at recently acquired Jaguar Nickel Sulphide Project, Brazil.

Centaurus Metals (ASX Code: CTM) is pleased to announce that it has raised $10.0 million to underpin an aggressive exploration and development program at the recently acquired Jaguar Nickel Sulphide Project in Brazil.

The share placement received strong support from a number of small-cap institutional investors in Australia and overseas, including clients and affiliates of the Sprott Group (“Sprott”), as well as new and existing sophisticated high net worth (HNW) investors.

The proceeds of the capital raising will ensure that Centaurus can maintain significant exploration and development momentum at Jaguar, which it is acquiring from global mining giant Vale S.A. in a transaction that was recently approved by the Vale Board. The funds raised will underpin the Company’s maiden exploration campaign, including resource definition drilling and other pre-development activities.

The Jaguar Project comes with an extensive geological and geophysical data base including over 55,000m of diamond drill core and numerous Fixed Loop EM (FLEM) and Down Hole EM (DHEM) surveys, immediately propelling Centaurus to the forefront of the nickel sulphide development sector with an asset capable of delivering a JORC compliant Mineral Resource in the near term plus an exceptional pipeline of exploration and growth opportunities.

Recent re-processing of the EM survey data over the Onça Preta Deposit and Onça Rosa Prospect by Southern Geoscience has shown excellent correlation between the location of the EM plates at these Deposit/Prospect areas and known high-grade nickel mineralisation seen in historical Vale drilling (see ASX Release of 29 August 2019). Reprocessing of the EM survey data is ongoing in the southern portion of the tenement over the Jaguar Deposits.

Centaurus’ Managing Director, Darren Gordon, said:

“The exceptional response to this raising, including from several new sophisticated and small-cap institutional investors reflects the quality, scale and potential of the Jaguar asset. This is a transformational acquisition for Centaurus, and has been acknowledged as such by the incoming investors – who share our view that this is a rare exploration and development opportunity in the nickel sulphide sector globally.

“We are particularly pleased to have been able to attract Sprott to the register given their North American presence and global reach. I would like to thank them and several other prominent Australian HNW and institutional investors for their support and welcome them to our share register.”

“With the Company’s existing cash, we are now fully funded to undertake extensive in-fill and resource definition drilling on the high-grade zones of mineralisation at Jaguar over the next 12 months together with further metallurgical testwork to put ourselves in a position to report the Company’s maiden JORC Resource in Q2 2020.

“With nickel prices rising strongly in USD terms since the start of the calendar year on the back of declining stockpiles, a diminishing global supply pipeline and surging demand from the EV-lithium-ion battery sector which requires Class 1 nickel for new battery technologies, now is a great time to be able to advance a quality nickel sulphide project towards development.”

Alkane Resources Limited (ASX:ALK)

The company closed up 15% to finish at 56c on $9.3 million stock traded. The reason they were up was because I wrote about them last night and you all piled in.

That's rubbish of course, but if you do want to know more about ALK - read yesterday's report (Rat's Rant: Stocks that are hot, not and... Constable Chapman) as I don't do this sh*t for fun, nor do I like creating memes or working late for that matter!

I say genius.

Hot Chilli Limited (ASX:HCH)

HCH closed up 12% to finish at 3.8c on $410,000 stock traded. There was no news, but they did get a speeding ticket from the ASX or Constable Chapman and were also asked to clarify an announcement, which seems to be happening a lot more often to many more companies these days.

HCH, in its 28 August ASX announcement this year said that, "First results for phase 2 drilling programme are expected to be released shortly".

So maybe the punters sorry I mean investors are punting that results aren't far away or maybe there is some interest around as in the same announcement they also said that "New in-bound corporate interest in the Company’s strategic funding process has been received in the past month with several groups engaged in advanced due diligence of Hot Chili’s Chilean copper-gold assets."

Either way I don't care if the stock keeps going up I'm happy - but as we all know, sadly they don't always go in a straight line unless they are going down. Always the way!

Details on that announcement are listed below:

Expansion Drilling Underway at Cortadera Copper-Gold Discovery

Highlights

  • First diamond drill hole complete at a down-hole depth of 959.9m for the Phase 2 drill programme at the Cortadera copper-gold discovery in Chile
  • A second diamond drill hole is underway, testing a potential 240m extension to the new high grade zone discovered at the main porphyry– Cuerpo 3 (As reported to ASX 5 th July 2019, 750m grading 0.6% copper and 0.2g/t gold from 204m depth, including 188m grading 0.9% copper and 0.4g/t gold)
  • First results for phase 2 drilling programme are expected to be released shortly
  • Reprocessing of historical IP geophysical data has highlighted a large coincident conductivity and chargeability anomaly located immediately down-plunge to the north of the main porphyry– Cuerpo 3
  • New in-bound corporate interest in the Company’s strategic funding process has been received in the past month with several groups engaged in advanced due diligence of Hot Chili’s Chilean copper-gold assets

Hot Chili (ASX : HCH) is one of the top ASX listed copper developers with an advanced Chilean coastal range portfolio and a resource base of 1.5Mt copper and 1Moz gold already established at its Productora project.

The Company is well advanced in its expanded growth strategy which aims to transform Productora by increasing margins and lowering production costs through higher head grade and expanded metal output.

In February 2019 Hot Chili executed an option agreement to acquire a 100% interest in Cortadera- a major, privately-owned, copper-gold porphyry discovery, adjoining the Company’s Productora and El Fuego copper projects, located on the Chilean coastal range.

Hot Chili has also executed agreements to secure majority interest in two neighbouring high grade, substantial underground mines and the surrounding prospective landholding- collectively named El Fuego (San Antonio and Valentina).

Addition of the Cortadera copper porphyry project and the El Fuego high grade copper project enables the Company to achieve its expanded growth strategy, unlocking both scale and grade.

In May 2019 the Company embarked on a maiden drilling campaign at Cortadera which delivered stunning results, which have transformed the Company’s view on Cortadera and opened up large possibilities, with the project having the potential to be a company-maker in its own right.

The best wave in Chile is called Punta de Lobos, and if and when I go over there to see how much copper these guys have actually got, I will be packing the boards too Christian... just FYI.

What's not

Syrah Resources Limited (ASX:SYR)

Syrah closed down 33% to finish at 47c on $13.2 milling stock traded. The reason they were down was because they provided an update on the current natural flake graphite market and its planned near term operational response and clearly it wasn't a good update.

Even blind Freddy could have told you that one.

Sudden and material decrease in spot natural flake graphite prices in China, driven primarily by depreciation of Chinese Yuan and Chinese inventory level concerns, have impacted price negotiations and contract renewals, with potential for further weakening of prices into Q4 2019.

It's not one I follow, but some details on the news are listed below:

NATURAL GRAPHITE MARKET UPDATE AND OPERATIONAL RESPONSE

Syrah Resources Limited (ASX: SYR), provides an update on the current natural flake graphite market and its planned near term operational response.

Key Features

  • Sudden and material decrease in spot natural flake graphite prices in China driven primarily by depreciation of Chinese Yuan and Chinese inventory level concerns have impacted price negotiations and contract renewals, with potential for further weakening of prices into Q4 2019.
  • In response to current market conditions, Syrah will:
  • Significantly reduce graphite production volumes in Q4 2019 to approximately 5kt per month;
  • Perform an immediate review of further structural cost reduction at the Balama Graphite Operation (“Balama”) and across the Company; and
  • Conduct a strategic and operational review for 2020, with further details provided in Syrah’s Q3 2019 Quarterly Activities Update to be released on 22 October 2019.
  • Cash and available liquidity in conjunction with a cost reduction program provides Syrah the opportunity to adjust near term production.

What's doing?

Most of you would know that if and when I can use this rant to help people I am more than happy to, without bombarding you of course.

This report has already donated $4,000 to the Starlight Foundation over the last three years. So thanks to all of you that have participated over the years.

The Starlight Foundation is one that's very close to me and I am proud that I have been able to give back a little Arthur Ash to them - with the help of all who have assisted me.

Anyway, there is some bloke on Twitter who I didn't even know and up until last night I didn't even follow him. However, his story really hit home with me and I am hoping that maybe 1% or 2% of you who read this can help make "The ASX Guy" wedding a really special day.

All I know about him is that he's not much older than me, has a love of stocks, plenty follow him on Twitter, (so he must have some decent value add) but more importantly he was recently diagnosed with Stage 4 brain cancer.

I have no idea where he's at with the the cancer, but what I do know is that his friends have set up a Go Fund me page to help pay for his wedding and they are hoping to raise $10,000. They are currently only at around $2000.

I have donated a pineapple myself ($50) and if any readers feel like doing a good deed for the day and sending "The ASX Guy" a few bob it all adds up and I am sure he would really appreciate it.

Sounds like he's been through some pretty tough times, (like many others I might add) but this guy's story really caught my attention and I dare say quite a few of you that read this rant actually follow the bloke on Twitter too.

It's not a scam and nor do you have to donate, but I would much rather you give $50 to some bloke that needs it rather than some rich footballer whose outspoken ways have seen him go from hero to zero in most peoples' minds including me.

The Go Fund Me link is below for those that can spare a few bucks it's for a good cause.

https://www.gofundme.com/f/jamie-and-becky039s-wedding?pc=&rcid=r01-156803627956-e770fcce595f45c3

Go hard.

The Rat.

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