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Northland Capital Partners View on the City Arian Silver, Mariana Resources, MotifBio, DiamondCorp and others


Motif Bio plc (LON:MTFB) - BUY*: FDA minutes confirm Phase 3 programme

Market Cap: £21m; Current Price: 33p; Target Price: 89p 

FDA meeting minutes confirm iclaprim Phase 3 clinical development programme

  • Motif announced today that it received the official meeting minutes from the U.S. Food and Drug Administration (FDA) guidance meeting which was held on 14 April 2015. 
  • The minutes confirm the FDA's agreement with Motif's Phase 3 clinical development programme for iclaprim - Motif’s flagship broad-spectrum antibiotic designed to be effective against multi-drug resistant bacteria. 
  • Iclaprim is being developed as an intravenous (IV) formulation to treat acute bacterial skin and skin structure infections (ABSSSI) and hospital acquired bacterial pneumonia (HABP) - two serious and life threatening infections caused by multi‐drug resistant bacteria. 
  • The FDA confirmed that two successful Phase III trials are required for the approval of the drug. 

NORTHLAND CAPITAL PARTNERS VIEW: iclaprim is set to fill a major market void in the battle against antibiotic resistance. If approved, the drug could achieve over $1bn/year in sales. Today’s FDA minutes confirm the regulator’s support for Motif’s programme. We maintain our BUY rating and 89p price target.


DiamondCorp (LON:DCP) – BUY: Update note

Market Cap: £36m; Current Price: 11.3p; Target Price: 16.4p (from 17.7p) 

FY14 results reflect last years the progress toward production

  • Forecasts and price target downgraded to 16.4p (from 17.7p). BUY rating maintained.

NORTHLAND CAPITAL PARTNERS VIEW: DiamondCorp’s FY14 results reflect the progress towards production made last year with a LBT of £3.3m. This was higher than our expectations (£2.4m) due to a £1.7m fair value adjustment that relates to the convertible bonds that outweighed the substantial £0.9m reduction in corporate expenditure against our forecasts. The Company’s net debt position of £21.9m was noticeably higher than the £14m we had previously forecast, largely a result of the increased capital cost in FY14 associated with the changes to the development schedule for the Lace Diamond Mine combined with an increase in the carrying value of the convertible debt. While these results reflected the development of Lace from last year, this year will see maiden production from the Upper K4 kimberlite at Lace that is expected to commence in H215. The extraction of diamonds during the ramp of production from the Upper K4 kimberlite is being treated as a credit to capex and not revenue. As a result, our headline forecasts do not reflect the cash generative nature of the business with Lace generating US$5.8m to fund development capital expense. We have made a number of changes to our valuation DiamondCorp following the FY14 results and the net effect is a downgrade to 16.4p (from 17.7p). In our view, the Company is still significantly undervalued with our revised price target offering 46% upside to the current price of 11.3p.


Arian Silver (LON:AGQ) – CORP: Q115 results

Market Cap: £10m; Current Price: 30.5p 

Q115 reflect the development of the San José Mine 

  • PBT for Q115 increased to US$1.9m compared to a LBT of US$1.1m in Q114, due to a US$3m fair value adjustment in relation to the derivative liability associated with the Quintana loan note and BMPA.
  • Net debt increased to US$24.5m in Q115 from US$21.7m in Q114.

NORTHLAND CAPITAL PARTNERS VIEW: The Q115 results reflect the significant transition Arian Silver has gone through in the first part of 2015. During Q115, Arian was focused on the continued development of the San Jose Mine and commissioning of the silver-lead circuit La Tesorera processing plant. In Q215, we expect first production from the zinc circuit as part of the commissioning process. Arian expects to start recognising production and revenue as part of the ramp up phase of operations during Q215 at it moves the mine towards commercial production.


Rockwell Diamonds (TSE:RDI) – CORP: FY15 results

Market Cap: CAD$11m; Current Price: 21c 

From yesterday: Secures bridge finance for the Remhoogte/Holsloot acquisition 

  • Rockwell expects to close the acquisition of the Remhoogte/Holsloot Project with Bondeo 140cc at the end of May 2015 as all the conditions precedent have been met and regulatory approvals granted.
  • The cost of the acquisition has been lowered to US$21.9m (from US$29m) through the exclusion of some of the earth moving fleet being acquired and the deferment of the acquisition of the Bo-Karoo property pending regulatory approval. The revised transaction will comprise of US$12.2m for the mineral rights and three processing plants and US$9.7m for earth moving fleet. Rockwell will also sell the Saxendrift Extension property to the vendors of Remhoogte/Holsloot for $0.5m.
  • Rockwell has secured a bridging loan for US$16.5m from key shareholders Diacore (US$15m) and Rockwell’s Chairman Mark Bristow (US$1.5m) to meet the revised purchase consideration and working capital. The initial term of the loan is three months, extendable for a further month. Interest is payable at 1.25% per month for the first period.
  • Rockwell plans to refinance the bridging loan in Q215. Should Rockwell not be able to refinance the by the end of August 2015 the providers of the bridging loan will be repaid from 25% of the sales of rough diamonds and 100% of the beneficiation income until the loan is fully repaid.
  • Forecasts, rating and price target remain under review.


Mariana Resources (LON:MARL) – SPECULATIVE BUY: FY14 results

Market Cap: £19m; Current Price: 2.5p

LBT in line with FY13

  • LBT of £6.8m in FY14 is comparable with £6.9m in FY13.
  • Net debt of £0.6m in FY14 was compares to net cash of £2.7m in FY13. 
  • No change to rating.

NORTHLAND CAPITAL PARTNERS VIEW: Nothing unexpected in Mariana Resources’ results from last year. Since the period end the Company completed a £1.8m placing in February providing what should be sufficient cash for the year. Mariana is currently focusing its attention on the 10,000m drill programme at the Hot Maden project located in North eastern Turkey that has continued to deliver exciting results. At its other projects in Peru, Suriname, Argentina and Chile Mariana has re-prioritised work to ensure that the Company has a cash buffer in the near term. This ensures that Mariana will be able to finance its share of the next phase of exploration at Hot Maden, post the 10,000m drill programme that is being funded by joint venture partner Lidya as part of its earn in to the project.

Connemara Mining Company (LON:CON) – CORP: Inishowen update

Market Cap: £0.9m; Current Price: 1.6p 

Initial results from Inishowen Gold Licences

  • Initial results from sampling of quartz vein boulders at the Inishowen Gold Project, located near Donegal, Ireland, returned grades including; 15.35g/t Au, 6.99g/t Au, 4.52g/t Au and 5.42g/t Au.

NORTHLAND CAPITAL PARTNERS VIEW: Positive initial results from Connemara Mining Company demonstrating the project justifies further work. Prospecting work is ongoing and the Company expects that Geophysics and additional sampling will be required to identify potential drill targets.

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