Smaller companies spotlight

EACH week, former Fleet Street City Editor

Going for gold

TIMING is everything, and Johann van den Berg and his team at Bullion Resources couldn't have timed their launch on the Alternative Investment Market with more precision.

The gold producer, registered in the UK but operating in South Africa, is raising £3m through a private placing at a time when the price of gold has just hit a two-year high.

It is no bad platform for a firm that aims to become 'the pre-eminent junior gold mining company in South Africa' - not by exploring for gold but by scraping up the leavings in areas that have previously been mined or explored.

Van den Berg, whose family claims a total of 150 years in the business, has jumped on the back of the South African government's soon-to-be introduced 'use it or lose' policy on mining rights. This is causing large mining companies, 'the seniors', to sell at a discount some smaller mines that are not economic for them. Farmers sitting on potential sites they have not been able to develop are also selling up.

Bullion Resources already has four gold leases on its books with some 1.8m ounces waiting to be picked up in open cast and shallow mining methods. Three of these will be in full production in the next nine months. The group expects to produce up to 11,000 ounces this year and 140,000 ounces in 2003.

The 'use it or lose it' policy also means senior miners are offering good quality, second-hand plant and equipment at scrap metal prices. 'We are able to buy virtually unused equipment at a fifth of the cost of new,' says Van den Berg.

His initial sums are based on production costs of $185 an ounce and a market price of $308. This week the price soared to $316 - and has been within a whisker of $320 - as India and Pakistan rattle their nuclear sabres at each other. The price has risen by around 15% over the past year but shares in companies in the gold mining index have risen 70%.

Even if the price falls to the $250 levels at which Chancellor Gordon Brown sold 425 tonnes from the Treasury reserves last year, Bullion Resources will still be making a healthy profit margin.

The company has been financed until now by Van den Berg and 'Fanie' Mellett, a former gold mining analyst whose brainchild this was and who is now executive director, and by other directors and their families and friends. It carries no debt. The funds being raised will be used to buy more equipment for the three initial production units and for working capital.

Under AIM rules, the directors are locked into the shares for at least one year. This board has locked them in for a further five years by restricting the sale of their shares to no more than 20% a year. That policy points to an early payment of dividends as compensation, once the profits start flowing.

Dealings are expected to start around the middle of June.

Some you may have missed

RICHARD Parris, chairman and chief executive of Intercede Group, the 'smart card' provider, might have been anticipating a surge in demand for its internet security services following 11 September. But potential customers were so worried about the future that they deferred spending.

The fall-off is recorded in the group's results for the year ended March, where sales fell £800,000 to £1.2m and the pre-tax loss doubled to £2.2m. Looking ahead, Parris says, 'we are confident that we can grow from the platform we have built for ourselves.'

SYNERGY Asset Management has paid £120,000 for a 16% stake in Mano River Resources, the AIM-listed diamond and gold exploration company. Mano has also announced a joint venture with International Taurus Resources, of Vancouver, to probe a major diamond exploration area in Canada.

OFEX-traded financial services group Brookvale is to help control bad debt problems for Bestway Cash and Carry, one of the UK's top ten privately-owned companies.

THE average price of homes built by Countryside Properties increased by 25% to £287,000 last year, chairman Alan Cherry revealed this week with results for the half year to 31 March. Sales overall, including social housing, rose 16% to £186m and profit before tax was £300,000 higher at £12.5m.

Cherry said: 'We are currently experiencing good levels of demand for our new housing across all price and product ranges. The directors anticipate a strong contribution from the second half and are confident in the outcome for the full year.' Finance director Michael Pearce retires at the end of this month and will be succeeded by chief accountant Wendy Colgrave.

IT has been a good first half for Care UK, the firm that helps the NHS and Social Services in providing non-acute care facilities. Turnover was up 20% to £46m in the six months ended March and pre-tax profits rose 1.4% to £3.3m.

RETAIL Decisions has been asked by Marks & Spencer, an existing customer, to market a new risk management service as part of a technology partnership between the two. The system, developed by M&S, helps retailers to handle requests for information and chargebacks from their bank more efficiently. M&S wants Retail Decisions to develop the system further and offer it to other retailers.

ELTON Games, makers of competitive group amusement games, has raised £659,000 through an offer for subscription, and has started trading on Ofex.

Some to look out for

COMMUNISIS, (current price 188p), has been give a price target of 250p by WestLB Panmure. The broker says the £42m acquisition of Centurion - the third largest provider of print management services in the UK - is a 'significant step up the value chain and towards Communisis becoming a uniquely-placed full service provider'.

ANALYSTS at broker Teather & Greenwood are not put off by the market's lack of enthusiasm. Still they find companies that are worth investigating.

Stephen Thomas says Auto Indemnity, the car crash specialist, has been reshaped enough to be a 'strong buy' with a price target of 45p, some 50% above its current level.

He also likes Basepoint, the AIM-listed real estate business. Its shares have recovered from recent profit-taking to show a 39% increase in six weeks. 'Buy', Thomas says.

Shares of insurance group Windsor are undervalued, says Ben Archer. It has just produced interims showing another period of increased profits. Peter Ashworth says 'another set of excellent interim results (from photocopying firm Eurocopy) demonstrate its continuing strengths'. The shares, up from 28p to 44p over the past 12 months, are still a 'buy', he says.

RICHARD Ratner at Seymour Pierce says the fall in the price of retailer Peacock's shares following results this week 'is a buying opportunity'.