Last updated: January 17, 2014 11:29 pm

Small-cap Week, January 18

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UK shale gas prospectors led the small-cap gainers this week after French group Total gave the fledgling industry a vote of confidence.

Total had bought a 40 per cent stake in two exploration licences in the Gainsborough Trough prospect in Lincolnshire through a farm-in with Egdon Resources and partners. Egdon soared 165 per cent while peers IGas Energy was up 37.6 per cent and Union Jack Oil climbed 7.3 per cent.

“The deal is significant as it marks the entry of the first international oil company into the UK shale industry and provides a useful [valuation] yardstick,” said Edison Research. “Total’s entry also provides strong verification of the Gainsborough shale-gas play, in what can now be considered to be one of the premier plays in the UK.”

Lamprell, the oil-rig engineer, bounced 14.4 per cent after its new management team said that 2013 results would be ahead of much-reduced expectations.

Games Workshop dropped 22.9 per cent. Store closures and a shift to a one-person shop format resulted in a 30 per cent drop in interim earnings for the specialist retailer, which announced another divisional reshuffle aimed at cutting costs.

Moss Bros rose 24.3 per cent after it said that same-store sales had improved and the board promised a progressive dividend policy.

Punch Taverns faded 7.6 per cent after outlining terms on its long-awaited debt restructuring plans, which came with a warning that it might default if its creditors did not accept the proposals.

Datatec hit by softer trading at wholesaling arm Westcon

Datatec, Aim’s largest technology stock, ticked down this week after it warned that earnings would be at least 20 per cent short of expectations in the full year to February, writes Kate Burgess.

The dual-listed South African group, which distributes networking technology and supplies integrated systems to customers around the world, reduced its own forecasts for post-tax profit from $102m to $88m and earnings per share from 46 cents to 40 cents – the same as last year.

Datatec said that it had been hit by softer trading at Westcon, its wholesaling business that contributes 60 per cent of profits. Westcon in the US has also been disrupted by the implementation of a new management system. This follows similar warnings in October.

In addition, the group has made a provision of up to $20m to cover previously understated sales costs. It said that revenues for the full year would be between $5.6bn and $5.8bn and has meanwhile strengthened the management team to “improve operating execution”. The shares fell 4 per cent in Johannesburg and 14 per cent in London.

Europa Oil & Gas heads off move to oust two executives

Cordial relations appear to have been restored at Europa Oil & Gas after calls for an EGM were dropped, writes Michael Kavanagh.

The Aim-quoted oil junior, which holds onshore production interests in northern England as well as exploration positions in France and off the west coast of Ireland, announced plans for a £4m fundraising in December.

The move prompted Paul Barrett, its former chief executive who stepped down in 2011 amid a sharp fall in the company’s share price, to call for a vote to oust Bill Adamson, chairman, and Roderick Corrie, non-executive board member.

Mr Barrett had proposed that he and his wife, fellow company founder Erika Syba who resigned as operations director in 2010, rejoin the board.

However, the company confirmed on Wednesday that the EGM demand by the two former board executives, who between them control 9 per cent of Europa, had been dropped.

Shares in Europa, which reached nearly 11p in November before the discounted placing and offer at 6p a share, traded just ahead of that mark on Friday at 6.83p.

Firestone Diamonds secures funding for production push

Firestone Diamonds reached a substantial landmark this week when it raised the funds it needs to develop its main mine in Lesotho, sending shares sharply higher, writes James Wilson.

The $140m package of debt and equity is on top of $82m of bank project finance secured last year and means that Firestone is set to build its main treatment plant at the Liqhobong mine, with a view to commissioning next year and full production of 1m carats annually in 2016.

Pacific Road and Resource Capital Fund, two funds focused on natural resources, are subscribing for shares that will see each hold 23.5 per cent of Firestone, as well as warrants that could take their stakes to more than 27 per cent.

Stuart Brown, who was for five years the chief financial officer at De Beers, the best-known diamond miner, took over as Firestone’s chief executive last year. Investec said: “This is an impressive accomplishment, fully financing the company’s flagship Liqhobong project, with two high-quality strategic investors joining the register.”

Aim-quoted Firestone previously had a pilot plant at Liqhobong for 20 months, during which time it produced 325,000 carats. “Liqhobong has scope for large diamonds as well as a smaller package of stones, which appeal to the lower end of the market,” SP Angel analysts said.

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