Broker Roundup: Solomon Gold, African Aura

Solomon Gold (LON:SOLG) could be transformed from explorer to miner in relatively short order if the Rannes project goes to plan, according to research by its broker Fairfax Securities.

This morning the company announced a resource upgrade for the Rannes project, taking the resource a fifth of the way to its 2 million ounce target.

It announced a maiden 203,000 ounce gold resource for the Kauffmans prospect. The total resource at the Rannes project - which comprises a series of prospects in central Queensland - has almost doubled to 404,000 ounces.

Today s resource announcement is a substantial step forward and marks the potential for economic mine development, Fairfax analyst John Meyer said in a note to clients.

Investors are now seeing strong progress both in Australia and in the Solomon Islands with the promise of more to come.

Meyer adds: If every exploration company was as driven as Solomon Gold then the world might not suffer commodity shortages and there would be much less opportunity for investors.

Meyer also commented on African Aura s (LON:AAAM, TSX-V:AUR) plans to split into two separate companies, Aureus Mining and Afferro Mining, to focus on their respective gold and iron projects.

Plans for the split were first aired back in August 2010 and this morning it gave more details on how the split will be carried out.

We see this split into two divisions leading to higher valuations for the asset base, Meyer said.

Although it is possible to see some weakness post the split as shareholders react to how the two companies sit in their portfolios e.g. some may seek gold but not iron ore exposure and visa versa.

We remain positive on the company and despite the strong performance in recent months, African Aura still looks cheap versus peers developing iron ore and gold projects.

The newly formed gold company, named Aureus Mining, will acquire the African Aura gold project portfolio, its 22.1 percent stake in Stellar Diamonds (LON:STEL) and 40 percent of the group s cash and cash equivalents.

Aureus most advanced asset will be the 1.5 million ounce New Liberty gold project, where a definitive feasibility study is on track for the fourth quarter of 2011.

Subsequently the remaining company, which will house the iron ore projects including Putu in Liberia and Nkout in Cameroon, will be renamed Afferro Mining, which will retain the group s remaining cash and cash equivalents.

Shareholders will vote on the proposal on the 5 April 2011. The company must get at least two thirds of votes in favour of the split.

Davy analyst Job Langbroek gave a bullish assessment of Ormonde Mining (LON:ORM) with a conservative valuation that implies nearly 80 percent upside from current levels.

According to Langbroek tungsten consumers are very anxious to ensure that alternative supplies become available as China tries to control supply for its own demand.

The analyst reckons Ormonde s Barruecopardo project in Spain offers one such alternative.

Last month Ormonde told investors that it was on course to have Barruecopardo up and running by the end of 2012, initially mining 500,000 tonnes of ore per year after a steady ramp-up.

The project, which has a total resource of 10.9 million tonnes grading 0.45 percent tungsten, is Ormonde s primary focus and it is made all the more important by tungsten s status as a strategic metal in the European Union.

The price of tungsten has risen sharply in the second half of 2010 and the early part of 2011, Langbroek said in a note to clients.

This reflects a market in which strong demand is jostling with tightening supply. In this respect, tungsten mirrors other strategic materials such as rare earth metals. As with rare earths, China is the most important actor in this evolving story.

The actions of Chinese regulators in recent years suggest that China is intent on controlling and ensuring domestic supply of tungsten for its own demand.

, Ormonde Mining, Xcite Energy, Chariot Oil & Gas, Victoria Oil & Gas