Shares in Russia-focused miner Amur Minerals (LSE: AMC) and mobile payment specialist Bango (LSE: BGO) both rose by around 10% this morning, following positive news updates.
The gains are welcome news for shareholders, but do today’s updates make either firm a buy?
Amur Minerals
Amur said today that it has now received £3m cash from a July 2013 equity swap agreement with Lanstead Capital, in addition to the £5m received in the original placing. This takes the total cash received from this deal to £8m, which is 60% more than the firm originally expected.
The reason this deal has been so profitable is that Amur’s share price has rocketed higher in 2015. The stock is up 45% this year, despite recent falls.
Amur’s goal in entering into an equity swap agreement with Lanstead in 2013 was to allow it to profit if its shares went up. To achieve this, Amur took a calculated risk and returned £4m of the £5m it raised in the placing to Lanstead.
Since then, Lanstead has been repaying this money to Amur in monthly instalments, one of which remains. These payments aren’t fixed, however. When Amur’s share price is above the agreed benchmark of 9.67p, Lanstead pays more to Amur, to reflect the increased value of its shares.
Similarly, Lanstead pays less when the shares are below 9.67p, as they were in 2014.
Amur received just $450,000 from Lanstead in 2014 and the firm’s cash reserves were down to $1.4m at the end of last year. Amur’s success in gaining a production licence came in the nick of time, but has left the firm quite well funded to begin the pre-production development phase.
Further fundraising will be required at some point, but things are much better than they might have been. Amur shares are a speculative hold, in my view.
Bango
Mobile payment specialist Bango said today that Telekom South African will use the Bango platform to allow Google Play to bill customers directly through their phone bills.
This is known as carrier billing and means that smartphone users wanting to buy apps and digital content like music don’t need to provide payment card details.
Bango says that carrier billing “routinely sees increases in digital content sales of 300 – 400%”. If today’s deal forms the spearhead of a major move into the African market, then it could be good news.
However, I think that Bango shareholders need to keep this deal in perspective. Their firm’s annual sales have fallen from £26.1m in 2009 to just £5.1m in 2014. Annual losses have increased steadily from -£0.7m in 2010 to -£5.15m in 2014.
Although some of these losses have been the result of the investment needed to develop the carrier billing platform, investors need to ask when the firm will break even.
The firm expects annualised transaction volumes to reach £65m by the end of 2015. They haven’t said whether they expect this to be enough to break even. This suggests to me that it won’t be.
Bango raised £6.0m through a placing in October 2014, but burned through £4.2m of cash in 2014.
I suspect more cash may be required, but I’ll reserve judgement until the firm’s interim results are published on 15 September.