Rare Earth Minerals(LSE: REM) and Gulf Keystone Petroleum (LSE: GKP) released their trading updates today good news or bad news for shareholders?
The movement in their share prices said it all, really.
Rare Earth Minerals
First off, REMstrading statementdoesnt move the needle.
The group said that it was pleased to announce that Western Lithium USA Corporation (Western Lithium), in which REM holds an approximate 3.05% interest, is continuing its optimisation studies with Tenova Bateman Technologies (Bateman) in order to complete an order-of-magnitude preliminary engineering study for Western Lithiums Nevada lithium deposit.
New news?
No news here, Id say.
Last week, REM alsoannouncedthat it had increased its shareholding in Bacanora Minerals Limited from 15.93% to 16.41% through further market purchases. Its stock price was virtually unchanged back then.
Only a few days earlier, on 5 June, it had issued an update on its Sonora Lithium and Borates Project, which did little to lift spirits, too!
These kinds of updates should not surprise you if you have followedour previous coverage.Similarly, recent weakness in REMs stock price the shares are down 20% since early April was predictable, and I would be tempted to close the trade if I were invested.
Thats likely what some opportunistic investors did today: the shares surged 6% in early trade, but they fell by more than that soon after, and they were down 0.5% at the time of writing.
Gulf Keystone Petroleum
Gulf Keystone Petroleum is not a plain vanilla investment, but you should know that by now.
Its market value has halved since the beginning of the year, but theres more at stake now survival.
GKP said today that further to the RNS as of 2 April 2015, it has completed the process of implementing the terms described in the announcement with respect to its $250m 13.0 per cent. guaranteed notes due 2017 and its $325m 6.25 per cent. convertible bonds due 2017, including the granting, on apari passubasis, of a security interest in its shares in Gulf Keystone Petroleum International Limited in favour of holders of the Notes and the Bonds.
This is essentially a non-event, as analysts describenews that has little or no impact on share prices but it says a lot about the risk associated to its debt maturity profile, and the possible dilution risk associated to the investment.
The GKP investment case isnt necessarily linked to macroeconomic trends and oil prices, but depends on whether GKP will manage to received all the money it is owed where it operates.The shares have been under a huge amount pressure since early 2015, when it emerged that Shaikan, its key producing asset, wasnt likely to turn receivables into hard cash.
In February, GKP said that it remained in talks with theKurdistan Regional Governments Ministry of NaturalResources in order to receive outstanding payments and establish a stable payment cycle for export crude oil sales. While the situation seems to have slightly improved, it clearly remainscritical and thats reflected in a stock price that has hovered around 30p/40p for several weeks now.
Today, the stock is flatat the time of writing.
Frankly, you’d be better off investing in a small-cap that is a highly promisinggrowth play, and whose name is includedin this brand new reportthat has recently been published by our team of analysts.
With this gem, there’s plenty of visibility on financials and cash flows.Moreover, it’s well funded, its trading multiples point to value, and does not price in any M&A premium at present, although it could receive interest from third parties.
Alessandro Pasetti has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.