The Anglo African roller coaster ride continues as Miton ups its stake (AAOG)

By James Moore


What a roller coaster Anglo African Oil & Gas (LSE:AAOG) is on. Despite becoming persona non grata in the wider market after a turbulent few months, the firm managed to close its potential £8.25m fundraise on Wednesday. I say “potential” because nothing is ever straightforward with this business, and there remains a chance the company could raise less (or even more) money. Who knows? Whatever happens next really is anyone’s guess. That being said, there are some possible clues that something significant is about to happen at the Tilapia oil field in the Republic of Congo.

Writing anything even vaguely bullish about Anglo African is on a hiding to nothing at the moment. Sentiment towards the stock is overwhelmingly negative. As I wrote last week, the company has a big job on its hands to recover from the reputational damage of recent weeks.

Whether or not it can do this is certainly open for debate, and the points I’m about to make are placed firmly in that context. It now looks like pretty much everything hinges on Tilapia.

With all the current noise about Anglo African, it is easy to lose sight of the 12-metre oil column the company identified in January in the deeper Djeno Sands in the TLP-103C exploration well. Although the firm has failed to deliver an updated Competent Persons Report (CPR) on this, it has gone on the record to say the reason for this was the additional data required. Essentially, the company would have had to re-enter the well to gather the data, which LR Senergy (the CPR provider) said it needed to complete its work. Commercially, this wouldn’t have made much sense- the next time Anglo African enters TLP-103C it wants to do so with a view to turning it into a production well.

At this point, enter Miton Asset Management.

Much of the detail in this morning’s RNS covers the complexity of 2/3 of the financing package with Riverfort and YA Global. I plan to write a follow up piece on the detail of this part of the deals over the coming days (it really does look very interesting…), but in the meantime there are some broader points to make.

First, £2.56m of the deal was a straight placing by Miton. The placing price was 5.2p, a 27pc premium to yesterday’s close. Miton was already Anglo African’s largest shareholder, holding 12.6pc of the company prior to today’s raise.

Questions have been asked why Miton would have not only participated at a premium to the prevailing share price, but also have taken the risk of increasing its percentage stake in Anglo African?

A number of theories have been flying around online, but perhaps the answers to these questions are straightforward. In terms of the price, if you look at the timeline of the deal over the last few weeks then it looks like Miton stuck with the original 5.2p price it must have signed up to when the fundraise was originally announced on 03 July. It would be extremely helpful if Miton issues a TR1 to confirm this over the coming days. Assuming it does, then this will scotch any rumours of market shenanigans having been played.

Then there is Miton’s overall percentage stake in Anglo African to consider. On admission the fund will have 70m shares in the company, out of a total 395m shares in issue. Miton will therefore hold about 17.7pc of Anglo African. This is subject to confirmation, but if my calculation is correct it begs the obvious question why Miton has jumped into this stock? If the market’s view of Anglo African is correct then this company is holed below the waterline and sinking fast.  There is a clear divergence between what the market believes and what Miton believes.

It’s a little early to come off the fence about which side might be right, but after reflection today I have to admit I am leaning towards Miton’s viewpoint. It would seem the fund genuinely believes in the potential of Tilapia and is unfazed either by the extreme pessimism surrounding Anglo African or the complex nature of the rest of Wednesday’s funding package involving Riverfort and YA Global.

As I wrote earlier, I will return another time to the Riverfort/YA “Investor Sharing Agreement” (ISA). There are some precedents in the market for this type of financing structure and its inclusion at this stage in Anglo African’s development is innovative. It is impossible to predict whether this aspect of the deal will work, but if it does then it could work out extremely well.

Looking at this from the outside, it appears that that is what Miton is betting on. While the presence of Riverfort and YA might give retail investors cause for concern, this is likely to be less of an issue for Miton. As an interesting little aside, Miton is the 16.87pc majority holder of Riverfort Global Opportunities Plc (LSE:RGO). This is a different vehicle from Riverfort Global Opportunities PCC, which has today invested in Anglo African, but broadly the same people are behind it. It stands to reason, therefore, that Miton must feel its interests are aligned with Riverfort’s on today’s deal.

Anglo African’s stock is up 6% at 4.35p on the mid today, so most of the discount to the Miton placing price still remains. There are obvious concerns about a stock overhang in the market thanks to the Riverfort/YA element of the fundraising package. Investors are also unclear how much money Anglo African will end up receiving once the Riverfort/YA ISA comes to an end. In my next piece, I’ll take a closer look at this and how it might play out for the company.


Author: James Moore

This article does not provide any financial advice and is not a recommendation to deal in any securities or product. Investments may fall in value and an investor may lose some or all of their investment. Past performance is not an indicator of future performance.

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