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Jacka Resources

By Dan Stratful (AFA)

Thursday 19th July 2012

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Jacka Resources (ASX: JKA) is an emerging oil & gas explorer in Africa with 2 two key development/appraisal projects - the Nigeria/Aje field and the Tunisia/Bargou field. Both projects are situated in proven hydrocarbon basins and there is near term development potential which is expected to generate cashflow to fund further exploration.

JKA has recently completed a $14 million capital raising by way of share placement which leaves it fully funded for its exploration activities throughout 2012.

Make no mistake that JKA is a high-risk speculative penny mining stock however it reportedly has a management team with a proven track record of developing oil and gas explorers in Africa.

JKA's shares have ranged between 9c and 22c over the last year and there could be further upside yet to come if exploration activities are successful. Africa presents a risky frontier for exploration activities and the shares bring plenty of sovereign and political risk.

JKA's shares have been assessed on a net present value (NPV) basis which provides a value of 35c per share and this valuation does not take into account the exploration of the Tanzanian and Somaliland blocks, additional exploration upside in existing permits and the potential for the further new ventures, meaning there is significant upside if further exploration proves successful.

Both Tanzania and Somaliland are underexplored but are beginning to attract the interest of major oil and gas companies and these countries add further upside potential. 

The Nigerian/Aje field could generate first production in 2013, while the Tunisian/Bargou field has benefitted from a 55% stake from Dragon Oil. JKA is also unhedged with no oil price or exchange rate hedging in place which brings foreign exchange risk and commodity price risk.

Status: SPECULATIVE BUY

JKA's shares today traded at 15c


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Employees may have an interest in the securities discussed in this report.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond


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