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Beaufort Securities – Speculative Buy rating for Tertiary Minerals

4th March 2016 / Leave a comment

Tertiary Minerals (TYM.L, 1.07p) – Speculative Buy

Tertiary Minerals (TYM) has published more detail about the recently granted Mining Concession at Storuman. Key points include a 25 year life, a licence area of 184 hectares (predominantly limited to the open pit), the permit is solely for the extraction of fluorspar. The announcement also states that the “Swedish Mining Inspectorate has granted the Permit by giving precedence to the national interest of minerals over the national interests of reindeer herding”. It also describes how during the process, the Swedish Mining Inspectorate and Tertiary Minerals consulted with 7 stakeholder groups in the area, only the Sami Reindeer Husbandry Community objected. The Mining Concession decision may be appealed by 24 March 2016.

Our view: Probably the most important part of the announcement is the clear local support from local groups and of the Swedish mining inspectorate. The lack of Sami support is no surprise and we expect them or an environmental group to object. Here begins the second part of the process which involves negotiating with the Sami groups and getting an environmental permit from the Swedish Land and Environmental Court. The environmental permit application will include various measures/precautions to ensure mining and reindeer husbandry co-exist successfully. Tertiary has full support of the Swedish Mining Inspectorate. As such, we reiterate a Speculative Buy on the stock.

Beaufort Securities acts as a corporate broker to Tertiary Minerals plc

Advanced Oncotherapy (AVO) – Rocket Science – All Set for Take-off

29th February 2016 / Leave a comment

A research note from Beaufort Securities.

A small, young company with limited financial resources, trying to take on giant, established international peers with exceptionally deep pockets, in a product area that both tests the limits of scientific understanding whilst also facing the scrutiny of the world’s most exhaustive regulators? Sounds like a recipe for disaster! Yet Advanced Oncotherapy plc (‘AVO’) is confident that it will demonstrate a full-scale Linac Image Guided Hadron Technology (or ‘LIGHT’ system) prototype during the course of 2016, before commencing commercial production the following year. Moreover, this wholly-owned technology appears to enjoy quite rigorous global IP protection, while its low-cost, second-generation proton beam therapy device possesses USPs, in terms of price, size and safety features, sufficient to effectively relegate predecessor devices to obsolescence. Given such an outcome, of course, major international competitors wishing to ‘remain in the game’ will almost certainly be willing to pay a very handsome price, one way or another, to get their hands on its proprietary technologies.

 It is now widely accepted that the physical properties of protons, for precise local treatment of cancerous tumours, offer an intrinsic advantage over traditional high-energy X-rays as a source of therapeutic radiation. Yet there are presently only 54 operational proton therapy devices in the whole world.

 There are good reasons for this, including price (US$160m to US$220m excluding building cost for a ‘first generation’ 3-bay system); size and weight (a four story football pitch and as much as 300 tonnes) and; safety (Cyclotron technology is very hazardous and requires extensive bunkering). AVO’s LIGHT system, by comparison, is compact enough to fit into a single-story penalty area, will cost around one-fifth of the price of the typical price of a three-bay first generation system, will be safe enough to operate in city-centre locations, while requiring much less power to operate, short power-up times, as well as offering a more precise direct and dynamic scanning beam; maintenance and operating costs will also be a fraction of that demanded by existing devices.

 AVO’s CERN-developed and protected linear accelerator technology has been validated through the successful testing of LIBO (its Linac Booster) which is expected to achieve a 230MeV. This is expected to lead to construction of the first full-sized prototype LIGHT during H2’2016, before moving to first commercialisation in 2017, for which the highly prestigious French multinational, Thales Group, has already started the optimisation studies required for mass production.

 AVO’s management appears to have significantly reduced the technical, commercial and financing risks that such leading-edge technical developments usually present. It appears set to rapidly capture the larger chunk of an existing ‘big-ticket’ US$2.5bn market that is forecast to nearly triple in size by 2018. Yet, in fact, the true global opportunity for LIGHT is potentially a multiple of this, given that it must also be considered the obvious replacement/upgrade for operators of the giant installed base of aging and, in medical terms at least, relatively antiquated X-ray radiotherapy systems.

 Tackling the presently significant unmet medical need, given growing incidence of cancer supported by aging populations and lifestyle, for which a global economic cost in 2009 was put at US$286bn, suggests the number of treatment rooms should rise from 121 today to upwards of 13,000. So the reality is that if AVO delivers exactly ‘what it says on the tin’, the operational and cost advantages LIGHT offers will effectively render first generation devices all but obsolete, while also placing the obvious superiority of proton beam technology within reach of the global medical fraternity for the first time. AVO’s principal limitation would then become simply its capacity to deliver, a challenge which is being addressed through the AVO/Thales partnership.

Click to view the full research note Advanced-Oncotherapy–3-_S

Advanced Oncotherapy (AVO) – Recent article and Speculative Buy rating from Beaufort Securities

25th February 2016 / Leave a comment

Advanced Oncotherapy (AVO), the developer of next-generation proton therapy systems for cancer treatment, yesterday made two important announcements. One being the realignment of roles and responsibilities of the Executive team, the other being a prospectively far reaching industrialisation agreement with Thales, the giant and highly prestigious French multinational technology design and manufacturing group.

1) The agreement with Thales provides Advanced Oncotherapy with the support needed to move from the first LIGHT system, currently being developed for use at the Company’s flagship Harley Street site, to full commercial roll-out and a fully industrialised machine series production. Thales is a well-established manufacturer of high RF energy equipment including klystrons, electron tubes, amplifiers and X-ray detectors, as well as synchrotrons, accelerators and advanced medical imaging equipment. They will offer Advanced Oncotherapy access to Thales’s unique execution and engineering skills to manage the transition from prototype to a series production manufacturing line, as well as cost reduction capabilities. As part of the agreement, Thales will undertake the initial engineering studies and test facilities commissioning required to construct the custom-designed series production line. The cost of these activities will be funded by Advanced Oncotherapy and recovered through the retention of 100% gross margin on the initial LIGHT machines produced. In addition, in the future Thales intends to organise the series production so as to drive down costs, whilst operating under an appropriate quality framework.

2) Regarding the directorate, Michael Sinclair, currently Executive Chairman, will become Chief Executive Officer and Executive Chairman; Sanjeev Pandya, currently Chief Executive Officer, will become Executive Vice President for Global Business Development and will remain on the Board of the Company. Nicolas Serandour, currently Chief Financial Officer, will become Chief Operating and Financial Officer.

Beaufort Securities view: Yesterday’s agreement with Thales tells investors two things: (i) That the signing of an agreement with such a highly prestigious global operator, that generally might not be expected to even open the door to small pre-prototype technology developers, underlines both parties’ confidence that the LIGHT system will be successfully developed during 2016 before moving to commercial production the following year and, (ii) That management is taking the forward initiative regarding the successful exploitation of its highly protected IP. As has been explained in numerous research documents, Beaufort’s commercial scenario for LIGHT is that the cost, safely, operational and size advantages its brings to the world of proton therapy, will effectively render ‘first generation’ systems all but obsolete; its development will also very significantly expand the international market for such systems from some US$2.5bn annually right now, to a figure potentially ten-times as large as LIGHT becomes the obvious successor to the similarly-priced but now relatively antiquated X-ray radiation systems that have a global installed base in excess of 20,000 units. In this respect, LIGHT uniquely faces a giant and accelerated global opportunity. To service this successfully, it will require the near-term facilitation of huge manufacturing and marketing support, which would require several years to independently create at significant expense. As Beaufort considers AVO to primarily be a medical technology designer of excellence, which will inevitably need to control its own small scale (relative to its potential international opportunity) manufacturing through which it would be able to develop and evolve successive generations of the LIGHT system, the volume manufacturing, distribution and servicing of its devices would be best done by external independent parties. The obvious choice for such a role being, of course, the existing ‘first generation’ manufactures who already have the right assembly, testing and support facilities in place. They would, of course, be required to pay royalties for the right to produce (possibly between US$2m and US$4m for a typical 3-bay LIGHT system), which would generate very significant income for the Group as output ramps up in coming years. The fact that AVO management has seen fit to put such a manufacturing agreement in place with Thales is, almost certainly, to create its own production and development facility; it is also a convenient way to remind the various ‘First Generation’ producers (Mitsubishi, IBA, Varian, etc.) that AVO could, if necessary, go it alone and so any licensing arrangements agreements that might be reached will not be up for negotiation. This places AVO is an exceptionally strong position and highlights the exceptional value of its technology. This will become increasingly clear as AVO moves toward demonstrating its first full scale prototype during H2’2016. With this in mind, the ‘moving around of the senior management chairs’ simply marks the shift in the business from focusing on the development of the first LIGHT system, to the ongoing commercial roll-out of its game-changing technology. Beaufort remains a very enthusiastic supporter of Advanced Oncotherapy and repeats its Speculative Buy recommendation on the shares.

Tertiary Minerals – Speculative Buy

1st February 2016 / Leave a comment

Tertiary Minerals (TYM.L, 1.50p) – Speculative Buy

Tertiary Minerals, the AIM-listed company focused on the identification, acquisition, exploration and development of mineral projects in the fluorspar sector, announced last week that its Managing Director, Richard Clemmey, had purchased a further 131,533 ordinary shares at a price of 1.5p. Following the acquisition, Mr Clemmey has a total beneficial holding of 504,037 ordinary shares representing 0.233% of the Company’s issued share capital.

Our view: We are encouraged with the continued commitment of Tertiary’s Board as the Company aims to become a long term supplier of high quality fluorspar. We look forward to progress updates from the MB fluorspar project in Nevada as well as progress on the permitting application at its Storuman project in Sweden. In the meantime, we reiterate a Speculative Buy on the stock.

Beaufort Securities acts as corporate broker to Tertiary Minerals plc

Advanced Oncotherapy (AVO) – “With every announcement the credibility grows”

13th October 2015 / Leave a comment

Advanced Oncotherapy “with every announcement the credibility grows”

Advanced Oncotherapy (AVO) announced yesterday that it has signed a joint venture agreement with CircleHealth to operate the Company’s proton beam cancer therapy centre in Harley Street. CircleHealth, owned by AIM-listed Circle Holdings plc (CIRC) which is an employee co-owned company, runs hospitals and healthcare across the UK. It has nearly 2,000 partners, working across four UK sites. Under the terms of the agreement, Advanced Oncotherapy and CircleHealth will jointly own a newly formed company into which funding of £6 million will be provided in equal portions by the parties and will cover, inter alia, pre-opening costs and working capital. The arrangement, together with further definitive agreements to be finalised in the coming months, would combine CircleHealth’s clinician-led operating model with Advanced Oncotherapy’s next-generation proton therapy systems for cancer treatment. Once the centre commences operation the equity in the operating company will be owned as to 50.1% by CircleHealth and the remaining 49.9% by Advanced Oncotherapy.

Beaufort Securities view: Yet another important step, yet another senior incoming partnership agreement. With every announcement, the credibility of AVO’s ground-breaking proposal to develop the next generation of proton therapy systems grows further, as either high-brow academics stake their reputations, hospital/medical institutes place firm orders or letters of intent and service providers carve out long-term working relationships. The Harley Street facility will house the UK’s first high energy proton beam cancer therapy centre. CircleHealth will take responsibility for all operational and clinical matters at the facility as well as the additional procurement, fit-out and facility testing requirements needed for full commissioning and beyond. CircleHealth will also take responsibility for insurance provision for the centre while Advanced Oncotherapy takes responsibility for all technical matters. A number of proposals from international financial institutions concerning the provision of vendor finance for the LIGHT technology in Harley Street are now also being considered. CircleHealth has a reputation for providing innovative healthcare delivery and are an ideal candidate to operate AVO’s flagship Harley Street site. Whilst AVO’s ongoing business model is to focus on the manufacturer of cutting edge proton therapy systems, that it obviously retains a vested interest in the operational success of the facility. This is exactly what has been agreed. Working alongside CircleHealth, AVO expects to transform the UK’s approach to cancer radiotherapy treatment. Beaufort retains its Speculative Buy recommendation on Advanced Oncotherapy.

Beaufort Securities acts as corporate broker to Advanced Oncotherapy plc

Advanced Oncotherapy – Rocket Science, and the countdown has already begun

3rd September 2015 / Leave a comment

Advanced Oncotherapy (AVO) – Rocket Science, and the countdown has already begun. Article in UK Investor Magazine by Barry Gibb and Andy Senga of Beaufort Securities.

Article image below, or go here to read the magazine.

Advanced Oncotherapy – Broker Notes

26th August 2015 / Leave a comment

Advanced Oncotherapy

Broker Notes

Westhouse retains a Buy recommendation with a Target Price of 25p.

Advanced Oncotherapy (AVO) – Analyst Robert Sanders – On Schedule. Two CCL modules are announced as ready for high-power testing. This is the first time two CCL modules will be tested together…the finished proton beam cancer treatment machine (LIGHT system) will incorporate 10 CCL units/15 CCL modules in a series so that protons are accelerated to the necessary speed to treat radiosensitive tumours. AVO has to date been hitting all of its previously set-out milestones. Westhouse Securities said in a note growing awareness of proton therapy as a treatment for cancer should ensure strong demand for Advanced Oncotherapy’s LIGHT system. Analyst Robert Sanders said Monday’s news showed the company was on track to have its treatment on track for 2017.

Beaufort Securities has a Speculative Buy rating.

Says the High-power testing of LIGHT’s individual components and modules at this stage is a crucial demonstration of their ability to perform to specifications. Initial low power testing has shown that they perform to expectations and it is realistic to expect that the successful conclusion of these tests to build confidence that the CCL modules can work under the required conditions to deliver the high energy protons required to treat patients effectively. Results from this work should be expected during Q4’15, before moving onto to running the modules in series as a bank of accelerators. Once demonstrated, the most significant technological hurdle will have been successfully negotiated, leaving only a number of less challenging barriers ahead. While Beaufort considers that the FDA could potentially hinder product approval for rather longer than might presently be anticipated, the extent of interest from other non-dependent territories (in particular that presently being shown from China) suggests the Group is likely to be overwhelmed by demand for LIGHT as soon as commercial units become available. The enormity of this opportunity and the market potential it presents has already been significantly detailed in Beaufort initiation research of September 2014 and subsequent updates. In simple terms, if AVO delivers exactly ‘what it says on the tin’, the operational and cost advantages LIGHT offers will effectively render first generation proton therapy devices all but obsolete. Its principal limitation would then become simply its capacity to deliver to a global opportunity that will grow dramatically beyond its current US$2.5bn size, as it will also become the natural replacement for the more antiquated X-ray radiation machines that are installed in huge numbers around the globe. Given such an outcome, of course, major international competitors wishing to remain in the game will almost certainly be willing to pay a handsome price, one way or another, to get their hands on AVO’s proprietary technologies. Advanced Oncotherapy plc remains one of Beaufort’s key investment picks for 2015. Beaufort Securities acts as corporate broker to Advanced Oncotherapy plc

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