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Today's Market View Including : Amur Minerals, Nyota Minerals, Ormonde Mining and Zanaga Iron Ore

Last updated: 12:24 30 Sep 2013 BST, First published: 11:24 30 Sep 2013 BST

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Amur Minerals* (LON:AMC)– Interims show costs under control while exploration continues to grow nickel resource

Bellzone Mining (LON:BZ) – Interims highlight recent BFS at Kalia

Gem Diamonds (LON:GEMD) – Recovery of rare blue and white diamond from Letseng

International Ferro Metals* (LON:IFL) – Margins improve as management show benefit of cost innovations

Noricum Gold* (LON:NMG)  – “Bonanza grade drilling results”

Nyota (LON:NYO) – suspended in Australia still trading on AIM

Ormonde Mining (LON:ORM) – Interims Highlight Developments at Barruecopardo Project

Zanaga Iron Ore (LON:ZIOC) – Interims highlight staged development for iron ore project

 

Markets quiet as China Golden Week starts tomorrow

Markets are flat this week in anticipation of lower activity due to Golden week in China.

Chinese PMI figures have disappointed.

Political tensions in the Middle East are a concern

Non-Farm Payrolls are due in the US on Friday

US needs to renegotiate their Debt Ceiling.

 

Mick Davis’ to invest $500m in joint venture with Noble and TPG

Noble and TPG, a private equity group are investing $500m into a new venture run by Mick Davis’ and his X2 Resources group.

The group aims to buy and restore value to second tier mining assets

Investors hope the group will repeat the success Davis had with the creation of value with Xstrata’s ferrochrome and zinc assets and with the well timed acquisition of MIM in Australia in 2003

We see this as a great time to acquire assets in the mining sector

Valuations have been hammered by a flow of funds out of the sector led by a trend for ETF sales in the first half this year

The majors continue to offer sub-scale assets, including some better quality but smaller operations as they refocus on their larger cash generators

Investors who follow Davis and other turnaround specialists in the sector could make a killing from these assets

Attention to costs and productivity in smaller assets should restore margins as metals prices continue to recover.

A number of similar specialist private equity vehicles are also coming to life as investors recognise the opportunity to post huge gains within a 3-5 year environment in this area.

 

US - The government is heading towards a possible shutdown of non-essential federal services and staff placed on unpaid leave as the US needs to pass the spending bill before the Oct 1 deadline.

On Sunday, Republicans agreed on the resolution that would grant the US government to another tranche of funding if Democrats accept a one-year delay to Mr Obama’s healthcare reforms/.

The proposal has been quickly rejected by Obama.

Consumer confidence fell to the lowest level in five months in Sep with rising interest rates seen as a risk to an economic growth momentum. The index came in at 77.5 this month versus 82.1 in Aug and estimates for a 78.0 reading.

Chicago PMI, a local business barometer, will be released later today and is expected to climb to 54.0 in Sep from 53.0 in Aug.

 

China - Manufacturing PMI from HSBC/Markit increased to 50.2 this month from 50.1 in Aug. This is significantly lower to a preliminary reading of 51.2 released last week.

A slow down in a manufacturing sentiment index highlights risks to growth as the government is aiming to refocus the economy towards consumer driven system.

Communist Party will be meeting in Nov to set economic policy for coming years.

 

Japan - Industrial production fell in Aug contracting by 0.7%mom (-0.2%yoy) compared with a 3.4%mom (+1.8%yoy) increase in Jul and a 0.3%mom decline forecast.

Retail sales rose 0.9%mom last month compared with a 1.7%mom fall in Jul a 1.0%mom gain expected.

Prime Minister is set to announce the decision on a potential 3pp hike in sales tax to 8% in Apr next year. In a move to avert a slow down in the economic growth as a result of a rising tax burden the cabinet of ministers is poised to reveal stimulus plan.

 

South Africa - The number of fatalities fell to the lowest level on record last year ending Mar 31, according to the Mine Health ad Safety Inspectorate.

Fatalities declined from 123 in 2011 to 112 in 2012.

Of that 112, 51 happened in the gold mines, 28 in platinum mines and 20 in coal operations.

 

US$1.3487/eur vs 1.3496/eur last week. Yen 97.77/$ vs 98.67/$. SAr 10.146/$ vs 10.012/$. $1.614/gbp vs 1.610/gbp

 

Commodity News

Precious metals:

Gold US$1,343/oz vs US$1,326/oz last week - Prices are slightly up this morning on the back of concerns over the US budget talks that may lead to the government shutdown if parties do not agree on time.

SPDR gold holdings fell to 906.0t (29,128koz) valued at US$39.0bn versus 909.6t (29,244koz) last week.

Platinum US$1,424/oz vs US$1,412/oz last week

Palladium US$733/oz vs US$723/oz last week

Silver US$21.84/oz vs US$21.61/oz last week

 

Base metals:

Copper US$ 7,325/t vs US$7,250/t last week - Copper is range bound today as Chinese prepare to go on holidays.

Aluminium US$ 1,844/t vs US$1,822/t last week

Nickel US$ 14,057/t vs US$13,860/t last week

Zinc US$ 1,917/t vs US$1,894/t last week

Lead US$ 2,108/t vs US$2,089/t last week

Tin US$ 23,350/t vs US$23,200/t last week

 

Energy:

Oil US$107.5/bbl vs US$108.8/bbl last week

Natural Gas US$3.553/mmbtu vs US$3.568/mmbtu last week

Uranium US$35.25/lb (27/09/13) vs US$34.90/lb (26/09/13)  

 

Others:

Iron Ore - $131.9/t (27/09/13) vs $133.8/t (26/09/13) 62% Fe spot (cfr Tianjin)

 

Company News

Amur Minerals* (LON:AMC) Interims show costs under control while exploration continues to grow nickel resource

Net loss totalled US$2.0m (H1/12: US$6.4m) including administrative costs of US$1.6m (H1/12: US$1.3m) and finance costs and revaluation losses/gains on revaluation of Lanstead equity swap deals of -US$0.4m (H1/12: -US$5.0m).

AMC drew down 4 last settlements for US$0.4m from the second Lanstead equity swap deal (Mar-2011) and another 9 tranches for US$1.9m from the third Lanstead deal (Feb-2012) to cover exploration and operating costs during the period.

The Company holds no debt with a net cash position of US$2.2m (YE2012: US$2.1m) as of 30 Jun 2013.

In addition to cash in the bank, Amur has got US$3.1m worth of unused swap arrangements from the Lanstead deal completed in in Feb 2012 and another US$7.9m funding secured this July.

Funds will enable Amur to complete exploration programme at Kubuk (US$3.5m for FY2013 vs US$1.1m spent in H1 2013), progress with more engineering and environmental studies, pay for a PFS update and cover administrative costs (US$2m).

Operations highlights included exploration success at Kubuk, the fifth deposit in the Kun Manie license area, an upgrade of JORC resource and an update on the progress of the mining license application.

Kubuk: FY2013 field season exploration programme is focused on Kubuk where the team has tested some 40-50% of the length of the target area with drilling results to date showing attractive nickel and copper grades of 0.7% and 0.3%, respectively, on average. Separate grades revealed high grade intercepts of >1% Ni. A resource statement is targeted for the 750-1,000m long deposit at the start of next year.

New resource: Total resource which includes four deposits (Maly Kurumkon/Flangovy, Vodorazdelny, Ikenskoe/Sobolevsky and Gorny) has been expanded to 100.2mt (+46%, from 68.5mt) at an average grade of 0.53% Ni (was 0.50% Ni) and 0.15% Cu (0.14% Cu) for 531.7kt contained nickel (+56%, from 341kt) and 145.5kt copper (+52%, from 95.5kt), (previous SRK estimates).

Mining license: Russian regulatory agencies have released an official charge for converting a portion of exploration permit into a mining license in May this year. Should license application be successful Amur will pay US$0.8m for the permit conversion. Post-reporting period, Amur released an update saying the application has been successfully reviewed by the Ministry of Defence (MoD), the Federal Security Service (FSB) and the Federal Antimonopoly Service (FAS). The Ministry of Economic Development (MED) now needs to complete its economic assessment of the project and report results to the Federal Agency for Subsoil Use (Rosnedra). Terms and conditions of the license will then be presented to the Presidential Commission on Strategic Projects for a final approval.

Conclusion: The management is focused a lid over exploration and operating costs while continuing to grow the resource at the Kun Manie license area. Exploration is reported to have benefited from using a proprietary diamond drilling rig as drilling costs have more than halved from previous c. US$290/m.

Exploration plans at Kubuk include some 6,000m of step out drilling before moving to infill phase. The target is flexible and may be revised depending on drilling results.

Alongside drilling at Kubuk, the management is looking to update a 5-year old PFS which would include new technical data regarding the resource, metallurgy, operating and capital costs and metal prices.

Successful completion of the mining license application process will be a transformation moment for Amur and will enable the team to potentially move the project closer to the BFS stage. 

 

Bellzone Mining (LON:BZM)– Interims highlight recent BFS at Kalia

As previously reported the company has released a BFS for Kalia.

The BFS looks at a much reduced capital outlay than the previous feasibility study with development to take place in phases.

The BFS looks at transporting a fines product through trucking using a access road to be built which forms the basis of the rail track to be developed during the second phase.

An IRR of 37.5% and NPV of US$1,387m is generated from the project based on 7 mtpa of dry 58% fines supported by reserves of 59.8 Mt at 54.1% Fe with FOB costs of $34.38/t and capex of US$865m.

At their Forecariah JV targets are being revised down to reflect problems with shipping previously highlighted.

270,000 tonnes have been shipped to date and 250,000 tonnes are in stockpiles through partially and fully processed stockpiles.

Cash at 20 Sept 2013 stood at US$9.44m which are expected to support planned activities to Q2 2014.

Conclusion: The main challenge is to get the BFS for Kalia funded.

 

 

Gem Diamonds (LON:GEMD)– Recovery of rare blue and white diamond from Letseng

The company have recovered a rare 12.47 carat blue diamond and a 83.8 carat white diamond from Letseng.

Both of these diamonds are to be put into the sale in Antwerp.

Conclusion: Recovery of these stones adds to the recent momentum in terms of recovery of larger stones from Letseng. The mining of the higher grade satellite pipe in H2 and better recovery of large stones, should position the company well for the second half.

 

 

International Ferro Metals* (LON:IFL) Margins improve as management show benefit of cost innovations

IFL have reported better sales from higher ferrochrome sales for the full year to end June 2013.

Production: the company sold 183,718t of ferrochrome through the year versus 153,046 through 2012.

“IFL are now producing ferrochrome at or below the production cost of Chinese producers”.

Earnings: The company posted a marked turnaround through the second half resulting in a small loss of just ZAR5m versus a loss of ZAR120m in H1.

Cost reduction:  IFL reckons its fourth quarter saw some 90% of the planned benefits of its cost reduction program.  Costs are now some 38c/lb lower than seen in FY 2011. 

Resource: increase 64% to 206mt with reserves rising by 6% to 92mt.

Power savings:  the cogeneration plant generated 6.4% of total power for the furnaces rising to 8% in Q4 highlighting further benefits to come

Power costs:  Eskom power prices are now set to rise 8%pa over the next five years.

Net debt increases to ZAR362m from ZAR308m yoy.

Forex:  the fall in the South African rand should continue to help local producers.  The rand is now an average of 13% lower than seen last year.

The rand averaged 8.79/USD through FY ’13.  The rand is now 10.09/USD some 15% lower than IFL’s FY ’13 average.   

Ferrochrome:  remain relatively low at around $1.125/mtu for lumpy charge chrome.  Charge chrome prices are said to be nudging higher in South Africa according to the Metal Bulletin on shipments into Shanghai

Capital investment:  IFL has now completed much of its planned capital investment program with plans to spend a further ZAR50m next year, its lowest capex plan for five years. The team should now be almost solely production focussed to raise production rates while maintaining lower production clost levels.

Production costs:  production costs fell by ZAR0.38c/lb on FY ’13 but rose 4.3% yoy in rand terms.  The major costs eg ‘ore’ and ‘reductant’ costs remain stable while power costs fell due to co-generation and better utilisation benefits. 

Conclusion:  IFL have implemented 90% of their cost reduction program and now appear focussed on delivering better utilisation through FY ’14.  If all goes well the company should return to profit this year.

* SP Angel acts as Joint Broker to IFM

 

Noricum Gold* (LON:NMG)  – “Bonanza grade drilling results”

Noricum Gold have announced assay results from further drilling at the Rotgulden gold and precious metals project in Austria.

The latest

“The latest four drill holes at Rotgulden, totaling 165 metres, include some exceptional grades, the best being an intercept of just over one metre containing over 5 ounces per ton of gold, 807 g/t silver and 8.75 % copper”.

Significant gold (‘Au’), silver (‘Ag’) and copper (‘Cu’) mineralisation included:

o XB01 - 3.9m @ 51.53 g/t Au, 237.77 g/t Ag and 2.69 % Cu from 4.7m

§ Including 1.1m @ 181 g/t Au, 807 g/t Ag and 8.75 % Cu

o RZ01 – 3.2m @ 5.36 g/t Au, 17.17 g/t Ag from 12m

o RZ02 – 7.2m @ 2.13 g/t Au, 12.16 g/t Ag from 12.8m

§ Including 1.6m @ 5.51 g/t Au and 15.5 g/t Ag

o RZ05 – 1.2m @ 3.69 g/t Au, 27.2 g/t Ag from 11.8m

Additional results from drilling at the next 4 holes expected within the coming weeks

*SP Angel acts as Nomad and Broker to Noricum

**SP Angel analyst is visiting the Rotgulden mine this week.

 

Nyota (LON:NYO) suspended in Australia still trading on AIM

Tulu Kapi on care and maintenance as talks continue with funding partners.

We believe the company is unable to publish its report and accounts due to the accountants inability to sign off on its going concern statement.

 

Ormonde Mining* (ORM LN) 4.875 pence, Mkt Cap £20.5m – Interims Highlight Developments at Barruecopardo Project

Permitting is progressing with the company awaiting the final approval for its environmental declaration.

Funding for Barruecopardo are at an advanced stage with debt funding discussions going well.

The equity element of the project is likely to a JV arrangement at the project level.

The JV partner would invest in shares in return for a direct investment in the project.

Funds of €1.27m has been raised through a share placement in September to further the engineering work for the project to be started up.

Engineering work will form the basis for placing orders for priority equipment when there is a definitive engineering contract in place.

A contract is to be put into place with the preferred candidate likely to be a UK based market leader who has considerable experience with gravity processing.

The value of the contract is thought to be around a 20% reduction to the DFS estimate.

The balance will be used for working capital and on going land rental payments under the land acquisition mechanism in place for the project.

Rental payments are part of an “option to purchase” arrangement and are on going.

Land discussions are progressing well with a steady flow of acceptances from individuals.

Ormonde reported a loss for the period €943,000 which included a write off of €143,000 for exploration costs for La Zarza.

Conclusion: The funds raised following the interims  will enable Ormonde to progress work at the Barruecopardo project where the company is awaiting permitting and finalisation of funding requirements. The tungsten price has been strong recently and is currently trading close to $415/mtu against the price of US$350/mtu used in the company’s DFS.

Ormonde is subject to a bid approach from Almonty where the current bid level is far below the realisable value based on the parameters set out in the DFS for an initial open pit mine of 227,000 mtus for nine years.

*SP Angel act as broker to Ormonde Mining

 

 

Zanaga Iron Ore (LON:ZIOC)– Interims highlight staged development for iron ore project

The company approached their new approach to the development of the JV iron ore project in the Republic of Congo.

The JV project with Glencore Xstrata is now looking at phased development with capex for the project reduced to a third from $7.4bn to $2.5-$3bn.

This large scale project with reserves of 2.5 Bt at 34% Fe and resources of 6.88 bt of 32% Fe is targeting

A high grade pellet product of 66% Fe - 12 mtpa is being targeted using a slurry pipeline with potential for a small scale (1-2mtpa) DSO trucking operation to be initiated at the start of the project.

The project has the benefit of power from the grid with 100 MW of spare capacity thought to be available with the project targeting 60 MW.

Cash balances stood at US$35.1m at the end of June.

Conclusion: The re-shaping of development plans puts the project in a better position to get to development. The scale of funding is still high but with the support of Glencore and the high quality product being targeted the project could attract funding from a Chinese industrial partner.

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