logo-loader

Today's Market View Including Nyota Minerals, Noricum Gold, Highland Gold, Peak Resources and others

Published: 12:07 27 Jan 2015 GMT

no_picture_pai

Copper gains (US$5,558/t) – The State Reserves Bureau in China is rumoured to be buying 20,000t of copper taking advantage of low prices.

While the potential order is relatively small to the overall market, the SRB may accelerate purchases further through the year.

Market estimates are for the SRB to buy at least 300kt this year compared to 500kt believed to have been purchased in 2014.

Sierra Gorda, a Chilean copper/gold/moly mine that started production in Jul/14 and is ramping up to its full 120kt Cu capacity, may see its miners go on strike by the end of the week.

Around 45 workers unanimously voted in favour of a strike demanding a revision to remuneration and benefits from the mine operators (KGHM 55%, Sumitomo 45%).

We reckon China will continue increase its copper demand due to new infrastructure, suburban rail and other infrastructure, and due to its under wiring of new housing. 

Base Metals post new gains as the US dollar pulls back

Ramifications of the new ECB QE at EUR60bn per month are working through the market

The Euro is some 6.6% lower vs the USD since the start of the year

Greek government is expected to renegotiate the terms of its bailout despite hard line comments from Brussels and Germany

Fed statement tomorrow expected to show no change in rates tomorrow 

Economic News

US – The governors of six East Coast states declared emergencies this week amid a strong blizzard affecting some 20% of Americans.

The National Weather Service warned of a “life-threatening blizzard” that coul deliver as much as 76cm of snow in some parts fo the region with winds reaching55mph around New York City.

Airports cancelled thousands of flights, subway trains were halted and workers and students stayed housebound.

New York Governor banned travel from 11pm yesterday for all but emergency vehicles on raods in 13 counties including New York City.

Economic news due today: 

o Dec core durable goods (+0.6% v -0.7% in Nov), Nov S&P/CS 20 City property index (+0.6%mom/+4.3%yoy v +0.8%mom/4.5%yoy in Oct), Jan Markit services PMI (53.8 v 53.3 in Dec) 

China – Industrial profits fall by a record 8%yoy in Dec marking the third consecutive yoy monthly decline suffering from the manufacturing sector overcapacity and consistently falling PPI.

Earnings contracted 4.2%yoy in Nov and 2.1% in Oct.

FY2014 profits climbed 3.3%, the weakest pace since at least 2008.

“As the economy enters the ‘new normal’, the industry sector faces increased downward pressures, unreasonable structures and weak innovation capability,” Ministry of Industry and Information Technology said at a press conference. 

UK – GDP climbed 0.5%qoq in Q4 (+0.7%qoq in Q3/14 and +0.6%qoq forecast) taking the annual growth to 2.6%yoy, the strongest performance since 2007. 

Russia/Ukraine – The conflict gains pace as evidence of new clashes between pro-Russian separatists and Ukrainian army emerge.

The rebels are reported to have launched an offensive targeting a 26,000 population Debaltseve located in between separatists’ controlled Luhansk and Donetsk.

The rebel goal is “to push (government forces) further back from us, from settlements, and straighten the “front” line,” a deputy commander told Reuters.

The town has been circled by rebel troops for the last couple of days with Ukrainian troops continuing to hold on in the town.

On a separate note, S&P cut Russia’s foreign currency credit rating to junk (BB+) yesterday. Local-currency bonds’ rating was reduced one level above junk to BBB-, still slightly above the investment/junk grade threshold.

The move has been widely expected according to market participants, but is likely to continue to weigh on bond prices and support more selling.

The agency estimates the economy to grow at 0.5%pa in the 2015-18 period.

The exchange continues to depreciate as currently at 67.7 RUB to the USD versus 60.5 at the start of the year. 

Peru - RioSol – A US based company, RioSol claims to have discovered a rich REE deposit in the 10-kilometer long Capacscaya valley

Problem is that this is known as ‘the sacred valley’ of the Incas and the issue of overcoming local and potentially international opposition to any form of industrial activity in the valley is likely to be a significant. 

Ethopia – According to a new report from the World Bank, Mining is not currently a key growth area for the Ethiopian economy.

“Currently, there is one large-scale gold mine in operation, while a growing number of large mining projects are under development and exploration for oil and natural gas is intensifying after significant discoveries in neighbouring countries.

Ethiopia also has an extensive and unique artisanal mining sector; the government estimates there are around 1 million miners, making it an important source of job creation, and an important source of foreign currency.” 

US$1.1316/eur vs 1.1251/eur yesterday.   Yen 118.13/$ vs 118.14/$.   SAr 11.558$ vs 11.453$   $1.509/gbp unch vs 1.501/gbp

A$0.7952 vs 0.7923 

Euro – was US$1.1235/eur on Friday vs 1.1622/eur last Thursday – Euro collapses causing US dollar to strengthen. A$ collapse more driven by China PMI numbers 

Commodity News

Precious metals:

Gold US$1,283/oz unch vs US$1,283/oz yesterday 

Platinum US$1,257/oz vs US$1,254/oz yesterday 

Palladium US$783/oz vs US$769/oz yesterday 

Silver US$17.95/oz vs US$18.02/oz yesterday 

Base metals:

Copper US$5,558/t vs US$5,438/t yesterday 

Aluminium US$1,883/t vs US$1,824/t yesterday   

Nickel US$14,710/t vs US$14,275/t yesterday

Zinc US$2,149/t vs US$2,083/t yesterday

Lead US$1,872/t vs US$1,837/t yesterday

Tin US$19,475/t vs US$19,400/t yesterday 

Energy:

Oil US$48.10/bbl unch vs US$48.00/bbl yesterday – 

Gas US price US$2.971/mmbtu vs US$2.850/mmbtu yesterday

Uranium US$37.15/t unch vs US$37.00/t yesterday 

Bulk commodities:

Iron ore spot price index (62% fines Tianjin) $68.2/t unch vs $68.5/t yesterday 

Thermal Coal (CFR European ARA price) $58.50/t vs $55.60/t yesterday 

Speciality metals and alloys:

Tungsten APT European US$292.5/mtu unch vs US$292.5/mtu last week – tungsten price fell again last week despite ECB QE

Ferrochrome HC $1.08/lb Cr Q1 vs $1.15/lb Q4 quarterly Benchmark pricing – 

Rare Earth Elements (REEs): - China’s new ‘Strict export license’ system looks is likely to continue to restrict exports of REEs and other industrial minerals. 

Company News

Anglo Pacific (LON:APF) – Royalty at Isua continues to apply on transfer to General Nice

General Nice has acquired the Isua asset from PWC the administrators for London Mining.

AngloPac lost the US$30m it paid in advance to London Mining for the development of Isua as a result of the fate of London Mining.

Conclusion: It is good to see that Anglo Pacific has been able to salvage something from Isua given the demise of London Mining. General Nice is keen to get into the iron ore space and has already invested in IRC. London Mining shareholders and other creditors remain the main losers with PWC selling the Marampa asset to Frank Timis for a song. 

First Quantum (LON:FQM) - 2014 Production and Sales

Copper increased 4% to 427,655 tonnes for the full year with 105,176 tonnes of production in the fourth quarter.

Sales of copper increased 7% to 411,203 tonnes.

Production at Kansanshi was down 3% at 262,287 tonnes and up 3% at Las Cruces at 71,094 tonnes.

Nickel was down 3% for the full year at 45,879 tonnes with sales down 3% at 47,749 tonnes.

For 2015 the company has guided to total production of copper of 410-440 kt with Kansanshi at 250-265 kt and Las Cruces at 69-71 kt.

Nickel production is guided to 32-40 kt.

Gold was down 7% to 229 koz, zinceup 12% to 55,980 tonnes, platinum up 12% to 34,090 oz and palladium up 5% to 25,990 oz.

Total physical production at Sentinel is expected to be 150 – 200 kt with the commissioning phase performing well.

Total capex for 2015 is expected to be between US$1.2 to US$1.4bn.

Planned capex at Cobre Panama has been reduced to US$600m for 2015.

Conclusion: These results look in line – successful commissioning of Sentinel will be viewed positively as will careful management of the Cobre Panama project. Overall capex for the project is still significant at US$6.4bn but FQM have improved the capital intensity of the project with installed capacity up by 17% and production at 320,000 tonnes pa over LOM up 20%. This project is important within the portfolio with scope to almost double current copper production. 

Gem Diamonds (LON:GEMD) – Q4 Trading Update highlights diamond price weakness

At Letseng, for the quarter the company recovered 25,525 carats down 10% from Q3 2014.

For the full year 2014, 108,569 carats were recovered up 14% on the year before.

Grades for the full  year were up 11% at 1.7 cpht against 1.53 cpht in 2013.

Ore treated for the quarter was down 1% at 1.59 Mt with waste stripped up 6% to 5.075 Mt.

64% of ore was sourced from the main pipe and 36% from the satellite pipe with that ration being 69% and 31% for the full year.

The company sold 31,614 carats for the quarter up 34% from the previous quarter giving sales of 108,963 carats for the full year up 12%.

The price achieved for the quarter of US$2,140/carat was down 18% on the previous quarter.

For the full year the price achieved was up 24% to US$2,540/carat.

13 exceptional rough diamonds achieved greater than US$1m each including a 299.3 carat yellow diamond.

This stone was sold into their downstream partnership in January 2015.

The polished uplift was seen on two large stone with a 112.6 carat white diamond selling for US$5.8m and a 90.4 carats stone selling for US$4.2m.

At the end of the period US$15.2m remained in polished inventory resulting in a US$12.3m drop in revenues.

The Coarse Recovery plant at Letseng remains on track for completion in Q2 2015 with US$5.7m spent over the year and US$12.1m in total for the plant.

Costs are within budget at direct operating costs (before waste) of Maloti 137/t, operating cost including was of Maloti 215/t and mining waste cash cost of Maloti 24/t.

For 2015 the company is guiding to 100,000 to 105,000 carats for ore treated of 6.3-6.5 Mt and waste tonnes treated of 20-22 Mt.

Costs are expected in line with 2014 with maintenance capex of US$8-10m and project capital of US$13-15m.

At Ghaghoo, 48,023 tonnes of ore has been treated with 10,167 carats recovered.

The recovered grade is running at 21 cpht compared to expectations of 27 cpht.

The grade is said to be impacted by highly diluted ore derived from the margins of the pipe and plant inefficiencies during commissioning.

Conclusion: Q4 saw prices come down 18% but for the full year prices are up 24%. For next year guidance for carats recovered from Letseng are at the same level as this year while costs per tonne remaining the same but the amount of waste going up.

Some of this should be absorbed by a weakening currency. Prices and exceptionals will continue to drive earnings. Ghaghoo will add to revenues but how much of a contribution this will make to earnings, we need to wait to see. Against a softer diamond pricing market, diamond stocks are running into profit taking after a stellar performance last year. We prefer Petra with its diversified asset base and growth profile which is a buy on weakness. 

Gold Road Resources (ASX:GOR) – Scoping study for Gruyere

The company has announced the results of a scoping study on its Gruyere deposit in W Australia and reports that it is commencing a pre-feasibility study immediately.

The study considered a base case consisting primarily of a 5mtpa open pit mining operation at an average waste:ore ratio of 1.6:1 producing around 190,000oz per year of gold at a cash cost of A$838/oz (all-in sustaining cost of A$916/oz) over an 11 year life. 

The study also considered higher throughput rates of 7.5 and 10mtpa.  The study incorporates small scale underground production at 150,000 tpa or ore from the Central Bore area over the first 3 years of the project. 

Pre-production capex of A$360m including a 15% contingency

The company describes the scoping study as “an important milestone”. Although the company has not disclosed details of NPV or IRR at this stage, it has disclosed that it expects the project to generate over A$550m of cash flow at a gold price of A$1350/oz. The rapid move into PFS underlines management’s confidence in the robustness of the project. 

Highland Gold (LON:HGM) – 2014 gold output and 2015 guidance

The company reports that gold production for 2014 amounted to 258,937 oz; within the latest guidance range of 250-260,000oz and 10.8% above the 2013 production of 233,696 oz. At this stage, neither historical cost information nor cost guidance for 2015 has been forthcoming.

Highland Gold is expecting a further production increase in 2015 to 270-285,000 oz.

Lower grade ore was treated at the MNV mine (3.04 g/t in 2014 vs 3.7 g/t in 2013) resulting in a decline in gold production to 122,320 oz for the year compared to 145,259 oz despite processing marginally more tonnes of ore.

Production at the Novo mine, “continued to meet or exceed expectations” with increased ore throughputs, higher recovery rates and marginally improved grades  contributing to an increase in gold output for the year to 97,775 oz compared to 81,361 oz in 2013.

Production at the Belaya Gora mine ramped up to 38,842 oz for the year from 7,077 oz in 2013 as a results of  substantially higher ore treatment rates (1,227,000 tonnes for 2014 vs 291,000 tonnes) at higher gardes (1.58 g/t vs 1.2 g/t).

During December, Hatch Engineering delivered the scoping study for the Kekura development project in Chukotka.  The company indicates that, following internal reviews and discussions with State and Federal authorities, it is intending to initiate construction during 2015. 

Nord Gold (LON:NORD) – Record 2014 gold production performance

Nord Gold reports a 7% increase in 2014 gold production to a record 984,500 oz, exceeding the company’s August 2014 guidance range of 900-950,000oz. Initial guidance for 2015 production in the range 925-985,000 oz.

The company ascribes the increased gold output to its implementation of efficiency measures across its operations with a19% YoY increase in the tonnage off ore treated, and marginal improvements in metallurgical recovery.

The Bissa mine produced 250,700 oz of gold, exceeding production guidance of 200,000 oz, while the Lefa mine in Guinea showed a 26% improvement in output to 205,100 oz.

Significantly improved output was also achieved at Buryatzoloto’s underground mines at Irokinda and Ziun-Holba where gold production increased by 22% to 119,700oz.

The Taparko and Berezitovy operations were more stable, posting increases of 3% and 2% to 112,000 oz and 122,800 oz respectively.

Weaker gold prices were realised during 2014 ($1,266/oz vs $1,376/oz) offsetting the production increases and driving a 4% decline in revenues to $1.22bn.

Conclusion: Nord Gold has had a strong year’s production as a result of implementing efficiency programmes in its mines and, although at this stage we have not seen cost information, it is reasonable to hope that costs have been at least contained.  Production guidance for 2015 implies that the company is looking for a period of consolidation at its existing mines while it develops a series of new projects. 

Nyota Minerals (LON:NYO) – Rejection of alluvial mining application in Ethiopia

Nyota Minerals reports that its application for alluvial mining in the Abay River area of Ethiopia has been rejected by the Ministry of Mines.

The area is scheduled to be flooded by the Grand Ethiopian Renaissance Dam project and Nyota’s proposal to extract alluvial gold before the area became inaccessible seemed a pragmatic response to capture an opportunity before it becomes unavailable.

The Ministry has, however, taken the view that the dam project was of such importance to Ethiopia that it should not “risk any negative impacts arising from any mining activities”  and that the dam development would “outweigh the potential gains from gold royalties and taxes.”

Nyota has decided that it will not appeal the decision and that it “will be conducting a strategic review of activities and opportunities in Ethiopia”.

Conclusion: The decision that it cannot proceed with alluvial mining in the Abay River area is a setback for Nyota, however, it was unlikely that it would ever do more than provide a short term cash flow to help fund further exploration. This decision increases the urgency on Nyota to formulate a new strategic path following the sale of the Tulu Kapi project to Kefi Minerals. 

Noricum Gold (LON:NMG) – Drilling at Schonberg indicates 

(Schonberg 100% ownership)

Noricum are currently drilling into mineralisation relating to a number of old copper mine workings at Schonberg in Austria.

The first drill hole deviated significantly from its intended target due to poor drill operation by the contractors and missed the massive sulphide mineralisation.

The drill crew have now finished a further three holes with two of these at the westernmost target of the Schonberg license

Drilling is now much faster and more accurate than the first hole drilled and the company notes that it has received a credit in reparation for the performance of the first drill hole.

Sampling of the underground workings of the historic Brandegger Vein which runs between 0.1m and 4m wide include:

o 6.15 g/t of gold (‘Au’), 16.25 g/t of silver (‘Ag’) and 4.7% copper (‘Cu’)

o 5.01 g/t Au, 8.84 g/t Ag and 4.67% Cu

o 6.46 g/t Au, 5.63 g/t Ag and 1.81% Cu

o 33.8 g/t Au, 31.1 g/t Ag and 8.14% Cu

A photo of the Brandegger Vein workings which run for nearly 200m is included in the company press release.

We hope the drill results will confirm the continuation of two parallel mineral zones and potentially eight veins which are seen at surface.

Conclusion:   We are expectantly waiting on the results of the three holes drilled to see what grades, widths and number of veins may be reported.  Historic mining shows that high grade copper and gold was extracted and while the old timers were good at mining we reckon there should be much left behind to be discovered.

*SP Angel acts as Nomad and Broker to Noricum.  An SP Angel analyst has visited the Schonberg site in Austria. 

Peak Resources (ASX:PEK) – Quarterly Update in line

There was little new news in the announcement with the company highlighting their strategic investors and progress on beneficiation test work.

For the quarter the company spent A$1,995,000 – A$582,000 on development, A$232,000 on exploration and the balance on administration and interest costs.

Cash at the end of the quarter stood at A$2,218,000.

Conclusion: With strategic partners in place and progress being made on improving the process, we look forward to results from the BFS. A number of challenges still remain to development. 

Petropavlovsk (LON:POG) ( fully diluted post rights and conversion convertible issue) – Rights issue offers value 

Valuation suspended pending Rights Issue document review

We expect Petropavlovsk’s rights issue document to be released this week to give material information on how the company should reach its new gold production targets

Management guided to 680,000-700,000/oz of gold production this year suggests the company could do very much better than we forecast using existing published data on the individual mines.

Longer term guidance is for the company to maintain around 600,000ozpa through to 2019. 

Our current modelling brings POGs gold production down to 299,000oz in 2019 based on existing data in the market and our own assumptions so we expect new data to support the higher guidance.  This should also support a higher valuation.

Our mine by mine breakdown currently gives us forecast gold production of 592,000 for this year with a total cash cost of $574/oz including our estimate for the impact of the Rouble devaluation at RUB65/USD. 

At this production rate and assumed costs we calculate a value for the mines of US$1.8bn excluding corporate and other costs.  Adjusting the valuation for debt, working capital, corporate overheads, tax and restoration costs cuts our current estimate of value to US$760m though we expect to revise this higher on modelling the higher gold production rate. 

The business is highly leveraged to its gold production and has the potential to post strong gains if it achieves or even comes close to its 680,000-700,000/oz target production rate.  The company should then benefit from higher sales and a significant further reduction in unit cash operating costs.

Petropavlovsk is a very large Russian gold producer and a significant part of the local economy in the Amur Region of Russia.

The challenge of building one of the world’s larger gold producers in such an inhospitable region has had cost.  We expect new cost discipline within the business now that Pavel Maslovskiy is back at the helm.  We expect Maslovskiy to exert new discipline on the mining operations and corporate cost base to restore lost profitability and ensure the mines meet their new targets.

Conclusion:  Higher gold production and rouble devaluation should enable POGs to multiply margins, create new value and restore profit.  The rights issue and debt reconstruction is a seminal event for shareholders and the company and we look forward to seeing evidence of the benefits in the company’s financial reports through the year. 

We expect to update our model below on data from the rights issue document

Caledonia Mining tackles 2023 challenges with optimism for 2024 as it...

Caledonia Mining Corporation PLC (AIM:CMCL, NYSE-A:CMCL) chief executive Mark Learmonth tells Proactive's Stephen Gunnion the company faced a challenging 2023, primarily due to poor production in the first half of the year at its core asset, the Blanket Mine in Zimbabwe, and an underperformance...

46 minutes ago