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Today's Market View Including Mariana Resources, Metminco, SolGold and others

Published: 10:38 27 Jul 2015 BST

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China – Industrial profits slump in contraction territory in Jun signalling a continuing slowdown in economic growth rates in China.
• Earnings were down 0.3%yoy in Jun following a 0.6%yoy increase in May and 2.6% growth in Apr.
• Meanwhile, the Chinese stock market started the week on a negative note posting a more than 8% decline today on renewed slowing growth concerns.
• Shanghai Composite was down 8.5% and Shenzhen dropped 7.0%.

Commodity forecasts cut as China struggles to support economic miracle
• Reports suggest that China is pumping trillions of renminbi into supporting municipal borrowing and equities in an attempt to stabilise the economy
• Government intervention and support for the stock market has yet to restore confidence in manufacturing and consumer buying
• The slowdown, particularly in construction and other industrial activity continues to lead metals prices lower
• Economic growth is still seen in the services sector but this gives little support for metals demand, so much of which is derived in China
• On the plus side non-Chinese manufacturers are gaining support from weaker local currencies caused by a strengthening of the US dollar and the linked Chinese renminbi
• We wonder how long the Chinese government will maintain the US dollar / renminbi link as the prospect for higher US interest rates continues to strengthen both currencies
• A widening of the Renminbi trading range with the US dollar might mark a first step in breaking the currency link
• Investors bought gold post the Lehman Bros collapse as the Sub-Prime crisis caused investors to shun the US dollar.
• This time the US dollar provides a strong alternative to gold until US government borrowing levels become an issue for investors again

Economic News

US – The Fed confirmed an accidental release of confidential internal economic projections prepare for June policy meeting.
• The file containing employment, growth and inflation has been posted on the Fed’s website on Jun 29.
• The FOMC is holding the policy meeting this week (28-29 Jul). This the last meeting this summer with the next one only in Sep 16-17.
• Other economic news due this week:
o Monday: Jun core durable goods (+0.5% v 0.0% in May), Jun capital goods orders (+0.5% v -0.4% in May)
o Tuesday: May property prices S&P/CS 20 City (+0.30%mom/+5.60%yoy v +0.30%mom/+4.91/yoy in Apr), Jul Markit services PMI (55.0 v 54.8 in Jun)
o Wednesday: FOMC announcement, Jun pending home sales (+1.0%mom/+12.0%yoy v +0.9%mom/+8.3%yoy in May)
o Thursday: Q2 GDP (+2.5%qoq v -0.2%qoq in Q1/15), Q2 core PCE (+1.6%qoq v +0.8%qoq in Q1/15)

Germany – IFO institute economic sentiment indices improve in Jul and beat expectations.
• IFO Business Climate: 108.0 v 107.5 in Jun and 107.2 forecast.
• IFO Expectations: 102.4 v 102.1 in Jun and 101.8 forecast.

UK – Consumer confidence exceeded the global average for the first time in more than nine years, according to a market research company Nielsen.
• The report comes on the back of poor Jun retail sales and ahead of the Q2 GDP numbers to be released tomorrow.
• Estimates are for a +0.7%qoq/+2.6%yoy v +0.4%qoq/+2.9%yoy in Q1/15.

Greece – Talks over a new three year €86bn rescue programme start today as bailout monitors arrive in Athens.
• Participants in negotiations point to a number of hurdles both parties need to pass to agree the deal.
• In particular, creditors are lobbying for more reforms or “prior actions” before the first tranche of the bailout fund is released.
• Greece argues reforms that have been approved by parliament so far should be enough for the first tranche of aid.
• There is an increasing chance that the previously indicated deadline for the approval (11 Aug) may now be missed.

US$1.1074/eur vs 1.0941/eur yesterday.   Yen 123.53/$ vs 123.79/$.   SAr 12.612/$ vs 12.479/$.   $1.552/gbp vs 1.549/gbp
US$0.729/aud unch vs0.730/aud.  Big weakening of South African currency rate

Commodity News
Precious metals:

Gold US$1,102/oz vs US$1,084/oz on Friday –
Platinum US$984/oz vs US$979/oz –
Palladium US$625/oz vs US$624/oz  – 
Silver US$14.74/oz vs US$14.61/oz  –

Base metals:
Copper US$ 5,225/t vs  US$5,271/t – Codelco temporarily suspends its Salvador division, the smallest in the Group, on the back of protests by contractors.
Aluminium US$ 1,647/t vs US$1,647/t -
Nickel US$ 11,080/t unch vs US$11,300/t –
Zinc US$ 1,944/t vs US$1,969/t –
Lead US$ 1,710/t vs US$1,728/t  –
Tin US$ 15,425/t vs US$14,850/t   –

Energy:
Oil US$54.50/bbl vs US$55.10/bbl
Natural Gas US$2.759/mmbtu vs US$2.807/mmbtu
Uranium US$36.15/lb unch vs US$36.25/lb –

Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$51.10/t unch vs US$51.20t –
Thermal Coal $56.8 vs $56.9 cif ARA Europe –
Tungsten - APT European prices price $220.0/mtu unch vs $225/mtu – price change as spreads widen

Company News
BlueRock Diamonds (LON:BRD) 26 pence, Mkt Cap £8.2m – Exercise of options and issue of equity
• The company has allotted shares of 607,625 shares after the exercise of 157,625 share options by Paul Beck (Chairman) at an exercise price of 18 pence and by Rian Visser (CEO)  of 450,000 shares at an exercise price of 14 pence.
• Funds received from the exercise of options will be used towards working capital.
• Following the exercise of options, Paul Beck will have a 5.42% interest and Rian Visser 2.02% interest in the company.

Mariana Resources (LON:MARL) 2.125 pence, Mkt Cap £16.2m – Latest drilling at Hot Maden intersects further high grade mineralisation
• The company reports assay results from three more holes (HTD- 15, 16 and 17) at its Hot Maden project in eastern Turkey.
• Hole HTD-15 intersected 117.3metres at an average grade of 13.9g/t gold and 2.0% copper from a down-hole depth of 216m. This intersection is thought to be the down-dip extension of mineralisation grading 5.6 g/t gold and 1.13% copper over a length of 100.2m in hole HTD-010
• Hole HTD-18 was drilled to investigate the mineralisation encountered in HTD-15 at greater depth – assays have not yet been received but the company reports that it “intersected the main mineralised zone over 93m from 313m downhole.”
• Hole HTD-16 intersected 100.7m at an average grade of 2.3 g/t gold and 1.8% copper from a depth of 332.3m and HTD-17 intersected 83m of mineralisation at a grade of 13.4 g/t gold and 3.9% copper from a depth of 51.3m.
• Holes HTD-19 is currently at a depth of 354m and is designed to investigate “large scale extensions to the broadly N-S trending Au-Cu mineralised zone”.
• Hole HTD-20 was lost in bad ground at a depth of 54.5m.
• Mariana has commissioned an independent resource estimate from the consultants RungePincockMinarco.
Conclusion: The Hot Maden drilling campaign continues to extend the high grade copper and gold mineralisation.  We look forward to the results of the independent resource assessment.

Metminco (LON:MNC) 0.20 pence, Mkt Cap £5.3m – Los Calatos mining study.
Metminco reports the results of an independent mining study conducted by the consulting engineers, Runge Pincock Minarco (RPM) on its Los Calatos copper project in southern Peru.
• SRK Chile reported a measured an indicated resource of 136.5m tonnes at an average grade of 0.73% copper and 435 ppm molybdenum at a cut-off grade of 0.5% copper.
• The mining study is based on extracting 94mt grading 0.88% copper and 0.051% molybdenum at a rate of 6mtpa using underground sub-level caving to produce around 45,000 tpa of copper in concentrates at a C1 cash cost of $1.20/lb over 17 years.
• The report estimates that the project will require pre-production capital expenditure of $650m, including contingencies of $111m, and will require construction taking 18-24 months.
• Based on a copper price of $3.00/lb, the project is expected to generate an NPV of $285m at an 8% discount rate and payback in 5.3 years.  By-product credits represent $0.53/lb of payable copper.
• Managing Director, William Howe, commented “we are pleased with the outcome of the Mining Study. Although the study is at a high level, it has provided the Company with a further development option that potentially yields very good financial returns and paves the way for Metminco to become a mid-tier copper producer.”
• The company is looking for a partner to help develop Los Calatos and a number of potential partners are reported to be undertaking due diligence.
• Conclusion: Metminco still has some way to go with Los Calatos but the completion of the high level mining study points a direction to bring the project to fruition and has, no doubt, identified the areas which will need further attention. The search for a development partner seems to be progressing and an incoming partner will have their own development ideas.

Medusa Mining (LON:MML) A$0.65, Mkt Cap A$129.9m – Quarterly and FY 2015 production in line
• For the June quarter the company produced 26,542 oz at a head grade of 6.01 g/t at an all in sustaining costs of US$1,076/oz.
• This gives full year production of 98,539 oz within guidance of 95-100,000 oz.
• For the full year cash costs were US$385/oz with an average realised gold price of US$1,220/oz – US$1,197/oz for the last quarter.
• Guidance for FY 2015-2016 remains unchanged at 120-130,000 oz.
• AISC is expected to remain high until all mine medium terms waste infrastructure projects are completed.
• Mill recovery was 94% in line with the previous quarter.
• Cash and bullion at the end of the quarter stood at US$14.6m.
• The project to deliver the upgrades to L8 shaft are progressing in line with expectations.
Conclusion: Medusa shares have fallen reflecting its gearing to the gold price. Operationally the Co-O mine has shown significant progress with the company now delivering in line with guidance. The new team on the ground are doing a good job.

Petra Diamonds (LON:PDL) 142 pence, Mkt Cap £732m – Trading Update and FY 2016 guidance
• The company produced totalled diamonds of 3,186,475 carats – 2.276 m carats from ROM and 910,307 from tailings.
• Sales of 3,168,650 carats generated revenues of US$425m.
• Prices fell by around 10% with the market continuing to face head winds in the short term.
• Finsch produced 2,065,875 carats up 13% with ROM grade and guidance for next year remaining unchanged.
• Prices achieved at Finsch for the full year was US$90/carats down 10% from last year.
• The second half saw prices improve to US$93/carat from US$85/carat.
• For FY 2016 ROM throughput will be 3 mtpa rising to 3.2 mtpa for FY 2017 and 3.5 mtpa for FY 2018.
• Capex for FY 2016 and FY 2019 remain broadly unchanged at Finsch.
• Cullinan production decreased by 11% to 729,496 carats due the falling ROM grades as a result of the mining of highly diluted production areas.
• For Q4 2015 ROM grades increased to 23.1 cpht.
• Prices achieved for FY 2016 was US$119/carat excluding specials against US$146/carat in FY 2014.
• Including specials the prices was US$174/carat against US$185/carat in FY 2014.
• FY 2016 is expected to see ROM tonnes sourced from mainly undiluted areas from H2 onwards with grade expected to rise to 31 cpht over the year.
• ROM tonnes treated are guided down for FY 2016  from 2.9 Mt to 2.3 Mt in the short terms as the company tries to optimise mine economics.
• FY 2016 cost is guided up at Cullinan with planned reduction in ROM tonnes.
• FY 2016 capex guidance for Cullinan is Zar 2,050 up by Zar 970m mainly due to the new plant which is guided at Zar 600m.
• The new plant is scheduled to be operational by the end of FY 2017.
• The plant is expected to deliver a 6-8% increase in revenue/t from a 10% increase in grades and improved recovery of higher value large stones.
• Koffiefontein production decreased by 10% to 45,384 carats with depletion of higher grade tailings being offset by ROM production from the 52 level.
• Prices achieved at Koffiefontein were US$386/carats against US$542/carat in FY 2014 down 41%.
• ROM thoughput for FY 2016 and FY 2017 at 1 mtpa and 1.1 mtpa is in line with previous guidance.
• Expansion capex is Zar 250m an increase of Zar 120m from previous guidance due to capex to access the 52L Western fissure mining area and extra underground fleet requirements.
• Kimberley Underground saw production rise to 137,226 carats up 8% with planned steady state treatment reaching 1.2 Mt in line with previous guidance.
• Prices achieved at Kimberley were in line with FY 2014 at US$302/carat.
• FY 2016 capex has been guided up to Zar 150m an increase to Zar 90m due to refinement of underground development at the joint shaft to extend the life of the Bultfonteina nd Dutoitspan pipes.
• At Williamson production increased by 7% to 202,265 carats due to increase in ROM tonnes treated.
• ROM throughput for FY 2016 is 3.8 mt down from previous guidance of 4.5 Mt due to downtime related to plant modifications.
• FY 2016 cost guidance for Williamson is up due to reduction in ROM tonnes.
Conclusion: FY 2015 trading and projections should not be a surprise. Guidance for Finsch remains broadly unchanged but changes in Cullinan reflect optimisation to mine plan and the new plant being built. Capex increase for new plant of Zar 950m.
However, there are guidance changes to FY 2016 in terms of ROM tonnage impacts on costs and increased capex. In addition, prices have been guided at Koffiefontein for ROM and tailings production while other pricing remains in line. We will review our numbers to reflect these changes.

Shanta Gold* (LON:SHG) 5.75p, Mkt Cap £26.7m – Mineral resource update for New Luika
Shanta Gold has issued an updated reserve and resource report on mineralisation within a 4km2 area around the New Luika gold mine in Tanzania.
• The update comes as a result of new drilling (9 holes totalling 2,676m) completed since January 2015 and comprises part of the work required for completion of the Underground Feasibility Study which is due for completion in Q3 2015.
• The new resource, which is reported at a 1g/t cut-off grade under the JORC (2012) Code, amounts to indicated and inferred resources of 12.9m tonnes at an average grade of 3.2 g/t representing 1.3m oz of gold. Over 70% (7.4mt at 4g/t gold or 950koz) is classed as indicated.
• Resources at Bauhinia Creek increased to 3.6m tonnes at 5.3g/t gold (from a previously reported 4.9g/t)  representing 626 koz of gold or 47% of the total resource. Almost 80% of the resource at Bauhinia Creek is “indicated”.
• The current open - pit reserve is reported as 1.6m probable tonnes at an average grade of 4.8g/t containing 245,000 oz of gold. This is substantially lower than the reserve reported in October 2014 (2.25m tonnes at 5.1g/t for 365,000oz of gold).
• The reserve reduction is partially a result of depletion of the reserve through mining of approximately 36,000 oz of gold but also from the reclassification of some of the reserve (approximately 67,000 oz) into the planned new underground mining operation.
• The current underground resource amounts to 2.2m tonnes at an average grade of 6.5 g/t gold or approximately 475,000 oz of contained gold.
• Deeper drilling results reported today include 5.93m at an average grade of 42.22g/t gold from 266 m below surface, 10.6m at 11.79 g/t gold from 211 metres and 4.29m at 7.29 g/t from 177 metres depth “confirms potential for underground mining”.
Conclusion: Shanta Gold is moving from open pit mining at Bauhinia Creek and New Luika into an underground mining phase. Today’s announcement shows the potential for high grades at depth and forms one of the key building blocks for the current feasibility study for the underground operations. Additional surface exploration has the potential to identify additional, open pittable mineralisation within this part of the historic Lupa goldfield. We llook forward to progress on both underground and surface operations and a continuing turn round at Shanta Gold.

*SP Angel’s analyst has visited New Luika

SolGold* (LON:SOLG) 2.3 pence, Mkt Cap £17.5m – Hole 12 shows copper from 88m depth
SolGold report the intersection of copper mineralisation close to surface in Hole 12 at Alpala Central, Cascabel, Ecuador.
Alpala Central:
• Hole 12 mineralisation is visually seen from 88.4m to the hole’s current depth of 246.9m.
• This is very good news as the presence of mineralisation close to surface should be of significant benefit to any plan for mine development
• Many copper/gold mines of this type shows elevated grades of mineralisation above the main orebody often through some form mineral enrichment and it is possible that Cascabel may show higher grades of primary and secondary mineralisation within areas which are considered to be relatively close to surface.
• These areas have the potential to significantly raise the value of the project through lower capital for development and faster and easier access.
• Hole 12 has intersected the mineralised diorite porphyry at 233.8m which again is significantly closer to surface than seen in previous holes indicating more porphyry structure close to surface. 
• Hole 1 also shows porphyry mineralisation at a similar depth with: 
o “100m grading 0.65% Cu, 1.00 g/t Au from 222m, including 58m grading 0.96% Cu, and 1.67 g/t Au from 226m, with estimated true widths being 52m and 30m respectively.”
Alpala North West:
• The geological team at Cascabel are also investigating targets around 400m north west of the Alpala Central zone.  The Alpala North West drill targets are being trenched and sampled with rock saw channel sampling in progress where trenches are exposing solid rock for the rock-saw channel sampling program.
• Previous rock-saw channel sampling perpendicular to the north-west trend of mineralisation along Alpala Creek returned true widths of 33.3m @ 0.65% Cu, and 1.02 g/t Au, including 18.3m @ 0.78% Cu and 1.61g/t Au in Trench 5.
• Trenching at the north western limit of exposed surface mineralisation returned 53.9m @ 0.32% Cu, and 1.38 g/t Au, including 15.6m @ 0.77 % Cu, and 0.56 g/t Au from Trench 56A.
• The team are also mobilisation a second drill rig to site to test other porphyry centres within the greater Cascabel porphyry cluster.
Conclusion:  Hole 12 is good news for SolGold.  The presence of visual mineralisation from 88m supporting the shallower mineralisation seen in Hole 1 is good news.  We also look forward to further trench results from Alpala North West supporting indications of mineralisation as indicated by recent geophysical surveying.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.

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