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Today's Market View Including Anglo Asian Mining, Medusa Mining, Minera IRL,SolGold andf Stellar Diamonds

Published: 10:25 24 Nov 2015 GMT

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Anglo Asian Mining* (LON:AAZ) – First flotation concentrate shipment completed
Amara Mining (LON:AMA) – Upgrade takes Yaoure to 7.3moz grading 1.5g/t in the Ivory Coast
Medusa Mining (ASX:MML) Hold – Roy Daniel re-joins the board as a NED
Minera IRL (LON:MIRL) SUSPENDED – Don McIver to face charges for destroying >$1m of exploration drill core according to allegations
Premier African Minerals (LON:PREM) – Update on RHA Tungsten Mine
SolGold* (LON:SOLG) – Ecuador and Australia to sign MOU on Mining
Stellar Diamonds (LON:STEL) – Final Results Highlight progress at Baoule and Tongo projects

Gold prices rise as tensions in the Middle East conflict rise
Turkey shoots down Russian jet for incursion into Turkish airspace
• Russia has been repeatedly warned that it should not allow its jets to fly through Turkish airspace
• Both Russian pilots successfully ejected so we reckon they were warned.  One of the pilots has been captured by Syrian rebels.
• The potential for escalation is a scary thought!
• A few years ago gold would have rocketed on news of a Russian jet being shot down, particularly over Turkey/Iraq.

Metals prices causing major pain for higher cost miners - China producers now closing metal production as losses rise
• Metals prices continue to fall on US dollar strength as developing nation currencies devalue against the dollar.
• In many cases devaluation is insufficient to offset the fall in metals prices.
• So many Chinese miners are racking up such great losses that industry leaders in China are now clubbing together to agree production cuts.
• The situation reminds us of the Asian Crisis when massive currency devaluation caused stockholders of metals Asia to offload anything they could sell in US dollars at almost any price, with prices invariably helped lower by commodity trading funds.
• Metals prices gained significantly after the shakeout as consumers and traders restocked and as the new ‘supercycle’ gained pace

Dow Jones Industrials                        -0.17%   at       17,793  – Thanksgiving on Thursday followed by ‘Black Friday’ when US stores offer discounts ahead of Christmas
Nikkei 225                                           +0.23%   at       19,925
HK Hang Seng                                    -0.35%    at        22,588
Shanghai Composite                          +0.16%    at         3,616
FTSE 350 Mining                                 -0.06%    at         8,200
AIM Basic Resources                          -0.84%    at         1,689

Economic News
US – Manufacturing data disappointed yesterday after reports released showing the sector expanded at the slowest pace in nearly two years in Nov.
• “The decline in the headline index in Nov reflected weaker contribution from all five PMI components.”
• “Reports from survey respondents generally cited a a cyclical slowdown in demand patterns and ongoing weakness in export sales. Reflecting this, the index measuring new orders from abroad dipped back inside negative territory in Nov.”
•  On employment, “payroll numbers were reported to have increased again in November, continuing the trend seen for much of the past six years”. “However, the latest expansion of employment levels was only modest and weaker than seen on average over the recovery period.”

Germany – A second reading of the Q3/15 growth showed a significant downwards revision to exports growth numbers balanced by better than previously estimated data for private consumption, government spending and property investment.
• Exports growth rapidly contracted in Q3/15 in what was the slowest pace since Q4/12.
• Final Q3/15 GDP growth numbers remained unchanged at 0.3%qoq.

France – A business confidence index came marginally better than forecast marking the fourth consecutive month when a reading has been at least 100, the separating point between pessimism/optimism.
• The index was unchanged at 102 in Nov versus 101 expected by markets.
• It should be noted the survey was largely carried before the Paris terror attacks.

Russia/Turkey – Turkey downed a Russian military airplane on the border with Syria.
• SU-24 had crashed in northern Syria with two pilots reported to have ejected.
• Turkish side is saying the plane was shot down after warning its pilots violated Turkish airspace.

Currencies
US$1.0652/eur vs 1.0628/eur yesterday.    Yen 122.60/$ vs 123.16/$.    SAr 14.126/$ vs 14.032/$.    Sterling $1.512/gbp vs 1.516/gbp
0.721/aud vs 0.718/aud – yesterday.  

Commodity News
Precious metals:
Gold US$1,074/oz unch vs US$1,071/oz yesterday –
Platinum US$842/oz vs US$848/oz yesterday -
Palladium US$539/oz vs US$550/oz yesterday –
Silver US$14.17/oz vs US$13.99/oz yesterday

Base metals:
Copper US$ 4,514/t vs  US$4,489/t yesterday –
Aluminium US$ 1,447/t vs US$1,444/t yesterday –
Nickel US$ 8,405/t vs US$8,385/t yesterday –
Zinc US$ 1,566/t vs US$1,531/t yesterday – Chinese top 10 zinc producers will cut production by 500kt in 2016 in an effort to support metal prices.
• Coupled with announcements by Glencore and Nyrstar, total cuts come to 1.5mt for the next year.
Lead US$ 1,589t vs US$1,574/t yesterday –
Tin US$ 14,300/t vs US$14,500/t yesterday –

Energy:
Oil US$45.6/bbl vs US$43.7/bbl yesterday –
Natural Gas US$2.164/mmbtu vs US$2.076/mmbtu yesterday –
Uranium US$36.10/lb unch vs US$36.10/lb yesterday –

Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$46.8/t unch vs US$46.1/t – yesterday There’s about 300mt of surplus capacity in China that need to bulldozed, ex Rio economist
Thermal coal (1st year forward cif ARA) US$46.20/t vs US$46.00/t – yesterday
Steel – Steel mills in China estimated to lose around US$50/t of steel produced.
Iron ore – Mines Ministry in India is planning to lift a 10 % export tax on lower-grade iron ore offering support to miners struggling with falling commodity prices.

Other:
Tungsten - APT European prices $165-175/mtu unch on last week
Ferrochrome – Benchmark charge chrome price for delivery in Europe at US$1.04/lb its lowest level since Q1/10.

Company News
Anglo Asian Mining* (AAZ) 5.25p, Mkt cap £5.9m – First flotation concentrate shipment completed
• Following successful commissioning in Oct/15, flotation plant has produced 125 wet tonnes of copper concentrate through Nov/15.
• The Company shipped 62 wet tonnes of flotation concentrate to Industrial Minerals SA on 22 Nov/15.
• The remainder to be shipped this week.
• 62wmt (48dmt) shipped contained 8.9t copper, 27oz gold and 1,275oz silver implying 19% Cu grade in the product.
• Sales proceed to be received on 4 Dec/15.
• The plant is in a ramp up stage and is expected to run at 150t concentrate per week (7.8ktpa or 1.4kt Cu using 19% grade) until production is steadily increased towards the design capacity of 90tph (35ktpa or 5kt Cu on our estimates).
• Annual gold production guidance narrowed to 72-74koz in FY15 from 70-75koz forecast previously.
Conclusion: The take up of the flotation concentrate is a positive news given the fact that the share of copper contained in total revenues is set to increase moving forwards. We expect concentrate revenues to account for around a third of total sales proceeds in FY16-17 from <10% in FY14-15. We are looking forward to the progress of flotation plant processing rates ramp up which would be instrumental in improving cash generation of the business and reducing outstanding debt (net borrowings stood at US$51.0m as of Q3/15).
On a separate note, Oct production numbers released by the State Statistics Committee last week showed operations at Gedabek yielded 6.7koz gold during the month taking the total for Jan-Oct/15 to 60.8koz (72.9koz annualised). The news suggests operations remain on track to hit management guidance.
*SP Angel acts as Nomad & Broker to Anglo Asian Mining.  SP Angel analysts have visited the Gedabek and Gosha mine sites

Amara Mining (LON:AMA) 8.0 pence, Mkt Cap £33.7m – Upgrade takes Yaoure to 7.3moz grading 1.5g/t in the Ivory Coast
Amara Mining have increased the grade of their Yaoure project by 20% to 1.5g/t while increasing the resource by 491koz to 7.3moz
• 71% of the Yaoure mineral resource is in the NI 43-101 Measured and Indicated category.
• 5.2moz are now determined at the higher grade of 1.54g/t gold
Conclusion:  The new resource statement increases the theoretical mineable gold content and grade in the pit shells

Medusa Mining (ASX:MML) A$0.39, A$81m – Roy Daniel rejoins the board as a NED
Hold
• Roy Daniel the previous CFO at Medusa re-joins the board as a NED,
• He will be Chairman of the Audit Committee and also a member of both the Renumeration and Nomination Committees.
Conclusion: We recently downgraded our recommendation on Medusa from a buy to a hold. Geoff Davis who had come back to re-steer the company has resigned on the grounds of ill health. Rob Gregory the COO has been instrumental in turning round the company is not on the board which is now being run by Andrew Teo who is taken on the role of Executive Chairman. Till we are clear on Rob Gregory’s role in light of management, we are no longer buyers.

Minera IRL (LON:MIRL) SUSPENDED – Don McIver to face charges for destroying >$1m of exploration drill core according to allegations
Minera IRL SA (the good guys, in our view and according to company staff who we have spoken to)
https://www.investegate.co.uk/minera-irl-sa/rns/further-information-for-minera-irl-sa-shareholders/201511231321286361G/
Minera IRL Limited (the bad guys, in our view and according to company staff who we have spoken to)
https://www.investegate.co.uk/minera-irl-limited--mirl-/mkw/minera-irl-limited-reports-on-ollachea-communit---/20151123065941M9642/
Minera IRL SA reports that an investigation by the Ministry of Energy and Mines to the Ollachea project in Peru demonstrates the illegitimacy of a supposed community statement by Jamie Pinto, Minera IRL Limited’s non-executive Chairman.  It goes on:  “The Rural Community of Ollachea rejects and declares null and void the Declaration of Minera IRL Ltd”.
• The statement then goes on referring to Don McIver, VP of Exploration:
• “Mr Don McIver currently faces charges brought by Peru’s Criminal Investigation Directorate (Dirección Investigación Criminal DIRINCRI) for the illicit appropriation and disposal of assets of Minera IRL SA.  Along with Mr. Carlos Yrigoyen, Controller, and Yuri Valdiviezo, Head of Exploration, it is alleged that Mr. McIver appropriated and destroyed the exploration drill core of the Corihuarmi mine, valued at over U$1m, in an action connected to the intention of the current Board to close the Corihuarmi mine, the only source of income of the company. The destruction of the drill core has impeded the continued geological model of the deposit.”
Conclusion:  It is alleged that Mr. McIver appropriated and destroyed the exploration drill core of the Corihuarmi mine.  We can think of no valid reason for drill core from the Corihuarmi mine to be destroyed.  Even if the core is barren it still gives structural information to help with a potential mine sale.
* SP Angel analysts are expressing their own views and opinions in this analysis.  SP Angel has no corporate connection with Minera IRL or its subsidiaries.  SP Angel holds no shares in Minera IRL and does not have any current financial arrangements with the company. 

Premier African Minerals (LON:PREM) 0.575 pence, Mkt Cap £4.5m – Update on RHA Tungsten Mine
• The company has suspended its open pit operations at RHA against the current pricing for tungsten.
• Underground development has been accelerated with first ore being delivered in October this year and stockpiled.
• The company are planning to target reserves underground at the 870 level.
• Hoisting and ventilation is expected to be in place by Q1 2016.
• An XRT machine is being used to recognise mineralised ore.
• The company also continue with exploration activities in Benin.
Conclusion: The life of the open pit was always limited so accelerated underground development makes. We look forward to further news flow as the company delivers further ore from underground to start processing.

SolGold* (LON:SOLG) 1.5p, Mkt Cap £12.1m – Ecuador and Australia to sign MOU on Mining
• The governments of Australia and Ecuador are to sign a memorandum of understanding on developing and expanding cooperation between the two nations on the mining industry. “The MOU will also seek to promote the exchange of technical expertise and sustainable mining practices.”
• “Ecuador has identified as relevant, the experience of Australia in the following areas:
o Environmental and land management;
o Mine safety and occupational health;
o Taxation and royalties from mining;
o Data management;
o Community management;
o Public policy and legislation;
o Mining Excellence Centre; and
o Training Ecuadorean communities and staff of the secretariat of state and related bodies.”
• Ecuador has a relatively small population of just 15m people with employment of nearly 5m
• Literacy rates are good for Latin America despite a high rural population of nearly 6m mainly subsistence farmers
• Ecuador’s oil revenues fell 55% yoy to $1.1bn in the first half.
• The Marxist government led by Raphael Correa is struggling to manage a doubling of government spending at a time of falling revenues.
• The government entered into a gold swap agreement with a US bank last year for around half the nation’s gold in a deal worth around $600m at the time to help manage the country’s debt.
• Since then the predicament has grown worse with the fall in Ecuador’s oil revenues significantly reducing government income.
SolGold recently reported a very strong intersection of high-grade copper at surface on the flank of the Aguinaga porphyry.
• The intersection of 9.0m grading 1.01 % copper, and 0.79 g/t gold shows tantalising prospects for a high grade deposit at surface to potentially mirror deeper set copper mineralisation seen in the Alpala project.  SolGold is duly planning drill the Aguinaga property by the year end with potential for game changing results if drilling supports the surface assays.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.

Stellar Diamonds (LON:STEL) 16.5 pence, Mkt Cap £3.9m – Final Results Highlight progress at Baoule and Tongo projects
• Over the period the company generated revenues of US$614,228 mainly from trial mining at Baoule.
• Trial mining so far has resulted in the recovery of 6,400 carats at a 1.25mm run of mine grade of 13.5 cpht.
• Cost on sales were US$1,047,608 resulting in a gross loss of $433,380.
• Further sales have been generated by Baoule and from inventory of other projects but these are not shown as revenue as they arose during plant commissioning.
• Admin costs have been trimmed back from to US$2.8m to US$1.4m.
• During the year the company raised US$2.2m of cash to complete the Tongo PEA and do the trial mining at Baoule.
• Since year end in June, the company have raised a further US$2.4m mainly to progress Tongo.
• Trial mining is also continuing at Baoule through 2016 with 100,000 tonnes of total material to be treated of which 50% has been completed to date.
• Two further sales are planned from trial mining.
• The target resource for Baoule is for 22 Mt containing 3m carats.
• The company will continue to progress Tongo with a view towards completing the application for a mining licence at Tongo.
• Deutsche Batalon who has been the main funder in the recent fund raising stand to have a maximum shareholding of 37.5% interest once the funding raised through convertibles are converted.
Conclusion: No new news from this announcement, but it is good to see the company progressing both Tongo and Baoule. Most of the funds raised are being used on the ground with admin costs cut by half to US$1.4m. The company continue to see short term pricing weakness in the diamond market with long term fundamentals intact.

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