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Today's Market View Including - Bushveld Minerals, Condor Gold, Coal of Africa, Hummingbird Resources and others


Bushveld Minerals (LON:BMN) – Corporate Update
Condor Gold (LON:CNR) – Termination of strategic review
Coal of Africa (LON:CZA) – Engineering firm appointed for the Makhado coal project
Hummingbird Resources (LON:HUM) – DFS enhances project economics reflecting higher throughput and production
Metal Tiger plc (LOM:MTR)  –  Updated at MOD Resources’ property in Botswana
Premier African Minerals (LON:PREM) – Update on underground development at the RHA tungsten mine

Gold miners predict peak in gold output
• According to the FT gold producers predict that gold production has peaked for this cycle
• According to Barrick Gold “falling grades and production levels, a lack of new discoveries and extended project development timelines are bullish for the medium and long term gold price outlook”.
• While this may sound like a gold producer talking its own book, there is evidence that costs have not come down sufficiently to make a number of development decisions economic.
• Currencies and energy prices have provided a reprieve to most emerging market producers while falling grades have been a negative.
• Falling supply with some resurgence of gold as a risk free asset could provide gold with more support this year.
• We forecast an average gold price of US$1,175/oz for this year, rising to US$1,250 next year with a long term price which is unchanged at US$1,250/oz.

SolGold* (SOLG LN) – Government approves new gold mine for Lundin Gold in South of Ecuador
Lundin Gold gets permission to develop the Fruta del Norte gold mine
• Fruta del Norte is being planned as an underground gold
• The project 6.7moz of prove and probably gold reserves
• Ecuador plans on attracting a minimum of $750m in new mining capital this quarter through opening new areas for copper and gold exploration (good luck with that!).
*SP Angel act as nomad and broker to SolGold

Attend Cape Town in style and comfort with the 121 Group Mining Investing Conference
– Cape Town 8-9 February 2016
• Join us in the beautiful and historic gardens of the Welgemeend farm house in Cape Town, close to the Mount Nelson Hotel
• Buy-side investors and analysts are able to attend the summit for free.  See registration form in link below

Davos - Did you know, the wealth of the richest 1% is estimated to be equal to the rest of the population
• Some of the 1% got rich in the mining industry indicating that resource investment often over a longer term period is a way to make gains
• Not sure if tax paid is in the same proportion.

Dow Jones Industrials                          -2.39% at        15,988
Nikkei 225                                              -1.12% at        16,956
HK Hang Seng                                       -1.45% at         19,237
Shanghai Composite                             +0.44% at          2,914
FTSE 350 Mining                                    -1.59% at          6,054
AIM Basic Resources                             -1.24% at          1,575

Economic News
China currency – The central bank raised reserve requirements for offshore lenders in an effort to cut CNY liquidity and raise the cost of borrowing.
• Recently, the bank has been engaged in selling dollars in the open market to narrow the gap between the onshore and offshore exchange rates.
• The latest decision is the first use of administrative measures to influence the offshore renminbi market.

Chinese house prices extended the winning streak to three months in Dec.
• Property prices in 70 large cities climbed by an average of 1.6%yoy in Dec compared to a 0.9%yoy increase in Nov.
• The increase was largely driven by gains in tier-one cities.
• GDP numbers are out tomorrow with estimates for no change in growth rates in Q4/15 (6.9%yoy v 6.9%yoy in Q3/15).

US – Economic data released on Friday showed both retail sales and industrial production contracted in Dec.
Total sales climbed 2.1%yoy in 2015 marking the slowest pace of growth since 2009.
• Industrial output contracted for a second consecutive month on the back of the strong dollar.
• Weak data led to a fall in government bond yields and pushed expectations of the next interest rate increase out.
• Economic news due this week:

UK – Property prices posted 0.5%mom/6.5%yoy increase in Jan/16 versus -1.1%mom/7.4%yoy recorded in Dec on Rightmove data.

Iran – The UN certifies Iran had completed first stages of the nuclear deal with a number of sanctions to be lifted off.
• EU embargo on oil imports from Iran as well as penalties on international banks dealing with local counterparties will now be removed.
• A removal of sanctions is expected to release proceeds from oil sales locked up in international banks, FT reports.
• The US Treasury put the amount at US$50bn with Iran’s central bank estimating it at US$29bn.

US$1.0903/eur vs 1.0908/eur yesterday.   Yen 117.28/$ vs 117.43/$.  SAr 16.824/$ vs 16.592/$.   $1.430/gbp vs 1.436/gbp
0.688/aud vs 0.688/aud -

Commodity News
Precious metals:
Gold US$1,091/oz vs US$1,083/oz yesterday –
Platinum US$828/oz vs US$834/oz yesterday –
Palladium US$491/oz vs US$486/oz yesterday – 
Silver US$13.94/oz vs US$13.83/oz yesterday

Base metals:
Copper US$4,383/t vs US$4,368/t yesterday – TC/RCs came down in Jan as traders expect a decline in supply of clean copper concentrates on the back of weak commodity prices.
• The MB copper concentrates index stood at US$92.7/dmt and 9.27c/lb last week, 3.4% down on levels recorded at the end of Dec.
• On a separate note, Codelco CEO forecasts copper prices to increase post Chinese New Year next month.
• Copper is set to rise to as much as US$2.2/lb (US$4,850/t) on Nelson Pizarro estimates.
• Low prices are likely to continue for two years before hitting US$5,500/t.

Aluminium US$1,472/t vsUS$1,472/t yesterday –
Nickel US$8,565/t vs US$8,435/t yesterday –
Zinc US$1,492/t vs US$1,482/t yesterday
Lead US$1,613/t vs US$1,604/t yesterday
Tin US$13,300/t vs US$13,255/t yesterday

Oil US$28.80/bbl vs US$29.90/bbl yesterday – End to Iranian sanctions will help Iran but should not add new oil supplies into markets as Iran was selling oil despite the sanctions
Natural Gas US$2.049/mmbtu vs US$2.109/mmbtu yesterday
Uranium US$34.75/lb vs US$34.75/lb yesterday

Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$40.80/t vs US$40.60/t yesterday –
• Chinese port inventories are set to surpass 100mt mark on the back of strong shipments from Australia and Brazil and seasonal weak demand in China.
• Stockpiles climbed 1.7% to 94.6mt, an eight-month high, last week following increases in the last four months.
• Current inventories beat respective five-year average of 92.7mt.

Steel – Tata Steel expected to cut 1,000 jobs in the UK in the face of cheap steel from China.  Tata had asked suppliers to cut prices by 30% back in November.
• Chinese dumping of surplus steel in Europe and the US is likely to cause further problems particularly with China having set up a ‘bad bank’ to effectively support uneconomic industries within China.
• So far the EU has failed to take action against Chinese dumping of steel into Europe as EU ministers could not reach agreement on anti-dumping measures
• The EU ministers have proposed to hold a conference to discuss possible action to be taken – don’t wait too long guys otherwise there won’t be anything left to protect!
• Perhaps ministers would like to invite all those hard working steel workers who have lost their jobs to the conference to hear their views?

Thermal coal (1st year forward cif ARA) US$37.20/t vs US$38.05/t on 30 December –

Tungsten - APT European prices $165–175/mtu vs $165–180/mtu last week and $165–185/mtu the week before – possibly due to Chinese clearout of stock ahead of the Chinese New Year
Ferrochrome – Benchmark prices collapsed to 92c/lb in December for Q1/16 marking.

Company News

Bushveld Minerals (LON:BMN) 2.75 pence, Mkt Cap £13.3m – Corporate Update
• Following the full acquisition of Lemur Resources, the company has three assets within its portfolio.
• For the Mokapane vanadium asset, the company have completed a PFS and are looking for partnerships to take the project forward.
• For the assets within Lemur, the company will continue to focus on securing the IPP licence for the Imaloto Coal Project.
• The Zaaiplats tailings project is to be transferred to the tin asset within Greenhills Resources.
• A scoping study has been completed for the Mokapane tin project.
• Anthony Viljoen from Bushveld is have responsibility for Greenhills and Lemur.
Conclusion: The acquisition in May of Lemur Resources brought further assets as well as cash around A$15m with a further convertible bond being raised of £2.6m. This helps with trying to push the projects further but is unlikely to give them enough to push them all along given the current climate for the sector. As a result the group will be seeking partnerships for their project with the Vanadium project being targeted first to find partners.

Condor Gold (LON:CNR) 17.875p, Mkt Cap £8.2m – Termination of strategic review
Condor Gold reports that it is, with immediate effect, terminating the formal strategic review and sale process which it announced on 4th September 2015.
• The announcement in September pointed out that financing the estimated $110m -$169m capital required to develop the La India Project in Nicaragua “would prove significantly dilutive to existing shareholders”. At 31st December 2015, the company held £1.1m in cash.
• One of the options to be considered in the strategic review was a possible offer for the company or the development of a joint venture.  Today’s announcement indicates that these options are no longer being pursued, however it is not yet clear how the company proposes to address the continuing development and financing of La India.
• Previously announced development plans for the 2.3m oz resource at La India indicate an open pit mine producing around 100,000oz pa of gold at an all-in sustaining cash cost of under $700/oz.
Conclusion: In our view, La India is a sound project with a substantial resource at relatively high grades of 4g/t and competitive operating costs. Announcements in December indicated that it was proceeding with the necessary permit applications and we see this as a low-cost way to add value. The dilemma now facing the company is how to proceed with the limited funds available.

Coal of Africa (LON:CZA) 2.375 pence, Mkt Cap £45.8m – Engineering firm appointed for the Makhado coal project
Coal of Africa has awarded the well-known South African engineering firm, DRA Projects a contract to prepare the Optimisation Study and Front End Engineering Design work for its Makhado Coal Project in the Limpopo Province of S Africa.
• DRA has been involved in earlier phases of the project dating back to 2010 and is well positioned to assist Coal of Africa in advancing Makhado. “CoAL’s current plan is that work on the Makhado site will begin during the second semester of 2016, followed by a 26 month build programme with first coal produced during 2019.”
• The studies will include the identification of opportunities to reduce costs and improve the economics of the project which in 2013 was reported to require capital expenditure of R3.96n.
• The announcement follows the report last week that the project had received its water use licence.

Hummingbird Resources (LON:HUM) 12.26 pence, Mkt Cap £13.1m – DFS enhances project economics reflecting higher throughput and production
• Hummingbird has completed a DFS on the Yanfolila project in Mali.
• The DFS improves project economics compared to the optimisation study published in March 2015.
• LOM tonnages have been increased from 6.4 Mt to 8.8 mt with grades up to 2.77 g/t compared to 2.64 g/t.
• The study looks at mining five open pits starting at Komana East and Komana West with a significant increase in tonnages from these pits at a US$1,000/oz cut off price.
• The plant will have a throughput of 1.24 mtpa to produce 121,000 oz of gold per annum.
• The plant will use standard equipment with gravity and CIL processes to recover around 92.5%.
• Strip ratios are also up at 12.1 to 1 against 10.6 to 1.
• LOM production costs are up marginally at US$645/oz against with a lower AISC cost of US$720/oz for a US$1,250/oz gold price against US$733/oz for the optimisation study at the same gold price.
• The AISC costs can change with the gold price assumption reflecting different royalty rates.
• Power is to be supplied through diesel generators.
• Project capex is estimated at US$79m against US$72m previously.
• The project does not require physical resettlement but will require land acquisition.
• At a US$1,250 gold price the NPV using an 8% discount rate is US$142m from Phase 1 and 2 and comes down to US$88m at a US$1,100/oz gold price with an IRR of 55% and 37% respectively.
• This compares with an NPV previously of US$72m and an IRR of 35% at a US$1,250/oz gold price for the optimisation study.
Conclusion:  Increased throughput and production with a small incremental capex has led to a good uplift in terms of project economics with the project stacking up at prices close to the current spot level. The project looks like it has good scope for development.

Metal Tiger plc (LON:MTR) 0.8p, mkt cap £2.9m –  Updated resource at MOD Resources’ property in Botswana
Metal Tiger plc reports today news from its joint venture partner, MOD Resources.
• The news states that MOD Resources has acquired 100% of the issued shares in Discovery Mines Ltd (DMI).  Discovery Mines Ltd contains exploration licenses formerly owned by the now-liquidated Discovery Metals company which was the subject of an $856m bid by Cathay Fortune.  Discovery Metals later collapsed following the withdrawal of Cathay Fortune’s offer following rumoured irregularities over calculation of the Discovery Metals copper resource at Boseto.
• Metal Tiger owns 30% of DMI and now also holds 4.92% stake in MOD giving Metal Tiger and effective 33.4% stake in the project.
• MOD report they are planning to drill for extensions below the high grade Mahumo resource and to follow up on previous high grade copper intersections on the DMI licenses in Ghanzi district.
• MOD has been exploring the Kalahari copper belt since 2011 when it discovered the Mahumo copper deposit.
• Cupric Canyon Capital funded by the Barclay Capital private equity team announced results of a feasibility study for the potential development of an underground mine at the Zone 5 deposit in November 2015.
• Cupric Canyon’s Zone 5 is around 100km NE of Mahumo and is thought to be on the structural geological contact as MOD’s Mahumo deposit.
• Cupric Canyon have a reported resource at Zone 5 of 100.3Mt @ 1.95% Cu and 20g/t Ag making it the most significant reported resource in the Kalahari Copper Belt.
• It was reported last year that Cupric Canyon will spend $200m to bring theie Zone 5 project into production
Conclusion:  It is good to see MOD and Metal Tiger making progress on copper exploration in Botswana.  If Cupric Canyon go ahead with the construction of their new copper mine then this region will become more interesting again.

Premier African Minerals (LON:PREM) 0.375 pence, Mkt Cap £4.1m – Update on underground development at the RHA tungsten mine
• The company reports that , based on an internal study, it plans to process “approximately 32,000 tonnes of run-of mine ore at average grade of 6.2kg/t” [0.62%] tungsten trioxide. Treating this material, sourced from the 926 adit level of the underground mine, is expected “to produce 249 tonnes of concentrate at 63%WO3 over a six month period from February 2016.”
• The company and its contractors are working to open up lower levels of the old mine on the 870 and 856 levels at a capital cost of $406,000. The commissioning of operations on the 870 level is reported to be on schedule for February 2016. According to today’s announcement, “First production and positive operating cash flow from RHA (before capital expenditure and working capital) is expected in spring 2016.”
• Meanwhile, Premier African Resources expects to publish an updated resources statement for the RHA mine by the end of January. In October 2014, Premier African Resources reported the results of a Preliminary Economic Assessment for the RHA mine based on a resource of 2.7mt at an average grade of 0.87% tungsten trioxide with grades for the underground portion of 0.66% being lower than those in the open pit. We look forward to the updated resource estimate.
Conclusion: The need to accelerate underground production arose from higher than originally planned throughput of ore from the open-pit operations depleting the surface ore. Although, on the numbers published today, the RHA mine is achieving approximately 79% recoveries of tungsten trioxide, the further fall in the European APT price on Friday to $165/175 per mtu (metric tonne unit) from $165/180 per mtu adds to the pressure.  [Note: APT or ammonium paratungstate is an intermediate product whose price is used to benchmark tungsten concentrate sales which are sold at a discount to the APT price.]


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