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Today's Market View Including: Alecto Minerals, Dalradian Resources, Metal Tiger, Noricum Gold

Published: 10:46 05 May 2016 BST

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Alecto Minerals (LON:ALO) – Renewal of Burkina Faso exploration licences
Dalradian Resources (LON:DALR) – Feasibility and environmental work at Curraghinalt
Metal Tiger (LON:MTR) – MOD Resources update shows extended strike at
Noricum Gold* (LON:NMG) – Drilling starts at second gold target in Georgia

Commodity prices pull back as US dollar bounces and Chinese investors have their speculative wings clipped by the authorities
• Copper, aluminium and iron ore prices have pulled back from recent highs. 
• The move is partly due to slower than expected drawdown of metal inventory moved into Chinese warehouses in anticipation of renewed demand.
• The other part of the story is the doubling of the cost of trading on the Dalian futures exchange where massive investment demand reportedly from thousands of small Chinese investors had pushed iron ore prices significantly higher upsetting the Chinese authorities who like to feel they are in control of almost everything.
• The Chinese futures bubble is now deflating but like the dot.com bubble it started with good reason. 
• Unfortunately, the consequential rise in steel and iron ore prices is disrupting China’s grand plan to force inefficient steel producers out of business in China.  Sounds a bit like Saudi Arabia’s plan to force US shale oil producers into liquidation.
• We understand that China is preparing to build dozens of suburban rail system which will need millions of tonnes of steel, iron ore, copper and other materials. 
• The question now is when will the impact of this construction cause the ramp up of production by local fabricators?

Mining M&A – MMG has a $5bn war chest for the acquisition of assets according to a Bloomberg report
• MMG, the Australian traded miner backed by China Minmetals.
• MMG led the group which acquired Las Bambas from Glencore for around $5.85bn.
• The MMG team reckon there are around $50bn worth of assets up for sale and this is a great time to by buying mineral assets.
• MMG CFO said: “If we were to do a transaction it would be in the $3 to $5 billion range I’d imagine, and we’ve got support from China through our major shareholder to do that”.

Lithium – rechargeable lithium air batteries may be next step forward
• Lithium air batteries are lighter and offer better performance than current lithium batteries but currently fade after just a few charging cycles.
• Carbon replaces heavy lithium cobalt oxide cathodes to make lithium air batteries so much lighter.  Problem is the release of highly reactive and corrosive singlet oxygen.
• If scientists can prevent the formation of singlet oxygen in lithium air batteries then these batteries could form the basis of the next revolution in battery technology.

Economic News
US – Preliminary payroll numbers disappoint while factory orders recover from a slump in Feb.
• While a fall in ADP numbers in Apr (156k v 194k in Mar and 195k forecast) suggests downside risks to headline employment data due on Friday, two series experienced low correlation in the past.
• Hiring fell at factories and climbed at service providers.
• Productivity continued to contract through Q1/16 on the back of continued gains in the labour market and weak growth rates during the period.
• Trade deficit narrowed to the lowest reading since Feb/15 on the back of lower imports (-3.6%mom) and exports (-0.9%mom).
• Driven by a major shift in local oil production dynamics, deficit in petroleum trade fell to the lowest since Feb/99.


China – Authorities are stepping up the control of investment firms and peer-to-peer lenders amid a wave of bankruptcies of such business and an effort to avoid social unrests, Bloomberg reports.
• Registration of all new companies with finance-related names was suspended nationwide in Apr.
• In Shenzhen, commercial property managers are asked to submit contact information for employees of all finance sector-related tenants to the local security bureau.
• Nearly 1,000 online lenders’ bankruptcies have been recorded in the past year with the number of wealth-management related fraud cases seen a major increase lately.
• On a separate note, unlike manufacturing industry, services sector continued to grow in Apr the latest private and official data shows.
• Caixin services PMI: 51.8 v 52.2 in Mar.
• Both new business and employment in the sector posted modest growth in Apr.
• Cost inflation pressures seen driving a marginal increase in prices.
• One of the negatives contained in the report was the outlook at services firms which remained weak, hovering around three-month low recorded in Mar.
• Positive services PMI helped the composite index including the manufacturing sector to remain above the 50.0 threshold.
• Official numbers guided for a stronger expansion in the services sector with the PMI coming in at 53.5 last month, down 0.3 points on Mar.

Australia – The dollar climbed against its US counterpart today on the back of stronger retail sales and trade figures.
• Retail sales: 0.4%mom in Mar v 0.1%mom in Feb and 0.3%mom forecast.
• Trade balance: -A$2.2bn in Mar v –A$3.0bn in Feb and –A$2.9bn forecast.
• The Aussie traded 0.2% higher today at $0.748 recovering some losses following a major sell off earlier in the week led by an unexpected decision by the RBA to cut rates.
• Glenn Stevens will be stepping down as the RBS Governor on Sep 18 to be replaced by his deputy Philip Lowe.
• Lowe, 54, joined the RBA in 1980, holds a PhD from the MIT and a B.Comm in Economics/Econometrics from the University of New South Wales.

Turkey – The lira fell nearly 4% yesterday on the back of speculations Prime Minister Ahmet Davutoglu might leave the office following a conflict with President Erdogan.
• It is argued the currently ruling AK Party is planning to hold a leadership contest within two weeks with current premier unlikely to make into a candidates list.

Currencies
US$1.1478/eur vs 1.1474/eur yesterday.   Yen 107.12/$ vs 107.07/$.   SAr 14.859/$ vs 14.800/$.   $1.450/gbp vs 1.449/gbp
0.749/aud vs 0.748/aud.   CNY 6.502/$ vs 6.500/$  – .

Commodity News
Precious metals:
Gold US$1,280/oz vs US$1,282/oz yesterday
• Gold ETFs 57.5moz unch vs 57.4moz yesterday –
Platinum US$1,060/oz vs US$1,059/oz yesterday
Palladium US$605/oz vs US$603/oz yesterday
Silver US$17.44/oz vs US$17.33/oz yesterday

Base metals:
Copper US$ 4,818/t vs  US$4,908/t yesterday
Aluminium US$ 1,618/t vs US$1,633/t yesterday
Nickel US$ 9,270/t vs US$9,490/t yesterday –
Zinc US$ 1,855/t vs US$1,886/t yesterday
Lead US$ 1,742/t vs US$1,753/t yesterday
Tin US$ 17,300/t vs US$17,310/t yesterday

Energy:
Oil US$45.6/bbl vs US$44.9/bbl yesterday –
Natural Gas US$2.150/mmbtu vs US$2.085/mmbtu yesterday
Uranium US$27.60/lb vs US$27.65/lb yesterday

Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$56.9/t vs US$58.4/t – Spot steel prices continued to fall for a second day dragging iron ore prices lower.
• Chinese spot rebar prices slid sub CNY 3,000/t level with Oct futures trading at the lowest since Apr 18 on the back of higher production and waning demand.
• Iron ore prices for the material delivered to Qingdao lost more than 9% in the past two sessions with Dalian futures down for a third day on Thursday.
• With iron ore up c.35% through the year iron ore shipments from Austrlia’s Port Hedland continue at strong pace.
• Iron ore cargoes totalled 37.7mt in Apr, a little less than 39.5m in Mar but up on 35.4mt recorded a year earlier.
Thermal coal (1st year forward cif ARA) US$46.6/t vs US$45.8/t yesterday –

Other:
Tungsten - APT European prices stood at $205-215/mtu vs $188-210/mtu last week

Company News

Alecto Minerals (LON:ALO) 0.135 pence, Mkt Cap £4.9m – Renewal of Burkina Faso exploration licences
• Alecto reports that it has secured a three-year renewal of its exploration licence on the Kerboule gold project in Burkina Faso.
• The Kerboule project covers almost 400 square kilometres of the Birimian age Djibo gold belt in northern Burkina Faso and was acquired by Alecto Minerals in November 2014. The project area lies approximately 20km along strike from Avocet Mining’s Inata mine which, though metallurgically challenging in some respects , has a current mineral resource of 4.2m ounces of gold and a reserve of 0.33m oz at an average grade of 1.9 g/t gold.
• Alecto Minerals, in conjunction with its consultants, Wardell Armstrong, has remodelled historic information and outlined a non - JORC resource of 6.2m tonnes of mineralisation at an average grade of 1.16 g/t gold (approximately 230,000 contained ounces).
Conclusion: Securing a three year licence to continue its exploration of the Kerboule project gives Alecto Minerals the opportunity to conduct a systematic exploration programme and firm up and perhaps extend the existing non-compliant estimates within a mineral belt known to host significant gold deposits. The company’s enviable challenge may be to balance the conflicting priorities of exploration in west Africa with its plans to develop its wholly owned Matala gold project in Zambia.

Dalradian Resources (LON:DALR) 58 pence, Mkt Cap £125.1m – Feasibility and environmental work at Curraghinalt
• Dalradian Resources, which is preparing a feasibility study for the development and permitting of the Curraghinalt gold deposit in N Ireland, reports a first quarter loss of C$2.0m (Q1 2015 – loss of C$1.4m).
• Work on the feasibility study and the Environmental and Social Impact Statement is on course for release during H2 2016.
• Baseline environmental studies are expected to be completed within the next few months and consultations and meetings with interested parties are continuing ahead of presentation of the final project design and submission of the planning application.
• The company recently completed an infill drilling programme in order to better define the resource and to upgrade and expand the proportion of resources in the measured and indicated category for inclusion in the feasibility study. The revised mineral resource estimate is expected to be released imminently.
• The company is also undertaking underground development and preparing to start trial mining which will provide valuable data on the mining characteristics of Curraghinalt ,including the ground conditions, dilution characteristics and appropriate mining methods.
• The company reports cash of C$31.1m at 31st March.
Conclusion: Dalradian Resources has reported high grade drilling results from its infill drilling at Curraghinalt where it plans to mine multiple gold-bearing veins using underground mining methods. Detailed technical work, including an updated resource estimate is feeding in to a full feasibility study which is likely to be submitted during the second half of the year. We look forward to the updated resources estimate and subsequent information on the development plan.

Metal Tiger (LON:MTR) 4.50 pence, Mkt Cap £23.4m – MOD Resources update shows extended strike at
(Kalahari Copper joint venture 30% Metal Tiger. 70% MOD Resources.) Metal Tiger also holds 4.92% of MOD Resources
This gives MTR an effective 33.4% stake in the Kalahari copper joint venture
• Metal Tiger report drilling results provided by its joint venture partner MOD Resources on its T3 copper prospect in Botswana.
• The drilling shows significant copper intersections extending 200m to east of the 52m @ 2.0% Cu in MO-G-12R announced 14 April. 
• Further assay results are awaited from six more reverse circulation ‘RC’ and four more diamond holes along a 1km strike length.
• Copper mineralisation has been intersected over a total strike distance of 800m to date.
• Metal Tiger note that hole MO-G-17R includes an intersection of 1m @ 994.3g/t Ag (>30 oz/t Ag) from 82m within a 3m wide high grade Copper (2.0% Cu); this assay is approximately nine times higher than any previous Ag assays reported from T3. There is also an anomalous Molybdenum (366ppm Mo) interval from 81m.

Hole MO-G-14R
• 1m @ 3.3 % Cu from 76m,
• 5m @ 1.1 % Cu from 87m
• 2m @ 1.9 % Cu from 121m
Hole MO-G-15R
• 15m @ 1.8 % Cu from 56m
• 5m @ 4.8 % Cu from 95m, including;
• 3m @ 7.2% Cu from 96m
• 15m @ 1.4 % Cu from 111m with;
• 11m @ 31.6 g/t Ag from 113m
Hole MO-G-16R
• 9m @ 1.2 % Cu from 53m
• 2m @ 1.8% Cu from 89m
Hole MO-G-17R
• 6m @ 1.5 % Cu from 81m, including;
• 3m @ 343g/t Ag from 81m
• 7m @ 2.0 % Cu from 128m, including;
• 4m @ 34g/t Ag from 131m                      
Hole MO-G-18R
• 1m @ 1.8 % Cu at 20m
• 2m @ 1.2%  Cu at 48m, however;
• Hole ended in 1.5 % Cu at 50m..

Conclusion:  These are encouraging intersections and should lead to the establishment of a meaningful JORC resource on the property.
It is worth looking at the latest presentation by MOD Resources https://media.wix.com/ugd/a5d095_750ae92f68b045408a356c8407172cd7.pdf
*The author of this note has previously visited licenses in the area and the mine site which is now held by Cupric Canyon Capital following its acquisition from Discovery Metals.
Discovery Metals was wound up in 2015 following two failed takeover attempts by Cathay Fortune, the first for A$830m and the second for A$170-195m

Noricum Gold* (LON:NMG) 0.215p, Mkt Cap £8.7m – Drilling starts at second gold target in Georgia
(Noricum has a 50:50 jv on Bolnisi’s exploration portfolio in Georgia)
• Noricum Gold have started diamond drilling at its Tsitel Sopeli gold project in Georgia.
• The plan is to prove up near surface gold resources at Tsitel Sopeli for mining in Q4 this year.
• If all goes to plan mining will move from Kvemo Bolnisi to Tsitel Sopeli in Q4 with ore being sold at the mine gate for processing at the Bolnisi plant.
• Soviet drilling indicates economic gold grades in good intersections from surface at Tsitel Sopeli with further mineralisation likely to the East of the known resource.
• The joint venture has a 30-year mining license in place.
• Previous drill results include
o 6.6m @ 1.07 g/t gold from surface
o 8m @ 0.49 g/t
o 4.6m @ 6.41 g/t
o 8.1m @ 5.85 g/t
o 15m @ 2.09 g/t
o 13m @ 2.12 g/t - from 15m
o 10m @ 1.42 g/t - from 1m
Conclusion:  Mining the surface pits at Kvemo Bolnisi and Tsitel Sopeli should provide significant cash flow for funding larger exploration programs at both sites.  This will also have the added benefit of establishing mining at both properties, proving the metallurgical characteristics of the ore (recovery rates).  Exposing the orebody within the pit walls and the pit is always helpful for the geologists and mining will give useful information on the consistency and characteristics of the ore.

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