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Today's Market View - DiamondCorp, European Metals, Georgian Mining Corp, Savannah Resources and Strategic Minerals

Published: 10:30 16 Nov 2016 GMT

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DiamondCorp (LON:DCP) Suspended – Lace mine put into Business Administration in South Africa
European Metals (LON:EMH) – Additional lithium – tin intercepts in recent drilling at Cinovec
Georgian Mining Corporation* (LON:GEO) – Raises £2.6m
(formerly Noricum Gold.  Ticker changed to GEOfrom LON:NMG)
Savannah Resources (LON:SAV) – Additional high grade copper intersections in Oman
Strategic Minerals* (LON:SML) – Drilling tender for Redmoor with drilling expected in H1 2017

FTSE 100 slips as miners trade lower on weaker iron ore prices.
• The US$ index continues to climb trading at the highest level in nearly a year.
• Crude is trading around $47.7/bbl after surging 5.7% yesterday marking the strongest increase in seven months on expectations for the OPEC to successfully reduce production rates.
• Saudi Energy Minister is expected to meet representatives of OPEC members in Doha this week on the side lines of the an energy forum.
• The official OPEC meeting is due on Nov 30.
• Both precious and base metals are little changed while Chinese iron ore futures posted the first back to back daily decline since mid-last month.
• Chinese steel mills are reported to have slowed purchases while traders decided to lock in their rally gains.
• Iron ore futures came down 7.1% today taking the two day decline to 8.8% as Jan futures contracts hit this year’s high on Monday.
• Spot iron ore with 62% Fe delivered to Qingdao fell 6.5% to $72.7/t as of Tuesday following a 2.6% decline on Monday taking prices down 8.9% from $79.8/t, the highest level since Oct/14, hit on Friday.

Lundin Mining to sell 30% minority stake in Tenke Fungurume to China’s BHR Partners for $1.14bn in cash (WSJ)
• The $1.14bn cash price might also be boosted by a further $51.4m depending on future copper and cobalt prices
• A termination fee of $100m is reported to be payable under certain circumstances
• The deal is expected to close in H1 2017
• Lundin has waved its right to acquire Freeport’s 56% stake in the mine
Freeport-McMoRan hold 70% of the Tenke Fungurume copper/cobalt mine.

Economic News
US – Positive retail sales data for Oct with upwards revisions to Sep numbers point to a continuing growth momentum in consumer spending.
• Consumption is led by growing employment levels and rising earnings.
• Sales growth was relatively broad based with 11 of 13 major categories posting a second consecutive monthly increase.
• Retail control group sales, the numbers that are used to calculate GDP, saw the strongest increase since Apr.

 

Eurozone – Single currency region growth held at 1.6%yoy in Q3/16 putting the annual pace on track for a slowdown when compared to the previous year.
• The economy expanded at 2.0% in 2015 and is expected to grow 1.6% this year and 1.3% in 2017.
• Eurozone Q3 GDP (%qoq): 0.3 v 0.3 in Q2/16 and 0.3 forecast.
• Eurozone Q3 GDP (%yoy): 1.6 v 1.6 in Q2/16 and 1.6 forecast.

Germany – Investment sentiment and the outlook over  the coming six months improved in Nov suggesting a rebound in economic activity in the final quarter of the year.
• ZEW Current Situation Index: 58.8 in Nov v 59.5 in Oct and 61.6 forecast.
• ZEW Expectations Index: 13.8 in Nov and 6.2 in Oct and 8.1 forecast.

UK – Employment climbed less than forecast with earnings growth keeping steady in three months through Sep.
• While unemployment rate fell to the lowest level in 11 years, earnings growth is a figure to follow closely given expectations for stronger inflation moving forwards that would weigh on consumers’ real income.
• Employment change (rolling 3m change): 49k v 106k in 3m to Aug and 91k forecast.
• Earnings (rolling 3m, %yoy): 2.3 in Sep v 2.3 in Aug and 2.4 forecast.
• Unemployment rate (%): 4.8 v 4.9 in 3m to Aug and 4.9 forecast.

DRC – signs royalties held by the state mining company to a company controlled by Kabila ally (Global Witness)
• Gecamines is said to have transferred royalties from Kamoto Mines in January 2015 to an anonymous Cayman company called Africa Horizons Investment Limited.
• According to a report in the Daily Mail, Africa Horizons is owned by Israeli billionaire Dan Gertler, who Global Witness said was involved in murky mining deals in DR Congo and was Kabila's close friend.

Currencies
US$1.0710/eur vs 1.0798/eur yesterday.   Yen 109.53/$ vs 108.17/$.   SAr 14.248/$ vs 14.178/$.   $1.245/gbp vs $1.243/gbp.     
0.752/aud vs 0.756/aud.   CNY 6.871/$ vs 6.853/$.   Yuan falls to lowest level for eight years

Commodity News
Precious metals:
Gold US$1,228/oz vs US$1,226/oz yesterday –
     Gold ETFs 62.8moz vs 63.2moz yesterday –
Platinum US$933/oz vs US$943/oz yesterday
Palladium US$700/oz vs US$705/oz yesterday –
Silver US$17.03/oz vs US$17.04/oz yesterday

Base metals:   
Copper US$ 5,476/t vs US$5,422/t yesterday –
Aluminium US$ 1,718/t vs US$1,718/t yesterday
Nickel US$ 11,320/t vs US$11,105/t yesterday – Finland continues to operate the Talvivaara nickel mine with €800m spent to date on the business by the government in keeping the operation going.  The mine is now run by Terraframe, a government agency since the mine went into insolvency in 2014.  The mine is expected to see positive cash flow in 2018 according to the chairman of Terraframe.
Zinc US$ 2,560/t vs US$2,548/t yesterday
Lead US$ 2,190/t vs US$2,168/t yesterday
Tin US$ 20,050/t vs US$20,295/t yesterday –

Energy:
Oil US$46.8/bbl vs US$45.4/bbl yesterday –
Natural Gas US$2.705/mmbtu vs US$2.793/mmbtu yesterday
Uranium US$18.65/lb vs US$18.65/lb yesterday –

Bulk:    
Iron ore 62% Fe spot (cfr Tianjin) US$67.1/t vs US$72.9/t – iron ore prices pulling back – should not feel like much of a surprise to anyone
Chinese steel rebar 25mm US$454.5/t vs US$465.1/t – HRC steel prices falling as steel futures prices collapse
Thermal coal (1st year forward cif ARA) US$69.7/t vs US$69.7/t yesterday
Premium hard coking coal Aus fob US$308.8/t vs US$308.8/t –

Other:
Tungsten - APT European prices $198-203/mtu vs $198-205/mtu unch last week – tungsten prices edge off as price recovery struggles to get going

Company News
DiamondCorp (LON:DCP) Suspended – Lace mine put into Business Administration in South Africa
• DiamondCorp have placed the Lace mine into Business Administration in South Africa to protect the business from its creditors
• The process is similar to Administration in the UK and Chapter 11 in the US
• While this is not good news it should protect the business so that the Lace mine may be restarted once the flood water has receded from the mine

European Metals (LON:EMH) 36.5 pence, Mkt Cap £31.8m – Additional lithium – tin intercepts in recent drilling at Cinovec
• European Metals has announced the results of 3 additional drill holes at its wholly owned lithium – tin property at Cinovec where the company has now completed ten diamond drill holes and has three currently underway.
• The results from holes CIW-13, CIW-14 and CIW-18 include an 82m wide intersection averaging 0.48% Li2O from a depth of 132m and a 175m intersection averaging 0.40% Li2O both in hole CIW-14 which was drilled “at the southern edge of the Cinovec Main  sector of the deposit near its boundary with Cinovec South. The area is marked by relative sparsity of historic drill data and lithium analyses.”
• Hole CIW-13 was drilled in a similar part of the deposit and encountered 152.3m of mineralisation at an average grade of 0.37% Li2O at a depth of 277m. The major mineralised intercept in hole CIW-18 was encountered at a depth of 151m in a 243m wide intersection at an average grade of 0.30% Li2O.
• The results to date will be incorporated in an interim update to the resource model which is expected to be released in the next two weeks. “in the meantime, drilling will continue to both expand the resource and increase its level of confidence to allow a further resource upgrade in the first half of 2017.”
• Currently, Cinovec has an indicated resource of 49.1m tonnes at an average grade of 0.43% Li2O with an additional inferred resource of 482mt at 0.43% Li2O. Cinovec also contains an undeveloped tin resource with an indicated 15.7mt at an average grade of 0.26% tin and an additional inferred tonnage of 57.7mt grading 0.21% tin.
Conclusion: The results reported today are generally deeper than some of the holes reported earlier in the programme and appear to come from an area which has less historical geological and drilling information available. The forthcoming resource model update may help put these results into context, however, it appears that there may still be further detailed investigation required to identify the optimum area for initial mine development though all the indications at this stage point to the economic logic of starting in shallower parts of the deposit.

Georgian Mining Corporation* (LON:GEO) 9p, Mkt Cap £7.3m – Raises £2.6m
(formerly Noricum Gold.  Ticker changed to GEO LN from NMG LN)
• Georgian Mining have raised £2.6m by way of an oversubscribed placing of 32.5m new shares at 8 pence per share.
• The placing is to work up a resource of 3-5mt of copper-gold mineralisation within the Kvemo Bolnisi project in Georgia.
• The idea is to utilise around 1mtpa of spare process capacity at the joint venture partner’s Madneuli mine just 7km from the project.
• This capacity is available to Georgian Mining Corp under its existing joint venture agreement.
• Capex:  The use of local contractors and the jv partners process plant means that Georgian Mining could start mining with virtually no capital cost.
• We expect costs to be relatively low at under $600/oz including mining and transport
• Grades should run at around 1% copper with 0.7-0.8% copper to start plus a significant gold credit
• Blending this in with material from the Madneuli mine might also improve recovery rates for both mines.
• Funds will be used for:
o 10,000m drilling program
o mine scoping study,
o plant optimisation review to potentially further expand plant capacity at jv plant
o metallurgical test work
o internal pre-feasibility studies.
o Production should start in Q4 2017 reaching full production of around 1mtpa expected early in 2018
 Processing; copper sulphides will float and gold recovery is via heap leach.
 Exploration:  25 drill holes at the Kvemo Bolnisi site show significant results and has yielded a geological exploration target of 50mt and is considered to offer much greater potential than the current 3-6mt plan.
Conclusion:  The ability to simply dig and deliver copper/gold ore to the existing Madneuli plant should be of great benefit to shareholders.  The opportunity to start mining at relatively low cost and virtually no capital cost presents an unusual opportunity for a junior listed mining company.
*SP Angel acts as Nomad and Broker to Noricum.  The company has agreed to issue 267,750 warrants to SP Angel exercisable at 10p/s

Savannah Resources (LON:SAV) 5.25 pence, Mkt Cap £23.6m – Additional high grade copper intersections in Oman
• Savannah Resources has reported the final results from its drilling at the Mahab 4 prospect which lies within the Block 5 exploration area where the company is earning a 65% interest.
• Hole 16B5DD018 has intersected 14.25m at an average of 3.86% copper, 0.62% zinc and 0.22 g/t gold from a depth of 109.1m in a shallow dipping hole angled at 25⁰ towards 256⁰ (WSW).
• These results, as well as those from previously reported earlier drill-holes in the programme, including a 67.4m wide intersection averaging 4.64% copper and 1.13% zinc in hole 16BDD009 from a depth of 18.6m which was drilled obliquely to the structure in order to produce a larger sample of mineralisation for metallurgical testing, will be incorporated in an updated resource estimate expected during Q4 2016.
• The current indicated and inferred resource of high grade VMS (volcanogenic massive sulphide) mineralisation is 1.7mt at an average grade of 2.2% copper.
• The company is now underway with a new 600m diamond drilling programme to “establish a JORC compliant resource estimate at the Dog’s Bone lens, which is part of the Aarja deposit”, which also lies within Block 4.
• Savannah Resources is working towards a “potential mine development for late 2017” and the resource drilling at Aarja is intended to ensure “that it can be considered as part of the potential mine development”.
Conclusion: With the completion of the drilling at Mahab 4, we look forward to the updated resource estimate later this year and results from the current drilling programme on the Dog’s Bone prospect.

Strategic Minerals* (LON:SML) 0.4 pence, Mkt Cap £5.2m – Drilling tender for Redmoor with drilling expected in H1 2017
• A drilling tender has been issued to eight companies for a two phase, 23-hole drilling programme at the Redmoor  tin tungsten project in Cornwall.
• The first phase consists of 13 holes, followed by a second, 10 hole programme. Discussions and site visits for short-listed companies are expected to occur during December with drilling to start during H1 2017.
• Commenting on the recent appointment of Jeff Harrison as the Community Advisor and the invitation of tenders for the start of drilling a Redmoor, Managing Director, John Peters, said “These developments continue to reinforce our intention to fully exercise our option over 50% of the Redmoor project and to commence drilling at Redmoor in the first half of 2017.”
• Strategic Minerals has also announced that its joint venture partner in the Redmoor, New Age Exploration has changed its name to Cornwall Resources Limited.
Conclusion: The move to drill at Redmoor will provide additional information over a wider area to help update the current inferred resource estimate of 13.3mt at an average grade of 0.56% tin equivalent, which is largely based on limited historic drilling.
*SP Angel act as Nomad and joint broker to Strategic Minerals alongside Optiva Securities

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