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Today's Market View - Berkeley Energia, Caledonia Mining Corporation, Nyota Minerals, Premier African Minerals Ltd, Rainbow Rare Earths Limited, Minera IRL Limited

Published: 10:47 21 Mar 2017 GMT

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Berkeley Energia (LON:BKY) – Euratom welcomes uranium mine development

Caledonia Mining (LON:CMCL) – Record quarterly and annual gold production at Blanket.

Minera IRL (MIRL PE, CVE:MIRL) – Gold production at Corihuarmi rises 21% over budget

Nyota Minerals (LON:NYO) Suspended – receives non-binding funding proposal and adjourns EGM

Premier African Minerals (LON:PREM) – Drilling update from the Zulu Lithium Project

Rainbow Rare Earths Ltd (LON:RBW) – Gakara project update

 

Gold prices are trading lower on the back of Chicago Fed comments that the central bank may raise rates two to four this year.

• Copper is down $50/t as Grasberg resumed concentrate production operations after a more than one-month stoppage.

• The euro is up 0.6% this morning moving towards a six-week high on the back of a poll showing Le Pen support waning in the Presidential debate.

• Independent candidate Emmanuel Macron appeared topped other contenders in the national debate coming ahead of Le Pen.

• The US$ index is down 0.4% hovering around the 100 mark

• Iron ore futures are off 2.8% this morning with rebar prices down 3.1% with seasonal demand having not picked up yet.

• FTSE 350 Mining shows losses on the back of lower iron ore and coal prices.

 

Peru – Flooding and landslides kill >70 are expected to affect the export and production of copper, zinc and other commodities out of Peru.

• The El Nino flooding is said to be the worst for decades and has caused avalanches and mudslides along Peru’s northern coast.

• The Capital, Lima is reported to have been without water for a week

• A railway used to ship concentrate to port was washed away after a river burst banks outside Lima.

• Highways outside the capital have been closed to non-essential cargo with the government prioritising getting help to communities affected by floods.

• Alternate highway routes to the coast have also been damaged in recent days.

 

Dow Jones Industrials  -0.04% at 20,906 

Nikkei 225  -0.34% at 19,456 

HK Hang Seng  +0.29% at 24,573 

Shanghai Composite  +0.33% at 3,262 

FTSE 350 Mining  -1.21% at 16,522

AIM Basic Resources  -0.29% at 2,605 

 

UK – Inflation jumped to 2.3% in February hitting the highest level in >3 years putting pressure on the BoE to reconsider the monetary policy.

The BoE now expects inflation to peak at 2.8% in 2018

• The pound is up 0.9% this morning.

• Theresa may set the date for triggering Article 50 with the UK officially notifying the EU of the decision to leave and initiating what is expected to be a two year process on Mar 29.

CPI (%mom/yoy): 0.7/2.3 v -0.5/+1.8 in Jan and 0.5/2.1 forecast.

• Core CPI (%yoy): 2.0 v 1.6 in Jan and 1.7 forecast.

 

UK – low interest rates in the UK are estimated to have saved around 1.5m jobs but hit productivity rates

• The impact of low interest rates seen since the Global Financial Crisis has been to keep around 1.5m jobs and kept failing firms alive.

• The other impact has been to force savings into property and equities in search of yield particularly with some banks offering negative yield.

• Some UK pensioners might feel aggrieved that a lack of income on their savings has effectively been used by policymakers to fund jobs for all and sundry.

• Effective job creation and the stimulation of small business growth in the UK had been beneficial for the economy and has supported employment for young people in marked contrast with a lack of youth employment in Southern Europe where the ECB has either forgotten it has some responsibility or simply doesn’t care.

 

UK estate agents closing offices and shedding staff as volumes fall

• The asset bubble caused by ongoing low interest rates, government policies, former easy lending practices and a whole bunch of other factors which have made housing unaffordable for much of the UK indigenous population is now causing transaction volumes to fall.

• It’s easy to blame high transaction costs driven by higher stamp duty rates which now dwarf agents fees.

• We also suspect a new raft of internet-inspired estate agents is starting to replace traditional high-street agencies with lower costs, fees and broader distribution.

• A rise in internet estate agencies may lead to a more efficient market though a good negotiators may become even more sought after as the marketplace changes its form.

 

Australia – The RBA Mar meeting minutes showed the central bank is getting concerned with nation’s increased exposure to the property market.

• “Recent data continued to suggest that there had been a build-up of risks associated with the housing market,” the RBA said.

• In particular, the bank is worried about an increase in mortgages for investment properties highlighting that “growth in household debt has been faster than that in household income”.

• Australian property prices climbed 4.1%qoq in Q4/16 making it the strongest increase since mid-15.

• The RBA left rates unchanged at 1.5% in Mar with inflation running at 1.5%, below the 2-3% official target range.

 

Currencies

US$1.0794/eur vs 1.0767/eur yesterday.   Yen 112.80/$ vs 112.72/$.   SAr 12.673/$ vs 12.655/$.   $1.238/gbp vs $1.242/gbp.  

0.771/aud vs 0.773/aud.   CNY 6.897/$ vs 6.904/$.

 

Commodity News

Precious metals:         

Gold US$1,229/oz vs US$1,234/oz yesterday

   Gold ETFs 58.4moz vs US$58.4moz yesterday

Platinum US$961/oz vs US$966/oz yesterday

Palladium US$780/oz vs US$778/oz yesterday

Silver US$17.35/oz vs US$17.43/oz yesterday

           

Base metals:   

Copper US$ 5,823/t vs US$5,920/t yesterday

Aluminium US$ 1,916/t vs US$1,912/t yesterday

Nickel US$ 10,175/t vs US$10,190/t yesterday

Zinc US$ 2,864/t vs US$2,889/t yesterday

Lead US$ 2,268/t vs US$2,303/t yesterday

Tin US$ 20,380/t vs US$20,200/t yesterday

           

Energy:           

Oil US$52.1/bbl vs US$51.5/bbl yesterday

Natural Gas US$3.076/mmbtu vs US$2.917/mmbtu yesterday

Uranium US$25.40/lb vs US$25.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$84.6/t vs US$87.9/t

Chinese steel rebar 25mm US$578.0/t vs US$579.4/t

Thermal coal (1st year forward cif ARA) US$63.8/t vs US$64.4/t yesterday

Premium hard coking coal Aus fob US$155.4/t vs US$157.8/t

 

Other:  

Tunsgten APT European US$208-216/mtu (from the 17Mar week) v US$212-217/mtu (from the 10Mar week)

 

Company News

Berkeley Energia (LON:BKY) 56p, Mkt Cap £143m – Euratom welcomes uranium mine development

• Berkeley Energia reports that the EURATOM Supply Agency, the governing body for all nuclear fuel transactions within the European Union, has advised that “We welcome the emergence and development of a new EU based uranium mining project and believe that it will contribute to the security of supply of natural uranium for Community users”.

• Euratom’s endorsement of the company’s sales agreement, announced in November 2016, with Curzon Resources (formerly Interalloys Trading) for the sale of 2m pounds of uranium over a five year period  should help the company as it extends its marketing efforts and “The company is in discussions with other potential off-takers in relation to contracts with terms similar to those outlined in the Interalloys Agreement.”

Conclusion: The company recently announced further high grade intersections in its drilling and has started initial construction – further progress on marketing confirms advances across another area of the business.

 

Caledonia Mining (LON:CMCL) 115 pence, Mkt Cap £60.4m – Record quarterly and annual gold production at Blanket.

• Caledonia Mining has announced that, following a record production year for its 49% owned Blanket gold nine in Zimbabwe, attributable profits for 2016 have risen by almost 80% to US$8.53m (2015 – US$4.78m). The company also reports a 31st December 2016 cash balance of US$14.34m.

• The Blanket mine increased production by 18% to 50,351 oz and reduced all in sustaining costs (AISC) by 12% to $912/oz during the year as its started to access ore beneath the 750m level for the first time and increased milling capacity within the plant.

• The new Central Shaft, which “is the key enabler of our longer-term life of mine plan at Blanket”, is currently on track and on budget  for completion in 2018. The shaft, which is planned to a depth of 1018m is currently at a depth of 633m.

• The improved underground infrastructure and plant enhancements are part of the company’s long term strategic plan to increase sustainable production at Blanket to 80,000 oz pa by 2021.

• Describing 2016 as “a pivotal year for 2016”, Chief Executive, Steve Curtis, paid tribute to the company’s staff  in delivering the improvements and the capital project and to the Zimbabwean Government’s “commitment to the gold sector by introducing several financial incentives to encourage Blanket and other gold producers to increase production, which included the royalty rate on incremental production being reduced from five per cent to three percent from May 2016, and Blanket receiving an export incentive to the value of 2.5 per cent of the value of gold sales.”

• Mr. Curtis also noted the substantial capital investment the company has deployed at Blanket “The total investment in Blanket for 2015 and 2016 exceeds $36 million and a further $18 million is budgeted for 2017”.

• Exploration work on the mine has delivered an additional 200,000oz of new inferred resources at a grade of 5g/t during the year and successfully upgraded 47,700 oz from inferred to indicated. We expect continuing exploration to maintain the replenishment of resources.

• The company is maintaining its previously issued production guidance of 60,000 oz in 2017 at an AISC of $810-850/oz.

Conclusion: Caledonia Mining’s long term strategic plan is delivering increased production and lower costs. The major shaft development is proceeding on schedule and within budget and exploration is continuing to identify mineralisation to replace mining depletion.

 

Minera IRL (MIRL PE) price US$0.11, mkt cap US$25m, (MIRL CN) price C$0.15 mkt cap C$33.3m – Gold production at Corihuarmi rises 21% over budget

• The Corihuarmi mine which was to be closed by the old board saw gold production rise to 21.4% over budget in January producing some 2,162oz of gold.

• Work continues at the much larger Ollachea gold project in Southern Peru with drilling showing that the deposit continues >500m and remains open to the east and at depth.

• The eastern target at Ollachea is estimated to contain some 370,000-550,000oz of gold in 3.1-4.6mt grading 2.9-4.3g/t.

• Trading:  Minera’s shares are now trading again on the Lima Stock Exchange and on the Canadian Securities Exchange.

• Minera IRL is reassessing options for the debt financing of its proposed 100,000oz pa Ollachea gold project in Peru.

• Sadly, Cofide, the Peruvian state agency, which had pledged funds for the project has revoked the mandate to exclusively structure the US$240m senior debt on the project.

• A 2014 study on the project estimates an NPV of US$277m and an IRR of 37.1% with a project payback within 2.4 years.

• Minera IRL was delisted from the UK following a board room disagreement which prevented the company from publishing its accounts.

• The errant Canadian directors have since left the company and the new board is working to restore more normal operations for the benefit of its stakeholders. 

 

Nyota Minerals (LON:NYO) Suspended – receives non-binding funding proposal and adjourns EGM

• Nyota Minerals reports it has received a non-binding offer of funding overnight and has duly postponed its EGM till 4th April so the board may consider the proposal.

• Given that AIM listed shells have significant inherent value in our view, it is not surprising that another offer has been received.

 

Premier African Minerals (LON:PREM) 1.6 pence, Mkt Cap £22.9m – Drilling update from the Zulu Lithium Project

• Premier African Minerals reports results from the latest drill-hole (ZDD-13) at its Zulu lithium project approximately 80km east of Bulawayo.

• The company reports three separate intersections of over 1% lithium oxide within the borehole:-

o 8.14m at an average grade of 1.13% Li2O from a depth of 111.86m;

o 5.32m at an average grade of 1.60% Li2O from a depth of 122.62m and

o 11.26m at an average grade of 1.27% Li2O from a depth of 130.81m

o The drilling is directed towards the preparation of a maiden resource estimate and is focussed on the central part of the pegmatite deposit which was explored during the late 1950s and early 1960s with minor production of the lithium feldspathoid mineral petalite “reported for 1961 and 1962.”

o Describing the geology of the pegmatite bodies, which are reported to be between 10-25 metres wide, the company states that “The bigger pegmatites to the north of the Machakwe River are rich in spodumene and lepidolite, the smaller pegmatites south of the Machakwe River are rich in petalite. The pegmatite bodies strike N20° and dip between 70° - 90° to the west.”

Conclusion: Premier African Minerals continues to report high grade lithium intersections from Zulu – we look forward to the maiden resource estimate which may assist in understanding the geometry and continuity of the mineralisation as well as providing the first information on overall grade and tonnage expectations.

 

Rainbow Rare Earths Ltd (LON:RBW LN) – 10.6p, mkt cap £16.4 – Gakara project update

• Rainbow Rare Earths reports that it has signed an Engineering, Procurement and Construction Management (EPCM) contract with “Obsideo Consulting Pty Limited of South Africa for the design, supply and construction of its ore processing plant with a capital equipment value of approximately US$1.5 million”.

• The plant is to be commissioned during Q4 2017 “in order to meet Rainbow’s stated objective of making its first sales of rare earth concentrate through its sales and distribution partner tkRaw Materials, before the end of 2017.”

• The company comments that it is preparing to start mining at Gasagwe, within the Gakara property and that “production of ROM ore will be stockpiled for approximately six months prior to commissioning of the ore processing plant.”

• Rainbow also discloses that, following the US$8m fundraising and London IPO in January, it “elected to repay Pala Investments Limited US$1.7m in full and final settlement of the outstanding loan facility and the Company is now debt free.”

Conclusion: Rainbow Rare Earths has a busy time ahead as it starts its initial mining and plant construction in order to meet its target sales date for rare earths concentrate by the end of the year.

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