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Today's Market View - Amur Minerals Corporation, Highland Gold, Management Resource Solutions, Patagonia Gold plc, Strategic Minerals Plc, URU Metals Ltd

Published: 10:36 05 May 2017 BST

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Amur Minerals* (LON:AMC) – Commencement of drilling at Kun Manie

Dalradian Resources (LON:DALR) – Q1 results and Curraghinalt update

Highland Gold (LON:HGM) – Updated MNV reserves extend life of mine

Management Resource Solutions plc (LON:MRS) – lifted from suspension following investigation into funding of creditors in subsidiaries that are no longer in operation

Patagonia Gold (LON:PGD) – Cap Oeste guidance maintained at 68,500oz gold for this year

Strategic Minerals* (LON:SML) – Taking control of CARE.

URU Metals (LON:URU) – Option agreement with Cameco over Gold/Uranium Project

 

With gold prices down nearly $30/oz over the last two days as investors position themselves ahead of the US NFP numbers due later today.

• US labour market is expected to have recorded a rebound to 190k from a relatively weak Mar number of 98k.

• Iron ore prices are in a sell off mode with DCE futures down 6.3% today extending losses to nearly 11% over the last two days.

• Amid weaknesses in copper, gold and oil markets, the Bloomberg Commodity Index, which tracks changes in major commodities from iron ore    is reported to have dropped to the lowest intraday level in a year today.

• Copper inventories continued to climb with LME stocks are reported to have jumped 40% over the last three days with cancelled warrants down 5.3%.

• Nickel prices hit the weakest level since Jun/17.

 

121 Mining Investment conference – sponsored by SP Angel - 10–11 May 2017

• The 121 team are running the London 121 Mining Investment conference at No 8 Fenchurch Street in The City on 10-11 May.

• The event is for registered investment professionals, mining and exploration companies and mining analysts and brings the industry together alongside a series of investor briefings.

• 65 quality producers, developers and explorers attending / presenting

• I’m talking at 3:00 on the Thursday on:  ‘UK mining outlook - A new era of UK funded exploration and production’.

• Follow link for investor passes - https://www.weare121.com/121mininginvestment-london/registration/register-investor/

 

Dow Jones Industrials  -0.03% at 20,951

Nikkei 225   +0.70% at 19,446 

HK Hang Seng   -0.84% at 24,476 

Shanghai Composite    -0.78% at 3,103 

FTSE 350 Mining   +2.35% at 14,211

AIM Basic Resources   -0.88% at 2,623 

 

Economic News

 

China – Short term interbank borrowing rates came off slightly today after having climbed to a multi-year high pointing to tightening liquidity amid a regulatory crackdown on financial risk.

• Tighter credit flow have filtered into equity and commodity markets which recorded heavy losses lately.

 

France – Euro is trading at the highest level in six months ahead of the second round of presidential elections in France this weekend.

• Following the latest televised debates between Marine Le Pen and Emmanuel Macron, the centrist candidate appeared as a clear winner set to secure 62% of the votes according to latest polls.

 

Currencies

US$1.0961/eur vs 1.0889/eur yesterday.   Yen 112.30/$ vs 112.77/$.   SAr 13.629/$ vs 13.521/$.   $1.293/gbp vs $1.285/gbp.  

0.740/aud vs 0.740/aud.   CNY 6.900/$ vs 6.898/$.

 

Commodity News

Precious metals:

Gold US$1,233/oz vs US$1,234/oz yesterday

   Gold ETFs 59.7moz vs US$59.6moz yesterday

Platinum US$912/oz vs US$900/oz yesterday

Palladium US$807/oz vs US$799/oz yesterday

Silver US$16.45/oz vs US$16.46/oz yesterday

           

Base metals:   

Copper US$ 5,567/t vs US$5,574/t yesterday

Aluminium US$ 1,918/t vs US$1,913/t yesterday

Nickel US$ 8,975/t vs US$9,105/t yesterday

Zinc US$ 2,578/t vs US$2,559/t yesterday

Lead US$ 2,182/t vs US$2,173/t yesterday

Tin US$ 19,860/t vs US$19,780/t yesterday

           

Energy:           

Oil US$48.5/bbl vs US$50.3/bbl yesterday

Natural Gas US$3.216/mmbtu vs US$3.218/mmbtu yesterday

Uranium US$22.65/lb vs US$22.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$59.4/t vs US$62.0/t

Chinese steel rebar 25mm US$543.0/t vs US$543.2/t

Thermal coal (1st year forward cif ARA) US$65.1/t vs US$65.5/t yesterday

Premium hard coking coal Aus fob US$219.8/t vs US$234.0/t

 

Other:

Tungsten - APT European prices $212-219/mtu vs $208-216/mtu

 

Company News

Amur Minerals* (LON:AMC) 6.1p, £37.1m – Commencement of drilling at Kun Manie

• The exploration team launched drilling season, nearly a month ahead of schedule, over two deposits at Kubuk (KUB) and Ikenskoye (IKEN).

• The plan is for 20,000m drilling programme to convert available Inferred mineral resource into Identified category, expand the existing mineral inventory with step out drill holes and collect samples for metallurgical assays.

• The Company mobilised two in-house drilling rigs with operating costs (labour, consumables, assays) estimated at impressively low $40/m.

• The management targets a 20% expansion to the Measured and Indicated category resource at KUB and IKEN which host 15.6mt at 1.04% Ni in Inferred resources.

• Previous drilling programme that focused on Maly Kurumkon/Flangovy ore zone significantly expanded the resource both in tonnage (+46%) and metal contained (+40%/47% for Ni/Cu) terms.

*SP Angel act as Nomad and broker to Amur Minerals

 

Dalradian Resources (LON:DALR) 64.5 pence, Mkt Cap £161m – Q1 results and Curraghinalt update

• Dalradian Resources reports a Q1 loss of C$1.3m as it moves to progress the Curraghinalt gold project in Northern Ireland towards the submission of a Planning Application for mine construction later this year.

• Partially as a result of receipts of C$7.9m arising from the exercise of warrants, the company reports cash of C$36.4m at 31st March compared with C$35.7m at 31st December 2016 which leaves the current work programme fully funded..

• Key elements of the programme include a 40,000 metres drilling campaign for resource infill and extension purposes as well as for geotechnical investigation; continued metallurgical investigations into ore-sorting; and work on the Environmental and Social Impact Assessment.

• Drilling results from the first ten holes of the 2017 campaign include

o 1.72m at an average grade of 28.23g/t gold from the V75 vein intersected in hole 17-CT-406b

o 2.27m at an average grade of 15.32g/t gold from the V75 vein intersected in hole 17-CT-403

o 0.62m at an average grade of 27.00g/t gold from the No 1 vein intersected in hole 17-CT-417 and

o 1.73m at an average grade of 11.89g/t gold from the Crow vein also intersected in hole 17-CT-417

• The company notes that “Permitting costs were somewhat higher during Q1 2017 as preparation of the Planning Application progressed.”

Conclusion: Dalradian remains well funded to complete the work required for submission of its Planning Application to develop Curraghinalt. The work appears to be progressing well and at this stage there is no indication that they have encountered similar issues to Galantas Gold which recently had to put its Omagh mine project, also in N Ireland, on hold while it resolved issues raised by the Police Service of Northern Ireland in relation to the security implications of the use of explosives.

 

Highland Gold (LON:HGM) 134p, £434m – Updated MNV reserves extend life of mine

• The Company released updated mineral resources and reserve statement for the MNV operation:

Mineral Resources   kt g/t koz 

Indicated  2,339 7.3 549.4 

Inferred  341 7.5 82.32 

Total  2,680 7.3 632 

Mineral Reserves   kt g/t koz 

- OP  113 5.7 20.8 

- UG  2,871 5.2 479.6 

Total   2,984 5.2 500 

CoG 1g/t (OP), 2g/t (UG), Gold price $1,200/oz

• This compares to 15.1mt at 3.4g/t for 1.7moz estimated as of Dec/15 in total resource and reflects more drilling completed at surface and at lower horizons of the underground operation as well as higher cut-off grades.

• Reserves have gon up from 2.3mt at 4.0g/t to 3.0mt at 5.2g/t.

• The Company is continuing with exploration drilling at a number of MNV ore bodies aiming to extend the life of mine beyond 2022.

• The statement does not include waste dumps which the Company has been evaluating separately and used as a source of lower grade blend for the plant feed with 400kt at 1.1g/t having been reclaimed through 2016.

Conclusion: The Company converts more ounces into reserves extending the MNV life of mine, the oldest operation in the Company’s portfolio. The mine is expected to move to exclusively underground operation in 2018/19 processing less tonnage but higher grades material. Any discovery of new ore zones around the plant could then be easily incorporated into the production schedule helping to run the plant at full 1.4mt capacity.

 

Management Resource Solutions plc (LON:MRS) 5.1p, mkt cap £8m – lifted from suspension following investigation into funding of creditors in subsidiaries that are no longer in operation

• Management Resource Solutions is an odd fish of a situation.

• The stock was suspended at the company’s request as funds raised last August were not applied to the working capital of MRS Services Group.

• It now appears funds were applied to the creditors of subsidiaries that are no longer in operation.

• A second fund raising for another £0.5m was then used to support the group and we suspect was then used to meet working capital requirements and lift the suspension of the shares.

• We note the ‘immediate’ resignation of Mr Murray Howard d'Almeida the previous chairman on 17 March and the re-appointment of Christopher John Berkefeld who then took over as Chairman to sort out the mess.

• A trading update in January warned against provisions for A$6.5m against contracts entered into by the now defunct consulting business of the group founded and operated by former CEO Paul Morffew.

• We note the company now has a new chairman and two new independent non-executive directors suggesting some strengthening of its corporate governance was required.

• The company now has a new website which tells us about MRS’s mining support group which offers mine services mine rehabilitation, wet and dry plant hire, industrial services, poly and water reticulation and mining support expertise.

Conclusion:  Bailing out a failing company once is not good and bailing it out twice is even less appealing.  Given the profits generated by many mining services groups we have to wonder if the losses were caused by mismanagement or misappropriation?  Let’s hope the Chairman, non-executives and Nomad are able to maintain tighter control this time.

 

Patagonia Gold (LON:PGD) 1.7p, Mkt Cap £26m – Cap Oeste guidance maintained at 68,500oz gold for this year

• Patagonia Gold today provide an operations update following the sale of their key Gold's Cap-Oeste Sur Este (COSE) project for $15m plus a 1.5% NSR royalty.  This is not to be confused with the company’s current Cap Oeste project which is just 1.4km away.

• The deal, previously announced also includes an exclusive option to buy the Calcatreu gold silver project in the Rio Negro Project of Argentina which has a NI-43-101 compliant indicated resource of 8mt at an average grade of 25.7g/t silver and 2.63g/t gold and a further, inferred resource, of 3.4mt at an average grade of 16.6g/t silver and 2.06g/t gold.

• Today’s update tells us that Patagonia are installing an agglomeration unit to deal with higher than anticipated clay content at the Cap-Oeste mine and that civil works for an expanded heap leach area and for the agglomeration unit have been completed.

• Set-up and instillation of the rest of the kit, eg the stackers, conveyors etc.. is expected to take another three weeks.

• The company maintains its guidance for 2017 from the new Cap Oeste project at 68,500oz gold equivalent from the heap leach.

• Evaluation of the Cap-Oeste pit has the potential to increase overall production to 186,800oz gold equivalent

• The company continue to explore its portfolio of other properties in Argentina and Uruguay and is looking for high-grade low sulphidation targets..

• The group has changed much in recent years and is now under the command of Carlos Miguens, Christopher van Tienhoven and Gonzalo Tanoira.

Conclusion:  It’s good to see Patagonia developing and exploring its gold portfolio

 

Strategic Minerals* (LON:SML) 2.5p, Mkt Cap £31m – Taking control of CARE.

• Strategic Minerals has announced that it has agreed to acquire the outstanding shares in the Central Australian Rare Earths (CARE) joint-venture from its partner, Rarus Limited. The project has been exploring for nickel and also for rare earth minerals in the Laverton area of W Australia, however recent work has also identified potential cobalt mineralisation which provides an additional focus for further exploration.

• The majority of the world’s cobalt comes from DRC, where the integrity of the supply chain has in the past been subject to question. Consequently we consider that the establishment of alternative sources of supply in a country like Australia could be a fruitful exploration endeavour.

• Strategic Minerals will acquire the remaining interest in exchange for 19m new shares issued at £0.0275p/share or £522,500 and the ”transaction is to be completed prior to 1 June 2017”.

• The transaction also ensures that Rarus Limited’s geologist responsible for the CARE project, Andrew Spinks, will continue to provide his expertise and “strategic professional advice, at market rates”.

• Managing Director of Strategic Minerals, John Peters, commented that “Under existing arrangements, SML was due to move to a 75% ownership of CARE.  However, it has become clear that to fully explore the resource potential indicated in CARE's tenements, larger amounts of funding would be required.”

• While Strategic Minerals has the cash-flows of its Cobre operation in New Mexico available for deployment to an expanded exploration programme,  “Rarus may have struggled to source suitable funding in the timeframe SML envisaged for the project, Accordingly, SML was not prepared to expand the exploration scope while not in full control of the project's expected timeline.”

Conclusion: Acquiring full control of the CARE project under amicable terms while retaining the professional services of a key technical team member should allow Strategic Minerals to accelerate exploration of the CARE tenements at their own pace and we would expect the project to progress more rapidly following the conclusion of the transaction. We will be particularly interested in news of further work to establish the cobalt potential of the tenements

*SP Angel act as Nomad and joint broker to Strategic Minerals

 

URU Metals (LON:URU) 3 pence, Mkt Cap £3.4m – Option agreement with Cameco over Gold/Uranium Project

• The company has signed an earn in with Cameco on the Nueltin Lake Gold-Uranium project in the Kivalliq Region in Canada.

• URU are to fund C$2.5m in exploration expenditure over a three year period to earn 51% in the project.

• The company retains the option to earn a further 19% in the project by funding a further C$8m over a four year period.

• Once the company has secured 70% it will take over as project operator and the parties will enter into a standard JV arrangement.

• The project contains 34 mineral claims and 1 mineral lease covering 27,279 ha.

• Cameco has conducted a 15 hole drill programme for 1,553 m on this potential gold-uranium zone with mineralization intersected in three of the 11 drill holes collared.

• Results from drilling showed grades of up to 8.95 g/t gold over 5.95 m, 3.2 g/t gold over 7.25 m and 0.23% U3O8 over 1.25m.

• The land is on lands that are subject to a land treaty negotiation between the Govt of Canada and the Sayisi Dene and Northlands Denesuline First Nations.

• The local land tribes will have ownership of surface and land rights of the project and the partners of the project will need to negotiate an MOU with First Nations regarding their mineral rights.

Conclusion: Finding a project which they can explore in conjunction with a major player will give URU a tangible project they can work on. Cameco discovered this poylymetalltic project in 1978 and has undertaken a drill programme following geological mapping and airborne geophysics. The objective would be to explore further the potential for uranium with the proposed targets being relatively s

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