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Today's Market View - Atalaya Mining, Ironridge Resources Limited, BlueJay Mining PLC, Kodal Minerals, Phoenix Global Mining Ltd, Strategic Minerals Plc

Published: 10:57 31 Jul 2017 BST

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Dow Jones Industrials  +0.15% at   21,830

Nikkei 225   -0.17% at   19,925

HK Hang Seng   +1.26% at   27,320

Shanghai Composite    +0.61% at    3,273

FTSE 350 Mining   +2.08% at   16,821

AIM Basic Resources   +0.23% at    2,483

 

Atalaya Mining (LON:ATYM) – Maintains copper production guidance

BlueJay Mining (LON:JAY) – Field Trip to Pituffik

IronRidge Resources* (LON:IRR) – Wide lithium bearing pegmatites in trenches

Kodal Minerals* (LON:KOD) –Suay Chin investment update

Phoenix Global Mining* (LON:PGM) – Initial drilling results from Empire

Strategic Minerals* (LON:SML) – Two additional drill holes added to Redmoor Phase 1 programme

 

Major miners (FTSE 350 Mining Index) are up more than 2% this morning as Chinese PMI data showed strong growth in construction industry that saw iron ore, coal and steel futures posting robust gains in the Chinese today.

• Iron ore futures climbed to the highest level in nearly four months as Chinese construction industry is reported to have expanded tat the fastest pace in more than three and a half years.

• Gold is holding onto its gains recorded over the last few weeks trading in the $1,265-1,270/oz range.

• The US$ index is little changed this morning trading not too far off the weakest level in over a year hit last week.

• Oil is consolidating gains form late on Friday with Brent prices trading above the $52/bbl level.

 

Economic News

US – Q2 GDP numbers point to robust economic growth led by private consumption while inflation data disappoints.

• Consumer spending expanded at 2.8%qoq (annualised) coming in line with estimates picking up from 1.9%qoq in Q1/17 on the back of strong gains in disposable income.

• Disposable income adjusted for inflation recorded the best back-to-back quarter since H1/15.

• Business investment also favoured well growing 8.2%qoq, the most in nearly two years, with trade also adding to Q2 GDP growth.

• On a less positive note, Core PCE inflation index, the Fed’s preferred price measure, moved further away from the 2% target; although, it is unlikely to deter the central bank from tightening its monetary policy as the FOMC expects inflation to stabilise around the objective “over the medium term”.

 

 

China – Latest official manufacturing PMI numbers show only a slight slowdown in the rate of expansion but still continuing to point to robust growth momentum.

• Growth is reported to be driven by the construction sector on the back of strong infrastructure spending and robust real estate investment.

• A point to note, the sub-index of small and medium sized firms’ sentiment has deteriorated slumping below the 50 mark, according to the report.

• This suggests the general index is driven by a disproportionate increase in activity among larger firms which provide a lower share of the nation’s employment while smaller companies take the brunt og the ongoing government led deleveraging programme.

• Regarding inflation measures, input and sales prices growth picked up in July following a period of slowing price gains recorded lately.

• Private PMI reports are due later this week (manufacturing PMI on Tuesday; services and composite PMIs on Thursday).

• Official Manufacturing PMI: 51.4 in July and 51.7 in June and 51.5 forecast.

• Official Services PMI: 54.5 in July and 54.9 in June.

 

Germany – June retail sales posted the strongest month on month increase in the last eight with unemployment reaching new post-reunification lows.

• This builds on strengthening economic growth in the Eurozone in general as France, Spain and Austria reported strong GDP numbers on Friday.

• Separate data showed inflation help up well in July against market estimates for a slight decline.

• Inflation which lagged the pick up in economic activity in the region lately is closely watched by

• Retail Sales (%mom/yoy): 1.1/1.5 v 0.5/4.9 in May and 0.2/2.7 forecast.

CPI (EU Harmonised %mom/yoy): 0.4/1.5 v 0.2/1.5 in June and 0.3/1.4 forecast.

 

Eurozone – Core inflation inched up in July in the Eurozone providing more evidence of an increasing consumer prices’ trend.

• This a welcome piece of news for the ECB which is watching inflation closely to determine the right timing for the shift in the monetary policy.

• The ECB is currently targeting the end of the QE programme at the end of this year, while the clear path to future rate increases and the reduction of the outstanding balance sheet is yet to be provided.

• CPI (%yoy): 1.3 v 1.3 in June and 1.3 forecast.

• Core CPI (%yoy): 1.2 and 1.1 in June and 1.1 forecast.

 

Currencies

US$1.1733/eur vs 1.1714/eur last week.   Yen 110.64/$ vs 111.22/$.   SAr 13.039/$ vs 13.042/$.   $1.312/gbp vs $1.309/gbp.

0.798/aud vs0.796/aud.   CNY 6.725/$ vs 6.742/$.

 

Commodity News

Precious metals:

Gold US$1,267/oz vs US$1,260/oz last week

   Gold ETFs 66.4moz vs US$66.5moz last week

Platinum US$937/oz vs US$927/oz last week

Palladium US$891/oz vs US$882/oz last week

Silver US$16.70/oz vs US$16.59/oz last week

           

Base metals:   

Copper US$ 6,408/t vs US$6,323/t last week

Aluminium US$ 1,921/t vs US$1,929/t last week

Nickel US$ 10,300/t vs US$10,210/t last week

Zinc US$ 2,818/t vs US$2,771/t last week

Lead US$ 2,345/t vs US$2,298/t last week

Tin US$ 20,880/t vs US$20,730/t last week

           

Energy:           

Oil US$52.8/bbl vs US$51.6/bbl last week

Natural Gas US$2.881/mmbtu vs US$2.962/mmbtu last week

Uranium US$20.50/lb vs US$20.50/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.4/t vs US$68.3/t

Chinese steel rebar 25mm US$599.8/t vs US$600.1/t

Thermal coal (1st year forward cif ARA) US$75.3/t vs US$73.3/t last week

Premium hard coking coal Aus fob US$179.9/t vs US$178.7/t

 

Other:

Tungsten APT European US$230-235/mtu vs US$226-231/mtu

 

Company News

Atalaya Mining (LON:ATYM) 138 pence, Mkt Cap £160m – Maintains copper production guidance

• Atalaya Mining reports that its 2017 production target of 34-40,000 tonnes of copper production remains intact following Q2 output of 9,058 tonnes which brings the total for the first six months of 2017 to 17,863 tonnes.

• Mined grades remained stable at 0.49% copper during the quarter (Q1 0.48%)

• Copper recovery rates at the Proyecto Riotinto  improved during the quarter to a record 85.09% (Q1 84.63%) and these will, no doubt, contribute to the company’s continuing drive to reduce costs.

• Benefitting from stable copper prices and the solid operational performance, cash generation was sufficient to allow “the full repayment of the old Social Security debt (€16.9m) that had been inherited with the mining concession.”

• The company is continuing its near-mine exploration programme, notably to test the lateral extension of Filon Sur, with a view to updating the resource/reserve model as part of the continuing studies into a further expansion in throughput to 15mtpa.

• In addition to the operation at Proyecto Riotinto, the company is also, as previously announced, evaluating the Proyecto Touro project in northern Spain, where “The technical reort is progressing ahead of schedule and is at an advanced stage of development. It is expected to be at a prefeasibility level of detail in the near future, with completion brought forward to the beginning of Q4 from the original estimate of the end of FY 2017.”

Conclusion: Atalaya is continuing to optimise the Riotinto operation while evaluating the viability of a further expansion from the current 9.5mtpa throughput rate to 15mtpa. Pre-feasibility level work on Proyecto Touro is running ahead of the original timetable and is now expected to be completed early in Q4 rather than the original estimate of the end of 2017.

 

BlueJay Mining (LON:JAY) 12p, Mkt Cap £92m – Field Trip to Pituffik

BUY - Target Price 22p

• Today our intrepid explorer / mining analyst, John Meyer, is on site at Pitiffuk, Greenland.

• The scene is dominated by beaches of black sand set against the desolate and bare rock of the Greenland Proterozoic Basin.  There is no snow for around 50km inland revealing the bare rock and thickening moss which is now typical of Greenland's coastal regions.

• The sonic drill rig, augers, screens, tractor, loader, JCB excavators, generators, ATV's and other kit is in place for the field season which started last week.

• The objectives for the season are to better define and to expand the titanium mineral sand resource. Geotechnical drilling is being done for the civil works in preparation for production next year. Environmental studies are also being finalised. The resource drilling is the short term focus with the rigs then moving to site development work.

• Work is underway for the production of a 600t bulk sample to be sent to a number of customers for testing.  The company expects this to generate larger orders for 2019.

• Conditions for dredge mining generally become operable from June till October giving more than sufficient time for production.  The dredges can produce some 100,000t of heavy mineral sand concentrate in three weeks with pre-concentration on the dredge and further beneficiation on land.  Unwanted oversize will be left in situ and or be used for the creation of earthworks to facilitate concentrate loading.  Light material will be re-deposited.

• The bulk sample is well advanced with the company expecting to ship this to customers in the coming months.

*SP Angel acts as nomad and broker to BlueJay

 

IronRidge Resources* (LON:IRR) 34p, Mkt Cap £89m – Wide lithium bearing pegmatites in trenches

• IronRidge Resources reports that it has intersected wide, lithium bearing, pegmatites in a series of trenches at its Barari licence, Ewoyaa Project withinits Cape Coast Lithium Project area in Ghana.

• The company notes that its trenching has intersected “broad, visible lithium spodumene bearing pegmatite intervals over 75m, 65m, 64m and 33m in new trenching.”

• The results have now helped define a promising zone zone covering 800m of strike length over a width of up to 100m wide at Ewoyaa where “previously reported due diligence trenching and rock chip sampling over this target returned results of 100m@ 1.57%Li2O (including 40m @ 1.93% Li2O and 15m @ 2.18% Li2O), 10m @ 2.41% Li2O, 25m @ 2.29% Li2O and 25m @2.14% Li2O.”

• As well as the results from Ewoyaa, “Step out line cutting and mapping has discovered a new spodumene bearing pegmatite field at the Abunko prospect 1 km to the east of the Ewoyaa target. Initial trenching has returned 27m and 15m pegmatite intersections with coarse visible spodumene crystals evident.”

• Trenching and mapping is continuing to help assess the scale of the mineralisation with Ewoyaa confirmed as the priority target at this stage to confirm the continuity and width of the mineralisation.

• As well as the exploration on the ground, IronRidge has a helimag and radiometric survey underway over the area. Work is currently around half complete. The airborne geophysics should help refine the future exploration programme in conjunction with the detailed mapping and trenching work.

Conclusion: The early stage exploration work in Ghana is showing encouraging results with lithium bearing mineralisation detected within apparently large scale pegmatite structures. We look forward to the assay results from the trenching and the results of the airborne geophysical survey in due course.

*SP Angel act as Nomad and Broker to IronRidge Resources

 

Kodal Minerals* (LON:KOD) 0.31p, mkt cap £19.5m –Suay Chin investment update

• Kodal Minerals has reported that Suay Chin has now invested a further £694,297 for an additional 182.7m shares comprising around 68% of the planned £1,025,266 in the second tranche of its investment in Kodal Minerals.

• At this stage, therefore, “approximately £330,969 remains outstanding (the “Final Amount”). Suay Chin has advised the company that it intends to honour its subscription in full and the Company acknowlwdgews that Suay Chin has made, and is continuing to make, significant efforst to complete the Further Subscription and, therefore, the Company and Suay Chin have mutually agreed to extend the deadline for receipt of the Final Amount from 31 July 2017 until 31 January 2018.”

• Negotiations for Suay Chin to secure an “extended offtake agreement for between 80% and 100% of the spodumene produced at the Project [Bougouni Lithium Project] for a period of three years from the commencement of commercial production” underlie, in our view, the  continuing interest of Suay Chin in Kodal Minerals.

• Suay Chin made an initial investment of £500,000 in the company and followed it up with an agreement to invest a further £4.3m for a 20% interest. Suay Chin has now completed around 92% of that commitment.

Conclusion: Suay Chin has already made a significant investment in Kodal Minerals and provided funds to progress the exploration work at Bougouni. The agreement to extend the deadline for payment of the final £330,000 should not, in our opinion slow down the work at Bougouni to any great extent while the support of Suay Chin as a potential offtaker for any future production is a positive benefit for a future project development.

*SP Angel act as broker to Kodal Minerals.  A partner at SP Angel acts as Chairman to the company.

 

Phoenix Global Mining* (LON:PGM) 3.6p, Mkt Cap £8.3m – Initial drilling results from Empire

• Phoenix Global Mining, which is seeking to re-open the historic Empire copper mine in Custer County, Idaho, reports that it has now completed 19 drill holes of its initial 28 hole, 2200m, infill drilling programme aimed at upgrading the current inferred resource of 5.55mt at an average grade of 0.53% copper.

• Fourteen of the planned 21 reverse-circulation drillholes and five of the seven planned diamond drill holes are now complete as of 26th July. The diamond drilling work completed to date includes three of the planned 4 hole programme of large diameter holes which are intended to provide sample material for metallurgical testing

• The assay results from the first 5 holes “have exceeded the average grade in the current JORC Resource.” Among the results released today are:

o A 22.9m long intersection from surface in hole KX 17-3 at an average grade of 0.66% copper, 0.1% zinc and 40.8 g/t silver, including a 4.6m long section between 16.8m and 21.3m at an average grade of 2.06% copper, 0.05% zinc and 92.9g/t silver

o A deeper intersection, also 4.6m long in the same hole, between 56.4m and 61m averaged 1.65% copper, 2.3% zinc and 3.4g/t silver.

o A 29m long intersection from surface in hole KX 17-2 averaged 0.46% copper, 0.07% zinc and 7.7g/t silver.

• Metallurgical assessment work and preliminary feasibility work is continuing with a revised JORC compliant resource estimate, incorporating the new drilling, to be published during Q4 2017.

• As well as the drilling work, the company has declared its intention to appoint a mining contractor to open up the 300,0700 and 1100 level portals in the old mine to facilitate sampling and mapping of the old workings and “to assess the underground sulphide resource potential where intercepts up to 11.4% copper and additional metal credits including gold, silver and tungsten have been recovered.”

• Additional exploration and preparatory work includes a re-evaluation of core and cuttings samples from previous exploration work conducted by previous operators, as well as the development of safety procedures required prior to the reopening of the old workings.

Conclusion: Initial drilling has shown positive results and puts the company well on course for a revised resource estimate later this year. Preparatory work is in hand for reopening parts of the old mine to allow access for sampling and mapping which should help to show the scope of the overall resource potential and refine future exploration plans.

*SP Angel acts as Nomad to Phoenix Global Mining

 

Strategic Minerals* (LON:SML) 2p, Mkt Cap £24.2m – Two additional drill holes added to Redmoor Phase 1 programme

• Strategic Minerals has announced that its on-site team at Redmoor have added an additional two drill holes to the original 13 holes planned for its Phase 1 drilling programme at the Redmoor tin project in Cornwall.

• The new holes “are designed to more clearly define the existing resource and provide further insight to the appropriate design and positioning of Phase 2 holes.” At this stage, there are no further details on the results from the earlier parts of the Phase 1 programme or on the more specific details and objectives of the new holes. We infer, however, that the earlier work has provided sufficient encouragement to justify the expanded Phase 1 programme.

• The additional drilling, estimated to cost an additional £60,000, will be jointly funded by Strategic Minerals and its partner, NAE. The company adds that the addition of the extra holes is “unlikely to alter [the] previously stated reporting timeframes.”

Conclusion: The addition of two extra holes to the Phase 1 programme at Redmoor is indicative of a dynamic and reactive approach to exploration management which should enhance the overall cost effectiveness of the programme. We look forward to the results of the work completed to date when they become available.

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

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