BlueJay Mining* (LON:JAY) STRONG BUY, Target Price 22p – BlueJay drill holes exceed length of available drill pipe
Bushveld Minerals* (LON:BMN) BUY – Target Price 11.6p (to be revised on today’s news) – Vametco expansion plans underway
Jubilee Platinum (LON:JLP) 4.15p, Mkt Cap £46.4m – US$50m project funding
Base Metals continue to rise as environmental cuts accelerate buying
• Industry, traders and investors are stocking up on base metals on news that China is cutting capacity and presumably production in aluminium.
• We expect China to order further cuts in capacity and production of a range of metals through the winter and to permanently close the worst polluters.
• Shandong province has ordered the closure of 3.2mt of aluminium capacity marking what looks like a major shift in policy and determination by the authorities to tackle pollution issues.
• Chinese commodity imports for July were unusually strong for the time of year when imports normally fall ahead of the summer industrial slowdown.
• China factory price inflation is serving to improve profits and debt ratios helping to put off moves to deleverage debt levels at corporate entities.
• Despite all this investors appear to remain concerned and mistrustful over China’s policy comments
China Earthquake - The latest earthquake in China is given as a reason for metals prices to rise today for reconstruction of damaged buildings in Sichuan province
• Steel is a major component for earthquake protection in seismic areas with steel frames put into repaired buildings and additional steel required for added protection in new construction
South Arica – Zuma narrowly survives vote of no confidence as 177 MPs vote against him
• Zuma won by 198 votes vs 177 against
• The South African rand fell by 1.5% following the vote
North Korea threatens Guam with missile strike
• The North Korean leadership is considering a plan to fire medium range rockets at the US base of Guam in Asia.
Elon Musk is reported to be inspiring BHP to make nickel sulphate at their facilities in Australia
• Nickel sulphate is used in lithium-ion batteries.
Dow Jones Industrials -0.15% at 22,085
Nikkei 225 -1.29% at 19,739
HK Hang Seng -0.35% at 27,757
Shanghai Composite -0.19% at 3,276
FTSE 350 Mining -0.48% at 16,965
AIM Basic Resources -0.10% at 2,445
China – Earthquake in Sichuan measures 7 in Richter scale killing around 30 people
US$1.1724/eur vs 1.1811/eur yesterday. Yen 109.72/$ vs 110.55/$. SAr 13.466/$ vs 13.216/$. $1.300/gbp vs $1.304/gbp.
0.787/aud vs 0.793/aud. CNY 6.679/$ vs 6.704/$.
Gold US$1,268/oz vs US$1,261/oz yesterday
Gold ETFs 66.2moz vs US$66.2moz yesterday
Platinum US$976/oz vs US$971/oz yesterday
Palladium US$894/oz vs US$888/oz yesterday
Silver US$16.64/oz vs US$16.28/oz yesterday
Copper US$ 6,496/t vs US$6,389/t yesterday
Aluminium US$ 2,033/t vs US$1,989/t yesterday
Nickel US$ 10,765/t vs US$10,320/t yesterday
Zinc US$ 2,962/t vs US$2,879/t yesterday
Lead US$ 2,403/t vs US$2,369/t yesterday
Tin US$ 20,320/t vs US$20,480/t yesterday
Oil US$52.1/bbl vs US$52.6/bbl yesterday
Natural Gas US$2.825/mmbtu vs US$2.826/mmbtu yesterday
Uranium US$20.65/lb vs US$20.50/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$73.7/t vs US$72.9/t
Chinese steel rebar 25mm US$641.1/t vs US$636.5/t
Thermal coal (1st year forward cif ARA) US$74.7/t vs US$75.2/t yesterday
Premium hard coking coal Aus fob US$193.6/t vs US$193.6/t
Tungsten APT European US$240-248/mtu vs US$230-235/mtu
BlueJay Mining* (LON:JAY) 15p, Mkt Cap £115.3m – BlueJay drill holes exceed length of available drill pipe
STRONG BUY, Target Price 22p
BlueJay Mining report significant progress at the Pituffik ilmenite (titanium mineral sand) project in Greenland this field season.
Sonic drill rig: The newly acquired Sonic-drill rig as recommended by SRK Consultants is working well and shows mineral sands to a depth of over 30m in some areas exceeding the length of available drill rods and casing. The Sonic rig is reported to be working well and to be drilling off five to six holes per day depending on depth. We witnessed the first test drill hole on the recent site visit to Moriusaq Bay, Greenland.
Resource: This dramatically exceeds our expectations depth and definitely exceeds the SRK JORC resource which assumes a very simple 1m depth based on the 1m auger and vibracore drill holes done to date.
It is too early to give an accurate estimate as to the eventual scale of the mineral sands at Pituffik eg Moriusaq Bay and at the Interlak delta area but it is easy to make the assumption that the resource should expand to a significant multiple of the current and relatively conservative SRK estimate.
Early indications suggest to us that the ilmenite rich sands at surface may be equally well distributed at depth with no or very few apparent layers of rocks, aggregates or other minerals seen in preliminary drilling. This may or may not extend over much of the deposit but given that the ilmenite rich material is so much heavier than any other mineral it may be natural that most other minerals were washed away by waves and storms through the deposition process. Either way, Pituffik appears to be an exceptional deposit in this way.
Bulk sample: The first 250t batch of ilmenite concentrate has already been shipped from Pituffik down to a warehouse at a deep water port in Greenland for further shipment.
The team were planning to produce around 500-600t this season but could produce much more if required given the very rapid production of the first 250t which has essentially been produced in the first full two weeks of the field season using simple screens.
Purity: The amazing thing about Pituffik is the apparent purity of the ilmenite mineral sands and the near total lack of any other material, particularly clay which bungs up processing at many other mineral sands operations.
In short, nature has done an amazing job in sorting out the heavy mineral sands from the lighter material and this can be very clearly seen from the air where rivers show plumes of natural sand being washed down the shoreline to other beeches leaving a mass of ilmenite sand on Bluejay’s beach licenses at Pituffik. We note, other beach sands in the region do not appear to have similar areas of ilmenite concentration.
Microscopy indicates good purity levels with the ilmenite grains liberated by erosion. The very heavy levels of erosion seen in general in Greenland appear to have served to liberate the ilmenite in a way that may not be seen in less active environments.
Bucket test: We completed our proprietary SP Angel bucket test on the BlueJay license. The test involved borrowing a five liter bucket from the kitchen, filling it with mineral sands off random locations on the beach, weighing said bucket with some recently purchased luggage scales. Our test showed high levels of heavy mineral sands from all areas and particularly near the shore line where we weighed 13.5kg for approximately 5kg of mineral sands with no sieving.
Beaches and Terraces: The very high level of erosion caused by glacial and freeze/thaw erosion combined with the unusually high level of ilmenite rich dyke swarms has created an exceptional environment for the sorting of heavy mineral sands over millions of years enabling the natural enrichment and deposition into the active beaches which have then been uplifted to form deep terraces of ilmenite mineral sands. Drilling is reported to show ilmenite to >30m of depth in this environment. This fits with a theoretical beach model when considering the scale of the beach terraces and surrounding geology in our view.
Shipping: the Fjords of Greenland provide deep shipping lanes with depths of >800m seen by us on the sonar during our travels. Deep water is present very close to shore at Pituffik and it should be relatively inexpensive and simple to rig up a short 10-20m pier and conveyor for the loading of handymax or panama ships through the summer months. Ice breaking could extend the shipping season though we suspect this will not be necessary if the carriers can load in time. The bathymetry survey should be completed in the next few weeks and should show the best location for the pier, though nature has provided much of the infrastructure to be needed.
Moriusaq Bay: The Moriusaq Bay area provides a natural harbor to protect against passing icebergs and heavy weather.
Environmental: a local group, Orbicon Artic are working on a baseline sampling program for the EIA though we saw nothing to cause any particular concern on the beaches or at the shore line.
Moriusaq camp: The abandoned settlement at Moriusaq provides a camp of reasonable quality saving BlueJay a small fortune in camp costs. The former supermarket provides a useful mess room and canteen and the recent installed washrooms are a significant addition for the team working at site.
Kitchen: an army marches on its stomach and miners in the field are just the same. We are pleased to report that the Pituffik kitchens are well appointed with an unusually creative Danish chef and enough grub to keep the team going through this season and beyond, though the coffee could take some getting used to.
Health & safety: Two minor injuries were sustained by staff eating Snow Crab and some icebergs were damaged while testing anti-polar bear deterrent devices. All other health and safety issues appear well managed.
Feasibility study: the team now look set to deliver a feasibility study on the project in the second half which will likely show very low unit operating costs and strong economic potential for the project. Our own preliminary evaluation of the project economics shows significant value and considerable upside from here.
Processing: The mineral sands at Pituffik appear to require very little in the way of mineral processing. Simple screening and sieving produces concentrate for testing while the use of spirals should produce a viable concentrate for sale. A further stage of processing using permanent 'neodymium' magnets may produce concentrate which is suitable for 'Chloride' producers commanding higher prices for this purer material. This fetches the higher end of market prices at around $180-220/mtu.
Ilmenite market: we expect the environmental crackdown in China to further restrict the processing of titano-magnetite ores and concentrates. This should restrict the availability of titanium from this source and drive demand for ilmenite ‘titanium’ rich concentrates from mineral sands.
Ilmenite pricing: The Metal Bulletin report bulk concentrate TiO2 prices for 54% FOB Australia today at $160-180/t though higher prices of around $180-280/t are seen in the market depending on quality.
Conclusion: Pituffik is one of the most economically promising mineral projects we have ever had the privilege to visit. We are reviewing our model and will update the market in due course.
*SP Angel acts as nomad and broker to BlueJay
Bushveld Minerals* (LON:BMN) 10.5p, Mkt Cap £84.6m – Vametco expansion plans underway
BUY – Target Price 11.6p (to be revised on today’s news)
• In its operational update today, Bushveld Minerals reports that plans for a multi-phased expansion programme by its 45% owned, Vametco, are underway to increase annual vanadium production capacity from the current nameplate capacity of 3,000 tonnes to 5,000 tonnes over the next 3 years.
• The company notes that the 16% expansion in annual vanadium production to 2,804 tonnes in 2016 represents a “3.7% share of global production.” Production of 1441 tonnes of vanadium during the six months to the end of June, 2017 suggests that production is currently relatively stable.
• Production costs declined by 16% to $14.50/kg of vanadium in 2016 (2015 - $17.23/kg) but have edged up during the last six months to $15.58/kg. Despite this, Bushveld Minerals states that Vametco is “in the bottom quartile of the international vanadium production cost curve.”
• As well as commenting on the cost position, the company highlights the improving trend in vanadium prices; “rising from a low of US$14.41/kgV* in January 2016 to US$23.23/kgV* in December 2016. This price improvement has continued into the first half of 2017, resulting in increased revenues.” Despite the dampening effect of stronger Rand/$ exchange rates, “Supply shortages are expected to continue to drive vanadium prices higher.”
• Commenting on the results and on the expansion plans, CEO, Fortune Mojapelo, commented "Vametco is a significant Vanadium producer, with extremely competitive production costs, that is now undergoing an expansion initiative to deliver increasing volumes into a structurally deficit supply market.”
Conclusion: Bushveld Minerals’ Vametco is building on its low cost base vanadium production near Brits in S Africa to expand production into an undersupplied vanadium market at a time of improving prices. We will revisit our model and valuation shortly based on the expansion plans revealed today
*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.
Jubilee Platinum (LON:JLP) 4.15p, Mkt Cap £46.4m – US$50m project funding
• Jubilee Platinum has announced a US$50m project funding agreement with Riverfort Capital to “support its growth strategy for its metals recovery business.”
• “The funding commitment is for an initial 33 month period with the flexibility for mutual extension. … Riverfort has been granted the right to exercise a 2.5% maximum preference equity stake in the subsidiary Jubilee Processing.”
• The company seeks to recover metals contained in multiple surface sources of pre-treated material where the original processors were unable to recover all the metal content.
• The company describes its metals recovery strategy as:
o “Secure low risk, low capital intensive, long-term commodity production from mine waste at an attractive point on the global cost curve by using advanced, environmentally sustainable metal recovery techniques;
o Diversify across multiple commodities including platinum, cobalt, copper and gold to hedge income risk and to align with global trends; and
o Rehabilitate the adverse footprint left by legacy mining in accordance with International Environmental Standards.”
• The funding is to be delivered at the project level where “Jubilee has developed successful proprietary processing techniques to optimises metal recovery in an environmentally friendly and sustainable manner” from “materials that contain metals and minerals missed by the original recovery path.”
Conclusion: The funding agreement should provide Jubilee with the financial platform to progress its metal recovery strategy. We look forward to news on developing projects in due course.