Atalaya Mining (LON:ATYM) – Raising £31m in placing at 167p/share
Galileo Resources (LON:GLR) – Interim Results
Metal Tiger (LON:MTR) – T3 underground mine potential
Faltering China drags commodities lower
• Signs of slowing growth in China are limiting successes in the commodity markets as the Bloomberg Commodities Index fell 4.1% in the past month, putting it on course for its sixth year of losses out of seven. Expectations for the transition in economic phase of the Asian nation are concerning investors as metal demand and investment may fall in 2018 on environmental cleanup actions and a cooling property market.
• The nations fixed-asset investment in infrastructure will grow 12% next year, according to the median estimate in a Bloomberg survey, down from almost 20% year-to-date 2017. The recent poor performance of copper can be attributed to early market hesitation.
Dow Jones Industrials +0.29% at 24,211
Nikkei 225 +1.39% at 22,811
HK Hang Seng +1.24% at 28,653
Shanghai Composite +0.55% at 3,290
FTSE 350 Mining +0.58% at 16,403
AIM Basic Resources -1.57% at 2,529
US$1.1746/eur vs 1.1790/eur yesterday Yen 113.54/$ vs 112.66/$ SAr 13.683/$ vs 13.572/$ $1.351/gbp vs $1.338/gbp
0.751/aud vs 0.753/aud CNY 6.617/$ vs 6.616/$
Europe – Stocks rallied as Brexit negotiations make headway
• European stocks rose to weekly highs as Britain and the European Union announced a breakthrough in Brexit negotiations while supportive global banking regulations were seen as more beneficial to European banks.
• The early morning breakthrough in Brexit negotiations show a willingness for both parties to compromise with Bloomberg highlighting the main points of the deal:
o The U.K will contribute to EU budgets for the years 2019 and 2020 as if it had remained in the Union.
o The U.K will contribute its share of financing of EU budgetary commitments outstanding at 31 December 2020.
o The U.K. will contribute its share of the financing of the EU’s liabilities incurred before 31 December 2020.
o The citizens’ rights part of the final Withdrawal Agreement is to be interpreted in line with the case law of the Court of Justice of the European Union.
o In the context of the application or interpretation of those rights, U.K. courts shall have due regard to relevant decisions of the ECJ.
o There will be a mechanism enabling U.K. courts to ask the ECJ questions of interpretation and it will last eight years.
o The U.K. will either propose a solution for keeping the Irish border open that will be acceptable to the EU, or continue to by EU’s single market and customs union rules “which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement”.
Gold US$1,248/oz vs US$1,257/oz yesterday
• Gold continues its decline, as the precious metal fell to a four-month low of $1,244/oz, on firming dollar demand. Strong equities markets have continued to draw investment away from gold, with expectations for further growth building from economic stimulus with the passing of the US Republican tax plan. The release of the non-farm payroll data is expected to drive the short-term direction of the dollar, while the upcoming US Federal Open Market Committee meeting will confirm rising interest rates.
• The metal edged up in early Asian trading as bargain hunting investors look to secure growth in the metal, as geopolitical tensions with the Middle East have significant potential to rise. Pressure was building as President Donald Trump recognised Jerusalem as the capital of Israel.
Gold ETFs 71.7moz vs US$71.9moz yesterday
Platinum US$896/oz vs US$900/oz yesterday
Palladium US$1,019/oz vs US$1,000/oz yesterday
Silver US$15.78/oz vs US$15.89/oz yesterday
Copper US$ 6,599/t vs US$6,600/t yesterday
• China’s tightening controls on copper concentrate imports are forcing low-quality suppliers to find alternative offtake partners. Improving environmental limits are clamping down on foreign solid waste with the General Administration of Quality Supervision, Inspection and Quarantine allowing maximum lead content of 6%, while the threshold for arsenic set at 0.5%, fluorine 0.1%, cadmium 0.05% and mercury 0.01%.
• The cuts in “foreign garbage” are aimed at reducing the strain on toxic and harmful elements within Chinese facilities. New rules are being implemented immediately, with November’s record imports at 1.78 million tonnes expected to contract under the updated limits. In order to match the loss in supply, imports of unwrought copper to the world’s top copper consuming country show a strong rise. Arrivals of unwrought products, which includes anode, refined, and semi-refined, rose 42.3% from October (23.7% yoy) to their highest level since December 2016.
• China’s second largest copper smelter began halting capacity last week at its main production hub in Tongling after local government ordered curbs as part of national plan to ease pollution
• Halted 20-30% of smelting capacity from annual total of 800,000 metric tons – no timetable for how long will last
Aluminium US$ 2,013/t vs US$2,015/t yesterday
Nickel US$ 11,020/t vs US$10,815/t yesterday
Zinc US$ 3,095/t vs US$3,101/t yesterday
Lead US$ 2,450/t vs US$2,508/t yesterday
Tin US$ 19,430/t vs US$19,475/t yesterday
Oil US$62.3/bbl vs US$61.5/bbl yesterday
Natural Gas US$2.778/mmbtu vs US$2.856/mmbtu yesterday
Uranium US$25.00/lb vs US$25.50/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$66.1/t vs US$67.2/t
• Iron ore imports rebounded in November to highest levels on record with appetite in worlds top buyer remaining strong even as steel mills cut output
• Rose 18.9% to 94.54 million tonnes in November and were up 2.8% from a year ago
Chinese steel rebar 25mm US$745.2/t vs US$750.6/t
Thermal coal (1st year forward cif ARA) US$86.3/t vs US$85.9/t
Premium hard coking coal Aus fob US$231.2/t vs US$231.7/t
Tungsten APT European US$291-300/mtu vs US$275-285/mtu last week
Cobalt LME 3m US$71000/t vs US$69900/t yesterday
Atalaya Mining (LON:ATYM) 166.5 pence, Mkt Cap £194.3m – Raising £31m in placing at 167p/share
• Following the recent announcement of the decision to expand the operations at Proyecto Riotinto to 15mtpa capacity from its current 9.5mtpa throughput, Atalaya Mining has announced the completion of a placing of approximately 18.57m new shares at a price of 167p/share to raise £31m.
• The placing, which represents around 16% of the company’s current issued capital, was supported by Atalaya’s principal shareholders and leaves Trafigura with approximately 22.8% of the enlarged company, Yanggu Xiangguang Copper with 22.7%, Liberty Metals with 14.5% and Orion Mine Finance with 13.9%.
• Commenting on the transaction, CEO, Alberto Lavandiera said “The Company welcomes the support from existing shareholders and new institutional investors through the Placing. The funds raised will allow the Company to begin executing on its 15 Mtpa Expansion plan immediately."
• We note that the company’s original announcement on 4th December indicated a planned placing of £39m.
Conclusion: The availability of additional financial backing will allow Atalaya Mining to press ahead immediately with its expansion plans at Riotinto. As we commented in relation to the approval of the expansion plan, Atalaya Mining’s plan to increase the capacity of its Riotinto operation is a relatively low-risk incremental expansion of an existing operating mine where management has already delivered previous expansion projects smoothly and we envisage that they will be able to deliver a similar outcome with the latest expansion.
Galileo Resources (LON:GLR) 1.375 pence, Mkt Cap £3.5m – Interim Results
• The company has reported a loss of 0.1p/share for the six months ending 30th September 2017 (2016 interim loss of 0.3p/share).
• Galileo Resources reports a cash balance of £1.13m at 30th September and an operating outflow of cash of £366,000 for the six month period suggesting that, at present, the company is adequately financed for its current activities.
• Exploration activity at the Concordia copper project in S Africa, where the company is in joint venture with Shirley Hayes, has been discontinued and Galileo Resources’ “interest in Concordia will be diluted to 15% from 51%.”
• Pre-feasibility studies are continuing on the Glenover Phosphate project in S Africa where the approval of a Mining Right application from the Department of Mineral Resources is pending.
• In Zambia, an initial 1750m drilling programme is expected to start imminently at the Star Zinc project “and will target a mix of resource confirmation and resource enlargement.”
• In Nevada, following the withdrawal of its joint-venture partner, Orogen Gold from all its exploration activities and a review of the results obtained, Galileo Resources has “decided not to renew the licence for the Silverton project.”
Conclusion: Galileo Resources appears to be focussing on the Star Zinc project in Zambia and its Glenover Phosphate project in S Africa, withdrawing from its US exploration and diluting its interest in the S African Concordia Copper Project.
Metal Tiger (LON:MTR) 1.95 pence, Mkt Cap £20.7m – T3 underground mine potential
• Metal Tiger plc draws attention to the announcement by its partner, MOD Resources on progress with evaluating the underground mining potential of the T3 copper discovery in Botswana (MOD Resources 70%, Metal Tiger 30%).
• The company has now drilled 45 holes since August in areas outside the proposed 10-year open pit mining area at T3 and is aiming to produce an underground mine scoping study during Q3 2018.
• Among the results highlighted from the latest 8 holes drilled are:
o A 7.2m wide intersection at an average grade of 1.9% copper and 39g/t silver from a depth of 218.8m in hole MO-G-82D and
o A 5.9m wide intersection at an average grade of 1.7% copper and 8g/t silver from a depth of 213.1m in hole MO-G-84D and
o A 9.m wide intersection at an average grade of 1.5% copper and 31g/t silver from a depth of 168.3m in hole MO-G-88D and
• “South African mining consultants have conducted a preliminary evaluation of these veins to explore the potential for an underground mine (T3 Underground Project) in addition to the planned open pit. The work done to date assumes good continuity between the mineralised veins, relatively low cost in ore development and room and pillar mining. There may be substantial benefits in developing T3 underground simultaneously with the open pit mine and using shared infrastructure, including the planned T3 processing plant.”
• The company reminds us that the plant capacity “was recently upgraded to 2.5Mtpa (a 25% increase on the scoping study plant capacity) with potential for expansion up to 4.0Mtpa”.
• The T3 open pit resource, published in September 2016, amounts to 13.236m indicated and inferred tonnes at an average grade of 1.84% copper and 24.6g/t silver. In August 2017, following further drilling and the inclusion of additional low grade resources within the proposed pit, the T3 resources was upgraded to 36mt at an average grade of 1.14% copper and 12.8g/t silver.
Conclusion: The recent drilling is indicating potential for underground mining of the deeper mineralisation at the T3 discovery within the Kalahari Copper Belt in conjunction with the planned open pit. We look forward to further news as the programme develops.
Atalaya Mining (LON:ATYM) – Raising £31m in placing at 167p/share