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SP Angel Marketing Report Including: Ariana Resources, Anglo Asian Mining, Aureus Mining, Caledonia Mining and others

Published: 11:13 19 Nov 2012 GMT

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Morning View

Mines & Money London 2012 -  4th & 5th December – well worth a visit for the speeches and presentations

https://www.minesandmoney.com/london/ 

Economic View

US – Existing home sales are estimated to hold near a two year high and total 4.75m units (annualised) in Oct on consumer confidence and cheap borrowing rates.

Existing home sales reached a post-recession low of 3.39m units in Jul 2010. A peak in the pre-recession period was 7.25m units in Sep 2005.

Another report may show home construction confidence held at a six-year high in Nov. (National Association of Home Builders/Wells Fargo)

Homebuilders may get a temporary boost from reconstruction activity after Sandy. Previously, storm Irene added around US$360m in sales, Home Depot executives said on a conference call.

The average rate on a 30-year, fixed mortgage declined to 3.34% last week, the lowest on record since 1972.

China – The Central Bank will be looking to reform convertibility of the yuan as part of a more broad new leadership’s course to smoothly deregulate markets, the Governor said.

The new government will likely announce market-oriented reforms in late 2013after a plenary session of the party’s central committee.

House prices gained in more cities than that the previous month, implying the government is likely to continue with curbs on the real estate sector.

Prices climbed in 35 of the 70 cities in Oct, compared with 31 in Sep.

Greece – European leaders may finalise negotiations with regards to the €32.6bn second bailout to Greece at a meeting this week, an ECB executive board member said.

Meanwhile, the IMF MD Christine Lagarde is planning to defend its position and ask the Greek government to meet its debt target in 2020 without delays.

Finance chiefs meet in Brussels tomorrow.

Spain – Catalan, the largest of all 17 states as well as the most indebted, will be seeking independence despite the risk being expelled from the EU, Catalan President Artur Mas said. Parliamentary elections are scheduled for Nov 25.

The government will be looking to borrow €207bn in 2013, up from €192bn this year. (The Budget Ministry)

Spain has spent more than €40bn bailing out regional governments this year after most of its 17 states could not borrow at public debt markets.

Spanish banks own 32% of the nation’s debt as of Sep, almost double the percentage held at the end of 2011.

A fall out of the investment grade category and a lack of demand from the banking sector for the state debt may force the government to ask for bailout funds next year.

Japan – The Bank of Japan may proceed with purchasing more bonds if the government presents a plan to cut the world’s largest public debt (237% of GDP), Nobuo Inaba said, a possible candidate to replace the Governor in Apr.

Shinzo Abe, a Liberal Democratic Party leader, called for the BoJ to embark on unlimited stimulus and said he would reconsider the Bank’s independence status.

30 year state bonds spreads over 10 year securities climbed to 123bp on Nov 16, the highest since Mar 2008, on inflation expectations. 

So far the BoJ has pledged to purchase JPY 39tn worth of sovereign bonds before 2014.

Nation’s debt stood at JPY 983tn at the end of Sep. (The Finance Ministry)

US$1.2770/eur vs 1.2761/eur last week. Yen 81.34/$ vs 81.09/$. SAr 8.834/$ vs 8.886/$. $1.591/gbp vs 1.589/gbp

Commodity News

Precious:

Gold US$1,723/oz vs US$1,714/oz last week – Gold is up this morning tracking other commodities as President Barack Obama said he is confident Congress would negotiate a deal to avert so called fiscal cliff in the beginning of 2013.

Village Main Reef, a gold miner in South Africa, said it will dismiss 960 workers at its Blyvooruitzicht operations amid cost restructuring across its divisions.

Miners at Blyvoor went on a three-week strike that ended in October.

Anglo American Platinum is conducting a review of its platinum operations amid violent strikes in South Africa and sluggish demand. It is expected the review will lead to some shafts closures and job cuts.

SPDR gold trust holdings increased to 1,343t (43.165moz) value US$73.927bn from 1,340t (43.070moz) yesterday. 

Gold US$1,723/oz vs US$1,714/oz last week

Platinum US$1,567/oz vs US$1,562/oz last week

Palladium US$634/oz vs US$624/oz last week

Silver US$32.60/oz vs US$32.44/oz last week

Base metals:

Copper US$ 7,690/t vs US$7,650/t oz last week – Prices gained on the news on Barack Obama comments that the fiscal cliff may be averted in 2013.

The copper-users group including AmRod, Southwire and Encore Wire critiqued a recent study prepared by the Securities and Exchange Commission that concluded that there is no strong link between asset flows and commodity prices.

The SEC study is part of the process to launch the JPMorgan XF Physical Copper Trust.

Aluminium US$ 1,956/t vs US$1,958/t oz last week

Prices may drop by 20% or more on unwinding of financing deals that tied up the metal in inventories when central banks will start raising interest rates. (Australian and New Zealand Banking Group)

Nickel US$ 16,141/t vs US$15,970/t oz last week

Zinc US$ 1,939/t vs US$1,945/t oz last week

Lead US$ 2,175/t vs US$2,190/t oz last week

Tin US$ 20,500/t vs US$20,468/t oz last week

Energy:

Oil US$109.7/bbl vs US$108.0/bbl last week

Natural Gas US$3.825/mmbtu vs US$3.721/mmbtu last week

Uranium US$41.25lb vs US$41.40lb last week

Australia is planning to expand uranium exports, Ministry for Resources and Energy said.

Steel – US steel shipments dropped 9%yoy to 7.23mt in Sep. It is the lowest reading since Feb 2011. (The American Iron and Steel Institute)

Chinese rebar prices fell the most in two months on reports showing property prices gained in 35 cities which in turn implies the government will unlikely relax curbs on the real estate.

Company News

Aureus Mining (LON:AUE) – Operational Update

Things are progressing well at the New Liberty project with a successful fund raise of $80m to start the development of the project.

At the project the company are starting some early construction works and continuing work on the metallurgy, improving processing through the CIL leach kinetics, improving gold throughput and reducing the use of cyanide and reagents.

This should improve capital and operating costs.

The road which links the Monrovia-Freetown tarmac highway with the mine site is being upgraded over 20 km.

A relocation plan impacting 325 property owners has been submitted to the Govt of Liberia and is awaiting approval expected in Q4 2012.

Conclusion: The New Liberty project looks well set with the equity funding now in place to enable the company to cover the rest of the project through debt with discussions in place with lenders. Initial capex for the mine is expected to around $140m. 

Caledonia Mining (LON:CAL) – Proposal to pay a dividend

The company has proposed an initial dividend and a consolidation of shares on a 1 for 10 basis.

Post consolidation the dividend will be equivalent to $0.05 a share.

Conclusion: The payment of the dividend underscores the cash generation of the company based on production increases at the Blanket mine where Q3 saw a 33% increase in production to 12,919 oz from Q3 2011. The company reported cash flows of $12.4m for Q3 2012 versus $8.7m for Q2 and has cash in hand of $25m at the end of Q3.

Diamcor (CVE:DMI)  – Raises funds from Tiffany for processing plant

This company which has a diamond project close to the De Beers Venetia mine in South Africa has raised $4m from Tiffanys to fund new processing equipment as a result of the commissioning and testing work underway at the project.

The company is doing trial mining at the Krone-Endora project and expect to move to full scale mining once they have received their mining right which they have applied for and is being processed.

The company has signed an off take agreement with Tiffany for 100% of its production.

Conclusion: We are surprised to see a much higher valuation on this company than DiamondCorp which also signed a deal with Tiffany for $6m in offtake funding as part of its funding package to re-start the Lace Diamond mine. The offtake for DiamondCorp is being structured as a first right of refusal at market price. 

The projects are very different with the Krone-Endora said to be a higher grade “alluvial” basal deposit covered by lower grade “Eluvial” deposit with an average total debt of 15m. This compares to a hard rock kimbelite with underground mining starting at a depth of 470m. The diamond package from Diamcor based on their technical report puts $70/carat on the upper gravels and $130/carat on the basal gravels. The total tonnage is 54.25Mt yielding 1.314 M carats which would suggest 0.41 cpht.

The company processed 7,831 tonnes processed in August yielded 1,214 carats with 85 diamonds over 1 carat with 5 diamonds between 3 to 4 carats and 3 diamonds between 4 and 5 carats and the nearby Venetia mine has published grades of 144.9 cpht.

The valuation achieved by BHP for its Ekati diamonds was disappointing at $500m which was around 2x EBITDA and much lower than book value of $800m. With BHP now out of diamonds and Rio looking to exit, the diamond market is likely to become an area for the specialists.

The current yields and valuations would suggest that DiamondCorp is a much better bet.

Wolf Minerals (LON:WLFE) – revised credit approval for £75m project finance

Wolf Minerals has received updated and increased credit approval for £75m of senior debt finance facilities from UniCredit Bank, ING Bank and Caterpillar finance .

Critically, a portion of the facility is guaranteed by the German government's Untied Loan Guarantee Scheme.

A similar loan guarantee is also provided under similar terms by the tungsten concentrate offtakers, Wolfram Bergbau und Hütten AG and Global Tungsten & Powders Corp.

The offtake and German government guarantees appear to cover 50% of the senior loan facility and are subject to final approval of the guarantors, due diligence and documentation..

The company report that the project’s ungeared NPV of some £74m remains as published as of May according to the press release.

The mine is projected to produce 345,000 mtu’s of 65% WO3  tungsten concentrate per year for a 9.25 year mine life. 

Wolf’s investor presentation shows a capex estimate of £104m including £9m of contingency.

Funding: we would expect the remaining £29m of funding to come from further offtake finance in the form of lower ranking debt or new equity

Resource Capital Funds and Traxys hold 42% of the equity due to their original pre-IPO funding and ongoing support and are likely to underpin any required funding

Conclusion:  It is interesting to see the German government guaranteeing the funding of a tungsten mine in the UK.  

The German government is keen to protect tungsten supplies for its valuable machine tool industry from the potential threat of Chinese supply disruption

It also seems ironic that the German government is effectively financing the reopening of a mine which was critical to British armament supply through WWII

Sirius Minerals (LON:SXX)  – York Potash product study and drilling update 

Sirius Minerals has today published headline results from drilling at its York Potash project in the UK.

The results continue to show good grades of polyhalite in the Upper Intersection and  Lower Intersection.

The SM9 portion of the deposit has a JORC resource of 2.2bn tonnes containing 82.4% polyhalite.. 

The JORC resource should increase further on the incorporation of further drill results in Q1 2013.

Sirius comment that they expect to release the findings of a project study update in December for the initial production of granulated polyhalite and a concept study for the production of NPK.  We are keen to see what products can be made out of Sirius’ polyhalite ore.  

Previous comments have focussed on the production of SOP products, a process which requires multi-billion dollar capex.  

The company are working on a concept study for the production of NPK fertilizers with polyhalite as the main blending component.

Conclusion:  The market appears disappointed in the shares and may have been expecting some pre feasibility numbers in this release.  

The investigation of lower capex fertilizer products to generate cash flow to better enable the funding of the higher capex SOP process seems sensible given the challenges faced with funding and producing a Polyhalite SOP plant.

Mining this week:

Discovery Metals (ASX:DML) – AGM highlights value as management reject opportunistic bid by Cathay Fortune 

DiamondCorp* (LON:DCP) – Tiffany agrees $6m term loan to fund Lace mine for offtake

Stratex International (LON:STI) –Inlice Gold Project sale proposal

EMED Mining* (LON:EMED) – site visit today to the Rio Tinto mine in Spain

Talvivaara Mining (LON:TALV) – Uranium leak appears to force board reshuffle

Amur Minerals (LON:AMC) - Drilling update and extension to Kun-Manie exploration licence.

Caledonia Mining (LON:CMCL) – Q3 gold production hits new high     

EMED Mining* (LON:EMED) – $50m offtake funding agreed with Red Kite 

Medusa Mining* (LON:MML) – Chairman’s address and AGM presentation (see links below)

Nautilus Minerals (LON:NUS) – cancellation of equipment contracts

Oxus Gold PLC* (LON:OXS) – Arbitration process update

Sylvania Platinum (LON:SLP) – conclusion of labour negotiations sets average wage increase at +11.4%

Anglo Asian Mining PLC (LON:AAZ) – Company produce concise video (see link below)

Petra Diamonds (LON:PDL) – Interim statement highlights new debt facility and fall in per carat sales

Impact of Moisture on Iron Ore from West Africa (see Friday’s flash note)

Ariana Resources* (LON:AAU) – Update on Kepez West and Karakavak Prospects

Kentz Corporation (LON:KENZ) – IMS highlights ongoing relationship with Kenmare Resources

Equatorial Resources (ASX:EQX) – Formal negotiations start with government over rail access for Mayoko-Moussondji iron ore

Metals Exploration* (LON:MTL) – Issue of writ to Philippine Subsidiary and the Dept of Environment and Natural Resources

 

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