column http://www.proactiveinvestors.co.uk Proactiveinvestors column RSS feed en Tue, 26 Sep 2017 04:48:12 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) Today's Market View - Amur Minerals Corporation, Avocet Mining, Bushveld Minerals Limited, Karelian Diamond Resources Plc, Savannah Resources Plc, Stellar Diamonds PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28662/today-s-market-view-amur-minerals-corporation-avocet-mining-bushveld-minerals-limited-karelian-diamond-resources-plc-savannah-resources-plc-stellar-diamonds-plc-28662.html Amur Minerals* (LON:AMC) – IKEN/KUB drilling update and management estimates for potential resource expansion

Avocet Mining (LON:AVM) – Creditor discussions continuing

Bushveld Minerals (LON:BMN) BUY, Target price 14p – £8m convertible bonds issue

Karelian Diamonds (LON:KDR) – Indicator Minerals suggest a nearby kimberlite

Savannah Resources (LON:SAV) – Resumption of drilling at Mina do Barroso

Sunstone Metals* (ASX:STM) – Bramaderos project shows significant gold intersections in Ecuador

Stellar Diamonds (LON:STEL) – Confirms environmental payment for Tongo

 

Cobalt - Volkswagen looking for Cobalt contracts - Volkswagen is reported to be looking for serious long term contracts with cobalt producers for the production of lithium ion batteries to shift its focus towards electric vehicles

• The company has asked suppliers to submit proposals for a 10 year contract which would start in 2019

• A Volkswagen spokesman told Reuters that the company is looking to procure all the materials needed to meet its 2030 goals could result in a total order volume worth $50bn

• We suspect Volkswagen will struggle to secure solid contracts with respectable producers for this much cobalt unless it is prepared to pay a significant premium for future metal

• VW is also likely to look to sign contracts for other Rare Earth and Minor Metals to ensure longer-term production of batteries and Electric Vehicles

 

Iron Ore – Rising production rates and stock levels push iron ore back into bear market

• Iron ore slumps back into a bear market after posting biggest weekly loss in 16 months as rising production, stock levels and an easing of record demand in China causes process to slip

• Chinese steel mills have rushed to raise output through the summer ahead of enforced anti-pollution measures which are expected to close many furnaces through the winter.

• Benchmark iron ore prices rose as steel mills bought better quality Australian and Brazalian iron ore over lower grade and quality material.

• Rising premiums for >62.5% ores continue to indicate ongoing pressure on quality feedstock to reduce emissions levels.

• Economic data may also signal some cooling of growth in the Chinese economy.

• Losses probably driven by realisation that if as planned large amounts of steel capacity are taken offline during the winter months, will mean lower demand for iron ore

 

 

Economics

Germany – Angela Merkel re-elected for fourth term as far right AfD party gains 13% of vote

• Angela Merkel has won her fourth term as German Chancellor.

• Mrs Merkel remains three terms behind President Museveni of Uganda who famously wrote a book indicating that African leaders should only serve a single term.

• Merkel’s win is tempered by the rise of the far right AfD party which won 13% of the vote and has vowed to fight Germany’s foreign invasion.

 

Currencies

US$1.1908/eur vs 1.2001/eur yesterday.  Yen 112.26/$ vs 111.98/$.  SAr 13.299/$ vs 13.193/$.  $1.355/gbp vs  $1.358/gbp.  

0.796/aud vs 0.795/aud.  CNY 6.614/$ vs 6.593/$.

 

Currencies

US$1.1899/eur vs1.1908/eur yesterday.   Yen 112.11/$ vs.112.26/$.   SAr 13.281/$ vs3.299/$.   $1.353/gbp vs  $1.355/gbp. 0.796/aud vs0.796/aud.   CNY 6.621/$ vs 6.614/$.

 

Commodity News

Precious metals:

Gold US$1,292/oz vsUS$1,292/oz yesterday - Gold falls as dollar firms

• Gold prices fell this morning to near one-month lows hit last week as the US dollar firmed and concerns over the Korean peninsula eased

• US gold futures for December delivery slipped 0.2 per cent to $1,295.00/oz

• Market risk sentiment fell over the weekend, following a quiet period in North Korean news and the victory of Angela Merkel in the German federal elections.

• This combines with increasing market expectation for another U.S. rate rise by the year-end, supporting the dollar, which has strengthened against the trade partners’ currencies. Growing market sentiment is evident in CME Group’s FedWatch tool, which tracks interest rate odds, who identify a 71.4% probability of a policy raise to 1.25-1.5 in December.

• Sanctions aimed at achieving a peaceful resolution in North Korea have been extended to a U.S. travel ban. It is hoped the enormous economic and human burden of the sanctions will persuade Kim Jong-Un to end its nuclear programme.

• On the back of buoyant gold prices, rising 15 percent this year, Chinese mining executives announced an intensification in exploration and capital allocations in the ‘Belt and Road countries’, which account for 80 percent of global gold consumption. The ‘go global’ strategy initiated in 2005 is expected to bring further investment in overseas gold projects, with a platform to promote the internationalisation of the yuan.

   Gold ETFs 69.0moz vsUS$69.0moz yesterday

Platinum US$933/oz vsUS$933/oz yesterday

Palladium US$924/oz vsUS$924/oz yesterday

Silver US$16.92/oz vsUS$16.92/oz yesterday

           

Base metals:

Copper US$ 6,460/t vsUS$6,460/t yesterday

• The copper futures price rally appeared to wane at the end of last week from the disappointing news of broad increase in treatment and refining charges for Chinese concentrate across the 10-member China Smelter Purchase Team (CSPT).

• A previously recognised balanced market is experiencing fewer mine supply interruptions, with LME stock levels also rising, resulting in a minimum level for treatment fees set at $95 per tonne and refining charges at 9.5 cents per pound on the back of the latest meeting on Thursday.

• Despite the hike in TC/RCs, base metal prices have grown during the Asian morning trading session from a large drawdown in stocks ahead of China’s weeklong National Day holiday, beginning 1st October.

Aluminium US$ 2,143/t vsUS$2,144/t yesterday

Nickel US$ 10,525/t vsUS$10,530/t yesterday -

• Broad caution in Chinese industrial metals, most evident in declining iron and steel output, caused base metal future prices to plunge on Friday.

• Despite LME nickel and zinc price recoveries, 1.3 percent and 2 percent respectively, investors are showing restraints on the outlook for the economy for China. ShFE nickel fell for the second day, dropping an additional 1.9 percent.

• Investors are showing disappointment in fixed-asset investment potential, with encouragement to cash-in profits from the recently rising metal markets.

Amur anticipates sizeable increase in nickel resource at Kun-Maine

• Drilling has identified a minimum 2,200m of new mineralisation, drill results are expected to materially increase the current resource which stands at 770,00t nickel and copper

Zinc US$ 3,088/t vsUS$3,072/t yesterday

Lead US$ 2,494/t vsUS$2,481/t yesterday

Tin US$ 20,570/t vsUS$20,540/t yesterday

           

Energy:

Oil US$56.8/bbl vsUS$56.8/bbl yesterday

Natural Gas US$2.961/mmbtu vsUS$2.960/mmbtu yesterday

Uranium US$19.75/lb vsUS$19.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$63.0/t vsUS$63.0/t

• Iron ore demand uncertainties continue to hamper prices, with all indices registering large losses last week; in particular 62% content in Qingdao exhibiting the worst performance since May 2016 by falling 12%.

• The metal has registered a loss for every week in September. Expectations of rising sea-borne supplies from increasing large-scale mines ramping up production, competition from growing scrap feedstock, and peak steel production ahead of winter environmental production cuts, has analysts expecting further price drops before stabilizing around $60 per tonne (ANZ senior economist, Daniel Gradwell).

Chinese steel rebar 25mm US$624.1/t vsUS$624.9/t

Thermal coal (1st year forward cif ARA) US$82.3/t vsUS$81.9/t

Premium hard coking coal Aus fob US$200.6/t vsUS$200.6/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$310-335/mtu

 

 

Other:

Tungsten APT European US$300-315/mtu vs US$310-335/mtu a week earlier.

• Probably just a correction but it is the first decline since 30th June this year

Quarterly hard coking coal US$170.0/t vs

 

 

Company News

Amur Minerals* (LON:AMC) 7.91p, Mkt Cap £50.2m – IKEN/KUB drilling update and management estimates for potential resource expansion

• The exploration team is reported to have drill tested 2,200m of the 3,000km area between IKEN and KUB deposits.

• Nickel and copper mineralisation has been intersected along 1,900m or nearly 90% of the drilled area.

• The average intersection per hole amounted to 23.1m with average grades of 0.87% Ni and 0.24% Cu.

• Along the 1,900m area three zones (ISK-1, ISK-2 and ISK-3) returned nickel/copper bearing intersections with the fourth one comprising a 300m long barren fault block:

• ISK-1 is an expansion eastward of the IKEN deposit with completed drilling having extended limits of the mineralisation 500m along strike and 400m in the down dip direction to the northeast. Drilling in the area returned on average 31.8m at 0.98% Ni and 0.28%.

• The management estimates the area may potentially add 70-150kt in contained nickel to the latest mineral resource (IKEN 21.1mt at 0.69% Ni for 146kt Ni).

• ISK-2 lies right after the 300m long barren block with a continuous mineralised section identified 800m in length and 200-250m down dip.

• Driling returned intersections averaging 24.2m at 0.79% Ni and 0.21% Cu with mineralisation remaining open in both strike and down dip directions.

• In particular, one of the holes drilled 500m northward of the main main ISK-2 zone intersected 11.6m at 1.28% Ni.

• ISK-3 zone is the continuation of the KUB deposit in the IKEN deposit with mineralisation traced for 600m along strike and 200-300m down dip.

• Drilling returned average mineralised thicknesses of 19.1m at 0.79% Ni and 0.20% Cu.

• The management estimates the area may potentially add 60-120kt of contained nickel to the KUB resource (KUB 14.5mt at 0.77% Ni for 112kt Ni).

• This makes the 800m long area between ISK-2 and ISK-3 the only untested block in the 3,000km long IKEN/KUB link which the Company is planning to continue drilling with sufficient supplies on site but the plan being always subject subject to weather conditions.

Conclusion: New mineralisation intersected between IKEN and KUB is expected to expand the Kun Manie resources with management guidance for the mineral inventory to grow past 1,000kt in contained nickel excluding copper/Co/PGMs from current 770kt Ni. An opportunity remains to further increase the mineralised by testing down dip extensions at ISK-1 and ISK-2.    

*SP Angel act as Nomad and Broker to Anglo Asian Mining

 

Avocet Mining (LON:AVM) 23.75p Mkt Cap £5.0m – Creditor discussions continuing

• Avocet has announced that discussions with the major financial and trade creditors of its Inata mine (SMB) in Burkina Faso are continuing “with a view to reach agreement on a consensual restructuring of SMB’s balance sheet.”

• The board is to meet on 28th September to examine the status of the discussions and to assess “SMB’s liquidity position and the available options.”

• The company warns that “it is unclear whether agreement on a restructuring of the balance sheet can be reached before SMB has exhausted all available sources of financing.”

Conclusion: Avocet Mining has been working on a resolution with SMB’s creditors even after an agreed standstill expired in early September. It appears increasingly likely that a speedy resolution will be needed to allow the Inata mine to survive.

 

Bushveld Minerals (LON:BMN) 9.125p, mkt cap £73.5m – £8m convertible bonds issue

Target price 14p

• Bushveld Minerals reports that it has agreed to issue £8m of unsecured convertible bonds to Atlas Capital Markets and its New York based joint venture company, Atlas Special Opportunities Limited.

• The bonds, which have a 2 year maturity and carry a coupon of 7.5%, are to be issued in two tranches at 98% of the £25,000 face value.

• The first tranche of £4.5m was issued on 22nd September with the balance to be issued, at the Company’s discretion, within 40 days.

• The bonds are convertible at the average 5day VWAP of the shares assessed over the 10 working days prior to notice of conversion. In addition to the bonds, the company will issue 6.25m 3-year warrants with the first tranche and a further 4.86m (approximately) options in connection with the second tranche of bonds. The warrants are exercisable at any time and have a strike price of 14.4p.

• Commenting on the issue of the convertible bonds and the new relationship with Atlas Capital and Atlas Special Opportunities, CEO, Fortune Mojapelo, noted that they will “provide the required capital to enable the Company to continue to deliver on its strategy to build the world’s largest, lowest cost and most vertically integrated vanadium platform”.

Conclusion: Bushveld Minerals is expanding its Vametco vanadium operation from 3000tpa to 5000tpa and the additional finance should help to ensure that the expansion is not held back by financial constraints.

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.

 

Karelian Diamonds (LON:KDR) 0.475 pence, Mkt Cap £2.8m – Indicator minerals suggest a nearby kimberlite

• Karelian Diamonds reports that kimberlite indicator minerals analysis of 22 samples taken in the Kuhmo area of Finland suggest that one of the samples were taken within “a couple of hundred metres of a kimberlite source”.

• The indicator minerals have been seen in the “down-ice” direction for two further samples and the indicator mineral anomaly has been closed off in an “up ice” direction giving the company confidence that it is close to the kimberlite source.

Conclusion: Indicator minerals sampling was used in the original Canadian discoveries in the Lac de Gras area – it is however an early stage exploration method and much additional work will be necessary to establish that any newly located kimberlite is both diamond- bearing and of sufficient size and grade to be potentially economic. We await further news as exploration proceeds.

 

Savannah Resources (LON:SAV) 5.625p, Mkt cap £31.6m – Resumption of drilling at Mina do Barroso

• Following the recent encouraging results, Savannah Resources has announced that it is resuming reverse-circulation drilling at the Mina do Barroso lithium project in Portugal .

• The initial focus of the renewed programme will be on the NOA deposit and on locating “potential extensions to the significant zones of mineralisation identified at Grandao and Reservatorio in recent drilling.”

• Mapping is also underway within the wider licence area to “define other lithium bearing pegmatites.”

• Savannah Resources has a 75% interest in the holder of the Mina do Barroso mining licence, Slipstream Resources Portugal Unipessol Lda.

Conclusion: Earlier this month, Savannah Resources reported a number of wide intersections grading over 1% Li2O from its earlier drilling at Mina do Barroso. At that time the company expressed its intention to resume drilling shortly and this is now underway. We await results with interest and to the initial JORC resource timetabled before the end of 2017.

 

Sunstone Metals* (ASX:STM) A$0.017, Mkt Cap A$15.1m – Bramaderos project shows significant gold intersections in Ecuador

(Sunstone Metals formerly called Avalon Minerals)

• Sunstone Metals reports significant intersections of gold in their first five Trenches in Ecuador covering an area of 100m x 100m.

• A further 15 trenches are planned within the 700m x 400m soil anomaly.

• Permits for drilling are expected by the year end.

• Sunstone is also looking to drill a gold-copper porphyry target at its Mramaderos Main and Limon target once permits are received.

o 22m at 4.8g/t Au (including 7m at 12.7g/t Au)

o 9m at 1.9g/t Au, and 

o 12m at 1.6g/t Au.

• The project lies adjacent to the Pan American Highway

• The company is run by Malcolm Norris who was formerly ceo at SolGold.

• Norris moved to Sunstone Metals, formerly called Avalon Minerals to develop the Viscaria project in the north of Sweden in the town of Kiruna which is renown for producing the world’s best quality iron ore pellets.

• Sunstone’s attention appears to have turned away from the Viscaria project in favour of more grass roots exploration in Ecuador.

• The Bramaderos project lies on a 4,949Ha concession in the Loja province, Ecuador and is subject to an earn-in joint venture agreement with Cornerstone Capital Resources which is listed on the TSX-V.  The concession was awarded to a subsidiary of Cornerstone on 5 January this year and then joint ventured with Sunstone on 10 April

• Historic drilling includes:

o 257m @ 0.6g/t gold and 0.14% copper in hole CURI-03 (inc 76m @ 0.9g/t Au and 0.2% Cu from 53m) at Bramaderos Ridge within the Bramaderos Main prospect.

• Significant results in historical trenching include:

o 42m @ 3.7g/t gold in Trench WZ-TR02 and 22m @ 4.7g/t gold at West Zone Breccia, with a peak gold value of 55g/t gold.

• The Bramaderos project is located near the town of Catacocha in Ecuador which lies close to the boarder with Peru.  It is an 11 hour drive from the capital Quito so there is little chance of former colleagues running into each other.

Conclusion: It is interesting to see the project generator model working with Cornerstone continuing to find and to feed projects in Ecuador to development companies

 

Stellar Diamonds (LON:STEL) 3.175 pence, Mkt Cap £1.7m – Confirms environmental payment for Tongo

• Stellar Diamonds reports that it has paid US$150,240 to the Sierra Leone Environmental Agency for the Togo licence.

• The issue of the Environmental is a key prerequisite for the consideration of the Mining Licence approval by Sierra Leone’s Minister of Mines and Minerals Resources.

• In addition to the licencing matters, the company also announced that it has agreed with Octea Mining to extend the dates for completion of their agreement on tribute mining at the Tongo-Tonguma mine to 31st October.

Conclusion: The payment of the environmental licence fee should help to keep the project to develop Tongo-Tonguma on track. We await further news before the expiry of the 31st October deadline for discussions with Octea.

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Mon, 25 Sep 2017 11:42:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28662/today-s-market-view-amur-minerals-corporation-avocet-mining-bushveld-minerals-limited-karelian-diamond-resources-plc-savannah-resources-plc-stellar-diamonds-plc-28662.html
Today's Market View - Acacia Mining, Central Asia Metals Ltd, Golden Star Resources, Zanaga Iron Ore Company http://www.proactiveinvestors.co.uk/columns/sp-angel/28651/today-s-market-view-acacia-mining-central-asia-metals-ltd-golden-star-resources-zanaga-iron-ore-company-28651.html Acacia Mining (LON:ACA) – Metallurgical innovations at Buzwagi protecting jobs

Central Asia Metals (LON:CAML) SUSPENDED – Acquisition of Lynx Resources for $402.5m

Golden Star Resources (TSE:GSC) – Drilling confirms northward extension of West Reef at Prestea

Zanaga Iron Ore (LON:ZIOC) – Interim results give interesting update on small scale pellet potential in the RoC

 

Miners are off this morning amid weaker base metals and bulk commodities prices with the exception of Rio Tinto which is only slightly lower thanks to the provided support from the earlier announced share $2.5bn share buyback.

• Gold is steady following a sell off over the last two days on the back of hawkish Fed comments.

• The US$ is down today set to come back to its pre-Fed announcement levels.

• A decline in base metals’ complex on the back of escalated rhetoric between the US and North Korea as well as a Chinese rating downgrade may the LME index undoing its earlier gains this week and posting a third weekly decline.

• Iron ore futures together with steel prices continued to slide extending losses to seven of the last eight days now on the back of oversupply concerns and lower demand.

• Demand concerns have been further revived on speculations that local governments are checking compliance with capacity cuts at local steel mills.

 

Iron Ore – benchmark prices for 62.5% iron ore continue to fall as Chinese port stocks build and market moves to higher-quality low phos ores

• The market for iron ore is rapidly breaking into two due to China’s drive to ramp up production while creating less pollution at its steel making blast furnaces

• The premium for Direct Reduction pellets is running at over $50/t depending on grade

• Typical magnetite concentrates and blast furnace pellets are around $90/t for Fe 67% with $69.5-70/t running at >$100/t

• Zanaga expects substantial iron ore production expansions to come into the market in the second half to impact benchmark iron ore prices but does not expect a significant contraction of the attractive price premiums being achieved by high quality products.

 

Dresden Mining Conference – From Mine to Market - Dresden on Thursday 28th September

• The FAME Project, GKZ (Geokompetenzzentrum) and the Minor Metals Trade Association (MMTA). are sponsoring a mining conference in in Dresden to be attended by a range of European industrialists.

• Speeches range from minor metals to smelters and Europe’s approach to mining, metallurgy and downstream integration.

• SP Angel’s John Meyer, will delivering a key note speech on “Minor metals in mining and markets – the future has just begun”

Rocket Lab plans weekly rocket launches into space

• Rocket Lab, a New Zealand company is planning weekly rocket launches using a low cost ‘disruptor’ rocket for launching relatively small satellites into space.

• The company’s Elevation rocket reached space on its last and is targeted to cost $5m per launch.

 

Nambia – President Trump confuses followers with new nation of Nambia

• "Nambia's health system is increasingly self-sufficient," said US President Donald Trump at a lunch with African leaders in New York on Wednesday, reeling off a list of their nations' achievements.

• "I have so many friends going to your countries trying to get rich. I congratulate you, they're spending a lot of money," Mr Trump said.

• Either Trump has decided to merge Namibia and Zambia without telling them or it is possible that he may be referring to the nation represented in Eddy Murphy’s film Trading Places.

 

London Supermarket trials biometric payment system

Costco are trialling a new system which identifies the unique vein pattern in your fingertip to pay for goods.

 

Police officer – shoots himself in the foot – a role normally reserved for politicians

 

Dow Jones Industrials  -0.24% at   22,359

Nikkei 225   -0.25% at   20,296

HK Hang Seng   -0.82% at   27,881

Shanghai Composite    -0.16% at    3,353

FTSE 350 Mining   -1.33% at   16,384

AIM Basic Resources   -0.91% at    2,467

 

Economics

US – Trump ordered new sanctions on individuals, companies and banks doing business with North Korea on Thursday.

• The executive order allows the US Treasury Department to suspend operations with companies from the US financial system that do business with North Korea.

• China appears to be the largest trading partner of the pariah state.

 

China – S&P cut Chinese sovereign credit rating one notch from AA- to A+ on the back of strong credit growth which “diminished financial stability”.

• The is the second downgrade among major credit rating agencies following the Moody’s decision to take A1 (equivalent of A+ at S&P).

• Deleveraging is expected to take much longer than previously forecast while “credit growth in the next two to three years will remain at levels that will increase financial risks gradually”.

• The Finance Ministry rebuffed S&P comments saying the agency ignored the nation’s sound economic fundamentals and that authorities are able to maintain financial stability.

• Foreign investors’ ownership of Chinese sovereign debt remains low amounting to only 4% of the outstanding total at the end of August; although the announcement comes ahead of the $2bn tender of US$-denominated bonds to foreign investors due in coming weeks.

 

Eurozone – The region recorded strong growth momentum in September led by robust PMI numbers in France and German.

• Growth accelerated in both services and manufacturing sectors with new orders showing the largest monthly increase since April 2011.

• Employment climbed in both categories as well while price pressures intensified for a second successive month reaching the highest rates since Aril.

• “The survey data point to 0.7% GDP growth for the third quarter (v 0.6%qoq in Q2/17) (as) manufacturing…remains a major driver of the current upturn, export sales playing an important role in pushing order books higher and encouraging further investment in capacity expansion,” Markit wrote.

• “The stronger euro was cited as a concern among manufacturers, but as yet appears to have had only a modest impact on exports.”

• The euro was up 0.30% against the US$ on course to recover most of Wednesday losses when the Fed announced that it will start reducing its balance sheet in October.

• Markit Manufacturing PMI (Preliminary): 58.2 v 57.4 in August and 57.2 forecast.

• Markit Services PMI (Preliminary): 55.6 v 54.7 in August and 54.8 forecast.

 

UK – Theresa May is set to give her Brexit speech in Florence today amid little progress in negotiations with the bill of leaving the EU and the status of EU citizens being fiercely debated points.

 

Currencies

US$1.2001/eur vs 1.1909/eur yesterday.   Yen 111.98/$ vs 112.53/$.   SAr 13.193/$ vs 13.357/$.   $1.358/gbp vs $1.350/gbp.     

0.795/aud vs 0.797/aud.   CNY 6.593/$ vs 6.594/$.

 

Commodity News

Precious metals:

Gold US$1,297/oz vs US$1,296/oz yesterday

• Gold show small rebound follow the latest sanction announcements and an unprecedented personal rebuttal from Kim Jong-Un.

• U.S. President Donal Trump has signed new orders to target firms and financial institutions conducting business with North Korea. Trump measures single out textiles, fishing, information technology and manufacturing industries to ‘cut off sources of revenue that fund North Korea’s efforts to develop the deadliest weapons known to humankind’.

• Trump’s statement at the UN rattled the supreme leader, who interpreted the comments as ‘the most ferocious declaration of war in history’, with North Korea considering the ‘highest level of hard-line countermeasure’.

• The latest in ever increasing rhetoric over recent months was met by market movement to the safe-haven asset.

   Gold ETFs 69.0moz vs US$68.8moz yesterday

Platinum US$944/oz vs US$941/oz yesterday

Palladium US$917/oz vs US$912/oz yesterday

Silver US$17.01/oz vs US$16.99/oz yesterday

           

Base metals:   

• Metal prices tumbled following a combination of mounting geopolitical strains, anticipated U.S. interest rate hikes and Chinese debt uncertainties.

• Despite the recent strong performance on the back of robust Chinese demand and environmental-influenced supply restrictions, metals across London and Shanghai fell between 1-4.5%. In London, lead fell 4% while the worse performing metal in Shanghai was nickel.

• Yesterday, S&P Global Ratings downgraded China’s long-term sovereign credit rating. The cut from AA- to A+ follows warnings by the International Monetary Fund in August of a dangerous debt trajectory, raising considerable ‘economic and financial risks’.

Copper US$ 6,429/t vs US$6,463/t yesterday

Aluminium US$ 2,133/t vs US$2,171/t yesterday

Nickel US$ 10,615/t vs US$11,060/t yesterday

Zinc US$ 3,037/t vs US$3,099/t yesterday - Trevali Mining Corp which recently bought Rosh Pinar, Namibia and Perkoa in Burkina Faso reports the smooth integration of the businesses

• The acquisitions add to the company’s Canadian and Peruvian mines to position Trevali as an zinc intermediate producer with a strong base to build from

• The integration is expected to complete by year end, to increase throughput, lower costs.  Most notably changes to the flotation plants are expected to lead to recovery and concentrate grade increases.

Lead US$ 2,450/t vs US$2,464/t yesterday

Tin US$ 20,515/t vs US$20,550/t yesterday

           

Energy:           

Oil US$56.4/bbl vs US$56.1/bbl yesterday

• Oil prices remain flat ahead of today’s OPEC panel discussion to an extension of last year’s oil supply cut deal. Extending the pact beyond March 2018 aims to limit output by 1.2 million barrels per day to help clear the global oil supply glut and give stability to prices.

Natural Gas US$2.957/mmbtu vs US$3.079/mmbtu yesterday

Uranium US$20.25/lb vs US$20.30/lb yesterday - Enertopia says round two of Clayton Valley lithium processing underway

• Enertopia’s lithium project in Nevada is reported to be showing remarkably high lithium recovery numbers

• The project is targeting recovery rates >80% and minimum purity of 99.5% for battery grade product

• If technique proved economically viable, the project could be fast tracked to production in months rather than the years

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$62.9/t vs US$66.7/t

Chinese steel rebar 25mm US$637.5/t vs US$647.2/t

• Chinese domestic stainless-steel prices have fallen around 7.6% in the since the beginning of September on increased delivery and softening demand. Tsingshan Holding Group, who operate a recently opened 1 million-tpy stainless-steel slab mill in Indonesia, is expected to increase product to China’s domestic market.

• Strengthening of Chinese environmental laws has lead thousands of small factories across the country to jostle for capacity on heavily congested rail networks. In an aim to diminish air pollution, the shelving of diesel trucks will create additional steel demand as expansions to the countries rail networks will be essential.

Thermal coal (1st year forward cif ARA) US$81.4/t vs US$83.2/t - US Coal output continues to slip

• US coal production slipped for the fourth consecutive week but at 16.5 million still higher than same week of 2016

• Coal has benefited from a rebound in exports as well as a slight reduction in natural gas output

Premium hard coking coal Aus fob US$203.0/t vs US$205.6/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$310-335/mtu

Graphite:

• Rapidly tightening supply and rising graphite prices are creating sourcing issues for steelmakers; where electrodes are necessary to melt scrap in electric arc furnaces.

• Prices have rocketed nine-fold on environmental restrictions. This shortage of electrode production is leaving major Asian producers unable to handle orders due to the tight supply, leaving ‘a year-long waiting period for electrodes from manufactures’ according to CRU’s Brooks.

 

Company News

Acacia Mining (LON:ACA) 184 pence, Mkt Cap £756m – Metallurgical innovations at Buzwagi protecting jobs

• Acacia Mining reports that trials of additional reagents in the leaching circuit at its Buzwagi mine in Tanzania have delivered gold recovery rates of around 85% opening the way for the mine to increase its production of saleable gold dore.

• Prior to the Tanzanian Government’s imposition of a moratorium on sales of gold concentrate in March 2017, Buzwagi produced around 65% of its gold in the form of a copper/gold concentrate with only 35% as dore.

• As a result of the changes introduced “the mine has been unable to export and sell its concentrate, and as such has only been selling approximately 35% of its gold production, whilst incurring 100% of the cost of production”.

• The capacity to increase production of dore “will result in Buzwagi being able to sell an additional 8,000-10,000 ounces per month for the remainder of the year” and the mine “will solely produce doré from now until the end of its life in 2020”.

• This is expected to “more than double” Buzwagi’s revenue for the remainder of the year and the company believes “that the changes will move the mine from a monthly cashflow negative position to a monthly cashflow positive position, strengthening Acacia’s balance sheet and helping to protect thousands of direct and indirect jobs that the Company supports.”

Conclusion: The increased leaching capacity, albeit at “limited additional operating costs” offers Buzwagi the opportunity to ameliorate the impact of the concentrate export ban, repair its balance sheet, restore the payment of royalties and other local charges, and help preserve jobs.

 

Central Asia Metals (LON:CAML) SUSP – Acquisition of Lynx Resources for $402.5m

• Central Asia Metals has agreed, conditionally, to purchase Lynx Resources, the operator of the SASA lead/zinc mine in Macedonia for $402.5m.

• The mine, which is reported to have produced 22,515 tonnes of zinc and 28,955 tonnes of lead in concentrates during 2016 “is a low cost operation with strong operating track record and a reserve base supporting production until at least 2032”.

• The transaction which will be classed as a reverse takeover under AIM rules and hence subject to shareholder approval at a meeting scheduled for 11th October, will be financed by a combination of equity, debt and a deferred consideration as follows:

o Equity financing:

 $153.5 million in CAML ordinary shares via an Accelerated Book Build ("ABB") expected to be launched shortly

 $50 million in CAML ordinary shares to Orion via an equity subscription   

o Debt financing:

 $120 million senior debt facility with Traxys (4.75% + LIBOR, 5 year term)

 Roll over of estimated $67 million of existing Lynx net debt (5% + LIBOR, 5 years remaining)

o Deferred Consideration $12m

• The SASA underground mine is located approximately 150km east of Skopje and has been mined for more than 50 years following its discovery during the 1950s. The cash costs (C1) of production for 2017 are estimated at US$0.39/lb of zinc and US$0.29/lb of lead placing the operation “at the lower end of the second quartile of the zinc industry cost curve and in the lowest quartile of the lead industry cost curve”.

• Published resource estimates for the mine show an overall indicated and inferred resource of 23.37mt (13.3mt are indicated) at an average grade of 4.14% lead, 2.81% zinc  and 20.3g/t silver. The recent production history  indicates a mining rate of approximately 800,000tpa.

• The orebody is described as “a shallow dipping, stacked, variable thickness, lead-zinc-silver lens system” currently mined by sub-level caving though “the cut and fill method … should be reassessed to determine whether this is a more suitable method from a dilution, recovery, safety, production rate and economic perspective.”

• Based upon the existing ore reserve, and excluding any inferred resources, the SASA mine is reported to have an NPV(10%) of US$413m.

• Historical accounts indicate that in 2015, SASA generated a profit of US$40.2m so CAML is buying the asset on a multiple of 10x historic earnings.

• CAML also report interim earnings for the six months to 30th June of US$15m (13.2cents/share) based on the sale of 6870 tonnes of copper.

Conclusion: CAML’s purchase of Lynx provides it with an established, long life, lead/zinc/silver mine at a price of 10x historic earnings and close to an assessed NPV10% valuation estimate. Indications that there may be scope to improve mining practices through the implementation of a safer, less dilutive mining method may provide scope for an incoming management to introduce operational improvements and efficiencies.

 

Golden Star Resources (TSE:GSC) C$0.89, Mkt Cap C$335m – Drilling confirms northward extension of West Reef at Prestea

• Golden Star Resources reports that infill and extension drilling has confirmed that the West Reef extends towards the north beyond the currently defined mineral reserve providing potential for additional reserve ounces of gold and the possibility of increased production from the Prestea underground mine.

• The drilling reported today comprises results from 4 holes, of the five drilled, to investigate the extension of the West Reef and a further 7 infill holes which “confirm the previously modelled high grade nature, simple geometry, strong continuity of gold mineralisation and thickness of the West Reef ore body (averaging 1.1 metres.)”

• The company reports that drilling is expected to accelerate during the rest of 2017 and into 2018 with the deployment of a second underground exploration drill rig.

• Highlighted results from the extension drilling include:

o A 0.9m wide intersection, interpreted as 0.5m true width, at an average grade of 67.2g/t gold from a depth of 182.3m in hole WR17-24-274S19; and

o A 1.3m wide intersection, (0.8m true width), at an average grade of 11.6g/t gold from a depth of 192.4m in hole WR17-20-274S20; and

o A 1.9m wide intersection, (1.5m true width), at an average grade of 13.7g/t gold from a depth of 159.3m in hole WR17-22-274S22; and

o A 0.6m wide intersection, (0.5m true width), at an average grade of 132.4/t gold from a depth of 174.1m in hole WR17-25-274S19.

• The relatively narrow intersections seem consistent with the comment that the ”average true in situ thickness of the vein is approximately 1.8 m, ranging from 0.8 to 2.8 m” which was reported in the Technical Report on the Prestea Underground Gold Project authored by  the consultants, SRK, in November 2015. In our opinion, the high grades reported in individual drill hole intersections are likely to be diluted to values closer to the current 14 g/t reserve grade in future reserve/resource estimations  after dilution and minimum mining width criteria have been applied.

• Higher grade results from the infill drilling comprising 7 holes totalling 947m of drilling include:

o 0.5m (0.5m true width) at an average grade of 87.6 g/t gold from a depth of 141.1m in hole WR17-24-274S16; and

o 1.6m (1.5m true width) at an average grade of 64.5 g/t gold from 144.2m in hole WR17-24-274S17; and

o 1.2m (1.1m true width) at an average grade of 23.7 g/t gold from a depth of 152.7m in hole WR17-24-274S18.

• The company has also confirmed that it expects “to blast the first stoping ore at Prestea Underground before the end of the third quarter of 2017 and remains on track to commence commercial production during the fourth quarter of 2017.”

• Our independent collation of published reserve data, though not purporting to be comprehensive, tends to support the company’s assertion that it believes “that Prestea is one of the highest grade gold development projects in West Africa.”

Conclusion: The successful drilling programme at Prestea has improved the understanding of the West Reef and expanded its known extent towards the north. Commercial production from the Prestea underground mine is expected to start during Q4 2017 and the company is maintaining its 2017 production guidance of 255-280,000 oz of gold production at a cash cost of US$780-860/oz.

 

Zanaga Iron Ore (LON:ZIOC) 4.1 pence, Mkt Cap £11.4m – Interim results give interesting update on small scale pellet potential in the RoC

(Zanaga Iron Ore hold 44.99% of the Zanaga Iron Ore project in joint venture with Glencore)

• Zanaga Iron Ore which has a 50:50 joint venture with Glencore in the Republic of Congo provides an interesting update on its iron ore project.

• Sensibly the team are looking at an early stage pellet opportunity which could start the project with a “small-scale, low capex, low opex project utilising road and potentially rail transportation solutions as well as existing port infrastructure.”

• This sounds like a good way to go given volatility in iron ore price.

• The statement goes on to say:

• “On the supply side, we expect substantial production expansions to enter the market in the second half of the year, with only a small number of these acting as replacement projects for mines entering the final phases of their lives.  It is difficult to forecast the net new tonnage expected to enter the seaborne market in the next few months, but guidance from the major iron ore mining companies indicates that these tonnages will continue to provide net overall increases in global seaborne supply. This should result in a reduction in benchmark iron ore prices, but Zanaga does not expect a significant contraction of the attractive price premiums being achieved by high quality products - the product market on which we are focused.”

• “From a demand perspective, we are pleased to see robust consumption of high quality iron ore products, but are concerned by the continuing build up in Chinese iron ore port stocks which may have a negative effect on iron ore pricing through the end of the year if Chinese steel mill consumption slows..”

• Zanaga had a cash balance of US$4.2m as of 31 August.

• Zanaga’s potential contribution to the Zanaga project through the rest of 2017 is US$0.9m plus 49.99% of all discretionary spending approved jointly with Glencore.

• The company reported an interim loss of US$0.6m vs a loss of US$1.6m yoy with general expenses running at a slightly lower rate than last year.

Conclusion: Zanaga offers leveraged investment potential to future iron ore pellet prices. We look forward to further news on progress towards the construction of the potential early stage pellet opportunity.  We see this as offering a potentially good route to de-risking the project for future larger scale expansion

*A SP Angel Analyst has visited the Zanaga Iron Ore project

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Fri, 22 Sep 2017 11:37:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28651/today-s-market-view-acacia-mining-central-asia-metals-ltd-golden-star-resources-zanaga-iron-ore-company-28651.html
Today's Market View - Anglo Asian Mining Plc, Ironridge Resources Limited, Orosur Mining Inc, Golden Star Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/28638/today-s-market-view-anglo-asian-mining-plc-ironridge-resources-limited-orosur-mining-inc-golden-star-resources-28638.html Anglo Asian Mining* (AAZ LN) – Earnings fall on weaker production; H2 output guided stronger as annual 64-72koz GE forecast reiterated

Golden Star Resources (GSC CN) – Drilling demonstrates extension to the “B Shoot” at Wassa

IronRidge Resources* (IRR LN) – High-grade gold intersections in trenching at Dorothe in Chad offer multi-million ounce potential

Orosur Mining (OMI LN) – Progress report on Uruguay exploration

 

Little change in Fed rates projections in near term as well as the start of Fed balance sheet unwinding in October point to policy makers’ determination to continue monetary tightening.

• US bond yields on 2y and 10y debts climbed 6bp and 5bp on the news, respectively.

• US equities dipped following the Fed press release but recovered all its losses later through the day to close flat on the day.

• The US$ bounced strongly climbing 1.2% on the news dragging metal prices lower.

• Gold continued to slide this morning falling past the $1,300/oz mark yesterday extending losses to c.$20/oz post the Fed announcement.

• Iron ore futures on the DCE slipped into a bear market after posting a 22% drop from August highs.

 

Rebuilding of buildings in Mexico City, Florida and hurricane hit islands to raise demand for metals

• The very tragic events seen in Mexico City and around the Gulf of Mexico over the past few weeks is likely to inspire new building and new building regulations.

• Mexico City withstood its most recent earthquake better than in the past though the death toll is still tragically high.

• Reconstruction, repair work and seismic retrofitting of earthquake-proof steel frames will require millions of tonnes of high-strength rebar containing higher vanadium content.

• China is now more stringently applying higher standards in construction since its last major earthquake and since the government cracked down on lax application of its new standards.

• Residents in islands hit by recent hurricanes will also want to construct more solid houses and apartments after the immediate clear-up is done.

• We suspect steel frame buildings will become more popular as they can be made to better withstand storms, earthquakes and floods.  The re-cabling, re-wiring, re-plumbing and re-building of affected areas will consume more copper, aluminium and other metals when reconstruction starts.  We expect manufacturers to start to restock in anticipation of massive reconstruction programs sometime soon.

 

Iron ore – premiums seen rising for high-quality magnetite as Chinese blast furnaces shun lower quality feedstock

• Headline prices for standard iron ore are falling due to a shift by blast furnaces to focus on higher-grade and cleaner feedstock

• Chinese steel producers are producing record tonnages of steel driven by better utilisation of blast furnace capacity through use of higher-grade magnetite

• Premiums for super-high grade Direct Reduction pellets with low phosphorous content are said to have risen dramatically.

• Pellet prices grading 65% are quoted at $127/t CFR Qingdao China vs $70/t for 62% iron ore concentrate. Higher-grade iron ore 66% concentrate is currently selling for $93/t

 

Rusatom, the Russian state nuclear company and world’s fourth largest uranium miner plans to start lithium mining

• The company plans to fully integrate the process from mining to the production of lithium and final battery production.

• Rusatom already makes lithium compounds and is looking to mine lithium projects in South America

• The move makes sense for a company which has long-standing expertise in producing the lithium isotopes used to prime so many hydrogen bombs aimed at the West.

• We suspect their move into South America might prove to be an expensive exercise.

 

Happy Rosh Hashanah

• Rosh Hashanah customs include sounding the shofar (a hollowed-out ram's horn), as prescribed in the Torah, following the prescription of the Hebrew Bible to "raise a noise" on Yom Teruah; and among its rabbinical customs is attending synagogue services and reciting special liturgy about teshuva, as also enjoying festive meals. Eating symbolic foods such as apples dipped in honey is now a tradition, hoping thereby to evoke a "sweet new year". (Wikipedia)

 

Dow Jones Industrials  +0.19% at   22,413

Nikkei 225   +0.18% at   20,347

HK Hang Seng   -0.04% at   28,115

Shanghai Composite    -0.24% at    3,358

FTSE 350 Mining   -1.55% at   16,452

AIM Basic Resources   +0.36% at    2,490

 

Economics

US – The FOMC voted to leave rates unchanged while announcing the start to the reduction of the balance sheet in October, broadly in line with market estimates.

• One more rate hike before year end remains on the cards with two meetings currently remaining.

• The committee noted near-term disruptions from the recent hurricane season, although policy makers did not believe there would be an impact on the overall national trend.

• In fact, the Fed revised its economic growth forecasts and employment projections slightly higher while bringing down its inflation estimates.

• Real GDP is expected to grow 2.4% in 2017, up from a previous estimate of 2.2% while 2018 was left unchanged at 2.1%; 2019 estimates were raised to 2.0%, up from 1.9% posted in June forecasts.

• Inflation forecasts were smoother only slightly leaving 2017 and 2019 estimates unchanged at 1.6% and 2.0%, respectively; whereas, 2018 estimates were brought down 0.1pp to 1.9%.

• Regarding future rates outlook, policy makers left 2017/18 projections unchanged at 1.4%/2.1% (median) while 2019 estimates were brought down 0.2pp to 2.7%; it is also worth noting that the longer term neutral policy rate was revised down to 2.8% from 3.0% suggesting the need for a more accommodative stance than previously forecast.

 

China – The PBoC and the China Banking Regulatory Commission are reported to be cracking down on consumer loans provided by local lenders for property purchases.

• Regulators issued a directive to suspend such lending activities as they are in breach of existing rules.

 

Japan – In contrast to US counterparts, the BoJ remained determined to continue with its monetary easing programme intending to keep the 10-year bond yield at around 0%.

• The bank reiterated it will continue to buy $711bn of debt on annual basis.

• The policy setting committee voted 8-1 to secure the status quo.

• The yen dropped to the lowest in two months against the US$ amid the hawkish announcement from the Fed earlier on Wednesday.

 

Russia – Another major lender asked for a emergency liquidity from the central bank following the rescue of Otkritie, formerly the largest privately owned bank by assets, last month.

• The central bank is reported to be taking major stake in B&N Bank and merging it with another troubled lender Rost Bank making it the eighth biggest in the country once the merger is complete.

 

Currencies

US$1.1909/eur vs 1.2008/eur yesterday.   Yen 112.53/$ vs 111.36/$.   SAr 13.357/$ vs 13.314/$.   $1.350/gbp vs $1.356/gbp.     

0.797/aud vs 0.804/aud.   CNY 6.594/$ vs 6.575/$.

 

Commodity News

Precious metals:

Gold US$1,296/oz vs US$1,314/oz yesterday

• Yesterday’s Federal Open Market Committee announcement to reduce its balance sheet was met with the strongest growth of the U.S. dollar index in six weeks.

• The growing probability of rate hikes in December and 2018 bolstered the strength of the dollar and depressed gold prices to its lowest in three weeks.

• U.S.  allies also reiterated the enforcement of international sanctions on North Korea as crucial to encourage Pyongyang to disband its nuclear development program while curtailing geopolitical risk.

   Gold ETFs 68.8moz vs US$68.8moz yesterday

Platinum US$941/oz vs US$954/oz yesterday

Palladium US$912/oz vs US$910/oz yesterday

Silver US$16.99/oz vs US$17.34/oz yesterday

           

Base metals:   

Copper US$ 6,463/t vs US$6,538/t yesterday

• International Copper Study Group (ICSG) revealed a 75kt market deficit in the first half of 2017.

• The ICSG identified a 2% YoY fall in global mine output, 1.7% decrease in concentrate production and solvent extraction-electrowinning diminishing by 3.5%.

• Chile mine output fell 9% on the back of strikes at the Escondida mine and reduced output from Codelco mines.

• Copper nanoparticles could help recycle co2 into fuel

• New catalyst converts carbon dioxide into 2 and 3 carbon compounds requiring a lower voltage

• Helps to move the bar in investigating the applications of copper-based catalysts for electrochemical transformation of CO2 to useful products

Aluminium US$ 2,171/t vs US$2,170/t yesterday

• Shanghai aluminium prices rise to a six year high after announced production cuts almost two months before China’s official winter restrictions.

• In efforts to avoid another smog-blackened winter the Ministry of Environmental Protection recently cemented plans to cut average concentrations of airborne particles (PM2.5) down 15% YoY.

• The 4 month seasonal suspension period (15th November – 15th March) eases coal-burning operations across 28 cities in the smog-prone provinces of Hebei, Shanxi, Shandong, and Henan.

• The premature closure of three smelters in Henan’s province allows the transfer of capacity out of the province in effort to control local pollution levels. The Commission of Industry and Information Technology of Henan Province announced 70,000 tpy aluminium capacity would be available for transfer throughout the country.

Nickel US$ 11,060/t vs US$11,325/t yesterday - Muted demand drags down nickel futures

• Nickel prices continue to ease in futures markets as traders cut positions, driven by subdued demand from consuming industries in the spot markets

• Analysts said the fall in nickel prices in futures trade is mostly attributed to tepid demand from alloy-makers at the domestic spot markets

Zinc US$ 3,099/t vs US$3,123/t yesterday

Lead US$ 2,464/t vs US$2,444/t yesterday

• Despite healthy lead demand, there is growing concern over tightening Chinese raw material supply.

• Shanghai stocks have fallen to their lowest since March 2016, dropping 80% since the peak in May to 16,568 tonnes.

• Global physical supply is in a squeeze, with imports of mine concentrate sinking 28% across the last year. This drop is further compounded by recent U.N. sanctions, with North Korea being the second-largest concentrate supplier by volume which recently added a further 45% growth over the first seven months of 2017.

• Import limitations are only applying further stress to domestic supply; of which 80% of ‘illegal’ secondary smelter have been closed. Limitations on the environmental performance has hit the entire industry supply chain, with a focus on lead and its association with toxicity.

Tin US$ 20,550/t vs US$20,720/t yesterday

           

Energy:           

Oil US$56.1/bbl vs US$55.4/bbl yesterday

Natural Gas US$3.079/mmbtu vs US$3.120/mmbtu yesterday

Uranium US$20.30/lb vs US$20.30/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$66.7/t vs US$66.8/t

• Following August’s peak near US$80/t, iron ore prices retreat for the fourth consecutive week.

• Faltering demand from a cooling property market, new house prices growing at an annualised pace of 5%, and reducing credit figures point to a decelerating economy

• Key-steel making areas, such as Hebei and Tianjin, have been ordered to cut output by up to 50% ahead of winter environmental controls

Chinese steel rebar 25mm US$647.2/t vs US$651.2/t

Thermal coal (1st year forward cif ARA) US$83.2/t vs US$83.9/t

Premium hard coking coal Aus fob US$205.6/t vs US$206.2/t

Lithium - Segue Resources reveals thick lithium discovery with drilling

• Confirmed lithium discovery through maiden drilling program at Malinda lithium project in Western Australia

• Assay results from the first six holes have confirmed significant lithium and tantalum mineralisation with intersections including 14 metres at 1.25% lithium oxide and 12 metres at 335ppm tantalum pentoxide

 

Other:  

Tungsten APT European US$310-335/mtu vs US$310-335/mtu - W resources gets licence extension for Tarouca Tungsten project

• Received a two-year extension to its Tarouca tungsten project in Portugal – licence now expires in 2019 and during this time expects to complete a 15 hole/1,500m reverse circulation drilling campaign

• Trench sampling at the Tarouca project has already indicated high-grade tungsten, drilling campaign at Tarouca will help to further delineate the resource with a view to increasing overall tungsten resource and production base

 

Company News

Anglo Asian Mining* (LON:AAZ) 30p, Mkt Cap £34.1m – Earnings fall on weaker production; H2 output guided stronger as annual 64-72koz GE forecast reiterated

• Total sales totalled $29.8m net of government PSA share of dore and concentrate sales (H1/16: $39.3m) reflecting weaker gold production during the period partially compensated by stronger copper concentrate sales.

• Gold and silver dore sales accounted for c. 2/3s of total revenues generated by the sale of 15.7koz at an average gold price $1,238/oz (H1/16: 27.8koz at $1,230/oz).

• Lower H1/17 gold production was attributed to a drop in processed gold grades as well as production optimisation initiatives implemented at Gedabek and Gadir mining operations.

• Copper concentrate production benefited from better copper grades in processed ores as well as higher flotation plant throughput, while a recovery in base metals prices helped to raise concentrate sales proceeds.

• Copper concentrate shipments totalled 5.4kt generating $10.3m in revenue net of PSA (H1/16: 2.9kt and $5.1m).

• AISC came in at $564/oz which include PSA share of dore and concentrate production (H1/16: $703/oz) reflecting high by-product revenues that are netted off costs.

• EBITDA ad EBIT totalled $8.6m and $0.6m (H1/16: $16.8m and $6.0m) with earnings margins lower on weaker grades and production rates.

• Operations remained FCF generative yielding $5.8m during the period (H1/16: $8.4m; FY16: $14.6m) as CFO of $10.8m more than covered interest costs of $1.5m (H1/16: $1.8m) and $3.5m (H1/16: $6.7m) in capex.

• Capex covered capitalised waste stripping, water treatment plant costs as well as Ugur development.

• PBT amounted to -$2.7m (H1/16: $0.4m).

• The Company had $1.5m in the bank (FY16: $1.4m) and $29.0m in ned debt (FY16: $34.6m) as repayments to ATB and Gazprombank continued as per schedule; both lenders provided waivers regarding the debt service cover ratio covenant though H1/17 (1.25 v reported 1.0 during the period).

• Ugur development works near completion with maiden dore production declared in September and daily output rates seen doubling in the first 10 days of the month compared to the previous eight months’ average; floatation plant is run separately utilizing a small 300-400tpd standalone mill and processing copper rich stockpiles (Ugur oxides do not contain copper and are treated directly by agitation leaching).

• The management reiterated its FY17 production guidance for 64-72koz GE (FY16: 72.3koz).

Conclusion: Results highlight lower earnings margins on the back of weaker processed grades partly compensated by stronger by-product concentrate revenues. Commissioning of the newly discovered Ugur mine helps to ramp up gold dore output rate and sees the management reiterating its full year guidance at 64-72koz implying a step up from the H1 production of 28.5koz GE (H1/16: 36.7koz).

*SP Angel act as Nomad and Broker to Anglo Asian Mining

 

Golden Star Resources (TSE:GSC) C$0.86, Mkt Cap C$324m – Drilling demonstrates extension to the “B Shoot” at Wassa

• Golden Star Resources reports that assays received from 11 of the 15 holes drilled to investigate the extent of the high grade B-Shoot at its Wassa mine in Ghana have shown that it extends approximately 50 metres to the north of the previously planned mining area and 200m to the south of the current inferred resource area “suggesting the potential to expand production in the short and longer term.”

• The programme comprised a total of 4.164m of drilling on the B Shoot North and 7000m on B Shoot South; further results are expected from the remaining holes during the second half of 2017, however among the results highlighted today are:

o A 14.9m wide intersection in the B Shoot North area at an average grade of 18.9g/t gold from a depth of 294m in hole BS17DD002, which included a higher grade section of 2m at an average grade of 91.8g/t from 300m and

o A 24.1m wide intersection at an average grade of 7.3g/t gold from a depth of 289.9m in hole BS17DD003, also in the B Shoot North area; and

o A 23.8m wide intersection in the B Shoot South area at an average grade of 6.1g/t gold from a depth of 1001m in hole BS17DD385M. This includes a 2m section from 1018m depth at an average grade of 20.1g/t gold and a 21.5m section from 1049.3m which averages 5.3g/t. In addition, this hole reports a second intersection of 21.7m width at an average grade of 5.3g/t gold from a depth of 1049.3m.

• The deeper B Shoot South drilling programme includes “two mother holes with up to four directional daughter holes being deflected from each of these.” Currently the first of the daughter holes of the first mother hole has been completed and a second is underway.

• A geological section on the company’s website illustrates the northward extension to the B Shoot beneath the Wassa Main open pit and the southern extensions apparently remaining open beyond hole BS17DD385 which appears to be currently the most southerly hole drilled.

• There remains additional assay information pending from a further four holes in the B Shoot North programme and results are expected to become available “during the fourth quarter of 2017, along with the results for the second mother hole and the daughter holes in the B Shoot South drilling.”

• Golden Star also comments that it expects to report drilling results from “definition and extension drilling at Prestea Underground during the third and fourth quarters of 2017.”

Conclusion: Golden Star’s drilling is helping to extend the B Shoot area at Wassa where the mine’s most recent overall proven & probable reserve is estimated at 5.4m tonnes at an average grade of 4.6g/t gold. High grade individual intersections in the recent drilling offer encouragement that the extensions now being identified will continue to maintain these high grades in any future resource update. We look forward to the remaining results from the programme as they become available.

 

IronRidge Resources* (LON:IRR) 38p, Mkt Cap £104m – High-grade gold intersections in trenching at Dorothe in Chad offer multi-million ounce potential

Chad (Tekton Gold 100%)

• IronRidge Resources report multiple high-grade gold intersections seen in fresh rock trenches at the Dorothe prospect in Chad held within its Tekton subsidiary.

• The combined grades and intersections are good for trenching and show the Main Vein zone to be open in all directions.

• The high-grade gold is close to surface as seen in IronRidge’s fresh trenches and in artisanal pitting.

• Management have dug 5,204m of trenches at Dorothe mostly using a 30 tonne excavator with the longest trench running at 1.74km in length. (See press release for trench locations)

• The surface extent covered by the Tekton program is around 3,000 x 1,000m covering the artisanal pitting zone.

• Trenching results:

o 8m @ 4.73g/t gold

o 12m @ 2.87g/t gold

o 10m @ 2.98g/t gold

o 10m @ 2.05g/t gold

o 4m @ 4.67g/t gold

o 4m @ 4.61g/t gold

o 2m @ 8.9g/t gold.

• Soil sampling has also identified three new target areas for follow-up sampling.  One at the north strike extension of the Dorothe prospect, a second to the north-west coincident with new artisanal workings and the third along a lithological contact zone.

• Previous sampling shows 14.12g/t of gold over 4m, 16m at 3.1g/t, 6m at 9.5g/t and 1m @ 63.2g/t Au and grades up to 103g/t, 99.6g/t and 94.5g/t in rock chips

• The spatial association between known gold occurrences in the region, granitic Intrusions and major fault corridors may suggest an Intrusion Related Gold System.

• The Ouaddaï Province potentially represents a metallogenic belt with possible analogies to the Tintina Gold Belt and other Intrusion Related Gold Systems hosting multi-million ounce deposits.

• The Dorothe area is characterised by two significant zones of mineralisation; the north-south striking ‘Main Vein Swarm’ defined over a 1km strike with potential extensions to 3km, and the north-east trending ‘Artisanal Pitting Zone’ over a 3x1km area. Previous sampling by Tekton has focussed on the Main Vein Swarm with significant trenching results over sub-vertical quartz veins.

• Further details are available on the company website:  https://www.ironridgeresources.com.au

Conclusion:  We reckon IronRidge’s geologist, Len Kolff, is doing a good job with the Tekton team on the Dorothe prospect. The discovery of very high-grade gold over widths of 2m-10m extending out to 14m in lower grade intervals as seen in the trenches reminds us of some previous major West African gold discoveries.  We look forward to future news of drilling on the prospect to confirm the lateral scale and depth extent of the discovery.

*SP Angel act as Nomad and Broker to IronRidge Resources

 

Orosur Mining (LON:OMI) 17.5 pence, Mkt Cap £20.6m – Progress report on Uruguay exploration

• Orosur Mining has provided information on the progress of its exploration work in Uruguay, including near mine projects close to the San Gregorio operation where the new San Gregorio West underground mine has produced 12,600 oz of gold.

• The company has completed around 15,000m of reverse-circulation and diamond core drilling during FY 2017 with a series of objectives including:

o The addition of short term reserves around the San Gregorio West mine (8,750m);

o The addition of reserves and resources to near mine open pit projects (6,060m); and

o Limited exploration of early stage opportunities within the Isla Cristalina greenstone belt

• Continuing exploration to continue these objectives is planned in 2018 with increased drilling close to the plant and along a 100km long belt of exploration licences.

• Near mine exploration has demonstrated the possibility of further eastward and depth extensions to the San Gregorio underground mineralisation where probable reserves currently amount to approximately 665,000 tonnes at an average grade of 1.62g/t gold.

• The company also identifies the Veta A project as a potential new underground mine beneath a “relatively small high grade open pit located next to the now reclaimed San Gregorio tailings dam which was in operation from September 2006 until March 2008” with historic production of approximately 29,000oz at an average grade of 3.1g/t.

Conclusion: Orosur Mining has demonstrated continuity of mineralisation at depth in the new San Gregorio West underground mine as well as identifying a new potential underground mining opportunity at Veta A. In the wider exploration area, continuing exploration of the 100km long licences within the Isla Cristina greenstone belt is characterised as having the scope for discoveries in excess of 100,000oz of gold. We look forward to further announcements as exploration progresses.

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Thu, 21 Sep 2017 10:54:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28638/today-s-market-view-anglo-asian-mining-plc-ironridge-resources-limited-orosur-mining-inc-golden-star-resources-28638.html
Today's Market View - Bluerock Diamonds Plc, BlueJay Mining PLC, Metals Exploration Plc, Petra Diamonds http://www.proactiveinvestors.co.uk/columns/sp-angel/28621/today-s-market-view-bluerock-diamonds-plc-bluejay-mining-plc-metals-exploration-plc-petra-diamonds-28621.html Gold prices are trading at the lowest in three weeks as geopolitical woes subside and market focus on the FOMC meeting due later today.

• Estimates are for the Fed to stay put on rates; although, the central bank may shed more light on the timing of the third hike this year and a reduction in a $4.5tn balance sheet.

• Holdings in gold ETFs held steady hovering at the highest level since November last year.

• The US$ index is slightly weaker as the euro headed for a fourth daily advance.

• Base metals range bound with the LME index consolidating following two straight weeks of declines on profit taking and weaker than expected Chinese economic data.

• Brent is little changed trading close to the highest level in five months; Iraq said OPEC members are considering to  deepen output cuts by around…1%.

• Iron ore futures climbed for the first in the last four taking the September drop to 9.3%; steel prices are little changed today after having coming off from this year’s high reached earlier in September (rebar futures are 1.6% this month).

 

Steel - New hybrid steel opens up new design possibilities

• Swedish steelmaker Ovako claims that it's new hybrid steels represents one of the most significant developments in steel metallurgy 'for decades'

• Offers the properties of tool steel, maraging steel and stainless steel combined with the production economy of engineering steel – opening up possibilities to use steel components in demanding applications

 

Dresden Mining Conference – From Mine to Market - Dresden on Thursday 28th September

• The FAME Project, GKZ (Geokompetenzzentrum) and the Minor Metals Trade Association (MMTA). are sponsoring a mining conference in in Dresden to be attended by a range of European industrialists.

• Speeches range from minor metals to smelters and Europe’s approach to mining, metallurgy and downstream integration.

• SP Angel’s John Meyer, will delivering a key note speech on “Minor metals in mining and markets – the future has just begun”

 

Land Rover – Jim Ratcliffe of Ineos looking to restart production of a Land Rover Defender like  vehicle

• Ratcliffe is reported to be looking at three site options including one on the coast in the northeast of the UK.

• Other options including potentially taking over a mothballed plant or spare production capacity in Europe.

• We suspect Land Rover defenders sell better in the UK then in the rest of Europe.

 

Dow Jones Industrials  +0.28% at   22,331

Nikkei 225   +1.96% at   20,299

HK Hang Seng   -0.23% at   28,094

Shanghai Composite    -0.18% at    3,357

FTSE 350 Mining   -0.41% at   16,549

AIM Basic Resources   -1.39% at    2,485

 

Economics

US – Senate Republicans are considering a budget that would involve a $1.5tn in tax cuts over the next decade, the WSJ reports.

• Once approved the budget paves the way for a tax bill that would specify rate cuts and other policy changes.

• That should provide support to businesses lifting economic growth rates.

• Preliminary estimates suggest cuts are not going to be revenue neutral and may be dropped in 10 years time.

 

Currencies

US$1.1993/eur vs 1.1929/eur yesterday.   Yen 111.79/$ vs 111.34/$.   SAr 13.303/$ vs 13.201/$.   $1.354/gbp vs $1.354/gbp.     

0.798/aud vs 0.801/aud.   CNY 6.583/$ vs 6.563/$.

 

Commodity News

Global investment in the metals rises to highest since 2011

• The investment by hedge funds follows mounting inflow of money into industrial metals on the back of rising commodity prices.

 

Precious metals:

Gold US$1,309/oz vs US$1,315/oz yesterday

• Weakness in the U.S. dollar inched the index down 0.1 percent, with a fall against the yen.

• Gold price improved with market focus on the two-day Federal Reserve meeting beginning today. The meeting will determine the plan to reduce the $4.5 trillion portfolio of debt assets accumulated since the 2007-2009 financial collapse.

• The U.S. military maintained pressure on North Korea’s nuclear threat with combined staged bombing drills with South Korea, Russia and China ahead of a U.N. General Assembly meeting today.

• Kinross shares fell nearly 7% after the miner said on Monday it would spend more than $800m expanding its mines in Mauritania and Nevada

• The company expects to boost annual output to 634,000 gold ounces per year and for the project to generate over $2.2bn over its lifetime

   Gold ETFs 68.7moz vs US$68.7moz yesterday

Platinum US$959/oz vs US$968/oz yesterday

Palladium US$928/oz vs US$936/oz yesterday

Silver US$17.17/oz vs US$17.55/oz yesterday

 

Base metals:   

Copper US$ 6,526/t vs US$6,566/t yesterday

• North Korean tensions are felt in the base metals market as banks in South Korea with large exposure to copper are offloading holdings.

• London copper rose despite data showing a cooling Chinese property market. House prices for August rose at the slowest pace since the beginning of the year on the back of government cooling measures.

• Copper catalyst yields high efficiency co2 to fuel conversion

• Scientists have developed a new electrocatalyst that can directly convert carbon dioxide into multicarbon fuels and alcohols using record-low inputs of energy

• The work is the latest in a round of studies coming out of Berkeley Lab tackling the challenge of creating a clean chemical manufacturing system that can put carbon dioxide to good use

Aluminium US$ 2,106/t vs US$2,095/t yesterday

Nickel US$ 10,970/t vs US$11,165/t yesterday

Zinc US$ 3,096/t vs US$3,085/t yesterday

• Upcoming Chinese winter steel output restrictions and environmental closures has limited industry steel production, increasing profits across the sector. This has caused a revival in zinc and nickel prices, on prospects of negotiating higher raw material costs.

• Despite domestic supply of zinc falling in August, market supply is being met by advances in production from large international sources. Peru, largest supplier of zinc ore to China, is ramping up production to capitalise on higher prices, with July exports growing 50% from 2016 figures.

Lead US$ 2,384/t vs US$2,404/t yesterday

Tin US$ 20,675/t vs US$20,635/t yesterday

           

Energy:           

Oil US$55.7/bbl vs US$55.7/bbl yesterday

• U.S. shale output is forecast for its 10th consecutive rise in October 2017. Growing U.S. oil price above the $50 per barrel level has spurred production across seven principal shale plays since the beginning of the year, delivering a total of 6.1 million bpd.

Natural Gas US$3.147/mmbtu vs US$3.067/mmbtu yesterday

Uranium US$20.60/lb vs US$20.60/lb yesterday

Lithium - Albemarle has developed a novel technology to increase of annual lithium production in Chile on a sustainable basis to as much as 125,000tpa of LCE equivalent without requiring additional brine pumping.  Projects currently underway are expected to raise the company's total annual production capacity in Chile to more than 80,000tpa of LCE equivalent by 2020

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$69.6/t vs US$68.7/t

• The RBA is expecting iron ore prices to come down in the medium term on the back of “ongoing expansion of global iron ore supply following an extended period of strong investment”.

• More long term the Bank highlighted there is a chance India will step up its steel demand driven by an increase residential construction and transport infrastructure.

• 62% Fe iron ore delivered to Qingdao was priced at $71.8/t yesterday, down 9.1% this month but up 34.5% over the last three months.

Chinese steel rebar 25mm US$653.3/t vs US$656.4/t

• Uncertainties surrounding the trend in ferrous prices over the winter production period have caused steel and iron ore futures in China to fall.

Thermal coal (1st year forward cif ARA) US$82.2/t vs US$82.5/t

Premium hard coking coal Aus fob US$206.2/t vs US$207.3/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$310-335/mtu

Graphite

• Tightening supply from China for the crucial manufacturing element, graphite, is threatening to limit European steel production. More stringent Chinese environmental legislations threaten the source as production quotas and pollution limitations are leading to a shortage of the metal.

• European steelmakers consume 226 kt graphite electrodes each year, although Chinese exports in 2017 have fallen 29 percent in a bid to maintain domestic steel. The current tightness of electrode supply has driven the spot price of graphite electrodes 10x the price at the beginning of the year.

 

Company News

BlueJay Mining* (LON:JAY) 16.8p, Mkt Cap £129m – High Spec products seen in Metallurgical test work

STRONG BUY

Target Price 24p

• BlueJay Mining report the confirmation of high specification ilmenite products in metallurgical test work from its Pituffik project in Greenland.

• The further optimisation of the wet and dry magnetic circuits has improved the process efficiency liberating a particularly pure ilmenite product cheaply and cleanly.

• The new simple and flexible improved flow sheet should now give a homogenous and consistent grade of ilmenite ore which is suitable for sulphate and as well as for sulphate chloride slag production.

• The low levels of chromium oxide and vanadium oxide are particularly significant while radioactive elements are also below detection limits.

• BlueJay reckon they can produce a typical ilmenite product with the following constituents:

 

• TiO2 • 46.5%

• FeO • 39.2%

• SiO2 • 0.71%

• CaO • 0.15%

• MgO • 0.78%

• U • <10ppm

• Th • <10ppm

 

Conclusion:  Our current valuation is based on a base-case ilmenite price of $180/t.  If the company is able to sell a premium product then the price received may increase by up to $100/t on our estimate price. While a full $100/t premium seems unlikely it is possible that a $30-50/t increase as seen for Australian and Ukrainian ilmenite may be justifiable.

Assuming an ilmenite price of $210/t would raise our valuation to 33p/s and to 35p/s on a $230/t price assumption.  We assuming concentrate sales of 426,000tpa of ilmenite product by year three.

Our recent site visit confirmed potential to raise ilmenite concentrate production to this level at Pituffik using either dry mining or dredging.  The team are expected to ship >500t of screened concentrate material this field season demonstrating the relative simplicity of the mining operation.

Raising future production beyond our assumed 426,000tpa rate makes a significant difference to our valuation.  If we raise sales to 710,000tpa of ilmenite concentrate from year four our valuation rises to 39p/s assuming a base case price of $180/t.  This rises further to 49p/s at $210/t and to 56p/s at $230/t.

We await the results of the ongoing feasibility study for confirmation of the intended route/routes for mining and processing. Today’s announcement shows the conceptual process methodology by IHC Robbins.  See:  http://www.titanium.gl/announcements/metallurgical-process-developments-and-product-specifications-for-its-ilmenite-products-from-its-flagship-pituffik-project-in-greenland/

*SP Angel act as nomad and broker to BlueJay Mining.  An SP Angel mining analyst has visited the Pituffik ilmenite sands project in Greenland and has carried out his own density tests on the heavy mineral sands at Pituffik.

 

BlueRock Diamonds* (LON:BRD) 2.4p, Mkt Cap £3.2m – Interims highlight ongoing improvement in Kareevlei diamond grades and production

• BlueRock Diamonds resolved a number of management and contractor issues in the first half and are finally getting to their warranted throughput and grade levels.

• Bringing all mining in-house and improvement to the mining and process plant is helping to ramp up production as is the move into fresh kimberlite underlying the very hard calcrete material which has so hampered production.

• Run times are now at 16 hours a day vs the very poor 6.4 hours a day seen from March to May this year.

• The mine has yet to see its target diamond grade of 4.5cpht as estimated in the CPR consultant report and there is some evidence that grades could rise to this level potentially by the year end with Level 2 kimberlite material seen at significantly higher grade than the Level 1 material so far mined.

• Diamond sales values continue to do well with the last sale at $323/ct far over the $232/ct assumed in the CPR.  This is despite worsening liquidity in the diamond supply chain and a potential surplus of smaller stones seen in the market.

• Koedenza:  not wishing to be constrained by the one diamond mine, BlueRock are busy evaluating another kimberlite some 40km north of Kimberley with a potential 2,500t bulk sample being mined in the next month.

• We note there are another two kimberlite resources at Kareevlei with the K1 pipe grading 6.3cpht and K3 grading 3.7cpht.

• Interim Sales fell to £150,551cts through H1 from £206,072cts yoy.

• Interim Operating losses widened to £751,109ct vs £301,324ct yoy

• Total losses rose to £803,787 vs £574,588 yoy.

Conclusion:  BlueRock will almost certainly post a profit in the second half marking a dramatic turnaround.  While it is difficult to see this enabling a profit for the full year it is likely that the business should be in a position to post ongoing positive returns if it is able to meet its target throughput and grade rates.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Metals Explorations (LON:MTL) 3.3p, Mkt Cap £67m – Algae in reprocessed water hampers BIOX processing

• The BIOX plant is reported to have experienced difficulties in ramping up throughput rates after reaching 50% of the design capacity with “currently limited material being processed through the citcuit”.

• The test work showed the presence of algae in the return water negatively affected the performance of the bacteria in the BIOX plant.

• Biomin, BIOX technology developers, have been called out to assist with remediation works and implement engineering solutions identified to fix the algae problem.

• No timing on a potential recovery in processing rates has been provided.

• On a positive note, cutting permit and all necessary blasting permits have been issued allowing the Company to start the access to the overflow waste dump site as well as increasing the supply of refractory ores to feed to the BIOX plant.

• The Company continues talks with lenders regarding a loan to refinance $12m in debt repayments and meet its working capital requirements.

 

Petra Diamonds (LON:PDL) 75p, mkt cap £399m – Petra having a bad week as it suffers labour disruption in South Africa following investigation in Tanzania

• Poor old Petra Diamonds is having a bad week.  First they are hit by the seizure of 71,655cts of diamonds worth around $14m by the Tanzania government and now they are suffering from labour disruption.

• The disruption is reported to be affecting Petra’s Finch and Kimberley Ekapa Mining JV operations in South Africa.

• Management are in discussions with the National Union of Mineworkers to finalise a new wage agreement.

• Things are hotting up in Tanzania with Petra’s latest parcel of diamonds seized by the government on suspicion that the stones had been undervalued before export.

• Petra management have said they will cut investment into Tanzania if the government continues to prevent the export of their diamonds out of the country.

• Petra shut down for four days but might still breach banking covenants if it is unable to resume diamond exports over the next two to three months.

• Petra is carrying net debt of around US$555m and while its banks are reported to have agreed to ease the terms of its covenants on its senior debt facilities it still leaves the company vulnerable to further disruption.

Conclusion: Labour disruption at Petra’s mines in South Africa has the potential to destabilise the company at a time when the Tanzanian government is also preventing diamond sales.  While Petra’s lenders are likely to remain accommodating shareholders are bound to suffer and there may well be further cost to this accommodation.

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Tue, 19 Sep 2017 10:33:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28621/today-s-market-view-bluerock-diamonds-plc-bluejay-mining-plc-metals-exploration-plc-petra-diamonds-28621.html
Today's Market View - BBluerock Diamonds Plc, Metal Tiger, Phoenix Global Mining Ltd, Stratex International plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28612/today-s-market-view-bbluerock-diamonds-plc-metal-tiger-phoenix-global-mining-ltd-stratex-international-plc-28612.html BlueRock Diamonds* (LON:BRD) – Grades rise as management improves recoveries and mining progresses through calcrete layer

Metal Tiger (LON:MTR) – Metal Tiger postpones IPO of Thai joint venture

Phoenix Global Mining* (LON:PGM) – New Corporate video of Phoenix’s Empire mine project in Idaho

Stratex International (LON:STI) – Angry shareholders requisition meeting to vote against expensive acquisition of Crusader

 

European equities are following US markets higher with S&P 500 hitting new highs on the back of stronger risk appetite among investors.

• Safe haven assets like gold and the Japanese yen are off today.

• The US$ index is marginally stronger this morning.

• Both BoJ and Fed are due to hold their monetary policy meetings this week.

• Copper is slightly stronger today after posting a 2.8% drop last week and as LME inventories posted a slight drop this morning following a nearly 50% increase during the previous week.

• Iron ore futures continued to post new declines with most active contracts on the Dalian Commodity Exchange losing 16% from a recent peak on the back of the latest weak Chinese economic data.

 

Dresden Mining Conference – From Mine to Market - Dresden on Thursday 28th September

• The FAME Project, GKZ (Geokompetenzzentrum) and the Minor Metals Trade Association (MMTA). are sponsoring a mining conference in in Dresden to be attended by a range of European industrialists.

• Speeches range from minor metals to smelters and Europe’s approach to mining, metallurgy and downstream integration.

• SP Angel’s John Meyer, will delivering a key note speech on “Minor metals in mining and markets – the future has just begun”

 

 

Dow Jones Industrials  +0.29% at   22,268

Nikkei 225   +0.52% at   19,910

HK Hang Seng   +1.27% at   28,160

Shanghai Composite    +0.28% at    3,363

FTSE 350 Mining   +0.23% at   16,565

AIM Basic Resources   -0.18% at    2,520

 

Economics

US – Poor retail sales raise concerns over the strength of the US private consumption.

• While August numbers reflected Hurricane Harvey related disruptions, two months of the previous data were also revised downwards.

• Industrial production numbers have also been affected by extreme weather conditions with much of lost utility and energy production expected to be restored in October.

• September numbers are expected to come in weak reflecting Hurricane Irma aftermath in the South East of the country.

Date Event   Survey Actual Prior Revised

Friday Empire Manufacturing Sep 18.0 24.4 25.2 --

  Retail Sales Advance MoM Aug 0.10% -0.20% 0.60% 0.30%

  Retail Sales Ex Auto MoM Aug 0.50% 0.20% 0.50% 0.40%

  Industrial Production MoM Aug 0.10% -0.90% 0.20% 0.40%

  Capacity Utilization Aug 76.70% 76.10% 76.70% 76.90%

  U. of Mich. Sentiment Sep P 95.0 95.3 96.8 --

Source: Bloomberg     

 

 

China – Property prices growth slowed to the weakest pace in more than a year in August, according to Reuters data based on China’s National Bureau of Statistics numbers.

• Prices climbed 8.3%yoy in August marking the ninth consecutive month of deceleration from a peak of 12.6%yoy recorded in November 2016.

 

Japan – Speculations started to emerge Shinzo Abe might dissolve the lower house of Parliament when it convenes on September 28 and call snap elections.

• PM has been seeing his approval ratings recovering lately amid intensified geopolitical tension with neighbouring North Korea.

 

UK – Real household incomes are reported to have declined at the sharpest rate in the past three years in September on the back of stronger inflation and low wage growth, Markit survey showed.

• “the subdued picture looks unlikely to change any time soon…while pessimism about future finances eased somewhat in September, sentiment remained among the gloomiest seen over the past three years,” Markit wrote.

• On a separate note, UK house prices fell in September compared to the previous month dragged down by a weaker London market, according to Rightmove.

• “Usual autumn price bounce had so far failed to materialise” as prices were down 1.2%mom with London recording declines of 2.9% as price  infive out of six most expensive boroughs in the city dropped.

 

Portugal – Sovereign 10y bonds climbed to a 1-year high after S&P returned its debt investment grade rating.

• The spread over the German bunds tightened to 2.14% marking the narrowest discount since January 2016.

• The spread hit 11.5% at the height of the sovereign debt crisis in 2011-12.

• The decision to raise ratings was driven by the “solid progress (Portugal) has made in reducing its budget deficit and the received risk of a marked deterioration in external financing conditions”.

• Portugal debt was rated as junk since 2012 after the government took part in a rescue programme provided by the IMF and EU.

 

North Korea – Fuel prices soar on the back of a reduced natural gas and crude oil imports driven by the US Security Council sanctions, Reuters reports.

 

Precious metals:

Gold US$1,315/oz vs US$1,327/oz last week

• Strong performance of the dollar against the yen, combined with starting balance sheet discussions at the Fed Open Market Committee meeting and the prospect of a December interest rate hike drove gold prices to the lowest level in two weeks.

• Donald Trump’s United Nations world leaders address will bring back the focus on North Korean geopolitical risks on Tuesday.

   Gold ETFs 68.7moz vs US$68.8moz last week

Platinum US$968/oz vs US$980/oz last week

Palladium US$936/oz vs US$928/oz last week

Silver US$17.55/oz vs US$17.76/oz last week

           

Base metals:   

Copper US$ 6,566/t vs US$6,501/t last week

• Copper price climbs after the largest weekly inventory inflow into LME-registered warehouses since May 2017; increasing the 276,025 tonne total by 24%.

• The sale of metal holdings follows the release of disappointing Chinese investment data last Thursday, indicating the world’s second largest economy has slowed to its lowest growth rate in 18 years.

Aluminium US$ 2,095/t vs US$2,086/t last week

• Norwegian aluminium components producer, Sapa, will provide lightweight aluminium from a revived British plant to supply material for the country’s first electric London black cab vehicle factory.

• New environmental laws introduced by Sadiq Khan rules all new cabs in London must be zero-emission capable. Sapa is investing £9.6m to supply 148 weight-saving components to support the mass-produce electric vehicle trend.

Nickel US$ 11,165/t vs US$11,070/t last week

Zinc US$ 3,085/t vs US$3,014/t last week

Lead US$ 2,404/t vs US$2,314/t last week

• Chinese government environmental crackdown is recognised in falling lead and zinc output, with lead production figures falling to the lowest since November last year.

Tin US$ 20,635/t vs US$20,530/t last week

           

Energy:           

Oil US$55.7/bbl vs US$55.2/bbl last week

• U.S. crude oil prices break the $50 per barrel mark as oil refineries across the Gulf of Mexico and the Caribbean begin reporting higher recoveries following the hurricane Harvey and Irma closures.

• Despite U.S. energy firms cutting the number of rigs drilling for new production, signs of a tightening market may be distorted by hurricane production disruption figures, and bullish bets on U.S. futures and options continues to fall.

• As well as the damage to the oil price, hurricane Harvey spilt over 22,000 barrels of oil, refined fuels and chemicals and millions of cubic feet of natural gas and hundreds of tonnes of other toxic substances. These spills rank among the worst environmental mishaps in recent history.

Natural Gas US$3.067/mmbtu vs US$3.058/mmbtu last week

Uranium US$20.60/lb vs US$20.60/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.7/t vs US$70.0/t

• Iron ore prices slumped as Chinese steelmakers ramp up production ahead of the winter mandatory cuts, with mills producing record tonnages in August.

• Despite the immediate fall in price, the value has surged from July lows following Chinese anti-pollution legislations forcing steelmakers to chase premium imports and avoid high-Fe domestic production.

• China’s revised environmental policy extends the winter shutdowns across October-March, pushing the supply market into a 40 million tonne surplus (HSBC - David Pleming) and driving prices lower.

Chinese steel rebar 25mm US$656.4/t vs US$662.2/t

Thermal coal (1st year forward cif ARA) US$82.5/t vs US$82.9/t

Premium hard coking coal Aus fob US$207.3/t vs US$207.8/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$310-335/mtu

 

Company News

BlueRock Diamonds* (LON:BRD) 2.5p, Mkt Cap £3.4m – Grades rise as management improves recoveries and mining progresses through calcrete layer

• BlueRock Diamonds reports diamond grades rising to 3.01cpht at its Kareevlei Diamond Mine, Kimberley, South Africa

• The latest reported parcel of 544.57cts of diamonds sold at tender, achieved an average of USD323/ct, slightly lower than the US$330/ct achieved in August and also lower than the US$395/ct seen in July, though this included a 5.5ct stone which sold for $7,054/ct.

• Note: the CPR average was $232/ct indicating that the achieved values remain significantly above the CPR values

• BlueRock are currently mining the K2 pipe which offers the potential for grades of around 4.5cpht according the inferred mineral resource statement.

• This is significantly better than the previous August tender production of 2.07 cpht.

• The average grade for total production in H2 is now 2.41 cpht vs 1.59 cpht for the first half of 2017.

• We expect diamond grades to rise at Kareevlei as mining progresses into the softer and fresher kimberlite underlying the calcrete layer.

• Production continues to improve with August’s production reaching 20,929t vs July at 20,200t.

• September throughput should rise towards management’s target of >25,000t/m.

 

Pipe Tonnes Carats Grade (cpht) Classification

K1 1,594,000 101,000 6.3 Inferred

K2 2,461,000 111,000 4.5 Inferred

K3 3,929,000 147,000 3.7 Inferred

Total 7,984,000 359,000  

 

Conclusion:  BlueRock is coming closer to realising its ambition to become a profitable diamond mining company.  We look forward to further positive news in relation to improving grades towards the 4.5cpht predicted in the fresh kimberlite, to potentially better diamond values as further high-value stones are recovered and to news on falling operating costs as throughput levels rise to the target 25,000t per month.  If grades and throughput rise to their target levels then the Kareevlei diamond mine should show significant potential over its current market valuation.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Metal Tiger (LON:MTR) 1.9p, Mkt Cap £18.8m – Metal Tiger postpones IPO of Thai joint venture

• Metal Tiger has decided to postpone the IPO of its Thai Joint Venture business.

• The decision is said to be for commercial reasons relating to:

o Pre-marketing feedback;

o New Thai Minerals Act and National Mineral Management Policy Committee;

o Community vote; and

o Further clarification on the Master Plan

• See press release for further details.

• Metal Tiger also hold a 30% stake in the MOD copper project in Botswana .

 

Phoenix Global Mining* (LON:PGM) 4p, Mkt Cap £9.2m – New Corporate video of Phoenix’s Empire mine project in Idaho

• Phoenix Global Mining have released a new corporate video showing drilling at its Empire mining project in Idaho.

• The video shows results from core and RC drilling for the old Empire open pit which the company is working towards re-opening

• The video shows drilling from their 28 hole drill programme of 21 reverse-circulation ‘RC’ (1595m) and 7 large diameter diamond drill holes (537m) at the AP oxide pit.

• The old Empire mine is a skarn- deposit of both oxide and sulphide ore types containing copper, tungsten and gold with historic production of around 694,000t from the early 1900s and WWII.

• Recently released drilling shows assay results from the first 14 holes of:

o 21.3m grading 0.86% copper, 1.22% zinc, 13.03g/t silver and 0.14g/t gold from a depth of 41.2m in hole KX17-3;

 Inc. 4.6m at an average grade of 1.65% copper, 2.30% zinc, 3.37g/t silver and 0.04g/t gold from a depth of 56.4m also in hole KX17-3;

o 35.1m grading 0.29% copper, 0.70% zinc, 12.56g/t silver and 0.0.70/t gold from surface in hole KX17-7;

o 70.1m grading 0.34% copper, 5.85g/t silver and 0.38g/t gold from surface in hole KX17-9;

o 51.8m grading 0.42% copper, 9.16g/t silver and 0.24g/t gold from a depth of 13.7m in hole KX17-6; and

o 51.8m grading 0.51% copper, 0.11% zinc, 16.09g/t silver and 0.07g/t gold from a depth of 12.2m in hole KX17-11;

• Wider intersections show higher grade sections with grades as high as 2.06% copper over a 4.6m wide section within hole KX17-3 and a 16.8m wide section within hole KX17-11 from 12.2m depth which averaged 1.02% copper and 33.99g/t silver.

• Existing resource:  7.26mt grading of 0.55% copper plus an additional inferred resource of 5.55mt grading 0.51% copper

• PFS due Q2 2018.

Conclusion: Phoenix is looking to add to its existing resource and to develop a Pre-Feasibility Study early next year based on the updated and upgrades resource.

With copper, zinc and tungsten prices performing well and with the ever growing issue of commodity security the reopening of this historic mine is become ever more pressing.

*SP Angel acts as Nomad to Phoenix Global Mining

 

Stratex International (LON:STI) 1.4p, Mkt cap £6.3m – Angry shareholders requisition meeting to vote against expensive acquisition of Crusader

• Stratex’s major shareholders are joining together to vote against the acquisition of Crusader Resources.

AngloGold Ashanti and Teck Resources have taken the rather unusual step of supporting the shareholder revolt against the board of Stratex.

• We believe they see the deal with Crusader as overpriced and not in the interests of Stratex’s shareholders and against its previously communicated business strategy.

• The deal offers Crusader a hefty premium in value terms.  Crusader shareholders are offered 6.6 new Stratex International shares for each share in a deal valuing Crusader at approximately £31.1m and effectively giving Crusader shareholders holding approximately 71% of the enlarged Stratex turning the deal into an effective reverse takeover in our view.

• Stratex issued its latest RNS statement at the cunning time of 2:54 on a Friday afternoon, perhaps hoping that other shareholders might miss the announcement.

• The statement says “the Board does not welcome the requisition or proposed resolutions and considers them without foundation or merit and firmly believes that they are not in the best interest of the Company or shareholders  The Board and its advisors are in discussions to see a resolution to the concerns of the Requisitioning Shareholders”.

• It may be that the board and its advisors are in discussions but we wonder whether the board had consulted with its major shareholders on the acquisition who we think are justifiably hopping mad at the change of direction and unnecessarily high price being paid for what is essentially a low grade gold project and an as yet undefined gold prospect both in Brazil.

• Worse still there are details of the Crusader deal which we believe are unpalatable to a number of major shareholders.  Eg the unwarranted rise in the value of severance packages to two Crusader directors alongside the fees being paid to the company’s advisors.

• We noticed that the directors of Crusader Resources pay themselves remarkably well.  The ceo, Robert Smakman gets a gross base salary of A$375,000 with Exec director, Paul Stephen not far behind at A$350,000.  The less well paid cfo, Andrew Beigel is at a slightly more reasonable A$170,000 and Julio Nery is on BRL 591,444 (A$232,577).

• The Crusader directors have 45 day notice periods.

• Curiously, the contracts continue on current salaries under the Stratex Scheme with notice periods for Robert Smakman and Paul Stephen increasing to two years.  That’s severance payments of A$1.45m (A$750,000 and A$700,000) for the two principal directors.

• The Stratex Scheme implementation deed states:

• “5.8 Stratex executive appointments

o (a) Stratex must, on or before the Implementation Date, make offers of employment to Rob Smakman and Paul Stephen (conditional on the Share Scheme becoming Effective) for senior executive positions with Stratex.

o (b) The offers of employment made by Stratex to Rob Smakman and Paul Stephen must be on terms no less favourable than the terms of their employment arrangements with Crusader immediately prior to the Implementation Date (as determined by Crusader), have a term of at least two (2) years (subject to summary dismissal termination rights available at common law), and include the right to participate in an appropriate incentive plan (as determined by Crusader). Is this consistent with the notice periods for members of the Stratex board, and if not why not?”

o Are Robert Smakman and Paul Stephen so critical to the operations and why are they being treated differently to other Crusader directors?

o We feel compelled to ask if this is a good use of Stratex funds and wonder if shareholders might like to seek to vote on the matter.

o Also, why has Stratex agreed to provide interim funding of A$1m to Crusader for working capital via a convertible loan note when it might have been better to wait to strike a more competitive deal?

• Stratex International reports that a group of shareholders has requested a General Meeting to consider the termination of the proposed all-share acquisition of Crusader Resources and “to make certain changes to the board”.

• The company “is advised that the request is currently invalid” and advises shareholders to “take no action” although it indicates that it will make an “announcement in due course.”

• The Crusader acquisition represents a significant change in direction from the company’s roots in exploration in Turkey and Africa, which led amongst other achievements, to mine construction of the Altintepe gold mine, into Brazil where the new management of Stratex is looking to ally itself with Crusader to develop the Borborema and Juruena gold projects.

Conclusion: It appears that a number of major and important shareholders disagree with the new course mapped out for Stratex which would leave Stratex shareholders with just 19% of the enlarged company.

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Mon, 18 Sep 2017 11:11:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28612/today-s-market-view-bbluerock-diamonds-plc-metal-tiger-phoenix-global-mining-ltd-stratex-international-plc-28612.html
Today's Market View - Premier African Minerals Ltd, SolGold plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28600/today-s-market-view-premier-african-minerals-ltd-solgold-plc-28600.html Premier African Minerals (LON:PREM) – Increase in Underground Resource at RHA tungsten mine in Zimbabwe

SolGold* (LON:SOLG) – Drilling continues to ramp up with an initial Alpala resource in December and 12 rigs due in operation by early 2018

 

Conference – Europe – From Mine to Market - Dresden on Thursday 28th September

• The FAME Project, GKZ (Geokompetenzzentrum) and the Minor Metals Trade Association (MMTA). are sponsoring a mining conference in in Dresden to be attended by a range of European industrialists.

• Speeches range from minor metals to smelters and Europe’s approach to mining, metallurgy and downstream integration.

• SP Angel’s John Meyer, will delivering a key note speech on “Minor metals in mining and markets – the future has just begun”

 

Miners are lower this morning on the back of a continuing decline in bulk commodities prices as well as a strong run in the British pound against the US$.

• The pound gained 2.5% over the last two days as the BoE indicated the rate hike is on the cards over the coming months amid strengthening inflation pressures.

• Gold prices and the US$ index are little changed this morning despite reports saying North Korea launched another missile over Japan in the Pacific for the second time in two months.

• Copper stockpiles surged 10% today to 304.4kt marking the highest level since July and taking a weekly increase to 43%; prices are down 3% this week.

• Iron ore prices continued to slide heading to its first back-to-back weekly drop since June with Dalian futures trading at a two-month low today.

 

Dow Jones Industrials  +0.20% at   22,203

Nikkei 225   +0.52% at   19,910

HK Hang Seng   -0.09% at   27,752

Shanghai Composite    -0.53% at    3,354

FTSE 350 Mining   -1.10% at   16,632

AIM Basic Resources   -0.79% at    2,525

 

Economics

US – Consumer prices inflation came in ahead of market estimates for the first time in six months with first signs of weather-related pressures making it into the data.

• Hurricane Harvey saw gasoline prices climbing 6.3%mom or 10.4%yoy last month during a period that is normally considered seasonally quiet.

• While core inflation measures excluding changes in energy prices also came in stronger than forecast stabilising following months of declines in growth rates.

• Weather related disruptions adding noise to inflation data may complicate Fed’s job slightly as policymakers are closely watching inflation amid the monetary tightening cycle.

 

China – Money supply numbers released today showed credit growth continued at a robust pace in August supporting growth dynamics ahead of the NPC opening on the 18th October.

• Total credit climbed 18.0%yoy in the first eight months of the year slightly down on 20.3% recorded through the January-July period but up on 16.4%yoy increase recorded in 2016.

 

UK – The pound rallied against the US$ yesterday on the back of the news the BoE may raise rates in “coming months” if the economy performs in line with authorities’ estimates.

• The rate setting committee voted 7-2 to leave rates unchanged at 0.25% for now, in line with market estimates.

• Greater attention is not turned to labour statistics and GDP numbers due on October 18 and 25, respectively.

• Should the data come in strong a rate increase in November may be a real possibility, Bloomberg reports.

• Markets are currently pricing in a one 25bp hike in February with a second one is not expected until beyond the same month in 2019.

 

Currencies

US$1.1919/eur vs 1.1900/eur yesterday.   Yen 110.73/$ vs 110.38/$.   SAr 13.146/$ vs 13.124/$.   $1.343/gbp vs $1.321/gbp.     

0.800/aud vs 0.800/aud.   CNY 6.546/$ vs 6.555/$.

 

Commodity News

Precious metals:

Gold US$1,327/oz vs US$1,324/oz yesterday - Gold prices slip further as US dollar steadies

• The yellow metal slipped below $1,322 per ounce this morning, but it has since risen back to $1,327.60, just 0.03 per cent below its closing price yesterday

• Improved US yields and rising USD demand could encourage a deeper downside correction. The key support to the two-month rise stands at $1,300

• Growing tensions over North Korea follow Friday’s missile launch over Japan’s northern Hokkaido far into the Pacific Ocean, prompting a flood of gold purchases.

• August’s U.S. consumer prices rose 0.4% on the back of increase gasoline and rental accommodation costs, causing an increased likelihood of December’s interest rate hike from the Federal Reserve.

• Despite the increase in domestic consumer prices, the U.S. dollar index fell 0.4%.

• The announcement of the close in trading on Chinese bitcoin exchange ‘BTCChina’ has triggered a shift back to more traditional safe-haven trades in the gold market.

Gold ETFs 68.8moz vs US$68.8moz yesterday     

Platinum US$980/oz vs US$981/oz yesterday

Palladium US$928/oz vs US$942/oz yesterday

Silver US$17.76/oz vs US$17.76/oz yesterday

           

Base metals:   

Copper US$ 6,501/t vs US$6,484/t yesterday - Copper continued slide yesterday on China data and inflows of copper stocks into warehouses.

• Note: we don’t trust stock numbers so much these days due to manipulation by hedge funds and strategic agencies.

• A downturn in Chinese infrastructure investment continues to send base metals prices to their lowest in September. August’s industrial production figures indicated the slowest growth rate since December 2016.

• Copper prices continue to fall on the back of investor profit-taking. London Metal Exchange warehouse stocks rose a further 16% Wednesday with investors dumping their copper holdings.

Aluminium US$ 2,086/t vs US$2,091/t yesterday - Buyers in Japan, Asia’s biggest aluminium importers, have agreed a 20% reduction in premiums of October to December quarter shipments at $95/t.

• The premiums to London Metal Exchange prices are representative benchmarks for the Asian region.

Nickel US$ 11,070/t vs US$11,235/t yesterday

Zinc US$ 3,014/t vs US$3,006/t yesterday – The zinc market remained in deficit through July seeing the cumulative shortage climbing to 227kt in the first seven months of the year

• This compares to a 214kt deficit recorded through January-July 2016, according to the ILZSG.

• Both demand and supply recorded weak growth rates of 0.3% and 0.4%, respectively, with cumulative numbers coming in at 7,850kt and 8,077kt.

Lead US$ 2,314/t vs US$2,277/t yesterday – Market recorded another monthly deficit in July according to the latest ILZSG data.

• Consumption totalled 1,023kt surpassing supply of 987kt taking the deficit to 36kt.

• This extended the shortage to 109kt in the first seven months of the year compared to a 42kt surplus recorded during the same period last year.

• Chinese lead stockpiles continue to fall to the lowest since May 2017 on the back of industrial pollution inspections. This declining market output is the result of the closure of approximately 80% illegal secondary smelting operations.

• August’s ban on North Korean lead exports have only acted to tighten the concentrate market, pushing up the physical premiums on Shanghai lead contracts.

Tin US$ 20,530/t vs US$20,575/t yesterday

           

Energy:           

Oil US$55.2/bbl vs US$55.1/bbl yesterday –

• Energy shares rose on the back of the weakening U.S. dollar index, while positive forecasting by the International Energy Agency on Wednesday proposed a more rapid rebalancing of the oil market.

Natural Gas US$3.058/mmbtu vs US$3.063/mmbtu yesterday

Uranium US$20.60/lb vs US$20.65/lb yesterday

Lithium - Kuehne + Nagel launches supply chain product for lithium battery industry

• The KN BatteryChain is designed to meet rapidly increasing global demand for lithium batteries and to offer safe reliable and efficient mass transport as well as storage.

• Transport of lithium batteries is complex given their classification as dangerous goods and the need to comply with new stricter regulations and restrictions.

• The KN solution complies with the respective international dangerous goods regulations and certified against ISO9001 and the leading automotive standard ISO16949

 

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$70.0/t vs US$72.3/t

Chinese steel rebar 25mm US$662.2/t vs US$663.6/t

Thermal coal (1st year forward cif ARA) US$82.9/t vs US$83.4/t

Premium hard coking coal Aus fob US$207.8/t vs US$208.9/t – coking coal prices cut by move by blast furnaces to more efficient higher-grade Australiana and Brazilian coals and lower feedstock throughput

• Thursday’s announcement of weak economic data from China, combined with tightening environmental legislations, have generated concerns over future demand for coking coal.

• The campaign to cut steel mill pollution, restricting raw material demand, has caused the greatest price drop in coking coal futures since inception in 2013.

 

Other:  

Tungsten APT European US$310-335/mtu vs US$285-300/mtu

 

Company News

Premier African Minerals (LON:PREM) 0.43p, Mkt Cap £23.8m – Increase in Underground Resource at RHA tungsten mine in Zimbabwe

Premier owns 49% of RHA. RHA is indebted to Premier in excess of US$20m and until such time as this is settled, all concentrate produced will be attributable to Premier)

• Premier African Minerals report an increase in the underground resource at their RHA tungsten mine in Zimbabwe.

• The resource has been prepared under the South African SAMREC code rather than JORC or NI 43-101.  We see SAMREC as a perfectly acceptable code for this sort of work.

• The company report a 32% increase in the underground Measured Resource category to 0.029mt and a 52% increase in grade to 5.45kg WO3/t.

• Plus a 33% increase in the underground Indicated Resource category to 0.076mt and a 95% increase in grade to 6.31kg WO3/t.

• The overall underground grade rises by 11% to 4.72kg WO3/t and 16% increase in total underground Mineral Resources contained metal to 6,257,493 kg WO3

Table 1: Summary of the Underground Mineral Resources (September 2017)

Category Gross Net attributable Operator

Tonnes (millions) WO3 Grade (kg/t) Contained metal (kg) Tonnes (millions) WO3

Grade (kg/t) Contained metal (kg)

Underground      

Mineral Resources      

Measured 0.029 5.45 157,679 0.029 5.45 157,679 Premier

Indicated 0.076 6.31 479,936 0.076 6.31 479,936

Inferred 1.220 4.61 5,619,877 1.220 4.61 5,619,877

      

Total 1.325 4.72 6,257,493 1.325 4.72 6,257,493

      

 

Conclusion:  We view the grades as a bit skinny for the operation of an underground tungsten mine.  Mining costs are lower in Zimbabwe which should be a help. We sincerely hope that the rise in tungsten prices is sufficient to enable the survival of the RHA mine and to repay the $20m owned to Premier following problems encountered with the open pit and the process plant.

 

SolGold* (LON:SOLG) 32.8p, Mkt Cap £497m – Drilling continues to ramp up with an initial Alpala resource in December and 12 rigs due in operation by early 2018

• SolGold continue to press ahead with resource definition and drilling at the Alpala prospect in Ecuador.

• Solgold’s AIF (Annual Information Form) filed in Canada yesterday confirms that SolGold intend to issue an initial resource for Alpala in December

• The company are also committing to update the resource quarterly

• The team and planning a minimum 100,000m of drilling at Alpala alone to close off the deposit.

• In addition SolGold are looking at 165,000 - 170,000m of drilling on the other targets at Cascabel with a further estimate of 170,000m for resource definition.

• The additional 440,000m of drilling will keep the drilling and geological teams busy and give plenty of data to asses.

• SRK Exploration have been commissioned to qualify the complex geological modelling and to draft the Cascabel Technical Report covering the Alpala deposit.

• Alpala now appears significantly larger than previously understood leading to the deferment of the maiden mineral resource estimate to December due to excessive portions of the deposit remaining open.

• This has resulted in an additional minimum of 100,000m of drill testing to fully constrain the Alpala deposit.

• SolGold plans to release updated mineral resource estimates on quarterly basis till such time that the true dimension of the Alpala Deposit are realised.

• Additional porphyry copper-gold targets within the Cascabel Project will also require over 165,000m of drill testing, with a supplementary 170,000 m of drilling anticipated for resource definition at additional targets.

• Five man-portable diamond drill rigs are currently working at site with a further two man-portable rigs being mobilised to site in September.

• A further 5 large track-mounted drill rigs are being mobilised to site during the final quarter of 2017 bringing the total number of operating drill rigs to 12 by early 2018.

• SolGold will be using three drilling contractors at Alpala and on the Cascabel site to accelerate and better define the project.

Conclusion: The move to 12 drill rigs marks a significant step up in activity at the Cascabel site and should feed further exciting and massive copper, gold intersections for analysis.

The new higher level of activity could make the next 12 months a big year for SolGold.

*SP Angel acts as Nomad and broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

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Fri, 15 Sep 2017 11:02:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28600/today-s-market-view-premier-african-minerals-ltd-solgold-plc-28600.html
Today's Market View - Amur Minerals Corporation, Gem Diamonds, Metminco, SolGold plc, Tethyan Resources PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28590/today-s-market-view-amur-minerals-corporation-gem-diamonds-metminco-solgold-plc-tethyan-resources-plc-28590.html Amur Minerals* (LON:AMC) – Drilling at KUB points to a potential resource expansion

Gem Diamonds (LON:GEMD) – Demand for Letseng quality diamonds remains strong

Metminco* (LON:MNC) – Miraflores underground exploration approved

SolGold* (LON:SOLG) – Annual results and operational update

Tethyan Resources* (LON:TETH) – Drilling results from the Rudnitza prospect

 

Base metals and bulk commodities pull back on disappointing Chinese industrial production, investment and retail sales

• Copper is retreating for a third session and is trading at a one month low.

• January iron ore futures slump 5.8% today extending losses in September to 8.9%; steel rebar futures were off 1.7%.

• Gold is level after posting losses on Wednesday amid an increase in the US$ and US equities posting new highs.

• US inflation data to be released later today will be watched closely as the latest slowdown in core consumer prices growth raised questions over the course of the future monetary policy tightening.

• Brent is holding onto its earlier gains on the back of stronger demand forecasts from the IEA and OPEC; Chinese oil production continued to decline to the lowest in eight years with output drop accelerating in August on the back of an outage at offshore fields; Nigerian Petroleum Minister is looking to raise production to 1.8mmbbl per day or 170kbbl more than it is currently pumping before agreeing to a new potential OPEC output cut.

 

New nickel catalyst transforms greenhouses gases

• Scientists have designed a water soluble nickel catalyst that transforms carbon dioxide to carbon feedstock.

• The discovery opens door to creating faster more efficient first-row transition metal catalysts for carbon dioxide conversion.

 

PotashCorp looking at selling stake in world’s largest lithium producer as part of deal to enable merger with Agrium

• PotashCorp is looking at selling its 32% stake in SQM, the world’s largest lithium producer

• The 32% stake is worth around US$4.6bn on the NYSE but may sell for more given growing interest in securing lithium production.

• Rumors reported on Mining.com suggest PotashCorp may be considering the sale of a 20% stake in SQM to GSR Capital, a Chinese Private Equity firm.

• PotashCorp are looking to merge with Agrium a smaller potash producer to create a combined business worth around $36bn.

• The deal has been approved by the Canadian competition bureau but Chinese and Indian appear to want PotashCorp to divest certain minority holdings in the Canadian firm.

• While we know SQM as a lithium company, investors should note that SQM is really a potash producer with a lithium co-product.

• The new combined entity will be called Nutrien if the merger goes through.

 

Dow Jones Industrials  +0.18% at   22,158

Nikkei 225   -0.29% at   19,807

HK Hang Seng   -0.42% at   27,777

Shanghai Composite    -0.38% at    3,371

FTSE 350 Mining   -1.88% at   17,027

AIM Basic Resources   -0.41% at    2,545

 

Economics

US – Headline inflation picked up in August driven by an increase in energy prices.

• Despite a pick up in core inflation measures price pressures seem to be well contained for now.

• Hurricane Harvey related effect has not been accounted for in August numbers, although as historic data suggests inflation measures may remain elevated for a few months post storm incidents.

 

China – Economic growth unexpectedly slowed further in August following a weaker July with industrial production, investment and retail sales cooled.

• Infrastructure spending growth was down at 19.8% in the first eight months compared to 20.9% recorded in the first seven months.

• Regulatory efforts to rein in credit expansion saw home sales growing at the slowest pace in almost three years last month.

• On the positive side of things, steel production hit record high.

• Retail Sales (%yoy/YTD): 10.1/10.4 v 10.4/10.4 in July and 10.5/10.4 forecast.

• Industrial Production (%yoy/YTD): 6.0/6.7 v 6.4/6.8 in July and 6.6/6.8 forecast.

• FAI ex Rural (%YTD): 7.8 v 8.3 in July and 8.2 forecast.

 

UK – John Lewis, a supermarket and department store chain, reported a 53% drop in PBT on the back of weak consumer demand, adverse FX currency moves and restructuring charges.

• The group expected difficult consumer market conditions to persist in H2/17 exercising pressure on operational margins.

• Property prices in London are reported to have recorded the weakest month since 2008, according to the Royal Institute of Chartered Surveyor survey.

• A net 56% of respondents saw a drop in prices in London last month against a net 6% nationally seeing a price increase.

• Although, subdued outlook for property prices in the capital seem to be driven largely by prime central London locations, the report said.

 

Australia – The A$ climbed 0.5% against the US$ on surprisingly strong August employment numbers.

• Encouragingly most of the increase in the number of jobs came from the full time category accounting for c. 3/4s of the total increase.

• Additionally, the number of people actively looking for job continued to rise.

• Despite strong numbers, the RBA is expected to stay put with regards to a potential rate hike as underemployment remains high and wage growth continues to be weak, Bloomberg reports.

• Employment Change (‘000): 54.2 v 29.3 in July and 20.0 forecast.

• Unemployment Rate (%): 5.6 v 5.6 in July and 5.6 forecast.

 

Currencies

US$1.1900/eur vs 1.1991/eur yesterday.   Yen 110.38/$ vs 109.97/$.   SAr 13.124/$ vs 13.027/$.   $1.321/gbp vs $1.331/gbp.     

0.800/aud vs 0.804/aud.   CNY 6.555/$ vs 6.528/$.

 

Commodity News

Precious metals:

Gold US$1,324/oz vs US$1,333/oz yesterday - Growth in the U.S. dollar index applied pressure to the precious metal markets, pulling gold prices moderately lower.

• Stronger U.S. consumer inflation data released in the August report today at 12.30 GMT could advance increased future interest rate expectations.

   Gold ETFs 68.8moz vs US$68.7moz yesterday

Platinum US$981/oz vs US$987/oz yesterday – Ballard Power claims technology breakthrough allows replacement of platinum in fuel cell design

• The technology non-precious metal catalyst design is said to reduces amount of platinum required by >80%

• Historically less platinum in fuel cells has meant less power and conversion efficiency.  Problem has been that platinum catalysts tend to run rather hotter than most consumers and manufacturers feel comfortable with.  Previous platinum-rich designs ran at >400oC in the days when Ballard Power was a darling of the Dot.Com boom.

• If Ballard’s new designs work well then their fuel cells may provide a good supplement or alternatives to batteries in Electric Vehicles.

Palladium US$942/oz vs US$953/oz yesterday

Silver US$17.76/oz vs US$17.95/oz yesterday

           

Base metals:   

Copper US$ 6,484/t vs US$6,603/t yesterday – 29,450t increase in LME approved copper warehouse stock brings the total to 276,025t, following further fund sales of the metal.

• Copper producers to benefit from hurricanes

• Texas hurricane costs estimated at $180bn with significant new demand for copper wiring and plumbing to come from need to rebuild houses, businesses and infrastructure

Aluminium US$ 2,091/t vs US$2,132/t yesterday - Chinese gov’t efforts to minimise excess smelting capacity limited August aluminium output, which fell to the lowest since April ‘16.

• August production was reduced following the forced closure of illegal capacity of top aluminium producers China Hongqiao and Xinfa Group.

Nickel US$ 11,235/t vs US$11,725/t yesterday – Indonesian discussions to increase nickel exports to China cause a 2% price drop amid concerns of excessive supplies.

Zinc US$ 3,006/t vs US$3,053/t yesterday

Lead US$ 2,277/t vs US$2,285/t yesterday

Tin US$ 20,575/t vs US$20,695/t yesterday

 

Energy:           

Oil US$55.1/bbl vs US$54.3/bbl yesterday - Record premium for high grade iron ore

Natural Gas US$3.063/mmbtu vs US$3.010/mmbtu yesterday

Uranium US$20.65/lb vs US$20.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.3/t vs US$72.3/t -

• China’s environmental legislations are driving increasing premiums for high-grade iron ore, enhancing the output from steel mills while reducing associated emissions.

• Combined with August production highs of 74.6mt, the gap between the two iron ore grades is the greatest since August 2011.

• The environmental clean-up is pushing more steel producers to use higher quality feedstock material, eg Australian iron ore and has driven Australia and Brazil’s market share to >80% of China’s total iron ore imports.

• This is also forcing shippers of lower grade material to offer steeper discounts to draw in buyers

Chinese steel rebar 25mm US$663.6/t vs US$664.6/t

Thermal coal (1st year forward cif ARA) US$83.4/t vs US$80.5/t

Premium hard coking coal Aus fob US$208.9/t vs US$208.9/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$285-300/mtu

 

Company News

Amur Minerals* (LON:AMC) 9.3p, Mkt Cap £57m – Drilling at KUB points to a potential resource expansion

• The Company reports the third drill update at KUB as part of its 30,000m field season in 2017.

• The team completed 21,933m of drilling through 8 September 2017 across IKEN and KUB deposits, part of the Kun Manie sulphide nickel/copper project.

• Infill drilling in the central part of the KUB deposit has been completed with the Company expecting high conversion ratios of the available Inferred Resources (10.9mt at 0.74% Ni and 0.20% Cu) to the Indicated category.

• Step out drilling in the eastward direction targeted 1,000m long segment of the 3,000m long continuous anomaly running between IKEN and KUB.

• A total of 14 holes that intersected mineralisation along the 500m long part returning an average thickness of 20.1m per hole (10.8m per mineralised interval) at average grades of 0.580% Ni and 0.21% Cu.

• Results “confirm that economic grades and thicknesses are similar to drill results defined and used in the generation of the KUB mineral resource estimates”, the Company highlighted.

• The remaining drilling scheduled over the next eight weeks until the end of the season is expected to test another 500m along the identified anomaly and potentially confirm IKEN and KUB are parts of a 4.5km long deposit similar to the MKF deposit.

• Conveniently, step out drilling is being completed at a spacing used in the identification of the Indicated Resource category suggesting the 2017 field season is likely to see “a substantial increase over current global 100mt inventory reported within four deposits”.

*SP Angel act as Nomad and Broker to Amur Minerals

 

Gem Diamonds (LON:GEMD) 76p, Mkt Cap £106m – Demand for Letseng quality diamonds remains strong

• Gem Diamonds report good demand for Letseng’s high quality diamonds. 

• A recently recovered 126.75 carat D-colour Type IIa diamond and a 7.78 carat pink sold for $56,400/ct and $202,000/ct.

• The company reported an interim after tax profit in mid-August of just US$578,000 vs a loss of US$15.9m yoy.

• A combination of lower ore tonnages treated due to reduced plant availability and reduced recovered grades, which at 1.59cpht was lower than both the 1.79cpht achieved in H1 2016 and the targeted 1.63 cpht for H1 2017, led to a 12% decline in the overall production to 50,478 carats (H1 2016 57,380 carats).

• Gem Diamonds is focussing on the production of larger, higher value diamonds with improvement evident in this area.

Conclusion: If recoveries of larger stones continues to improve then Gem Diamonds looks likely to report further positive progress going forward.

 

Metminco* (LON:MNC) 2.875p, Mkt Cap £3.7m – Miraflores underground exploration approved

• Metminco has received approval for up to 2000 metres of underground development at its Miraflores gold project in Colombia.

• The development “will allow the Company to expose the previously defined ore zones on multiple levels and complete infill diamond drilling for stope definition ahead of a final decision to construct the processing facilities and supporting infrastructure”.

• The company plans to access the mineralisation on multiple levels which should provide detailed information on the mining characteristics of the deposit as well as providing sites for further underground drilling and significant quantities of mineralised material for further metallurgical testing.

• The company reiterates that it remains on course to complete the Miraflores feasibility study during Q3 2017. Given the timing, it is unlikely that the information gained from the initial exploratory underground work will be available to be incorporated in the feasibility study itself, however it should provide detailed information for the planning and implementation phases of a future mine development at Miraflores.

• In our view, gaining underground access to the mineralisation at Miraflores should provide important geological, mining and metallurgical information to help de-risk the project. It should also provide an opportunity for the company to demonstrate its operating credentials to local regulatory authorities and other interested parties within the local communities.

Conclusion: Approval for limited underground development at Miraflores should help to de-risk the project and provide detailed information for the future development.

*SP Angel act as broker to Metminco. SP Angel analysts have previously visited Los Calatos in Peru and the Miraflores project in Colombia.

 

SolGold* (LON:SOLG) 33p, Mkt Cap £500.4m – Annual results and operational update

• SolGold has reported a pre-tax loss of A$8.3m for the year ending 30th June 2017 (2016 – A$5.7m loss). The increased pre-tax loss is attributed to “A$2,239,533 (2016: A$nil) recognised as a share based payments expense representing the fair value of share options granted to employees and contractors during the year and an unrealised foreign exchange loss of A$1,032,010 (2016: gain of A$126,619) recognised on funds held in United States dollars.”

• After allowing for an A$3.8m tax benefit, the company reports an overall loss for the year of A$4.5m or 0.3Acents per share (2016 – A$5.7m loss or 0.7Acents)

• The company reports a 30th June cash balance of A$89.3m.

• The year has seen Newcrest Mining invest a total of US$62.8m in order to bring its holding in Solgold to 14.5% and the increased funding and support of a major industry player has enabled Solgold to escalate its exploration activity at Cascabel to the point where, with over 44,500m of drilling completed, the company is targeting “the Company’s maiden resource estimate for the Alpala Prospect, which is expected to be completed by the end of 2017.”

• Drilling at Cascabel “over a 2200m by 700m surface area along an 1800m deep vertical column has now defined a northwesterly-trending, steeply northeast-dipping zone of multi-phase porphyry style stock-work veining and associated phases of diorite to quartz diorite stocks and dykes”. As the company escalates its drilling campaign to a complement of 10 rigs by early 2018, the overall extent of the known mineralisation is likely to increase.

• In addition to the work at Alpala and in the greater Cascabel licence area, where only 4 targets of 15 identified and have yet been drilled, Solgold has secured a further 59 exploration tenements totalling 2,496km2 throughout Ecuador.

Conclusion: The past year has been pivotal for Solgold as it moves to its initial resource estimate at Alpala by the end of 2017.

*SP Angel acts as Nomad and broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

 

Tethyan Resources* (LON:TETH) 3.125p, Mkt £5.3m – Drilling results from the Rudnitza prospect

• Tethyan Resources has announced results from its recently completed 4 holes diamond drilling programme at the Suva Ruda licence within its Rudnitza prospect in Serbia.

• The programme which totalled 2127.6m of core “drilling at Rudnitza has confirmed that this is a very extensive mineralised system.” Among the highlighted results are:

o A 460m long intersection at an average grade of 0.21% copper and 0.20 g/t gold from surface in hole RDD-006. This intersection includes a higher grade section of 20m from a depth of 92m which averaged 1.04% copper and 0.20g/t gold; and

o A 260m long intersection at an average grade of 0.22% copper and 0.20 g/t gold from a depth of 6m in hole RDD-005. This intersection includes a higher grade section of 12m from a depth of 116m which averaged 0.78% copper and 0.13g/t gold; and

o Hole RDD-007 reported an intersection of 572m from surface at an average grade of 0.11% copper and 0.16 g/t gold including a higher grade section of 80m, from a depth of 106m at an average grade of 0.3% copper and 0.16g/t gold; and

o RDD-008 which intersected 341.7m at an average grade of 0.17% copper and 0.24 g/t gold from a depth of 138m.

• Tethyan Resources comments that “The results of these drill holes have expanded the known extent of the Rudnitza porphyry system” and that following detailed geological interpretation, the results will help the exploration team to identify areas of “higher grade mineralisation” for future drilling.

• Today’s results add to the previously reported holes RDD-001 to RDD-004 which also showed relatively near surface, long intersections at similar grades, also including some higher grade sections within the hole.

• Although the assays reported today, and earlier in the programme, are relatively low, they confirm an extensive system of disseminated mineralisation close to the surface. Until the detailed interpretation is completed, the geometry, particularly of the higher grade sections of mineralisation, remains obscure, however we would expect the company to be planning further drilling once the more promising targets have been identified.

Conclusion: Drilling confirms an extensive system of disseminated mineralisation and has provided geological information which should help identify potential higher grade targets within the system for future exploration.

*SP Angel act as broker to Tethyan Resources

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Thu, 14 Sep 2017 10:59:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28590/today-s-market-view-amur-minerals-corporation-gem-diamonds-metminco-solgold-plc-tethyan-resources-plc-28590.html
Today's Market View - Anglo Asian Mining Plc, Metminco, Tri-Star Resources, Vast Resources PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28581/today-s-market-view-anglo-asian-mining-plc-metminco-tri-star-resources-vast-resources-plc-28581.html Anglo Asian Mining* (LON:AAZ) – Start of mining at Ugur ramps up production rate

Metminco* (LON:MNC) – Interim results and progress report on Miraflores

Tri-Star Resources* (LON:TSTR) – Interim report and update

Vast Resources (LON:VAST) – Baita Plai mining licence expected shortly

 

Gold got a bit of support from escalated Pyongyang rhetoric that North Korea is planning to accelerate its nuclear programme in response to new sanctions approved by the UN Security Council on Monday.

• Gold ETF holdings climbed to 2,138t yesterday marking the highest level since mid-November.

• Copper prices correction continued amid an increase in LME stockpiles with money managers net long positions to 6-week low.

• “Oil markets have started to rebalance...pointing to firmer fundamentals,” the IEA said in its monthly report released today; “expectations are that markets are tightening and that prices will rise, albeit very modestly”.

• Oil demand growth has been revised upwards by 1.6mmbbl to 97.7mmbbl this year as strong growth momentum outpaces expected slowdown due to Hurricanes Harvey and Irma; this comes amid Opec countries and Russia plans to curb global supplies in an effort to reduce high oil inventories and boost prices.

• January iron ore and steel futures are trading higher for a second day today recovering from a slight drop at the start of the month.

 

Dow Jones Industrials  +0.28% at   22,119

Nikkei 225   +0.45% at   19,866

HK Hang Seng   -0.31% at   27,886

Shanghai Composite    +0.14% at    3,384

FTSE 350 Mining   -1.71% at   17,450

AIM Basic Resources   -0.49% at    2,555

 

Economics

Eurozone – The single currency region growth momentum remains strong with the latest employment numbers showing the pace of new jobs created by the economy keeping at the highest level since the financial crisis in 2008-09.

• The ECB is expected to announce plans on a revision in its €60bn per month QE programme during its October meeting.

• The euro is stronger against the US$ this morning extending gains seen through Q2/Q3 to 14% and hovering around the 1.20 mark.

• Employment Gains (%yoy): 1.6 in Q2/17 v 1.6 in Q1/17 (revised from 1.5).

 

UK – Unemployment continued to fall beating market estimates while growth in earnings slowed and lagged forecasts.

• The jobless rate now stands at the lowest level since 1975.

• Slowing gains in labour earnings are attributed to “an element of Brexit uncertainty”, according to BoE; whereas, different explanations include poor productivity and companies limiting wage increases amid an rise in import costs, Bloomberg reports.

• The pound fell 0.4% against the US$ following the release of the news coming off the strongest level since September last year.

• Unemployment (3 months, %): 4.3 in 3m to July v 4.4 in 3m to June and 4.4 forecast.

• Earnings ex Bonus (3 months, %yoy): 2.1 v 2.1 in June and 2.2 forecast.

 

Currencies

US$1.1991/eur vs 1.1975/eur yesterday.   Yen 109.97/$ vs 109.56/$.   SAr 13.027/$ vs 12.909/$.   $1.331/gbp vs $1.321/gbp.     

0.804/aud vs 0.805/aud.   CNY 6.528/$ vs 6.529/$.

 

Commodity News

Precious metals:

Gold US$1,333/oz vs US$1,327/oz yesterday

• U.S. President Donald Trump’s latest comments regarding U.N. sanctions with North Korea have improved the demand.

• U.S. Treasury Secretary Steven Mnuchin threatened new financial sanctions on Beijing to cut off access to the U.S. financial system if China doesn’t back up the U.N. sanctions.

   Gold ETFs 68.7moz vs US$68.6moz yesterday

Platinum US$987/oz vs US$991/oz yesterday

Palladium US$953/oz vs US$944/oz yesterday

Silver US$17.95/oz vs US$17.79/oz yesterday

           

Base metals:   

Copper US$ 6,603/t vs US$6,729/t yesterday

• Copper stocks in LME approved warehouses rose over 10,000 tonnes (4.7%) following commodity fund sales of copper.

• Strengthening of the U.S. dollar encouraged the sale of positions in London metals.

Aluminium US$ 2,132/t vs US$2,127/t yesterday

Nickel US$ 11,725/t vs US$11,720/t yesterday

Zinc US$ 3,053/t vs US$3,090/t yesterday

Lead US$ 2,285/t vs US$2,277/t yesterday

• Tightening concentrate supply concerns in China continues to encourage positive buying interest.

• Equipment failure at Chinese Haicheng Chengxin Nonferrous Metal Co. suspended production at the 100 Ktpa smelter.

Tin US$ 20,695/t vs US$20,705/t yesterday

           

Energy:           

Oil US$54.3/bbl vs US$53.7/bbl yesterday

Natural Gas US$3.010/mmbtu vs US$2.961/mmbtu yesterday

Uranium US$20.65/lb vs US$20.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.3/t vs US$72.3/t

Chinese steel rebar 25mm US$664.6/t vs US$664.4/t

• Major Chinese steel maker Baoshan Iron Steel announced higher steel product prices for October bookings.

Thermal coal (1st year forward cif ARA) US$80.5/t vs US$80.9/t

Premium hard coking coal Aus fob US$208.9/t vs US$209.4/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$285-300/mtu

 

Company News

Anglo Asian Mining* (LON:AAZ) 26.8p, Mkt Cap £30m – Start of mining at Ugur ramps up production rate

• Production commenced at Ugur located within the Gedabek license area and linked by a 4.6km long road to the Company’s processing facilities.

• Processing of Ugur ores contributed to increased gold dore daily production rates which climbed 116% to 212oz in the first 10 days of September compared to the previous eight months.

• Average daily production is expected to improve further as Ugur operations ramp up to full capacity.

• As a result the Company reiterated its FY17 annual production guidance for 64-72koz of gold equivalent.

• Ugur ore is being treated at the agitation plant at Gedabek while flotation plant is running at 300-400tpd processing mainly high sulphide stockpile ore.

Conclusion: The team has done well in delivering a reserve/resource statement and commissioning mining operations at Ugur in a year since the discovery. Production start at Ugur lends confidence to the management team to reiterate annual production guidance supplying oxide ores to the agitation plant while Gedabek and Gadir operations go through a production review.

*SP Angel act as Nomad and Broker to Anglo Asian Mining

 

Metminco* (LON:MNC) 2.5p, Mkt Cap £3.2m – Interim results and progress report on Miraflores

• The Company has announced a loss of A$30.7m for the six months ending 30th June. The loss included a A$27.2m on the sale of its Los Calatos project in Peru to CD Capital as well as an unrealised loss of A$1.6m on a derivative instrument. Cash at 30th June stood at A$6.3m.

• The company expects to complete  the Bankable Feasibility Study on proposed underground mining of its flagship, Miraflores Gold Project, by the end of Q3 2017. Miraflores, which is located in the Middle Cauca Belt of Colombia, contains a Measured and Indicated, JORC compliant, resource of 9.3m tonnes at an average grade of 2.82g/t gold and 2.77 g/t silver.

• The company estimates that it will mine 4.32m tonnes of ore at a grade of 3.3g/t gold and 2.56 g/t silver to produce around 50,000 oz pa of gold over a 9 years mine life.

• Under the planned development, mining will use three access tunnels, designated the South, North and Main Portals, to open up the orebody to trackless mechanised mining. The decision to develop Miraflores as an underground mine significantly reduces the surface environmental disturbance of open-pit mining envisaged by the project’s previous owners and is expected to accelerate the permitting process as a result.

•  The company notes that it has achieved “significant operating cost savings” through “optimisation of the mining plan and schedule” and that metallurgical testwork has “confirmed previous testwork results with gold recovery of 91% confirmed.”

Conclusion: We look forward to the detailed results of the BFS and to news on the progress of the permitting for Miraflores.

*SP Angel act as broker to Metminco. SP Angel analysts have previously visited Los Calatos in Peru and the Miraflores project in Colombia.

 

Tri-Star Resources* (LON:TSTR) 0.15p, mkt cap £28.5m – Interim report and update

• TriStar Resources reports a loss of £5.7m (0.06p/share) for the six months ending 30th June as it presses ahead with the development of the 40% owned Oman Antimony Roaster (OAR) by the Omani company, Strategic and Precious Metals Processing (SPMP).

• The loss includes a £3.6m, non-cash charge arising as  a result of the conversion of Loan Notes held by Odey Asset Management (OAM) which took place in June and resulted in OAM holding 54% of TriStar Resources’ equity.

• Administrative costs have been reduced by 14% to £410,000 (H1 2016 £478,000). Cash at 30th June amounted to £1.1m.

• The company recaps on the progress of the OAR where construction has been underway since early in the year and on design changes which facilitate the treatment of a wider range of feedstock, including the construction of a gold treatment circuit and the associated gas handling infrastructure.

•  Independent test-work has confirmed good recoveries of antimony and gold and aided the design changes which are now being implemented in the plant construction. These changes which, we consider will increase the flexibility of the plant and, in particular, enhance the ability to treat a wide range of mineral concentrates, have resulted in the previously announced increase in the capital budget to $96m.

• These design changes and the increased budget make it “highly likely that TriStar will be required to contribute significant additional capital to SPMP in order to maintain the Company’s 40% stake in the OAR project.” At this stage, in the absence of further information we are maintaining our view that an additional contribution of around US$7.5m may be required from TriStar.

• Earlier this year, in June, the company announced that SPMP had agreed a long term mineral concentrate supply agreement with the international trading business of Traxys Europe in order to source antimony and gold concentrates for the roaster.

• The company observes that environmental measures in China compounding seasonal weakening in demand has seen subdued Chinese production but that “In recent months, antimony prices have increased  have increased amid tightening of supply of the metal  over the summer months.”

Conclusion: TriStar Resources has stabilised its finances through the conversion of its debt which has given it an historically supportive long term major shareholder in OAM. Operationally construction is now well underway with an expanded design capability to treat a wider range of mineral concentrate material. Access to these feedstocks is enhanced by the supply agreement with Traxys.

*SP Angel acts as Nomad and Broker to Tri-Star Resources

 

Vast Resources (LON:VAST) 0.39 pence, Mkt Cap £18.3m – Baita Plai mining licence expected shortly

• Vast Resources reports that it expects to receive permission to mine the Baita Pali polymetallic mine in Romania “during September”. The outstanding step in the permitting process requires the payment of US$1.6m which “has been provided by a 180 day loan facility from Sub-Sahara Goldia  Investments(“Sub-Sahara”)”.

• The loan which carries an interest rate of 1% per month, repayable by 9th March 2018, “has been added to the existing US$4 million loan previously announced on  30 January 2017 and is on the same terms. … The Company’s 49.9 per cent stake in Sinarom Mining Group … has been provided as additional security for the Loan.”

• The company comments that “Obtaining the right to mine at Baita Plai will represent a significant milestone in the process of expanding the mining operations of Vast in Romania becoming the Company’s second mine in country alongside its Manaila Polymetallic Mine”.

Conclusion: The permitting of Baita Plai is expected to be concluded later this month adding a second mine in Romania emphasising the company’s shift from its earlier roots in Africa. The loan finance is in place to complete the transaction though given the terms which include the pledge of its Romanian assets as security and the comment that “Vast now looks forward to securing the strategic investment to support growth initiatives planned at both mines”, we would not be surprised by a refinancing.

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Wed, 13 Sep 2017 11:08:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28581/today-s-market-view-anglo-asian-mining-plc-metminco-tri-star-resources-vast-resources-plc-28581.html
Today's Market View - Altus Strategies, Botswana Diamonds, Phoenix Global Mining Ltd, Petropavlovsk PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28573/today-s-market-view-altus-strategies-botswana-diamonds-phoenix-global-mining-ltd-petropavlovsk-plc-28573.html Altus Strategies* (LON:ALS) – Agdz copper silver project reconnaissance trenching update

Petropavlovsk* (LON:POG) - Interims

Botswana Diamonds (LON:BOD) – Exploration update on S African joint-venture

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

 

121 Mining Investment Conference 27-28 November 2017 – London

• SP Angel are sponsoring the 121 Mining Investment Conference in London on Monday 27 and Tuesday 28 November.  .

• The event works well from an investor meeting perspective and we advise investors and directors register quick to ensure they get a place in the 121 meeting planner

• Please contact me for further details. 

 

Miners are marginally stronger today on the back of higher iron ore and coking coal prices while base metals and precious metals trade lower today.

• Gold is retreating trading around $1,350/oz as geopolitical concerns subside and risk appetite increases with S&P 500 hitting new record high.

• The US$ index is holding up to its gains rebounding from a multi year low earlier this month.

• Brent is weaker today giving some of its gains reported through September when US refineries reported restarting operations post Hurricane Harvey related temporary closures.

• Irma is said to have left seven million Americans without power with the storm expected to drop 8-15 inches of rain in parts of northern Florida as it moves up the coast.

• Steel rebar futures in Shanghai are up for the first day in five as investors see support from demand through the rest of the year, Bloomberg reports.

 

China deliberately moving to refocus economy on new, more efficient growth and away from old heavy industrial model.

• Comments published by Damien Ma, a fellow and associate at the Paulson Institute indicate that China is looking to develop a more modern service-orientated, domestic consumption and more efficient economy.

• He comments that there is a deliberate effort to really slow down the Chinese economy as it moves away from the old, heavy industrial model..

• China is aiming for 6.5% GDP Growth through to 2020 and to make china a high-income country by 2049 according to Ma who was talking at the ISRI Commodities Roundtable Forum in Chicago.

• China observers will note that 6.5% is less than 8.4% seen in 2010-2015 and slightly slower than 6.8% from 2015 to today (YTD).  The lower GDP target still reflects amazing growth for the world’s second largest economy.

• The pattern of development effectively follows other now advanced developing nations.  Eg Japan, South Korea and others, the difference being the Centralist Communist Government and its clear focus on strategic planning.

• Pollution is a key and immediate driver given the horrendous damage done to the environment in China and the urgent need to improve air quality particularly through the winter months.

 

China restricting exports of key industrial commodities as it moves to better balance rising domestic demand with internal production

• The move is causing prices of many industrial commodities to rise.

• Tungsten prices are continue to rise as China seen enforcing export quotas.

• Vanadium prices have risen on new regulations requiring more ferro-vanadium in rebar.

• Rare Earth Element prices rising on rising demand and an end to the destocking seen in recent years since the end of a number of failed collective investment schemes.

• The EU asked the WTO to look into Chinese export restrictions on Antimony, ferrochrome, cobalt, indium, copper, ferro-nickel, graphite, lead, tantalum and tin.

• We believe all the above metals are also seeing supply disruption caused by the enforcement of new environmental regulation on furnaces and on polluting mines.

 

China considering banning production of combustion engine vehicles to force producers and consumers to go electric. 

• Adding up the potential rise in electrical power demand to run the new generation of electric vehicles indicates a marked increase in the consumption of copper.

• Increasing demand is expected for cables in new Electric Vehicles as well as in the instillation of new charging points and for cabling to ensure sufficient power capacity to feed millions of new charging stations.

 

Lithium - Lithium ETF prices surged to new 6-year high on expected demand growth for lithium batteries after China announced commitment to EV only future

• Demand for lithium is expected to surge more than 30x 2030 as world shifts towards EV and industry standardizes on lithium-ion batteries

• Fears of shortage has already caused lithium carbonate prices to triple in China requiring more mines to support production

 

Tanzania - authorities block parcel of diamonds worth $29.5m claiming that Petra has under declared its value

Petra Diamonds may be left with no choice but to close the Williamson Diamond mine following a move to block the export of diamonds from the mine.

• Problem is that the provisional valuation of the diamonds is performed by the government’s own diamond and gemstone valuation agency.

• There is no reasonable way a diamond mining company can operate if its sales are impeded in this way and Petra’s Williamson diamond mine may not have sufficient funds to pay local staff and suppliers.

• While Acacia has alternative sources of income, Petra has no such fall back leading to potential mass redundancies.

• The move presents a worrying escalation in the aggressive approach the president is taking in relation to mining companies.

• Tanzania would do well to note the collapse of the Zambian copper industry which was caused by it’s nationalisation by President Kaunda

 

America First – Hurricanes Second

• Gun owners in the US have been advised not to shoot the storms.

• Graphics show bullets fired into Hurricane Irma being carried high by the storm winds before falling back to earth with potentially fatal consequences.

• It would be interesting to know the odds of being hit by your own bullet if you fired it directly into a storm cell, though it is probably allot less than shooting an Armadillo, another US pastime.

 

Dow Jones Industrials  +1.19% at   22,057

Nikkei 225   +1.18% at   19,777

HK Hang Seng   +0.05% at   27,968

Shanghai Composite    +0.09% at    3,379

FTSE 350 Mining   +0.12% at   17,718

AIM Basic Resources   -0.46% at    2,568

 

Economics

Currencies

US$1.1975/eur vs 1.2006/eur yesterday.   Yen 109.56/$ vs 108.50/$.   SAr 12.909/$ vs 12.938/$.   $1.321/gbp vs $1.319/gbp.     

0.805/aud vs 0.804/aud.   CNY 6.529/$ vs 6.519/$.

 

Commodity News

Precious metals:

Gold US$1,327/oz vs US$1,337/oz yesterday - Scientists have created a new wonder material that changes between mirror and window using gold nanoparticles

   Gold ETFs 68.6moz vs US$68.5moz yesterday

Platinum US$991/oz vs US$1,004/oz yesterday - Enzymes compete with platinum in new fuel cell

• Researchers succeeded in making an enzymatic fuel cell that is as good as fuel cells that work using platinum catalysts – make cheaper alternatives to fuel cells that require rare and expensive metals

Palladium US$944/oz vs US$949/oz yesterday - Palladium thought to be benefiting from strong Chinese car sales data due to its use in catalytic converters, though forecasts are for sales to fall

Silver US$17.79/oz vs US$17.85/oz yesterday

           

Base metals:   

Copper US$ 6,729/t vs US$6,735/t yesterday - Copper Prices bounce back from correction

• Three month copper price fell by over $200 at the end of last week but trading back at above $6,700/t this morning as inventories continue to fall.

• Rising electric vehicle production and renewable energy systems are expected to keep demand for copper at elevated levels.

Aluminium US$ 2,127/t vs US$2,128/t yesterday

Nickel US$ 11,720/t vs US$11,635/t yesterday - Sherrit International considers Nickel for Battery market

• One of worlds largest producers of Nickel looking to build plant to produce nickel sulphate a substance that can be used in batteries – main component of lithium ion batteries nickel

• BHP Billiton, world’s largest mining house planned to spend $43 million on repositioning its nickel business around batteries

Zinc US$ 3,090/t vs US$3,097/t yesterday

Lead US$ 2,277/t vs US$2,283/t yesterday

Tin US$ 20,705/t vs US$20,630/t yesterday

           

Energy:           

Oil US$53.7/bbl vs US$53.8/bbl yesterday

Natural Gas US$2.961/mmbtu vs US$2.923/mmbtu yesterday

Uranium US$20.65/lb vs US$20.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.3/t vs US$71.9/t

Chinese steel rebar 25mm US$664.4/t vs US$664.5/t

Thermal coal (1st year forward cif ARA) US$80.9/t vs US$80.5/t

Premium hard coking coal Aus fob US$209.4/t vs US$209.4/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$285-300/mtu

 

Company News

Altus Strategies* (LON:ALS) 10.1p, Mkt Cap £10.9m – Agdz copper silver project reconnaissance trenching update

• Exploration team completed a series of trenches at the Agdz Cu-Ag project located in central Anti-Atlas of Morocco and 14km south west from the newly opened Bouskou Cu-Ag operated by Group Managem.

• 275m trenching programme was done over two targets – Amzwaro and Makarn, – with a combined strike length of c.4km and widths up to 0.5km.

• Completed to an average depth of 0.5m, trenches targeted bedrock below a weathered material and guided by previously ddone ground magnetics and high grade surface samples.

• Trenches confirmed the presence of multiple alteration and breccia zones as well as oxide and sulphide copper mineralisation.

• One of the trenches at Makarn showed disseminated and vein-hosted copper oxide and copper sulphides over 14.8m with channel samples completed over 1m intervals returning grades of 0.2% Cu.

• At Amzwaro 237m have been completed with one done over 192m demonstrating “a series of weathered, highly altered, brecciated and fractured zones in packages over widths of up to 33m” with copper oxides and sulphides recorded having been near absent at surface.

• The Company is planning to continue with reconnaissance trenching through Q4/17 in the area combined with detailed structural and alteration mapping to identify most prospective drill targets.

Conclusion: Exploration works continue at the two most advanced targets across the Agdz copper silver project in Morocco where the exploration team is trench testing previously identified structures and alteration zones.

*SP Angel act as Nomad and Joint Broker to Altus Strategies

 

Petropavlovsk* (LON:POG) 7.2p, Mkt Cap £235m - Interims

• Revenues up 20% at $304m (H1/16: $254m) on the back of higher gold sales (231.8koz v 195.4koz in H1/16) and stronger realised gold price ($1,255/oz v $1,194/oz in H1/16).

• H1/17 gold sales benefited from the release of gold in circuit which amounted to 50.8koz across four operations.

• Forward gold contracts covering 100koz that matured in H1/17 contributed $2.8m (H1/16: -$5.5m) to cash revenues with another 500koz at an average price of $1,252/oz outstanding as of 30 Jun/17.

• TCC and AISC came in at $675/oz and $965/oz (H1/16: $663/oz and 762/oz) driven by an appreciation in the rouble against the US$, local inflation and weaker recoveries at Pioneer and Malomir.

• AISC totalled $965/oz (H1/16: $762/oz) including higher sustaining capex ($21.3m (incl sustaining exploration costs) v $3.9m in H1/16) due to Pioneer and Malomir underground projects and expansion of tailings dams at Pioneer and Albyn as well as increased central admin costs ($23.1m v $13.1m in H1.16).

• Higher admin costs were primarily “attributed to a $5.2m increase in staff costs, mainly as a result of the proposed key management bonus accrual, an increase in Russian staff costs due to the appreciation of RUB against US dollar and general increase in Russian salaries, and $4m professional fees incurred in relation to corporate projects”.

• EBITDA climbed to $114.1m (H1/16: $88.0m) and EBIT was at $64.9m ($34.2m).

• Capex (including exploration) increased to $41.9m (H1/16: $11.9m) as the Company restarted POX development project and continued exploration and development works to support the underground mining at Pioneer and Malomir.

• FCF (post interest) improved to $32.7m (H1/16: $18.0m (excluding sale proceeds for the disposal of Verkhnetisskaya and Visokoe assets)).

• Net debt came down 5% to $570m (HY16: $599m).

• 2017 annual target reiterated at 420-460koz with TCC expected to come in at the upper end of the original guidance for $600-700/oz; net debt is forecast to close at $560m by year end assuming current USDRUB rate and $1,265/oz average gold price through the remainder of the year.

Conclusion: Interim results show improved cash generation driven by stronger gold sales and prices while pressures from the USDRUB rate appreciation has been partially mitigated by a boost in production from the release of the gold in circuit in H1/17.

 

Botswana Diamonds (LON:BOD) 1.6 pence, Mkt Cap £7.1m – Exploration update on S African joint-venture

• Botswana Diamonds reports that it has now completed 17 reverse-circulation drill holes on the Zebediela kimberlite within its diamond exploration joint-venture project with Vutomi Mining, near Frishgewaagt in the Limpopo Province of S Africa.

• Details of the depth and location of these holes, which are described as “pilot holes for a Large Diameter Drilling programme which is scheduled to commence next month” have not been disclosed, however they “have been drilled to further delineate the extensive kimberlite pipe/fissure system” and will, presumably aid the detailed planning for the forthcoming large diameter programme which is probably mainly intended to provide a sufficiently large sample for the company to establish an initial view of the distribution of any diamonds within the system.

• The wider programme is aimed at the generation of an inferred mineral resource estimate for Zebediela by the end of the year. “Zebediela is located in close proximity to the … Marsfontein Mine, which had an average grade of 172cpht and diamond value of US$128/ct”; and no doubt Botswana Diamonds is hoping for a similar deposit on this ground.

• Elsewhere, detailed ground geophysical surveying at the company’s newly discovered Ontevreden kimberlite in the North West Province has identified an anomalous area measuring approximately 100m x 70m.

• Samples taken at Ontevreden are currently being assessed for kimberlite indicator minerals in conjunction with the University of Johannesburg. The discovery “is close to Petra's Helam Mine which has grades running as high as 500 cpht and diamond value of US$255/ct” and even at this early stage, we presume that the company is hoping for a similar outcome.

Conclusion: The exploration programmes in S Africa remain at an early stage with no assay data specific to the company’s properties yet disclosed. The licence areas are, however, in relatively close proximity to other known mineable diamond pipes. The large diameter drilling scheduled to start at Zebediela in the coming weeks is intended to help generate an initial, inferred, resource by the end of this year. We look forward to the results at both Zedediela and Ontevreden as they become available and to the initial resource estimates which should give the first tangible indication of the economic potential.

 

Phoenix Global Mining* (LON:PGM) 4.1p, Mkt Cap £9.5m – Further drilling results from Empire

• Phoenix Global Mining, which is working to re-open the historic Empire copper mine in Custer County, Idaho, reports that its 28 hole drilling programme comprising 21 reverse-circulation (1595m) and 7 large diameter diamond drill holes (537m) at the AP oxide pit has been completed.

• Assay results from the first 14 holes have been received and results from the remaining holes are expected “in forthcoming weeks”. Among the highlights reported today are:

o 21.3m at an average grade of 0.86% copper, 1.22% zinc, 13.03g/t silver and 0.14g/t gold from a depth of 41.2m in hole KX17-3;

o Including 4.6m at an average grade of 1.65% copper, 2.30% zinc, 3.37g/t silver and 0.04g/t gold from a depth of 56.4m also in hole KX17-3;

o 35.1m at an average grade of 0.29% copper, 0.70% zinc, 12.56g/t silver and 0.0.70/t gold from surface in hole KX17-7;

o 70.1m at an average grade of 0.34% copper, 5.85g/t silver and 0.38g/t gold from surface in hole KX17-9;

o 51.8m at an average grade of 0.42% copper, 9.16g/t silver and 0.24g/t gold from a depth of 13.7m in hole KX17-6; and

o 51.8m at an average grade of 0.51% copper, 0.11% zinc, 16.09g/t silver and 0.07g/t gold from a depth of 12.2m in hole KX17-11;

• The wider intersections reported above contain higher grade sections with grades as high as 2.06% copper over a 4.6m wide section within hole KX17-3 and a 16.8m wide section within hole KX17-11 from 12.2m depth which averaged 1.02% copper and 33.99g/t silver.

• The current drilling work is part of a programme to revise and update the existing resource estimate which is expected to be available during Q4 2017 to be followed by a preliminary feasibility study (PFS) early in Q2 2018.

• Phoenix Global Mining has appointed key consultants for the PFS. The PFS team will be led by M3 Engineering and Technology which is well known for its work in the design and commissioning of SX-EW copper plants in the US, supported by Hard Rock Consulting for the reserve and mining studies, Minerals Technology on the metallurgical testing and Cascade Earth Sciences to complete the environmental and permitting work.

• Among other developments at the Empire mine site, the company reports that it has engaged a mining contractor to regain access to the old workings in order to undertake a programme of sampling and appraisal of the deeper sulphide mineral potential beneath the AP pit area.

• Commenting on the wider potential, CEO, Dennis Thomas, pointed out that “Whilst the oxide resource offers the near term development opportunity, the deeper sulphide resource is of potentially significant value to us given the historic grades of up to 11.4% copper plus gold, silver and tungsten that have been recovered”. Once safe access to the extensive historic underground workings is established, the company plans to “commence a programme to assess the deeper sulphide potential beneath the AP pit oxides.”

Conclusion: Since its admission to the AIM market in June, Phoenix Global Mining has completed its initial drilling appraisal of the AP pit area at the Empire mine and is targeting an update of the existing resource, of 7.26mt at an average grade of 0.55% copper with an additional inferred resource of 5.55mt at an average grade of 0.51% copper, before the end of the year with a preliminary feasibility study expected during Q2 2016. We look forward to the remaining drilling results and the completion of the resource and pre-feasibility studies.

*SP Angel acts as Nomad to Phoenix Global Mining

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Tue, 12 Sep 2017 11:24:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28573/today-s-market-view-altus-strategies-botswana-diamonds-phoenix-global-mining-ltd-petropavlovsk-plc-28573.html
Today's Market View - Dalradian Resources, Ortac Resources Ltd, Petra Diamonds, Stellar Diamonds PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28561/today-s-market-view-dalradian-resources-ortac-resources-ltd-petra-diamonds-stellar-diamonds-plc-28561.html US dollar gains as Huricane Irma loses power and North Korea fails to celebrate nation’s anniversary with missile firing

 

China considering ban on production of combustion engine vehicles

• China produced and sold >28m vehicles last year with EVs and hybrids rising by 50% to >500,000

 

Tungsten prices continue to gain - APT European US$310-335/mtu vs US$285-300/mtu last week

• Tungsten prices continue to rise.  The increase in prices may reflect proposals to rebuild strategic stocks while supplies of low grade tungsten from Chinese mines may be cut back.

 

China commodity imports may be running out of momentum

• The big question in base metals and other industrial commodity markets is on how much will environmental closures affect Chinese metals production?

• Reuters comments this morning on “China’s commodity imports show why rally in prices may stall”.

• Reuters’ focus is on falling imports for crude oil and coal which they see as tapering off in recent months.

• We are not surprised to see lower import numbers through August as China’s crackdown on polluting mines, smelters and other businesses should naturally reduce energy consumption.

• Furthermore, directives to enforce the closure of polluting businesses through the worst winter months are likely to prompt lower stock levels at power utilities, blast furnaces etc…

• Comparing the fall in commodity exports with import numbers should reveal more about underlying activity and overall demand trends within China

• China’s focus on electric vehicles is also likely to cause to a longer term increase in coal consumption while leading to a decline in crude oil imports.

• China already has some 200m e-bikes on the road with around 700 e-bike manufacturers.  There are so many e-bikes that legislation now limits e-bikes from certain parks of its major cities.

• China is also ramping up Electric Vehicle production to further reduce the nation’s dependence on oil imports, while the recent fall in oil imports may also reflect a slowdown in the construction and stocking of massive strategic storage facilities.

• While coal imports remain firm, local production is reported to be rising to better balance domestic needs though the quality of new local coal is likely to be significantly less than imported material.

• Imports for copper and iron ore remained relatively strong through August probably reflecting more ongoing internal demand growth for steel and copper products.

• Imports of unwrought copper were steady through June, July and August indicating that copper demand remained firm and that many processors continue to operate despite new environmental controls

• We expect to see lower export exports for many refined commodity products as polluting mines and furnaces close.  While some will reopen following work on their environmental compliance we suspect many will not as the cost of rehabilitation and environmental compliance will raise production costs beyond economic sense.

• We have already seen significant disruption to commodity imports and exports in some of the speciality metals such as antimony, vanadium, titanium and tungsten with prices rising strongly as a result of both temporary and permanent plant closures in China.

• Rare Earth Element prices are also seen rising strongly as resolving the pollution issues relating to the production of Rare Earths from clays in China is no easy matter.

 

Dow Jones Industrials  -0.10% at   21,785

Nikkei 225   -0.63% at   19,275

HK Hang Seng   +0.53% at   27,668

Shanghai Composite    -0.01% at    3,365

FTSE 350 Mining   -0.63% at   17,829

AIM Basic Resources   +0.04% at    2,606

 

Economics

Currencies

US$1.2047/eur vs 1.1966/eur yesterday.   Yen 107.64/$ vs 108.97/$.   SAr 12.821/$ vs 12.823/$.   $1.314/gbp vs $1.306/gbp.     

0.809/aud vs 0.801/aud.   CNY 6.466/$ vs 6.501/$.

 

Commodity News

Precious metals:

Gold US$1,337/oz vs US$1,354/oz yesterday - Gold retreats from 1 year high as dollar gains ground

   Gold ETFs 68.5moz vs US$68.5moz yesterday

• Gold fell early Monday morning after hitting highest level in over a year, with recovery in US dollar reining in any upward momentum in the metal

• Dollar recovered from last week’s low as a lack of geopolitical developments dented safe-haven appeal of gold

Platinum US$1,004/oz vs US$1,019/oz yesterday

Palladium US$949/oz vs US$956/oz yesterday

Silver US$17.85/oz vs US$18.18/oz yesterday

           

Base metals:   

Copper US$ 6,755/t vs US$6,807/t yesterday

Aluminium US$ 2,128/t vs US$2,094/t yesterday

Nickel US$ 11,600/t vs  US$11,940/t yesterday - New Australian nickel mine hoping to cash in on battery demand

• A new nickel mine in Australia is pinning its hopes on use of nickel in electric vehicle batteries which could significantly raise demand for the metal

Zinc US$ 3,096/t vs US$3,090/t yesterday

Lead US$ 2,283/t vs US$2,309/t yesterday

Tin US$ 20,630/t vs US$20,750/t yesterday

           

Energy:           

Oil US$53.8/bbl vs US$54.7/bbl yesterday

Natural Gas US$2.923/mmbtu vs US$2.971/mmbtu yesterday

Uranium US$20.75/lb vs US$20.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.2/t vs US$74.6/t - Iron Ore prices continue to pull back

• Some weakness is down to a sharp rally in the Chinese Yuan on Friday leaving it at fresh multi-year high against the US dollar

Chinese steel rebar 25mm US$674.2/t vs US$671.8/t

Thermal coal (1st year forward cif ARA) US$80.5/t vs US$80.0/t - Coal prices set to lose their spark

• Benchmark coal prices may pull back over next couple of years as China and India strive to meet demand with through domestic production

• Coal imports are expected to remain subdued because of low demand from coal-based units and the rise in renewable energy capacity

Premium hard coking coal Aus fob US$210.0/t vs US$210.0/t

 

Other:  

Tungsten APT European US$310-335/mtu vs US$285-300/mtu

Quarterly hard coking coal US$285.0/t vs US$285.0/t

 

Company News

Dalradian Resources (LON:DALR) 100 pence, Mkt Cap £264.2m – Taking a new look at Curraghinalt veins

• In a report which the company emphasises is not a new resource update, Dalradian Resources outlines the findings of a “sensitivity study” on two veins (T17 and V75) at its Curraghinalt gold deposit in Northern Ireland.

• The study, which lays increased emphasis on the detailed geology observed in the drilling, “yields 24% narrower veins accompanied by a 20% decrease in tonnage”.

• “This change in modelling sequence, … can in part explain the positive reconciliation between mill and resource (42% more ounces) resulting from the test stopes completed in 2016.”, leading to the conclusion that “The bottom line is that we have 32% more mineable ounces for the two veins tested."

• The results show that contained ounces of gold within the T75 vein are 3% higher than previously expected for the measured/indicated resource and 10% greater for the inferred resource with grades around 35% higher than originally modelled. On the T17 vein, measured and indicated ounces are 15% higher and inferred ounces of gold are 9% higher as a result of a 38% increase in modelled grades.

Conclusion: The higher grades seem better to reflect the results of the various trial mining exercises completed by the company and are reported to tie in better with the observed geology. The conclusion that the resources are contained within lower estimated tonnages is helpful but the mining of narrower veins will require rigorous control of mining operations in order to minimize dilution and capture the benefits of the higher grades.

 

Ortac Resources* (LON:OTC) 2.375p, Mkt cap £3.5m – New board emphasises African focus

• Ortac Resources has emphasised that under the direction of its new Chairman, Nick von Schirnding, the company is “to focus exclusively  on its high potential African exploration mining assets.”

• These comprise the copper assets of Zamsort in Zambia and the gold exploration of Casa Mining in the DRC where drilling of the priority target at Akyanga started in late August.

• The company is looking “to divest its investment in Eritrea” where it holds an 18.5% interest in Andiamo Exploration as well as considering “a number of strategic options with respect to its Slovakia (Kremnica) gold project”.

• In Slovakia, Ortac reports that it “is in constructive discussions with a number of parties, both local and international and in the interim, will keep associated expenditures to a minimum.”

Conclusion: The decision to focus on its principal African projects and move away from the Slovakian project where it has encountered repeated setbacks on permit issues, now largely resolved, comes as little surprise. We look forward to news of progress in Zambia and the DRC and of the possible divestment of Andiamo and the Slovakian interests.

*SP Angel acts as nomad and broker to Ortac Resources

 

Petra Diamonds (LON:PDL) 83p, mkt cap £441.5m – Tanzania blocks diamond exports from Williamson – mine operations temporarily shut down

• The company has confirmed that “a parcel of diamonds (71,645.45 carats) from the Williamson mine in Tanzania has been blocked from export to Petra’s marketing office in Antwerp and certain key personnel from Williamson are currently being questioned by the authorities.”

• As a result of the diversion of these “key personnel” from their usual duties, “operations at Williamson have temporarily been stopped for health and safety and security reasons.”

• The measures come as part of the Government’s implementation of new measures to control the minerals industry, however, the company makes clear that “the grounds upon which these actions have been taken have not been made clear to the Company as yet.” The company also indicates that it has yet to receive a copy of the report which led to the blocking of the export of this parcel of diamonds.

• Petra points out that the Government, which has a 25% interest in the mine, “has complete oversight of the diamonds produced at the mine, which are physically controlled by a number of different Government representatives in conjunction with Petra from the point of recovery until the point of sale.”

• Emphasising the transparency of the chain of custody, the company also points out that “the provisional valuation of the diamond parcels from Williamson before they are exported to Antwerp is carried out by the Government’s Diamonds and Gemstones valuation agency” and not by the company.

• This provisional valuation is the basis of provisional royalty payments to the Tanzanian Government with subsequent adjustments applied based on the actual sales achieved.

• The company emphasises its commitment to address the concerns raised by the parliamentary investigation and “to resolve this matter and ensure that the correct information is available to all parties.”

Conclusion: The company makes a strong case for the transparency of its operations at Williamson and emphasises the involvement of government, which is a 25% owner of the mine, at all stages of the production and sales process. We hope that there is a speedy resolution leading to a resumption of normal activity at Williamson before the impact on the mine workforce and the company becomes too onerous.

 

Stellar Diamonds (LON:STEL) 3.375 pence, Mkt Cap £1.4m – Placing and £200,000 open offer

• Stellar Diamonds reports that “it has conditionally raised £330,000 through the issue of 10,153,847 new Ordinary Shares of the Company at an issue price of 3.25 pence per share”.

• “In order to provide all Stellar shareholders with an opportunity to participate in the proposed issue of new ordinary shares of the Company, the Company proposes to raise up to approximately £200,000 (before expenses), at 3.25 pence each through an open offer”

• The funds are to be used to “prioritise payment of the Tongo environmental licence and renewal of the Tonguma environmental licence (estimated $250,000 for both”. The approval of the Tongo Mining licence in Sierra Leone is “subject to the payment of the Tongo environmental licence” and hence the financial capacity to secure the renewal of the environmental licences is a key milestone in the project development.

Conclusion: The funding should help to keep the longer term development of the Tongo project on track.

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Mon, 11 Sep 2017 10:36:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28561/today-s-market-view-dalradian-resources-ortac-resources-ltd-petra-diamonds-stellar-diamonds-plc-28561.html
Today's Oil and Gas Update: Columbus Energy Resources PLC, Jersey Oil and Gas PLC, Mosman Oil And Gas, Mayan Energy, Providence Resources PLC, Tlou Energy Ltd, Zenith Energy http://www.proactiveinvestors.co.uk/columns/sp-angel/28559/today-s-oil-and-gas-update-columbus-energy-resources-plc-jersey-oil-and-gas-plc-mosman-oil-and-gas-mayan-energy-providence-resources-plc-tlou-energy-ltd-zenith-energy-28559.html Headlines

• In Brief:

o Mosman Oil And Gas*** (LON:MSMN – 1.52p) – ($9.80mm – 3.20p) – Permian Acquisition

o Providence Resources (LON:PVR – 8p) – Drombeg Dry

o Mayan Energy (LON:MYN – 0.29p) – Update

o Jersey Oil and Gas (LON:JOG – 77p) – Verbier and Partridge Well Results

o Zenith Energy (LON:ZEN/ CVE:ZEE – 7p/C$0.11) – Funding to What?

o Columbus Energy (LON:CERP – 2.95p) – Boost for Trinidad Assets

o Tlou Energy (LON:TLOU/ ASX:TOU – 8p/A$0.14) – Good Progress So Far

In Brief

• Mosman Oil and Gas*** (LON:MSMN – 1.52p) – ($9.80mm – 3.20p) – Permian Acquisition: Today’s announcement of an acquisition in West Texas the and is the next step in the Company’s target at increasing its exposure to producing assets. It is too early to quantify what impact today’s acquisition will have on the overall valuation.

• Providence Resources (LON:PVR – 8p) – Drombeg Dry: Today’s announcement will be disappointing for many people, not least the Company’s technical team. However, what is more important than the if the Company from here on in is what is going to happen next Barryroe.

• Mayan Energy (LON:MYN – 0.29p) – Update: Today’s update detailing yet another strategic partnership, whilst its demonstrates a management team seeking two grow the Company’s the value, it appears from the outside that the approach is chaotic and more “scatter gun” than rifle shot. What if the management team need to do is articulate their strategy, and more importantly, where the application of that strategy will generate shareholder returns.

• Jersey Oil and Gas (LON:JOG – 77p) – Verbier and Partridge Well Results: Today’s announcements that both Wells are dry holes will undoubtedly disappointed not only management, but the Company’s owners too. What the management does next will define the how they’re viewed by the public, and more importantly by their existing shareholders. We believe that the management team need to cut these results in the context of the remainder of their portfolio and highlight any impact, if any, that today’s announcement has on the remaining prospectivity.

• Zenith Energy (LON:ZEN/ CVE:ZEE – 7p/C$0.11) – Funding to What?: While we’re certain that today’s announcement of an equity issue to fund the acquisition of a workover rig, given what we know about the Company’s plans makes sense, it is difficult to put it in the context of what it means for shareholder value. The management team need to articulate their plan, providing us with adequate milestones to measure their performance.

• Columbus Energy (CERP LN – 2.95p) – Boost for Trinidad Assets: Today’s announcement is a vindication of the approach that the Company has taken to date in Trinidad, which begs the question as to what this management team will do to create shareholder value over and above what the past management team had already highlighted.

• Tlou Energy (LON:TLOU/ ASX:TOU – 8p/A$0.14) – Good Progress So Far: Are there is nothing new in today’s announcement, it is a timely reminder of the progress that the Company has made. While the progress that they have made has been significant, and not easy, in many respects the hard yards are about to start. We believe that the Company will soon provide its outline for the intermediary steps to the supply of power generated by the gas from its CBM assets. With this route map, the Company’s owners and potential investors will be able to identify the key risks and milestones. There is no doubt that the Company’s owners should be pleased with the way in which the management team have approached progress so far.

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Mon, 11 Sep 2017 09:21:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28559/today-s-oil-and-gas-update-columbus-energy-resources-plc-jersey-oil-and-gas-plc-mosman-oil-and-gas-mayan-energy-providence-resources-plc-tlou-energy-ltd-zenith-energy-28559.html
Today's Market View - Alexander Mining, BHP Billiton, Eramet, Stratex International, Petra Diamonds and Tethyan Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/28548/today-s-market-view-alexander-mining-bhp-billiton-eramet-stratex-international-petra-diamonds-and-tethyan-resources-28548.html Alexander Mining (LON:AXM) – Vanadium research and development project
BHP Billiton (LON:BLT) – US bond tenders
Eramet - 2020 Start for Eramet Argentina Lithium
Stratex International (LON:STI) – Request for a General Meeting
Petra Diamonds (LON:PDL) – Tanzania orders review of Petra’s diamond exports
Tethyan Resources* (LON:TETH) – Proposed delisting

Dow Jones Industrials  -0.10% at   21,785
Nikkei 225   -0.63% at   19,275
HK Hang Seng   +0.53% at   27,668
Shanghai Composite    -0.01% at    3,365
FTSE 350 Mining   -0.63% at   17,829
AIM Basic Resources   +0.04% at    2,606

Economics
The US$ index weakened to a new 33 month low and the euro continued to strengthen following the ECB meeting on Thursday.
• Gold prices are trading at the highest level in a yea on the back of continued escalated rhetoric between the US and North Korea.
• Pyongyang may see another missile test this weekend amid the “founding day” celebrations on September 9.
• Copper is on course for the first weekly drop ending an eight-week bull run with the latest Chinese trade showing a slowdown in exports growth for a second month in August.
• Iron ore futures are heading for the biggest decline since May with the latest data on ore imports showing year to date shipments slowed posting a 6.6% increase (Jan-Aug) v 7.5% recorded in the Jan-Jul period.
• Oil is higher this morning and is looking to post the first weekly increase since July as Gulf Coast refiners ramp up crude processing operations following Hurricane Harvey disruptions.

Economies
US – Weekly jobless claims jumped the most since 2012 affected by Hurricane Harvey.
Date Event   Survey Actual Prior Revised
Tuesday Factory Orders Jul -3.3% -3.3% 3.0% 3.2%
  Factory Orders Ex Trans Jul -- 0.5% -0.2% 0.1%
Wednesday ISM Non-Manf. Composite Aug 55.5 55.3 53.9 --
  U.S. Federal Reserve Releases Beige Book         
Thursday Initial Jobless Claims Sep-02 242k 298k 236k --
  Continuing Claims Aug-26 1945k 1940k 1942k --
Source: Bloomberg     

China – Exports came in lower than forecast slowing for a second month in August amid strengthening yuan; imports performed well implying robust domestic demand.
• Nevertheless, exports are reported to be performing better posting growth after contracting in much of 2015 and 2016.
• Exports (%yoy US$): 5.5 v 7.2 in July and 6.0m forecast.
• Imports (%yoy US$): 13.3 v 11.0 in July and 10.0 forecast.

ECB – The ECB kept rates unchanged saying economic growth is recovering although underlying inflation fails to pick up significantly.
• The bank said that it will announce plans to end its €2tn economic stimulus programme in October with the council said to have had “very, very preliminary discussion” about how to phase out the QE.
• On a pro stimulus side of things, Mario Draghi mentioned stronger euro which might slow down inflation over the next two years.
• Hence, the bank revised its inflation forecasts slightly lower for the 2018-19 period to 1.2% and 1.5%, respectively, down 0.1% from June estimates.
• GDP growth estimates were left unchanged at 1.8% and 1.7%.
• The euro climbed more than 1% against the US$ at some point following the press conference and is currently trading at the highest level since early 2015.

UK – “No sign on the horizon of a return to healthier level of growth,” the British Chambers of Commerce said in its quarterly report regarding economic outlook in the UK.
• “The rising upfront cost of doing business in the UK, the uncertainty around Brexit, and the constraints created by skills gaps and shoddy infrastructure collectively outweigh any benefit arising from the recent depreciation of sterling.”
• The BCC marginally revised its 2017 GDP estimates upwards to 1.6%% (+0.1pp on previous estimates) on the back of stronger consumer spending in H1/17 but cut its 2018-19 estimates to 1.2% (-0.1pp) and 1.4% (-0.1pp).
• The BCC expected exports to contribute less to growth than many other forecasters suggest in their medium term outlooks.

France – Industrial production continued to strengthen in July hitting the highest level since Nov/15.
• Industrial Production (%yoy): 3.7 v 2.4 (revised from 2.6) in June and 3.6 forecast.

Mexico – Tsunami warning has been issued across most of Central America following an earthquake registered 70 miles off the southwestern coast of Mexico today.
• The earthquake recorded magnitude 8.2 with tremors felt in Mexico City which was more than 500 miles away from the quake’s epicentre.

Tanzania – President John Magufuli ordered a review of the Petra Diamonds’ Williamson operation.
• Magufuli ordered local authorities to investigate allegations of under-declared diamond exports, Mining Weekly reports.

Currencies
US$1.2047/eur vs 1.1966/eur yesterday.   Yen 107.64/$ vs 108.97/$.   SAr 12.821/$ vs 12.823/$.   $1.314/gbp vs $1.306/gbp.     
0.809/aud vs 0.801/aud.   CNY 6.466/$ vs 6.501/$.

Commodity News
Precious metals:
Gold US$1,354/oz vs US$1,338/oz yesterday - Gold prices could soon hit $1,400 but downside risks remain
• Downside risks remain if dollar rebounds gold prices will fall
   Gold ETFs 68.5moz vs US$68.5moz yesterday
Platinum US$1,019/oz vs US$1,006/oz yesterday
Palladium US$956/oz vs US$946/oz yesterday - New Way to convert methane to methanol using gold-palladium nanoparticles
• Liquid methanol is widely used as feedstock for other chemicals and has considerable potential as an alternative fuel source
• Researchers discovered gold-palladium nanoparticles can directly oxidise methane to methanol under relatively mild conditions
Silver US$18.18/oz vs US$17.88/oz yesterday
           
Base metals:   
Copper US$ 6,807/t vs US$6,870/t yesterday - Copper rise to three year high before slipping back 1.5%
• Copper hit a fresh three year high yesterday thanks to encouraging economic numbers out of China
• Prices on London Metal Exchange hit three year high on Tuesday clocking $6,970 a tonne
Aluminium US$ 2,094/t vs US$2,097/t yesterday
Nickel US$ 11,940/t vs US$12,135/t yesterday - Cuba shuts down nickel industry as Hurricane Irma approaches
• Cuba has begun to shut down its nickel industry in preparation for Hurricane Irma, one of two plants was closed and the other was operating at minimum capacity and is set close as conditions warrant.  The industry is located near flood prone coast

Zinc US$ 3,090/t vs US$3,089/t yesterday – Chinese production dropped 8.7%yoy to 372kt in August, according to Beijing-based Antaike and its survey of 47 local smelters with total capacity of 6.1mtpa.
• Weaker production was driven by seasonal maintenance, environmental checks and limited ore supply.
• Output in September is expected to remain constrained at 370-380kt on the back of ore shortage.
Lead US$ 2,309/t vs US$2,338/t yesterday
Tin US$ 20,750/t vs US$20,730/t yesterday
           
Energy:           
Oil US$54.7/bbl vs US$54.6/bbl yesterday
Natural Gas US$2.971/mmbtu vs US$3.023/mmbtu yesterday
Uranium US$20.90/lb vs US$20.65/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$73.2/t vs US$74.6/t
Chinese steel rebar 25mm US$674.2/t vs US$671.8/t
Thermal coal (1st year forward cif ARA) US$80.5/t vs US$80.0/t
Premium hard coking coal Aus fob US$210.0/t vs US$210.0/t

Other:  
Tungsten APT European US$285-300/mtu vs US$269-275/mtu

Lithium - 2020 Start for Eramet Argentina Lithium
• Eramet, the French government metal alloys group is to start construction of a new 20,000tpa lithium carbonate project in Argentina
• The project is to use a direct extraction process, eg no evaporation ponds.

Company News
Alexander Mining (LON:AXM) 0.13 pence, Mkt Cap £1.9m – Vanadium research and development project
• Alexander Mining have announced they intend to run a research and development project for potential vanadium leaching technology.
• It’s interesting that the rise in vanadium prices has caught the attention of the team at Alexander Mining.
Conclusion: So far the company’s greatest achievement has been the leaching of shareholder value and we suspect this latest project will result in the further leaching of shareholder funds.

BHP Billiton (LON:BLT) 1,444.p, Mkt Cap £84.5bn – US bond tenders
• BHP Billiton has announced that following its previously announced plan to spend up to US$1bn in aggregate to repurchase a portion of its debt it has received tenders for a total of US$1.25bn.
• Tenders comprise US$72.2m for the 3.25% 2021 Notes, US$416.1m for the2.875% 2022 Notes and US$765.6m for the 3.85% 2023 Notes.
• We estimate that at 30th June 2017, the Company had net debt of approximately US$16.3bn having reduced the figure from around US$26.1bn a year earlier.
• Among the FTSE 100 mining companies, BHP Billiton with gearing (net debt: capital employed) of around 21% sits at around the average gearing of 23%. To put this into context, Glencore is the most geared, at 39% (US$28bn), while Randgold Resources holds net cash of approximately US$0.6bn.

Eramet - 2020 Start for Eramet Argentina Lithium
• Eramet, the French government metal alloys group is to start construction of a new 20,000tpa lithium carbonate project in Argentina
• The project is to use a direct extraction process, eg no evaporation ponds.

Stratex International (STI LN) 1.15p, Mkt cap £5.4m – Request for a General Meeting
• Stratex International reports that a group of shareholders has requested a General Meeting to consider the termination of the proposed all-share acquisition of Crusader Resources and “to make certain changes to the board”.
• The company “is advised that the request is currently invalid” and advises shareholders to “take no action” although it indicates that it will make an “announcement in due course.”
• The Crusader acquisition represents a significant change in direction from the company’s roots in exploration in Turkey and Africa, which led amongst other achievements, to mine construction of the Altintepe gold mine, into Brazil where the new management of Stratex is looking to ally itself with Crusader to develop the Borborema and Juruena gold projects.
• Yesterday, Stratex announced that its due-diligence review had identified potential to optimise the development plan at Borborema which had the potential to reduce capex by around $20m to below $100m and also that Crusader had received an initial payment of approximately US$0.32m for the conditional sale of its Posse iron ore mine.
Conclusion: It appears that some shareholders disagree with the new course mapped out for Stratex, and we have previously noted that the acquisition price of Crusader Resources, which would leave existing Stratex shareholders with around 19% of the enlarged company, appears relatively full. We await developments but would observe in general that disputes of this nature, if they are not resolved quickly and amicably, often result in the erosion of shareholder value.

Petra Diamonds (LON:PDL) 90.2p, mkt cap £480m – Tanzania orders review of Petra’s diamond exports
• The President of Tanzania, John Magufuli, has ordered a review of Petra Diamonds and its diamond exports
• The President has also asked a number of senior public officials to resign over allegations of corruption in the mining sector.
• Petra holds a 75% stake in the Williamson diamond mine with 35% held by the Tanzanian government
• The President has ordered law enforcement agencies to investigate allegations of under-declared diamond exports as he has done with Acacia’s gold exports.
• The President’s move with Acacia was then followed by further demands for compensation payments or for a large stake in the company to be given to the government.
• New laws have increased local taxes and renegotiate contracts to enable the state to own up to 50% of mining companies.
• The government has also barred the export of gold and copper concentrates and mineral sands.
Conclusion: Petra has always appeared a respectable and honourable company.  The government risks denigrating the value of it’s stake in the Williamson mine through its actions.

Tethyan Resources* (LON:TETH) 2.4p, Mkt £4m – Proposed delisting
• Tethyan Resources has announced today its proposed delisting from the London market.
• The delisting will occur subject to shareholder approval from 75% of investors who bother to vote in accordance with AIM rule 41.
• The company listed on the TSX Venture exchange market on Wednesday.
Southern Arc Minerals currently controls 29.91% of Tethyan Resources.  A recent presentation by Southern Arc Minerals describes the TSX-V listing filing as for better access to the North American mining market.
*SP Angel act as broker to Tethyan Resources

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Fri, 08 Sep 2017 10:48:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28548/today-s-market-view-alexander-mining-bhp-billiton-eramet-stratex-international-petra-diamonds-and-tethyan-resources-28548.html
Today's Market View - Acacia Mining, Georgian Mining Corporation, Ironridge Resources Limited http://www.proactiveinvestors.co.uk/columns/sp-angel/28541/today-s-market-view-acacia-mining-georgian-mining-corporation-ironridge-resources-limited-28541.html Acacia Mining (LON:ACA) – Cutbacks at Bulyanhulu reduce production guidance by 100,000 oz of gold.

Georgian Mining* (LON:GEO) STRONG BUY – New mine plan to include results from another 28 drill holes into Gold Zone 2. Satisfaction of US$6m commitment obligation four months ahead of schedule

IronRidge Resources* (LON:IRR) – New corporate presentation

 

Gold $1,339/oz - A continuing escalation of rhetoric between North Korea and the US saw safe haven assets rallying on Tuesday with 10y US Treasury yields coming off 10bp while the yen climbed c. 0.9% against the US$.

Donald Trump agreed to support billions of dollars in new weapons sales to South Korea while the US ambassador to the UN Security Council supported “the strongest sanctions” against North Korea.

Gold nearly hit $1,345/oz this morning amid voting Fed member Lael Brainard comments that the US central bank should pay close attention to underlying inflation before raising rates again.

Copper is holding up well trading near the highest level in three years

European equities drifted lower after US markets finished in the red in the first day of trading following the Labour Day weekend

Steel rebar futures dropped in China as production recovered post reported accidents at local steel mills while a separate report showed nationwide rebar stockpiles climbed 5.2% last week marking the largest increase since February.

Brent held onto its previous session gains trading near the strongest level in more than three weeks as key refineries restarted operations post Hurricane Harvey related shutdowns.

 

Hurricane Harvey and Palladium

Palladium reached highest price in almost 16 years after US automakers reported better than expected August sales

Higher demand is also expected in flood affected areas Hurricane Harvey has left many vehicles damaged beyond repair

 

Nissan – develops longer range electric car

Nissan has added 50% to the range of its new model Nissan Leaf vehicles.

This is still short of the range offered by Tesla and GM but is a significant improvement.

The new Leaf will have a 40kWh battery to give it a range of 235 miles under EU standards and just 150 miles under US standards.

The real-world range is probably somewhere between the two.

Nissan has sold some 283,000 Leaf cars since their launch in 2010 making it the world’s most purchased electric vehicle.

 

Economics

US – A sharp decline in large durable goods in July was largely expected and balanced out a surge in the previous month reflecting high demand for non-defence aircraft orders at the Paris Air Show.

Adjusting for one offs business orders continue to demonstrate good growth momentum following a pickup in business investment seen over the last several quarters.

Shipment of goods in the beginning of the current quarter point to the positive contribution to GDP from the business sector to continue through Q3.

 

U.S. Federal Reserve Releases Beige Book

 

Germany – Business orders surprisingly contracted MoM in July led by a decline in bulk orders.

General trend remained positive.

Factory Orders (%mom/yoy): -0.7/+5.0 v 0.9/5.1 in June and 0.2/5.8 forecast.

 

Australia – The latest GDP numbers for H1/CY17 show the slowdown in growth rates has been led by weaker government spending and declines in business investment, albeit at a slower pace.

Businesses remain cautious over committing more funds to future growth with surveys suggesting firms are expecting to cut capex by 4% in the 12 months to June 2018 compared to 11% planned for the year ended in June 2017.

On a more positive side of things, household spending picked up as did net exports during the quarter.

The A$ edged lower against the US$ following the release to $0.7993 after hitting a five-week intraday high of $0.8028 late yesterday.

Q2 GDP (%yoy): 1.8 v 1.8 (revised from 1.7) in Q1 v 1.9 forecast.

 

Canada – The CAD$ is trading at the highest level against the US$ in 26 months ahead of the central bank decision due today.

Markets forecast no change in benchmark rates to be announced following a 25bp hike recorded in July.

 

Currencies

US$1.1921/eur vs 1.1876/eur yesterday.   Yen 108.66/$ vs 109.44/$.   SAr 12.921/$ vs 12.985/$.   $1.302/gbp vs $1.292/gbp.    

0.798/aud vs 0.796/aud.   CNY 6.545/$ vs 6.545/$.

 

Commodity News

Precious metals:

Gold US$1,338/oz vs US$1,331/oz yesterday

   Gold ETFs 68.5moz vs US$68.2moz yesterday

Platinum US$1,007/oz vs US$1,002/oz yesterday – The market returned to surplus in Q2/17 on the back of stronger supply and a decline in auto, jewellery and industrial demand, according to the latest World Platinum Investment Council.

Production outpaced demand by 75koz during the quarter compared to a 305koz deficit recorded in Q1/17.

As investment demand is expected to halve this year, the WPIC forecasts a balanced market in 2017 following years of deficit.

Palladium US$964/oz vs US$979/oz yesterday

Silver US$17.90/oz vs US$17.80/oz yesterday

          

Base metals:  

Copper US$ 6,895/t vs US$6,942/t yesterday

Aluminium US$ 2,082/t vs US$2,113/t yesterday

Nickel US$ 11,965/t vs US$12,180/t yesterday

Zinc US$ 3,081/t vs US$3,196/t yesterday

Lead US$ 2,315/t vs US$2,399/t yesterday

Tin US$ 20,600/t vs US$20,715/t yesterday

          

Energy:          

Oil US$53.3/bbl vs US$52.2/bbl yesterday

Natural Gas US$2.966/mmbtu vs US$3.025/mmbtu yesterday

Uranium US$20.50/lb vs US$20.25/lb yesterday

 

Lithium - MGX Minerals aiming to get Lithium from Oil wastewater

Canadian company, MGX, is looking to feed demand for lithium from oil extraction wastewater – at present water is disposed of but contains lithium carbonate which they hope to obtain commercially by end of year.

MGX have reported the processing of wastewater from and lithium brine from 2 mines and 6 oil and gas sites in North America using a pilot plant capable of handling a cubic meter if water an hour, independent assays of lithium expected in next 3 weeks.

The process can remove contaminants from water at cost of $1 per barrel and extract minerals from this at roughly the same cost again.

Benefits are said to be cost competitive, turning waste water into clean water as a by-product and also that the lithium can be extracted in just a few days as compared to the 18 months through solar evaporation.

MGX claims it can recover almost 70% of lithium in oil wastewater and recoveries should continue to improve.

https://www.greentechmedia.com/articles/read/the-company-aiming-to-get-lithium-from-oil

          

Bulk:  

Iron ore 62% Fe spot (cfr Tianjin) US$76.1/t vs US$76.5/t

Chinese steel rebar 25mm US$669.2/t vs US$671.5/t

Thermal coal (1st year forward cif ARA) US$80.3/t vs US$79.5/t

Premium hard coking coal Aus fob US$210.0/t vs US$210.0/t

 

Other: 

Tungsten APT European US$285-300/mtu vs US$269-275/mtu

 

Company News

Acacia Mining (LON:ACA) 189 pence, Mkt Cap £774m – Cutbacks at Bulyanhulu reduce production guidance by 100,000 oz of gold.

Following its announcement earlier this week of operational measures, including the cessation of underground operations at the Bulyanhulu mine,  to constrain cash outflows while it seeks to negotiate with and adjust to the new regulatory regime in Tanzania, Acacia Mining has announced that it has purchased put options over 210,000oz of gold production at a strike price of US$1300/oz.

The options, which expire in equal 35,000oz instalments over the next six months secure a minimum gold price of US$1300/oz while retaining “full upside exposure should the gold price continue to trade above US$1,300 per ounce.”

Acacia Mining produced 428,203oz of gold during the first half of 2017 and hence, in the light of the new guidance for the year of around 750,000oz, the 210,000oz represents approximately 60% of the likely second half production.

The options cost a total of US$3.2m, equivalent to approximately US$15 per ounce for each of the ounces covered by the put option.

Conclusion: Acacia Mining continues to strive in its efforts to mitigate the impact of Tanzania’s restrictions on the export of mineral concentrates. The latest move to secure a minimum gold price of US$1300/oz for around 60% of its production over the next six months comes at a price but provides an important safety net in the event that the company’s woes are compounded by a future reversal of the recent strength in gold prices.

 

Georgian Mining* (LON:GEO) 19.125p, Mkt Cap £21.9m – New mine plan to include results from another 28 drill holes into Gold Zone 2

Satisfaction of US$6m commitment obligation four months ahead of schedule

(Georgian’s assets in Georgia are held in a 50:50 joint venture)

STRONG BUY

Georgian Mining report today the satisfaction of their US$6m financial commitment to earn into 50% of the assets of Georgian Copper & Gold JSC ‘GCG’ and Caucasian Mining Group JSC ‘CMG’.

The Georgian team have held successful strategic discussions in Tiblisi with its joint venture partners which hold a mining license over a 860sqkm target area.

We note they don’t issue exploration licences in Georgia. They issue 30 year mining licences with 5 year exploration periods which are termed “Licence for the Extraction of Subsoil Minerals”.

The JV partner has confirmed its initial commitment and full support for the ‘phased future development of Kvemo Bolnisi’, GEO’s first mining project.

Results from a further 28 drill holes which are outstanding from Gold Zone 2 are to be integrated into the resource to optimise the mine plan before finalising the KB mining and processing agreement.  The results are due from the assay lab within weeks and we expect these to show a material increase in the gold oxide resource.

GEO and its jv partners will then move to finalise the KB gold oxide mining and processing agreement using the Madneuli process plant.

Conclusion: Georgian Mining and their 50:50 jv partners are expanding their initial plan to mine gold oxides at and near surface.  The results are due within weeks after which the mining and processing agreement will be finalised.  Mining the gold oxides should provide an effective pre-strip for what we believe will be a much larger copper sulphide resource underneath.

While the real value of Georgian Mining should lie in the mining of the copper resource the near-term mining and recovery of gold from the gold oxide cap should provide significant cash flow.  This should pay for much of the exploration and feasibility study work for the future development of the much larger copper resource.  We see this as presenting unusual potential for investors.

*SP Angel acts as Nomad and Broker to Georgian Mining.

 

IronRidge Resources* (LON:IRR) 31p, Mkt Cap £82m – New corporate presentation

IronRidge Resources has released a new corporate presentation, delivered to the “Africa Down Under Conference” in Perth, on its website at https://www.ironridgeresources.com.au/presentations/

The presentation provides an update, including detailed maps and geological information, on the company’s gold exploration in Chad, where the completion of the Tekton acquisition was announced earlier this week, and in Cote d’Ivoire; the lithium exploration in Ghana; as well as the iron ore project in Gabon and the bauxite exploration in Queensland.

Among the financial information is the disclosure that the company held a cash balance of US$12.3m at 31st August which indicates that there is currently adequate funding available to pursue multiple exploration targets across west and central Africa and in Australia.

Conclusion: The latest presentation provides a, largely technical, review of the diverse exploration opportunities currently pursued by IronRidge in west and central Africa and Australia.

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Wed, 06 Sep 2017 10:50:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28541/today-s-market-view-acacia-mining-georgian-mining-corporation-ironridge-resources-limited-28541.html
Today's Oil and Gas update: Frontera Resources Corporation, Nostra Terra Oil and Gas Company plc, SDX Energy Inc, Zenith Energy http://www.proactiveinvestors.co.uk/columns/sp-angel/28540/today-s-oil-and-gas-update-frontera-resources-corporation-nostra-terra-oil-and-gas-company-plc-sdx-energy-inc-zenith-energy-28540.html Headlines

In Brief:

Frontera Resources (LON:FRR – 0.108p) – Only Now the Workover Rig?

Nostra Terra (LON:NTOG– 1.43p) – Pine Mills a Building Block

SDX Energy (LON:SDX / CVE:SDX – 46p/C$0.73) – Fundraising Raises Circle Questions

Zenith Energy (LON:ZEN/ CVE:ZEE – 7p/C$0.14) – Sustained Production is Key

In Brief

Frontera Resources (LON:FRR – 0.108p) – Only Now the Workover Rig?: Today's news, that a workover rig is mobilising to test the findings of a well drilled by previous licence holders is an interesting development. It begs the question as to why the Company is targeting it now when it obviously wasn't good enough before, it all sounds a bit chaotic. While there is a “new” management team, and this could be the change of direction that is required, but we fail to see how anything can change the fact that the previous management team destroyed value. To our mind, there is still such a lack of transparency, that we find ourselves asking the question as to what value the Georgian assets have, and is it achievable in the real world. We conservatively estimate that between this incarnation, and the previous one, that ~$400mm has been invested in the Georgian assets which has gotten them no further than late stage appraisal. Against this backdrop, we fail to see how early equity investors will even make back their money, or how the Company will be funded in any meaningful way without substantial dilution, given the contempt with which the previous team treated the convertible holders. What the Company requires is a clean slate and a complete break with the management team that oversaw the destruction in value. That can start with the “new” CEO, but it must be compete, and involve a new approach to investors.

Nostra Terra (LON:NTOG – 1.43p) – Pine Mills a Building Block: Today's news is a positive for the Company as it now allows it to fully access Pine Mills' value, both in terms of a lever to other assets, and a cash source. On the latter point, of more importance to NTOG, is the cash that it is owed, and if delivered to the Company, will provide a significant building block for other things. Egypt still remains a thorn, but the underlying asset is a solid base, provided the operating costs can be fully resolved. All in all, the summer has been a positive one, but the forward roadmap is now more important than ever.

SDX Energy (LON:SDX / CVE:SDX  – 46p/C$0.73) – Fundraising Raises Circle Questions: There is no doubt that SDX's management team completed a great deal for its shareholders when it acquired Circle's assets for the price they did. Make no bones about it, the bid was a competitive one set in the context of the Circle’s then distressed situation. That SDX was able to raise the cash it did, and has gone from strength to strength on what is a higher-grade portfolio than its legacy portfolio, is testament to the deal that was done. What is continues to do, however, in the context of the performance since, is raise the question of whether the creditors achieved a fair price for the Circle’s owners, or in that matter, themselves. However, businesses aren't charities, the creditors have an obligation to their investors, and it is SDX's shareholders that are reaping the rewards.

Zenith Energy (LON:ZEN / CVE:ZEE  – 7p/C$0.14) – Sustained Production is Key: Today's announcement neatly summarises the good work that Mike Palmer is doing, and although the 1m bpd target is a good sound bite, we believe that further funding will be required to get there. What is more important, however, is how the wells produce over the longer term, not just after the well has been worked-over. While nearly all workovers return the cash cost (eventually), only successful programmes generate a return. While the difference sounds trite, this is the central tenet of ZEN's offering, and one which we have not seen articulated adequately. What is needed is a clear programme, with costs and milestone against which we can measure the Company's (and managements) performance. We know that Mike Palmer has the ability to be able to this, it's now up to the management team to fully harness it.

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Wed, 06 Sep 2017 10:03:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28540/today-s-oil-and-gas-update-frontera-resources-corporation-nostra-terra-oil-and-gas-company-plc-sdx-energy-inc-zenith-energy-28540.html
Today's Market View - Anglo American, Birimian, Ironridge Resources Limited, Ormonde Mining plc, Shanta Gold Limited, Strategic Minerals Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28531/today-s-market-view-anglo-american-birimian-ironridge-resources-limited-ormonde-mining-plc-shanta-gold-limited-strategic-minerals-plc-28531.html Anglo American (AAL LN) – De Beers diamond sales slip

Birimian Limited (BGS AU) – Exploration at Goulamina lithium project shows three new pegmatite zones

IronRidge Resources* (IRR LN) – Completion of Tekton acquisition

Ormonde Mining* (ORM LN) – Barruecopardo on track for commissioning in Q3 2018

Shanta Gold (SHG LN) – Hold – Optimisation of the cost base and management changes

Strategic Minerals* (SML LN) – August delivers record sales at Cobre

 

Copper – prices continue to rise as China grows, manufacturers restock and investors look forward to further electrification

Copper prices look set to continue to rise as manufacturers, traders and investors look to secure supplies.

The environmental crackdown in China may have precipitated the price run but ongoing infrastructure and other growth in China along with the further electrification of urban sites for electric vehicles is likely to continue to ramp up demand.

Further, around 2mt of copper has been lost by major producers representing close to 10% of total mined (20.2mt 2016) and <10% of refined production (23.3mt 2016) so far this year through strikes and production issues.  While this is not particularly unusual in our view the losses are ahead of the 5% many forecasters might expect.

Critically, we feel it is increasingly difficult for the major mines to ramp up copper production again and for new mines to come to production indicating to us that the market response to higher prices will be less than seen in previous cycles.

 

Gold is slightly off this morning with European equity markets trading higher as risk-off sentiment subsided.

Brent is climbed marginally while copper gained most among industrial metals amid a largely range bound US$ index.

The US are back from a long holiday weekend with reports on durable goods orders, unemployment claims and the Fed’s Beige Book due this week.

Final Eurozone PMI numbers for August confirmed strong growth momentum in the region with the manufacturing sector growth accelerating post a slowdown in the previous month and the services segment growing at above its long-term trend.

“On current trend, output growth so far in the third quarter is slightly below its second quarter high, but remains among the best seen over the past seven years,” Markit wrote.

Positive Chinese services sector numbers for August came on top of good manufacturing data released last week.

Steel futures are lower today (-0.2%) following a strong run in previous session on the back of the news of a number of fire accidents at Chiense steel mills; iron ore is down as well (-2.0%).

 

Sky Taxis – Dubai pushing to become first city with drone taxis in the sky

http://www.bbc.co.uk/news/business-41088196

Drone taxis are fast becoming a reality with Uber, Airbus and Daimler looking to develop new drone Sky Taxis.

Battery capacity is still a challenge with the FAA requiring flights to have a spare 20mins of fuel on landing which does not leave much flight time on current capacity

The next generation of Li-ion batteries should lengthen flight times and could turn Sky Taxis into the next transport revolution.

This combined with incremental improvements in rotor design and motor efficiency should also add hugely to their potential.

 

Tungsten prices continue to rise

Tungsten prices continue to rise with prices now reported at US$285-300/mtu vs US$269-275/mtu last week as reported by the Metal Bulletin.  This is the benchmark price generally used by mines in the West for pricing contracts.

Prices are rising on the back of environment related issues in China, a lack of US DLA sales and the potential for the US DLA to start restocking tungsten again if Congress pass a proposal to classify a number of industrial metals and other elements as strategic minerals.

 

 

Economics

China – Following positive manufacturing activity reports in August, services PMI numbers came in ahead of estimates as well seeing the composite index recovering from a trough recorded in April-June.

New orders growth posted gains at both service providers and goods producers while inflation pressures continued to strengthen.

“The recovery in both manufacturing and services has led the economic outlook to continue to improve,” Markit/Caixin wrote.

Markit/Caixin Manufacturing PMI (announced on 01 September): 51.6 v 51.1 in July and 51.0 forecast.

Markit/Caixin Services PMI: 52.7 v 51.5 in July.

Markit/Caixin Composite PMI: 52.4 v 51.9 in July.

 

China bans offerings of Bitcoins and other cryptocurrencies

It was inevitable that China would crack down on Coin offerings of bitcoins and other cryptocurrencies.

Tech companies have been taking advantage of a lack of regulation in the space.

Nearly $400m has been raised through Initial Coin Offerings ‘ICOs’ in China this year.

This is not the first Chinese crackdown on crypto-currencies but it is inevitable that governments and security services will want to block this financing route.

 

Currencies

US$1.1876/eur vs 1.1889/eur yesterday.   Yen 109.44/$ vs 109.51/$.   SAr 12.985/$ vs 12.952/$.   $1.292/gbp vs $1.294/gbp.    

0.796/aud vs 0.795/aud.   CNY 6.545/$ vs 6.538/$.

 

Commodity News

Precious metals:

Gold US$1,331/oz vs US$1,338/oz yesterday

   Gold ETFs 68.2moz vs US$68.1moz yesterday

Platinum US$1,002/oz vs US$1,012/oz yesterday

Palladium US$979/oz vs US$997/oz yesterday

Silver US$17.80/oz vs US$17.88/oz yesterday

          

Base metals:  

Copper US$ 6,942/t vs US$6,899/t yesterday

Aluminium US$ 2,113/t vs US$2,124/t yesterday

Nickel US$ 12,180/t vs US$12,165/t yesterday

Zinc US$ 3,196/t vs US$3,179/t yesterday

Lead US$ 2,399/t vs US$2,399/t yesterday

Tin US$ 20,715/t vs US$20,735/t yesterday

          

Energy:          

Oil US$52.2/bbl vs US$52.4/bbl yesterday

Natural Gas US$3.025/mmbtu vs US$3.045/mmbtu yesterday

Uranium US$20.25/lb vs US$20.25/lb yesterday

          

Bulk:  

Iron ore 62% Fe spot (cfr Tianjin) US$76.5/t vs US$76.5/t

Chinese steel rebar 25mm US$671.5/t vs US$672.5/t

Thermal coal (1st year forward cif ARA) US$79.5/t vs US$77.9/t

Premium hard coking coal Aus fob US$210.0/t vs US$209.8/t

 

Other: 

Tungsten APT European US$285-300/mtu vs US$269-275/mtu

Ferrochrome $1.1/lb – rising costs of operation in South Africa may cause Samancor to shut ferrochrome smelters despite recent price rises

Rising local costs and in particular higher future electricity prices could prompt further closures.

Samancor restarted three quarters of its capacity after suspending all production in December through weak demand.

 

Company News

Anglo American (LON:AAL) 1422 pence, Mkt Cap £18.4bn –De Beers diamond sales slip

Anglo American reports that De Beers achieved sales of US$505m for its 7th diamond sale of 2017.

“As expected, rough diamond sales were somewhat lower in the seventh cycle of the year, with some midstream demand having already been brought forward into Cycle 6 due to Diwali being earlier than normal in 2017.”

The latest sales were approximately 12% lower than the US$576m achieved in the preceding sales round and 21% lower than the US$639m in the equivalent sales round in 2016.

Conclusion: Diamond sales declined at the 7th De Beers sale of the year - we look forward to signs of improvement later in the year

 

Birimian Limited (ASX:BGS) A$0.37/s, mkt cap A$72m – Exploration at Goulamina lithium project shows three new pegmatite zones

Birimian Limited which have sparked a small rush of exploration for lithium in pegmatite veins in Mali reports the discovery of three new pegmatite zones close to the current lithium resource at Goulamina.

The Birimian team have conducted two auger drill programs to locate the new pegmatite zones.  562 holes averaging 8m deep show the three pegmatite zones along with some other anomalies in the area.

The company also report lithium grades in outcropping pegmatites from rock chip samples.  We are wary of rock chip grades due to their selectivity and the propensity for geologists to chip off the best bits, though it’s still a useful tool and a good starting point from an exploration perspective.

The current resource at Goulamina is for 32.9mt grading 1.37% Li2O for 451,000t of contained lithium oxide.

Conclusion: It is reasonable to expect the Goulamina project resource to continue to expand and for the economic potential of the project feasibility study to meaningfully increase.  The Goulamina scoping study currently envisages the processing of 1mtpa of ore for 190,000t of spodumene concentrate with a capex of US$42.7m in phase 1 plus US$40.7m in phase 2. The study works on a concentrate sales price of US$537/t and an operating cash cost of US$326/t. Results from the ongoing Pre-Feasibility Study are expected this month.

Kodal Minerals holds the Bougouni lithium project next to Birimian’s Goulamina project.  The area around Bougouni which is around 163km south of Bamako in Mali may become a centre for lithium mining and further exploration going forward.

 

IronRidge Resources* (LON:IRR) 29.8p, Mkt Cap £78.1m – Completion of Tekton acquisition

IronRidge Resources reports the completion of its acquisition of 100% of Tekton Minerals giving it “full ownership of a highly prospective gold exploration portfolio in Chad.”

The company first announced an interest in Tekton in September 2016 when it acquired a 6% holding and entered into an agreement to spend US$3.5m in order to increase its holding to up to 58%. By June 2017, IronRidge proposed to acquire 100% for 10m shares. “This equates to a 3.8% interest in the enlarged share capital of IronRidge“

Commenting on the exploration opportunity of the Tekton projects in Chad, Chief Executive, Vincent Macolo, noted that “The Chad portfolio represents a highly prospective ground holding with high-grade gold targets within an underexplored yet highly prospective gold Province, potentially analogous to the world class Tintina Province in the Alaska and Yukon Territory”. There are reported to be extensive artisanal gold workings in the area with the presence of visible gold.

Key exploration professionals from the Tekton team are being incorporated into the IronRidge team which should help to ensure a relatively seamless continuity in the work on site.

A work programme for the coming field season is in an advanced stage of planning “with teams expected to mobilise to country during September 2017 … [ and with] Field work is expected to commence in October 2017 after the effects of wet season rains abate.”

Conclusion: The acquisition of Tekton Minerals gives IronRidge a portfolio of over 1000 km2 of high potential gold exploration properties in Chad with an experienced exploration team and a database of initial exploration results indicating near surface high-grade gold potential in an area of widespread artisanal gold production. We look forward to results of the forthcoming exploration programme due to start in October.

*SP Angel act as Nomad and Broker to IronRidge Resources

 

Ormonde Mining* (LON:ORM) 2.3p, Mkt Cap £11m – Barruecopardo on track for commissioning in Q3 2018

Ormonde Mining reports that as the company presses ahead with the accelerated development of the Barruecopardo tungsten project in Spain, all the high priority equipment is now being manufactured, the second order equipment including gravity separation equipment including the spirals and tables, screens and thickeners has been ordered and orders for the lower priority items are being prepared.

In addition, the civil engineering works contract for the construction of the process plant foundations has been awarded with the contractor, Copisa, expected to mobilise to the site in early October.

Initial work for the dam construction started in early July shortly after the award of the contract to the Spanish contractor, Cerezo, “with wide experience of dams and other mining infrastructure, including the execution of entire open pit mining operations for several international mining companies.”

These initiatives place the commissioning of Barruecopardo on course for Q3 2018.

Commenting on the recent improvements in the tungsten market, the company noted that the benchmark ammonium paratungstate (APT) price “touched a low of US$162 per metric tonne unit (“mtu”) in January 2016 following a period which had seen significant commodity price reductions associated with a general weakening of the commodity markets.”

Subsequent improvements in the economic outlook of Europe and the US and reductions in supply from the world’s largest producer, China, sees the current APT price at “US$285-300/mtu” … While some consolidation in the near term may be expected, the outlook remains positive over the medium and longer term.”

Conclusion: Ormonde is currently on track to commission the Barruecopardo tungsten operation in Q3 2018. Major items of equipment are on order and currently being manufactured while key civil engineering contracts have been awarded. The market for tungsten concentrates is improving and although the company is expecting short-term consolidation, it remains positive on the prospects for the medium and longer term. We look forward to continuing progress reports as project development proceeds.

*SP Angel acts as Broker to Ormonde Mining

 

Shanta Gold (LON:SHG) 4.5p, Mkt Cap £35m – Optimisation of the cost base and management changes

Hold

In light of latest regulatory and fiscal changes in Tanzania, Shanta announced a number of initiatives targeted at optimising its cost base.

The management estimates up to $5m per annum ($60/oz) on a run-rate basis is achievable through a reduction in headcount and streamlining support services.

This is expected to partly mitigate an adverse effect on cash flows of increased royalties and a newly introduced 1% clearing fee which together amount to c. $39/oz in additional costs as well as increasing amount of capital tied in owed VAT rebates.

Headcount cuts will involve the NLGM amid a drop in capital project development activity and a reduction in the usage of external contractors.

Some of previously outsourced functions will brought in-house including such things as open pit mining and catering.

The plan is to bring staff numbers from 1,075 (447 contractors / 628 direct employees) as of Jun/17 to 700-750 (1225 contractors / 600 direct employees) by the end of the year.

Importantly, no cuts or reductions will take place at NLGM underground operations where development works are progressing as planned

As at Aug/17, 4.6km of development has been completed at the underground mine with over 90kt of 7.50g/t material mined (v 7.48g/t budgeted) to date.

First ore was mined at Luika last month following the start of commercial production at Bauhinia Creek in June.

Annual production and cost guidance (AISC) was reiterated at 80-85koz and $800-850/oz for this year.

No VAT rebates returned by the government continue to be a drag on working capital with the outstanding owed balance currently standing at $15m; although, the management indicated the pace of accumulation of owed VAT has come down significantly as capex comes down and large contracts are being internalised with the run rate cash outflow currently at $7m, down from $12m, previously.

Senior management unanimously agreed to an average 15% reduction in salary while discretionary remuneration is now 100% share based.

Singida development which has been put on hold as all efforts and cash resources were focused on delivering the NLGM underground operation is being assessed with regards to an asset level financing with and update on development plans to be provided before year end.

Management changes announced today include:

Scott Yelland promoted from GM of NLGM to COO.

Honest Mrema who joined Shanta in 2015 as the Technical Services Manager with 20 years’ experience in mining has been promoted to GM of NLGM.

Luke Leslie who acted as Shanta’s NED since 2012 will assuming CFO responsibilities.

Conclusion: The management is taking a proactive approach in streamlining operations and reducing the cost base amid cash generation constraining government initiatives. It is a positive development which is expected to at least cover increased running costs from higher royalties and clearing fees. It is also welcoming news to see the management agreeing to a pay cut and having potential bonuses made 100% share based. Importantly, underground operations that are planned to account for 80-90% of annual gold production appear to be ringfenced from proposed staff cuts.

Earnings below have not accounted for recently proposed cost cuts.

 

*Two SP Angel analysts have visited Shanta’s New Luika Gold mine in Tanzania

 

Strategic Minerals* (LON:SML) 2.3p, Mkt Cap £28.7m – August delivers record sales at Cobre

Strategic Minerals has announced that its Southern Minerals Group’s Cobre magnetite tailings operation in New Mexico achieved record monthly sales of $999,064 during August more than doubling the record $486,560  of sales reported during July.

The record revenues result August from sales of 13,897 tons of magnetite and mean that in the first two months of the September quarter Cobre has already sold over 21,000 tons; more than doubling the total sales of the June 2017 quarter and 50% more than the record tonnages sold during the Mar 2017 quarter.

Commenting on the increasing sales volumes, Managing Director, John Peters, paid tribute to the local management team at Cobre “for rising to the logistical challenge of moving significant stockpiles of material by truck in order to achieve record magnetite sales.”

He went on to underline the significance of the improved performance at Cobre; “The performance at Cobre has placed the Company in an ideal position to record an increased profit performance in 2017 and provided it the luxury of recycling the profits derived from Cobre into value adding exploration programmes at Redmoor and Hanns Camp, without diluting shareholders.”

Conclusion: The increasing cash flow from Cobre facilitates Strategic Minerals’ exploration programme, where drilling is underway at both Redmoor and Hann’s Camp, and the management’s wider growth ambitions.

*SP Angel act as Nomad and broker to Strategic Minerals

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Tue, 05 Sep 2017 10:40:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28531/today-s-market-view-anglo-american-birimian-ironridge-resources-limited-ormonde-mining-plc-shanta-gold-limited-strategic-minerals-plc-28531.html
Today's Oil and Gas update: Petroneft Resources, Volga Gas http://www.proactiveinvestors.co.uk/columns/sp-angel/28529/today-s-oil-and-gas-update-petroneft-resources-volga-gas-28529.html Headlines

In Brief:

Volga Gas*** (LON:VGAS – 58p) – $141mm (144p) – Testing Extended

PetroNeft (LON:PTR – 1.80p) – Side Track a Positive Result

In Brief

Volga Gas*** (LON:VGAS – 58p) – $141mm (144p) – Testing Extended: Yesterday the Company announced that it was producing (and processing) approximately 9mm cfpd, as its testing process for the implementation and commissioning of its RedOx desulphurisation project was continuing While longer than we had initially anticipated, we believe that the Company will also take advantage of the lower rates during this testing phase to also complete the tie-in work for its LPG facilities. We estimate that the current feed rate will be maintained for at least the remainder of September, but will ramp up towards December. We have adjusted our full year average fluid according, which is now ~17mm cfpd. As a result of our adjusted average production outlook for the year, our valuation is falls modestly to $141mm (144p), some      143% above the current price. 

PetroNeft (LON:PTR – 1.80p) – Side Track a Positive Result: Today’s news that the Company’s appraisal well (the S-375) has intersected      up to 14.8m of net pay is a boost to the company and should the ensuing testing programme be successful, should enable it to book more reserves. We believe that the company has continued to make steady progress in delineating its asset base, but the next 18 months should now focus on the acceleration of its development programme to fully monetise its licences.

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Tue, 05 Sep 2017 10:00:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28529/today-s-oil-and-gas-update-petroneft-resources-volga-gas-28529.html
Today's Market View - BlueJay Mining, Acacia Mining, Avocet Mining, Highland Gold, Ncondezi Energy, Premier African Minerals and Tethyan Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/28523/today-s-market-view-bluejay-mining-acacia-mining-avocet-mining-highland-gold-ncondezi-energy-premier-african-minerals-and-tethyan-resources-28523.html BlueJay Mining* (LON:JAY) STRONG BUY - Target Price 24p – Michael Hutchinson steps up as non-exec Chairman
Acacia Mining (LON:ACA) – Cutbacks at Bulyanhulu reduce production guidance by 100,000 oz of gold.
Avocet Mining (LON:AVM) – Standstill agreement expires
Highland Gold (LON:HGM) 161p, Mkt Cap £524m – Interims
Ncondezi Energy (LON:NCCL) – Shareholder loans extended
Premier African Minerals (LON:PREM) – Drilling shows continuity of mineralisation at Zulu
Tethyan Resources* (LON:TETH) – TSX listing

Gold prices are stronger this morning on the back of reports of a hydrogen bomb tests in North Korea over the weekend and weaker than expected US NFP numbers released on Friday.
• In the base metals complex copper and nickel are leading gains; nickel is trading at the strongest level since mid-2015 while copper climbed as much as 1.3% today to $6,920, marking the highest point since 2014.
• Almost all metals continue to rise on the back of Friday’s China PMI data.
• LME base metals index capped an eight-week long advance last Friday, one short of a record run in 2006.
• US markets are closed today as the nation is off on a Labor Day weekend.
• The ECB will meet on Thursday with Bloomberg survey showing respondents expect Mario Draghi to comment on the euro’s strength and its dampening effect on growth outlook but avoid commenting on potential changes to the QE program.
• The US$ index is little changed from early Friday hours after recovering all losses recorded right after the weak NFPs report.
• Brent is off 1.2% and trading at $52.2/bbl today; the number of oil rigs as unchanged at 759 rigs last week, according to the Baker Hughes data released last Friday; US gasoline futures are off for a second session coming off from the biggest monthly gain since March last year as some of temporarily suspended refineries in the hurricane Harvey affected areas are preparing to resume operations.
• Steel rebar futures are 2.6% today amid reports that two more fire accidents were recorded in the Hebei region after the accident at the Benxi Steel Group new smelter on Friday; accident involved no casualties; incidents prompted speculation of increased inspection risks causing potential supply disruptions.
• Iron ore futures for January delivery are up 0.9% on the DCE in China today.

US threatens to cut trade to North Korean trading partners
• That means China (>80%), India (3.5%), Pakistan, Russia, Thailand, Singapore Philippines.
• A third of N Korea’s exports are coal briquettes, eg coking coal, mostly going into China.
• While cutting trade to N Korea will help the fundamental issue is about who has been supplying nuclear and rocket technology to the rogue state?
• We suspect China is pulling more strings in North Korea than it lets on

Lithium – incremental improvements to li-ion battery chemistry likely to lead to significant increase in new demand
• Chemical and engineering news report further on news that ‘nanodiamonds’ when added to the electrolyte solution in a lithium battery help to make Li-ion batteries safer.
• The use of nanodiamonds could help to add to power capacity and extend the life span of Li-ion batteries through the better diffusion of Li ions across more uniform surface.
• Nanosized diamonds are commonly used in electroplating to make coatings more uniform.
• This and other developments suggest better battery capacity is close to hand with a series of incremental improvements looking to add meaningfully to performance
• There will be very substantial replacement and new demand for better batteries particularly as the number of electric vehicles grows
• The challenge for policy makers will be how to supply power to so many new EVs, how to tax them and how to make us pay to recycle used batteries.

Dow Jones Industrials  +0.18% at   21,988
Nikkei 225   -0.93% at   19,508
HK Hang Seng   -0.84% at   27,719
Shanghai Composite    +0.37% at    3,380
FTSE 350 Mining   +0.13% at   18,024
AIM Basic Resources   +0.29% at    2,590

Economics
US – Employment numbers came in lower than forecast in August while previous two months saw downward revisions (-41k in total).
• Labor earnings have also lagged estimates.
• Despite a drop in August NFP, an average over the past three months is running at 172k which is roughly in line with t the general trend.
• The labor market statistics are expected to be skewed downwards in the next couple of months on the back of hurricane Harvey aftermath.
• While US Treasury yields dipped 3bp on the announcement of non-farm payrolls, they recovered afterwards and closed 4bp higher compared to the pre-release.
• Market estimates of a rate hike odds before year end declined only slightly to 31.4%, down from 33.4% recorded before the NFP release.
Date Event   Survey Actual Prior Revised
Friday Change in Nonfarm Payrolls Aug 180k 156k 209k 189k
  Unemployment Rate Aug 4.3% 4.4% 4.3% --
  Average Hourly Earnings MoM Aug 0.2% 0.1% 0.3% --
  Average Hourly Earnings YoY Aug 2.6% 2.5% 2.5% --
  ISM Manufacturing Aug 56.5 58.8 56.3 --
  Wards Total Vehicle Sales Aug 16.60m 16.03m 16.69m --
  Wards Domestic Vehicle Sales Aug 13.00m 12.48m 12.96m --
Tuesday Factory Orders Jul -3.30% -- 3.00% --
  Factory Orders Ex Trans Jul -- -- -0.20% --
Wednesday ISM Non-Manf. Composite Aug 55.5 -- 53.9 --
  U.S. Federal Reserve Releases Beige Book         
Thursday Initial Jobless Claims Sep-02 242k -- 236k --
  Continuing Claims Aug-26 1945k -- 1942k --
Source: Bloomberg     

Spain – Unemployment recorded the first increase since January last month in August.

North Korea – Pyongyang described underground explosions at its nuclear test site as a “perfect success in the test of a hydrogen bomb for an intercontinental ballistic missile”.
• The explosion at the sits in North Korea’s northeast region at Punggye-ri was followed by a magnitude-6.3 earthquake and a magnitude-4.1 tremor.

Currencies
US$1.1889/eur vs 1.1889/eur last week.   Yen 109.51/$ vs 110.18/$.   SAr 12.952/$ vs 12.961/$.   $1.294/gbp vs $1.292/gbp.     
0.795/aud vs 0.793/aud.   CNY 6.538/$ vs 6.577/$.

Commodity News
Precious metals:
Gold US$1,338/oz vs US$1,319/oz last week
   Gold ETFs 68.1moz vs US$67.6moz last week
Platinum US$1,012/oz vs US$998/oz last week
Palladium US$997/oz vs US$939/oz last week
Silver US$17.88/oz vs US$17.54/oz last week
           
Base metals:   
Copper US$ 6,899/t vs US$6,820/t last week
Aluminium US$ 2,124/t vs US$2,142/t last week
Nickel US$ 12,165/t vs US$11,925/t last week
Zinc US$ 3,179/t vs US$3,167/t last week
Lead US$ 2,399/t vs US$2,407/t last week
Tin US$ 20,735/t vs US$20,705/t last week
           
Energy:           
Oil US$52.4/bbl vs US$52.6/bbl last week
Natural Gas US$3.045/mmbtu vs US$3.046/mmbtu last week
Uranium US$20.25/lb vs US$20.15/lb last week
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$76.5/t vs US$74.5/t
Chinese steel rebar 25mm US$672.5/t vs US$653.1/t
Thermal coal (1st year forward cif ARA) US$77.9/t vs US$77.5/t
Premium hard coking coal Aus fob US$209.8/t vs US$209.8/t

Other:  
Tungsten APT European US$285-300/mtu vs US$269-275/mtu

Company News
BlueJay Mining* (LON:JAY) 17.8p, Mkt Cap £136m – Michael Hutchinson steps up as non-exec Chairman
STRONG BUY
Target Price 24p
• Michael Hutchinson, a legend in metals trading circles, has stepped into the role of non-executive Chairman.
• ‘Hutch’ as he is known in trading circles, worked for Metallgesellschaft for 25 years working his way up to Managing Director.
• He was also a director of the London Metals Exchange from 1986-2008.
• More recently Hutch was Chairman of Metalloyd Ltd, a major supplier of steel and other raw materials to traders, distributors and end-users as well as Chairman of Wogen. These roles are particularly relevant given the forthcoming development of BlueJay ilmenite sales to consumers in North America, Europe and China.
• Hutchinson was also Chairman of Greenland Minerals & Energy Ltd and is currently Chairman of SL & PF Solar Limited, a Director of Pierces Solar Limited, and Non-Executive Director of Greenland Gas & Oil Limited.
• We note the weather at Qaanaaq, which is close to Bluejay’s Pituffik operations is turning colder this week at -4oc to -9 oc though the team can look forward to a warmer weekend with temperatures varying from -1 oc to -4oc.
Conclusion:  Michael Hutchinson was Chairman at Greenland Minerals & Energy Ltd when it helped to overturn a long standing ban on uranium exploration.  While we expect permitting of full scale mining to be very much simpler at Pituffik we see Hutchinson’s knowledge, experience and presence in Greenland to be helpful to the company.
*SP Angel act as nomad and broker to BlueJay Mining.  An SP Angel mining analyst has visited the Pituffik ilmenite sands project in Greenland and has carried out his own density tests on the heavy mineral sands at Pituffik.

Acacia Mining (LON:ACA) 193 pence, Mkt Cap £791m – Cutbacks at Bulyanhulu reduce production guidance by 100,000 oz of gold.
• Acacia Mining has announced that operational cutbacks at its Bulyanhulu mine in response to the Governments gold/copper concentrate ban are likely to reduce the company’s production guidance by around 100,000 oz below “the bottom of the previous guidance range of 850,000-900,000 ounces”. This would take group production to around 750,000oz in 2017.
• The company’s cost guidance of between US$880-920/oz on an all-in-sustaining cost basis remains unchanged.
• Acacia Mining points out that, since the concentrate export ban was implemented in March this year, a concentrate inventory amounting to some US$265m has been accumulated and that despite operating and capital cost controls there has been “a significant cash outflow of approximately US$210 million in 2017 year to date”.
• In response, Acacia is now planning to cut operations at Bulyanhulu by the cessation of underground mining within the next four weeks. Treatment of tailings from previous mining, which has currently been suspended in response to continuing drought conditions in Tanzania ”is expected to recommence in October, assuming adequate rainfall is received, and will continue at a rate of 30-35,000 ounces per annum whilst underground activity is ceased.”
• The company points out that “Regrettably, the implementation of this programme will lead to a significant reduction in the workforce from the current 1,200 employee and 800 contractor roles.”
• The company expects that, at this stage, operations at the short-life Buzwagi mine will continue unaffected. North Mara, Acacia’s largest mine produces dore gold and is, as far as we know, also not affected.
• Acacia believes that the changes at Bulyanhulu will allow the Group “to return to positive cash generation early in 2018.” Further remedial steps under consideration include “a reduction in corporate overheads, expansionary drilling at North Mara, greenfield exploration activity and a gold hedging programme.”
• The company balance sheet at the end of August shows a cash balance of US$107m and debt of US$71 million.
• Discussions between Barrick Gold, which owns approximately 64% of Acacia Mining, and the Government of Tanzania are continuing.
Conclusion: The decision to suspend underground mining operations at its second largest mine underlines the seriousness Acacia Mining sees in its present position over the concentrate export ban. The potential losses of well-paid job are likely to have a widespread impact in Tanzania and beyond and it must be hoped that the continuing discussions with Government will produce a speedy resolution of the impasse.

Avocet Mining (LON:AVM) 27p Mkt Cap £5.6m – Standstill agreement expires
• Avocet has announced the expiry of the standstill agreement between its operating subsidiary (SMB) at the Inata gold mine in Burkina Faso and its creditors.
• The company reports that “Given the current status of discussions, it is unclear whether agreement on a restructuring of the balance sheet can be reached before SMB has exhausted all available sources of financing.”
• The agreement runs out without an agreement between the parties and as a result, “the boards of both Avocet and SMB will convene on 8 September 2017 to assess the status of the discussions with the Major Creditors, SMB’s current liquidity position and its imminent liabilities.”
• Avocet Mining’s announcement reports that “The boards will consider all available options, including the potential filing of an insolvency position by SMB.” At this stage, however, the company emphasises that no decision has been made in regard to whether to file for insolvency.
Conclusion: It appears that whatever the final outcome, Inata is reaching an endgame.

Highland Gold (LON:HGM) 161p, Mkt Cap £524m – Interims
• Revenues were little changed from last year (H1/17: $147.2m; H1/16: $147.1m) reflecting stable gold sales (H1/17: 128.5koz AuEq; H1/16: 127.7koz) and commodities prices.
• EBITDA slipped 8.2% to $73.2m (H1/16: $79.7m) on the back of an appreciation of the rouble against the US$ and inflation in separate costs segments.
• TCC and AISC came in at $509/oz and 674/oz, respectively (H1/16: $444/oz and $609/oz).
• The average USDRUB exchange rate went from 70.2 in H1/16 to 57.8 in H1/17.
• Additionally, overall local inflation totalled 2.3%yoy while energy prices climbed 13.0%yoy (in rouble terms).
• PAT totalled $25.9m (H1/16: $37.1m) taking EPS to $0.08/sh (H1/16: $0.11/sh).
• Generated FCF came down to $26.2m (H1/16: $48.7m) on the back of higher operating costs, tax expenses as well as capital outlays.
• Capex (excluding capitalised interest and waster stripping) totalled $27.4m (H1/16: $18.8m) funding development costs at Kekura, expansion project at Novo and exploration expenses at MNV targeted at increasing the reserves base and extending the life of mine.
• The Board approved a £0.0498 per share interim dividend ($0.0646/sh) payable on 13 October.
Conclusion: A drop in earnings reflect higher operating costs amid stronger rouble and higher local inflation, while operationally the Company demonstrated stable performance. The management reiterated its full year gold production guidance at 255-265koz with significant progress recorded at Company’s development projects.

Ncondezi Energy (LON:NCCL) 3.9 pence, Mkt Cap £9.7m – Shareholder loans extended
• Ncondezi Energy reports that it has now reached a formal agreement with holders of its shareholder loan to extend the repayment date until 2nd September 2018.
• The loan extension had been previously mooted and today’s announcement confirms that the formal agreement is now in place and that “This provides the Company with time to conclude the new partner search process, better develop loan repayment options and raise additional working capital by the end of September 2017.”
• In late August, Ncondezi announced that it expected to have selected a new partner for the development of the planned 300MW coal fired power plant in Mozambique before the end of 2017.
Conclusion: The formal agreement to extend the repayment date for the shareholder loans is not unexpected but it is encouraging that the company is sticking to its new timetable and we look forward to further news on the selection of a new strategic partner over the coming weeks.

Premier African Minerals (LON:PREM) 0.4p, Mkt Cap £23.8m – Drilling shows continuity of mineralisation at Zulu
• Premier African Minerals confirms that it has now completed 16 drill-holes (2278m) in its current drilling programme at its Zulu lithium prospect near Fort Rixon, Zimbabwe.
• The current drilling “is proving successful in confirming continuity in the Main Zone as well as identifying additional targets such as massive pegmatites with visually high-grade lithium mineralisation intersected in the new south-eastern zone.”
• The company confirms that “Assay results are now being received and any significant results will be published in the near future.” Today’s announcement does not contain new assay data, implying that the company has not yet received assay results which it considers significant.
• The drilling programme is being undertaken to expand and extend the previously published maiden resource on the Main Zone of 20.1mt at an average grade of 1.06% Li2O, which was published under the guidelines of South Africa’s SAMREC mineral reporting code, in June this year.
• Encouraged by the initial resource, Premier African Minerals committed to a further 8-10,000m of drilling which would now appear to be around 25% complete.
Conclusion: The demonstration of continuity of mineralisation within the Main Zone at the Zulu prospect is encouraging, however, the absence of specific assay data in today’s announcement makes it difficult to speculate on whether the mineralisation encountered in the recent drilling is of a comparable grade to the previously announced resource. We look forward to assay information when it becomes available.

Tethyan Resources* (LON:TETH) 3.6p, Mkt £6.1m – TSX listing
• Tethyan Resources report the company’s shares are due to start trading on the TSX on Wednesday 6th September.
Southern Arc Minerals currently controls 29.91% of Tethyan Resources.  A recent presentation by Souther Arc Minerals describes the TSX-V listing filing as for better access to the North American mining market.
*SP Angel act as broker to Tethyan Resources

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Mon, 04 Sep 2017 10:35:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28523/today-s-market-view-bluejay-mining-acacia-mining-avocet-mining-highland-gold-ncondezi-energy-premier-african-minerals-and-tethyan-resources-28523.html
Today's Oil and Gas Update - Union Jack Oil http://www.proactiveinvestors.co.uk/columns/sp-angel/28522/today-s-oil-and-gas-update-union-jack-oil-28522.html Headlines
• In Brief:
o Union Jack Oil*** (LON:UJO– 0.14p) – $6.4mm – $39.1mm – Wressle Dominates, But More to Come
In Brief
• Union Jack Oil*** – $6.4mm – $39.1mm – Wressle Dominates, But More to Come: While there is little doubt that there has been disappointment surrounding the continued delays to Wressle, the remainder of the portfolio marches into the horizon. Most notable of these is the Holmwood well in the Weald basin, but also the Biscathorpe appraisal wel. While there has been much hype surrounding the Kimmeridge potential of the Weald Basin (“Basin”), it must be remembered that Holmwood is a conventional prospect first and foremost, but will provide a useful data point on the Kimmeridge, not just for UJO but for the wider shale potential of the Basin. We are adjusting our current valuation, which is impacted by our revised estimates for the timing of Wressle, the impending exploration of Biscathorpe and Holmwood and the new shares in is sue. Our valuation stands at $6.9mm (0.13p – Core) to $38.1mm (0.73p – Full).


We may provide a further update on one, or all, of the stories above later today. However, if there is anything that you would like to discuss, please feel free to contact us.

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Mon, 04 Sep 2017 08:22:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28522/today-s-oil-and-gas-update-union-jack-oil-28522.html
Today's Market View - DGR Global http://www.proactiveinvestors.co.uk/columns/sp-angel/28517/today-s-market-view-dgr-global-28517.html DGR Global (ASX:DGR) – Update on Solgold’s Cascabel exploration

 

Lagging Fed target inflation sees gold trading higher with prices at $1,320/oz, the highest level since H2/16.

• US labor number are out later today with estimates for a 180k headline reading and earnings growth to post a marginal increase recovering from a slowdown recorded through Q2/17.

• European equities climbed this morning with mining names extending gains on the back of stronger metal prices and positive economic data coming from the US, China and the Eurozone.

• The LME metals index surged to the highest in almost three years with copper leading gains.

• Gasoline prices pulled back for the first time in nine days while remaining at elevated levels as hurricane Harvey reported to have affected a quarter of the local refining capacity.

• Reduced US refining capacity has kept crude prices in check lately with Brent prices virtually unchanged week to date.

• Iron ore prices are up led by gains in steel prices on the back of the news that newly built Benxi Steel blast furnace with a capacity of 10kt per day caught fire with speculation that the incident might lead to a series of work safety inspections.

 

Dow Jones Industrials  +0.25% at   21,948

Nikkei 225   +0.23% at   19,691

HK Hang Seng   -0.06% at   27,954

Shanghai Composite    +0.19% at    3,367

FTSE 350 Mining   +0.58% at   17,930

AIM Basic Resources   +0.39% at    2,583

 

Economics

US – Robust labor market and low borrowing costs sees personal spending growth accelerating boding well for private consumption that has been driving GDP growth lately.

• On a less positive note, inflation continued to slide further below the Fed’s 2% target July consumer prices reports showed.

• The Fed remains convinced the latest slowdown in the core PCE index reflects temporary issues and expect inflation to accelerate moving forwards.

 

China – Private Markit-Caixin manufacturing survey showed the sector activity strengthened in August driven by solid gains in overseas demand which expanded at the fastest rate since Mar/10, according to PMI data.

• Higher new orders led firms to expand production again in August with the rate of growth little changed from July’s five-month high.

• Inflation pressures intensified on the back of higher input costs and output charges.

• This was the fourth consecutive PMI reading above 50 and the second highest this year so far.

• Caixin-Markit Manufacturing PMI: 51.6 v 51.1 in Jul and 51.0 forecast.

 

UK – Manufacturing growth accelerated in August led by new order inflows with robust demand recorded both locally and overseas.

• Manufacturing PMI climbed to a four week high.

• Stronger production led gains in employment with job creation recording the thirteen straight month of gains.

• Respondents also highlighted increase in purchase price inflation for the first time in seven months in August which was attributed to rising costs of commodities.

• Markit suggests strong growth in the sector recorded through Q3/17 looks increasingly sustainable during the near term given the breadth of the expansion.

• “Business conditions improved across the three main sub-sectors – consumer, intermediate and investment goods – and at smaller and large-sale producers alike… business confidence also rose to one of its highest levels in over a year,” Markit concluded.

 

Currencies

US$1.1889/eur vs 1.1892/eur yesterday.   Yen 110.18/$ vs 110.57/$.   SAr 12.961/$ vs 13.027/$.   $1.292/gbp vs $1.288/gbp.     

0.793/aud vs 0.789/aud.   CNY 6.577/$ vs 6.597/$.

 

Commodity News

Precious metals:

Gold US$1,319/oz vs US$1,306/oz yesterday

   Gold ETFs 67.6moz vs US$67.5moz yesterday

Platinum US$998/oz vs US$989/oz yesterday

Palladium US$939/oz vs US$936/oz yesterday

Silver US$17.54/oz vs US$17.41/oz yesterday

           

Base metals:   

Copper US$ 6,820/t vs US$6,838/t yesterday – First Quantum agreed to raise its stake in the major Cobre Panama copper project to 90% by acquiring a 10% stake from LS-Nikko Copper for $635m.

• First Quantum will pay the agreed amount over five years.

• “This acquisition underline our confidence in this world class project and the strong fundamentals for copper,” Chairman and CEO Philip Pascal said.

• The project is reported to be 60% complete.

Aluminium US$ 2,142/t vs US$2,117/t yesterday

Nickel US$ 11,925/t vs US$11,720/t yesterday

Zinc US$ 3,167/t vs US$3,125/t yesterday

Lead US$ 2,407/t vs US$2,389/t yesterday

Tin US$ 20,705/t vs US$20,595/t yesterday

           

Energy:           

Oil US$52.6/bbl vs US$50.9/bbl yesterday

Natural Gas US$3.046/mmbtu vs US$2.940/mmbtu yesterday

Uranium US$20.15/lb vs US$19.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$74.1/t

Chinese steel rebar 25mm US$653.1/t vs US$645.8/t

Thermal coal (1st year forward cif ARA) US$77.5/t vs US$77.8/t

Premium hard coking coal Aus fob US$209.8/t vs US$207.7/t

 

Other:  

Tungsten APT European US$269-275/mtu vs US$250-256/mtu

 

Company News

DGR Global (ASX:DGR) A$0.13, Mkt Cap A$74m – Update on Solgold’s Cascabel exploration

• Australian listed DGR Global, which owns 13.5% of Solgold has updated its own shareholders on Solgold’s recent progress at its flagship Cascabel copper/gold project in Ecuador as well as the recent additions to the wider Ecuadorean exploration portfolio where Solgold was recently granted an additional 21 exploration licences throughout the country bringing the total to 59 licences totalling 2,496km2.

• At Cascabel, SolGold has reported the latest results from holes 26 and 27 at Cascabel and provided an update on the drilling programme and its wider exploration and evaluation work.

• Hole 26 (CSD-17-026) at Alpala Northwest was completed at a depth of 1875.9m and “returned an open ended 809.95m grading 0.72% copper equivalent” with average grades of 0.5% copper and 0.34 g/t gold. The broader intersection contains three higher grade sections of 356m between 1084m and 1440m at an average grade of 0.53% copper and 0.36 g/t gold and 114m between 1492m and 1606m at an average grade of 0.46% copper and 0.27g/t gold and 203.95m between 1672m and the end of the hole with an average grade of 0.63% copper and 0.47g/t gold.

• Hole 26 extends the known extent of mineralisation at Alpala Northwest by 300m further to the northwest of hole 15R2 and “A strongly mineralised diorite intrusion encountered in the lower portion of Hole 26confirms the Alpala Northwest deposit at depth, some 400m below the intersection achieved in Hole 13 of 190m @0.82% copper equivalent (0.63% Cu, 0.31 g/t Au).”

• The company also reports results from hole 27 (CSD-17-027) at Hematite Hill which was completed at a depth of 1614.3m and intersected 802m at an average grade of 0.32% copper and 0.14 g/t gold from a depth of 718m. The hole contains a higher grade portion between 806m and 1178m of 372m at an average grade of 0.39% copper and 0.19g/t gold which itself includes 212m between 906-1118m at an average grade of 0.52% copper and 0.24g/t gold.

• The results from hole 27 “extends Alpala mineralisation 100m southeast of Hole 21, and 250m southeast of Hole 16, which returned 894m @1.41% copper equivalent (0.78% Cu, 0.99 g/t Au).”

• In addition, Solgold reports the completion of holes 23-D-R1 in Alpala Central at a depth of 1626.6m and Hole 24-D1R at Alpala Southeast at 1268.15m. Assay results from these holes have yet to be received, however photographs of selected sections of the drill core for both holes which are included in the Solgold announcement show sulphide mineralised veins similar to those seen in other drill holes at Cascabel.

• The company notes that there are currently five drill holes in progress; 26-D1 at Alpala Northwest; 28 at Hematite Hill; 29 at Alpala East; 30 at Alpala Central; and 31 at Alpala Southeast.

• As previously announced, the company is building up its drilling efforts at Cascabel and is planning to have 10 rigs on site by January 2018. “A further two man-portable drill rigs (rigs 6 and 7) are currently mobilising to site from Cuenca, Southern Ecuador.”

• Two large track mounted rigs (rigs 8 & 9) are being shipped by sea and expected to arrive on site at the beginning of November as part of the build-up of drilling capacity

• Recent work on geomagnetic modelling has “revealed a northwest trending line of significant magnetic bodies at Moran, Trivinio, Alpala Northwest and Alpala Central. These bodies are thought to replicate subsurface mineralised envelopes, such as that confirmed by drilling at Alpala Central.”

• Geochemical exploration and modelling has “confirmed the major porphyry centres at Alpala Central, Aguinaga and Tandayama –America as well as highlighting a deep target extending immediately north of the existing Alpala West porphyry centre to approximately 1000m west of the Moran target.”

• In comments on the general progress of exploration at Cascabel, Solgold confirms that, with Hole 31 “drilling the first of a series of infill holes between Alpala Southwest and Hematite Hill ahead of resource estimation expected in December 2017.”, we should expect an initial resource estimate later this year. The company also states that “Solgold is also commencing planning for the collection of necessary data to complete a prefeasibility assessment by the end 2018.”

• “The Company is currently planning further metallurgical testing and completion of an independent Prefeasibility Study at Cascabel. Solgold is investigating both high tonnage open cut and underground block caving operations, as well as a high grade / low tonnage initial underground development towards the economic development of the copper gold deposit/s at Cascabel.”

• Other assets of DGR Global include a 26% interest in IronRidge Resources which is exploring for gold, lithium and iron ore in Africa; a 13% interest in  AusTin Mining in Australia; a 13% interest in the Argentinian lithium brine play, Darkhorse Resources and a 23% interest in Armour Energy, and oil and gas business in Australia.

Conclusion: DGR’s 13.5% stake in Solgold provides exposure to the rapidly developing Cascabel project where Solgold has drilled over 44,500m to date to test only 4 of 15 identified targets as well as to Solgold’s expanding portfolio of other exploration licences in Ecuador. DGR’s other investments in IronRidge Resources (26% owned), exploring for gold, lithium and iron ore in Africa, tin exploration and production in Australia via Austin Mining, Darkhorse Resources (13%) and the Australian oil and gas industry via 23% owned Armour Energy) provide a diversity of commodity and geographic exposure to global commodities. With a holding of 13.5% in Solgold, DGR’s £45.7m market capital represents a lower cost exposure to Solgold than the £113m market value of the 11.2% owner, Canadian listed Cornerstone Capital which also holds a 15% direct interest in the project. Even so, and excluding the other assets of both Cornerstone Capital and DGR Goba l, we estimate that a 1% exposure to the project via Cornerstone would cost around £4.6m while 1% exposure acquired via DGR would cost approximately £4.2m.

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Fri, 01 Sep 2017 11:12:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28517/today-s-market-view-dgr-global-28517.html
Today's Market View - Amur Minerals Corporation, Katoro Gold, SolGold plc, Wolf Minerals, Weatherly International plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28506/today-s-market-view-amur-minerals-corporation-katoro-gold-solgold-plc-wolf-minerals-weatherly-international-plc-28506.html Amur Minerals* (LON:AMC) – Step out drilling returns mineralised intersections at the IKEN/KUB link

Katoro Gold (LON:KAT) – Update on Imweru PFS – insight to new Tanzanian mining regulations

SolGold* (LON:SOLG) – Latest drilling results from Cascabel

Weatherly International (LON:WTI) – Rescheduling of repayments to Orion

Wolf Minerals (LON:WLFE) – Secures additional $5m bridging finance.

 

Base metals are stronger today on the back of good US Q2/17 GDP numbers and ADP payrolls while Chinese official manufacrturing PMI beat market estimates.

• Gold is little changed trading around $1,307/oz ahead of US NFPs due tomorrow.

• The US$ index is flat today after climbing on Wednesday following the release of better than expected upgrade in Q2/17 GDP growth numbers.

• US gasoline prices climb on the back of hurricane Harvey related disruptions to oil refineries and a Colonial pipeline; Nymex September futures hit $2.0/gallon marking a 6.6% increase on yesterday and more than 20% from a week ago.

• Crude is little changed with Brent trading around $50.9/bbl after a drop in the previous session.

• Iron ore futures (January maturity) recorded the third consecutive monthly increase this year (+7.4%), although price gains have slowed amid signs accumulating steel inventories in China driven by record steel production.

• Steel rebar holdings climbed for past three weeks in longest increasing series since February; steel rebar futures are flat today in China but capping a 11.2% gain this month

 

Lithium battery nanowalls to make batteries more efficient

• Scientists at the Lomonosov Moscow State University reckon that the use of silicon, germanium and carbon nanowalls could significantly increase the specific characteristics of lithium-ion batteries.

• The implication is that the nanowalls should enable Li-ion batteries to be more energy efficient and presumably safer at higher energy densities.

• Our money is on the use of nanodiamonds and graphene nanowalls.

 

Brazil opens vast national reserve in Amazon to mining

• The National Reserve of Copper and Associates (Renca) banned mining in roughly 46,000skm of Amazon rainforest an area around the size of wales (all areas are compared to Wales which is just a bit larger than Denmark!).

• The reserve boarders with French Guiana and with the South of Suriname in the North of Brazil.

• The reserve was set up in 1984 by the military government more to reserve mineral resources than to protect the forest.

• Opening up the area to mining should help to control the illegal artisanal mines which already operate in the area

 

Afghanistan – The US is pushing ahead with plans to expand mining in Afghanistan

• The US is reported to have already spent some $500m on mining in Afghanistan and is looking to push forward with plans to expand this activity.

• The plan is to provide jobs and help Afghanistan to become financially independent.

• We suspect the US would also like to balance increasing Chinese influence on mining in the region.

• Afghanistan’s mineral resources may also help to repay some of the $0.5bn cost of US involvement in the region while supporting the ongoing US presence.

• Wilbur Ross, Trumps’ commerce secretary and a former venture capitalist, knows the mining business well and understands its risks and huge potential.

• We suspect the US military will make a good mining incubator. Reminds us of M*A*S*H the US tv series.

 

 

Dow Jones Industrials  +0.12% at   21,892

Nikkei 225   +0.72% at   19,646

HK Hang Seng   -0.44% at   27,970

Shanghai Composite    -0.08% at    3,361

FTSE 350 Mining   +2.04% at   17,964

AIM Basic Resources   +0.27% at    2,573

 

Economic News

China – Official manufacturing PMI data beat estimates posting stronger growth on the back of robust infrastructure spending and new domestic orders.

• On the less positive side, gauge of the services sector activity fell to the weakest since May/16.

• Manufacturing PMI: 51.7 v 51.4 in July and 51.3 forecast.

• Services PMI: 53.4 v 54.5 in July.

 

Germany – Inflation growth accelerated in August which would be a welcome news to the ECB which have been adding to monetary stimulus to revise inflation expectations.

• Unemployment held at the record low of 5.7% in August, in line with market estimates, matching latest reports over the nation’s robust economic growth.

CPI (EU Harmonised %mom/yoy): 0.2/1.8 v 0.4/1.5 in July and 0.1/1.7 forecast.

 

UK – Consumer confidence picked up slightly from the lowest level since the Brexit vote, although the sentiment gauge remained weak amid falling real personal incomes.

• A separate index of business confidence from Lloyds dropped to the lowest in a year in August reflecting uncertainty regarding Brexit negotiations.

• Consumer Confidence: -10 v -12 in July and -13 forecast.

 

France – Macron to reveal French labour reforms

• Today could be a big day in France as the Macron government announces measures to reform strict labour laws.

• Mass protests are planned for 12 September but interestingly one of the biggest unions has decided not to take part, implying their support for the new reforms.

• Macron has pledged to reduce unemployment from the 9.5% level to around 7% by 2022 but with support failing Macron’s reformist agenda will be tested.

France – Unlike Germany, France recorded no change in consumer price levels in August, in line with market estimates.

• CPI (EU Harmonised %mom/yoy): 0.6/1.0 v -0.4/+0.8 in July and 0.6/1.0 forecast.

 

US – Q2/17 GDP growth rates have been revised upwards tot the fastest pace in two years on stronger consumer spending and business investment, the latest Commerce Department numbers showed yesterday.

• The data also showed that corporate profits recorded growth in Q2/17 compared to a contraction in Q1/17 boding well for future employment gains and stronger business investment.

• Stronger economic growth is expected to further tighten labour market and drive inflation pressures further pushing the Fed to continue with the monetary tightening policy.

• A separate jobs report showed companies added more workers than forecast in August with July numbers revised upwards, according to the ADP Research Institute data.

• Job openings are at a record high while employer dismissals were limited hovering close to a three-decade low.

 

 

Currencies

US$1.1892/eur vs 1.1954/eur yesterday.   Yen 110.57/$ vs 110.07/$.   SAr 13.027/$ vs 13.030/$.   $1.288/gbp vs $1.296/gbp.     

0.789/aud vs 0.800/aud.   CNY 6.597/$ vs 6.586/$.

 

Commodity News

Precious metals:

Gold US$1,306/oz vs US$1,308/oz yesterday

   Gold ETFs 67.5moz vs US$67.5moz yesterday

Platinum US$989/oz vs US$993/oz yesterday

Palladium US$936/oz vs US$944/oz yesterday

Silver US$17.41/oz vs US$17.35/oz yesterday

           

Base metals:   

Copper US$ 6,838/t vs US$6,805/t yesterday

Copper – Zambian power supplier will restore power to Glencore’s Mopani Copper Mines following the Company’s meeting with President Edgar Lungu and an agreement on new tariffs.

• The government will also resolve outstanding issues with Mopani with regards to tax refunds and transfer pricing over the next six weeks.

• Previously, Copperbelt Energy Corp lowered supplies to Mopani after Glencore refused to pay new increased power prices with Mopani arguing fees rise was not part of the agreement with CEC and warned that the dispute could affect 4,700 jobs.

 

Aluminium US$ 2,117/t vs US$2,100/t yesterday

Nickel US$ 11,720/t vs US$11,715/t yesterday

Zinc US$ 3,125/t vs US$3,141/t yesterday

Lead US$ 2,389/t vs US$2,395/t yesterday

Tin US$ 20,595/t vs US$20,365/t yesterday - Yunnan Tin, Chinese top tin producer, will shut its smelting and refining unit for scheduled maintenance for 41 days starting today, the Company said.

• The shutdown involves 70ktpa refined tin capacity out of 80ktpa total Company’s capacity and a little under 50% of the nation’s 153kt produced in 2016 (WBMS).

          

Energy:           

Oil US$50.9/bbl vs US$52.0/bbl yesterday

Natural Gas US$2.940/mmbtu vs US$2.970/mmbtu yesterday

Uranium US$19.95/lb vs US$19.95/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.1/t vs US$74.7/t – The premium for higher quality material has expanded significantly over the last two years with the differential between 65% Fe and 58% Fe contracts of more than $50/t.

• This compares to a less than $10/t premium recorded at the start of 2016.

• 65% Fe material benchmark price currently hovers around $100/t compared to less than $50/t for 58% Fe material, according to Metal Bulletin.

• Among factors leading the spreads higher is the drive by steel mills to raise efficiency of its operations and reduce pollution.

• “In an oversupplied market, you’ll see that flight to quality… we anticipate the maintenance of those differentials over the next two to three years,” metals and mining market intelligence firm Wood Mackenzie said.

Chinese steel rebar 25mm US$645.8/t vs US$645.8/t  – Chinese steel sector gauge climbed to the strongest in 16 months in August with sub-indices of production and domestic orders posting particularly robust performance.

• Steel PMI: 57.2 v 54.9 in July.

Thermal coal (1st year forward cif ARA) US$77.8/t vs US$78.8/t

Premium hard coking coal Aus fob US$207.7/t vs US$207.7/t

 

Other:  

Tungsten APT European US$269-275/mtu vs US$250-256/mtu

 

Company News

Amur Minerals* (LON:AMC) 9.5p, Mkt Cap £58m – Step out drilling returns mineralised intersections at the IKEN/KUB link

• The Company provides an update on the 2017 field programme at the Kun Manie copper/nickel project.

• A total 82 diamond core drill holes for 20,060m have been completed to date.

• The Company is planning to extend the programme for an additional 10,000m representing a 50% increase over the original plan with supplies available to continue through the remainder of the season (31 Oct/17).

• Infill drilling completed at KUB is expected to see Inferred resources which account for c.3/4s of the total converted to the Measured & Indicated category.

• Additionally, 29 of 39 holes driven along the 2,200m long link between IKEN and KUB returned economic grades of nickel and copper.

• Average intersections per hole assayed 0.85% Ni and 0.23% Cu over 24.4m (12.9m per mineralised interval).

• Of 2,200m tested 1,800m of strike showed present sulphide mineralisation present with plans to drill test the remaining 800m of the IKEN/KUB link.

• Should drilling hit further mineralised horizons, that would confirm that two deposits IKEN and KUB is likely a single “near continuous” deposit with a total of more than 4.5km in strike.

• Merging two deposits the Company estimates may potentially yield “more than a million tonnes of nickel alone” compared to the current c.1mt NiEq contained in the total Kun Manie resource (JORC, Feb/17).

• Given the scope of the potential in terms of tonnages as well as higher average grades, “the newly identified mineralisation will ultimately have a significant impact in reserve definition and resultant production schedule”, the Company said.

Conclusion: Latest drilling results continue to expand the resource/reserves potential of the Kun Manie project and are expected to favourably influence economics of the planed bulk mining sulphide nickel/copper operation.

*SP Angel act as Nomad and Broker to Amur Minerals

 

Tanzania

Katoro Gold (LON:KAT) XX 3.8 pence, Mkt Cap £4.1m – Update on Imweru PFS – insight to new Tanzanian mining regulations

• Recently listed Katoro Gold, which acquired the Imweru and Lubando gold projects in Tanzania from Kibo Mining in May this year has provided an update on the progress at Imweru which gives an insight into the working of the new Tanzanian mining regulations.

• The company has now completed resource, metallurgical and geotechnical drilling at Imweru where it is working to upgrade the existing, JORC (2012) 11.6m oz resource at 1.38g/t gold (515,000 oz contained gold).

• Samples from the resource drilling programme are currently being assayed within Tanzania and are “thereby avoiding any unnecessary delays as a result of the new export rules under the recently amended mining legislation in Tanzania.”

• Metallurgical and geotechnical samples, however, have been subject to the new regulatory regime as they cannot be tested within Tanzania and the metallurgical samples, required to establish the necessary processing parameters, were “successfully exported in late August after a lengthy process of Ministry of Energy and Minerals analyses and administration” and the geotechnical samples which help define the pit designs are “following the same process as the metallurgical samples.”

• The company has expedited other aspects of the pre-feasibility work and is confident that once the sample results are available from both the local and overseas testing they will be able to be incorporated into the study rapidly.

• Commenting on the progress made, Louis Coetzee, Executive Chairman of Katoro Gold noted that “We are … very proud [of] our ability to adapt and adjust quickly enough to be one of the first, if not the very first company, to successfully export geological / metallurgical samples under the new mining legislation.” Noting the cooperation between officials and the company’s technical staff he also said “We believe the successful export of this sample batch to South Africa demonstrates a willingness by the government to cooperate with industry to implement new regulations and to adjust where justified and necessary.”

Conclusion: Katoro Gold has been a pathfinder in testing the new minerals regulatory regime in Tanzania and has navigated a route to advance its Imweru pre-feasibility study. Larger, producing companies will no doubt  have more in-house facilities available to them but face different challenges in exporting mineral product rather than samples for testing. We are, however, encouraged that Katoro Gold has found a workable solution to the new legislation and we look forward to the results of the Imweru PFS when it becomes available.

 

SolGold* (LON:SOLG) 36.5p, Mkt Cap £553m – Latest drilling results from Cascabel

• SolGold has reported the latest results from holes 26 and 27 at Cascabel and provided an update on the drilling programme and its wider exploration and evaluation work.

• Hole 26 (CSD-17-026) at Alpala Northwest was completed at a depth of 1875.9m and “returned an open ended 809.95m grading 0.72% copper equivalent” with average grades of 0.5% copper and 0.34 g/t gold. The broader intersection contains three higher grade sections of 356m between 1084m and 1440m at an average grade of 0.53% copper and 0.36 g/t gold and 114m between 1492m and 1606m at an average grade of 0.46% copper and 0.27g/t gold and 203.95m between 1672m and the end of the hole with an average grade of 0.63% copper and 0.47g/t gold.

• Hole 26 extends the known extent of mineralisation at Alpala Northwest by 300m further to the northwest of hole 15R2 and “A strongly mineralised diorite intrusion encountered in the lower portion of Hole 26confirms the Alpala Northwest deposit at depth, some 400m below the intersection achieved in Hole 13 of 190m @0.82% copper equivalent (0.63% Cu, 0.31 g/t Au).”

• The company also reports results from hole 27 (CSD-17-027) at Hematite Hill which was completed at a depth of 1614.3m and intersected 802m at an average grade of 0.32% copper and 0.14 g/t gold from a depth of 718m. The hole contains a higher grade portion between 806m and 1178m of 372m at an average grade of 0.39% copper and 0.19g/t gold which itself includes 212m between 906-1118m at an average grade of 0.52% copper and 0.24g/t gold.

• The results from hole 27 “extends Alpala mineralisation 100m southeast of Hole 21, and 250m southeast of Hole 16, which returned 894m @1.41% copper equivalent (0.78% Cu, 0.99 g/t Au).”

• In addition, Solgold reports the completion of holes 23-D-R1 in Alpala Central at a depth of 1626.6m and Hole 24-D1R at Alpala Southeast at 1268.15m. Assay results from these holes have yet to be received, however photographs of selected sections of the drill core for both holes which are included in the announcement show sulphide mineralised veins similar to those seen in other drill holes at Cascabel.

• The company notes that there are currently five drill holes in progress; 26-D1 at Alpala Northwest; 28 at Hematite Hill; 29 at Alpala East; 30 at Alpala Central; and 31 at Alpala Southeast.

• As previously announced, the company is building up its drilling efforts at Cascabel and is planning to have 10 rigs on site by January 2018. “A further two man-portable drill rigs (rigs 6 and 7) are currently mobilising to site from Cuenca, Southern Ecuador.”

• In comments on the general progress of exploration at Cascabel, Solgold confirms that, with Hole 31 “drilling the first of a series of infill holes between Alpala Southwest and Hematite Hill ahead of resource estimation expected in December 2017.”, we should expect an initial resource estimate later this year. The company also states that “Solgold is also commencing planning for the collection of necessary data to complete a prefeasibility assessment by the end 2018.”

• “The Company is currently planning further metallurgical testing and completion of an independent Prefeasibility Study at Cascabel. Solgold is investigating both high tonnage open cut and underground block caving operations, as well as a high grade / low tonnage initial underground development towards the economic development of the copper gold deposit/s at Cascabel.”

Conclusion: Solgold continues to generate lengthy mineralised intersections at the Cascabel project. We look forward to assay results from the recently completed holes, the results of the continuing drilling programme and an initial resource estimate later this year leading to a prefeasibility study by the end of 2018.

*SP Angel acts as Nomad and broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

 

Weatherly International (LON:WTI) 1 pence, Mkt Cap £10.3m – Rescheduling of repayments to Orion

• Weatherly International reports that it has reached agreement with its major shareholder, Orion Mine Finance, for the rescheduling of debt repayments due under the “Facility B” financing.

• The first repayment has now been “deferred to 30 October 2017 and Orion has agreed … to limits its acceleration and enforcement rights on the terms set out in Amended Facility. The Facility B Final Maturity Date remains unchanged at 28 February 2020, and each Facility B repayment will be increased so that Facility B will be repayable in 11 equal repayments of US$9.7m each, including capital and interest.”

• The company discloses that the second repayment is due on 30 November and that the remaining repayments are due quarterly thereafter. On this basis, Weatherly International is facing repayments due under Facility B totalling US$19.4m before the end of 2017.

• The company also discloses that it has deferred capital and interest repayments totalling US$10.3m under Facilities C and D has been deferred until 30th October 2017.

• Weatherly has drawn down US$2m of its uncommitted loan from Orion Mine Finance “to accelerate building of the leach pads at Tschudi. To seek to ensure the loan would be sufficient to meet the necessary funding requirements the Company has hedged both copper and currency out to March 2018, and some of these hedges were entered into prior to the recent upward movement in copper prices.”

• In total, “Weatherly has 1000 tonnes per month fixed December to December at an average copper price of US$6,077 per tonne and US$ to N$ exchange rate of 13.38; and 1000 tonnes per month fixed January to March at an average copper price of US$6,464 per tonne and US$ to N$ exchange rate of 13.25.” We note that the copper price yesterday was US$6798 and the current exchange rate is 13.03.

• Most worrying for investors, however, may be the company’s statement that “The Company and its subsidiaries are unlikely to generate sufficient surplus cash to meet all loan repayments when due, particularly in the near term. The Company continues to positively engage with Orion on the subject.”

Conclusion: Weatherly International has reached an agreement to reschedule its debt repayments to its major shareholder, Orion Mine Finance, however, with a major proportion of its production hedged below current copper prices and its admission that it is unlikely to generate sufficient cash to meet its loan repayments in the near term, its continued independent existence appears to rest on the forbearance and support of Orion.

 

Wolf Minerals (LON:WLFE) 3.9p, Mkt Cap £42.1m – Secures additional $5m bridging finance.

• Wolf Minerals has announced that “it has received confirmation from Resource Capital Fund … that the release of the further £5 million, which represents the remaining uncommitted amount of the existing bridge facility  … has been approved on the same terms as previously announced.” This brings the funds available under the facility to £45m.

• The increased facility supports Wolf’s “short term working capital, whilst additional funding requirements for long term self-sustainable operations at the Drakelands open pit mine (Drakelands) are being reviewed.”

• The company also provides an update on the progress of a number of aspects of its operating turnaround plan at the Drakelands tungsten mine in Devon. Initial, Phase I modifications to the DMS (Dense Media Separation) plant were completed during August and a second phase of work is planned to start on 9th September; “Initial results are encouraging with availability above target and recoveries starting to improve.”

• Wolf Minerals also completed the first phase of its planned modifications to the refinery last week and reports that “Initial performance indicators are on plan and Wolf expects an increase in throughput and availability as a result.” Further enhancements to the refinery are due in mid-October.

• “Gravity fines modifications are underway, with initial changes taking place last week. The remainder of the works will take place over the next 8 weeks to minimise the impact on production, with commissioning into early November.”

• Although the details of the modifications are not discussed, Wolf Minerals  expresses optimism on its operational changes: “These modifications along with improved operating discipline across the business are expected to provide the necessary foundation for sustainable performance into next year”.

• Commenting on the improving trend in tungsten prices this year, the company notes that “Wolf has also seen an improving trend in the price of tungsten, with a 44% increase since December 2016 from US$187 per mtu to US$269 per mtu in August 2017. The strong price growth has been particularly evident recently with a monthly increase of US$30 per mtu in both July and August.” We note that these prices are for the intermediate product, ammonium paratungstate (APT) which is used as a benchmark for pricing tungten concentrates which typically sell at a discount to the APT price.

Conclusion: The increased bridging facility provides Wolf Minerals the opportunity to implement operational improvements at Drakelands. The company indicates that a number of these initiatives are showing promise at this stage and that it is also encouraged by the recent improvements in tungsten pricing. We wish the operational team success with its turnaround plan and await further news on the review of the additional funding requirements for long term sustainable operations.

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Thu, 31 Aug 2017 10:44:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28506/today-s-market-view-amur-minerals-corporation-katoro-gold-solgold-plc-wolf-minerals-weatherly-international-plc-28506.html
Today's Market View - Berkeley Energia, Condor Gold PLC, Mkango Resources Ltd, Strategic Minerals Plc, Thor Mining PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28497/today-s-market-view-berkeley-energia-condor-gold-plc-mkango-resources-ltd-strategic-minerals-plc-thor-mining-plc-28497.html Berkeley Energia (LON:BKY) – Strategic investment by Oman Sovereign Wealth Fund

Condor Gold (LON:CNR) – Completion of 5922m drill programme at La India

Mkango Resources* (LON:MKA) – Interim report and progress update

Strategic Minerals* (LON:SML) – Drilling underway at Hann’s Camp

Thor Mining (LON:THR) – Tungsten mineralisation intersected at Pilot Mountain

 

Gold prices pull back on Trump response to North Korean missile launch.  Markets’ turn attention to Friday US labour stats.

• US equities reversed earlier losses to close in the black yesterday as concerns over the confrontation between the US and North Korea subsided

• The US$ index is up marginally after declining to the weakest level in more than two years.

• The euro climbed to the highest level in more than two years crossing the $1.20 level for the first time since Jan/15 amid strengthening growth and speculation Mario Draghi will soon announce a dialling down of the latest monetary stimulus programme.

• The ECB is set to hold its next policy meeting on September 7.

• Storm Harvey continues to cause more flooding in eastern Texas and western Louisiana with water levels in reservoir in west Houston rising and a levee south of the city breached.

• Moody’s estimates the storm could cost up to $65bn in property damage and lost economic output while officials expect more than 450,000 people seeking federal aid.

• Base metals are largely range bound this morning.

• Iron ore futures finished lower today (-2.0%) as investors add to bearish bets amid expectations for increased shipments in coming weeks; steel futures were also down (-1.1%).

 

Houston – insurance is mainly Federal insurance as most private insurers will not cover flooding in the Houston area

• The National Flood Insurance Program was designed for home owners and is reported to be inadequate for businesses.

• Federal Insurance and does not costs for business interruption and significant disaster reparation are not covered.

• Flooding in the Houston area continues to worsen as water floods in from the levies and over the top of major dams and reservoirs.

 

LME to look at new lithium contract

• We would expect there to be a lithium carbonate concentrate contract and possibly a lithium hydroxide contract with strict quality controls which might add to costs.

• Lithium carbonate is the major traded raw material for lithium processors and battery producers with lithium hydroxide as a value added product preferred by some battery producers.

• The development of a market in Lithium concentrates should help investors access the market and encourage new investment in lithium mining and processing.

• Quoted prices for lithium vary in the market with The Industrial Minerals Battery Price report quoting $19.85-21.25/kg in China for lithium carbonate and Benchmark Mineral Intelligence quoting $14,000/t in June.

• The pricing picture varies dramatically when considering short term and longer term contracts with lithium carbonate prices varying from lows of $11/kg to highs of $16/kg for large biannual contracts delivered into the US.  Spot bags of lithium carbonate delivered into China were quoted at $17.4-22.8/kg in July/August highlighting the discrepancy in prices for differing contracts and locations.

• We hope the LME can get on and establish this contract ASAP to help better mage and stabilise the market.

 

Electric Vehicles – Renault-Nissan to build electric vehicles in China through new venture with Dongfeng Motor

• Renault-Nissan and Dongfeng already manufacture conventional vehicles in China and will extend this co-operation to a new range of electric vehicles in China to capitalise on the new move to go electric in China.

• China is the world’s largest market for Plug-in Electric Vehicles with 530,000 passenger vehicles and 270,000 commercial vehicles expected to be sold in 2017 according to EVvolumes.com

• Foreign car makers need to raise their EV sales in China to meet new regulations as the Chinese government brings in quotas for new EV sales.

• Manufacturers also need to produce EVs locally to qualify for subsidies and to avoid import duties to remain competitive

 

EV Power: the critical element to an Electric Vehicle is its power source which will create an increasing challenge to town planners and local utility providers.

• The powering of a few vehicles in a local neighbourhood might not require much additional infrastructure but the arrival of significant numbers of Plug-in EVs could require new infrastructure on a major scale.

• Charging with DC is faster and more efficient than more conventional AC chargers but to be truly effective requires its own distribution network.

• The alternative is the development of a separate three phase electrical distribution network to deliver more power more quickly than our current single phase network.

• Many industrial sites already have three phase power but direct DC supply is relatively rare except for sub-sea cabling and Photovoltaic supply which naturally generates DC.

 

Dow Jones Industrials  -0.02% at   21,808

Nikkei 225   -0.45% at   19,363

HK Hang Seng   -0.35% at   27,765

Shanghai Composite    +0.08% at    3,365

FTSE 350 Mining   -1.00% at   17,232 (from last week)

AIM Basic Resources   +1.06% at    2,546 (from last week)

 

Economic News

US – Consumer confidence strengthened to the second highest level since late 2000 on the back of robust assessment of present conditions, according to the Conference Board data.

• Gains have been led by a continuing improvement in the labour market and strong property and stock markets.

• Gauge of consumer expectations recorded only modest gains.

• The Conference Board index comes on top of University of Michigan data that saw consume sentiment climbing to a seven-month high in August as well as the Bloomberg Consumer Comfort Index which climbed for the sixth consecutive time to reach a 16-year high in the week ending Aug/20.

• This is good news for the consumer led economy with personal consumption accounting for 3/4s of growth in GDP in Q2/17.

• The survey was completed before Storm Harvey events which would be reflected in September reading.

 

 

Germany – Inflation is set to record an increase in the headline rate in August as suggested by the data released by separate states.

CPI (Harmonised EU %mom/yoy): 0.1/1.7 forecast v 0.4/1.5 in July.

 

Spain – Inflation accelerated in August with an increase likely to have been led by oil prices, Bloomberg reports.

• The breakdown between categories in the headline inflation will be released only in two weeks.

• While unemployment rate has been continuously trending downwards it remains elevated implying a significant amount of spare capacity to weigh on inflation outlook.

• CPI (Harmonised EU %mom): 0.2 v -1.2 in July and 0.2 forecast.

• CPI (Harmonised EU %yoy): 2.0 v 1.7 in July and 1.8 forecast.

 

Russia – The government will recapitalise Otkritie, once Russia’s biggest private bank, following a run on deposits from the institution amid surprise ratings downgrade.

• Clients are estimated to have pulled $7.4bn or 26% of deposits in two months of June and July only.

• Current owners of the business will see their stakes capped at a maximum 25% and may potentially be wiped out completely if the bank continues to be undercapitalised after three months.

 

Currencies

US$1.2061/eur vs 1.1784/eur last week.   Yen 108.46/$ vs 109.64/$.   SAr 13.054/$ vs 13.162/$.   $1.296/gbp vs $1.280/gbp.     

0.796/aud vs 0.791/aud.   CNY 6.596/$ vs 6.664/$.Commodity News

Precious metals:

Gold US$1,325/oz vs US$1,287/oz last week

   Gold ETFs 67.5moz vs US$67.0moz last week

Platinum US$1,000/oz vs US$978/oz last week

Palladium US$945/oz vs US$935/oz last week

Silver US$17.57/oz vs US$16.99/oz last week

           

Base metals:   

Copper US$ 6,798/t vs US$6,718/t last week – Rio Tinto is considering whether to continue with the Freeport JV agreement over the Grasberg operation or walk away.

• Rio has got a team in Jakarta currently in discussions over the operation.

• “There is a difference between having a world-class resource and a world-class business… depending on the outcome of the negotiation, then we will decide if we want to stay, or if we want to go,” Rio said.

• Freeport will need to get Rio’s approval before being able to proceed with the latest agreement with the Indonesian government regarding the disposal of the major interest in the operation.

• Codelco is sceptical the latest copper price rally is sustainable in the short run suggesting it could reverse in the coming months.

• Over a more medium to long term, the Company sees tighter fundamentals driving the price up.

• “If you look at the supply and demand in the next couple of years, you do see a deficit and fundamentals for a good price in the future and that is the reason why speculative capitals are moving towards copper,” Codelco said.

 

Aluminium US$ 2,088/t vs US$2,105/t last week

Nickel US$ 11,770/t vs US$11,705/t last week – Prices may break $12,000 in September on the back of strong fundamentals and falling US$, according to Chinese Antaike.

• Chinese visible refined nickel inventories dropped to 130kt from almost 200kt at the start of the year.

• Stainless steel mills are reported to be running full order books amid high margins.

• Nickel pig iron supply from Indonesia is expected to come short of market estimates, Antaike said.

• Nevertheless, total LME stocks remain at high level having climbed to 387kt from 372kt as of the start of the year.

 

Zinc US$ 3,119/t vs US$3,119/t last week

Lead US$ 2,372/t vs US$2,365/t last week

Tin US$ 20,530/t vs US$20,380/t last week

           

Energy:           

Oil US$52.0/bbl vs US$52.5/bbl last week

Natural Gas US$2.924/mmbtu vs US$2.944/mmbtu last week

Uranium US$20.00/lb vs US$20.25/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.1/t vs US$75.9/t

Chinese steel rebar 25mm US$650.1/t vs US$643.8/t

Thermal coal (1st year forward cif ARA) US$79.5/t vs US$78.3/t

Premium hard coking coal Aus fob US$207.5/t vs US$202.6/t

 

Other:  

Tungsten APT European US$269-275/mtu vs US$250-256/mtu

 

Company News

Berkeley Energia (LON:BKY) 49.5p, Mkt Cap £126m – Strategic investment by Oman Sovereign Wealth Fund

• Berkeley Energia reports that, subject to shareholder approval, it has agreed a US$120m investment by the Oman Sovereign Wealth Fund (the State General Reserve Fund) “to fully fund the Salamanca mine into production.”

• The investment comprises an interest free unsecured convertible loan of US$65m which can be converted into ordinary shares at 50p/share to give the fund a 28% interest in the company and 3 tranches of options which are convertible at a weighted average price of 85p/share “contributing a further US$55 million towards the later phases of the Company’s development of the Salamanca mine resulting in the fund holding a further 9% of the Company.”

• In addition to the right to appoint a non-executive director, the investment allows the fund “to match future uranium off-take transactions on similar commercial terms subject to certain limitations on volume.”

Conclusion: Securing full funding to advance the Salamanca Uranium Project to production represents a milestone for the project and we look forward to further news as development progresses.

 

Condor Gold (LON:CNR) 42.3p, Mkt Cap £32.0m – Completion of 5922m drill programme at La India

• Condor Gold has announced that it has now completed a 5922m drilling programme of 43 holes to a maximum depth of around 200m testing the Mestiza vein set located to the north of the 1.3m oz resource contained within the La India Vein set.

• The Mestiza set of veins comprises 4 principal veins, the Tatiana vein, where a 450m long high grade shoot has now been confirmed over a strike length of some 450m within the overall 3.5km long Mestiza system; the Buenos Aires; and the Jicaro Vein; as well as the as yet largely untested 2km long Espinitio Vein. Mapping has also discovered a new, parallel vein, “the Tortuga Vein, which assayed up to 6.1 g/t Au in a mullock rock sample.”

• The area was drilled during the early 1990s by Soviet sponsored interests at which time a Soviet standard resource of 2.4mt at an average grade of 10.2g/t gold (786 koz of contained gold was outlined.

• Condor Gold’s current programme is intended to assess the area in terms of current, Canadian Ni43-101 reporting standards. As this area is currently excluded from Condor Gold’s published resource and mine plan, the company comments that “A successful resource conversion of the Soviet-style resource has the potential to add large, high grade, and relatively shallow resources to a future mine plan, thereby increasing the annual gold production, life of mine, and project economics.”

• Among the results highlighted in today’s announcement are the following intersections of the Tatiana Vein:

o The previously reported 3.3m wide intersection averaging28.3g/t gold and 38.9 g/t silver from a depth of 76.70m in hole LIDC 344;

o A 3.55m wide intersection averaging 23.3g/t gold and 66.6 g/t silver from a depth of 160.50m in hole LIDC 358;

o A 3.60m wide intersection averaging 13.7g/t gold and 13.9 g/t silver from a depth of 142.60m in hole LIDC 365 and;

o A 7.00m wide intersection averaging 2.9g/t gold from a depth of 145.50m in hole LIDC 363;

• The company also reports mineralised intersections of both the Buenos Aires and Jicaro Veins, including:

o A 0.70m wide intersection on the Buenos Aires Vein averaging 11.9g/t gold and 7 g/t silver from a depth of 93.3m in hole LIDC 373;

o A 0.90m wide intersection on the Jicaro Vein averaging 0.86g/t gold and 6g/t silver from a depth of 33.7m in hole LIDC 374; and

o Multiple intersections of the  Buenos Aires Vein including 0.3m averaging 4.98g/t gold and 4g/t silver from 88.2m; 1.4m averaging 1.55g/t gold and 0.55m averaging 1.05g/t gold all in hole LIDC 375.

• Deeper drilling will require more powerful equipment but the company comments that “the deepest drill holes, about 200m below surface, intersected lower grades. This may reflect pinching of the vein or the base of supergene enrichment. This has only been tested in two holes at the western end of Big Bend; further deeper drilling is required to test this observation.”

Conclusion: The drilling a Mestiza highlights the expansion potential of the wider La India prospect with a new vein discovered and a high grade shoot identified within the Tatiana Vein. We look for further news as exploration progresses.

 

Mkango Resources* (LON:MKA) 3.1p, Mkt Cap £2.6m – Interim report and progress update

• Mkango Resources reports a loss for the six months to 30th June 2017 of US$0.01/share (6 months to 30th June 2016 – loss of US$0.02/share)

• At the 30th June 2017, Mkango Resources held a cash balance of approximately US$498,000 following an operating cash flow of approximately US$470,000 offset by the proceeds of the issue of shares which generated a net inflow of approximately US$535,000.

• Mkango remains focussed on the optimisation and development the Songwe Hill rare earth deposit in Malawi where the most recent update of the pre-feasibility study shows that the project could produce an average of 2,840 tonnes per year of rare earth oxides in concentrate over the first 5 years of an 18 years open pit mine life. Based on a basket price of US$59.80/kg of rare earth oxides for the expected mineral assemblage at Songwe Hill and on an initial capital investment of US$216m, the company’s PFS estimates that the project generates an after-tax NPV10% of US$345m and delivers an after tax IRR of 37%.

• The company has entered into agreements with a number of technical and commercial partners to advance the project in a cost efficient way. An agreement with researchers at McGill University provides access to a technology which generates high strength hydrochloric acid  required for the processing of the rare earth mineralisation while it has also joined forces with Metalysis Limited to “jointly research, develop and commercialise rare earth metal alloys for use in three-dimensional (3D) printed permanent magnets.”

• Mkango has also entered an agreement which allows the Singapore-based  international metals trader, Noble Resources International, to acquire up to a 12.5% interest while providing Mkango access to Noble’s marketing and logistics expertise and strategic advice.

• The company has also recently secured a two-year extension to its exploration licence at Thambani, also in Malawi, where it has relatively early stage exploration for uranium, niobium, tantalum, zircon and other minerals underway. Mkango has, however, indicated that it is considering a range of strategic options for the advancement of Thambani, including the possible joint-venture or spin off of the project.

Conclusion: Mkango Resources continues to make progress with its flagship Songwe Hill rare earths project in Malawi through developing cost-efficient alliances with technical and commercial partners to help optimise the project

*SP Angel acts as Nomad and Broker to Mkango Resources

 

Strategic Minerals* (LON:SML) 1.9p, Mkt Cap £23.7m – Drilling underway at Hann’s Camp

• Strategic Minerals has announced the start of a programme of aircore drilling comprising some 2500m in 50 holes at its Hann’s Camp property near Laverton, W Australia.

• The drilling will cover an area of some 1.1km2 using a regular pattern of holes spaced at intervals of around 120 metres and will focus on the potential for cobalt and nickel laterite mineralisation as well as identifying targets for a possible second phase of drilling aimed at nickel-copper sulphide mineralisation.

• The programme, which is being funded internally from the cash generated by the company’s Cobre operation in New Mexico, is expected to take approximately 2 weeks with a further four to six weeks after sampling before assay results are available.

Conclusion: The commencement of drilling at Hann’s Camp should provide an initial systematic test of the recently identified cobalt potential at Hann’s Camp as well as pointing to deeper level sulphide mineralised targets. We look forward to the results of the drilling and associated assaying when they become available.

*SP Angel act as Nomad and broker to Strategic Minerals

 

Thor Mining (LON:THR) 0.9 pence, Mkt Cap £3.8m – Tungsten mineralisation intersected at Pilot Mountain

• Thor Mining reports that its most recent drill hole at its Desert Scheelite prospect in Nevada has intersected scheelite mineralisation at multiple levels within the hole.

• At this stage, no assays are available but the scheelite, which fluoresces under ultra violet light, has been identified over a 15m interval between 198-213m; a 4m interval between 217-221m and an 18m wide interval between 256-274m all in hole 17DS-DD01.

• In addition to the tungsten mineralisation, the hole encountered copper sulphide mineralisation (chalcopyrite) “for 5m from 265m and for a further 4m from 266m.”

• Drilling is to continue though the company comments that “In response to challenging drilling conditions through the volcanic cover to the north of Desert Scheelite, the Company has elected to sight the next hole to the south of the deposit and drill through more competent quartz monzonite.  Regulatory permitting to drill from this new site is in process, and subsequent drilling at Desert Scheelite will be deferred until this permitting is in place.”

Conclusion: Intersecting multiple tungsten bearing horizons at the Desert Scheelite Project provides encouragement for future exploration and we await the assay results with interest.

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Wed, 30 Aug 2017 10:44:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28497/today-s-market-view-berkeley-energia-condor-gold-plc-mkango-resources-ltd-strategic-minerals-plc-thor-mining-plc-28497.html
Today's Market View - Birimian, Horizonte Minerals Plc, BlueJay Mining PLC, KEFI Minerals plc, Kibo Mining PLC, SolGold plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28487/today-s-market-view-birimian-horizonte-minerals-plc-bluejay-mining-plc-kefi-minerals-plc-kibo-mining-plc-solgold-plc-28487.html BlueJay Mining* (LON:JAY) STRONG BUY - Target Price raised to 24p – Sonic drilling expected to raise scale of high-grade titanium mineral sands at Pituffik

Birimian Limited (ASX:BGS) Suspended – New presentation issued following findings of corporate review by new board

Horizonte Minerals (LON:HZM) – Araguaia feasibility study 60% complete and on schedule

Kefi Minerals* (LON:KEFI) – Progress report on Tulu Kapi

Kibo Mining (LON:KIBO) –Transmission arrangements for Mbeya Coal to Power Project (MCPP)

SolGold* (LON:SOLG) – Securing additional exploration licences in Ecuador

 

Gold climbs to the highest level YTD trading around $1,325/oz on the back of the news that North Korea fired a ballistic missile over Japan today.

• The missile is reported to have passed over Japan and landed around 1,200km off Hokkaido in the Pacific Ocean with no damages reported, according to Japan.

• Prime Mininster Shinzo Abe held a 40-minute phone call with Donald Trump early today and called the United Nations Security Council to hold an emergency meeting following the incident.

• In addition, North Korea fired three short-range missiles on Saturday.

• Copper continues to post new gains climbing more than $100/t today and trading around $6,780/t with investors growing bullish towards the metal outlook with US Comex net long speculative positions to have doubled since June.

• LME Index tracking performance of six base metals posted seven consecutive weekly gains marking the strongest run since 2006.

• January iron ore futures are off today (-1.1%) having earlier reached CNY 554/t, the lowest since August 16; steel rebar prices were up only marginally stronger claiming back earlier losses today.

• Crude is virtually flat this morning while reports of suspended refining capacities in the Storm Harvey affected areas near Houston emerge with companies waiting for floods to recede before bringing plants back online.

• 10 of the Texas’ 25 refineries are shut down, accounting for about half the 6mmbbl per day capacity, Bloomberg reports.

• The US$ index is down this morning trading at weakest levels since Jan/15 amid worries over the Hurricane Harvey’s impact on the economy and rising tensions in Asia.

• Both euro and Japanese yen rallied

 

UK insurers / funds may sell equities to cover losses in the Gulf of Mexico

• UK insurers and reinsurers may sell some equities in preparation for losses to come from Hurricane Harvey.

• Direct losses are currently estimated at >$20bn with economic losses expected at >$40bn.

• While the inconvenience caused by the Hurricane is huge the economic benefits of the reconstruction and refurbishment of damaged property will benefit the US economy.

• Economic losses will continue to rack up till the flood water subsides.

 

Lithium batteries – blending lithium with nanosized diamonds offers way to increase battery capacity and power

• Blending lithium with graphene makes batteries safer and more robust but lowers battery capacity.

• More lithium in the cathode = more power capacity but increases dendrite formation which effectively short circuits the battery reducing its life and capacity.

• Nanosized diamonds help to inhibit the formation of dendrites and therefore enable the lithium loading to be increased adding to capacity.

• Nanodiamonds are already used in electroplating to make coatings more uniform.

 

Dow Jones Industrials  -0.02% at   21,808

Nikkei 225   -0.45% at   19,363

HK Hang Seng   -0.35% at   27,765

Shanghai Composite    +0.08% at    3,365

FTSE 350 Mining   -1.00% at   17,232 (from last week)

AIM Basic Resources   +1.06% at    2,546 (from last week)

 

Economic News

US – Houston is battling with results of a post Tropical Storm Harvey flooding which is estimated to be the costliest US natural disaster since Hurricane Sandy in 2012.

• Both Draghi and Yellen decided to avoid discussion over potential changes in the monetary policy amid a dip in the US inflation numbers and strengthening growth in the Eurozone during the meeting of central bankers in Jackson Hole last week.

• Instead the ECB head went on to discuss benefits of free trade while Janet Yellen defended the progress made on financial regulation lately warning about the dangers of excessive de-regulation, FT reports.

 

Germany – Consumer confidence continued to trend higher helped by robust labour market and strong economic growth, according to the latest GfK report.

 

UK – House prices growth slowed in August and reached May readings marking the weakest pace since H2/13.

• “The slowdown in house price growth to the 2-3% range in recent months from the 4-5% prevailing in 2016is consistent with signs of cooling in the housing market and the wider economy,” Nationwide said.

• “Housing market activity will remain subdued.”

• Nationwide continues to forecast prices to average 2% growth this year with a shortage of properties providing support to the market.

• The stock of houses on estate agents’ books is close to 30-year lows while a lack of new properties is adding to housing supply pressures.

• Month on month, prices were down 0.1% with an averaged of £211k.

• Nationwide Property Prices (%yoy): 2.1 v 2.9 in Jul and 2.5 forecast.

 

France – The economy expanded at 0.5%qoq in Q2/17 the second reading showed coming in line with previous estimates and market expectations.

• Trade saw the largest contribution to the final GDP with net exports accounting for 0.8pp, while the drop in inventories was the largest drag on growth (-0.6pp).

• Private consumption (+0.2pp) and government spending (+0.1pp) saw only modest contributions.

• GDP (%qoq): 0.5 v 0.5 in Q1/17 and 0.5 forecast.

 

Currencies

US$1.2061/eur vs 1.1784/eur last week.   Yen 108.46/$ vs 109.64/$.   SAr 13.054/$ vs 13.162/$.   $1.296/gbp vs $1.280/gbp.     

0.796/aud vs 0.791/aud.   CNY 6.596/$ vs 6.664/$.

Euro rises to >$1.1986, highest level since January 2015

 

Commodity News

Precious metals:

Gold US$1,325/oz vs US$1,287/oz last week

   Gold ETFs 67.5moz vs US$67.0moz last week

Platinum US$1,000/oz vs US$978/oz last week

Palladium US$945/oz vs US$935/oz last week

Silver US$17.57/oz vs US$16.99/oz last week

           

Base metals:   

Copper US$ 6,798/t vs US$6,718/t last week – Freeport McMoRan agreed to sell a majority stake in its Indonesia unit to the government in exchange for mining licenses extended through to 2041.

• As part of the deal, Grasberg is expected to see as much as $20bn investment through 2031 to develop underground operations as well as construct copper smelter.

• As of now the government owns 9.4% with the remainder owned by Freeport.

• The situation is further complicated by the JV agreement with Rio Tinto which is entitled to a 40% interest in output above specific levels before 2021 and 40% of all production after that.

• Rio did not comment on the story, Bloomberg reports.

• Both Freeport and government are planning to negotiate the price of the stake in a way that “compensates market value”, the Company said.

Aluminium US$ 2,088/t vs US$2,105/t last week

Nickel US$ 11,770/t vs US$11,705/t last week

Zinc US$ 3,119/t vs US$3,119/t last week

Lead US$ 2,372/t vs US$2,365/t last week

Tin US$ 20,530/t vs US$20,380/t last week

           

Energy:           

Oil US$52.0/bbl vs US$52.5/bbl last week

Natural Gas US$2.924/mmbtu vs US$2.944/mmbtu last week

Uranium US$20.00/lb vs US$20.25/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.1/t vs US$75.9/t

Chinese steel rebar 25mm US$650.1/t vs US$643.8/t

Thermal coal (1st year forward cif ARA) US$79.5/t vs US$78.3/t

Premium hard coking coal Aus fob US$207.5/t vs US$202.6/t

 

Other:  

Tungsten APT European US$269-275/mtu vs US$250-256/mtu

 

Ferrochrome – Both Tsingshan Group and Baosteel raised bid prices for high carbon FeCr for September amid strong local stainless steel demand and significantly lower imports of the material from South Africa.

• Tsingshan bumped up prices CNY 1,496/t to CNY 8,496/t for September tender while Baoshan announced a CNY 1,500/t increase to CNY 8,500/t equivalent to 99c/lb Cr (50% Cr).

• Imports of high-carbon ferrochrome from South Africa totalled 170kt in July, down 50%oy and 10%mom.

 

Company News

BlueJay Mining* (LON:JAY) 19.3p, Mkt Cap £148m – Sonic drilling expected to raise scale of high-grade titanium mineral sands at Pituffik

STRONG BUY

Target Price raised to 24p

• BlueJay Mining expect to increase the size of the current mineral sands resource from the current 23.6mt grading 8.8& ilmenite.

• The team report they have completed all the planned sonic drill holes outside of the existing resource area.

• The sonic drill rig back is now working on a further 50 drill holes within the Pituffik resources area indicating a very good field season from a drilling perspective

• The rig has been working for around 28 days now indicating a very good run rate for the rig which operates off the back of a large tractor.

• Interlak: we expect drilling at the Interlak Delta to reveal very substantial intersections of unusually high-grade ilmenite material when announced.

• Bulk Samples: 250t of ilmenite rich material has been screened and shipped with a further 250t of material now being prepared for shipment.

• Another 250t of material is also being prepared for further customer work.  The speed and ease of preparing these bulk samples has exceeded expectations.  Stockpiling of run of mine ore will continue till end-September.

• Metallurgical testing: samples are also being shipped for metallurgical testwork at the company’s pilot plant in Queensland.

• Shipping: nearshore survey work shows potential to bring bulk carriers close enough to shore to reach ship loading facilities.  This should result in a significant cost saving as mineral sands could be loaded directly using a conveyor system on a short pier.  The system should be relatively inexpensive to emplace and to run and should remove expensive double handling and transhipment costs which are an additional cost at many other ilmenite producers.

• EIA:  the environmental impact assessment is scheduled for completion sometime in the fourth quarter.  Recent work has been focussed marine sampling for future offshore work.  The company is able to effectively mine in the on-shore environments under its current licenses.

• Disko project (near Ilulissat):  Bluejay are also planning to run an Electro Magnetic survey on the Disco license in early Q4  using equipment which has been demobalised from Pituffik..

• Weather:  The weather at Pituffik Airport, the closest major weather station is for rain today with a high of 7C and a low of 3C with wind speeds of around 6mph.  Some snow is expected at the weekend with wind speeds picking up to 8mph.

Conclusion: this update indicates good progress made at Pituffik particularly with the Sonic drill rig as recommended by SRK consultants.  It is good to see the outlying Sonic drill holes completed quickly outside the resource area with the rig returning to the resource for further infill drilling. We look forward to seeing the assay results from the Interlak Delta area and to see the average depth extent of the raised beeches within the resource.   

*SP Angel act as nomad and broker to BlueJay Mining.  An SP Angel mining analyst has visited the Pituffik ilmenite sands project in Greenland

 

Birimian Limited (ASX:BGS) Suspended – New presentation issued following findings of corporate review by new board

• Birimian Limited have issued a revised presentation on their Goulamina Lithium project and scoping study near Bougouni in Mali

http://birimian.com/pdfs/ShareholderInformationSessionsPresentation29Aug17.pdf

• The Goulamina project has a defined JORC resource of 32.9mt grading 1.37% Li2O containing some 451,000t at a 0.4% cut off grade.  This reduces to an indicated resource of 25.3mt containing some 347,000t of lithium oxide material.

• The scoping study works on a 1mtpa throughput to produce some 190,000t of spodumene concentrate material with a capex of US$42.7m in phase 1 plus US$40.7m in phase 2.

• The study works on a concentrate sales price of US$537/t and an operating cash cost of US$326/t.  Further details were released on 31 January.  The company has since moved to commission a Preliminary Feasibility Study which is due by end September.  From there it should move to develop a Definitive Feasibility Study on a 1-2mtpa mining operation.

• The corporate review reported on 16 August that the board has identified A$1.8m in tax related liabilities in Australia and in Mali plus a further A$386k of non-tax liabilities (Founders Fee payable to the State of Mali).  The resignations of the CFO and company secretary were accepted in the same statement.

• The board reckons that a total of 1,975,000 performance rights held by former directors have lapsed though the statement notes that lawyers for these directors have reserved their rights against the company in this respect.

 

Horizonte Minerals (LON:HZM) 2.825 pence, Mkt Cap £33.1m –Araguaia feasibility study 60% complete and on schedule

• The company reports that its feasibility study work for the development of a ferro-nickel mine at Araguaia in Brazil is around 60% complete and on schedule for “completion [in] Q4 2017 into Q1 2018.”

• Work is progressing on a number of areas including the mining and geology, process design and engineering and social and environmental studies.

• The mine –planning and design is “at an advanced stage” with geotechnical sampling and testing already completed in order to “support engineering design in the process plant araes and appropriate pit design.”

• Site layout work is now complete for the process plant and the company has solicited capital cost estimates for the major items of equipment from the market. The route of the power transmission line linking to the national grid has been selected and the company has finalised the organisational structure and staffing structure for future nickel operations.

• During Q3 2017, the company submitted environmental control plans to the State Environmental Agency and work is progressing toward the finalisation of water pipeline and energy transmission line installation licences.

• Commenting on the progress achieved, CEO, Jeremy Martin, noted that the study remains on schedule and budget for completion by the end of 2017, with a view to publishing early in 2018. He went on to point out that the company planned to submit its applications in to the Environment Agency in Q3 2017 and emphasised it as “The next major milestone and de-risking step for the Project will be the award of the Installation Licence, which allows construction to start. … with a view to the award of the licence in Q1 2018”

Conclusion: Feasibility study work for the development of Araguaia is reported to be on schedule and within budget with the company hopeful of receiving the necessary permits to start work in Q1 2018. We look forward to the outcome of the feasibility work early in 2018.

 

Kefi Minerals* (LON:KEFI) 5.25p, Mkt Cap £17.5m – Progress report on Tulu Kapi

• Kefi Minerals reports that, in order to maintain the schedule needed for initial production in late 2019,  it expects to start preliminary field work, including geotechnical drilling of the pant and dam site areas at Tulu Kapi following the end of the wet season in September.

• The company also reports that it has now received VAT refunds totalling approximately £2.5m and also that it has agreed with its project finance partner, Oryx management a “finance execution plan [and is] assembling documentation across all the fronts for finance closing later in 2017.”

• Kefi comments that “Based on current estimates of capital spending and capital contributions, respective shareholdings will be 75-80% KEFI and 20-25% Government.” The interests will be held in a “new company to hold the Project, Tulu Kapi Gold Mines Share Company Limited (“TKGM”).”

• Expressing his satisfaction with the progress achieved at Tulu Kapi, Chief Executive, Harry Anagnostaras-Adams remarked that “The launch of project company TKGM has cemented our relationship with the Government and everyone is pushing to complete the financing and get into development and production.”

Conclusion: Kefi Minerals has now established a formal project company in association with the Ethiopian Government which, in tandem with the progress on project financing provides a firm platform for the delivery of the Tulu Kapi gold mine. Initial geotechnical site investigation drilling is scheduled to start in September after the end of the wet season.

*SP Angel act as Nomad and broker to Kefi Minerals

 

Kibo Mining (LON:KIBO) 5.625 pence, Mkt Cap £20.5m –Transmission arrangements for Mbeya Coal to Power Project (MCPP)

• Kibo Mining reports that it has concluded the final bid clarification for the construction of the power transmission line for distribution of electricity from the proposed MCPP 250-300MW mine-mouth power plant at Rukwa in south west Tanzania.

• The power transmission contract will supplement the Power Station EPC contract which was conditionally awarded to SEPCO III during December 2016.

• The “Power Line Construction EPC contract which is to be awarded to SEPCO III as an integral part of the Power Station EPC contract, subject to final technical, financial and operational benchmarking that will be conducted by Tractebel Engineering over the course of the next month.”

• The relationship with the Chinese company, SEPCO III, stems from an agreement in August 2016 which granted SEPC “the right to become the sole bidder for the EPC contract to build the power plant component of the MCPP in exchange for SEPCO III refunding 50% of the development costs incurred by Kibo to date on the project. Kibo has already received the first tranche of this funding in the amount of US$1.8million on the 5th September 2016 and signed an EPC contract with SEPCO III on the 19th December 2016.”

• Commenting on the progress with the transmission line bide, CEO, Louis Coetzee said “Finalisation of the transmission line bid concludes all technical development work on the MCPP prior to financial close.”

Conclusion: The completion of the technical work on the transmission line should facilitate the delivery of financial close on the MCPP project which has the potential to help address a significant shortfall in power generation capacity in Tanzania. The impact on the project of recent legislative changes affecting the mining industry in Tanzania remains unclear, however.

 

SolGold* (LON:SOLG) 36p, Mkt Cap £545.8m – Securing additional exploration licences in Ecuador

• SolGold reports that it has continued to capitalise on the geological and operational expertise it has developed in Ecuador and that it now been granted an additional 21 exploration licences in Ecuador bring the total to 59 licences, excluding its core Cascabel project where the company is expanding its exploration effort with the deployment of additional drilling rigs.

• The award of the new licences brings Solgold’s exploration holding, excluding the Cascabel licences, to a total of 2,496km2. The new licences are to be held in the four previously announced wholly owned subsidiary companies Carnegie Ridge Resources, Green Rock Resources, Valle Rico Resources and Cruz de Sol with the Cascabel block of licences held by Exploraciones Novomining SA.

• The initial exploration results from mapping and sampling are described as “very encouraging with widespread areas of hydrothermal alteration identified which are considered highly prospective for porphyry and epithermal style mineralisation.”

• The company notes that, while many of its samples have yet to be returned from the laboratory but that “initial rock chip samples taken of altered outcrops have returned values as high as 12% Cu.”

• The initial reconnaissance exploration is being followed up with systematic stream sediment sampling over the most prospective areas  in order to focus on areas for gridded soil sampling in order to identify future drilling targets.

Conclusion: Solgold is building on the expertise it has built up during the continuing exploration of Cascabel and is expanding its exploration portfolio in Ecuador. Early stage results are promising and the company is moving systematically towards the identification of drilling targets.

*SP Angel acts as Nomad and broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

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Tue, 29 Aug 2017 10:41:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28487/today-s-market-view-birimian-horizonte-minerals-plc-bluejay-mining-plc-kefi-minerals-plc-kibo-mining-plc-solgold-plc-28487.html
Today's Market View - Bushveld Minerals Limited, Edenville Energy, Ncondezi Energy, Strategic Minerals Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28473/today-s-market-view-bushveld-minerals-limited-edenville-energy-ncondezi-energy-strategic-minerals-plc-28473.html Bushveld Minerals (LON:BMN) – Brazilian producer highlights vanadium 5 year price high

Edenville Energy (LON:EDL) – Preparing to supply sized coal from Rukwa

Ncondezi Energy (LON:NCCL) – Progress report on search for strategic partner

Strategic Minerals* (LON:SML) – Proposed Management Option Programme

 

LME base metals index is on course to post the seventh weekly increase heading for the longest run of weekly gains in more than a decade.

• Gold is mute this morning trading in a $5/oz range around the $1,290/oz mark.

• The US$ index was also little changed after climbing 0.2% on Thursday.

• Copper prices continue their ascend hitting three year high amid reports of disrupted supply, firm Chinese demand and falling inventories; Shanghai Futures Exchange copper inventories dropped 8.2% from last week, most since week to June 8.

• Iron ore is stronger today following a surge in Chinese steel futures; iron ore inventories in Chinese ports declined for five straight weeks, the longest streak since Sep/16, but remained up 16% YTD.

• Brent prices are higher amid reports Hurricane Harvey is approaching the major producing region in the US Gulf.

 

Trading in steel related commodities surges with Bloomberg reporting that volumes in ferrosilicon trading on the China’s Zhengzhou Commodity Exchange climbing to more than 705,000 contracts this week.

• This compares to an average of 22,000 contracts trading daily in July.

• Prices hit record high on Tuesday recording a 25% increase YTD.

 

Chinese steel mill debt restructuring marks the first time investors agreed to a principal haircut, according to Goldman Sachs.

• Bondholders of Dongbei Special Steel agreed to a 22% cash payout on their debts of more than CNY 500,000 ($75,000).

• Investors may also opt for their claims being converted into equity.

• Previous cases of failed businesses saw either repayments of owed funds in full supported by state bail out or were stuck in restructuring with investors reluctant to accept losses.

 

Dow Jones Industrials  -0.13% at   21,783

Nikkei 225   +0.51% at   19,453

HK Hang Seng   +1.22% at   27,855

Shanghai Composite    +1.83% at    3,332

FTSE 350 Mining   +0.44% at   17,419

AIM Basic Resources   +0.05% at    2,519

 

Economic News

Germany – Final Q2 GDP numbers released this morning confirmed previous estimates for the economy to have expanded 0.6%qoq/2.1%yoy led by strong growth in industrial production and private consumption.

• Industrial output was up by an impressive 1.8%qoq accounting for about half a percentage point of the GDP growth recorded in the period.

• Consumption climbed 0.8%qoq marking the strongest increase since 2011 and beating estimates for a 0.7%qoq rise.

• Change in net exports weighed on overall growth as an increase in imports (+1.7%qoq) outpaced a rise in exports (+0.7%qoq).

• In a separate report, business outlook improved to the highest since 2014, according to the Ifo data.

• While the composite index slipped marginally (115.9 from 116.0 in July) driven by a small drop in assessments of current trading conditions, the future expectations index beat estimates and came in strong.

• Previously, Markit in their latest PMI report showed that firms remained strongly confident regarding future output over the next 12 months; although the subindex eased for the third straight month in August to the lowest in 2017 so far.

 

South Korea – Samsung vice-chairman and de facto head of the Company Lee Jae-yong who was planning to take over from his father chairman Lee Kun-hee has been sentenced to five years in prison.

• The court found Mr Lee guilty on a series of charges including bribery, embezzlement and perjury.

 

Currencies

US$1.1784/eur vs 1.1787/eur yesterday.   Yen 109.64/$ vs 109.38/$.   SAr 13.162/$ vs 13.215/$.   $1.280/gbp vs $1.280/gbp.     

0.791/aud vs 0.789/aud.   CNY 6.664/$ vs 6.662/$.

 

Commodity News

Precious metals:

Gold US$1,287/oz vs US$1,286/oz yesterday

   Gold ETFs 67.0moz vs US$67.0moz yesterday

Platinum US$978/oz vs US$979/oz yesterday

Palladium US$935/oz vs US$935/oz yesterday

Silver US$16.99/oz vs US$17.01/oz yesterday

           

Base metals:   

Copper US$ 6,718/t vs US$6,575/t yesterday

Aluminium US$ 2,105/t vs US$2,064/t yesterday

Nickel US$ 11,705/t vs US$11,520/t yesterday

Zinc US$ 3,119/t vs US$3,129/t yesterday

Lead US$ 2,365/t vs US$2,408/t yesterday

Tin US$ 20,380/t vs US$20,375/t yesterday

           

Energy:           

Oil US$52.5/bbl vs US$51.6/bbl yesterday

Natural Gas US$2.944/mmbtu vs US$2.944/mmbtu yesterday

Uranium US$20.25/lb vs US$20.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.9/t vs US$75.7/t

Chinese steel rebar 25mm US$643.8/t vs US$651.7/t

Thermal coal (1st year forward cif ARA) US$78.3/t vs US$77.5/t

Premium hard coking coal Aus fob US$202.6/t vs US$200.9/t           

 

Other:  

Tungsten APT European US$250-256/mtu vs US$248-256mtu

 

Steel – US steel and steel-related companies signed a letter to President Donald Trump asking for immediate import restrictions amid reports showing that inbound shipments of overseas steel prodcuts surged back to 2015 levels.

 

Company News

Bushveld Minerals (LON:BMN) 9.4p, mkt cap £75.6m – Brazilian producer highlights vanadium 5 year price high

Target price 14p

• Further positive news on vanadium pricing is contained within the announcement by the Canadian listed, Brazilian producer, Largo Resources that it had shipped “its 1000th lot shipment of vanadium, representing approximately 44 million pounds of vanadium pentoxide” from its Maracas Menchen mine in Bahia State.

• Largo comments that “The price range of V2O5 for the week ended August 18, 2017 was US$9.00/lb to US$10.00/lb (Source: Metal Bulletin), which represents an approximate 64% increase over the US$5.81 average price for fiscal Q2. We anticipate that the vanadium price environment created by the recent price increases which represent a 5-year high”.

• The price rises and optimism over future price trends stem from a number of, mainly China – related, factors including moves to curb environmental breaches, seasonal closures in China’s principal producing region of Sichuan and measures to limit imports of vanadium bearing scrap metal as well as the recently implemented measures to increase the vanadium content of steel reinforcing bars.

Conclusion: Bushveld Minerals is increasing its annual production capacity from 3000 tonnes to 5000 tonnes at a time when vanadium demand is increasing and the price has just reached a five-year high.

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.

 

Edenville Energy (LON:EDL) 0.79 pence, Mkt Cap £8.7m -  Preparing to supply sized coal from Rukwa

• Edenville Energy reports that the majority of the components for its coal washing plant at Rukwa in Tanzania have arrived on site and, with construction already underway, the balance of the equipment is expected to arrive next week.

• The screening section has already been completed and is currently undergoing operational testing to “allow sized coal to be distributed to customers who have requests pending.” The company also remarks that “We are in communication with others to take both screened coal and washed coal once the plant construction is completed.”, and “In addition to the Company marketing the coal, we have an agent actively exploring new client possibilities in the region, including Kenya, Rwanda and Uganda.”

• Independent testing has “returned raw coal values of 5,220Kcal/kg (21.93Mj) and 15.7% Ash. We are very encouraged by these numbers and consider when this coal is processed through the wash plant a premium product can be obtained.”

• Progress on waste (overburden) removal at the mine has exposed “significant quantities of coal in readiness for the plant. Overburden at this stage is soft and friable which is helping to achieve high digging rates.”

Conclusion: Edenville Energy has made progress towards the production of saleable coal from Rukwa. The impact of recent legislative changes concerning mining in Tanzania on the company’s business remains unclear at this stage though, in the past, the company has appeared to enjoy a constructive relationship with Government.

 

Ncondezi Energy (LON:NCCL) 4 pence, Mkt Cap £10m – Progress report on search for strategic partner

• Ncondezi Energy reports that it is now receiving non-binding offers from prospective partners for the development of the planned 300MW Ncondezi coal-fired power project in Mozambique. All non-binding offers are expected to have been received by the end of the month.

• The company expects to move to a second phase of the process in September, when a limited number of preferred candidates will be facilitated to undertake their detailed due-diligence processes and invited to undertake detailed negotiations with a view to submitting binding offers in early Q4 2017, and “the Company expects to be in a position to accept its preferred offer before year end.”

• Commenting on the progress achieved, Non-Executive Chairman, Michael Haworth, commented that “We are very pleased with the quality of the partners who have submitted offers to date, and believe the power project will be well positioned to finalise development, financing and initiate construction once a binding offer has been agreed.”

• The company has also announced that the holders of loans to Ncondezi, which include board and senior staff members, have agreed, in principle, to extend their loans for a further 12 months until 2nd September 2018. “This will provide the Company with time to conclude the new partner process, better develop loan repayment options and raise additional working capital by the end of September 2017.”

Conclusion: Ncondezi Energy expects to have selected a new partner for the development of the coal fired power plant in Mozambique before the end of 2017. Continuing support of the loan holders has been secured, in principle, and the company may look to secure additional working capital during September.

 

Strategic Minerals* (LON:SML) 2p, Mkt Cap £24.9m – Proposed Management Option Programme

• Strategic Minerals has announced its intention to introduce an option programme “designed to incentivise the Board and Management of the Company to target, over the next five year, a market capitalisation of £100m and progressing onto a share price of £0.10”.

• The proposed scheme consistes of 3 tranches as follows:

o Tranche 1 comprising 120m shares at a vesting price of £0.055; an exercise price of £0.0275 at a maturity date of 30th June 2020 and

o Tranche 2 comprising 55m shares at a vesting price of £0.075; an exercise price of £0.0375 at a maturity date of 30th June 2021 and

o Tranche 3 comprising 25m shares at a vesting price of £0.100; an exercise price of £0.0500 at a maturity date of 30th June 2022

• The Company points out that “As the bulk of these options are for the Board, it is considered appropriate that the adoption of this proposal be ratified by shareholders at a General Meeting to be held in London on 24 October 2017… “

• “It is currently intended that 30% of each Tranche will be allocated to the Managing Director, John Peters, 20% to the Non-Executive Chairman, Alan Broome and another 20% to Non-Executive Director Peter Wale”. The proposed recipients of the remaining 30% has not been disclosed but by inference should include the operational management teams at CARE in Australia, Cobre in New Mexico and Redmoor in the UK.

*SP Angel act as Nomad and broker to Strategic Minerals

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Fri, 25 Aug 2017 10:55:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28473/today-s-market-view-bushveld-minerals-limited-edenville-energy-ncondezi-energy-strategic-minerals-plc-28473.html
Today's Market View - Bacanora Minerals Ltd, Bushveld Minerals Limited, Bluerock Diamonds Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28464/today-s-market-view-bacanora-minerals-ltd-bushveld-minerals-limited-bluerock-diamonds-plc-28464.html Bacanora Minerals (LON:BCN) – Sonora Lithium Project Feasibility Study update

BlueRock Diamonds* (LON:BRD) – August diamond sales

Bushveld Minerals (LON:BMN) – Additional working capital support from Wogen

 

Gold is little changed consolidating around $1,290/oz levels following a strong run through July/August.

• Copper is having another good day climbing $55/t to $6,620 on course towards $6,650/t, the highest level since the end of 2014, hit on Tuesday this week.

• Aluminium futures in China climbed to the highest level in six years as the State Council reiterated its pledge to follow through with capacity cuts.

• Surprisingly, with summer months being normally quiet ones in terms of activity in the market, trading volumes in aluminium futures on the Shanghai Futures Exchange climbed to record high this month to date.

• Base metals LME index closed at 3,147 yesterday marking the highest level since Q4/14.

• Steel and iron ore futures rebounded in China paring some of its Wednesday’s drop as markets bet on continuing tightness in the steel market.

• With the government concerned with speculation driven steel prices increases sees the Shanghai Futures Exchange capping daily new positions of a number of hot-rolled coil contracts at 3,000 lots per account for non-hedging clients from tomorrow and raising transaction fees to 0.05% of trading value from 0.01%.

• The US$ index is rangebound while Brent came off this morning shedding some of its previous session’s gains when oil prices increased on a drop in US crude stockpiles amid a period of seasonally strong demand.

• US equities closed slightly lower yesterday with President Trump threatening to “close down… government” by blocking spending approvals pressuring Congress to agree with the construction of the US-Mexico border wall.

• US Congress is set to vote on a spending package and a revision in the debt ceiling in September with the Treasury targeting new debt ceiling agreement by September 29.

• European equities are trading higher ahead of a meeting of central bankers in Jackson Hole, Wyoming, with investors following the event closely for clues over the future monetary policy decisions.

• Both Janet Yellen and Mario Draghi are scheduled to speak on Friday.

 

Dow Jones Industrials  -0.40% at   21,812

Nikkei 225   -0.42% at   19,354

HK Hang Seng   +0.43% at   27,519

Shanghai Composite    -0.49% at    3,272

FTSE 350 Mining   +0.52% at   17,329

AIM Basic Resources   -0.04% at    2,518

 

Economic News

US – Private sector shows strong growth momentum in August with new business volumes increasing at the fastest pace in just over two years.

• Robust economic growth with strong domestic demand led employment gains with the rate of job creation unchanged from July’s seven-month record.

• The Markit PMI report also revealed an acceleration in output prices inflation with selling prices increasing at the fastest pace in nearly three years.

• “The US economic growth story remained a tale of two sectors… the overall rate of expansion accelerated to a 27-month record, driven higher by strong and improved growth of business activity in the vast services economy,” market wrote.

• “in contrast, the performance of manufacturing remained sluggish in comparison, with production volumes rising to the weakest extent in over a year.”

• Markit Manufacturing PMI: 52.5 v 53.3 in Jul and 53.5 forecast.

• Markit Services PMI: 56.9 v 54.7 in Jul and 55.0 forecast.

• Markit Composite PMI: 56.0 v 54.6 in Jul.

 

France – August business confidence hit the highest level since April 2011 adding further to growth momentum in the Eurozone’s second largest economy.

• Both manufacturing and services sectors tracked by Insee recorded improvements; although, the report highlighted that employment outlook weakened slightly.

• Business Confidence: 109 v 108 in Jul and 108 forecast.

 

Currencies

US$1.1787/eur vs 1.1784/eur yesterday.   Yen 109.38/$ vs 109.43/$.   SAr 13.215/$ vs 13.238/$.   $1.280/gbp vs $1.280/gbp.     

0.789/aud vs 0.789/aud.   CNY 6.662/$ vs 6.664/$.

 

Commodity News

Precious metals:

Gold US$1,286/oz vs US$1,286/oz yesterday

   Gold ETFs 66.9moz vs US$67.0moz yesterday

Platinum US$973/oz vs US$979/oz yesterday

Palladium US$933/oz vs US$935/oz yesterday

Silver US$16.89/oz vs US$17.01/oz yesterday

           

Base metals:   

Copper US$ 6,614/t vs US$6,575/t yesterday

Aluminium US$ 2,094/t vs US$2,064/t yesterday

Nickel US$ 11,705/t vs US$11,520/t yesterday

Zinc US$ 3,110/t vs US$3,129/t yesterday

Lead US$ 2,377/t vs US$2,408/t yesterday

Tin US$ 20,490/t vs US$20,375/t yesterday – Earlier this week Governor of Bangka Belitung, the major tin producing province in Indonesia, suspended the release of new licenses and extension of existing ones for next two/three months as his administration is drafting new tin mining regulation.

• Governor said that his administration and local law enforcement.

• The province accounts for roughly 90% of the local tin production.

           

Energy:           

Oil US$52.4/bbl vs US$51.6/bbl yesterday

Natural Gas US$2.925/mmbtu vs US$2.944/mmbtu yesterday

Uranium US$20.50/lb vs US$20.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.6/t vs US$75.7/t

Chinese steel rebar 25mm US$644.1/t vs US$651.7/t

Thermal coal (1st year forward cif ARA) US$77.8/t vs US$77.5/t

Premium hard coking coal Aus fob US$201.2/t vs US$200.9/t

           

Other:  

Quarterly hard coking coal US$285.0/t vs US$285.0/t

Tungsten APT European US$250-256/mtu vs US$248-256mtu

 

Company News

Bacanora Minerals (LON:BCN) 85.5p, Mkt Cap £113m – Sonora Lithium Project Feasibility Study update

• Bacanora Minerals has provided a progress report on its feasibility study work for the development of the proposed 35,000tpa lithium carbonate production facility at its Sonora Lithium Project in Mexico.

• The study, which builds on the April 2016 pre-feasibility work, is now expected to be completed “in late 2017” which is later than the previously announced revised summer 2017 date.

• The project development envisages a Phase 1 development to produce 17,500 tonnes per year of battery grade lithium carbonate for the initial two years of production from 2019/2020 then doubling output to 35,000 tpa of lithium carbonate for the remaining 20+ years.

• Operating and capital cost estimation work “is nearing completion” and the company notes that as they are proposing to mine “a soft rock deposit, operating costs at Sonora are anticipated to be lower than the typical hard rock deposits due to the lack of a need for the lithium ore to be drilled, blasted, crushed and ground prior to processing.”

• Work continues on optimising the mine plan for the open-pits and on equipment selection and on securing the energy requirements of the project.

• The company comments that “While Sonora’s OPEX is expected to be higher than brine deposits in Chile, the length of time to produce Li2CO3 should be considerably shorter.”

• Work to finalise the proposed flowsheet, using a sodium sulphate roast, is nearing completion with the preparation of capital equipment tenders, plant layouts and optimisation. “In addition, mechanical and metallurgical optimisations of the Hermosillo pilot plant are currently being undertaken as a result of the past 12 months operating improvements and advances to improve flow sheet ergonomics and operations.”

• Elsewhere, the company confirms that approvals have been obtained to mine a large bulk sample for metallurgical testwork at the Zinnwald Lithium Project in Germany where “initial laboratory testwork has demonstrated that higher value lithium products can be produced from the Zinnwald concentrates”. Testing will now be expanded to establishing a pilot scale flowsheet.

• Commenting on market developments for lithium, Bacanora Minerals highlights China’s domestic car producers dominant 96% share of the Chinese electric vehicle market; the commitment of the British and French Governments to achieving zero emissions from all vehicles by 2040; and the strategy of major manufacturers such as Volvo and Volkswagen to move towards electric vehicles with the former “announcing that it will move to total electric vehicle production by 2019.”

• “In addition, it has also been reported that China is targeting to have 65 percent of the world’s manufacturing capacity for lithium-ion batteries by 2021.”

Conclusion: Bacanora Minerals is aiming to complete the feasibility study on its Sonora Lithium Project by the end of this year, although this is later than originally hoped, we look forward to seeing the results and to further details of the planned development.

 

BlueRock Diamonds* (LON:BRD) 1.75p, Mkt Cap £2.4m – August diamond sales

• BlueRock Diamonds reports that during August it sold 400 carats of diamonds from its Kareevlei mine near Kimberley, South Africa, at an average selling price of US$330/carat.

• This compares with sales of 330 carats at US$395/ct in August and is significantly higher than the 143 carats sold for US$224/ct in May. Although  the selling price in August declined from that seen in July, this was compensated by a more than 20% increase in the volume of stones sold, stabilising revenues at around US$130,000 per month.

•  The July sales included a 5.5 carat diamond which achieved the “highest dollar per carat valuation to date of $7,054”. We comment that occasional abnormally high value stone has a disproportionate influence on the average value achieved by relatively small parcels of diamonds and take encouragement from the rising trend in the volume of stones offered for sale which has now almost doubled since BlueRock Diamonds sold 206 carats in April this year.

• We also note that over each of the last three months, sales of diamonds from Kareevlei have exceeded the most recent US$232/carat guidance price from the company’s competent person, Zstar, which was disclosed in the company’s 5th July production update.

• BlueRock Diamonds points out that grades are improving with “The diamonds produced and included in August’s sales tender has resulted in a grade of 2.07cpht showing an increase to Kareevlei’s previous average diamond grade achieved during 2017 of 1.7 cpht.”

• The company also notes that ore production rates continue “to improve with July’s total production of 20,200 tonnes representing an increase of 40% on the production achieved in June 2017. The total tonnage for August is on target to exceed July’s total.”

• Commenting on the progress towards achieving the targeted 25,000 tonnes per month throughput, Chief Executive, Adam Waugh, commented that “We are now well on our way to achiebing profitable mining with the expected further improvement to grades as we begin processing the sub 20 metre level kimberlite in September.”

Conclusion: BlueRock Diamonds is making progress towards achieving its targeted 25,000tpm throughput of ore with realized diamond prices holding above the most recent US$232/carat guidance price from the company’s competent person, Zstar.

 

Bushveld Minerals (LON:BMN) 9.5p, mkt cap £76.6m – Additional working capital support from Wogen

Target price 14p

• Following its announcement earlier this week that Wogen Resources had agreed to retire its prepayment facility to Bushveld Vametco and increase the working capital facility to US$9m, Bushveld Minerals has now announced that Wogen Resources has further increased the working capital facility “from US$9 million to US$11 million with immediate effect.”

• The facility, which has a five year term from March 2017, “is an inventory and receivable financing, is in place to optimise the operating position of Vametco Alloys Limited ("Vametco Alloys").”

• Wogen has exclusive rights to market Bushveld Vametco’s Nitrovan product worldwide (with the exclusion of Japan and Taiwan).

• Commenting on the transaction, Bushveld Minerals’ CEO, Fortune Mojapelo noted that the facility agreements with Wogen “relieves Bushveld Vametco's operations from the fixed debt commitment of the (now retired) prepayment facility and avails of additional cash resources backed by inventory shipments in a rising vanadium market."

• We commented yesterday on recent developments in the vanadium market where a tightening of standards for the production of steel reinforcing bars in China is expected to increase China’s vanadium consumption by as much as 30% or 10,000 tonnes per year.

Conclusion: The increased working capital facility, at time of rising prices and when plans to increase Vametco’s production capacity from the current nameplate 3,000 tonnes per year to 5,000 tonnes per year, should facilitate the expansion plans and suggests a positive and deepening relationship with Wogen

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.  This note is MiFID II compliant.

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Thu, 24 Aug 2017 10:48:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28464/today-s-market-view-bacanora-minerals-ltd-bushveld-minerals-limited-bluerock-diamonds-plc-28464.html
Today's Market View - BlueJay Mining PLC, Mkango Resources Ltd, Savannah Resources Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28453/today-s-market-view-bluejay-mining-plc-mkango-resources-ltd-savannah-resources-plc-28453.html BlueJay Mining* (LON:JAY) Interim report and progress update for Pituffik

Mkango Resources* (LON:MKA) – Two year extension secured over Thambani licence

Savannah Resources (LON:SAV) – Start of PFS at Mutamba

 

Gold is flat this morning with the rest of precious and all base metals little changed as well.

• Copper is off only slightly trading around $100/t below $6,650/t hit yesterday afternoon.

• Nickel is trading around $11,400/t after reaching $11,550/t, the highest level seen this year, yesterday.

• Zinc is steady after climbing to a decade-high on Monday.

• Brent is off 0.5% at $51.6/bbl amid news that Libya reopened 230,000bbl/day Sharara field pipeline and lifted the force majeure clause

• Steel futures together with iron ore prices are off more than 3.5% today as China Iron & Steel Association warned that prices are unlikely to increase significantly from here but to continue fluctuate.

• Chinese steel market is expected to be well balanced with planned winter closures to be compensated with “quick release of superior capacity” on the back of higher prices.

• Steel demand is forecast to remain stable.

 

Dow Jones Industrials  +0.90% at   21,900

Nikkei 225   +0.26% at   19,435

HK Hang Seng   +0.91% at   27,402

Shanghai Composite    -0.08% at    3,288

FTSE 350 Mining   +0.45% at   17,065

AIM Basic Resources   +0.32% at    2,519

 

Economic News

Eurozone – A broad measure of economic activity in the area in August showed the region “maintained growth momentum” in August with an increase in manufacturing production highlighted, in particular, as shown by Markit PMI numbers.

• The rate of expansion of the private sector remained around the best recorded over the past six years with both major economies, Germany and France, continuing to show solid output growth.

• Manufacturing sector recorded the strongest increase in export orders in six-and-a-half years.

• Of note, inflation in both input and output prices strengthened in August; although, the inflation rate remained modest.

• “The survey data over the first two months of the quarter are consistent with only a fractional easing in the rate of growth of GDP from the 0.6% rise in Q2…overall, this is another positive set of numbers for the euro area, which continues to enjoy its best growth spell for a number of years,” Markit wrote.

• Markit Manufacturing PMI: 57.4 v 56.6 in July and 56.3 forecast.

• Markit Services PMI: 54.9 v 55.4 in July and 55.4 forecast.

• Markit Composite PMI: 55.8 v 55.7 in July and 55.5 forecast.

 

Germany – Private sector activity picked up in August with both manufacturing and services sectors posting gains, according to the latest Markit PMI data.

• “Growth of output was broadly in line with the strong trend shown over the past 12 months,” Markit wrote.

• Additionally, new orders growth accelerated after having slowed to a six-month low in the previous month, employment continued to grow in August while inflation in output prices hit a five-month high.

• New export orders posted the strongest increase since May 2010 with strong demand recorded in Asia, in particular.

• Markit Manufacturing PMI: 59.4 v 58.1 in July and 57.6 forecast.

• Markit Services PMI: 53.4 v 53.1 in July and 53.3 forecast.

• Markit Composite PMI: 55.7 v 54.7 in July and 54.7 forecast.

 

France – Business surveys continued to show robust growth rates in output and new orders leading further gains in jobs in August, according to Markit.

• Composite PMI was unchanged from the July as stronger growth in the manufacturing sector made up for a slowdown in the services segment.

• Services sector activity slowed for the third consecutive month in August, although the rate remained above the long run average; new business in the sector continued to grow but at a slower rate.

• Manufacturing production expanded at the fastest pace in almost six-and-a-half years with respective new orders climbing at the strongest rates since Dec/10.

• Contrary to German inflation data, French selling prices declined in August after recording a marginal increase in July as the sharpest drop at service providers since November last year weighed on general inflation levels.

• Markit Manufacturing PMI: 55.8 v 54.9 in July and 54.5 forecast.

• Markit Services PMI: 55.5 v 56.0 in July and 55.8 forecast.

• Markit Composite PMI: 55.6 v 55.6 in July and 55.4 forecast.

 

South Africa – Inflation came in weaker than expected in July marking the lowest level since Oct/15.

• Softer inflation is welcome news to the South African Reserve Bank which is pursuing a monetary easing policy aiming to help the economy recover from recession.

• The SARB cut benchmark rates for the first time in five years last month.

CPI (%mom): 0.3 v 0.2 in June and 0.3 forecast.

• CPI (%yoy): 4.6 v 5.1 in June and 4.7 forecast.

 

Currencies

US$1.1784/eur vs 1.1792/eur yesterday.   Yen 109.43/$ vs 109.39/$.   SAr 13.238/$ vs 13.157/$.   $1.280/gbp vs $1.287/gbp.  

0.789/aud vs 0.794/aud.   CNY 6.664/$ vs 6.656/$.

 

Commodity News

Precious metals:

Gold US$1,286/oz vs US$1,285/oz yesterday

   Gold ETFs 67.0moz vs US$66.9moz yesterday

Platinum US$979/oz vs US$977/oz yesterday

Palladium US$935/oz vs US$936/oz yesterday

Silver US$17.01/oz vs US$16.95/oz yesterday

           

Base metals:   

Copper US$ 6,575/t vs US$6,619/t yesterday

Aluminium US$ 2,064/t vs US$2,079/t yesterday

Nickel US$ 11,520/t vs US$11,400/t yesterday

Zinc US$ 3,129/t vs US$3,143/t yesterday

Lead US$ 2,408/t vs US$2,355/t yesterday

Tin US$ 20,375/t vs US$20,465/t yesterday

           

Energy:           

Oil US$51.6/bbl vs US$52.1/bbl yesterday

Natural Gas US$2.944/mmbtu vs US$2.964/mmbtu yesterday

Uranium US$20.50/lb vs US$20.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.7/t vs US$76.8/t

Chinese steel rebar 25mm US$651.7/t vs US$652.5/t

Thermal coal (1st year forward cif ARA) US$77.5/t vs US$77.6/t

Premium hard coking coal Aus fob US$200.9/t vs US$194.6/t

           

Other:  

FeCr lumpy Charge 52% Cr US$0.00/lb vs US$0.00/lb yesterday

Quarterly hard coking coal US$285.0/t vs US$285.0/t

 

Tungsten APT European US$250-256/mtu vs US$248-256mtu

 

Vanadium – The authoritative journal, “Metal Bulletin” has reported that China’s vanadium consumption could increase by as much as 30% or 10,000 tonnes per year as more rigorous standards for steel reinforcing bars (rebar) come into force.

• Quoting an un-named official of the China Iron & Steel Research Institute the journal points out that “The new standard is an improved edition of the GB 1499.2-2007 and proposes to eliminate the 335MPa strength rebar, replacing it with a 600MPa strength rebar, to increase rebar grades with earthquake resistance.”

• The moves to enhance standards for rebar in China came in 2010/11 following the substantial loss of life and structural damage caused by the magnitude 7.9 Sichuan earthquake of May 2008.

• Reports from the BBC suggest that the earthquake cost over 87,000 lives, rendered 4.8m people homeless and incurred over US$130bn in rebuilding costs.

• As we reported recently, vanadium prices have almost doubled since June this year. Although part of the increase may be in anticipation of additional Chinese demand, the long term outlook for vanadium prices is likely to be enhanced by the implementation of the more demanding standards in China.

• We also note that today, Anglo Pacific Group, which holds a royalty on production from Largo Resources’ Maracas Menchen vanadium mine in Brazil, reported that “the vanadium price has recovered to recent highs. Recent spot prices have been in excess of $9.00/lbs compared to an average spot price of ~$3.56/lbs in 2016. It is possible that higher pricing levels could prevail throughout the second half of the year.”

 

Company News

BlueJay Mining* (LON:JAY) 18.3p, Mkt Cap £140m – Interim report and progress update for Pituffik

STRONG BUY

Target Price raised to 24p from 22p

• In its interim report for the six months to 30th June, BlueJay Mining reports substantial progress in the evaluation of its Pituffik ilmenite sands project in Greenland. The project has now been “independently verified and recognised as the highest-grade ilmenite mineral sand project globally”.

• The company highlights the chemical homogeneity of the mineralisation over a strike length in excess of 30km with low levels of oxidation and of impurities contributing to a potential for low capital cost development.

• In April 2017, BlueJay Mining announced an initial resource estimate of 23.6m tonnes at an average grade of 8.8% ilmenite over “just 17% of the raised beach environment within the Moriusaq target area.” This resource contains a higher grade portion of 7.9mt at an average grade of 14.2% ilmenite and the company also points out that “The raised beach environment is one of three types of domains within the licence area, with the other two being the active and drowned beach environments, and Moriusaq is one of two primary target areas, with the other being Interlak.“

• CEO, Roderick McIllree, commented that “through targeted drilling currently underway, I expect this volume [of resource] to grow exponentially in the coming months.” He also pointed out that “as a result of glacial (mechanical) erosion and favourable deposition centres along the coastal plain, the entire front-end capital expenditure associated with mining, crushing, grinding and concentrating has been done naturally, … This greatly simplifies the requirements on us in terms of how we mine and produce a saleable ilmenite product and will have a significant impact on the unit cost of our product.”

• BlueJay Mining has already shipped an initial 250 tonne bulk sample, with a second similar sized sample due for despatch in the coming days, to potential customers as part of negotiations to demonstrate the quality of the product.

• The application process for the required permits to mine are “well advanced” with a successful conclusion to the public pre-consultation process  and the company points out that it has received “overwhelming support … from the local community to date”

• At this stage, the company expects to complete the Environmental Impact Assessment and Social Impact Assessment “in the coming months, with the full Exploitation Licence anticipated in H1 2018.”

• At 30th June 2017 the company balance sheet shows cash of £5.76m.

Conclusion: BlueJay Mining is advancing the high grade Pituffik ilmenite deposit towards production and expects to receive an Exploitation Licence during H1 2018. The existing resource covers only a relatively small portion of one of the three prospective mineralised environments at Moriusaq with additional potential for further resources at Interlak. We look forward to further news of additional resources as exploration continues.

 

Mkango Resources* (LON:MKA) 3.1p, Mkt Cap £2.6m – Two year extension secured over Thambani licence

• Mkango Resources reports that the Malawian Government has granted a two year extension to the Exclusive Exploration Licence at Thambani. The licence is now valid until September 2019.

• The Thambani licence area is still at a relatively early stage of exploration for uranium, niobium, tantalum, zircon an other minerals. In May this year, the company announced the results of grab samples taken over the licence area which “returned high grade uranium, tantalum and niobium values ranging up to 3.3% U3O8, 1.9% TaO2 and 6.0% Nb2O5.”

•  Mkango has previously disclosed that it is considering a range of strategies to advance exploration of Thambani, “including opportunities to joint venture or spin-off the project and other potential avenues to create value.”

Conclusion: The extension to the licence at Thambani gives Mkango Resources time to consider its options for the future of its exploration strategy while leaving adequate time for any possible incoming partner to complete an appropriate evaluation.

*SP Angel acts as Nomad and Broker to Mkango Resources

 

Savannah Resources (LON:SAV LN) 5p, Mkt cap £28m – Start of PFS at Mutamba

• Savannah Resources reports that Phase 1 of its pre-feasibility study (PFS) on the Mutamba mineral sands project in Mozambique is now underway and expected to be finished “in [the] coming months.”

• The Phase 1 work, comprising project definition and scoping for the PFS is to be conducted by “Mineral sands expert TZMI” which previously completed a Scoping Study for Savannah Resources.

• Completion of the PFS will be an important milestone for the company as it triggers the vesting of a 35% interest for Savannah Resources in the Mutamba Consortium.

• The company also reports that “assembly of the 20 tph pilot plant is well underway.” The plant will “provide product for metallurgical test work by our partner, Rio Tinto.”

• Under the terms of the Consortium Agreement, Rio Tinto (or an affiliate) has the right to purchase, on commercial terms, 100% of the heavy mineral concentrate produced.

Conclusion: Work now starting on the Mutamba mineral sands project should ultimately lead to the completion of a PFS and to Savannah Resources earning a 35% interest in the project.

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Wed, 23 Aug 2017 10:35:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28453/today-s-market-view-bluejay-mining-plc-mkango-resources-ltd-savannah-resources-plc-28453.html
Today's Market View - Antofagasta Plc, BHP Billiton plc, Bushveld Minerals Limited, Ortac Resources Ltd http://www.proactiveinvestors.co.uk/columns/sp-angel/28444/today-s-market-view-antofagasta-plc-bhp-billiton-plc-bushveld-minerals-limited-ortac-resources-ltd-28444.html Antofagasta (LON:ANTO) – Q2 production on track to meet 2017 guidance

Bushveld Minerals (LON:BMN) – Wogen prepayment facility retired

BHP Billiton (LON:BLT) – Dividend increased by 177% to 83cents per share

Ortac Resources* (LON:OTC) – Annual results and start of drilling at Akyanga

 

Gold is off ahead of the annual meeting of world central bankers this week (24-26 Aug) in Jackson Hole.

• Palladium hit $941/oz, the highest level since Feb/01, earlier today.

• LME base metals index is trading at the strongest level since late 2014 with major gains in copper and nickel this week.

• Copper is up 2.2% since the start of the week and 4.1% in August helped by a weaker US$, strong demand for the metal and speculation China is looking at banning copper scrap imports.

• The Shanghai Futures Exchange imposed a cap of 2,000 lots on new positions for non-hedging clients trading October and November zinc futures from Wednesday in an effort to cool speculation in the zinc market which saw prices climbing to a ten-year high.

• Brent is stronger today before the US EIA inventories report due tomorrow and estimates for stocks to post another weekly decline; Libya declared force majeure and halted shipments from Sharara, its biggest oil field, on Saturday.

• Iron ore futures for January delivery climbed 1.7% to CNY 606/t on DCE extending gains to March highs.

 

Dow Jones Industrials  +0.13% at   21,704

Nikkei 225   -0.05% at   19,384

HK Hang Seng   +1.26% at   27,498

Shanghai Composite    +0.10% at    3,290

FTSE 350 Mining   +1.39% at   16,887

AIM Basic Resources   +0.60% at    2,511

 

Economic News

Germany – The economy may post stronger growth this year than earlier expected driven by robust industrial production, exports and consumption, according to latest Germany central bank report.

• “The exceptionally positive corporate and consumer sentiment indicators, and the solid stock of industrial orders suggest that the German economy is likely to continue to gain momentum in the current quarter as well,” the Bundesbank said.

• Strong consumer demand helps to load up manufacturing capacities leading to a further increase in corporate investment in the German economy.

 

Currencies

US$1.1792/eur vs 1.1737/eur yesterday.   Yen 109.39/$ vs 109.00/$.   SAr 13.157/$ vs 13.212/$.   $1.287/gbp vs $1.285/gbp.     

0.794/aud vs 0.792/aud.   CNY 6.656/$ vs 6.671/$.

 

Commodity News

Precious metals:

Gold US$1,285/oz vs US$1,288/oz yesterday

   Gold ETFs 66.9moz vs US$66.8moz yesterday

Platinum US$977/oz vs US$979/oz yesterday

Palladium US$936/oz vs US$929/oz yesterday

Silver US$16.95/oz vs US$16.99/oz yesterday

           

Base metals:   

Copper US$ 6,619/t vs US$6,551/t yesterday – At least seven people were injured and dozens of vehicles and building torched at Grasberg operations as protesting miners blocked access road to the mine.

• Police arrested 17 people on Saturday amid violent demonstrations over employment terms.

Aluminium US$ 2,079/t vs US$2,078/t yesterday

Nickel US$ 11,400/t vs US$11,190/t yesterday

Zinc US$ 3,143/t vs US$3,150/t yesterday

Lead US$ 2,355/t vs US$2,381/t yesterday

Tin US$ 20,465/t vs US$20,340/t yesterday

           

Energy:           

Oil US$52.1/bbl vs US$52.6/bbl yesterday

Natural Gas US$2.964/mmbtu vs US$2.907/mmbtu yesterday

Uranium US$20.50/lb vs US$20.85/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$76.8/t vs US$73.9/t

Chinese steel rebar 25mm US$652.5/t vs US$638.8/t

Thermal coal (1st year forward cif ARA) US$77.6/t vs US$78.5/t

Premium hard coking coal Aus fob US$194.6/t vs US$194.8/t

Other:

Tungsten APT European US$248-256/mtu vs US$230-235/mtu

 

Vanadium – The China Iron & Steel Research Institute submitted a revision to the standard tensile strength in rebar products in China to the Standardization Administration for review.

• The review considers a replacement of 335MPa strength rebar with a new 600MPa standard which should see increased vanadium usage in steel alloys.

• The CISRI estimates that new standard would lead to a 30% increase in Chinese vanadium demand equivalent to 10,000t per annum.

• “The (required) amount of vanadium to be added is 0.03-0.05% for HRB400 and 0.05-0.08% for HRB500 (two most used hot rolled high strength steel rebar products),” the official said.

• The review is expected to be “formally released” in September, the CISRI official involved in the drafting of the document said.

 

Company News

Antofagasta (LON:ANTO) 1003p, Mkt Cap £9.9bn – Q2 production on track to meet 2017 guidance

• Antofagasta reports a strong first half with earnings of 29.5 cents per share more than three times the 8.9 cents per share reported for H1 2016. The interim dividend has been increased by a similar proportion to 10.3 cents per share (H1 2016 3.1 cents per share).

• EBITDA grew by 87.8% to $1080m (H1 2016 - $575m) while EBITDA margins widened to 52.7% (H1 2016 – 39.8%.

• The company reports a strong balance sheet with cash an liquid investments of US$2.2bn available at 30th June leaving the company with net debt of US$860m or 9% gearing.

• The company’s guidance for 2017 production (685-720,000 tonnes of copper), cash costs (US$1.30/lb of copper production – net of by-product credits) and capital expenditure ($900m) remain intact.

• The company highlights the impact of its “Cost and Competitiveness Programme” in delivering $403m of mine site cost savings since it was introduced in 2014, including $44m of savings during H1 2017.

• Looking to the future, Antofagasta reports that it sees the development of the Centinela mining district as a “key area for longer-term growth” with the construction of a second concentrator some 7km from the current facility seen as a key development project. Optimisation of the original plan to construct a 90,000tpd concentrator capable of delivering an additional 170,000 tpa of copper equivalent is continuing into 2018 with the phasing of expenditure over a longer period than originally envisaged one key focus of the evaluation.

• Plans to develop the Twin Metals copper-nickel-platinum group metals project in Minnesota are currently the subject of legal dispute following the decision by “the relevant US authorities” to deny “renewal of two of its long-held federal mining leases”.

• Commenting on the state of the copper market, Antofagasta reports that “The copper market is currently exhibiting unexpected strength, but it is unclear if this can be maintained although it does appear that a new base price level has been established at $2.50-2.60/lb. The outlook in the mid to longer term continues to be favourable as demand is expected to grow at around 2% while supply growth remains constrained.”

• In the shorter term, “the market is moving to a tighter demand-supply position with a small deficit expected this year and next. However, volatility is anticipated as demand expectations are continually reassessed although supply has stabilised following the spate of disruptions earlier in the year”.

Conclusion: Antofagasta reports a robust half year and strong increase in both earnings and dividends.

 

Bushveld Minerals (LON:BMN) 9.1p, mkt cap £73.5m – Wogen prepayment facility retired

Target price 14p (raised from 11.6p)

• Bushveld Minerals reports that its Bushveld Vametco business has agreed with Wogen Resources, which exclusively markets Vametco’s Nitrovan product, to “retire in full the US$3 million prepayment facility and to simultaneously increase the Vametco Alloys (Proprietary) Limited ("Vametco") working capital facility by same amount from US$6 million to US$9 million.”

• The US$3m prepayment facility was an element of the financing for Bushveld Vametco’s April 2017 acquisition of a 78.8% interest in SMC, (Strategic Minerals Corporation) from Evraz.

• The global marketing agreement excludes “Japan and Taiwan which are covered exclusively by Sojitz Noble Alloys Corporation, the minority partner in SMC.”

• Commenting on the evolving relationship with Wogen, Bushveld’s CEO, Fortune Mojapelo, said “The retirement of the prepayment facility at such an earlier point than initially anticipated is testament to the quality of Vametco's operations and the extent to which the vanadium market has strengthened in the past year. Wogen continues to be a supportive and beneficial partner and its increase in the working capital facility from US$6 to US$9 million we believe demonstrates their confidence in Bushveld Vametco's strategy and vision going forward.”

Conclusion: Wogen Resources’ agreement to the early retirement of the prepayment facility is a milestone in the relationship with Bushveld Vametco and implies Wogen’s confidence in Bushveld’s capability.

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.  This note is MiFID II compliant.

 

BHP Billiton (LON:BLT) 1,406.p, Mkt Cap £81.1bn – Dividend increased by 177% to 83cents per share

• BHP Billiton has announced a sharp increase in its annual dividend to 83 cents per share (FY 2016 – 30 cents per share) as “Recognising the importance of cash returns to shareholders, the Board has determined to pay an additional amount of 10 US cents per share, taking the final dividend to 43 US cents per share.”

• Chief Executive, Andrew Mackenzie, commented “We had a very strong financial year. Free cash flow was US$12.6 billion, our second highest on record. We used this cash to reduce net debt by nearly US$10 billion and return US$4.4 billion to shareholders. Productivity gains across our simpler portfolio of tier one assets increased our return on capital to 10 per cent.”

• The results assisted a continuing strengthening of the balance sheet with a US$9.8bn reduction in net debt to US$16.3bn (December 2016 – US$20.1bn and June 2016 US$26.1bn) giving year end gearing of 20.6%.

• In his comments, retiring Chairman, Jac Nasser, added “Over the last five years, we have laid the foundations to significantly improve our return on capital and grow long-term shareholder value. … We have reduced unit costs by over 40 per cent and achieved over US$12 billion in productivity gains. Our capital allocation framework provides flexibility at the bottom of the cycle and discipline at the top”

• EBITDA margins have increased to 55% from the 41% in the previous years’ delivering underlying EBITDA of US$20.3bn as a result of higher commodity prices, operating cash cost improvements and “other net movements (in total US$9.4 billion) more than offsetting the impacts of unfavourable exchange rate movements, inflation and one-off items (in total US$1.4 billion).”

• The company’s iron ore business contributed 45% (US$9,077m) of the total EBITDA; the petroleum division contributed a further 20% (US$4,063m) with the coal (US$3,784m (19%) and copper US$3,545m (17%) businesses also significant.

• Reflecting on the global economic outlook, the company noted that “World economic growth is likely to be close to the top of the anticipated range of three to three and a half per cent in the 2017 calendar year” and that “China's economic growth is expected to slow modestly in the 2018 financial year, while remaining within the official GDP target range of between six and a half and seven per cent.”

Conclusion: BHP Billiton continues to strengthen its balance sheet while increasing its dividend payout.

 

Ortac Resources* (LON:OTC) 3.3p, Mkt cap £4.8m – Annual results and start of drilling at Akyanga

• Ortac Resources reports a loss of 1.2p per share (£835,000) for the year ending 31st March 2017 (loss of 2.2p/share or £853,000 in 2016).

• During the year, Ortac raised £716,000 through the issue of a total of approximately 2.5bn new shares. Shares were subsequently consolidated on a 1:100 basis. Cash balance as of 31st March amounted to £80,000.

• The company’s long-serving Chairman, Anthony Balme is to pass the baton to Nick von Schirnding at the AGM on 8th September at which time non-executive director, Paul Heber will retire.

• During the year, Ortac increased its interest in Casa Mining, the holder of the 1m oz Akyanga gold deposit in the DRC and where the next phase of drilling has now started, to 22.2%. Subsequent to the year end, Ortac  “put a convertible loan note in place that, when converted, will result in Ortac owning approximately 45 percent of Casa.”

• The drilling involves a total of around 5000m of diamond drilling, including 2200m in the first phase of work which should be completed in October. The work aims to assess the grade continuity of the mineralisation, particularly in the southern part of the deposit, and examine the geological controls of mineralisation. The company aims to establish the potential for grades in excess of 2g/t gold and or a deposit exceeding 2moz of contained gold as well as assessing the scale of drilling needed to establish an indicated resource.

• Among the other highlights of the past financial year are the resolution of the long-standing mining permit issues at the Sturec mine in Slovakia where the company has now been issued an amended underground mining permit which allows the commencement of small scale mining beyond the boundaries of the town of Kremnica.

• The company has also “also entered into a non-binding Memorandum of Understanding with a potential Joint Venture partner in Slovakia in April 2017”.

• In Zambia, the “completion of the demonstration scale processing plant at Kalaba was delayed whilst Zamsort [Ortac’s local partner] concluded financing to complete the plant.” Following the partial conversion of Ortac’s loan notes to Zamsort, “the company now holds a 14% equity stake in Zamsort with the c. 6 percent balance and interest being rolled forward to the end of 2018.”

• Ortac’s intereset in “Andiamo Exploration Limited ("Andiamo") was reduced to 18.5 percent as a result of the acquisition for shares of Environminerals East Africa Limited's JV interest in Andiamo's Haykota Licence and subsequent fundraise.”

Conclusion: Ortac’s leadership team is changing as it seeks to advance its portfolio of projects in Slovakia, Zambia, the DRC and Eritrea. Drilling has just started at Akyanga with a view to establishing grade continuity and mineralisation controls and laying the groundwork for future resource estimation.

*SP Angel acts as nomad and broker to Ortac Resources

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Tue, 22 Aug 2017 10:30:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28444/today-s-market-view-antofagasta-plc-bhp-billiton-plc-bushveld-minerals-limited-ortac-resources-ltd-28444.html
Today's Market View - Herencia Resources, Shanta Gold Limited, SolGold plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28424/today-s-market-view-herencia-resources-shanta-gold-limited-solgold-plc-28424.html Herencia Resources (LON:HER) - Geological review precedes further drilling

Shanta Gold (LON:SHG) – Interim results and Helio acquisition arrangement termination

SolGold* (LON:SOLG) – Admission to Main Market delayed

 

Vanadium prices holding at new high levels

• Ferro-Vanadium prices are holding at $42.6/kg (MB Bloomberg) having risen from around $26/kg in mid-July and $24/kg in January

• The market has jumped due to the closure of a number of vanadium process plants in Sichuan province, China where environmental inspectors have been focussed (see Metal Bulletin news)

• China’s environmental inspectors may move next to Hubei which may tighten the supply of ferro-vanadium further.

• The Metal Bulletin report prices of $55-60/kg for 78% ferro-vanadium fob China vs $40.40-42.60/kg in Western Europe.

Vanadium and single-electron transistors breaks law of thermal conductivity

• Physics.aps.org report that a single-electron transistor does not obey the Wiedemann-Franz law which states that at a given temperature, the thermal conductivity of a metal is proportionate to its electrical conductivity.

• The law does not hold for metallic vanadium dioxide or for single-electron transistors

 

Lithium – Super volcanic lakes may contain large deposits of lithium

• Scientists reckon there are huge deposits of lithium to be found in ‘supervolcanic’ lakes, eg in the caldera basins of super volcanos.

• Nature Communications published yesterday a paper on ‘Lithium enrichment in intracontinental rhyolite magmas leads to Li deposits in caldera basins’.

• ‘moderate to extreme lithium enrichment occurs in magmas that incorporate felsic continental crust. Cenozoic calderas in western North America and in other intracontinental settings that generated such magmas are promising new targets for lithium exploration because lithium leached from the eruptive products by meteoric and hydrothermal fluids becomes concentrated in clays within caldera lake sediments to potentially economically extractable levels.’

• We advise our intrepid geological readers pack carefully before rushing off to Yellowstone National Park or Mount St Helens in the US and we ask that they really think carefully before drilling into an active super volcano and remember what happened last time a super volcano erupted.

 

Lithium-air batteries

• Electronics weekly advise us not to hold our breath for lithium-sir cells indicating that these cells may not work as well as was first expected.

• The idea is to replace one energy-containing electrode with oxygen though this does not seem to have worked so well in the case of lithium-air.

• Problem is these cells need high voltages for charging, give low efficiency in terms of giving back less power than required to put in and .

• Worse still test batteries show low cycle lifetimes according to scientists at MIT.

• Looks like we are going to be using Lithium-ion batteries for some time to come.

 

Barcelona – our thoughts are with the victims and their families following this latest terrorist attack

• We also note the recent instillation of heavy concrete blocks outside many busy public places in London.

 

Dow Jones Industrials  -1.24% at 21,751

Nikkei 225   -1.18% at 19,470

HK Hang Seng   -0.96% at 27,082

Shanghai Composite    +0.01% at 3,269

FTSE 350 Mining   -0.39% at 16,574

AIM Basic Resources   +0.93% at 2,493

 

Economic News

 

Currencies

US$1.1729/eur vs 1.1740/eur yesterday.   Yen 109.04/$ vs 109.96/$.   SAr 13.242/$ vs 13.169/$.   $1.289/gbp vs $1.290/gbp.  

0.792/aud vs 0.795/aud.   CNY 6.680/$ vs 6.673/$.

 

Commodity News

Precious metals:

Gold US$1,294/oz vs US$1,288/oz yesterday

   Gold ETFs 66.8moz vs US$66.8moz yesterday

Platinum US$985/oz vs US$976/oz yesterday

Palladium US$933/oz vs US$924/oz yesterday

Silver US$17.13/oz vs US$17.10/oz yesterday

           

Base metals:   

Copper US$ 6,514/t vs US$6,505/t yesterday

Aluminium US$ 2,090/t vs US$2,081/t yesterday

Nickel US$ 10,845/t vs US$10,805/t yesterday

Zinc US$ 3,131/t vs US$3,106/t yesterday – prices jump to $3,131/t in London

• Zinc prices continue to rise as supply discipline and environmental inspections in China raises deficit.

• The Zinc supply deficit rose to 181,000t in the first five months of the year according to WBMS.

• Vedanta, though Hindustan Zinc and Glencore are major players in the zinc market with both companies acquiring zinc production in recent years.

• Hindustan Zinc has tried to take the market down in comments this year to dissuade other zinc production from starting up while Glencore has maintained a good degree of supply discipline.

Nyrstar, which was forced into a fire sale of certain assets a year ago and is the world’s second largest zinc smelter is restarting two projects in North America

Lead US$ 2,444/t vs US$2,497/t yesterday

Tin US$ 20,225/t vs US$20,255/t yesterday

           

Energy:           

Oil US$51.2/bbl vs US$50.3/bbl yesterday

Natural Gas US$2.926/mmbtu vs US$2.884/mmbtu yesterday

Uranium US$20.85/lb vs US$20.85/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.9/t vs US$74.6/t

Chinese steel rebar 25mm US$638.8/t vs US$634.1/t

Thermal coal (1st year forward cif ARA) US$78.5/t vs US$78.4/t yesterday

Premium hard coking coal Aus fob US$194.8/t vs US$195.9/t

 

Other:

Tungsten APT European US$248-256/mtu vs US$230-235/mtu

Tungsten prices moving higher but beware of problems at Wolf Mineral’s Drakelands mine

• We notice that Tungsten prices moved higher this week to US$248-256/mtu vs US$230-235/mtu previously.

• The price is a far cry from the persistent sub $200/mtu seen in January and may serve to allow a few tungsten miners to come off lifesupport.

• Prices were said to be depressed by the production of poor quality tungsten as some miners in China prepared for their inevitable closure.

• Chinese environmental regulators have become more vociferous since then and while tungsten mines are not a major polluters APT process plants may suffer more significant closure.

• Tungsten concentrate and APT prices may well continue to rise but despite this we are still wary of investment in Wolf Minerals where ongoing problems with recovery rates must be hurting investors.

• Wolf Minerals is also seeking to recover £7.5m of costs from its lead construction contractor under a performance bond due to low frequency noise coming from its plant which is further evidence that all is not well.

 

Company News

Herencia Resources (LON:HER) 0.04p, mkt cap £3.4m - Geological review precedes further drilling

• Herencia Resources reports that a geological  review of past exploration and the exploration potential its Chilean exploration licenses, including the Picachos, Montenegro and relatively underexplored Pastizal areas has identified "significant upside exists for the discovery of further copper mineralisation".

• The review was conducted by an independent geological consultant, John Holliday, who specialises in this type of mineralisation and amongst other projects was involved in the discovery and evaluation of the Cadia copper-gold deposit in Australia.

• Among the conclusions the company highlights is that future drilling should focus on the "'main mineralised manto …. a cherty limestone at the base of a sedimentary sequence above a volcanic breccia'.

• "The company is now planning the scope of its exploration program which will commence shortly."

Conclusion: The review by its independent geological consultant points to additional exploration potential within the company's licenses in Chile. We look forward to further information when specific drilling targets have been identified.

 

Shanta Gold (LON:SHG) 3.3p, Mkt Cap £24.9m – Interim results and Helio acquisition arrangement termination

Under Review

• Revenues totalled $52.7m (H1/16: $55.7m) reflecting gold sales of 41.2koz at an average price of $1,257/oz (H1/16: 47.6koz at $1,193/oz); this compares to an average spot gold price of $1,240/oz.

• EBITDA totalled $21.5m (H1/16: $33.3m) which includes the contribution from the sale of underground development ore prior to commercial production (H1/16: $33.3m); lower margins compared to last year are attributed to weaker processed grades and sales during the period as the NLGM operation transitioned to underground operations and the plant was fed stockpiled ores.

• Admin and exploration spend came in at $4.2m (H1/16: $4.4m) due to less exploration works completed during the period.

• C1 and AISC averaged $546/oz and $755/oz during the period (H1/16: $437/oz and $632/oz, respectively) accounting for “underground development ore as it became available with the development cost reporting to capital”; stripping out development ounces would see AISC average around $950-1,000/oz.

• PAT totalled -$2.1m (H1/16: -$4.7m) with EPS of -0.36c (H1/16: -0.95c).

• Levered FCF (post interest payments) totalled -$9.0m (H1/16: $0.4m; FY16: -$9.6m) reflecting continuing investment the NLGM underground operations development and locked in cash in working capital.

• Outstanding VAT receipts due to the Company continued to increase with the balance coming to $13.6m having been accumulated over the course of the last 14 months; the last VAT refund was received in Apr/16.

• The Company is planning to “update the market… with details of its ongoing and one-time efficiencies and cost improvements” in due course.

• Helio Resource acquisition arrangement by which Shanta was planning to issue 63.4m shares in exchange for 100% of Helio equity has been terminated due to “potential impact on Helio of the bills signed into Tanzanian law on 10 Jul/17”.

• On operations side, Underground operations continue as planned as the Bauhinia Creek decline reached the 835 RL level as of the end of June/17 having completed 4.4km in just over 13 months.

• The underground mine declared the start of commercial production on 1 Jun/17 with 56.3kt at 8.3g/t mined in H1/17.

• Singida development spend remains on hold amid delays in the release of VAT receipts and legislative changes focusing on development of underground operations at the NLGM.

• 2017 annual production guidance reiterated at 80-85koz; although, since previously the management included a small contribution from the Singida pilot plant this year and with the project development paused for the time being, total output “is expected to remain with guidance, albeit towards the lower end”.

• Production estimates for the 2017-20 remain as per the Mar/17 Revised Mine Plan (RMP) at around 85kozpa.

Conclusion: Good operational results have been weighed down by legislative changes and challenges with claiming back VAT receipts putting pressure on FCF generation. Although H2/17 is expected to be much better in this regard as capital investments are due to come down significantly while production is forecast to benefit from increased share of high grade underground ores. The management excluded cash costs forecasts from the announcement as the team is working on optimising its cost structure due to recent legal changes with the market update expected in due course. We are looking forward to what extent the revision will affect the NLGM RMP.

 

SolGold* (LON:SOLG) 38p, Mkt Cap £576m – Admission to Main Market delayed

• SolGold report the delay of their planned move from the AIM market onto the Main Market on the London Stock Exchange.

• SolGold have been planning to move onto what is called the ‘Standard List’ of the LSE from AIM.

• We suspect the move is partly driven by investors in Canada who have insisted the company list on the TSX.

*SP Angel acts as Nomad and broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

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Fri, 18 Aug 2017 10:51:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28424/today-s-market-view-herencia-resources-shanta-gold-limited-solgold-plc-28424.html
Today's Market View - Bushveld Minerals Limited, Gem Diamonds, Wolf Minerals http://www.proactiveinvestors.co.uk/columns/sp-angel/28416/today-s-market-view-bushveld-minerals-limited-gem-diamonds-wolf-minerals-28416.html Bushveld Minerals (LON:BMN) Target price 14p (raised from 11.6p) - Vanadium prices drive profits higher as management target expansion

Gem Diamonds (LON:GEMD) – Interim results for H1 2017

Wolf Minerals (LON:WLFE) – Progress report on operational turnaround plan

 

Copper, zinc and nickel lead metals complex as traders and manufacturers stock up un China ahead of anti-pollution closures

• China has been getting tough with pollution and has informed steel producers in key provinces that they will be expected to shut down or reduce production during certain winter months.

• One aim is to improve air quality through the winter when smog is particularly bad.

• Inspectors are also focussing on miners, smelters and other furnaces in a drive to force companies to pollute less and clean up historic waste.

• While many producers will clean up and restart production some may not afford the additional cost of environmental compliance.

• The disruption is serving to cause manufacturers to restock metal inventory as metals prices are expected to rise due the higher costs going forward.

 

Vanadium prices holding at new high levels

• Ferro-Vanadium prices are holding at $42.6/kg (MB Bloomberg) having risen from around $26/kg in mid-July and $24/kg in January

• The market has jumped due to the closure of a number of vanadium process plants in Sichuan province, China where environmental inspectors have been focussed (see Metal Bulletin news)

• China’s environmental inspectors may move next to Hubei which may tighten the supply of ferro-vanadium further.

• The Metal Bulletin report prices of $55-60/kg for 78% ferro-vanadium fob China vs $40.40-42.60/kg in Western Europe.

 

Dow Jones Industrials  +0.12% at   22,025

Nikkei 225   -0.14% at   19,703

HK Hang Seng   -0.24% at   27,344

Shanghai Composite    +0.68% at    3,268

FTSE 350 Mining   +0.79% at   16,792

AIM Basic Resources   +0.22% at    2,470

 

Economic News

Gold prices are up nearly $14/oz tradin around $1,290/oz levels as FOMC meeting minutes highlighted weakening inflation pressures; although, the committee continued to believe consumer prices growth slowdown is attributed to temporary “idiosyncratic factors”.

• The US$ index is level today after losing 0.7% yesterday as markets revised chances of another rate rise this year down.

• Additionally, following a number of high profile business leaders leaving Trump councils, President disbanded both manufacturing and jobs councils adding to concerns over prospects of enacting pro-growth policies.

• Steel making commodities including iron ore and coking coal posted strong gains in China on Thursday one day ahead of the Chinese house price data.

• Coking coal contracts hit new high of $78.7/t for 2017 today while iron ore January futures jumped 3.7% to CNY 545/t ($81.6/t) undoing this week’s losses.

 

Economics

US – Describing the state of the economy FOMC meeting minutes highlighted that “the labour market had continued to strengthen and that economic activity had been rising moderately this year… job gains had been solid… household spending and business fixed investment had continued to expand”.

• “Members saw near-term risks to the economic outlook as roughly balanced, but, in light of their concern about the recent slowing in inflation, they agreed to continue to monitor inflation developments closely,” minutes read.

• On the balance sheet normalisation subject, “several” FOMC members were ready to announce the start of the programme at the July meeting but “most” preferred to wait assessing both economic conditions and “development potentially affecting financial markets” including such things as debt-ceiling negotiations and geopolitical concerns.

• There was little reaction in the bonds market to the announcement with government debt yields on 2y notes trading flat at 1.33% and 10y notes posting a drop of 1bp to 2.22%.

• Market estimates of the next rate hike during the December meeting have come down from 43.8% to 40.6%.

 

France – Labour market continued to improve with unemployment contracting for a third consecutive quarter in Q2/17.

• The jobless rate inched down hitting the lowest level since early 2012.

• With business sentiment running high and latest Markit PMIs pointing to robust economic growth rates expectations are for the labour market to continue improving.

• Unemployment Rate: 9.5% v 9.6% in Q1/17 and 9.5% forecast.

• Unemployment Change (qoq): -20k v -115k in Q1/17.

 

Currencies

US$1.1740/eur vs 1.1735/eur yesterday.   Yen 109.96/$ vs 110.93/$.   SAr 13.169/$ vs 13.244/$.   $1.290/gbp vs $1.290/gbp.     

0.795/aud vs 0.786/aud.   CNY 6.673/$ vs 6.694/$.

 

Commodity News

Precious metals:

Gold US$1,288/oz vs US$1,270/oz yesterday

   Gold ETFs 66.8moz vs US$66.6moz yesterday

Platinum US$976/oz vs US$965/oz yesterday

Palladium US$924/oz vs US$896/oz yesterday

Silver US$17.10/oz vs US$16.68/oz yesterday

           

Base metals:   

Copper US$ 6,505/t vs US$6,442/t yesterday – Peruvian government enact 30-day state of emergency around the Las Bambas copper mine area

• Local protesters have blocked the only route connecting the operation to Matarani port.

• Police are reported to have yet to clear road ahead of a meeting between government, MMG (operator and owner of the mine) and residents today.

• The Chinese do not have a good track record of public relations in Peru from our experience.

Aluminium US$ 2,081/t vs US$2,067/t yesterday

Nickel US$ 10,805/t vs US$10,545/t yesterday

Zinc US$ 3,106/t vs US$3,009/t yesterday – China accounting for roughly half of the world’s zinc supply recorded the weakest monthly output in three years

• The weakness is on the back of environmental closures due to ongoing inspector checks and a shortage of ores.

Lead US$ 2,497/t vs US$2,419/t yesterday

Tin US$ 20,255/t vs US$20,080/t yesterday

           

Energy:           

Oil US$50.3/bbl vs US$51.2/bbl yesterday

Natural Gas US$2.884/mmbtu vs US$2.901/mmbtu yesterday

Uranium US$20.85/lb vs US$20.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.6/t vs US$70.5/t

Chinese steel rebar 25mm US$634.1/t vs US$635.4/t

Thermal coal (1st year forward cif ARA) US$78.4/t vs US$77.3/t yesterday

Premium hard coking coal Aus fob US$195.9/t vs US$196.9/t

 

Other:

Tungsten APT European US$248-256/mtu vs US$230-235/mtu

 

Company News

Bushveld Minerals (LON:BMN) 9.5p, mkt cap £77m - Vanadium prices drive profits higher as management target expansion

Target price 14p (raised from 11.6p)

• Bushveld Minerals report impressive results from the acquisition of Vametco, the South African vanadium producer.  Bushveld currently holds 45% of Bushveld Vanadium which owns 78.8% of SMC which owns 75% of Vametco Alloys with the other 25% owned by the BEE consortium.  Bushveld Minerals is equity accounting for 26.6% of Vametco Alloys in its accounts and may move to consolidate its holding further in time.

• This, well timed, deal has paid off its acquisition cost and associated debt within an impressive four months of its acquisition.

• The team are looking to expand market share to >10% of global vanadium supply over the next 3-5 years in a move which could add significantly to production expanding nameplate capacity to 5,000tpa of FeV from 3,000 tpa currently.

• Vametco increased production by 16% last year to 2,804t of ferrovanadium which is mainly sold under the ‘Nitrovan’ product name representing a 3.7% share of global production and is looking to raise its market share of global vanadium supply to >10% in the next 3-5 years.

• The business produced some 1,441t of vanadium in the first six months to end June indicating that production is continuing at this rate.

• Vanadium Prices: have soared in recent weeks nearly doubling since June and more than doubling since last March. 

• We have assumed vanadium prices remain at elevated levels of around $42/kg for some months to give an average of $30.80/kg for the year up from $25.25/kg previously but that prices will normalise in the last quarter.

• We are using $25.25/kg as our as our longer term assumption for ferro-vanadium.

• These may well prove to be very conservative assumptions if China continues to enforce environmental restrictions causing the long term closure of a number of vanadium plants.

 

Vametco plant assuming 100%    2017 2018 2019 2020 2021

Price V2O5 $/lb 6.40  5.46  5.46  5.46  5.46

Vanadium flake price US$/kg 30.80  25.25  25.25  25.25  25.25

Vanadium sales kg 2,757  2,757  3,342  4,984  4,984

Sales US$m 80.67  66.13  80.17  119.55  119.55

Operating costs US$m 52.36  53.91  61.57  89.47  89.47

Operating costs US$/kg 18.99 19.55 18.42 17.95 17.95

Operating profit US$m 28.31  12.22  18.60  30.08  30.08

Pre-tax profit US$m 28.07  11.76  17.22  27.84  27.94

tax inc royalty US$m 9.06  4.35  7.45  12.96  12.96

Post-tax profit US$m 19.01  7.42  9.77  14.87  14.97

EPS US$c/s 2.36  0.92  1.21  1.85  1.86

PE x 5.2  13.4  10.2  6.7  6.6

EV/EBITDA x 3.5  8.1  5.3  3.3  3.3

Figures based on 100% of Vametco plant. Bushveld currently equity account for 26.6% of the Vametco plant

 

• Costs:  While costs fell 16% to $14.50/kg of vanadium last year vs $17.23/kg in 2015 costs rose slightly to $15.58/kg in the first six months of the year, though these costs remain at the bottom of the vanadium cost curve due to the higher grades mined by Vametco vs much of the rest of the industry.

• If Chinese vanadium producers are able to modify their plants to meet the new environmental regulations then we would expect prices to pull back from today’s very high levels but for prices to potentially rest at higher levels than previously seen to pay for higher processing and capital costs.  We suspect that some Chinese vanadium production may not come back onstream due to the cost of environmental compliance at related mines and process plants.

• Vanadium deficit:  Bushveld see the current market deficit as very real as evidenced by the Chinese releasing stock of older ferro-vanadium into the market.  Better enforcement of Chinese regulations on the quality of steel being used in construction combined with ongoing strong demand for steel is likely to increase demand for vanadium yet further at a time when European steel producers are also looking to increase capacity utilisation and raise production.

• Barrier to entry:  Bushveld’s previous feasibility study indicates that prices of over $33/kg are required to stimulate new vanadium production to meet a pre-tax IRR of 24%.  While some new incremental vanadium production may come in at lesser price increases it seems unlikely that any new mines and process plants would be built at this price level in our view.  Most vanadium plants in China process grades of 1-1.1% material exacerbating their environmental issues and requiring yet higher price levels for new investment.

• FOREX:  A stronger South African rand has served to dampen the impact of higher ferro vanadium prices.  Strengthening the Rand by around 7% eg from $14/US$ to $13/US$ knocks around 2p/s off our Bushveld valuation.  We assume a stable rand of SAR14/US$ over the life of the project.  We could assume this will weaken but we prefer to use stable price and currency rates in our modelling.

• Profit:  Bushveld Minerals reported a profit of £1.167m for the year ended 28 February 2017.  The acquisition of Bushveld’s effective 26.6% stake in Vametco will radically change the company’s income outlook going forward as indicated in the company’s recent operational update.  Further structuring of the group is likely to continue to change and develop the profit outlook for Bushveld from here.

• Bushveld Energy (vanadium rexox batteries) are reported to be on plan to vindicate the IDC's choice of vanadium for large-scale energy storage as one of the significant new industries to support in South Africa.  This could mark a major milestone in the use of vanadium for large scale utility battery storage.

• Greenhills Resources (49.5% interest in Dawnmin, which owns an 85% interest in the Uis Tin Project in Namibia): Bushveld are looking to consolidate a critical mass of tin resource inventory and are implementing a pilot production programme and are exploring options for a potential listing of Greenhills Resources.

• Lemur (coal and power generation in Madagascar):  for Lemur this entails securing a power purchase agreement for a 60MW thermal coal power project as well as tying up partnerships with financial and EPC project involves securing an Independent Power Producer licence and a Power Purchase Agreement for a thermal coal fired power station next to the coal mine, thereby providing a captive market for the Imaloto project run-of-mine coal.

• Lemur have signed a MoU with PowerChina for the development of a 60MW thermal coal power plant in Madagascar. The development of the Imaloto project, including the mine and the power plant could generate ~US$300m of new investment in Madagascar and increase the country's power supply by 15%.

• Valuation:  We have carefully considered the impact of the rise in vanadium prices, the strength of the South African rand and the increase in FerroVanadium production in our modelling.  We see significant potential for upside with higher prices over the longer term and if the South African rand weakens from here as it is likely to do.  We have not assumed any reduction in unit costs to come from the increase in production though it would be reasonable to assume so.

Conclusion:  We are excited to see vanadium prices take off but cautious in our revised valuation in case prices pull back for the fourth quarter.  We see Bushveld as offering unusually good value for investors.  Our revised earnings table is for 100% of the Vametco vanadium operations in which Bushveld currently hold just 26.6% though we expect this stake to change.  The dramatic rise in vanadium prices should have a substantial impact on Vametco’s profit through the second half as indicated in our revised numbers.

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.  This note is MiFID II compliant.

 

Gem Diamonds (LON:GEMD) 78p, Mkt Cap £108m – Interim results for H1 2017

• Gem Diamonds reports an after tax profit for the six months to 30th June 2017 of US$578,000 (H1 2016 US$ loss US$15.9m). The 2016 result, however, reflected a US$40m impairment charge against the value of the Ghaghoo mine while the 2017 result includes a smaller, US$3m, exceptional charge for care and maintenance of the suspended Ghaghoo operation.

• A combination of lower ore tonnages treated due to reduced plant availability and reduced recovered grades, which at 1.59cpht was lower than both the 1.79cpht achieved in H1 2016 and the targeted 1.63 cpht for H1 2017, led to a 12% decline in the overall production to 50,478 carats (H1 2016 57,380 carats).

• Production of larger, higher value diamonds has, however, improved with the 70% owned Letseng mine yielding 4 stones larger than 100 carats in size and a total of 96 diamonds larger than 20 carats during H1 2017. These included “two exceptional D-colour Type IIa diamonds of 98.42 and 80.58 carats”.

• A further positive trend has seen the prices achieved for the high value diamond production from Letseng which showed a 20% increase to average US$1779/carat in H1 2017 (H2 2016 – US$1480/carat), although still below the US$1899/carat recorded in H1 2016.

• Despite the positive impact of the large, high quality diamonds, revenues declined by approximately 15% to US$92.9m (H1 2016 – US$109.1m) and EBITDA fell to US$13m (H1 2016 – US$43.5m).

• The company comments that “Capital and cash management discipline remains a high priority in the short term and the Company remains committed to generating cash and strengthening its balance sheet.” We estimate that at 30th June, Gem Diamonds held net debt of approximately US$14.2m compared to net cash of US$3.0m at the beginning of 2017.

• As part of the effort to improve its balance sheet and improve cash generation, Gem Diamonds is implementing “a Group-wide efficiency and cost reduction review has commenced and has already identified opportunities that are being actively pursued.”

• In a review of the wider state of the diamond market, the company remarked that “The global market for both rough and polished diamonds remained cautious. Financing challenges persist and the volatile macro-economic environment continues to create challenges for the middle diamond market. In the medium to long term, rough diamond prices are expected to be supported by favourable demand/supply fundamentals, which are underpinned by a continued growth in demand from emerging markets coupled with a limited growth in supply. … The cautious approach adopted by rough and polished diamantaires and manufacturers is expected to continue into the second half of the year”.

Conclusion: Gem Diamonds has weathered a tough half year helped by the improved production of large, high value diamonds from Letseng. Lower earnings and increased debt remain a challenge as the company is taking a cautious outlook on the short term market for rough diamonds. We look forward to further details on the efficiency and cost reduction strategy and other measures to strengthen the balance sheet in due course.

 

Wolf Minerals (LON:WLFE) 3.6p, Mkt Cap £39.4m – Progress report on operational turnaround plan

• Wolf Minerals reports that it is making progress with its operational turnaround plan at the Drakelands tin tungsten mine in Devon. The plan is focussing on three main areas:

o “improving processing plant reliability in the crushing circuit;

o improving performance of the refinery to enhance production levels; and

o reducing noise emissions from the processing plant including low frequency noise ("LFN").”

o Implementation of remedial measures involving shut-downs of the screening circuit at weekends has involved Wolf Minerals and its lead contractor, GR Engineering Services, identifying a need to expedite control of LFN emissions which, understandably, are a potential source of friction with the mine’s host communities. “The  Company has assessed the costs of ongoing LFN rectifications and has decided to notify GRES of its intention to recover these costs from the £7.5 million Performance Bond under the construction contract. The Company is confident that the Performance Bond will be sufficient to cover the costs of implementing the technical solutions required to deliver a successful LFN outcome.”

o At this stage, the company has not elaborated on the progress of measures to improve the crushing circuit or the moves to enhance production levels.

o Commenting on the decision to trigger the Performance Bond, Acting Managing Director, Richard Lucas, emphasised the community relations aspects of LFN; “Managing our operations successfully … requires us to maintain strong relationships with our local communities, which includes further reductions in low frequency noise emissions. Therefore, after extended discussions with our lead construction contractor, GRES, we have decided to notify them of our intention to call upon the Performance Bond to ensure an LFN solution is achieved as quickly as possible."

o Mr. Lucas went on to comment that “We are … encouraged by an improving tungsten price which supports the opportunity for Drakelands to be an important part of the global supply chain for such a critical industrial metal.”  We note that the price of the benchmark ammonium paratungstate (APT) currently stands at US$248/256 per metric tonne unit compared with a price of US$187/198 per mtu at the beginning of 2017.

Conclusion: The decision to call upon the Performance Bond will not have been taken lightly however the funds it releases should speed up the rectification of the LFN issue and demonstrate to the local communities the company’s resolve to maintain a positive working relationship. In the wider context, the remedial work to improve plant performance is entering a critical phase with the company having commented at the release of their quarterly results in July that “The next six months is a pivotal time for Wolf to realise its’ objective of becoming a reliable steady-state producer.” and that it “aims to achieve a sustainable production platform during the December quarter …”

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Thu, 17 Aug 2017 10:47:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28416/today-s-market-view-bushveld-minerals-limited-gem-diamonds-wolf-minerals-28416.html
Today's Market View - Bushveld Minerals Limited http://www.proactiveinvestors.co.uk/columns/sp-angel/28415/today-s-market-view-bushveld-minerals-limited-28415.html Bushveld Minerals (LON:BMN) 9.5p, mkt cap £77m - Vanadium prices drive profits higher as management target expansion

Target price 14p (raised from 11.6p)

 

• Bushveld Minerals report impressive results from the acquisition of Vametco, the South African vanadium producer.

• Bushveld currently holds 45% of Bushveld Vanadium which owns 78.8% of SMC which owns 75% of Vametco Alloys with the other 25% owned by the BEE consortium.  Bushveld Minerals is equity accounting for 26.6% of Vametco Alloys in its accounts and may move to consolidate its holding further in time.

• This, well timed, deal has paid off its acquisition cost and associated debt within an impressive four months of its acquisition.

• The team are looking to expand market share to >10% of global vanadium supply over the next 3-5 years in a move which could add significantly to production expanding nameplate capacity to 5,000tpa of FeV from 3,000 tpa currently.

• Vametco increased production by 16% last year to 2,804t of ferrovanadium which is mainly sold under the ‘Nitrovan’ product name representing a 3.7% share of global production and is looking to raise its market share of global vanadium supply to >10% in the next 3-5 years.

• The business produced some 1,441t of vanadium in the first six months to end June indicating that production is continuing at this rate.

• Vanadium Prices: have soared in recent weeks nearly doubling since June and more than doubling since last March. 

• We have assumed vanadium prices remain at elevated levels of around $42/kg for some months to give an average of $30.80/kg for the year up from $25.25/kg previously but that prices will normalise in the last quarter.

• We are using $25.25/kg as our as our longer term assumption for ferro-vanadium.

• These may well prove to be very conservative assumptions if China continues to enforce environmental restrictions causing the long term closure of a number of vanadium plants.

• Costs:  While costs fell 16% to $14.50/kg of vanadium last year vs $17.23/kg in 2015 costs rose slightly to $15.58/kg in the first six months of the year, though these costs remain at the bottom of the vanadium cost curve due to the higher grades mined by Vametco vs much of the rest of the industry.

• If Chinese vanadium producers are able to modify their plants to meet the new environmental regulations then we would expect prices to pull back from today’s very high levels but for prices to potentially rest at higher levels than previously seen to pay for higher processing and capital costs.  We suspect that some Chinese vanadium production may not come back onstream due to the cost of environmental compliance at related mines and process plants.

• Vanadium deficit:  Bushveld see the current market deficit as very real as evidenced by the Chinese releasing stock of older ferro-vanadium into the market.  Better enforcement of Chinese regulations on the quality of steel being used in construction combined with ongoing strong demand for steel is likely to increase demand for vanadium yet further at a time when European steel producers are also looking to increase capacity utilisation and raise production.

• Barrier to entry:  Bushveld’s previous feasibility study indicates that prices of over $33/kg are required to stimulate new vanadium production to meet a pre-tax IRR of 24%.  While some new incremental vanadium production may come in at lesser price increases it seems unlikely that any new mines and process plants would be built at this price level in our view.  Most vanadium plants in China process grades of 1-1.1% material exacerbating their environmental issues and requiring yet higher price levels for new investment.

• FOREX:  A stronger South African rand has served to dampen the impact of higher ferro vanadium prices.  Strengthening the Rand by around 7% eg from $14/US$ to $13/US$ knocks around 2p/s off our Bushveld valuation.  We assume a stable rand of SAR14/US$ over the life of the project.  We could assume this will weaken but we prefer to use stable price and currency rates in our modelling.

• Profit:  Bushveld Minerals reported a profit of £1.167m for the year ended 28 February 2017.  The acquisition of Bushveld’s effective 26.6% stake in Vametco will radically change the company’s income outlook going forward as indicated in the company’s recent operational update.  Further structuring of the group is likely to continue to change and develop the profit outlook for Bushveld from here.

• Bushveld Energy (vanadium rexox batteries) are reported to be on plan to vindicate the IDC's choice of vanadium for large-scale energy storage as one of the significant new industries to support in South Africa.  This could mark a major milestone in the use of vanadium for large scale utility battery storage.

• Greenhills Resources (49.5% interest in Dawnmin, which owns an 85% interest in the Uis Tin Project in Namibia): Bushveld are looking to consolidate a critical mass of tin resource inventory and are implementing a pilot production programme and are exploring options for a potential listing of Greenhills Resources.

• Lemur (coal and power generation in Madagascar):  for Lemur this entails securing a power purchase agreement for a 60MW thermal coal power project as well as tying up partnerships with financial and EPC project involves securing an Independent Power Producer licence and a Power Purchase Agreement for a thermal coal fired power station next to the coal mine, thereby providing a captive market for the Imaloto project run-of-mine coal.

• Lemur have signed a MoU with PowerChina for the development of a 60MW thermal coal power plant in Madagascar. The development of the Imaloto project, including the mine and the power plant could generate ~US$300m of new investment in Madagascar and increase the country's power supply by 15%.

• Valuation:  We have carefully considered the impact of the rise in vanadium prices, the strength of the South African rand and the increase in FerroVanadium production in our modelling.  We see significant potential for upside with higher prices over the longer term and if the South African rand weakens from here as it is likely to do.  We have not assumed any reduction in unit costs to come from the increase in production though it would be reasonable to assume so.

Conclusion:  We are excited to see vanadium prices take off but cautious in our revised valuation in case prices pull back for the fourth quarter.  We see Bushveld as offering unusually good value for investors.  Our revised earnings table is for 100% of the Vametco vanadium operations in which Bushveld currently hold just 26.6% though we expect this stake to change.  The dramatic rise in vanadium prices should have a substantial impact on Vametco’s profit through the second half as indicated in our revised numbers.

Vametco plant assuming 100%     2017 2018 2019 2020 2021

Price V2O5 $/lb  6.40  5.46  5.46  5.46  5.46

Vanadium flake price US$/kg  30.80  25.25  25.25  25.25  25.25

Vanadium sales kg  2,757  2,757  3,342  4,984  4,984

Sales US$m  80.67  66.13  80.17  119.55  119.55

Operating costs US$m  52.36  53.91  61.57  89.47  89.47

Operating costs US$/kg 18.99 19.55 18.42 17.95 17.95

Operating profit US$m  28.31  12.22  18.60  30.08  30.08

Pre-tax profit US$m  28.07  11.76  17.22  27.84  27.94

tax inc royalty US$m  9.06  4.35  7.45  12.96  12.96

Post-tax profit US$m  19.01  7.42  9.77  14.87  14.97

EPS US$c/s  2.36  0.92  1.21  1.85  1.86

PE x  5.2  13.4  10.2  6.7  6.6

EV/EBITDA x  3.5  8.1  5.3  3.3  3.3

Figures based on 100% of Vametco plant. Bushveld currently equity account for 26.6% of the Vametco plant

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.  This note is MiFID II compliant

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Thu, 17 Aug 2017 09:49:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28415/today-s-market-view-bushveld-minerals-limited-28415.html
Today's Market View - Altus Strategies, Bushveld Minerals Limited, Bluebird Merchant Ventures Ltd, European Metals Holdings, Hochschild Mining, Jangada Mines Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28404/today-s-market-view-altus-strategies-bushveld-minerals-limited-bluebird-merchant-ventures-ltd-european-metals-holdings-hochschild-mining-jangada-mines-plc-28404.html Altus Strategies* (LON:ALS) – Laboum gold prospect update

Bluebird Merchant Ventures* (LON:BMV, Standard List)  – Bluebird team find three entrances for Gubong gold mine

Bushveld Minerals* (LON:BMN) – BUY – Target Price raised to 14p (formerly 11.6p) – Vametco profits exceed expectations as management target ambitious expansion

European Metals (LON:EMH) – Infill drilling at Cinovec

Hochschild Mining (LON:HOC) – On track for record 37m oz attributable silver production in 2017

Jangada Mines (LON:JAN) – Revised Pedra Branca resource estimate including copper and nickel.

 

Gold is trading lower with the US$ little changed ahead of the Fed July meeting minutes due later today.

• Gold is down nearly $20/oz from the start of the week as geopolitical tensions between the US and North Korea subsided while good US retail sales numbers support the monetary tightening case.

• Zinc prices climbed past the $3,000/t level reaching the highest level in almost a decade on the back of strong Chinese infrastructure demand and a shortage of the metal in the market.

• Iron ore and steel futures are trading lower as Chinese steel mills are reported to be delaying purchases after restocking; steel prices are off for fifth consecutive day in longest losing streak since April.

• Brent is stronger this morning as industry data showed US stockpiles continued to drop led by a seasonally strong demand.

 

Vanadium prices continue to soar despite the emergence of old ferro-vanadium stock

• Vanadium prices have taken off Ferro Vanadium prices climbing to $19.5/kg today from $12/kg in mid July

• Vanadium pentoxide prices have also jumped to $9.5/lb from around $5.75/lb in a similar timeframe.

• The resurfacing of some old ferro-vanadium stock in China is seen as temporarily easing some tightness in China as traders and consumers compete for material

• The Metal Bulletin report Chinese ferro-vanadium prices as high as $55-60/kg FOB last week, with V2O5 prices held at $12-13/lb FOB China.

• Chinese domestic prices for ferro-vanadium are reported to have been indicated at $60-65/kg with exporters refusing to sell into the weaker European market

• European Vanadium Pentoxide ‘V2O5’ prices are reported to have doubled since March to $9-10/lb, in Rotterdam as seen last week.

 

Zambia – Energy price rise causing problems for copper miners and farmers

• ZESCO, the Zambian Electricity Supply Corporation is proposing a further rise in electricity prices of 25% on top of the 50% price rise already imposed.

• Glencore has already suspended operations at its Mopani copper mine after CEC which supplies power into the Kitwe and Mufulira regions raised prices to  ~9.3USc/kWh from ~6USc/kWh previously negotiated.

• The government is looking to generate a million new jobs in the energy sector by making it more attractive for investment.

• Zambia continues to suffer from lower hydropower availability due to low water levels in the Kariba dam.

 

Dow Jones Industrials  +0.02% at   21,999

Nikkei 225   -0.12% at   19,729

HK Hang Seng   +0.86% at   27,409

Shanghai Composite    -0.15% at    3,246

FTSE 350 Mining   +1.58% at   16,479

AIM Basic Resources   -0.91% at    2,464

 

Economic News

US – Good retail sales numbers for July and upwards revised June were led by a broad pick up in consumer spending from department stores and to building materials.

• 10 of 13 major retail categories posted gains as retail control group sales used in GDP calculations increased 0.6%mom following a 0.1%mom in June.

• On a separate note, surveys in the manufacturing sector in the state of New York conducted by the local Fed showed an improvement in the sentiment to the highest in over two and a half years on the back of robust gains in new orders, shipments, and employment trends.

 

Eurozone – Q2 GDP growth was revised upwards slightly from initial estimates with the pace of expansion accelerating and hitting the highest since 2011.

• Q2 GDP (%qoq): 0.6 v 0.5 in Q1 and 0.6 forecast.

• Q2 GDP (%yoy): 2.2 v 1.9 in Q1 and 2.1 forecast.

 

UK – The pound climbs on the back of good employment data with both jobs numbers and earnings growth beating market estimates in June.

• Despite stronger than expected increase in labour earnings, real wages posted a 0.5%yoy decline amid strong consumer prices inflation.

• 3m Unemployment Rate: 4.4% v 4.5% in May and 4.5% forecast.

• 3m Employment Change: 125k v 175k in May and 97k forecast.

• 3m Av Weekly Earnings (incl bonus, %yoy): 2.1 v 1.9 in May and 1.8 forecast.

 

Sierra Leone – mudslides kill around 400 with some 600 unaccounted in Freetown

 

Currencies

US$1.1735/eur vs 1.1756/eur yesterday.   Yen 110.93/$ vs 110.32/$.   SAr 13.244/$ vs 13.313/$.   $1.290/gbp vs $1.294/gbp.

0.786/aud vs 0.784/aud.   CNY 6.694/$ vs 6.676/$.

 

Commodity News

Precious metals:

Gold US$1,270/oz vs US$1,275/oz yesterday

Gold – India is banning exports of gold products with purity above 22 carats with immediate effect.

• The measure is directed at reducing “round-tripping of jewellery and coins,, wherein a trader can import the gold coins or jewellery at a lower import tax because of trade agreements with some countries and re-export the same stock without any value addition,” the India Bullion and Jewellers Association commented on the regulation.

• Exporters, thus, previously managed to avoid the 10% import tax which is levied on most inbound shipments.

   Gold ETFs 66.6moz vs US$66.5moz yesterday

Platinum US$965/oz vs US$963/oz yesterday

Palladium US$896/oz vs US$897/oz yesterday

Silver US$16.68/oz vs US$16.91/oz yesterday

           

Base metals:   

Copper US$ 6,442/t vs US$6,418/t yesterday

Copper – Flash floods late on Tuesday in the Grasberg mine area left one worker missing and led to water and power outages.

• Mining operations are said to continue as normal while water and power disruptions are expected to continue in the coming days, the Company said.

• “One person remains unaccounted for after flash floods that occurred late Tuesday destroyed roads, bridges, water lines and most of the plant that supplies power to Tembagapura and Hidden Valley,” the Indonesian unit of Freeport said.#

• 5,000 workers at Grasberg operations remain on strike since May protesting against mass layoffs announced by the Company earlier this year in response to government led initiative to revise taxes and royalties.

Aluminium US$ 2,067/t vs US$2,033/t yesterday

Aluminium – China Hongqiao Group, one of the largest aluminium producers, is raising funds through a sale of a stake to Citic and an issuance of convertible debt.

• Citic Group, a state-owned conglomerate, will invest $702m in the Company in exchange for a 10% stake with another $320m to be raised through a sale of convertible bonds to CNCB Capital, another Citic unit.

• A separate announcement by Hongqiao confirmed the curtailment of 2.7mt of aluminium production capacity accounting for around 29% of its total on the back of “misconducted construction” of five plants.

Nickel US$ 10,545/t vs US$10,435/t yesterday

Zinc US$ 3,009/t vs US$2,939/t yesterday

Lead US$ 2,419/t vs US$2,363/t yesterday

Tin US$ 20,080/t vs US$20,375/t yesterday

           

Energy:           

Oil US$51.2/bbl vs US$50.5/bbl yesterday

Natural Gas US$2.901/mmbtu vs US$2.961/mmbtu yesterday

Uranium US$20.75/lb vs US$20.80/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$70.5/t vs US$70.6/t

Chinese steel rebar 25mm US$635.4/t vs US$644.4/t

Thermal coal (1st year forward cif ARA) US$77.3/t vs US$77.5/t yesterday

Premium hard coking coal Aus fob US$196.9/t vs US$196.9/t

 

Other:

Tungsten APT European US$248-256/mtu vs US$230-235/mtu

 

Titanium – Chinese environmental inspections are restricting TiO2 supply in China.

• Coatings manufacturers in China are said to be the worst affected.

• September is said to be peak season for TiO2 sales in China according to ‘Industrial Minerals’

• EU proposal:  The British Coatings Federation ‘BCF’ is countering proposals by the European Commission to classify titanium dioxide as a potential carcinogen.

• The proposed classification could lead to products containing titanium dioxide being labelled as ‘suspected of causing cancer’ even when included in products where titanium dioxide can nor be inhaled.

Ilmenite prices hold at $170/t (MB price)

• Prices for basic Ilmenite recovered to around $170/t in August following a very brief dip to around $155/t at end July.

 

Company News

Altus Strategies* (LON:ALS) 10.4p, Mkt Cap £11.2m – Laboum gold prospect update

• The exploration team completed high resolution ground magnetics on the Laboum gold prospect covering a 15km long and 5km wide shear zone in northern Cameroon.

• The study identified a strong correlation between magnetic signatures and regional gold in soil anomalies identified by previous soil sampling programmes and numerous artisanal gold workings.

• The Laboum license covers the northeast striking Tchollire-Banyo shear zone with regional dilational and fold structures considered to be potential hosts for economic mesothermal gold mineralisation.

• The survey identified three key prospect areas including:

o Landou prospect: 3.8km long NE trending structure with grab samples returning up to 6.86g/t Au from sheared meta sedimentary samples, visible gold in outcrop and artisanal workings;

o Tapare prospect:  7km long NE trending zone located on strike with Landou (4km NE) and remaining open along strike;

o Kalardje prospect: 2.5km long NE trending area with grab samples returning 2.03g/t Au and visible gold up to 3mm from reconnaissance trenches, the structure remains open along strike.

• This brings the total length of the delineated structure to 13.5km with the exploration team to “extend the programme in order to target potential strike extensions as defined by the presence of artisanal gold workings”.

• The magnetic survey was focused on identifying broad regional structures and lithological features and forming the basis for the infill soil sampling programme ahead of trenching and generation of potential drill targets.

• Infill soil sampling programme is currently in progress with samples being collected at 50m intervals along 100m lines.

*SP Angel act as Nomad and Joint Broker to Altus Strategies

 

Bluebird Merchant Ventures* (LON:BMV, Standard List) 2.3p, Mkt Cap £4.2m – Bluebird team find three entrances for Gubong gold mine

• The team at Bluebird Merchant Ventures have found three historic points of entry for the historic Gubong gold mine in South Korea.

• The main adit was found and opened in such a way as not to let water flow out of the flooded tunnel.  The water was not under pressure indicating that higher workings should be relatively dry.

• Water from the main adit and workings will be dewatered and the adit will be rehabilitated where necessary.

• A decline shaft and further adit have been identified with first entry to be through the decline shaft.

• The mine was closed in 1971 when gold prices were around US$38.9/oz.

• The mine was closed without any systematic closure program likely leaving blocks of developed and undeveloped ore in place.

Conclusion:  The Bluebird team are making rapid progress in gaining access and toward reopening the old Gubong gold mine.  We look forward to results from sampling from within the mine and early indications of what was left in-situ when the mine was closed.

*SP Angel act as broker to Bluebird Merchant Ventures

 

Bushveld Minerals* (LON:BMN) 9.5p, Mkt Cap £77m – Vametco profits exceed expectations as management target ambitious expansion

BUY – Target Price raised to 14p (formerly 11.6p)

• Bushveld Minerals report impressive results from the acquisition of Vametco, the South African vanadium producer.  Bushveld currently holds around 35% of Vametco though it has equity accounted 27% of Vametco in these accounts.

• This, well timed, deal has paid off its acquisition cost and associated debt within an impressive four months of its acquisition.

• The team are now looking to expand Vametco’s market share to >10% of global vanadium supply over the next 3-5 years in a move which could approximately treble production and is ahead of our modelled expectations.  The team plan to expand nameplate capacity to 5,000tpa of ferro vanadium from 3,000 tpa currently.

• Vametco increased production by 16% last year to 2,804t of ferrovanadium which is mainly sold under the ‘Nitrovan’ product name representing a 3.7% share of global production.

• The business produced some 1,441t of vanadium in the first six months to end June indicating that production is continuing at this rate

• Costs:  While production fell 16% to $14.50/kg of vanadium last year vs $17.23/kg in 2015 costs have risen slightly to $15.58/kg in the first six months of the year, though these costs remain at the bottom of the vanadium cost curve due to the higher grades mined by Vametco vs much of the rest of the industry.

• Vanadium Prices: have soared in recent weeks nearly doubling since June and more than doubling since last March.   We have assumed vanadium prices remain at elevated levels of around $42/kg for some months to give an average of $30.80/kg for the year but that prices will normalise in the last quarter.  We are using a more modest $25.25/kg vanadium price as our longer term assumption.  These may well prove to be very conservative assumptions if China continues to enforce environmental restrictions causing the long term closure of a number of vanadium plants.

• If Chinese vanadium producers are able to modify their plants to meet the new environmental regulations then we would expect prices to pull back but for prices to potentially rest at higher levels than previously seen to pay for higher processing and capital costs.

• Vanadium deficit:  Bushveld see the current market deficit as very real as evidenced by the Chinese releasing stock of older ferro-vanadium into the market.  Better enforcement of Chinese regulations on the quality of steel being used in construction combined with ongoing strong demand for steel is likely to increase demand for vanadium yet further at a time when European steel producers are also looking to increase capacity utilisation and raise production.

• Barrier to entry: Bushveld’s previous feasibility study indicates that prices of over $33/kg are required to stimulate new vanadium production to meet a pre-tax IRR of 24%.  While some new incremental vanadium production may come in at lesser price increases it is unlikely that any new mines and process plants would be built at this price level in our view.  Most vanadium plants in China process grades of 1-1.1% material exacerbating their environmental issues and requiring yet higher price levels for new investment.

• FOREX:  A stronger South African rand has served to dampen the impact of higher ferro vanadium prices.  Strengthening the Rand by around 7% eg from $14/US$ to $13/US$ knocks around 2p/s off our Bushveld valuation.  We assume a stable rand of SAR14/US$ over the life of the project.  We could assume this will weaken but we prefer to use stable price and currency rates in our modelling.

• Bushveld Energy (vanadium rexox batteries) are reported to be on plan to vindicate the IDC's choice of vanadium for large-scale energy storage as one of the significant new industries to support in South Africa.  This could mark a major milestone in the use of vanadium for large scale utility battery storage.

• Greenhills Resources (49.5% interest in Dawnmin, which owns an 85% interest in the Uis Tin Project in Namibia): Bushveld are looking to consolidate a critical mass of tin resource inventory and are implementing a pilot production programme and are exploring options for a potential listing of Greenhills Resources.

• Lemur (coal and power generation in Madagascar) - For Lemur this entails securing a power purchase agreement for a 60MW thermal coal power project as well as tying up partnerships with financial and EPC project involves securing an Independent Power Producer licence and a Power Purchase Agreement for a thermal coal fired power station next to the coal mine, thereby providing a captive market for the Imaloto project run-of-mine coal.  Lemur have signed a MoU with PowerChina for the development of a 60MW thermal coal power plant in Madagascar. The development of the Imaloto project, including the mine and the power plant could generate ~US$300m of new investment in Madagascar and increase the country's power supply by 15%.

• Valuation:  We have carefully considered the impact of the rise in vanadium prices, the strength of the South African rand and the increase in FerroVanadium production in our modelling.  We see significant potential for upside with higher prices over the longer term and if the South African rand weakens from here as it is likely to do.  We have not assumed any reduction in unit costs to come from the increase in production though it would be reasonable to assume so.

Conclusion:  We are excited to see vanadium prices take off but cautious in our revised valuation incase prices pull back for the fourth quarter.  We see Bushveld as offering unusually good value for investors.

*An SP Angel mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.

 

European Metals (LON:EMH) 48.8 pence, Mkt Cap £63.1m – Infill drilling at Cinovec

• European Metals Holdings has released the assay results from the first of a six-hole programme of infill drilling designed to cover areas of missing data within its resource model at its Cinovec lithium/tin project in the Czech Republic. The area warrants follow-up investigation as it “could potentially be targeted for mining in the initial years.”

• To date, the company has completed five holes (2163.1m) of the planned programme with the final hole currently underway.

• Hole CIS-4, which is located in the eastern part of Cinovec South, encountered a 148.3m wide mineralised intersection at an average grade of 0.4% Li2O from a depth of 297.7m in greisenised granite immediately beneath the contact with an overlying rhyolite. Upper parts of the mineralised section also contain tin and tungsten with the 15.85m interval between 279.7m and 295.55m averaging 0.70% Li2O, 0.29% tin and 0.073% tungsten.

• European Metals has also announced the strengthening of its management team with the appointment of Craig Reimer to manage the DFS for the project. Mr Reimer is a mechanical engineer with “over 25 years’ experience in project management, engineering management and business management and has delivered successful international mining projects for previous clients.” Previous projects include work for BHP, Vale, Lynas, Boddington Gold Mine and Alcoa.

• In addition, the company has secured the services of an experienced, former Manager of Lithium Chemicals for Talison Lithium, Grant Harman, as a consultant to the project DFS. Mr Harman, described as “one of the world’s foremost lithium metallurgists … was involved in the management of the Talison Lithium Carbonate Plant from Scoping Study to Definitive Feasibility Study.”

Conclusion: The infilling of previously undrilled parts of the resource model, particularly those to be mined early in the project life, should mitigate risks of encountering unexpected geological conditions early in the project. The appointment of additional, experienced technical and project management personnel to the project team should enhance the DFS work currently underway.

 

Hochschild Mining (LON:HOC) 274 pence, Mkt Cap £1.4bn – On track for record 37m oz attributable silver production in 2017

• At the half way point, Hochschild Mining reports that it is on track “to deliver record attributable production target of 37.0 million silver equivalent ounces for 2017”. The company adds that all-in-sustaining costs are “expected to be in line with $12.2-12.7 per silver equivalent ounce guidance”.

• Production of 8.9m oz of attributable silver and 121,000 oz of gold brings silver equivalent output for the six months to 30th June to 17.9m oz. For comparison, attributable silver equivalent production in H1 2016 was 6% lower at 16.95moz.

• The wholly owned Peruvian mines at Inmaculada, Arcata and Pallancata produced 2.6m oz, 2.3m oz and 2.4m oz of silver respectively while the 51% owned San Jose mine in Argentina contributed a further 1.6m oz of attributable silver production.

• The group’s gold output was dominated by the 79,820oz from Inmaculada and the 23,776 attributable oz from San Jose with Arcata contributing a further 8,040 oz and Pallancata 9,790oz.

• Costs, on an all in-sustaining-cost basis, rose by around 10% to US$12/oz of silver equivalent (H1 2016 – US$10.9/oz). lower grades, and also in the case of Arcata, lower tonnages, increased costs by 7% at Inmaculada (to US$8.8/oz from US$8.2/oz), at Arcata by 35% to US$17.6/oz (H1 2016 US$13/oz) and by 23% to US$14.4/oz (H1 2016 11.7/oz) at San Jose.

• Pallancata on the other hand was able to lower its costs by 31% to US$10.9/oz (H1 2016 US$15.9/oz) reflecting “better than expected tonnage and silver grades which offset the loss of January's production due to the stoppage. AISC for full year 2017 is now expected to be approximately $12.0 per silver equivalent ounce.”

• Revenues of US$340.8m during the six months to 30th June 2017 were broadly in line with the H1 2016 revenue of US$339.3m, however he higher costs led to a reduction in adjusted EBITDA reported of 20% to US$136m (H1 2016 – US$170.3m).

• Despite the cost increases, however, cash balances increased to US$145m at 30th June (31st December 2016 US$140m) short term debt reduced by US$19m during the half year and overall net debt was reduced from the US$187.4m at the beginning of the year to US$165m.

• Looking towards the future, Chief Executive, Ignacio Bustamante, commented that “Towards the end of the year, once permits are in place, we can expect further progress with the development of the Pablo vein at the Pallancata deposit as well as several brownfield drilling campaigns across the Company's portfolio.”

Conclusion: Hochschild Mining has maintained its production target for the year though a trend towards higher costs, particularly at the Arcata mine in Peru where 2017 all-in-sustaining costs are projected to be US$17/oz are a concern. Continuing strong cost and production performance from Pallancata provide a firm base for the future.

 

Jangada Mines (LON:JAN) 4.9 pence, Mkt Cap £9.6m – Revised Pedra Branca resource estimate including copper and nickel.

• Jangada Mines has amplified the details on its previously announced resource update for its Pedra Branca PGM project located approximately 280km from the city of Fortaleza in north-east Brazil.

• The resource estimate, which now includes cobalt and chrome credits, comprises 23.114mt at an average grade of 0.76g/t palladium, 0.48g/t platinum, 0.04g/t gold, 0.05% copper, 0.21% nickel, 0.85% Cr2O3, and 127ppm of cobalt.

• The company notes that “At current cobalt prices, this represents a potential in-situ increase to the ore value of approximately USD170 million or USD7.80 per tonne subject to recovery rates.”

• Jangada Mines also comments, similarly, that “At current chrome ore prices, the Type 2 chrome horizons at the Project have the potential to add between USD55 million and USD80 million to the in-situ ore value or circa USD15 per tonne within the chrome ore horizon.”

• In terms of tonnage, 38% (8.8mt) is contained in oxide ore, a further 19% in material classed as “transitional” with the remaining 43% described as “sulphide“ ore. Around 13% (3mt) across all ore types is identified as “Measured” in terms of the JORC Code (2012) with a further 34% (7.9mt) is “Indicated” with the remaining 12.2mt (53%) “Inferred”.

Conclusion: The upgraded resource estimate for Pedra Branca brings in additional value for cobalt and chrome. With much of the overall resource still classed as inferred, there seems to be much work still to do in what appears to be a metallurgically complex, multi-element mineral assemblage. Metallurgical treatment of oxide/transitional PGM ores may add a further layer of complexity to process flowsheet design. We look forward to further news as the project develops.

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Wed, 16 Aug 2017 10:43:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28404/today-s-market-view-altus-strategies-bushveld-minerals-limited-bluebird-merchant-ventures-ltd-european-metals-holdings-hochschild-mining-jangada-mines-plc-28404.html
Today's Market View - Asiamet Resources, Avocet Mining, Mkango Resources Ltd, Tri-Star Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/28394/today-s-market-view-asiamet-resources-avocet-mining-mkango-resources-ltd-tri-star-resources-28394.html Asiamet Resources (ARS LN) – Filing of updated resource report

Avocet Mining (AVM LN) – Extension of standstill agreement with Inata’s major creditors

Mkango Resources* (MKA LN) – Respected industry observer sees 50% YTD price increase in key rare earth elements in China

Tri-Star Resources* (TSTR LN) – Antimony prices continue to rise as environmental shutdowns in China cause stock levels to fall

 

Gold prices posted new losses as the US$ index climbed on Dudley hawkish comments.

• William Dudley, a FOMC voting member, said it is not unreasonable to expect Fed to release plans in September to start reducing balance sheet; he also highlighted he was in support of another rate increase before year end if economy performs as expected.

• Open interest in copper futures market hit the highest level on record as speculative demand in the commodity increases; hedge funds bullish bets climbed to an all-time high last week.

• Steel rebar prices continued to decline marking the 4th consecutive drop in their longest streak of loses since early June as the SHFE increased fees and capped daily positions for some traders.

• January iron ore futures were slightly higher today following three days of losses.

• Oil prices are flat this morning after sliding nearly $2/bbl to $50.5/bbl ahead of the EIA inventories data due later today with estimates for another drop in a period of strong seasonal demand; earlier EIA said strong US shale oil production is likely to keep crude oil in the mid-$50/bbl.

 

Noble Group saw its credit rating cut by two major rating agencies as the Company is trying to refinance operations with a covenant waiver on its $1.1bn revolving credit facility expiring on October 20.

• Both S&P and Moody’s cut respective ratings two notches down to CCC- and Caa3 highlighting increased risks of a default.

• Noble agreed to sell its gas-and-power unit to its rivals Mercuria Energy Group for $248m and is looking for buyers for its oil liquids business in an effort to shore up its balance sheet.

• “The increased losses reflect in part a loss of confidence among Noble’s lenders, suppliers, customers and other counter-parties,” Moody’s said.

• It is uncertain if asset sales “will raise sufficient proceeds to meet debt maturities and cash outflow over the next 12 months”, the agency added.

 

Dow Jones Industrials  +0.62% at   21,994

Nikkei 225   +1.11% at   19,753

HK Hang Seng   -0.09% at   27,226

Shanghai Composite    +0.43% at    3,251

FTSE 350 Mining   -0.97% at   16,256

AIM Basic Resources   +0.16% at    2,487

 

Economic News

US - ordered trade probe of China’s alleged theft of US intellectual property on Monday

 

China – Aggregate financing continued strong through July beating market expectations with the total for the first seven months of the year up 20.5%yoy, marking the strongest run in the last four years.

• M2 Money Supply (%yoy): 9.2 v 9.4 in June and 9.5 forecast.

• Aggregate Financing (CNY bn): 1220 v 1776 (revised from 1780) in June and 1000 forecast.

Stronger Renminbi may allow select Chinese companies to resume overseas acquisitions

• We expect to see China return to M&A markets as the renminbi strengthens and to continue to move to grab.

Chinese – Chinese offer for Fiat Chrysler rejected

• Other Chinese automaker executives are reported to have been seen working on due diligence.

• Fiat Chrysler has been streamlining its operations for some time to make itself more attractive to byers, though The Agnelli family holding company, Exor would apparently want to exclude Maserati and Alfa Romeo from the sale.

• Automotive companies are faced with a stark choice.  Invest in the development of new, hybrid or pure Electric Vehicles or find their vehicles excluded from the world’s major city centres.

• The ease at which Tesla has risen to the largest automotive company in the US by market capitalisation demonstrates the disruptive potential of new Electric Vehicle production.

• Chinese and other auto manufacturers are working hard to catch up with Tesla and Toyota who currently dominate the EV field.

 

Germany – The economy enjoyed 0.6%qoq growth last quarter with Q1 numbers revised upwards.

• Continuing robust economic growth is expected to boost support for the Christian Democratic Union led coalition in the September 24 election and raise chances of Angela Merkel securing a fourth term as chancellor.

• Growth was driven by domestic consumption with both consumers and government increasing spending; although, trade weighed on overall growth with imports rising significantly faster than exports.

• Business investment and construction also climbed from the Q1.

• Q2 GDP (%qoq): 0.6 v 0.7 (revised from 0.6) in Q1 and 0.7 forecast.

• Q2 GDP (%yoy): 2.1  v  2.0 (revised from 1.7) in Q1 and 1.9 forecast.

 

UK – The pound is off 045% this morning as July inflation data slightly undershoots estimates.

• Increases in clothing, household goods and food are reported to have led inflation gains.

CPI (%mom): -0.1 v 0.0 in June and 0.0 forecast.

• CPI (%yoy): 2.6 v 2.6 in June and 2.7 forecast.

Brexit – UK suggests temporary customs union with EU (BBC)

• David Davis sees the arrangement as being “as close as we can get to the current arrangements”.

• The temporary customs union may last for two years or less but the transition period has to be done by the time of the next UK election in 2022 at the latest.

• The UK is in talks with non-EU countries but is not signing deals as yet considering the temporary customs union with the EU.

 

North Korea backs away from Guam missiles as China imposes US Sanctions banning imports of iron ore, coal and seafood

• We note China is still not restricting the supply of fuel into North Korea.

• China has already imported its quota of coal under the sanctions and North Korea has already exported nearly as much iron ore as last year so there appears to be little change for North Korea when dealing with China.

• The question remains, how has North Korea obtained ballistic and nuclear technology when nations like Iran have yet to master the technology?

 

Zambia – Energy price rise causing problems for copper miners and farmers

• ZESCO, the Zambian Electricity Supply Corporation is proposing a further rise in electricity prices of 25% on top of the 50% price rise already imposed.

• Glencore has already suspended operations at its Mopani copper mine after CEC which supplies power into the Kitwe and Mufulira regions raised prices to  ~9.3USc/kWh from ~6USc/kWh previously negotiated.

• The government is looking to generate a million new jobs in the energy sector by making it more attractive for investment.

• Zambia continues to suffer from lower hydropower availability due to low water levels in the Kariba dam.

 

 

Currencies

US$1.1756/eur vs 1.1822/eur yesterday.   Yen 110.32/$ vs 109.53/$.   SAr 13.313/$ vs 13.368/$.   $1.294/gbp vs $1.301/gbp.     

0.784/aud vs 0.789/aud.   CNY 6.676/$ vs 6.661/$.

 

Commodity News

Precious metals:

Gold US$1,275/oz vs US$1,286/oz yesterday

   Gold ETFs 66.5moz vs US$66.3moz yesterday

Platinum US$963/oz vs US$978/oz yesterday

Palladium US$897/oz vs US$896/oz yesterday

Silver US$16.91/oz vs US$17.14/oz yesterday

           

Base metals:   

Copper US$ 6,418/t vs US$6,405/t yesterday

Aluminium US$ 2,033/t vs US$2,029/t yesterday

Nickel US$ 10,435/t vs US$10,610/t yesterday

BHP talking to gold miners in Kambalda region in effort to keep nickel concentrator going

• News reports today suggest that BHP Nickel West is in talks to see if gold can be concentrated at the plant to avert closure of the Nickel West plant at Kambalda.

• The plant is challenged by a lack of feed due to the closure of mines by Mincor and Panoramic leaving only Western Areas, Independence Group and BHP ores to feed the concentrator plant.

• Worse still Independence is to close its Long nickel mine at Kambalda next year exacerbating the shortage of feed stock.

• BHP’s Nickel West plant has been running for 50 years and may extend its life through mining some of its own opportunities

Zinc US$ 2,939/t vs US$2,916/t yesterday

Lead US$ 2,363/t vs US$2,344/t yesterday

Tin US$ 20,375/t vs US$20,325/t yesterday

           

Energy:           

Oil US$50.5/bbl vs US$52.1/bbl yesterday

Natural Gas US$2.961/mmbtu vs US$3.001/mmbtu yesterday

Uranium US$20.80/lb vs US$20.80/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$70.6/t vs US$70.5/t

Chinese steel rebar 25mm US$644.4/t vs US$649.6/t

Thermal coal (1st year forward cif ARA) US$77.5/t vs US$77.0/t yesterday

Premium hard coking coal Aus fob US$196.9/t vs US$198.0/t

 

Other:

Tungsten APT European US$248-256/mtu vs US$230-235/mtu

 

Titanium – Chinese environmental inspections are restricting TiO2 supply in China.

• Coatings manufacturers in China are said to be the worst affected.

• September is said to be peak season for TiO2 sales in China according to ‘Industrial Minerals’

• EU proposal:  The British Coatings Federation ‘BCF’ is countering proposals by the European Commission to classify titanium dioxide as a potential carcinogen.

• The proposed classification could lead to products containing titanium dioxide being labelled as ‘suspected of causing cancer’ even when included in products where titanium dioxide can nor be inhaled.

Ilmenite prices hold at $170/t (MB price)

• Prices for basic Ilmenite recovered to around $170/t in August following a very brief dip to around $155/t at end July.

 

Company News

Asiamet Resources (LON:ARS) 5.1p, Mkt Cap £43m – Filing of updated resource report

• Asiamet Resources reports that it has now filed the independent technical report relating to the resource upgrade at its Beruang Kanan Main (BKM) property in central Kalimantan.

• The measured/indicated resource, reported at a 0.2% cut-off grade is now 49.2mt at an average grade off 0.7% copper with a further 17.7mt grading 0.6% copper classed as inferred.

• The new estimate, which has been reported earlier, represents a 200% increase in the contained copper inventory of BKM and the company reports that 73% of the resource lies within the conceptual pit outlined in April 2016 Preliminary Economic Assessment.

• Ore reserve delineation and further definition and optimisation of the open pit configuration forms part of the full feasibility study for BKM which is expected to be completed early in 2018.

Conclusion: Asiamet is moving ahead with the BKM project and has also identified additional targets at BKZ, approximately 800m to the north to follow up. We look forward to continuing news on the progress of the BKM Feasibility Study.

 

Avocet Mining (LON:AVM) 35p Mkt Cap £7.3m – Extension of standstill agreement with Inata’s major creditors

• Avocet has announced that, following the attack on a restaurant in the capital of Burkina Faso, Ougadoudou, which left at least  18 people dead, it has reached agreement with the major creditors of its Inata mine to extend the standstill agreement from 14th August to 18th August 2017.

• The standstill agreement, which is intended to allow time for restructuring of the balance sheet in collaboration with the Government, banks and major creditors, had previously been extended from the original 31st July 2017 date.

Conclusion: The short extension of the standstill agreement has been precipitated by wider events in Burkina Faso. We look forward to news of the resolution of the problems at Inata in the coming days.

 

Mkango Resources* (LON:MKA) 3p, Mkt Cap £2.5m – Respected industry observer sees 50% YTD price increase in key rare earth elements in China

• Mkango Resources, which is working towards the development of the Songwe Hill rare earths deposit in Malawi, should take considerable encouragement in a recently published review of the rare-earths market by the highly regarded industry commentator, Adamas Intelligence.

• Mkango Resources is one of a number of companies developing rare-earths projects which the authors identify as potential beneficiaries of structural changes within the Chinese rare-earths supply chain.

• The report highlights a 50% increase in the price of so far this year. Spot prices are currently at 3 year highs as the availability of spot material in China is squeezed as a result of Government intervention to curb illegal production of rare-earth materials.

• Government inspections of over 400 companies, “with an explicit focus on 180 companies involved in mining, processing and trading of rare-earth products” has focused on “inventory levels, actual output versus permitted, and entailed a thorough audit of past sales, tax payments and export prices charged to clients abroad.”

• Supply tightness in the spot market is being exacerbated by the Government inspired concentration of the industry into the hands of six major players which have been developing key long-term supply agreements with downstream industry off-takers and thereby further restricting material entering the spot market.

• In an interesting observation of the position of non-Chinese producers of rare-earths, Adamas Intelligence highlights that Chinese purchasers of overseas produced rare earths “can avoid paying a 17% value-added tax (VAT) imposed on China-derived supplies.”

• Adamas observe internal demand for neodymium/praseodymium in China growing at around 10% pa and have increased their short term price forecasts while maintaining their long term target prices post 2025. Although they do not detail their price forecasts in the summary, they describe the price outlook as “higher prices sooner”.

Conclusion: Structural changes in the Chinese rare earths supply chain in response to Government controls and a concentration amongst a limited number of large players is restricting supply and increasing prices. Mkango Resources is identified by the authors at Adamas Intelligence as a potential beneficiary.

*SP Angel acts as Nomad and Broker to Mkango Resources

 

Tri-Star Resources* (LON:TSTR) 0.16p, mkt cap £31.4m – Antimony prices continue to rise as environmental shutdowns in China cause stock levels to fall

• Prices for Antimony trioxide and metal continue to rise in China as shutdowns for environmental work have taken stock out of the market.

• The Metal Bulletin report that prices have risen 6% mom and 32% yoy for Standard Grade II antimony metal delivered duty paid in China

• Prices have also risen 5% mom and 16% yoy for Standard Grede II antimony metal in Rotterdam

• A number of Chinese antimony smelters are due to restart in September though some restarts may be delayed depending on environmental approvals.  Smelters may also be required to shutdown in certain winter months to save on coal fired power generation in efforts to reduce smog.

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Tue, 15 Aug 2017 10:47:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28394/today-s-market-view-asiamet-resources-avocet-mining-mkango-resources-ltd-tri-star-resources-28394.html
Today's Market View - Anglo Asian Mining Plc, Caledonia Mining Corporation, Savannah Resources Plc, Serabi Gold http://www.proactiveinvestors.co.uk/columns/sp-angel/28386/today-s-market-view-anglo-asian-mining-plc-caledonia-mining-corporation-savannah-resources-plc-serabi-gold-28386.html Anglo Asian Mining* (LON:AAZ) – Ugur maiden JORC resources/reserves

Caledonia Mining (LON:CMCL) – On track for 2017 production guidance

Savannah Resources (LON:SAV) – Pilot plant construction underway at Mutamba

Serabi Gold Price (LON:SRB) – interim results and production update

 

China Renminbi strengthening as North Korean tensions hit US dollar and Japanese Yen

• The more we look at the actions of North Korea the more we see the situation as benefitting the Chinese.

• North Korea’s threat to fire missiles to locations close to Guam could have been designed by China to test the USA’s resolve in the region.

• While China is publically trying to calm tensions we have to wonder who North Korea is working for here?  Question is, which nation has the bigger mad-man?

 

China steel production saw new record rising 10.3% yoy in July to 74mt

• Steel production rose 5.1% yoy yo 491.23mt for the first seven months of the year

• The crackdown on pollution and the expected winter closures may be causing steel producers to push production through the summer delaying closures for maintenance till the winter.

• The move has lifted iron ore prices at a time when demand normally slows. 

• Margins reported for Chinese steel producers are seen to have risen which may be causing the government to push producers to reinvest in new anti-pollution measures.

• The authorities are also allowing steel mills to expand if they comply with new tougher environmental standards.  It will be interesting to understand just how tough these standards really are?

 

Steel prices (rebar 25mm $649.6/t) gain while iron ore prices pause at $70.5/t

• The recent rise in Chinese rebar prices have prompted the authorities to raise transactions fees to dampen speculative demand causing steel futures prices to pull back.

• Margins for Chinese steel producers are rising as the Chinese state cuts less efficient and polluting production.

• The state is reported to be widening steel production restrictions in winter months to another four provinces

• This is thought to be causing buyers to bring forward steel and other metal purchases raising stock levels for when production slows through the winter

 

Safe haven assets pull back as US/North Korea tensions calm

• Gold fell $8/oz this morning after hitting a 9-week high late last week.

• US 10y Treasuries yields climbed 2bp to 2.21% from a six-week low reached last week.

• The US$ index is hovering around a more than 12m low as US inflation data released on Friday came in below market estimates.

• Equities are trading higher as risk-off sentiment abates with the Stoxx Europe 600 Index up 0.8%, marking the strongest increase in more than a week, and S&P 500 futures up 0.6%, the largest gain in more than a month.

• Iron ore and steel futures extended declines on Monday as the China Iron and Steel Association said late last week that the latest rally in bulk commodity prices is based on a misunderstanding of the impact of government policies rather than on market fundamentals.

• Chinese steel mills are reported to have produced the record monthly volume with crude steel production hitting 74mt in July, up 10%yoy; this brings total output for the first seven months of the year to 492mt, up 5.1%yoy, amid high margins mills are locking in on a rebound in steel prices with index of steel profitability in China at the highest level sicne 2008 this month.

 

Dow Jones Industrials  +0.07% at   21,858

Nikkei 225   -0.98% at   19,537

HK Hang Seng   +1.25% at   27,220

Shanghai Composite    +0.90% at    3,237

FTSE 350 Mining   +0.73% at   16,256

AIM Basic Resources   +0.47% at    2,483

 

Economic News

Currencies

US$1.1822/eur vs 1.1758/eur last week.   Yen 109.53/$ vs 108.99/$.   SAr 13.368/$ vs 13.481/$.   $1.301/gbp vs $1.297/gbp.  

0.789/aud vs 0.786/aud.   CNY 6.661/$ vs 6.667/$.

 

Commodity News

Precious metals:

Gold US$1,286/oz vs US$1,289/oz last week

   Gold ETFs 66.3moz vs US$66.3moz last week

Platinum US$978/oz vs US$984/oz last week

Palladium US$896/oz vs US$901/oz last week

Silver US$17.14/oz vs US$17.16/oz last week

           

Base metals:   

Copper US$ 6,405/t vs US$6,363/t last week

Copper – Glencore suspends operations at Mopani Copper Mines due to local power restrictions

• Glencore suspends operations at its Mopani copper mine as Copperbelt Energy Corporation ‘CEC’ has restricted power supplies into the Kitwe and Mufulira regions.

• The company managed to raise all underground miners to surface.

• Mopani and other miners have been contesting new power tariffs of around 9.3US c/kWh in court.  Vs around 6USc/kWh which had been previously negotiated.

• Zambia continues to suffer from lower hydropower availability due to low water levels in the Kariba dam.

Aluminium US$ 2,029/t vs US$2,030/t last week

Nickel US$ 10,610/t vs US$10,680/t last week

BHP talking to gold miners in Kambalda region in effort to keep nickel concentrator going

• News reports today suggest that BHP Nickel West is in talks to see if gold can be concentrated at the plant to avert closure of the Nickel West plant at Kambalda.

• The plant is challenged by a lack of feed due to the closure of mines by Mincor and Panoramic leaving only Western Areas, Independence Group and BHP ores to feed the concentrator plant.

• Worse still Independence is to close its Long nickel mine at Kambalda next year exacerbating the shortage of feed stock.

• BHP’s Nickel West plant has been running for 50 years and may extend its life through mining some of its own opportunities

Zinc US$ 2,916/t vs US$2,918/t last week

Lead US$ 2,344/t vs US$2,348/t last week

Tin US$ 20,325/t vs US$20,250/t last week

           

Energy:           

Oil US$52.1/bbl vs US$51.4/bbl last week

Natural Gas US$3.001/mmbtu vs US$2.982/mmbtu last week

Uranium US$20.80/lb vs US$20.80/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$70.5/t vs US$71.9/t

Chinese steel rebar 25mm US$649.6/t vs US$648.1/t

Thermal coal (1st year forward cif ARA) US$77.0/t vs US$75.8/t

Premium hard coking coal Aus fob US$198.0/t vs US$198.0/t

 

Other:

Tungsten APT European US$248-256/mtu vs US$230-235/mtu

 

Ilmenite prices bounce back to $170/t (Metal Bulletin prices)

• Prices for basic Ilmenite have recovered to around $170/t following a very brief dip to around $155/t at end July.

• Prices remain very much better than they were in December at around $110/t.

 

Company News

Anglo Asian Mining* (LON:AAZ) 25p, Mkt Cap £28.4m – Ugur maiden JORC resources/reserves

• The Company together with geological consulting group Datamine International released maiden JORC-compliant mineral resources and reserves statement for the latest Ugur discovery located only three kilometres NW of Gedabek processing facilities.

• The deposit is estimated to host 3.6mt at 1.3g/t Au and 7.0g/t for 147koz and 808 koz in contained gold and silver in total reserves.

• Mineral reserves contain c.74% of the total mineral resource which stands at 7.0mt at 0.9g/t Au and 4.7g/t Ag for 199koz and 1,049koz in contained gold and silver, respectively.

Ugur Reserves/Resources mt Au g/t Ag g/t Au, koz Ag, koz

PP Reserves 3.59 1.3 7.0 147 808

MI Resources 4.46 1.2 6.2 172 884

Inferred Resources 2.50 0.3 2.1 27 165

Total Resources 6.96 0.9 4.7 199 1049

Source: Company    

• Study assumptions include:

o Gold price of $41.19/g ($1,280/oz).

o Gold and silver processing recoveries of 90%/66% for agitation leaching (AL), 70%/7% for crushed heap leaching (HL) and 40%/7% for uncrushed heap leaching (ROM).

o Processing routes of the Ugur mineralisation are reported to be well understood with oxide ores said to be “relatively soft” and requiring “comparatively low levels of processing reagents for recovery”.

o Metallurgical testwork was completed on a number of samples with highest recoveries of 95% demonstrated by 1.5g/t gold grades, while other samples ranging from 1.0g/t to 3.6g/t yielded 84-89% recoveries.

o Accepted gold headgrades for AL, HL and ROM are 1.8g/t, 0.8g/t and 0.5g/t, respectively.

o “Further to the gold cut-off grade calculations (reserves), after long term scheduling the mill cut-off grade resulted in 0.3g/t gold”.

o Operation is estimated to involve a limited amount of waste stripping with the total strip ratio of 0.83x.

• On development progress, the team has completed the construction of the 4.6km road link between Ugur and Gedabek.

• Waste stripping commenced in late July with mining and haulage of Ugur ores is due to start before end of August.

• First Ugur ore is scheduled for processing in September, ahead of the previously envisaged Q4/17.

Conclusion: Ugur is set to help the Company to fill Gedabek processing facilities with soft oxide material as the team continues works on resources models at Gedabek and Gadir. The statement shows Ugur hosts 1.6mt at 1.94g/t for 100koz of contained gold suitable for agitation leaching in Proved Reserves, enough to keep the Gedabek AL 700-800ktpa plant running for a couple of years at least.

*SP Angel act as Nomad and Broker to Anglo Asian Mining

 

Caledonia Mining (LON:CMCL) 510p, mkt cap £54m - On track for 2017 production guidance

• Caledonia Mining reports that it's Blanket mine in Zimbabwe achieved 12,521 oz of gold production during the quarter ending 30th June 2017 bringing H1 gold output to 25,315oz and keeping the company on course to meet its latest production guidance of 52-57,000 oz for 2017.

• In the longer term, the mine also remains on course with its deeper mine development project with the Central Shaft project currently at a depth of 870m and on course to help deliver 80,000oz pa of gold production in 2021 and ensure the long term viability of the Blanket mine. The Central Shaft project is still on course to start production during Q4 2018.

• Although cash production costs increased by 3%  to $677/0z (H1 2016 US$658/oz) , costs on an "all-in-sustaining" basis declined by almost 9% to US$856/oz (H1 2016 US$937/oz).

• Despite a "marginally weaker average" gold price of US$1235/oz during the quarter, "Operating cash flow in the Quarter of $4.7 million contributed to a strong balance sheet and supports the funding of the Central Shaft project.

• The company maintained a broadly stable level of gross cash (US$10,9m) at the end of the quarter even after funding a further US$4.2m of capital expenditure and US$0.7m of dividend payments to shareholders.

• The quarter was not without its challenges with lower mined grades and "logistical difficulties in the underground material handling" which we consider reflect the competing priorities on the existing shaft infrastructure of the requirements of production and the new mine development work to access ore below the 750 level. Sadly the mine also experienced two fatalaties in recent months.

• Commenting on the operational issues, CEO, Steve Curtis commented "Management have implemented several remedial measures in the Quarter to improve our underground material handling capacity and to address the logistical constraints, The benefit of these actons was evident in July when we saw improvements in ore tonnages, grade and gold recoveries. I expect that further benefits will be realised in the second half of 2017."

• Conclusion: Development at the Blanket Mine remains on course to deliver both the long term goal of 80,000ozpa of gold production by 2021 as well as meeting the 52-57,000 oz guidance for 2017 A number of operational challenges have been addressed during the first half of 2017 and he company in indicating that improvements may carry through into H2.

 

Savannah Resources (LON:SAV) 5.1p, mkt cap £29m - Pilot plant construction underway at Mutamba

• Savannah Resources reports that construction of a 2-tph capacity pilot plant is underway at its Mutamba mineral sands project in Mozambique.

• The construction, which is expected to be completed by the end of 2017, is aimed to provide mineral concentrate samples for bulk metallurgical testing, will utilise a plant, previously "constructed and tested under the direction of Rio Tinto in 2012 in South Africa before being disassembled and packed into containers and shipped to the Mutamba site."

• The reassembly of a pre-tested plant on site at Mutamba should, in our opinion, facilitate commissioning of the pilot plant where major works will include the civil engineering and the connection of power and water supplies.

• The concentrate bulk samples will be used for analysis, "and the preparation of final products for test marketing. The completion of the plant will be a key milestone for the Mutamba Consortium as we move towards a development decision."

• Savannah Resources operates the Mutamba project in collaboration with Rio Tinto and is earning a 51% interest in the project in a series of stages. Savannah earned  a 20% interest with the completion of a scoping study in May this year and will increase its interest to 35% through the completion of a pre-feasibility level study. Delivery of a full feasibility study earns Savannah the full 51% interest.

• Conclusion: The construction of the pilot plant at Mutamba will be part of the pre-feasibility and feasibility study work which provide milestones in the earn-in process which increases the company's ultimate stake to 51% of the project.

 

Serabi Gold Price (LON:SRB) 4.6p, mkt cap £32m - interim results and production update

• Serabi Gold reports an H1 loss of 15cents/share, reversing a 15 cents per share profit in H1 2016. Even so, the company expects an improvement in production which is already underway, to "recover lost revenue and cash flow with a relatively low increase in operating cost" during the second half of the year.

• Production during the first six months of 2017 amounted to 18,009 oz of gold (2016 - 19667oz) at an all in sustaining cost of US%1,072/oz representing a 13% increase on the US$945/0z achieved during H1 2016. Year to date cash costs of US$819/oz are approximately 7% above the US$763/0z of H1 2016.

• The company highlights that "Temporary operational issues in Q2 2017, which have now been fully resolved, restricted production, and in combination with a strengthening Brazilian Real, impacted financial results for the first half of the year."

• Commenting on the results, CEO, Mike Hodgson, reiterated that the operational issues encountered in April and May have now been fully resolved and that "June and July has seen production levels return to those levels that we achieved through much of 2016 and during the first quarter of 2017. Furthermore, the month of July was the highest monthly production for the year to date and I remain confident that we can recover shortfall over the remainder of the year and will be able to meet our full year production guidance of 40,000 ounces."

• The company also discloses that, it has taken out a new working capital loan facility totalling US$5m with the Sprott Resource Lending Partnership. The additional funds, which are available for a 30 month period are not reflected in the company's cash balance for 30th June of US$3.83m as they were not received until July. "This loan funding will allow the Company to expedite some of its capital investment programmes that it feels will improve operations and bring cost efficiencies in the medium term and thus reduce unit production costs."

• Conclusion: Serabi Gold expresses confidence that it has resolved the operational issues of April and May and that an improving trend in June and July will carry forward into the remainder of the year allowing it to meet its 40,000 ounce production guidance for 2017.

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Mon, 14 Aug 2017 10:54:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28386/today-s-market-view-anglo-asian-mining-plc-caledonia-mining-corporation-savannah-resources-plc-serabi-gold-28386.html
Today's Market View - Kodal Minerals Strategic Minerals Plc SolGold plc Xpediator Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28376/today-s-market-view-kodal-minerals-strategic-minerals-plc-solgold-plc-xpediator-plc-28376.html Xpediator Plc (LON:XPD) – IPO – Xpediator, which offers freight management solutions lists on AIM today

Kodal Minerals* (LON:KOD) – Core-drilling at Bougouni

Strategic Minerals* (LON:SML) – Q2 update includes report of record sales from Cobre in July

SolGold* (LON:SOLG) – Issue of equity to Newcrest

 

Metals prices to rise on North Korea tensions

• Metals prices should benefit from the brinkmanship being played out between North Korea, China and the US.

• We include China as we see North Korea as a form of proxy for the Chinese military and its strategy to control the South China seas and parts of the Pacific.

• Consumers are likely to stock up on base and speciality metals as shipping may be diverted by potential military activity in the Asian region causing metals prices to rise in anticipation.

• Industry and traders were already buying ahead of forecast smelter closures in China due to the anti-pollution crackdown and this gives further reason for industry to add to stock.

• Gold is rising on geopolitical tensions as is typical in these sorts of markets.

 

North Korea threatens Guam but Jeremy Corbyn still seen as higher risk to UK economy

• The potential and increasingly likely election of Jeremy Corbyn appears to present a greater risk to the UK economy than North Korea or Brexit according to recent discussions.

• North Korea might spark a war in the South China Seas and Brexit will no doubt impede UK exports to Europe but the socialist policies of Jeremy Corbyn and his shadow chancellor John McDonnel who is best known for lobbing a copy of Mao’s little red book across the Dispatch Box are still seen in financial circles as a greater financial threat to the UK than any other single issue.

 

Cuba – The US is investigating the high incidence of deafness in US diplomatic staff (FT)

• The US reckons a covert sonic device was used to target a group of US diplomatic officials in Cuba who worked in Cuba in late 2016

• The incident occurred at a time when the US was forging closer ties with Cuba

 

Dow Jones Industrials                -0.93%  at  21,844

Nikkei 225                                     -0.05%  at  19,730

HK Hang Seng                             -2.04%  at  26,884

Shanghai Composite                  -1.63%  at    3,209

FTSE 350 Mining                         -3.35%  at  16,035

AIM Basic Resources                 -0.05%  at    2,471

 

Economic News

 

Currencies

US$1.1758/eur vs 1.1716/eur yesterday.  Yen 108.99/$ vs 109.90/$.  SAr 13.481/$ vs 13.361/$.  $1.297/gbp vs   $1.298/gbp.     

0.786/aud vs 0.788/aud.  CNY 6.667/$ vs 6.660/$.

 

Commodity News

Precious metals:

Gold US$1,289/oz vs US$1,279/oz yesterday

   Gold ETFs 66.3moz vs US$66.2moz yesterday

Platinum US$984/oz vs US$976/oz yesterday

Palladium US$901/oz vs US$897/oz yesterday

Silver US$17.16/oz vs US$17.07/oz yesterday

 

Base metals:   

Copper US$ 6,363/t vs US$6,448/t yesterday

Aluminium US$ 2,030/t vs US$2,031/t yesterday

Nickel US$ 10,680/t vs US$10,815/t yesterday

Zinc US$ 2,918/t vs US$2,937/t yesterday

Lead US$ 2,348/t vs US$2,371/t yesterday

Tin US$ 20,250/t vs US$20,250/t yesterday

 

Energy:           

Oil US$51.4/bbl vs US$52.9/bbl yesterday

Natural Gas US$2.982/mmbtu vs US$2.891/mmbtu yesterday

Uranium US$20.80/lb vs US$20.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$71.9/t vs US$75.4/t

Chinese steel rebar 25mm US$648.1/t vs US$648.8/t

Thermal coal (1st year forward cif ARA) US$75.8/t vs US$76.0/t yesterday

Premium hard coking coal Aus fob US$198.0/t vs US$193.6/t

 

Other:

Tungsten APT European US$240-248/mtu vs US$230-235/mtu

 

Company News

Kodal Minerals* (LON:KOD) 0.28p, mkt cap £18m – Core-drilling at Bougouni

• Kodal Minerals has reported promising results from 5 diamond core drillholes recently completed within its Bougouni Lithium project in Mali.

• The drilling, comprising a total of 362.1m was undertaken at the Ngoualana prospect and each of the five holes intersected lithium mineralisation grading in excess of 1% Li2O.

• The Ngoualana prospect area has now demonstrated lithium mineralisation over a strike length of 650 metres and to depths in excess of 250m with the mineralised bodies remaining open both laterally and at depth.

• Among the results reported today are:

o 41.50m at an average grade of 1.71% L12O from a depth of 45.89m in hole KLDH001 which also contains a 1.25m wide intersection averaging 1.72% Li2O from 87,50m and

o 26.25m at an average grade of 1.51% Li2O from 30.46m in hole KLDH002 and

o 17.00m averaging 1.69% Li2O from a depth of 25.55m in hole KLDH003 and

o 26.25m at 1.22% from a depth of 14.20m in hole KLDH004 and

o 27.25m at an average grade of 1.61% Li2O from 28.65m in hole KLDH005.

• The Ngoualana prospect area contains a single main vein structure "that is continuous throughout the prospect and multiple parallel and subsidiary pegmatite veins."

• CEO, Bernard Aylward noted that the results from the core-drilling programme improved the company's confidence in the results of the earlier reverse-circulation drilling work and that "We anticipate being able to extend this prospect when we recommence drilling following the rainy season."

• Metallurgical testing of the drill core is continuing "to improve our understanding of the characteristics of the mineralisation".

Conclusion: Core drilling at Ngoualana is supporting the results of earlier reverse-circulation drilling while also providing material for metallurgical testing. The limits of the structure have yet to be defined and will no doubt be one of the priorities when drilling resumes after the wet season.

*SP Angel act as Nomad and broker to Kodal Minerals

 

Strategic Minerals* (LON:SML) 2p, Mkt Cap £24.3m – Q2 update includes report of record sales from Cobre in July

• Strategic Minerals has announced that its Cobre magnetite tailings operation in New Mexico achieved record monthly sales of 7206 tons ($486,560) during July.

• The record month comes after issues with delayed road transport at both the major customers led to a  reduction in quarterly sales which declined to 10,446 tonnes ($602,000) from the record quarterly sales of 14,264 tonnes ($1.32m) achieved during the quarter ending 31st March 2017.

• The company confirms that the earlier transport problems have been resolved, that margins are being maintained at “around 50% for the six months to June 2017”, and that “Cobre’s newest customer has a minimum monthly sales requirement, the customer [has] made a prepayment for sales not transported which helped to bolster cash balances but was not reflected in the June quarter sales. Currently, it is expected that the tonnage associated with this prepayment will be fully absorbed within the September quarter.”

• A further boost to the company’s cash position, $1.359m at 30th June, was provided by the receipt of the final, $175,000, payment under the rail settlement agreement at Cobre.

• Elsewhere, Strategic Minerals reports that drilling of the phase 1 programme at Redmoor is well underway and that, as previously announced an additional two holes have been added to the programme. The initial assay results from this work are expected to become available during the current quarter and “Full results from Phase 1 are expected to be released in the December quarter during which Phase 2 drilling may be undertaken.”

• The company has previously reported the completion of its acquisition of the balance of the Central Australian Rare Earths (CARE) project where the company “is currently making good progress with plans to undertake a substantial number of air core holes, drilling some 2,000 metres” at Hanns Camp. This programme is primarily aimed at identifying the cobalt mineralisation potential of the tenement, though it should also provide important progress in understanding its nickel laterite potential and “will provide insight into a second stage drilling programme to drill deeper in search of Nickel Sulphide.”

• A strategic review by the company’s board of its growth opportunities noted that it is likely to pursue “further acquisitions” and “adopted a target of achieving a £100m market capitalisation within this five-year timeframe.”

Conclusion: Strategic Minerals’ ability to generate cashflow from its Cobre operation enables the company to pursue exploration drilling at CARE and Redmoor without recourse to shareholders for funding. The company hints that it may be considering further acquisitions as part of a strategy to deliver a £100m market capitalisation within five years.

*SP Angel act as Nomad and broker to Strategic Minerals

 

SolGold* (LON:SOLG) 38p, Mkt Cap £576m – Issue of equity to Newcrest

• Solgold report they have issued a further 690,000 shares to Newcrest Mining Ltd.

• The shares are issued due to ‘top-up rights’ due to an anti-dilutionary right to hold Newcrest at 14.54% of Solgold.

• The shares are paid for and were priced at 38.16p based on the 10-day VWAP as set out in the subscription agreement.

• The allotment takes Newcrest’s stake to 220,462,271 shares which represents 14.54% of Solgold stock.

• Solgold now have a total of 1,516,245,686 shares.

• The company continue to drill the Cascabel project in Ecuador with a sixth drill rig to arrive on site in August and up to nine rigs due to be at the site in September.

• Management recently reported massive intersections of mineralisation with the last hole 23R-D1 now at a depth of 1351.6m at Alpala Central where it is investigating eastward extensions of the mineralisation encountered in its “parent” hole, 23R, which intersected 770m of mineralisation grading 0.71% copper and 1.16g/t gold from a depth of 540m.

• Hole 24-D1R, shows 286m at average grades of 0.27% copper and 0.25g/t gold from a depth of 636m down to 1044.8m with a further 320m+ to be drilled.

• Drilling continues at Alpala Northwest where hole 26 has now reached a depth of 1876m with Visible copper sulphide mineralisation encountered in the upper portion of the hole extending the prospect by a further 120m northeast of hole 15R2 which returned 830m @ 0.93% copper equivalent (0.63% Cu, 0.46 g/t Au).

*SP Angel acts as broker to SolGold.  The mining team at SP Angel have raised funds for SolGold on at least eight occasions over the past 10 years.

 

Xpediator Plc (LON:XPD) 25.25p, mkt cap £25.5m – IPO - Xpediator, which offers freight management solutions lists on AIM today

• Xpediator listed at 24p this morning

• Xpediator Plc provides freight management solutions in the UK and across Europe.

• The company is said to be poised to deliver strong organic growth across their three divisions, freight forwarding, logistics and transport services.

• Freight forwarding services, trading under the Delamode brand, and specialising in connecting CEE countries and the UK.

• Logistics and warehousing which comprises: distribution hubs in the UK and southern Europe providing over 39,000 sqm of shared user space; pallet distribution services, where the Group is the master franchisee of a fast growing pallet distribution network in Romania which trades under the Pall-Ex brand; and the recently acquired EMT business which is based in London and specialises in fashion logistics.

• Transport services, trading under the Affinity brand, providing bundled fuel and toll cards, financial and support services for hauliers in southern Europe.

• M&A: The team have identified a number of earnings enhancing acquisitions which they plan to make in the coming months funded in part by the funds raised on listing.

• Dividends: the group is expected to deliver dividends as well as capital growth

*SP Angel act as Nomad and joint broker to Xpediator

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Fri, 11 Aug 2017 10:44:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28376/today-s-market-view-kodal-minerals-strategic-minerals-plc-solgold-plc-xpediator-plc-28376.html
Today's Market View - Bluerock Diamonds Plc, Georgian Mining Corporation, BlueJay Mining PLC, KEFI Minerals plc, Rainbow Rare Earths Limited, Savannah Resources Plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28369/today-s-market-view-bluerock-diamonds-plc-georgian-mining-corporation-bluejay-mining-plc-kefi-minerals-plc-rainbow-rare-earths-limited-savannah-resources-plc-28369.html Altus Strategies (LON:ALS) – IPO – First day of dealing – First project generation company lists on AIM

BlueJay Mining* (LON:JAY) STRONG BUY - Target Price raised to 24p from 22p – Ilmenite depth exceeds drill capacity

BlueRock Diamonds* (LON:BRD) – £860,000 fund raising

Endeavour Mining (CVE:EDV) – Sale of Nzema mine – a possible yardstick for west African gold mine value

Georgian Mining* (LON:GEO) STRONG BUY – Strengthening the team

Kefi Minerals* (LON:KEFI) – Residual funding requirement reduced

Rainbow Rare Earths Ltd (LON:RBW) – Higher grades identified for first 2 years of production

Savannah Resources (LON:SAV) – Drilling report from Mina do Barroso

 

North Korea – promises Guam strike plan in days (BBC)

• The North Korean leadership has promised to fire four missiles near the US island of Guam in a move which may provoke the US into military action.

• Curiously, the could suit Chinese plans for military dominance in the South China seas and the North Pacific.

• This suggests to us that the Chinese military may be pulling more strings in Pyongyang than we had previously considered, hence their refusal to cut oil the supply to North Korea.

• So is Kim Jong-un acting for the Chinese military using North Korea to push the US and others out of the South China Seas and the Pacific?

• How has North Korea acquired so much military technology and the ability to build nuclear warheads and intercontinental ballistic missiles?

• The world has not faced this form of brinkmanship since the end of the Cold War.  But is it brinkmanship or simply the beginning of the end for North Korea?

 

Dow Jones Industrials                -0.17%  at         22,049

Nikkei 225                                     -0.05%  at         19,730

HK Hang Seng                             -1.13%  at         27,444

Shanghai Composite                  -0.42%  at         3,262

FTSE 350 Mining                        -1.15%  at         16,725

AIM Basic Resources                +1.11% at         2,473

 

Economic News

 

Currencies

US$1.1716/eur vs 1.1724/eur yesterday.  Yen 109.90/$ vs 109.72/$.  SAr 13.361/$ vs 13.466/$.  $1.298/gbp vs $1.300/gbp.     

0.788/aud vs 0.787/aud.  CNY 6.660/$ vs 6.679/$.

 

Commodity News

Precious metals:

Gold US$1,279/oz vs US$1,268/oz yesterday

   Gold ETFs 66.2moz vs US$66.2moz yesterday

Platinum US$976/oz vs US$976/oz yesterday

Palladium US$897/oz vs US$894/oz yesterday

Silver US$17.07/oz vs US$16.64/oz yesterday          

 

Base metals:   

Copper US$ 6,448/t vs US$6,496/t yesterday

Aluminium US$ 2,031/t vs US$2,033/t yesterday

Nickel US$ 10,815/t vs US$10,765/t yesterday

Zinc US$ 2,937/t vs US$2,962/t yesterday

Lead US$ 2,371/t vs US$2,403/t yesterday

Tin US$ 20,250/t vs US$20,320/t yesterday           

 

Energy:           

Oil US$52.9/bbl vs US$52.1/bbl yesterday

Natural Gas US$2.891/mmbtu vs US$2.825/mmbtu yesterday

Uranium US$20.65/lb vs US$20.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.4/t vs US$73.7/t

Chinese steel rebar 25mm US$648.8/t vs US$641.1/t

Thermal coal (1st year forward cif ARA) US$76.0/t vs US$74.7/t yesterday

Premium hard coking coal Aus fob US$193.6/t vs US$193.6/t

 

Other:

Tungsten APT European US$240-248/mtu vs US$230-235/mtu

 

Company News

Altus Strategies (LON:ALS) 10.75p, Mkt Cap £11.6m – First project generation company lists on AIM today

• Altus Strategies, an exploration stage company engaged in the discovery, acquisition and exploration of Africa-based mineral properties prospective in a broad range of commodities including precious and base metals, bauxite and iron ore, starts trading on AIM today.

• The ‘Project Generator’ model is better known in Canada and Australia where there are multiple companies working in this way and were project generation has led to the discovery and delineation of resources with significant value.

• Management:  are well known, well respected, well backed by a number of connected expert advisors.  See company website for further details.

• http://www.altus-strategies.com/corporate/who-we-are/

o The core Altus team go back a long way with Steven Poulton (CEO), Matthew Grainger (Executive Director) and David Netherway (Chairman) having been involved in a number of Africa-based projects building strong track records in discovering, developing and monetising grassroots mineral projects.

o JV “earn in” agreements carry shareholders through the exploration/discovery stage, one of the riskiest as well as most rewarding parts in the average mining project life cycle, while retaining upside from a potential discovery and minimising dilution to existing shareholders.

o Altus currently have two JV partnerships in place earning an interest in copper properties in Ethiopia where JOGMEC has just finished a third programme of drilling and bauxite licenses in central Cameroon where JV partner Canyon Resources is studying potential for a DSO operation supplying high grade and low impurity concentrate to local/overseas smelters; a number of drill ready targets over gold and base metals tenements in Cameroon and Morocco; an early stage gold prospect in Liberia; iron ore exposure in infrastructure poor but rich in high grade projects West Africa; and a team of 16 geologists/mining specialists, combined experience of which covers most of the continent (see front page map) who sort through available prospects and manage the projects pipeline.

o We view Altus as an opportunity to get involved in a portfolio of promising early stage projects with downside minimised by the project generator business model and backed by a team with a proven track record in the mining industry. A lack of new discoveries and heightened concerns over reserves replacement among mining companies should see a positive revision to exploration budgets and increased interest in JV type funding deals.

o Exploration budgets are at multi year lows following a near 70% drop in exploration spend from a 2012 peak of $33bn to c.$10bn in 2016, the weakest reading since the second half of the last decade. While Africa, the sole operating jurisdiction of Altus Strategies, remains significantly underexplored with the latest exploration spend data from MinEx Consulting showing that the continent accounted for only 14% of the global exploration budget in the last decade while yielding 22% of all discoveries and the highest number of top tier discoveries in the respective period.

• Business model:  generation of through the staking of claims in new potential mining areas; to joint venture assets as they develop at a relatively early stage; to use joint ventures to earn fees and pay for work programs.  Joint venture partners are junior, mid cap and larger mining companies.

• The theory:  is that the joint venture partners should pay for much of the cost of the new work programs while supporting a proportion of the cost borne by Altus staff in the field.

• For example:  SolGold (mkt cap ~£572m) shares its giant Cascabel project with Cornerstone which has a free carry on the project and is successful through SolGold’s expenditure, determined management efforts and financial support from Newcrest.  Cornerstone hold 15% of the project with an implied value of around £100m today.

• Peer:  Altus’ closest peer on AIM is Stratex which has had a tough time with investors but has reaped value from the sale of its Turkish mineral discoveries and developments which it now intends to ploughing into two gold projects in Brazil.

• Assets:  Altus do have a number of existing mineral assets within the portfolio giving the company significant potential for upside generation.

• Potential:  Altus’ geological team have the respect, connections and relationships with local geologists and their offices to quickly stake promising claims.  This should put Altus in poll position to grab good looking mineral licenses as they come available.

Conclusion:  Altus Strategies fills a gap in the process of project generation left by the exit of the Majors from grass-roots and sometimes brownfields exploration.  Altus offers a broad portfolio of existing exploration assets alongside the potential to acquire new assets for value creation.    We expect to see regular news flow on new project development and on interest from joint venture partners.

 

BlueJay Mining* (LON:JAY) 15.5p, Mkt Cap £119m – Ilmenite depth exceeds drill capacity

STRONG BUY

Target Price raised to 24p from 22p

(See pdf note attached for site visit photos)

• 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 depth expectations and definitely exceeds the 1m depth assumed in the SRK JORC resource based on auger drilling.

• It is too early to give an accurate estimate as to the eventual scale of the mineral sands at Pituffik eg at Moriusaq Bay and 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 of 23.6mt grading 8.8% ilmenite.

• 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 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 has already been shipped down to a warehouse at a deep water port in Greenland for further shipment.

• The team are 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 beaches leaving a mass of ilmenite sand on Bluejay’s 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.

• Sonic Drilling:  we believe the sonic drill rig will show high-grade ilmenite in a mass of heavy mineral sands largely free of any other mineralisation till the base rock.

• 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 13.4kg 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 Panamax 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 harbour to protect against passing icebergs and heavy weather.  The bay, active beaches and raised beaches appear to contain significant concentrations of potentially uniform ilmenite.

• Iterlak Delta:  The Iterlak Delta and raised beaches appears to host exceptionally high-grade ilmenite as seen in the very heavy and black nature of the mineral sands.  The delta is solid to walk across due it its concentration of heavy mineral sands.  People tend to sink into normal sand in such wet environments but the density of the heavy minerals in the sand at Iterlak makes it quite unlike any beach we have ever walked across.

• The ‘freeboard’ or wall of mineral sand demarking the raised beach from the lower delta area at Iterlak gives a view as to the probable depth of ilmenite in the raised beach, though we do not yet know the depth of ilmenite in the more active delta environment.

• 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/t.

• 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.

• Valuation: we are upgrading our target price today to 24p/s from 22p/s based on adjustments to our cash flow analysis following our site visit.

• Conclusion: Pituffik is one of the most economically promising mineral projects we have ever had the privilege to visit.

*SP Angel act as nomad and broker to BlueJay Mining

 

BlueRock Diamonds* (LON:BRD) 1.75p, Mkt Cap £1.2m – £860,000 fund raising

• BlueRock Diamonds reports that it has raised £860,000 via the issue of 68.8m new shares at a price of 1.25p/share. The additional shares represent approximately 50% of the enlarged capital.

• The funds are to be used “to further develop mining operations at Kareevlei mine.”

• Expanding on the company’s plans for the funds raised, CEO, Adam Waugh, said “These funds will enable us to complete some minor modifications to our plant designed to increase production volumes further and provide the working capital to put us in a position to achieve our short term goal of 25,000 tonnes production per month.  We will soon be mining the sub 20 metre level of Kimberlite where we expect to see an uplift in our grade of diamonds recovered and a move to profitable mining. This will put us in a good position to optimise our known resource at Kareevlei and explore new opportunities. We look forward to providing further updates in due course."

• The company has also confirmed that a six-month loan facility provided by Messrs. Tim Leslie and Mark Poole and by Segar Properties (Hyde Park) – a company wholly owned by Mr Paul Beck,  for up to £150,000 originally due to mature on 15th September 2017 has been extended until 31st December 2017.

• Mr Leslie and Segar have each also provided an additional $£20,000 loan at a 10%pa coupon rate.

Conclusion: The additional funding comes at a time when mining is moving into deeper levels of the open-pit mine where grades are expected to improve.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

Endeavour Mining (CVE:EDV) C$22.78, Mkt Cap C$2,198m – Sale of Nzema mine – a possible yardstick for west African gold mine value

• Endeavour Mining reports that it has sold its 90% interest in the short-life, non-core Nzema gold mine situated near Takoradi  in Ghana to BCM International, described as “one of Africa’s largest mining and civil contractors” for US$65m. The transaction comprises an initial payment of US$20m with the balance as a series of deferred payments over the remaining mine life until 2019.

• The Nzema operation, which produced 87,710oz of gold in 2016 at an all-in sustaining cost of $1167/oz contains a proven/probable reserve of 291,000 oz of gold within a measured/indicated resource of 1.43moz and a further inferred resource of 243koz.

• Based on published 2017 production guidance of 100-110,000 oz of gold, we estimate that Endeavour Mining is selling Nzema at a valuation of $248/oz of attributable ore reserves, $50/oz of measured and indicated resources and $823/oz of 2016 production ($657-722/oz of projected 2017 production). These figures give a current, albeit limited, snapshot of current gold mine valuation in west Africa.

 

Georgian Mining* (LON:GEO) 17.25p, Mkt Cap £19.8m – Strengthening the team

(Georgian’s assets in Georgia are held in a 50:50 joint venture)

STRONG BUY

• Georgian Mining reports that it has appointed an experienced process engineer and metallurgist, Mr Mikhail Leskov, as an advisor “to assist the Company in the development and commencement of gold and copper production at the Kvemo Bolnisi East Project”.

• Mr Leskov, who has over 35 years relevant experience, including as the founder and Chairman of NBL Gold, described as “one of the first and largest engineering consulting groups in post-Soviet Russia”, “will work closely with the Company’s JV partner, the owner of two adjacent producing gold and copper mines and processing facilities at Madneuli and Sakdrisi.”

• Mr Leskov, who graduated as a mineral processing engineer from the Moscow Institute of Steel and Alloys has previously run scoping studies and metallurgical programmes across a wide range of commodities as well as projects to re-engineer and optimise efficiencies to maximise production.

• He has also served as a “member of the Board of the Union of Gold Producers of Russia, a non-commercial organisation, founded in 1995 to assist in the development of the gold mining and precious metals industry in Russia.”

Conclusion: The appointment of an experienced technical engineer with long-standing and wide ranging experience in the post-Soviet era mining industry as an advisor should smooth the path to production from Kvemo Bolnisi and the company’s wider ambitions in Georgia.

*SP Angel acts as Nomad and Broker to Georgian Mining.

 

Kefi Minerals* (LON:KEFI) 5.5p, Mkt Cap £18.3m – Residual funding requirement reduced

• Kefi Minerals reports that, following the previously announced funding agreement with Oryx Management which left the residual funding requirement at US$32m it has now further reduced the remaining requirement to US$ 24m “based on refinements to planned capital expenditure and contingency provisions.”

• The company has identified potential sources for this last part of the funding matrix “from a separate finance facility against ore stockpiles which are estimated to include US$15 million of contained gold at start-up of production”.

• Kefi “intends to optimise the finance mix in consultation with the Project syndicate, in particular the Government of Etiopia and principal financier Oryx” however it provides the reassurance that “It remains Kefi’s preference to retain majority ownership and control of the Project.”

Conclusion: Kefi Minerals has sharpened its pencil on the capital estimates and contingency allowances for the Tulu Kapi project and found an $8m saving.

*SP Angel act as Nomad and broker to Kefi Minerals

 

Rainbow Rare Earths Ltd (LON:RBW) – 11.25p, mkt cap £17.4m – Higher grades identified for first 2 years of production

• Rainbow Rare Earths has announced that as a result of independent laboratory testing of material from the Gasagwe area of its Gakara rare-earths project in Burundi, it has identified grades as high as 62% total rare earths oxide (TREO) which “is expected to provide ore for the first two years of production, which is targeted to commence in Q4 2017.”

• The samples come from grade control samples over the upper 2 metres of a vein which is exposed over 80m along strike and which is expected to be mined first in the development.

• The grades are higher than the already exceptionally high 57% TREO grade “as disclosed in the Competent Person’s Report compiled by MSA contained in Rainbow’s IPO Prospectus published in January 2017.”

• The company also highlights that “Rainbow’s basket price has increased by 33% during 2017 following strengthening REE prices”.

Conclusion: Rainbow Rare Earths has located a higher grade area for initial production of what is already reported to be “one of the highest grade rare earth element mining projects globally.”

 

Savannah Resources (LON:SAV) 5.25p, Mkt Cap £29.4m – Drilling report from Mina do Barroso

• Savannah Resources reports that it has now completed 16 reverse-circulation drill holes at its 75% owned Mina do Barroso lithium exploration project in Portugal. At this stage assay results have yet to be received from the laboratory.

• The company has completed 7 holes (605m) at the Reservatorio area and a further 7 holes (565m) at Grandao, both of which remain open both down dip and along strike. The whereabouts of the remaining two holes is not clear, however the wider exploration area of over 1000 sq km no doubt provides ample opportunities.

• At Reservatorio, the drilling has intersected between 15-39m widths of pegmatite over a strike length of 400m and “on one section at least to 80m down dip”. Pegmatite was intersected in each of the 7 holes drilled and in all but one the drilling encountered multiple pegmatite horizons.

• Drilling at Grandao encountered multiple pegmatite horizons in each of the holes along 200m of strike and “has indicated that the body is close to flat or shallowly dipping to the south west. … The pegmatite body remains open in all directions …”.

• The drilling is continuing.

Conclusion: Initial drilling at Mina do Barroso has confirmed the presence of multiple pegmatite bodies though the extent and tenor of lithium mineralisation will need to be confirmed by the assays. The relatively shallow and  flat lying structures at Grandao may, subject to grade, offer potential for relatively straightforward mining at some point in the future.

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Thu, 10 Aug 2017 14:27:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28369/today-s-market-view-bluerock-diamonds-plc-georgian-mining-corporation-bluejay-mining-plc-kefi-minerals-plc-rainbow-rare-earths-limited-savannah-resources-plc-28369.html
Today's Market View - Bushveld Minerals Limited, BlueJay Mining PLC, Jubilee Platinum PLC http://www.proactiveinvestors.co.uk/columns/sp-angel/28359/today-s-market-view-bushveld-minerals-limited-bluejay-mining-plc-jubilee-platinum-plc-28359.html 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

 

Economic News

China – Earthquake in Sichuan measures 7 in Richter scale killing around 30 people

 

Currencies

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/$.

 

Commodity News

Precious metals:

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

           

Base metals:   

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

           

Energy:           

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

           

Bulk:   

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

 

Other:

Tungsten APT European US$240-248/mtu vs US$230-235/mtu

 

Company News

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.

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Wed, 09 Aug 2017 10:34:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28359/today-s-market-view-bushveld-minerals-limited-bluejay-mining-plc-jubilee-platinum-plc-28359.html
Today's Market View - Amur Minerals Corporation, Firestone Diamonds, Ironridge Resources Limited, Stratex International plc http://www.proactiveinvestors.co.uk/columns/sp-angel/28350/today-s-market-view-amur-minerals-corporation-firestone-diamonds-ironridge-resources-limited-stratex-international-plc-28350.html Amur Minerals* (LON:AMC) – Independent analysis confirms company assay data

Firestone Diamonds (LON:FDI) – Revision to 2018 production guidance

IronRidge Resources* (LON:IRR) – Strengthening the exploration team

Stratex International (LON:STI) – Crusader merger presentation

 

Steel prices continue to rise in China as traders continue to buy stock ahead of expected winter environmental shutdowns

• Iron ore prices lost some of yesterday’s gains on the realisation of a build-up in iron ore port stocks

• Iron ore demand is likely to be hit through the winter months though we expect good quality Australian iron ore to continue to gain market share as preferred feedstock

 

China to impose environmental tax.  Tax will raise mineral processing costs and will cut production of many industrial commodities

• China’s new ‘Environmental Protection Tax Law" is due to come in on 1 January next year with Beijing committed to enforcement as top priority for the country.

• The anti-pollution crackdown is now being rolled out to other regions multiplying its impact on production and capacity.

• Industry is being offered the option of shutting polluting capacity through the worse winter months around urban areas to help stem the worst pollution though this may effectively render much capacity uneconomic as winter approaches.

• Many industrial furnaces, most of which are open to the atmosphere will have to be shut and the worst of these may never reopen despite price rises in a number of industrial commodities.

• This will cause some upset in the market for mineral concentrates into China as convertors run down stocks or simply go bust when the lack of several months of cash flow hits home.

• Producers must now declare details on their emissions and waste outflows as well as on tailings disposal and storage.

• The move marks a structural change in China policy and tolerance towards polluting industries and is likely to result in marked price rises for many base and specialist metals.

 

Dow Jones Industrials                +0.12%  at  22,118

Nikkei 225                                      -0.30%  at  19,996

HK Hang Seng                             +0.59%  at  27,855

Shanghai Composite                  +0.07%  at    3,282

FTSE 350 Mining                          -0.59%  at  16,960

AIM Basic Resources                  -0.56%  at    2,448

 

Economic News

China – trade surplus widens to US$46.7bn for fifth consecutive month to end July

 

China FOREX outflows stabilise at $3.1bn as Renminbi strengthens against the US dollar

• China may move to relax capital outflows as its currency gains against the US dollar.

• Enforcement tighter regulations on overseas acquisitions and investment has stemmed much of the capital outflow which had concerned Bejing

• Now that outflows have stabilised the authorities may start to relax what have been seen as relatively aggressive capital controls.

 

Currencies

US$1.1811/eur vs 1.1807/eur yesterday.  Yen 110.55/$ vs 110.76/$.  SAr 13.216/$ vs 13.393/$.  $1.304/gbp vs $1.305/gbp. 

0.793/aud vs 0.792/aud.  CNY 6.704/$ vs 6.718/$.

 

Commodity News

Precious metals:

Gold US$1,261/oz vs US$1,258/oz yesterday

   Gold ETFs 66.2moz vs US$66.2moz yesterday

Platinum US$971/oz vs US$961/oz yesterday

Palladium US$888/oz vs US$877/oz yesterday

Silver US$16.28/oz vs US$16.24/oz yesterday

           

Base metals:   

Copper US$ 6,389/t vs US$6,367/t yesterday

• China copper imports climb >8% in July as credit restrictions ease. China copper concentrate imports held steady at 1.4mt but were up 2.2% yoy.

Aluminium US$ 1,989/t vs US$1,924/t yesterday

Nickel US$ 10,320/t vs US$10,375/t yesterday

Zinc US$ 2,879/t vs US$2,825/t yesterday

Lead US$ 2,369/t vs US$2,365/t yesterday

Tin US$ 20,480/t vs US$20,640/t yesterday

           

Energy:           

Oil US$52.6/bbl vs US$52.1/bbl yesterday

Natural Gas US$2.826/mmbtu vs US$2.803/mmbtu yesterday

Uranium US$20.50/lb vs US$20.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.9/t vs US$75.4/t

Chinese steel rebar 25mm US$636.5/t vs US$614.5/t

Thermal coal (1st year forward cif ARA) US$75.2/t vs US$75.0/t yesterday

Premium hard coking coal Aus fob US$193.6/t vs US$191.3/t

 

Other:

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

 

Company News

Amur Minerals* (LON:AMC) 7.22p, Mkt Cap £44.2m – Independent analysis confirms company assay data

• Amur Minerals reports that independent analysis, by Alex Stewart Laboratories (ASL), of 561 core samples derived from 12 holes drilled at  the Kubuk and Ikenskoe prospects in eastern Russia has confirmed the company’s results derived using the Niton X-Ray Fluorescence analyser which were released in June.

• Results showed the average analysis of the ASL results was 0.82% nickel and 0.26% copper while the company derived results averaged 0.84% nickel and 0.27% copper.

• Amur Minerals points out that the turnaround time for the independent sampling is approximately six to eight weeks longer than for the internally generated analysis, although it will be using the independent assaying for future Mineral Resource Estimates.

• Further results from “the second sample batch (557 core samples with 217 additional trench, QAQC and reconnaissance samples) … are now under management review. The third batch (403 core samples with 320 additional trench, QAQC and reconnaissance samples) is presently in analysis at ASL with the fourth (355 core samples and additional QAQC and trench samples) in transit.”

Conclusion: The independent validation of the company’s analytical results should assist in exploration planning through the more rapid turnaround of results as well as helping to maintain the flow of information to the market. In the light of the close correlation between the two sets of data, the use of the independent assays for future resource estimation purposes in preference to the internally generated assay data is unlikely to materially affect the estimates themselves but should add a higher level of credibility to the resulting estimates.

*SP Angel act as Nomad and Broker to Amur Minerals

 

Firestone Diamonds (LON:FDI) 29.5 pence, Mkt Cap £94m – Revision to 2018 production guidance

• Firestone Diamonds has announced that, as a result of a review aimed at optimising the long term mining plan at its 75% owned Liqhobong diamond mine in Lesotho, it is reducing its production guidance for the year to June 2018 to 800-850,000 carats from the 1 million carats indicated previously.

• The revision represents a change in the timing of extraction of diamonds and Firestone expects that “the overall life of mine carats is not anticipated to change.”

• As part of the optimisation plan, Firestone “plans to mine additional waste rock in the coming year, in order to improve the long term mining operations.” This should allow access to “lower areas of the pit that have historically yielded higher grade and higher value diamonds.”

• The company intends to release further details of the optimised mine plan in conjunction with its Q4 results.

• Liqhobong announced the formal start of commercial production last month and we interpret the current re-optimisation as both part of a sensible process of continuing review of the mining plan and also, perhaps, a response and adjustment to the real-world data of full scale commercial production.

Conclusion: The reduction in short term diamond output in order to deliver an improved long term plan has, presumably, enhanced the overall project value of the Liqhobong operation and we look forward to the details of the new plan in due course.

 

IronRidge Resources* (LON:IRR) 33.25p, Mkt Cap £87.3m – Strengthening the exploration team

• IronRidge Resources reports that it has appointed an experienced exploration manager, Joe Clarry, to strengthen its growing exploration efforts in Africa.

• Mr Clarry “has over 20 years’ experience in managing greenfields, brownfields and near mine exploration in gold, lithium, iron ore and base metals” with both major and junior companies in West Africa and Australia and was recently “involved in the rapid delineation of a spodumene dominant lithium pegmatite in Mali, West Africa.”

• His immediate priority will be to advance IronRidge’s “Cape Coast Lithium Project in Ghana as it moves towards initial drill planning.”

• Commenting on the appointment, Chief Geologist, Len Kolff, said “Joe brings with him a wealth of African expertise, including extensive lithium pegmatite and gold exploration experience. He will be a valuable addition to the team as we advance our project pipeline.”

Conclusion: IronRidge is expanding its exploration portfolio and Mr Clarry’s geographical and commodity experience should complement the existing IronRidge team.

*SP Angel act as Nomad and Broker to IronRidge Resources

 

Stratex International (LON:STI) 1.175p, Mkt cap £5.5m – Crusader merger presentation

• Stratex International have issued an updated presentation in an attempt to justify their expenditure on their effective takeover by Crusader.

• The presentation highlights an effective four man management team led by Marcus Engelbrecht and Perry Ashwood of Stratex and the two senior executives from Crusader Paul Stephen formerly of Pattersons Securities in Australia and Robert Smakman who is said to be a well regarded geologist.  Both Crusader executives had their severance terms uncommonly boosted as part of the deal terms, though you can’t say they did a bad deal for Crusader.

• Sadly Robert Smakman is not on the board meaning that the Stratex board is run by people with banking expertise more than real world mining experience.

• Engelbrecht is at pains to explain to the market the benefits of the Crusader transaction.

• The great news is that existing Stratex shareholders are only getting 19% of the enlarged company vs Crusader shareholders’ 81% stake – a great deal for Crusader.

• We also note Marcus Engelbrecht’s recently approved 12m of options expiring in August 2020 and further 11m of options expiring in August 2027 which equates to 5% of the current issued share capital.  There are conditions which appear align these options to the creation of shareholder value and we are not at all against management incentives.

• The Stratex presentation goes on to highlight the former undervaluation of Crusader against it’s peers in EV/Resource ounce terms which is unusual for a stock run by a ex Pattersons’ stockbroker though the high price being paid in shares and cash commitments by Stratex shareholders goes some way to closing that gap.

• Borborema: the presentation goes on to highlight a clear path to production for the Borborema gold resource which is around 100km inland in the North East of Brazil.  The plan is to build a large open pit and plant to process 2mtpa of ore grading 1.61g/t for 75,000oz pa of gold.  The project needs optimisation, some $100-120m of funding and a mining license to create more clarity on the path to production.

• Juruena: arguably the better asset in the Crusader portfolio, Juruena carries unusually high grade but is very much smaller in its current form.  Juruena grades 14.7g/t for 205,000oz in indicated and inferred.  This reduces to 6.3g/t when a further 55,000oz grading 2g/t are included.  There is good potential for Juruena to become a larger and more promising project but it will need more drilling and geological investigation to work this out.  Crusader spent US$25m on 44,458m of drilling giving a discovery cost of US$96/oz which looks like expensive exploration particularly considering the drilling cost at US$562/m.

Conclusion:  We encourage Stratex shareholders to review the latest company presentation.  The expanded executive management team has much to prove to justify the elevated cost of the Crusader acquisition.  We are looking forward to further progress and optimisation at Borborema and to more high grade gold at Juruena but we have to hope the company does not take any wrong turns in Rio along the way.

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Tue, 08 Aug 2017 10:58:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28350/today-s-market-view-amur-minerals-corporation-firestone-diamonds-ironridge-resources-limited-stratex-international-plc-28350.html
Today's Market View - Ironridge Resources Limited, KEFI Minerals plc, Lonmin, Premier African Minerals Ltd http://www.proactiveinvestors.co.uk/columns/sp-angel/28340/today-s-market-view-ironridge-resources-limited-kefi-minerals-plc-lonmin-premier-african-minerals-ltd-28340.html IronRidge Resources* (LON:IRR) – Geochemical soil anomalies at Bodite prospect, Ivory Coast

Kefi Minerals* (LON:KEFI) – Ethiopia’s State of Emergency lifted

Lonmin PLC (LON:LMI) 93 pence, Mkt Cap £262.7m – Maintained 2017 sales guidance

 

Iron ore, steel and coking coal prices rise dramatically in China overnight as steel mills and buyers bring forward purchases ahead of production cuts

• Production capacity cuts and recent Chinese policy statements have combined to lift prices for steel and related bulk commodities

• Coking coal prices have risen by a further $7.4-10.4/t in China

• Steel rebar futures prices were limit up overnight at >6% up as China asked steel producers to cut production in four provinces in the north through the peak winter heating months.  This expands existing restrictions already seen in Beijing and Tianjin.

• Iron ore prices added >5% with related futures prices >7% higher

• China continues to close polluting and illegal steel mills restricting capacity and cutting exports lifting steel prices globally and enabling European steel producers to raise imports of iron ore and coking coal.

• Chinese Q2 numbers are better than expected with further positive figures expected this week.

• We are due China trade data tomorrow, inflation data on Wednesday and bank lending numbers later in the week.  China industrial output, retail sales and investment numbers are due next Monday.

• The figures indicate potential for a strong Q3 following from a solid and better than expected first half

• This could continue to support higher prices for copper and other base metals which have posted solid gains over the last two weeks

 

Dow Jones Industrials                +0.30% at  22,093

Nikkei 225                                     +0.52% at  20,056

HK Hang Seng                             +0.47% at  27,693

Shanghai Composite                  +0.53% at    3,279

FTSE 350 Mining                        +1.65% at   16,929

AIM Basic Resources                 -0.48%  at    2,461

 

Economic News

US – non-farm payrolls rise by 209,000 in July adding to 231,000 new jobs created in June revised higher from 222,000.  The July gain was better than expected

• 6,000 jobs were added in US construction in July with 900 added in the retail sector

• US auto sales fell 6.1% in July yoy to a seasonally adjusted rate of 16.73m vehicles

 

Germany – Industrial output sees unexpected falls 1.1% in June despite 1.8% rise in Q2

• The fall is due to lower construction and output of intermediate, consumer and capital goods

 

China – foreign reserves increase by US$23.9bn to US$3.081tr

 

Currencies

US$1.1807/eur vs 1.1882/eur yesterday.  Yen 110.76/$ vs 110.09/$.  SAr 13.393/$ vs 13.368/$.  $1.305/gbp vs  $1.316/gbp.  0.792/aud vs 0.798/aud.  CNY 6.718/$ vs 6.718/$

 

Commodity News

Precious metals:

Gold US$1,258/oz vs US$1,269/oz yesterday

   Gold ETFs 66.2moz vs US$66.4moz yesterday

Platinum US$961/oz vs US$966/oz yesterday

Palladium US$877/oz vs US$886/oz yesterday

Silver US$16.24/oz vs US$16.71/oz yesterday

           

Base metals:   

Copper US$ 6,367/t vs US$6,367/t yesterday

Aluminium US$ 1,924/t vs US$1,908/t yesterday

Nickel US$ 10,375/t vs  US$10,400/t yesterday

Zinc US$ 2,825/t vs US$2,827/t yesterday

Lead US$ 2,365/t vs US$2,373/t yesterday

Tin US$ 20,640/t vs US$20,730/t yesterday

           

Energy:           

Oil US$52.1/bbl vs US$52.0/bbl yesterday

Natural Gas US$2.803/mmbtu vs US$2.786/mmbtu yesterday

Uranium US$20.40/lb vs US$20.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.4/t vs US$71.5/t

Chinese steel rebar 25mm US$614.5/t vs US$614.5/t

Thermal coal (1st year forward cif ARA) US$75.0/t vs US$75.1/t yesterday

Premium hard coking coal Aus fob US$191.3/t vs US$182.3/t

 

Other:

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

 

Company News

IronRidge Resources* (LON:IRR) 33.75p, Mkt Cap £88.6m – Geochemical soil anomalies at Bodite prospect, Ivory Coast

• IronRidge Resources has reported results from its infill soil sampling programme at its Bodite prospect area in the Ivory Coast. A total of 1510 samples were collected from a 200m spaced grid within the original 400m grid.

• The survey has identified a 3km long Central gold anomaly extending over some 3km of strike length with a suite of seven gold-in-soil anomalies at grades in excess of 50ppb (parts per billion).

• The anomalies are reported to occur “within favourable structural settings” and are to be followed up with trenching and further infill auger drilling  of the most promising targets following consultation with the local communities.

• Commenting on the results, Chief Executive Vincent Mascolo remarked that “We are excited with the rapid exploration progress and positive results we are generating on our gold projects in Ivory Coast”.

• Ivory Coast is emerging as a favoured gold exploration area and we noted as recently as last week, for example, that RandGold Resources had reported exploration successes in the Fonondara corridor where it was optimistic of delineating in excess of 3m oz of gold.

Conclusion: Ivory Coast is becoming a sought-after jurisdiction for gold exploration and IronRidge is generating promising early stage exploration results from its Bondite licence. We look forward to continuing news as the exploration progresses through trenching to the potential identification of drill targets.

*SP Angel act as Nomad and Broker to IronRidge Resources

 

Kefi Minerals* (LON:KEFI) 4.725p, Mkt Cap £15.7m – Ethiopia’s State of Emergency lifted

• Kefi Minerals reports that the State of Emergency in Ethiopia, which was imposed in October 2016, has been lifted following a parliamentary vote.

• Kefi Minerals has, with the support of the Government, has been able to progress its Tulu Kapi development during the State of Emergency and has previously reported that it is “targeting to commence development of Tulu Kapi in 2017 and open-pit gold production in 2019.”

• The company’s latest economic assessment suggests that Tulu Kapi should produce around 115,000oz pa of gold for a period of approximately 8.5 years at an estimated all-in-sustaining cost of US$777/oz which places the project in the “bottom cost quartile of existing gold producers.”

Conclusion: The company was able to progress Tulu Kapi during the State of Emergency in Ethiopia, however its removal is welcome news and should enhance the country’s profile as an investment destination described in June  2017 by the World Bank’s Global Economic Prospects as “the world’s fastest growing economy in 2017”.

*SP Angel act as Nomad and broker to Kefi Minerals

 

Lonmin PLC (LON:LMI) 93 pence, Mkt Cap £262.7m – Maintained 2017 sales guidance

• Lonmin is maintaining its 2017 sales guidance at 650-680,000 ounces of platinum following a quarter of improved mine production, particularly from the key “Generation 2“ shafts which increased output by 18.6% to 2.2mt during the quarter and by 9% compared with Q3 2016.

• “Traditionally, the fourth quarter is our strongest in terms of production and we anticipate this momentum to continue absent any unforeseen interruptions to the mining production run”. Production at the K3 shaft (806,000 tonnes) increased by 38.3% quarter-on-quarter and the company reports that the 290,000 tonnes achieved during May was the highest since July 2013 while the 528, tonnes delivered from the Rowland Shaft was the highest quarterly total “since the fourth quarter of the 2011 financial year and the best Q3 output in the last eight years.”

• The Saffy Shaft increased production by 16.8% during the quarter to 580,000 tonnes while the 4B Shaft produced 314,000 tonnes, a decrease of 26.5% on the prior year period, impacted by safety stoppages associated with the two fatalities.

• Production from the higher cost, “Generation 1” shafts continues to be cut back in line with the company’s rationalisation plan to adjust to the “lower prices for longer” environment with an 18.1% reduction to 431,000 tonnes.

• On the processing side, the plant treated 2.7mt of ore as planned with “Concentrator recoveries for the quarter continue to be excellent at 86.8%.”

• Costs of R11,278/PGM ounce were 4.7% lower during the quarter, largely attributed to the improved mining performance. The company notes that “This is at the lower end of our revised guidance of between R11,300-R11,800.”

• The company’s net cash position improved to US$86m compared with US$75m at the end of the previous quarter.

Conclusion: Lonmin is making progress in its rationalisation plan with significant improvements in the productivity of key shafts and improvements to its costs and net cash position

 

Premier African Minerals (LON:PREM) 0.475p, Mkt Cap £25.0m – Further pegmatite intersections in the south-east zone at Zulu

• Premier African Minerals reports that it has now completed over 2000m of diamond drilling in 14 drill holes in the recently discovered South East Zone of its Zulu lithium prospect near Fort Rixon, Zimbabwe.

• “Significant visible lithium mineralisation [has been] intersected in all holes” though at this stage assay results are not yet available. Some of the holes have intersected multiple zones of pegmatite at intersection widths up to in excess of 100m.

• The drilling is intended to expand the existing 20.1mt resource which grades 1.06% Li2O and the company comments that the “New zone in [the] south-east of [the] licence area has [the] potential to exceed [the] Main Zone tonnage.”

• CEO, George Roach, commented “These new substantial intersections of pegmatites with visually high-grade Li-bearing mineralisation in the south-east of the claims block area yet again confirm the potential of the new Zulu Lithium Project and support the Board’s decision to add value to Zulu before proceeding with any of the strategic offers Premier has received to date.”

Conclusion:  The new south-east zone appears to offer promising potential to expand the resource base at Zulu. We await the assay results with interest. Meanwhile, the company is hinting that a corporate transaction for the future of the project may be under consideration.

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Mon, 07 Aug 2017 10:26:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28340/today-s-market-view-ironridge-resources-limited-kefi-minerals-plc-lonmin-premier-african-minerals-ltd-28340.html
Today's Market View - Lucara Diamond Corp http://www.proactiveinvestors.co.uk/columns/sp-angel/28330/today-s-market-view-lucara-diamond-corp-28330.html Dow Jones Industrials  +0.04% at 22,026

Nikkei 225   -0.38% at 19,952

HK Hang Seng   +0.07% at 27,550

Shanghai Composite    -0.33% at 3,262

FTSE 350 Mining   +0.73% at 16,672

AIM Basic Resources   -1.13% at 2,473

 

Lucara Diamonds (TSE:LUC) – Q2 Results

 

Gold is steady trading close to a seven-week high reached earlier this week.

• US$ is little changed hovering around a multi-year low.

• Copper is heading for 4th weekly gain trading in the $6,340-6,380/t range and little changed on the day.

• Iron ore futures are stronger today led by further increases in steel rebar prices.

• Brent is on course for a weekly decline following strong run recorded at the end of July while latest reports show the US production expanded to the highest level since Jul/15 and OPEC output was up at the strongest level this year last month.

 

Economic News

US – Jobless claims came down last week with the four week average continuing to hover around the lowest level in decades pointing to robust state of the market.

• The Labour Department is due to release July NFP numbers later this afternoon with estimates for the jobless rate to hit a fresh low in over a decade.

• Services sector recorded strong performance according to Markit PMI data as the flow of new business reached a two year high and service providers increased payroll numbers at fastest pace in 2017 so far.

• “At current levels, the surveys are indicative of GDP rising at an annualised rate of approximately 2%, but if growth accelerates further in line with the upturn in new business, the third quarter could be even stronger,” Markit said.

• Latest PMI numbers are indicative of a 200k increase in payroll numbers, Markit suggested; this compares to 180k currently expected by the market.

• While factory orders climbed 3.0%mom in June, the increase was mostly attributed to a one-off surge in aircraft demand with core orders and shipments coming in soft.

 

 

China – Financial regulators are tightening control over foreign investments by SOEs in an effort to rein in capital outflows and reduce systemic risk, FT reports.

• Form this week, Finance Ministry requires SOEs to provide more evidence of overseas investments financial viability, use stricter audit as well as better document FX transactions.

• “Some investments do not meet our industrial policy requirements for outwards investment… they are not of great benefit to China and have led to complaints abroad… therefore we think a certain degree of policy guidance is necessary and effective,” PBoC governor said.

• Confronted with increasing leverage and overcapacity, Chinese SOEs have been lagging private companies in terms of profitability while the government merged underperforming companies with stronger one warning them to reduce non-strategic investments.

 

Germany – Factory orders surge on the back of strong domestic demand in June beating market estimates and extending the run of the accelerating pace of growth.

• Factory orders (%mom/yoy): 1.0/5.1 v 1.1/3.8 in May and 0.5/4.4 forecast.

 

UK – The BoE voted 6-2 to leave rates unchanged, in line with estimates, but cut down economic growth forecasts on the back of Brexit-related uncertainty holding back business investment and household spending.

• Economic growth was revised downwards to 1.7% this year compared with 1.9% estimated previously.

• Business investments are said to be 20pp lower by 2020, down from forecasts before last year’s referendum.

• The pound declined 0.9% to $1.31 against the US$ and 1% to €1.11 against the euro following the announcement.

• On inflation, consumer prices growth which reached 2.6% in June, up from 2.3% in March are expected “to rise further in coming months and to peak around 3% in October, as the past depreciation of sterling continues to pass through to consumer prices”.

• “Inflation is projected to remain above the MPC’s target throughout the forecast period,” MPC said.

 

South Africa – The Department of Mines has withdrawn plans to place a moratorium on granting and renewing mining licenses.

• Objections to the moratorium submitted to the department, by junior miners in particular, suggested that alternative measures should be explored to ensure companies are compliant with the industry Charter, the department said.

• The moratorium was planned to allow the department to freeze issues of new rights while changes to Mining Charter proposed in June are being debated in court

• The lobbyist group Chamber of Mines filed the case to court to block the new Mining Charter which is set to be heard in September.

 

Currencies

US$1.1882/eur vs 1.1843/eur yesterday.   Yen 110.09/$ vs 110.65/$.   SAr 13.368/$ vs 13.264/$.   $1.316/gbp vs $1.323/gbp.     

0.798/aud vs 0.792/aud.   CNY 6.718/$ vs 6.723/$.

 

Commodity News

Precious metals:

Gold US$1,269/oz vs US$1,261/oz yesterday

   Gold ETFs 66.4moz vs US$66.4moz yesterday

Platinum US$966/oz vs US$946/oz yesterday

Palladium US$886/oz vs US$892/oz yesterday

Silver US$16.71/oz vs US$16.46/oz yesterday

           

Base metals:   

Copper US$ 6,367/t vs US$6,316/t yesterday

Aluminium US$ 1,908/t vs US$1,923/t yesterday – Chinese aluminium inventories are reported to have climbed to an all-time high as smelters ramped up production on better margins, according to the SMM Information & Technology data.

• Inventories in Shanghai, Wuxi, Nanhai, Hangzhou and Gongyi, which account for mor ethan 90% of the nation’s total climbed to 1.33mt as of yesterday, up more than 6 times from late last year.

Nickel US$ 10,400/t vs US$10,295/t yesterday

Zinc US$ 2,827/t vs US$2,819/t yesterday

Lead US$ 2,373/t vs US$2,365/t yesterday

Tin US$ 20,730/t vs US$20,565/t yesterday

           

Energy:           

Oil US$52.0/bbl vs US$52.1/bbl yesterday

Natural Gas US$2.786/mmbtu vs US$2.817/mmbtu yesterday

Uranium US$20.40/lb vs US$20.25/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$71.5/t vs US$71.1/t

Chinese steel rebar 25mm US$614.5/t vs US$611.5/t

Thermal coal (1st year forward cif ARA) US$75.1/t vs US$73.3/t yesterday

Premium hard coking coal Aus fob US$182.3/t vs US$182.1/t

 

Other:

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

 

Company News

Lucara Diamonds (TSE:LUC) C$2.70, Mkt Cap C$1.0bn –Q2 Results

• Lucara Diamonds, the owner of the Karowe mine in Botswana, reports that diamond production during the quarter to 30th June 2017 amounted 57,624 carats bringing production for the first half of 2017 to 122,865 carats.

• The company notes that its mining contractor, which we observe was appointed in January this year, “experienced equipment availability issues during the beginning of the quarter that resulted in lower than planned waste and ore mined.” President and Chief Executive, William Lamb commented that “We have worked with our new mine contractor to improve performance during Q2 and Q3 and our mining department is now achieving our productivity targets.”

• The mine is engaged on a major waste removal exercise to uncover the higher value but lower grade South Lobe material with 5mt of waste and 432,000 tonnes of ore were removed during the quarter (Q1 2017, 131,000 tonnes of ore and 587kt of waste).

• The mine treated around 14% fewer tonnes (513,643 tonnes vs 598,934 tonnes in Q1 2017) albeit at a somewhat higher grade of 11.2cpht (Q1 2017 10.9cpht).

• On the positive side, the increased proportion of higher value production from the South Lobe increased received prices on sales from US$405/ct in Q1 to US$1336/ct.

• The company has reduced its production guidance for the year from 290-310,000 carats to 265,-285,000 carats while maintaining “its revenue guidance due to the more than planned south lobe ore being processed.” Lucara Diamonds does, however add the caveat that “While revenue guidance is maintained, lower recovered carats results in increased risk to the revenue forecast based on the overall timing of the recovery of large and higher value stones.”

• The company has completed a drilling programme to assess the AK06 kimberlite at depths below 400 metres and expects to update its mineral resources estimate during Q4 2017. In addition, work is underway to assess the underground mining potential at Karowe; the company expects to produce a Preliminary Economic Assessment in Q4 2017 and a pre-feasibility study in Q1 2018.

Conclusion: After a wobbly start with its new mining contractor, productivity at Karowe is getting back on track although the company has reduced its 2017 production guidance by around 10%. At this lower level, the company will need to increase diamond output by some 15-30% during the second half. Fortunately, by accessing higher value ore, the company expects to protect its revenue expectations albeit at somewhat higher risk.

]]>
Fri, 04 Aug 2017 10:52:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28330/today-s-market-view-lucara-diamond-corp-28330.html
Today's Market View - Centamin PLC, BlueJay Mining PLC, Randgold Resources, Shanta Gold Limited, Dalradian Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/28322/today-s-market-view-centamin-plc-bluejay-mining-plc-randgold-resources-shanta-gold-limited-dalradian-resources-28322.html Dow Jones Industrials  +0.24% at   22,016

Nikkei 225   -0.25% at   20,029

HK Hang Seng   -0.29% at   27,526

Shanghai Composite    -0.37% at    3,273

FTSE 350 Mining   +0.03% at   16,311

AIM Basic Resources   -0.06% at    2,502

 

BlueJay Mining* (LON:JAY) – Drilling campaign to multiply scale of Pituffik ilmenite resource (site visit update)

Centamin (LON:CEY) – Interim dividend increased by 25%

Dalradian Resources (LON:DALR) – Quarterly results and update

Randgold Resources (LON:RRS) – Strong quarter delivers 21% profit increase

Shanta Gold (LON:SHG) – Change of CEO

 

Gold demand is off 14%yoy in H1/17 on the back of significant drop in ETF investments which saw a record inflow in H1/16, according to the latest WGC data.

• Central bank purchases have also came off in the first half of the year (-3%yoy).

• Jewellery demand climbed compared to a weak 2016 on the back of a recovery in Indian demand from a trough posted last year; although, generally, jewellery sector continued to lag average historic levels.

• Mine supply was flat over the first six months of the year while reduced hedging from suppliers and a drop in recycling rates saw total gold supply lower.

• “We expect mine production to fall from 2019 onwards… although a small number of major projects are expected to come online by the end of 2017, the project pipeline remains weak… production development expenditure remains at multi-year lows,” WGC wrote.

 

Economic News

US – Preliminary data released by the ADP Research Institute showed the economy added 178k jobs in July while June numbers have been revised upwards signalling continued growth momentum in the labour market and boding well for future consumer spending.

• Official payrolls numbers are due tomorrow with estimates for 180k in July, down on strong June numbers (+222k) but on par with a six month average.

 

China – General business activity picked up to a four-month high in July led by strong growth momentum in manufacturing production, Caixin/Markit PMI showed.

• In contrast, services sector growth changed only slightly coming in on par with April’s reading that marked the weakest pace of expansion since May/16.

• New business trends diverged as a pick up in the manufacturing sector was partly compensated by the slowdown in new orders growth in the services sector with the composite gauge climbing at the quickest pace in four months.

• On the other hand, employment growth in the services industry continued for the 11th month running while manufacturing staffing continued to decline.

• On inflation, general input costs posted the strongest increase in three months in July on the back of stronger pressures in the manufacturing sector.

• “China’s economic performance in July was stronger than expected, mainly due to sustained recovery in the manufacturing sector… however, downward pressure on the economy likely remains as the index gauging companies’ confidence towards the 12-month business outlook dropped in both the manufacturing and services industries,” Caixin/Markit said.

• Caixin Manufacturing PMI (released Tuesday): 51.1 in July v 50.4 in June and 50.4 forecast.

• Caixin Services PMI: 51.5 in July v 51.6 in June.

• Caixin Composite PMI: 51.9 in July and 51.1 in June.

 

Eurozone – The economy in the single currency region made a solid start to Q3/17 according to the final Markit PMI numbers.

• “Although July saw rates of expansion in business activity and new work moderate, growth in both remained among the best registered over the past six years,” Markit said.

• The data points to “a very respectable 0.6%qoq increase in GDP”, in line with growth recorded in Q2/17 but stronger than 0.4% currently forecast by markets.

• Markit Compposite PMI: 55.7 in July v 55.8 (Flash reading) and 56.3 in June.

• On a separate note, retail sales growth accelerated in June in the latest sign of strengthening economic expansion in the region.

• Retail Sales (%mom/yoy): 0.5/3.1 in June v 0.4/2.4 in May and 0.0/2.5 forecast.

 

UK – Latest PMI numbers point to “steady but sluggish expansion” in Q3/17 while business confidence deteriorates.

• “Firm’s prospects for the coming year have slipped to a level which has previously been indicative of the economy stalling or even contracting, having taken a lurch downward since the general election, largely reflecting heightened uncertainty about the economic outlook and Brexit process,” Markit wrote.

• Purchasing Managers survey suggest the economy is growing at just over 0.3%qoq.

• Markit Manufacturing PMI (released on Tuesday): 55.1 in July v 54.2 in June and 54.5 forecast.

• Markit Services PMI: 53.8 in July v 53.4 in June and 53.6 forecast.

• Markit Composite PMI: 54.1 in July and 53.8 in June and 53.8 forecast.

 

Currencies

US$1.1843/eur vs 1.1846/eur yesterday.   Yen 110.65/$ vs 110.78/$.   SAr 13.264/$ vs 13.289/$.   $1.323/gbp vs $1.324/gbp.     

0.792/aud vs 0.796/aud.   CNY 6.723/$ vs 6.721/$.

 

Commodity News

Precious metals:

Gold US$1,261/oz vs US$1,267/oz yesterday

   Gold ETFs 66.4moz vs US$66.4moz yesterday

Platinum US$946/oz vs US$946/oz yesterday

Palladium US$892/oz vs US$897/oz yesterday

Silver US$16.46/oz vs US$16.66/oz yesterday

           

Base metals:   

Copper US$ 6,316/t vs US$6,330/t yesterday

Aluminium US$ 1,923/t vs US$1,921/t yesterday

Nickel US$ 10,295/t vs US$10,250/t yesterday

Zinc US$ 2,819/t vs US$2,763/t yesterday

Lead US$ 2,365/t vs US$2,335/t yesterday

Tin US$ 20,565/t vs US$20,445/t yesterday

           

Energy:           

Oil US$52.1/bbl vs US$51.8/bbl yesterday

Natural Gas US$2.817/mmbtu vs US$2.815/mmbtu yesterday

Uranium US$20.25/lb vs US$20.15/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$71.1/t vs US$70.8/t

Chinese steel rebar 25mm US$611.5/t vs US$611.3/t

Thermal coal (1st year forward cif ARA) US$73.3/t vs US$73.6/t yesterday

Premium hard coking coal Aus fob US$182.1/t vs US$182.1/t

 

Other:

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

 

Company News

BlueJay Mining* (LON:JAY) 14p, Mkt Cap £108m – Drilling campaign to multiply scale of Pituffik ilmenite resource

Investor and broker site visit update

STRONG BUY

• The BlueJay team are refreshed from their Arctic swim and are back at work loading concentrate bags with what looks like high-grade mineral sand.

• The sonic drill rig is out site beyond the current resource and is working away with the drillers reckoning on 5 or 6 drill holes a day.  The crew could go faster but we suspect they are taking care at the start of the drill program.

• There is no word on the depth of the ilmenite mineral sand as yet but it seems likely that the resource could multiply in scale on news on the depth and lateral extension from the sonic drilling.

• Our view is that the resource should at least double in size on the next resource estimate and that with a successful sonic drill campaign could be shown to be very much larger.

• Furthermore, the team may try to drill the Itelak end of the deposit towards the end of the season.  This has the potential to show some very high-grade material and the sonic drill should give some idea of the potential tonnage of this material.

• Grades appear very much higher than are normally seen in mineral sands deposits due to the unusually high grade nature of the ilmenite dyke swarms in the country rock.  Approximately 700m of total vertical erosion, suggested by recent Danish study which indicates there may be some 17bnt of pure ilmenite in the area.  The high rate of erosion has been aided by freeze/thaw, glacial action and short rivers which have transported the ilmenite grains to the beach where wave action and slumping has further liberated the near-pure ilmenite grains and then further concentrated the heavy mineral sands.

• The Bathymetry team are now making good headway after setting up a complex base station network in the bay and in the near shore area in what have been quiet consistently calm seas. The survey is looking for the best location for a ship loader to carry a conveyor belt for Handymax ship-loading. The results of the survey should allow the engineers to design a relatively short pier to deep water in the fjord.

• Key parameters for BlueJay are, concentrate purity, grade, tonnage and ease of loading.  The purity is looking good and may be set to improve on simple refinement of the separation process.  Tonnage is set to increase and low cost dredge mining and ship loading should add to the economics of the project.

Conclusion:  BlueJay is shaping up to be a world-class ilmenite mineral sands project.  It still requires the endorsement which only comes with customer orders and it needs to better prove its tonnage and grade potential but with rich-looking black beach sands on the active beaches and in the historic beaches the project is looks set for world-class potential.

*SP Angel acts as nomad and broker to BlueJay

 

Centamin (LON:CEY) 166 pence, Mkt Cap £1.9bn – Interim dividend increased by 25%

• Centamin has declared an interim dividend of 2.5US cents/share, a 25% increase on the 2016 interim disbursement.

• Despite a fall in after tax profit to US$67.3m ((H1 2016 – US%$114.2m) the company reports that it has generated US$50.8m of free cash flow in the year to date as a result of increased production and sales volumes and higher average realised sales prices.

• Centamin reports that it remains on track to achieve its 2017 production guidance of 540,000 oz of gold production at a cash cost of US$580/oz and an all-in-sustaining cost of US$790/oz.

• Gold production of 124,641 oz represents a 14% increase during the quarter and brings production for H1 2017 to 233,828 oz.

• This implies that Centamin will produce approximately 306,000 oz of gold during the second half of the year at a cash cost of around US$880/oz

Conclusion: Centamin will need to build up production rates by around 30% during the second half of the year in order to meet its maintained production guidance. In our view, the mine and processing infrastructure capable of processing 12mtpa should be able to deliver this ramp up in line with plan. Strong cash generation underpins a 25% increase in the interim dividend.

 

Dalradian Resources (LON:DALR) 94 pence, Mkt Cap £228m – Quarterly results and update

• In its quarterly report for the three months to 30th June, Dalradian Resources confirms that it plans to submit a formal application to build a mine at Curraghinalt in Northern Ireland during 2017 and that the relevant technical and environmental studies and reports to support the application are being finalised.

• The company also confirms that its cash balances at 30th June amounted to C$34.6m and that it expects warrants worth some $23m and exercisable at $1.04 to be “exercised before their expiry in October.”

• As a development company, Dalradian reported a financial loss of $2.7m for the quarter bringing the total loss for the first half of the year to $4.0m “compared to a net loss of $3.4m … in the same period of 2016.”

• The company reiterates a number of the significant, previously announced developments, which include the completion of a 9,580m programme of underground drilling which continued to intersect multiple high grade veins as well as the initiation of a 30,000m programme of surface drilling designed to test potential strike extensions of the mineralisation.

• The processing of some 14,500 tonnes of ore from test stoping confirmed a better than expected recovery rate of 95.9% while reconciliation with the reserve block model showed a 42% increase in the volume of  gold  expected largely as a result of a 40% improvement in the grade achieved compared to the model.

• The company also confirmed the acquisition of Minco plc’s 2% net smelter royalty, subject to the final approval of the Irish High Court.

Conclusion: Dalradian Resources is making systematic progress towards the submission of its applications to mine at Curraghinalt before the end of the year. The company is adequately funded to complete the relevant studies and the current programme of surface drilling. We await the results of the drilling and any sUBSequent updates to the resource estimate, particularly in the light of the apparent understatement of the estimated grades highlighted by the test stoping.

 

Randgold Resources (LON:RRS) 7210 pence, Mkt Cap £6.8bn – Strong quarter delivers 21% profit increase

• Randgold Resources reports a 21% increase in profit during the quarter ending 30th June to US$102.8m bringing the profit for the half year to US$187.7m – up 53% on H1 2016.

• Commenting on the results of what he described as a good quarter for Randgold “both operationally and on the exploration and new business front”, Chief Executive, Mark Bristow commented that “At this stage the outlook is positive and Randgold is trending towards the top end of its production guidance range at a total cash cost below $600 per ounce.”

• The results reflect a 16% increase in gold production for the six-month period to 663,786oz of gold and a 15% decline in the group’s cash operating cost to US$533/oz. Total cash costs for the half year fell to US$ 595/oz (H1 2016 – US$687/oz).

• Operations at the Loulo-Gounkoto complex in Mali, rose to 194,091 oz at a cash operating cost of US$382/oz (Q1 2017 – 186,366 oz at US$459/oz) largely as a result of improved mill throughput at an unchanged 5.4g/t head grade.

• The Tongon mine in Cote d’Ivoire increased quarterly output by 15% to 77,260 oz bringing production for H1 to 144,480oz at an average cash operating cost of US$597/oz. Stripping ratios increased during the quarter, in line with the long term mine plan, resulting in an increase in cash costs from US$592/oz in Q1 to US$601/oz.

• At the Kibali mine quarterly production remained stable at 141,203 oz (Q1 2017 – 141,013 oz) at a cash operating cost of US$803/oz (Q1 2017 – US$782/oz). “Brownfields drilling from surface and underground has shown potential for extensions of current underground reserves on the 3000 and 9000 up plunge shoots.”

• In Senegal, the company is continuing its feasibility work on the Massawa / Sofia deposits with additional drilling, trenching and metallurgical testing on a bulk sample “expected to take place in Q3.”

• True to its roots, Randgold Resources continues an active exploration programme with work in Mali concentrating on follow up work in the Loulo/Gounkoto area as well as at Sinsinko and on the joint-venture projects at Bakolobi with Taurus Gold and Massakama with Alecto Mineralsas well as continuing regional exploration. In Senegal, exploration continues in the Massawa area while in Cote d’Ivoire, “Recent RC drilling along the Fonondara corridor to the immediate north and south of Fonondara Main has [identified]  … three new mineralised zones”. These have “not only have significantly extended the initial Fonondara target from 1.3km to 8km, but highlighted a real opportunity to move the target towards a +3Moz asset.”

• Exploration in DRC centred on the Kibali area where additional trenching at Makoke between the Meg and Pamao satellite deposits has now “confirmed the continuity of the geology and mineralisation in the area which will now be tested by drilling.” Additional work at the Moku and Ngayu joint-venture properties has followed up on artisanal working areas and examined structural, geophysical and field mapping data to feed additional projects into the base of Randgold’s famous resource triangle.

Conclusion: Randgold Resources has had a strong production quarter while continuing the strong commitment to exploration which has over the past delivered its operating mines.

 

Shanta Gold (LON:SHG) 3.6p, Mkt Cap £27.8m – Change of CEO

• Toby Bradbury is stepping down as CEO of the Company.

• “Following the recent changes to the regulatory, operating and fiscal environment in Tanzania, the Company will be refocusing its strategy on cost control and shareholder return,” the announcement read.

• Toby will remain on the Board until Sep/17 to help with the transition.

• Eric Zurrin who was re-appointed as CFO in March this year will replace Toby with immediate effect while the Board is planning to find new CFO in due course.

• Eric knows operations well having worked with the Company over the last four years including as interim CFO in 2015/16 and as adviser to the CEO in 2013 amid an operational restructuring at the NLGM.

• He has 15 years of experience in investment banking and mining having previously worked with UBS (London) and served as a director of Kincora Copper Limited (KCC TSX).

• Eric will be based in the UK from Sep/17.

Conclusion: The announcement raises many questions to the sudden and hasty departure of the CEO. The news comes amid extensive underground development works at Bauhinia Creek and Luika mines. It is unclear what change in the strategy led Toby Bradbury to leave and if the departure of top management would see other key operational people go putting further development plans under risk.

We wish good luck to Eric with the new role and hope he will manage the transition well.

]]>
Thu, 03 Aug 2017 11:07:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28322/today-s-market-view-centamin-plc-bluejay-mining-plc-randgold-resources-shanta-gold-limited-dalradian-resources-28322.html
Today's Market View - Stratex Internation, Rio Tinto and Golden Star Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/28311/today-s-market-view-stratex-internation-rio-tinto-and-golden-star-resources-28311.html Dow Jones Industrials  +0.28% at   21,891
Nikkei 225   +0.30% at   19,986
HK Hang Seng   +0.79% at   27,540
Shanghai Composite    +0.60% at    3,293
FTSE 350 Mining   +0.42% at   16,689
AIM Basic Resources   +0.93% at    2,506

Golden Star Resources (TSE:GSC) – Profitable June quarter – 2017 production guidance maintained.
Rio Tinto (LON:RIO) – $3bn to be returned to shareholders in dividends and buy-back
Stratex International (LON:STI) – Crusader sale of Posse iron ore mine

Gold is off slightly (-$6/oz at $1,267/oz) ahead of US labour data due on Friday.
• The US$ remains rangebound, up 0.1% today following a 0.2% increase on Tuesday.
• US equity-index futures are trading higher today helped by better than forecast Apple quarterly results; Apple shares climbed more than 6% in after-ours trading.
• Base metals are weaker this morning except for aluminium which is up 1% on the back of the news that the China’s top smelter is deepening capacity cuts.
• China Hongqiao Group is planning to shut 2mt of outdated aluminium capacity; although the Company also suggested that capacity cuts should be offset by new additions with production likely to remain at similar levels.
• More news of increased of supply from Indonesia weighs on the nickel price as local authorities are reported to have issued permits to two miners to ship low-grade nickel ores.
• Brent is off 0.7% extending yesterday’s losses when prices slid 1.7% as the API reported increasing inventories of crude in the week to July 28 (+1.8mmbbl to 488.8mmbbl) compared to market expectations for a decline; official inventories figures released by the US EIA are due later today.
• Spot iron ore delivered to Qingdao traded at $73.56/t yesterday coming off slightly from $73.70/t reached on Monday, the highest level since April; prices recorded a 13% increase in July following a 14% increase in June, recovering from this year’s decline.

Economic News
US – Final manufacturing PMI report showed the sector expanded at the strongest pace in four months driven by expansions in both output and new orders.
• New business was predominantly sourced locally with overseas orders said to have come down for the first time in ten months “albeit only slightly”.
• Business optimism is reported to have picked up to a six-month high while firms have also accelerated hiring.
• Inflation pressures were relatively subdued during the month.
• “However, although rising, the survey indices remain consistent with only very modest increases in comparable official data… clearly the manufacturing sector remains stuck in a low gear, though it is at least gaining momentum and will hopefully shift up a gear as we move through the second hald of the year if demand continues to improve,” Markit concluded.
Date Event   Survey Actual Prior Revised
Monday Pending Home Sales MoM Jun 1.00% 1.50% -0.80% -0.70%
Tuesday Personal Income Jun 0.40% 0.00% 0.40% 0.30%
Personal Spending Jun 0.10% 0.10% 0.10% 0.20%
Real Personal Spending Jun 0.10% 0.00% 0.10% 0.20%
PCE Deflator MoM Jun 0.00% 0.00% -0.10% 0.00%
PCE Deflator YoY Jun 1.30% 1.40% 1.40% 1.50%
PCE Core MoM Jun 0.10% 0.10% 0.10% --
PCE Core YoY Jun 1.40% 1.50% 1.40% 1.50%
ISM Manufacturing Jul 56.4 56.3 57.8 --
  Wards Total Vehicle Sales Jul 16.80m 16.69m 16.41m 16.59m
Wednesday ADP Employment Change Jul 190k -- 158k --
Thursday Initial Jobless Claims Jul-29 242k -- 244k --
Continuing Claims Jul-22 1958k -- 1964k --
ISM Non-Manf. Composite Jul 56.9 -- 57.4 --
Factory Orders Jun 3.00% -- -0.80% --
  Factory Orders Ex Trans Jun -- -- -0.30% --
Friday Change in Nonfarm Payrolls Jul 180k -- 222k --
Two-Month Payroll Net Revision Jul -- -- 47k --
Unemployment Rate Jul 4.30% -- 4.40% --
Average Hourly Earnings MoM Jul 0.30% -- 0.20% --
  Average Hourly Earnings YoY Jul 2.40% -- 2.50% --
Source: Bloomberg     

Spain – Unemployment recorded the sixth consecutive decline in July coming off a high base as well as being led by a recovering economy.
• Jobless rate currently has come down to 17.1%, still the second highest in the Eurozone after Greece, from over 26% reached in 2013 following the sovereign debt crisis in the region.
• One of the highlights of the report is the steady decline in youth unemployment as the jobless rate among under-25s was around 12%, higher than the 9.1% average, but down from over 50% in 2013.

Indonesia – The Energy and Mineral Resources Ministry concluded Freeport needs to divest 51% interest in the local unit which owns the Grasberg operation to the state and complete construction of a copper smelter by 2022.
• “The regulation is non-negotiable… we agree that they can maintain operational control until the Indonesian side is ready and professional,” Minister Ignasius Jonan said.
• In return, the Company is expected to receive an extension of the mining license through 2021 with two 10-year extensions.
• This will allow the Company to continue with a $15bn investment in underground mining and the construction of a $2.3bn smelter.

Venezuela – Sovereign bonds are sold off with the 2022 debt trading at a 15-month low as secret service imprisons two opposition leaders and changes in the nation’s structure of legislative bodies.
• The newly established 545-member constituent assembly that is expected to be controlled by President Maduro and his allies is set to supersede the national assembly currently dominated by the opposition.

Currencies
US$1.1816/eur vs 1.1733/eur yesterday.   Yen 110.36/$ vs 110.64/$.   SAr 13.224/$ vs 13.039/$.   $1.323/gbp vs $1.312/gbp.
0.801/aud vs 0.798/aud.   CNY 6.722/$ vs 6.725/$.

Commodity News
Precious metals:
Gold US$1,268/oz vs US$1,267/oz yesterday
   Gold ETFs 66.3moz vs US$66.4moz yesterday
Platinum US$943/oz vs US$937/oz yesterday
Palladium US$889/oz vs US$891/oz yesterday
Silver US$16.81/oz vs US$16.70/oz yesterday
           
Base metals:   
Copper US$ 6,342/t vs US$6,408/t yesterday
Aluminium US$ 1,908/t vs US$1,921/t yesterday
Nickel US$ 10,150/t vs US$10,300/t yesterday
Zinc US$ 2,776/t vs US$2,818/t yesterday
Lead US$ 2,312/t vs US$2,345/t yesterday
Tin US$ 20,565/t vs US$20,880/t yesterday
           
Energy:           
Oil US$52.8/bbl vs US$52.8/bbl yesterday
Natural Gas US$2.826/mmbtu vs US$2.881/mmbtu yesterday
Uranium US$20.05/lb vs US$20.50/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$71.5/t vs US$72.4/t
Chinese steel rebar 25mm US$611.3/t vs US$599.8/t
Thermal coal (1st year forward cif ARA) US$75.5/t vs US$75.3/t yesterday
Premium hard coking coal Aus fob US$180.3/t vs US$179.9/t

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

Company News
Golden Star Resources (TSE:GSC) C$0.83, Mkt Cap C$312m – Profitable June quarter – 2017 production guidance maintained.
• Golden Star Resources reports attributable profit for the quarter ending 30th June 2017 of US$13.88m, reversing the US$22.03m loss reported in the same quarter of 2016.
• Gold sales increased by 48% y-o-y to 63,604 ounces (Q2 2016 – 42,997 oz) while gold revenues rose by 50% to US$77.3m (2016 – 51.5m).
• Gold production increased by 51% to 64,176oz reflecting both a record fourth consecutive quarter from the Prestea open pits, which produced 31.689 oz as well as a 16% increase in underground gold production from the Wassa mine to 13,288 oz and initial production from underground development ore at Prestea. Year to date production amounts to 121,971 oz with Q2 representing an 11% improvement on Q1 2017.
• Production costs on a cash basis showed an 18% decline to US$785/oz and a 19% fall on an all-in-sustaining basis to US$960/oz.
• The company is, at the half way point in the year, maintaining its 2017 production guidance range of 255-280,000 ounces of gold production, implying that production will continue to increase during the second half of the year.
• Golden Star did, however, suffer a short term setback in its underground development operations at Prestea where “The original installed pumping system at Prestea Underground began to come under pressure due to the increased mining activity and as a result, the Company took the decision to suspend hoisting in order to safeguard the shaft infrastructure. By the start of the third quarter of 2017, the situation was rectified and hoisting had resumed, but the suspension impacted the rate of waste development as the operations team prioritized raise development.  As a result of the limited hoisting capacity, the first stoping ore is expected to be blasted during the third quarter of 2017 and commercial production is anticipated to be achieved during the fourth quarter of 2017.”
• The temporary slowdown at the Prestea underground operation does, however, illustrate the prudence of the company’s “stated strategy since 2013 [which] has been to develop multiple sources of ore in order to reduce our risk profile and protect the Company against temporary issues with any one source.”
• Commenting on the quarter, President and SEO, Sam Coetzer, said “The second quarter of 2017 represents the fifth consecutive quarter of production growth. I am also delighted to see out operating costs continue to decrease as we are beginning to see the impact of our high grade underground ore being realised.”
Conclusion: Golden Star is moving from its former, relatively high costs and low grade, open pit mining operations into higher grade, lower cost underground mining from multiple ore sources – at this stage, with production growing and costs falling the strategy is increasingly showing that it is be being vindicated. We look forward to this improving trend continuing

Rio Tinto (LON:RIO) 34.23p, Mkt Cap  £63.6bn – $3bn to be returned to shareholders in dividends and buy-back
• Rio Tinto has declared an interim dividend of US$1.10/share (US$2bn) and announced a further share buy-back amounting to US$1bn on the back of faster than expected sustainable cash cost savings of US$2bn and strong first half operating cash flow of US$6.3bn.
• After capital expenditure of US$1.8bn, Rio Tinto generated free cash flow of US$4.6bn during the first half, which, after dividends and share buy-backs, enabled a debt reduction of US$2.0bn to US$7.6bn from US$9.6bn.
• In its guidance, the company highlights
o “Additional cumulative free cash flow of $5.0 billion from 2017 to the end of 2021 from productivity improvements” and
o “Capital expenditure expected to remain at around $5.0 billion in 2017 and around $5.5 billion in each of 2018 and 2019. Each year includes approximately $2.0 to 2.5 billion of sustaining capex.”
• Sector performance is dominated by the Group’s iron ore division which contributed 59% of EBITDA (US$5.6bn) and 71% off earnings (US$3.3bn). Strong EBITDA performance was generated by the Energy & Minerals Group (US$1.4bn or 15%) and by the aluminium business (US$1.7bn or 18%). Copper and diamonds generated a further US$771m of EBITDA (8%).
• Underlining the significance of the bulk commodities is the 63% increase in the year-on-year first half growth in EBITDA contribution of iron ore, 55% increase in aluminium, and 170% increase in the contribution from the Energy and Minerals Group.
• The improvements in iron ore reflect “a reduction in Pilbara unit cash costs to $13.8 per tonne in 2017 first half (2016 first half :$14.3 per tonne).” as well as productivity improvements and an average 42% increase in iron ore prices, slightly offset by a minor 2% decline in shipped volumes.
• A “strong operational performance and a rise in alumina and aluminium LME prices.” as well as productivity improvements and increased volumes drove the improvements in the aluminium business.
• The Energy & Minerals business delivered a further $41m of cost savings bringing the cumulative total to $1.5bn “compared with the 2012 base.”
• Capital expenditure of US$1.8bn is dominated by the Copper and Diamonds Group which accounted for US$665m (38%) of the total with the Oyu Tolgoi/Turquoise Hill project in Mongolia spending over half the divisional total (US$347m). Iron ore and Aluminium each consumed around 30% of the capital expenditure (US$528m and US$521m respectively.).
Conclusion: Rio Tinto’s H1 performance has been dominated by the performance of its iron ore and aluminium businesses, however all the business units have delivered growth and continuing cost savings.

Stratex International (LON:STI) 1.2p, Mkt cap £5.7m – Crusader sale of Posse iron ore mine
• Stratex International has announced that Crusader Resources has reached a conditional agreement on the sale of its Posse iron ore mine in Brazil for R$8.005m (approximately £1.94m).
• The sale is conditional upon Crusader receiving the initial R$1m “on or before 10 August 2017” with the balance to be paid “in 15 equal monthly payments commencing 60 days from the effective date of the sale agreement (1 August 2017).”
• The sale is also conditional upon the transfer of the mineral tenements to the purchaser by the Brazilian Mines Department.
Conclusion: Stratex is acquiring Crusader Resources mainly for the 2.4m oz Borborema gold deposit and the smaller Juruena deposit (260koz). The divestment of the iron ore mine prior to the acquisition gives Stratex a more focussed gold vehicle to form a platform for the development of its “intention to become a gold explorer and near-term producer”.

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Wed, 02 Aug 2017 10:36:00 +0100 http://www.proactiveinvestors.co.uk/columns/sp-angel/28311/today-s-market-view-stratex-internation-rio-tinto-and-golden-star-resources-28311.html