column http://www.proactiveinvestors.co.uk Proactiveinvestors column RSS feed en Sat, 24 Feb 2018 02:27:09 +0000 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) Today's Market View - W Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/29423/today-s-market-view-w-resources-29423.html W Resources (LON:WRES) – La Parilla offtake agreements

Electric Vehicle revolution boosting profits across miners
• Rapid adoption of global electric vehicles is flowing through to the bottom line of growing battery miners, who are benefiting from elevated prices and higher profits. Major lithium miner, Orocobre Ltd., reported a net income growth of 11% in the December half while forecasting high-purity lithium prices to continue rising through the first half of 2018. The supplier joins global miners, including FMC Corp. and Mineral Resources Ltd., in posting earnings gains on growing volumes on tightening markets.
• Orocobre Chief Executive Officer notes “all of the international producers will have had increases in their contract pricing for this year’s deliveries. The outlook for further price gains is strong as rivals add higher cost-supply to meet accelerating demand”. The prices of battery-grade products are expected to continue to gain on tight markets and as auto makers including BMW, Daimler AG and Ford Motor Co. battle for long-term supply to expand ambitious EV production plans. The average global lithium carbonate prices rose 9% last month, according to Benchmark Mineral Intelligence data.
• The outlook remains strong for the entire battery minerals sector, with lithium, graphite and cobalt companies all delivering profit growth and focusing on exploration and expansion plans.
o FMC, a top five producer, announced annual revenue from lithium to jump approx. a third in 2017, while Albemarle and SQM, the No.1 and No.2 suppliers are scheduled to report earnings next week with a focus on expanding production across facilities.
o Orocobre is developing its partnership with Toyota Group’s trading unit on plans to construct a processing plant in Japan, and is also seeking to expand its Olaroz operation in Argentina. “We see ourselves stepping up a little bit in the next year”.
o Perth-based Mineral Resources said this month first-half net income jumped 16 percent, boosted by exports of lithium raw materials. Earnings from the company’s lithium division will become its biggest cash generator in fiscal 2019, overtaking the mining services business, according to Deutsche Bank AG forecasts.
o Galaxy Resources Ltd., which reports in March, boosted quarterly earnings from its Mt. Cattlin mine by almost 60 percent in the final three months of 2017, filings show. Neometals Ltd., a partner in an Australian mine with Mineral Resources and China’s top producer Ganfeng Lithium Co., is also scheduled to detail profits next month.
• Lithium-firms are well positioned with fast rising demand and the risk of weaker-than-expected supply response. “If you look at what’s required over the next 50 years, 60 years, and have a look at the known lithium on the planet, I don’t think it’s as much as everyone understands it to be”.

China air quality under further negotiation
• China’s top steel-making city could impose further output curbs following the close of the winter season in an effort to improve air quality. Tangshan city in northern China’s Hebei province is investigating implementing cuts of idle steel capacity of 9.875 million tonnes from March 16 to Nov. 14.
• Under the Tangshan plan, mills in the centre of the city, including HBIS Group Tangsteel Co. and Tangshan Guofeng Steel Corp., would be ordered to halt 15% of capacity during the period, while other mills would see cuts of 10-15% based on conditions including wind direction.
• The curbs aim to further build on unusually clean air in cities including the capital Beijing, while tightening suppliers, reducing exports and increasing steel prices.

Cobalt – Apple in talks to buy cobalt directly
• Reports that Apple is in talks to procure cobalt reveals concerns over an impending supply shortage as well as ethics and human rights.
• Apple is hoping to secure supply chain visibility through ensuring their cobalt isn’t sourced from illegal mining operations
• The move to secure cobalt may also save Apple save on procurement costs over the next two to three years

Dow Jones Industrials  +0.66% at 24,962
Nikkei 225   +0.72% at 21,893
HK Hang Seng   +0.98% at 31,270
Shanghai Composite    +0.63% at 3,289
FTSE 350 Mining   +0.22% at 18,981
AIM Basic Resources   -0.30% at 2,542

Economics
US – Equity indices closed higher on Thursday in a volatile trading and amid good earnings results released so far.
• S&P 500 companies are expected to have posted per-share profit growth of 15%yoy in the final three months of the year, according ot FactSet.
• Around 3/4s of reporting companies have beaten analyst estimates so far, ahead of the five-year average of 69%.
• Adding to positive business outlook are accelerating economy and the recent tax reform bill with the corporate rate reduced to 21% from 35%.
• Gains recorded yesterday helped to break a two-day streak of declines cutting weekly losses in the index to 1.0% as investors adjusted expectations for higher interest rates moving forwards.

Japan – Headline inflation surged to the highest level in almost three years in January on higher food and oil prices.
• Stripping out volatile components of the gauge, inflation remained subdued and significantly far off the 2% target.
• Cold January weather is reported to have contributed strongly to higher fruit and vegetable prices which climbed at the highest pace since 1970.
CPI (%yoy): 1.4 v 1.0 in December and 1.3 forecast.
• Core CPI (ex food and energy, %yoy): 0.4 v 0.3 in December and 0.3 forecast.

Germany – Q4 GDP increase has been confirmed at 0.6%qoq this morning with strong overseas demand behind growth last quarter.
• Exports climbed 2.7%qoq versus a 2.0%qoq increase in imports.
• 2017 saw the strongest GDP growth in seven years in Germany (+2.2%).
• While latest surveys show that growth momentum may start to slow down with the central bank warning of potential bottlenecks developing in the economy, market estimates are for growth to accelerate to 2.4% next year.

UK – Cabinet members may have reached a fragile compromise between Brexiters and Remainers as PM May is expected to give a public speech on her approach to Brexit next week,  FT reports.

Indonesia – The government issued $1.25bn in five year green sukuk bonds at 3.75% amid strong demand for environmentally responsible investment products.
• Additionally, the nation issued $1.75bn in standard sukuk debt at 4.40%.
• Proceeds of green bonds will be allocated to renewable energy, sustainable transport, waste management and green buildings.
• The green finance market has been growing rapidly lately with $155bn raised in funds in 2017, according to Moody’s estimates.

Russia – 850lbs of cocaine found in Russian diplomatic luggage in Argentina
• The Russian Ambassador has called in local authorities to catch a group of drug traffickers who where trying to ship cocaine to Russia.
• A tracking device was placed in the suitcase to be used to make the shipment enabling police to catch the gang who had links to Russia with the plot masterminded in Germany.
• A serving police offices and an accomplice have been arrested in Argentina.

Gabon – government seizes Veolia water and waste group
• There are always two sides to every expropriation but it is difficult to agree with Gabon’s seizure of French owned Veolia’s local water and waste subsidiary.
• Gabon took control of the subsidiary last Friday on the pretext of preserving the continuity and quality of the public provision of drinking water and energy.
• The capital, Libraville, has suffered frequent cuts in water supply due to a lack of investment and the move to seize the company may be seen as a populist move by the government.
• Problem for Gabon is that they renewed Veolia’s municipal contract for another five years in March.
• It will be interesting to see if there are any allegations of corruption. French companies used to be able to reclaim tax against payments used for corruption though we believe this practice is now banned under EU regulations.

Burkina Faso - Timis Mining unit, Pan African Minerals has been told to stop mining at its Tambao manganese mine in Burkina Faso
• The Burkina Faso government has withdrawn the company’s rights to the Tambao mine
• The Mining Minister has cited a breakdown of confidence between the government and the company stating that they didn’t respect their obligations
• Pan African Minerals which is run by Souleymane Mihin, is petitioning the International Court of Arbitration in Paris to prevent its permit from being withdrawn
• The move also follows a recent change of government.
• African Minerals formerly run by Frank Timis was placed into Administration in March 2015.

Canada is worlds overall top mining destination
• Canada is the world’s most attractive region for mining investment, based on the combined rankings of all its provinces and territories, the latest annual survey of mining executives released by Fraser Institute shows
• However, many of its providences and territories did not fare as well, with Manitoba simply disappearing from the top ten and British Columbia and Alberta continue to receive low marks from investors for regulatory uncertainty and concerns about disputed land claims
• In Australia, every jurisdiction received lower scores on policy this year, indicating increasingly unattractive government regulations across the country, Western Australia ranked 5th overall, followed by Queensland (12) and South Australia (14)

Currencies
US$1.2293/eur vs 1.2273/eur yesterday  Yen 106.93/$ vs 107.47/$  SAr 11.657/$ vs 11.723/$  $1.393/gbp vs $1.389/gbp  0.782/aud vs 0.780/aud  CNY 6.339/$ vs 6.359/$.

Commodity News

Precious metals:         
Gold US$1,328/oz vs US$1,322/oz yesterday
• The precious metal is set for its third weekly decline in four, contracting 1.5%, as Federal Reserve’s upbeat assessment of US economy raises the possibility of tighter monetary policy and supports a strengthening dollar.
• Chief economist at Australian Bullion Co. notes “concerns around tighter monetary policy, and a slight uptick in the dollar, have contributed to gold prices softening this week”. Fundamentals remain positive as “bulls still have the advantage though, with this pullback representing a buying opportunity in our view”.
   Gold ETFs 72.1moz vs US$72.1moz yesterday
Platinum US$995/oz vs US$988/oz yesterday
Palladium US$1,041/oz vs US$1,023/oz yesterday
Silver US$16.59/oz vs US$16.44/oz yesterday
           
Base metals:   
Copper US$ 7,144/t vs US$7,025/t yesterday
Aluminium US$ 2,180/t vs US$2,167/t yesterday
Nickel US$ 13,760/t vs US$13,440/t yesterday
Zinc US$ 3,504/t vs US$3,460/t yesterday
Lead US$ 2,543/t vs US$2,526/t yesterday
Tin US$ 21,485/t vs US$21,530/t yesterday
           
Energy:           
Oil US$66.4/bbl vs US$64.9/bbl yesterday
Natural Gas US$2.583/mmbtu vs US$2.655/mmbtu yesterday
Uranium US$22.00/lb vs US$22.00/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$77.6/t vs US$77.9/t
• Despite Chinese iron ore port holdings expanding to a record 155.88 million tonnes, according to Shanghai Steelhome E-Commerce Co., forecast prices are expected to remain elevated through 2018 says BMI Research in a latest report. While they cite demand sustaining and heavy restocking of inventory following the Lunar New Year to justify the raised $55/t forecast, prices are expected “to decline in subsequent years as Chinese economic growth refocuses away from heavy industry to services, dampening global demand for iron ore”.
Chinese steel rebar 25mm US$638.6/t vs US$636.6/t
• Raw materials for steelmaking show recovery after falling to their lowest levels in over a week on Thursday as Chinese investors broadly sell metals as their markets open after the holidays and steel prices dropped. Trading on the Shanghai Futures Exchange resumed yesterday after the week-long break for the Lunar New Year with “a flurry of sales. Probably traders, merchants and some arb players are behind this move, looking to capture some profit before buying interest returns”, according to head of metals research at Societe Generale.
• Nickel and zinc were hit the hardest as Chinese steel futures fell nearly 2%, recording their lowest levels in five weeks. Nickel which is mainly used in stainless steel closed down 0.1%, while zinc lost 0.3% as a main ingredient to galvanizing steel.
• The move isn’t expected to last however, as a late reversal in dollar trend recovered some loss while fundamentally the market is moving into peak season of demand, which runs from March to June.
Thermal coal (1st year forward cif ARA) US$83.0/t vs US$81.7/t
Premium hard coking coal Aus fob US$233.0/t vs US$231.6/t

Other:  
Tungsten APT European US$319-325/mtu unchanged
Cobalt LME 3m US$82,500.0/t vs US$81,250.0/t - Cobalt 27 buys royalty on world’s largest undeveloped nickel and cobalt reserve
• Cobalt 27 Capital Corp, a Canadian company created to buy the metal, said it has bought a royalty on all future nickel and cobalt production from the Dumont project in Quebec in a deal worth $70 million
• Transaction is for a 1.75 percent net smelter return royalty on output from Dumont, which contains the world’s largest undeveloped nickel and cobalt reserves, the project is jointly owned by RNC Minerals and private equity firm Waterton Global Resource Management
• RNC said last month that it is in talks with Japanese trading houses, mine operators and financiers to help secure $1 billion to build the project, which is expected to start production in 2020
• Cobalt 27 is also in talks for other cobalt streaming and royalty deals and plans over the next year

Company News
W Resources (LON:WRES) 0.625p, Mkt Cap £32.2m –La Parilla offtake agreements
• The Company reports that it has signed agreements to supply approximately 80% of the tungsten concentrate production of its phase T2 development at La Parilla.
• The agreements with Wolfram Bergbau und Hutten and “a leading supplier to the USA tungsten markets” are for the supply of “66% tungsten concentrate on competitive pricing terms”.
• Commenting on the agreements, Chairman, Michael Masterman, said “The agreements provide W with assurance of a solid revenue stream once production commences in early 2019 as we now focus on the implementation of the mine development plan…”
• The company also confirms that it has received the “first tranche of US$3.125 million” under its US$35m loan facility with BlackRock and that it has now repaid in full “the short term loans of €100,000 each provided by Symmall Pty Limited and Beronia Investments Pty Ltd ATF Duke Trust”.
• We observe that W Resources’ timing for the La Parilla development is either fortunate or astute as prices of the benchmark, intermediate product, ammonium paratungstate (APT) improved by around 50% during 2017 from approximately US$200/ metric tonne unit (mtu) to about US$300/mtu and that the improving price trend has continued into 2018 with the price currently around US$320/mtu.

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Fri, 23 Feb 2018 11:21:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29423/today-s-market-view-w-resources-29423.html
Morning View . Metals continue retreat following Fed Reserve minutes http://www.proactiveinvestors.co.uk/columns/sp-angel/29419/morning-view-metals-continue-retreat-following-fed-reserve-minutes-29419.html SP Angel morning note readership numbers rise significantly since introduction of new MiFID II regulations

  • Restrictions on the publication of research under the new MiFID II regulations appear to have significantly increased readership of our morning note

 

Anglo American (LON:AAL) – H1 recovery and dividend resumption as net debt almost halved in a year

Golden Star Resources (LON:GSC) – 2017 results confirm the operational turnaround resulting from the underground strategy

Kodal Minerals* (LON:KOD) – Drill results confirm continuity, high-grade and potential of Bougouni lithium project

Click link for Flash Note

Mkango Resources* (LON:MKA) 8.9p, mkt 9.3m - EV Automakers look to optimise use of rare earths on forecast demand growth

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Results

Xpediator PLC* (LON:XPD) – Buy, Target price 44p – Full Year trading update shows strong growth in line with market expectations

Click link for Flash Note

 

Miners reward shareholders with cash returns while slashing debt

  • The four major London-listed mining companies have released earnings this month and its clear they are doing what shareholders have demanded of them by rewarding shareholders through pay-outs and pay down debt
  • Glencore impressed investors with a $2.9bn in dividends, Rio Tinto is offering $5.2bn plus a $1bn buy-back facility, Anglo are paying $618m and BHP Billiton paid $2.9bn in interim dividends.
  • Free Cash Flow generation from the majors of $26.7bn is made up of: BHP $11.1, Anglo $4.9bn, Rio Tinto $9.5bn, Glencore $1.2bn (after adjusting for $5.0bn changes in working capital)
  • Funds which are short of the miners are likely to continues to show lesser returns as the sector continues to outperform in terms of cash generation and strong earnings

 

Dow Jones Industrials

 

-0.67%

at

24,798

Nikkei 225

 

-1.07%

at

21,736

HK Hang Seng

 

-1.31%

at

31,020

Shanghai Composite

 

+2.17%

at

3,269

FTSE 350 Mining

 

+2.08%

at

18,941

AIM Basic Resources

 

-0.01%

at

2,550

 

Economics

 

Currencies

US$1.2273/eur vs 1.2313/eur yesterday  Yen 107.47/$ vs 107.67/$  SAr 11.723/$ vs 11.704/$  $1.389/gbp vs $1.396/gbp  0.780/aud vs 0.785/aud  CNY 6.359/$ vs 6.342/$

 

Commodity News

 

Precious metals:         

Gold US$1,322/oz vs US$1,328/oz yesterday

  • Spot gold continues to retreat, falling 1.7% this week so far as the last US Fed Reserve meeting showed policymakers are confident in the need to keep raising interest rates. The more upbeat take on inflation in the minutes of the Jan. 30-31 policy meeting has convinced market participants that the new Fed chief Jerome Powell will lead his colleagues in raising interest rates next month. The USD rose to an over one-week peak to extend its weekly recovery, helped by the Fed minutes and higher short-term Treasury yields.

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$988/oz vs US$997/oz yesterday

Palladium US$1,023/oz vs US$1,027/oz yesterday

Silver US$16.44/oz vs US$16.43/oz yesterday

           

Base metals:   

Copper US$ 7,025/t vs US$7,043/t yesterday

  • Investors withdraw from global equities and commodities into the safety of the dollar ahead of the release of the minutes from the US Federal Reserve’s most recent policy meeting. The Bloomberg dollar index continued its positive surge against the basket of currencies to 1% this week so far, with global stocks falling for the third consecutive trading day and as the two-year US Treasury yield touched its highest since 2008.
  • Crucial January US data highlights higher than expected US wages and inflation, driving up the USD and US yields, with the Fed minutes signaled the potential for additional increases in interest rates this year on the back of an expanding US economy. The policy meeting minutes “increased expectations for further rate hikes”, boosting the dollar and hurting metals, said an analyst with Guotai Junan Futures Ltd.
  • However, sentiment continues to be positive for metals as “the bullish fundamentals haven’t changed”, while advice that “investors should buy on the dips” remains. Banks including Goldman Sachs Group Inc and JP Morgan Chase & Co. have reiterated that renewed inflation as the economy expands may boost commodity prices and raw materials will do well in the late stage of the economic cycle. Synchronised global growth and constrained mine supplies are also supporting metals. In the near-term, Chinese demand is set to recover as manufacturers return after the Lunar New Year holiday.

Aluminium US$ 2,167/t vs US$2,168/t yesterday

Nickel US$ 13,440/t vs US$13,440/t yesterday

Zinc US$ 3,460/t vs US$3,521/t yesterday

Lead US$ 2,526/t vs US$2,569/t yesterday

Tin US$ 21,530/t vs US$21,500/t yesterday

           

Energy:           

Oil US$64.9/bbl vs US$64.6/bbl yesterday

Natural Gas US$2.655/mmbtu vs US$2.609/mmbtu yesterday

Uranium US$22.00/lb vs US$21.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.9/t vs US$77.3/t - Glencore iron ore trading volumes rise to 47.7mt as EBIT rises to +$7m from a loss of $9m yoy

  • Said that iron ore trading volume increased marginally in 2017 as it rebounded to profit for the business among a widening in pricing by grade with less low grade demand in China expected
  • Traded 47.7mt of ore in 2017, up from 47.1mt in 2016, booked adjusted EBIT of $7m for iron ore, from a loss of $9 million in 2016 on the same basis
  • Glencore said while the overall supply of iron ore may increase in 2018, a decrease in low grade cargoes exported to China may be seen, as steel margins incentivised purer less-polluting grades

Chinese steel rebar 25mm US$636.6/t vs US$638.3/t

  • The most-active steel rebar futures fell almost 2% as investors return from a week-long Lunar New Year holiday, touching its weakest level in five weeks at 3,841 yuan ($605)/tonne. While steel demand is expected to firm when construction activity resumes at full swing, but is not expected until next months with many workers still away. “Traditionally, most of the construction workers will stay at their hometown until early March” according to a Shanghai-based trader.
  • The peak season in China’s construction begins next month with encouraging order books at steel plants and traders for February and March. Low steel inventories along with abundant liquidity across China following a substantial increase in new loans in January “will fuel steel demand”.
  • Chinese steel producers are actively restocking raw material inventories, eager to unleash full mill capacity following the winter’s output curb ending next month, with hopes for a repeat of last year’s record margins. BHP Billiton Ltd. Forecast mills to boost run rates through the second quarter to make up for the curtailments. Chief Commercial Officer Arnoud Balhuizen forecasts a gradual resumption as provinces step back from restrictions designed to fight air pollution, noting “our base case is that the winter restrictions expire in staggered fashion across localities, with the blast furnace fleet expected to return to the high utilisation rates that prevailed prior to the winter curtailments sometime in the June quarter. This is required due to the gap in construction steel supply left by the permanent closure of induction furnaces”.
  • The move toward air emission improvements also brought a focus on higher-grade ore, with demand expected to remain high following the output lift, although average prices may drop as China’s demand growth may fall this year given a slowdown in housing and autos. “While it will be challenging to maintain the same average prices as those achieved in the half year just concluded, we are optimistic that the 62% index price can be relatively resilient”. Support for lower-grade ore has fallen, as the discount on 58% content ore has widened to more than 40%, from less than 15% in 2016.  

Thermal coal (1st year forward cif ARA) US$81.7/t vs US$83.3/t - Adani Group facing renewed claims of $600m fraud in India

  • India’s customs office has revived allegations of a US$600m financial fraud against the Adani Group, challenging an order clearing the mining giant last year as “erroneous, illegal and improper”
  • Adani has been fighting allegations for the past four years that it used a shell company in Dubai to siphon hundreds of millions of dollars from the company’s books into Adani family companies based in overseas tax havens
  • Adani has plans to build one of the world’s largest coal mines in Australia though their ability to finance and run the operation may now be in some doubt

Premium hard coking coal Aus fob US$231.6/t vs US$231.6/t

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,250.0/t unchanged

  • Chinese cobalt companies rally as much as 10% with Apple Inc. becoming the latest major consumer to seek long-term supply deals for the battery metal. China Molybdenum Co., which has operating mines across the world’s largest producer, the Democratic Republic of Congo, climbed as much as 10% in Hong Kong, with mainland stocks Zhejiang Huayou Cobalt Co., GEM Co., Nanjing Hanrui Cobalt Co. following suit.
  • Even Apple is trying to secure cobalt supply for its mobile batteries (direct from miners)” according to Argonaut Securities Asia analyst, and “it indicates that future global demand for cobalt from electric vehicles will be really huge”. While consumption from individual electronic devices remains relatively low compared to Tesla vehicle batteries, the favoured Lithium-Cobalt-Oxide (LCO) compounds represent up to 60% cobalt, compared to the 6-19% for Nickel-Manganese-Cobalt (NMC) variations.
  • Benchmark cobalt metal price rose yesterday to its highest since 2008, climbing 145% last year.

 

Company News

Anglo American (LON:AAL) 1726.8 pence, Mkt Cap £22.3bn –H1 recovery and dividend resumption as net debt almost halved in a year

  • Anglo American has reported a doubling of attributable profit during 2017 to US$3,166m (2016 US$1,594m). Earnings per share doubled to $2.48/share from US$1.24/share in 2016.
  • The company reports that it “exceeded our cost and volume improvement target for the year, achieving $1.1 billion of underlying EBITDA benefit.”
  • Attributable free cash flow almost doubled to US$4,943m from US42,562m in 2016 and, as a result, the group net debt almost halved to US$4.5bn at the year-end (2016 – US$8,487m) reducing gearing from 26% to 13%.
  • In terms of EBITDA, the contribution of Anglo American’s coal operations, which generated an EBITDA margin of 46%,  rose by over 70% to US$2,868m (2016 – US$1,646m) and contributed 33% of the total US$8,823m. Metallurgical coal dominated with sales of 19.8mt generating US$1,977m of EBITDA from revenue of US$3,675m at a 54 % margin.
  • Coal sales of 10.6mt from Cerrejon in Colombia generated a further US$385m of EBITDA at a margin of 49% while to lower margin South African coal business sold 18.6mt at a margin of 32% to generate US$588m from sales revenue of US$2,746m
  • The second largest contributor were the iron ore and manganese businesses which contributed US$2,357m of EBITDA from revenues of US$5,831m (2016- US$1,536m EBITDA from revenues of US$3,426m). The S African iron ore business of Kumba dominated providing over 60% (US$1,474m) of EBITDA at a margin of 42% on sales of 44.9mt.
  • Anglo American’s copper business recovered strongly rising from EBITDA of US$903m in 2016 to US$1,508m with what were described as “solid performances at Los Bronces and Collahuasi partly offset by the impact of lost production at El Soldado, owing to temporary suspension of mining operations in the first half.”
  • The De Beers diamond business improved both sales and margins to deliver EBITDA of US$1,435m (2016 – US$1,406m)  at a margin of 25% (2016 – 23%) despite lower sales revenues as a result of the anticipated destocking of the middle part of the supply chain.
  • The company is declaring a final dividend 54 cents bringing the total to US$1.02/share (2016 – nil).
  • Commenting on the results, Chief Executive, Mark Cutufani, said “These strong financial results benefit from transformed productivities and efficiencies across our business” and went on to highlight that “Over the last five years, we have now delivered a $4.2 billion annual underlying EBITDA improvement. While we have already driven a material operational turnaround, we believe there is significant additional upside within the business both through further operating gains and from selected organic growth options”.

 

Golden Star Resources (NYSEAMERICAN:GSS) C$0.92, Mkt Cap C$350.5m – 2017 results confirm the operational turnaround resulting from the underground strategy

  • Reporting a reversal of the US$39.6m loss in 2016 to an attributable profit of US$38.8m in 2017, Golden Star Resources underlined that it had met or exceeded its guidance for gold production cash and all-in sustaining costs and capital expenditure.
  • Gold production of 267,565oz during the year included a contribution of 137,234oz from Wassa and 130,331oz from Prestea and exceeded 2016’s 194,054oz by 38%.
  • Consolidated cash costs declined by around 13% to US$763/oz, below the 2017 guidance range of US$780-860/oz,  with Wassa declining by 6% to US$880/oz while Prestea delivered a 21% reduction to US$632/oz.
  • Consolidated all-in sustaining costs fell by 14% to US$944/oz which was also below the guided US$970-1070/oz.
  • Capital expenditure during the year of US$69.6m represents a decline of around 17% compared to 2016.
  • The company’s production guidance for 2018 is for 230-225,000oz of gold production at an average cash cost of US$650-730/oz. In detail, Wassa is expected to produce 137-142,000oz of gold at between US$600-650/oz while Prestea is forecast to produce 93-113,000oz of gold at a cash cost in the range US$740-880/oz.
  • Capital cost guidance for 2018 shows a substantial reduction to US$36.5m, of which US$18.8m is classed as development capital and US$17.7m as sustaining capital. The breakdown by operating unit is for US$20.6m to be spent at Wassa (US$5.9m of development capital with the balance to sustain operations); US$9.3m at Prestea (US$6.3m development) and the remaining US$6.6m on exploration.
  • At 31ST December 2017, the company held cash of US$27.8m leaving net debt of US$67.8m (December 2016 US$83.1m).

Conclusion: Golden Star’s move away from its historic low grade, high cost open-pit mining operations to focus on higher grade, lower cost underground mining has reversed 2016’s losses and delivered a profit of US$38.8m. As the transition continues following the milestone of commercial production at the Prestea underground mine which was achieved on 1st February, a reduction in expected capital expenditure and continuing cost reduction at both Wassa and Prestea, the trend looks set to continue.

 

Kodal Minerals* (LON:KOD0.18p, mkt cap £12m – Drill results confirm continuity, high-grade and potential of Bougouni lithium project

Click link for Flash Note

  • Kodal Minerals continues to report good quality drill results from the Ngoualana prospect at its Bougouni Lithium project in Southern Mali.
  • The drilling indicates that the scale, grade and continuity of the project now make Bougouni look like a potentially viable prospect.
  • Work done nearby by Birimian Limited gives some indication as to the economic potential of the region for lithium production.
  • Significantly, results from metallurgical work indicate that Kodal’s Bougouni project may produce cheaper and more viable Lithium Carbonate concentrate product directly in country.
  • High-purity spodumene: Kodal’s ‘naturally’ high purity spodumene formed in massive pegmatite intrusions hosted in metasediments which may be bulk mined to enable extraction of the whole pegmatite with particularly high grades seen where pegmatite dykes intersect. The pegmatite veins are spodumene rich at 20-30% spodumene content in low mica pegmatite bodies.
  • So far drilling shows a strike length of some 850m of remarkably consistent spodumene in pegmatite with a number of associated parallel veins.
  • Drilling is done at around 50 degrees to the vertical to give good intersections of the vertical or near vertical vein material.  Intersections show the major vein to have a true width of around 20m.
  • Drill spacing’s are around 50m apart with infill drilling closing this up to 20m in some areas. Consistency of the vein material may enable a JORC resource to be done on the current drill pattern.
  • A newly discovered vein some 250m to the south also appears to provide a further zone of material.
  • Drill results: today’s results show high grade lithium of up to 1.75% in Li2O.
  • The team have drilled some 45 RC drill holes covering 5,619m since October with assays returned for some 26 of the holes by ALS Laboratories.
  • Results have been calculated with a rigorous 1% Li2O lower cut-off and maximum 2m internal dilution and only reporting intersections of >5m width.
  • Notable results are:
    • 18m at 1.75% Li2O;
    • 20m at 1.71% Li2O;
    • 17m at 1.63% Li2O;
    • 18m at 1.54% Li2O;
  • Bulk sample: Kodal is looking to ship a 5,000t bulk sample to China for further testing. The cost of the sample will be around £350,000 though a portion of this will be recouped through the sale of the contained lithium after processing.
  • Concentrate: Battery grade lithium carbonate concentrate of >6% Li2O should be producible at Bougouni. Recent prices are reported by Kodal to be running at around US$600/t
  • Cash: Kodal is relatively well funded for an exploration company with £3.6m cash in the bank and relatively low overhead costs running at around £360,000pa.
  • Drilling costs extra but this is also at a relatively modest $60/m.
  • Feasibility Study: Kodal is working on the key elements for a Feasibility Study, eg drilling, bulk sampling and metallurgical testing. The data should enable the development of a suitable study for more accurate economic assessment of the project for further financing and potential future development.
  • Location: Bougoumi is unusually well located for a project in Mali with the town of Bougouni just 7km to the north which is just 180km from Bamako.
  • Power: there is a power line running through the license area though the project is likely to require its own power plant. Advances in solar power mean that much of this could be generated simply and locally with grant funding available to help projects get going.

Conclusion: The relative purity of Kodal’s Bougouni project ores combined with low associated mica levels should make concentrates from the Bougouni project relatively simple to produce and easy to sell. So far Suay Chin PTE based in in Singapore has contributed £4.8m to Kodal. The group is affiliated with the Shandong Ruifu Lithium Company, a lithium processing and chemical business based in China. We see this as a beneficial, strong and meaningful partnership for Kodal and its shareholders.

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

 

Mkango Resources* (LON:MKA) 8.9p, mkt 9.3m - EV Automakers look to optimise use of rare earths on forecast demand growth

  • Toyota Motor Corp., Asia’s number 1 automaker, is developing a new wave of electric vehicles which are more affordable and less vulnerable to price fluctuations for key elements in short supply. The next generation electric motor permanent neodymium batteries look to reduce the dependency on expensive rare earths including neodymium, terbium and dysprosium.
  • Magnet development in the future aims to reduced neodymium consumption by up to 50% and eliminated terbium and dysprosium from 4th generation Prius motor permanent magnets, in favour of more abundant lanthanum and cerium, which cost about 20x less.
  • With rising neodymium prices and exports from China dropping 30%, next-generation magnets prices are expected to be more sustainable.
  • Toyota expects that the magnets will be put to first use in electrified vehicle drive motors and generators and electric power steering in the first half of the 2020s. The International Energy Agency estimates the number of electric vehicles to reach around 40 million, while the mining Giant BHP Billiton forecast 8% global fleet (140 million vehicles) by 2035.

Conclusion: The adjustments to the mix of rare elements to be used appears to favour the mix of rare earth metals within Mkango’s Songwe Hill project in Malawi

*SP Angel act as nomad and broker

 

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Results

We apologise for issuing an old headline in yesterday’s comment

  • Rainbow Rare Earths has reported a loss of US$1.1m for the six months to 31st December 2017 2016 Loss - US$0.4m) as it ramps up mine production at its Gakara mine in Burundi and moved the Kabezi plant through commissioning.
  • The 31st December cash balance is reported at US$2.7m and at US$2.4m net cash.
  • The company expects to achieve formal hanDover of the plant this month and be able to declare full commercial production during Q2 2018 so that during the second half of the calendar year it can build up to a production rate of 5000tpa of concentrate.
  • Two 25t consignments of concentrate were shipped during December with a further 75t consignment in January and "February's export Figure is due to be higher still."
  • Exploration work including mapping and geochemical stream sediment sampling has identified 69 potential rare earth target while ground based gravity and airborne magnetic geophysical surveys have " indicated the presence of four sizeable and highly prospective magnetic anomalies, the largest of which covered an area which includes the Gashirwe and Kiyenzi prospects." 
  • Drilling is currently underway on these targets.

Commenting on the state of the rare earths market, the company points out that rare earths prices "increased considerably in the second half of 2017" after "two years of inactivity". The basket price of the company's suite of rare earths "ranged between US$10-11 per kg TREO in the first six months of 2017, reached a peak in excess of US$18per kg in September, before ending the year at US$12.27per kg and strengthening further to US$13.24per kg as at 20th February 2018."

 

Xpediator PLC* (LON:XPD) 38.5p, mkt cap £45.2m – Full Year trading update shows strong growth in line with market expectations

Buy - Target price 44p

  • Adjusted net profits double and cash is ahead- UK based freight management company, Xpediator, has issued a trading update for the Full Year ending December 2017. We estimate that 2017 adjusted net profits more than doubled from £1.4m to £3.1m. Year-end cash closed at £1.5m (vs. our forecast net debt of £1.5m) on strong working capital performance. Our 2018 adjusted EPS estimates (unchanged) rate the shares on a p/e 9.9x with a yield of 4.4%.
  • Group margins are rising - the Group continues to invest in operations to expand margins and add value. Xpediator has today announced the appointment of a new Chief Information Officer to drive IT strategy. We forecast rising adjusted EBIT margins - from 3.8% in 2017 to 4.6% in 2018 and 4.8% in 2019. 
  • Expanding European presence and e-commerce capability - three acquisitions were undertaken during 2017, management resource is in place to support integration and IT infrastructure is being expanded.  
  • Brexit and shipping via UK ports - Dover handled more than 2.6 million trucks in 2017 and Calais 2 million – both ports are now campaigning for a free flow trade system post Brexit. Without this, HMRC estimate customs declarations rising from 55 million to 255 million per annum. The existing customs declaration system CHIEF is 25 years old and HMRC is in the process of developing and testing a replacement, the Customs Declaration System (CDS). This is to be phased in from August 2018. The Group recently acquired UK port offices at Dover and Felixstowe for potential post Brexit customs work.
  • Growth opportunities - the Freight Forwarding division is seeing strong CEE freight demand, supported by strong regional GDP growth and is investing in new routes. Newly acquired Regional Express is an Amazon Global preferred supplier providing VAT registration and shipping for e-commerce operators in the U.S. and Asia selling into UK and Europe. This brings upside opportunity. The Warehousing & Logistics division’s new Romania warehouse has reached full capacity helped by growth of the Pall-Ex franchise. Further capacity is being sought. The Transport Services division, with a network of 1,500 CEE haulage firms, provides fuel cards, breakdown recovery and ferry bookings. It has high margins and steady growth.

Valuation - the UK sector trades on a p/e multiple range of 10.0x – 13.0x and the wider international sector on a p/e of 16.0x. Xpediator trades on a 2017 p/e of 12.5x falling to 9.9x in 2018 and 8.6x in 2019. Coupled with an attractive 2018 yield of 4.4%, market opportunity and upside from the effective integration and development of the recent acquisitions, we believe that the current share price is undervalued. 

 

*SP Angel act as Nomad and joint broker

]]>
Thu, 22 Feb 2018 12:59:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29419/morning-view-metals-continue-retreat-following-fed-reserve-minutes-29419.html
Morning View . Gold pulls back ahead of Fed minutes http://www.proactiveinvestors.co.uk/columns/sp-angel/29413/morning-view-gold-pulls-back-ahead-of-fed-minutes-29413.html Glencore (LON:GLEN) 400p, Mkt Cap £58bn – Trading and marketing drives Glencore earnings

Mkango Resources* (LON:MKA) 9.3p, mkt 9.7m - Rare Earth Element prices hike higher

Patagonia Gold (LON:PGD) 1.3p, mkt cap £31.3m - Proceeding with Calcatreu option

Pathfinder Minerals plc (LON:PFP) £1p, mkt cap £2.4m –  Mozambique

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Raising £2.8m for growth plans at Gakara

 

Japan task force echoes foreign minister calls to back renewables over coal and nuclear

  • Energy task force advising Japan’s foreign minister has proposed boosting renewable energy and shifting away from coal fired and nuclear power at home
  • The task force report, presented to Kono on Monday, argues nuclear power has lost economic competitiveness and says the world’s third-biggest economy should cut reliance on atomic energy to as little as possible, and instead boost use of renewables
  • In its current official targets Japan, one of the world’s biggest importers of thermal coal and natural gas, aims for renewables to make up 22 to 24 percent of its energy mix in 2030, up from about 14 percent now

 

Dow Jones Industrials

 

-1.01%

at

  24,965

Nikkei 225

 

+0.21%

at

  21,971

HK Hang Seng

 

+1.81%

at

  31,432

Shanghai Composite

 

-

 

 

FTSE 350 Mining

 

-0.37%

at

  18,487

AIM Basic Resources

 

-0.91%

at

   2,573

 

Economics

US – Bond yields on 10y sovereign debt held up around 2.89% and the US$ index hovered around 5-day high ahead of Fed meeting minutes due later today.

  • US equities closed in red in Tuesday after returning from a long weekend break snapping a six-session winning streak.

 

Germany – Economic growth continued strong in February with the pace coming off a seven year high recorded in the first month of the year, Markit PMI numbers suggest.

  • Another increase in new orders has been recorded taking the series of gains to thirty-eight months; although, rates of growth slowed across both manufacturing and services for seven and six months, respectively.
  • Employment climbed higher although at a reduced pace.
  • Business sentiment was at a record high since Jul/12 led by the services sector; manufacturers were the least optimistic for three months.
  • Inflation climbed to the second-fastest level since Jul/08 with businesses passing higher input costs onto consumers.
  • “The performance so far in the first quarter remains better than that seen in final three months of 2017, which saw GDP rise 0.6%... HIS Markit is currently forecasting an improved outturn of 0.9% in quarter one,” the report read.
  • Manufacturing PMI: 60.3 v 61.1 in January and 60.5 forecast.
  • Services PMI: 55.3 v 57.3 in January and 57.0 forecast.
  • Composite PMI: 57.4 v 59.0 in January and 58.5 forecast.

 

UK – Unemployment inched up in three months through December as an gains in new jobs weakened; average pay growth was little changed from the previous period.

  • The pound dropped against the US$ on the back of weaker than forecast employment numbers and an unexpected pick up in the jobless rate.
  • With inflation currently running at 3% means real earnings are down year on year.
  • Real pay was down 0.3%yoy in 2017, according to ONS numbers.
  • Unemployment rate (%): 4.4 v 4.3 in the previous three months and 4.3 forecast.
  • Employment change: +88k from three months to September and +165k forecast.
  • Av weekly earnings (3m%yoy): 2.5 v 2.5 in the previous month and 2.5 forecast.

 

France – Private sector growth remained elevated in February, although both manufacturing and services recorded a dip in the pace of expansion through the month.

  • Production gained on the back of a 20th consecutive increase in new orders.
  • Contrary to the trend for output and new orders, the rate of employment growth accelerated from the previous month and was just slightly below November’s 16-and-a-half year high.
  • Stronger employment increase was driven by service providers which hired staff at the second-sharpest pace since mid-2001, while manufacturers recorded a slight moderation in new jobs available.
  • Inflation eased slightly from the previous month amid weaker increases in both manufacturing and services sectors.
  • “Private sector growth in France shifted down a gear in February, with the rate of expansion in output and new orders each hitting four-month lows… nonetheless, the headline composite output PMI number of 57.8 remained firmly in positive territory and greater than the long-run series average (53.9),” the report said.
  • Manufacturing PMI: 56.1 v 58.4 in January and 58.0 forecast.
  • Services PMI: 57.9 v 59.2 in January and 59.0 forecast.
  • Composite PMI: 57.8 v 59.6 in January and 59.2 forecast.

 

South Africa – The SA rand strengthened against the US$ this morning following the release of weaker inflation numbers in January.

  • Consumer prices climbed 4.4%yoy v a 4.7%yoy increase recorded in December.
  • Moderating inflation eases pressure on the central bank to maintain a tight monetary policy.
  • The reserve bank held the benchmark repo rate unchanged at 6.75% in the last three meetings after cutting it by 25bp in mid-2017 as inflation came back into the target range of 3-6%.
  • Core CPI slowed to 4.1% in January, from 4.2%yoy recorded in December.

 

Currencies

US$1.2313/eur vs 1.2362/eur yesterday. Yen 107.67/$ vs 107.09/$. SAr 11.704/$ vs 11.716/$. $1.396/gbp vs $1.396/gbp. 0.785/aud vs 0.792/aud. CNY 6.342/$ vs 6.342/$.

 

Commodity News

 

Precious metals:         

Gold US$1,328/oz vs US$1,338/oz yesterday

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$997/oz vs US$1,002/oz yesterday

Palladium US$1,027/oz vs US$1,029/oz yesterday

Silver US$16.43/oz vs US$16.50/oz yesterday

           

Base metals:   

Copper US$ 7,043/t vs US$7,089/t yesterday - BHP says copper best way to play EV revolution

  • Copper is the best way to benefit from growth in electric cars and renewable energy according to BHP, the world’s largest mining company
  • Chief Executive said that the miner will concentrate on boosting its copper production rather than venturing into smaller markets such as lithium and cobalt, he argued that ‘copper market is order of magnitude greater even when you allow for EV’s’  
  • According to consultancy CRU, electric cars will require a global infrastructure revolution that will drive increase in global copper demand, with forecast that demand for copper in charging in distribution upgrades will reach 1.2m tonnes

Aluminium US$ 2,168/t vs US$2,213/t yesterday

Nickel US$ 13,440/t vs US$13,535/t yesterday

Zinc US$ 3,521/t vs US$3,547/t yesterday

Lead US$ 2,569/t vs US$2,574/t yesterday

Tin US$ 21,500/t vs US$21,400/t yesterday

           

Energy:           

Oil US$64.6/bbl vs US$65.4/bbl yesterday

Natural Gas US$2.609/mmbtu vs US$2.637/mmbtu yesterday

Uranium US$21.75/lb vs US$21.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.3/t vs US$77.4/t - Fortescue Metals wants to drive production costs lower

  • After production costs hit record low in the last quarter, Fortescue Metals, wants to drive its production costs even lower this fiscal year
  • Company is relying on automation and innovation to do so, using automated drills and an automated haulage system
  • Company says they are on track for a guidance of between $11 and $12 a tonnes for the financial year
  • Company has recently seen its interim net profit slump by almost half because of weaker prices and less demand in China for its lower quality iron ore

Chinese steel rebar 25mm US$638.3/t unchanged

Thermal coal (1st year forward cif ARA) US$83.3/t vs US$83.5/t

Premium hard coking coal Aus fob US$231.6/t vs US$233.1/t

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,250.0/t unchanged

 

Company News

Glencore (LON:GLEN) 400p, Mkt Cap £58bn – Trading and marketing drives Glencore earnings

  • Glencore report a triumphantly strong set of earnings for 2017 driven by strong recovery in their mining business supported by another good performance from their trading (Marketting) activities.
  • Debt which so haunted the group back in December 2015 when the shares hit a low of 69p on rumours of potential debt refinancing issues has been cut.
  • Net debt is reduced to a more manageable US$10.7bn from US$15.5bn yoy though it is good to see Glencore’s appetite for expansion and asset acquisition remains undimmed.
  • Glencore has proven that its policy of aggressive expansion into some higher-risk areas, eg the DRC has worked well for the business creating growth that other mining majors can but envy.
  • Recent moves mean that Glencore is well placed in terms of production of cobalt and other battery metals required to feed the massive expansion in electric vehicle production that is to come.
  • The Marketing division, which refers to the trading business reported an EBIT of US$3bn. While this was just 3% better than last year investors should remember that it was the marketing business which led the company out of its downturn and effectively rescued the company at a time when a number of aggressive hedge funds were against it.
  • Industrials, consisting of mining and energy products, saw a major 60% rise in EBITDA to US$11.5bn highlighting the impact of higher prices across almost all commodities particularly through the second half.
  • The rise in metals prices has continued into the new year and we would look forward to another strong first half for Glencore this year.
  • Glencore continues to expand in areas which other majors are shying away from with Glencore taking up a 49% stake in the acquisition of Rio Tinto’s Hunter Valley coal operations in cooperation with Yancoal retaining a 51% stake giving Glencore access to coking and other high quality coal.
  • Agriculture improved to EBIT of US$990m from US$909m last year
  • Dividends have increased to 20c/s distributing some US$2.9bn for the year.
  • Net income rose to US$5.8bn from US$1.4bn last year highlighting the turnaround and the massive contribution from the mining business.

Conclusion: Glencore goes where others fear to tread. While this increases its risk profile it also raises the potential reward. 2018 should be a great year for Glencore’s mining business with ongoing support from growth in its trading business.

 

Mkango Resources* (LON:MKA) 9.3p, mkt 9.7m - Rare Earth Element prices hike higher

  • Rainbow Rare Earths have noted this morning that the basket price of the company's suite of rare earth elements has risen dramatically by 8% since the year and around 26% since H1 ’17.
  • The market is partially driven by growth in production for electric vehicles as well as other new technologies.
  • REE prices are also recovering from depressed levels caused by the collapse of a number of REE investment schemes in China. The collapse in prices forced Molycorp to close the Mountain Pass REE mine in California and file for Chapter 11 bankruptcy protection in June 2015. The Mountain Pass REE mine sold in June 2017 for $20.5m to a Chinese led consortium .
  • Molycorp was acquired by Oaktree Capital Management and reorganised into Neo Performance Materials which was listed on the TSX on 8 December last year at $18/s. The shares have since pulled back to $15.30/s.

*SP Angel act as nomad and broker

 

Patagonia Gold (LON:PGD) 1.3p, mkt cap £31.3m - Proceeding with Calcatreu option

  • Patagonia Gold reports production of 26,005oz of gold equivalent vs 25,800ozeq last year and 21,521ozeq in 2015.
  • Production guidance is for 59,000ozeq driven by the ramp up at the Cap Oeste project which is reported to be on schedule to exceed 4,200ozeq in February
  • Cap Oeste production 82,000ozeq gold equivalent within a range of US$800-850/oz.
  • Cash costs in January are stated at US$711ozeq which is just as well because the company’s other administrative costs of US$8.7 served to wipe out what remained of the company’s US$15m gross profit last year to create a US$0.9m total comprehensive loss for the year. The 2015 other admin charge was US$11.4m.

Conclusion: It is good to see new gold and silver production coming from Cap Oeste. The company now needs to get a grip on its administrative expenses which include an element of local taxes to enable returns to shareholders.

 

Pathfinder Minerals plc (LON:PFP) £1p, mkt cap £2.4m –  Mozambique

  • Pathfinder Minerals, which lost its mineral sands licenses in Mozambique in 2011 in a dispute with General Veloso continues to seek to recover control of the mineral licenses.
  • The company updates today that it continues to pursue a dual-track process to recover control of the licenses by way of enforcement in Mozambique or by way of a negotiated settlement with the General.
  • The company issued 19m shares on 1 December at 1.3p and the issued a further 3m shares on 22 December to Linkwood Holdings.
  • It is remarkable that a company should exist for so long while advancing so little.

 

Rainbow Rare Earths Ltd (LON:RBW) – 13.9p, mkt cap £24.2m – Raising £2.8m for growth plans at Gakara

  • Rainbow Rare Earths has reported a loss of US$1.1m for the six months to 31st December 2017 2016 Loss - US$0.4m) as it ramps up mine production at its Gakara mine in Burundi and moved the Kabezi plant through commissioning.
  • The 31st December cash balance is reported at US$2.7m and at US$2.4m net cash.
  • The company expects to achieve formal handover of the plant this month and be able to declare full commercial production during Q2 2018 so that during the second half of the calendar year it can build up to a production rate of 5000tpa of concentrate.
  • Two 25t consignments of concentrate were shipped during December with a further 75t consignment in January and "February's export Figure is due to be higher still."
  • Exploration work including mapping and geochemical stream sediment sampling has identified 69 potential rare earth target while ground based gravity and airborne magnetic geophysical surveys have " indicated the presence of four sizeable and highly prospective magnetic anomalies, the largest of which covered an area which includes the Gashirwe and Kiyenzi prospects." 
  • Drilling is currently underway on these targets.

 

Commenting on the state of the rare earths market, the company points out that rare earths prices "increased considerably in the second half of 2017" after "two years of inactivity". The basket price of the company's suite of rare earths "ranged between US$10-11 per kg TREO in the first six months of 2017, reached a peak in excess of US$18per kg in September, before ending the year at US$12.27per kg and strengthening further to US$13.24per kg as at 20th February 2018."

]]>
Wed, 21 Feb 2018 11:01:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29413/morning-view-gold-pulls-back-ahead-of-fed-minutes-29413.html
SP Angel . Morning View . Metals drift as China celebrates year of dog http://www.proactiveinvestors.co.uk/columns/sp-angel/29405/sp-angel-morning-view-metals-drift-as-china-celebrates-year-of-dog-29405.html African Battery Metals* (LON:ABM) – Kisinka cobalt project in DRC

Dalradian Resources (LON:DALR) – Drilling results from a further 16 holes at Curraghinalt

Kodal Minerals* (LON:KOD) – Gold anomaly in auger drilling at Nielle

SolGold* (LON:SOLG) – Latest drilling results from Alpala

Sunstone Metals (ASKSTM) – Results show potential of Bramaderos copper/gold project in Ecuador

 

European equities rise FTSE 100 off slightly as weaker than expected HSBC results weighed on the financial sector performance.

  • US indices futures are pointing to a weaker opening later today as markets reopen following a day off on Monday.
  • The US$ climbed for a third day as markets await Fed meeting minutes due tomorrow.
  • US sovereign bond yields are back on an increasing trend with the 10y benchmark trading above 2.9% ahead of a $258bn in government debt auction this week.
  • Brent is holding onto its gains recorded since mid last week amid signs of continued cooperation between major oil producing regions to control output; UAE Energy Minister said OPEC, Russia and other producers are looking at ways to “institutionalise” their cooperation beyond the end of this year.
  • Base and precious metals are lower on a stronger US$; despite a pull back by the LME index it continues to trade around highest levels in the last five years.

 

Lithium-ion batteries could be charged five times faster

  • New way of measuring internal temperatures of lithium ion batteries have revealed that they could safely be charged up to five times faster than currently recommended limits
  • Researchers at University of Warwick created a new sensor which works during battery’s normal operation without affecting its performance, previously have had to rely on unreliable external methods and have set very conservative limits as a result
  • The sensor uses miniature reference electrodes and Fibre Bragg Gratings along with an outer skin of fluorinated ethylene propylene to protect the device from the corrosive electrolyte inside the battery
  • The technology has been tested on commercially available vehicle batteries, but the researchers have said that more work would need to be done on battery management systems to take advantage of their findings

 

Lithium – The Lilium Jet, the world’s first electric vertical take-off and landing jet.

  • German company Lilium recently won “Early Stage Company of the Year” at the Global Cleantech 100 awards.
  • The team have developed a prototype electric plane that use turbo fans for Vertical Take Off and Landing (VTOL).
  • The VTOL capability makes the plane ideal for operations in urban locations and, dare we say it, military applications.
  • The team’s mission is to produce an affordable, clean, air taxi for 5 people.
  • Post early trials of their two seater prototype, Lilium claim performance of 300km/hr and 1 hour of flight on a single battery charge. 
  • The aircraft, constructed using light weight composites,  uses 12 flaps that are tilted to provide lift and direction.
  • Each flap carries 3 electric jet engines (source: Lilium) – all 36 engines generate 320kw of power.
  • LIlium raised $90m Series B funding in September 2017 to take it through regulatory approvals with the company aiming for manned test flights next year.
  • See more at: https://lilium.com/

 

Capital flows out of gold mining into Cobalt, Steel and Lithium

  • The gold sector may suffer as investment capital flows into other metals, according to a report from, accountants, Ernest & Young
  • The report shows that value of merger and acquisitions in the mining sector increased 15% in 2017 though the number of transactions declined by 6% last year
  • Specifically in the gold market, EY notes that M&A activity declined by 13% with the value of activity falling by 34% last year – whilst gold is suffering from lack of financing, EY said that with the growth in EV’s, demand is increasing for speciality metals like cobalt and lithium
  • EY also noted that the source of funding for the mining sector appears to be shifting, for the last two years industry participants accounted for nearly 70% of the financing deals; however, last year financial investors accounted for 22.4% of the transactions made last year, its highest level since 2015

 

Dow Jones Industrials

 

-

 

 

Nikkei 225

 

-1.01%

at

  21,925

HK Hang Seng

 

-

 

 

Shanghai Composite

 

-

 

 

FTSE 350 Mining

 

-0.31%

at

  18,755

AIM Basic Resources

 

-0.74%

at

   2,573

 

Economics

Germany – Producer prices growth beat estimates in January led by higher oil and electricity prices.

  • Annual price increase climbed 2.1%yoy last month beating analyst estimates for a 1.9%yoy reading but down on 2.7% recorded in FY17.

 

UK – PM May is considering to hold back UK contributions (£40bn) to the EU budget if EU officials refuse favourable trade deal terms.

  • A potential course of actions is discussed as an option if negotiations go wrong, people familiar with the matter told Bloomberg.
  • May is planning to announce details of a draft trade accord in a major speech next week with a draft ready by October and signed soon after Brexit in Mar/19.
  • EU officials argued that a full trade agreement would be impossible to finish before Brexit with October draft likely to only outline main principles rather than represent a legally binding contract.

 

Australia – The A$ is little changed against the US$ this morning amid the release of this month’s RBA policy meeting.

  • The RBA expects inflation to “only gradually” accelerate as the economy strengthens and labour market tightens.
  • Low interest rates have so far been supportive of reducing unemployment and bringing inflation closer to target levels.
  • Inflation has been stubbornly running at the 1.8%yoy rate, below the 2-3% target corridor.
  • The central bank remained cautious over the strength of the consumer demand growth in the wake of high household indebtedness highlighting that “consumption might be particularly sensitive to adverse developments in household income or wealth”.
  • On the other hand, business conditions remained at high levels with non-mining related investments prospects seen “more positive than they had been for some time”.
  • The bank held rates steady for the last 16 meetings with markets assigning a more than 50% chance to a rate hike only in November.

 

South Korea threatens WTO action if US hikes steel tariffs

  • South Korea will consider filing a complaint with the World Trade Organisation if President Donald Trump imposes high steel tariffs in line with recommendation made by the US Commerce Department
  • Whilst China does export a lot of steel and aluminium to the US, other countries import a lot more steel than China does
  • The recommendations call for tariffs on multiple countries, although Trump could determine that specific nations should be exempt, based on the economic or security interests of the United States
  • South Korea's trade ministry said in a statement that it had met with executives from steelmakers, and agreed to make outreach efforts until Washington reaches a final decision, Reuters reported
  • We find the news interesting given that South Korea may need to call on the US for its defence against North Korea at any moment

 

Currencies

US$1.2362/eur vs 1.2410/eur yesterday. Yen 107.09/$ vs 106.56/$. SAr 11.716/$ vs 11.671/$. $1.396/gbp vs $1.401/gbp. 0.792/aud vs 0.793/aud. CNY 6.342/$ vs 6.342/$.

 

Commodity News

Precious metals:         

Gold US$1,338/oz vs US$1,348/oz yesterday

   Gold ETFs 72.1moz vs US$72.1moz yesterday

Platinum US$1,002/oz vs US$1,013/oz yesterday

Palladium US$1,029/oz vs US$1,049/oz yesterday

Silver US$16.50/oz vs US$16.69/oz yesterday

           

Base metals:   

Copper US$ 7,089/t vs US$7,182/t yesterday - BHP forecasts a finely balanced market for copper over the next few years with supply shocks potentially exposing it to shortages, particularly in the concentrate segment.

  • Peru is planning to launch an auction for the $2bn Michiquillay copper project which has been returned by Anglo American to the government amid an optimization of its capex programs in 2014.
  • The project is estimated to host 1.2bn tonnes of copper in mineral resources and to potentially produce 200kt of copper per annum; although, the ore reported to contain elevated levels of arsenic.
  • The government is reporting that 10 companies including ones from China, UK and the US expressed interest and presented pre-registration documents to take part.
  • This would mark the first major mining project auction in Peru in at least a decade.

Aluminium US$ 2,213/t vs US$2,193/t yesterday

Nickel US$ 13,535/t vs US$13,765/t yesterday

Zinc US$ 3,547/t vs US$3,559/t yesterday – Vedanta is considering accelerating expansion of its African zinc operations to take advantage of prices that have climbed to the highest level in a decade, according to the zinc business head.

Lead US$ 2,574/t vs US$2,609/t yesterday

Tin US$ 21,400/t vs US$21,850/t yesterday

           

Energy:           

Oil US$65.4/bbl vs US$65.2/bbl yesterday

Natural Gas US$2.637/mmbtu vs US$2.611/mmbtu yesterday

Uranium US$21.75/lb unch

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.4/t vs US$77.2/t - BHP Billiton report firm demand for high quality iron ore in six months’ through Dec/17 in its interims.

  • Demand has been driven by “high steel margins, which benefited from Chinese steel supply-side reforms and winter production restrictions”.
  • The miner forecasts premiums for high grade ore to persist in the medium to long term on “ongoing Chinese supply-side reforms, the shift of steel capacity to coastal regions and more stringent environmental policies”.
  • Same logic has been expressed regarding main drivers for robust demand for higher quality metallurgical coal.

Chinese steel rebar 25mm US$638.3/t unch

Thermal coal (1st year forward cif ARA) US$83.5/t vs US$80.2/t

Premium hard coking coal Aus fob US$233.1/t unch

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,250.0/t v US$81,500.0/t - The voracious appetite for electric cars is driving a boom in small scale cobalt production in the Democratic Republic of Congo, where some artisanal and other private-run mines have found to be dangerous and employ child labour.

  • Production from artisanal mines probably rose by at least 50% last year, according to the estimates of officials at three of the biggest international suppliers of the metal, who asked not to be named because they’re not authorized to speak on the matter with production estimates accounting for as much as a quarter of the DRC’s production last year.

 

Company News

African Battery Metals* (ABM LN) 0.06p, Mkt Cap £3.5m – Kisinka cobalt project in DRC

  • Exploration is now underway at the Kisinka cobalt/copper project in the DRC.
  • Field exploration and mapping is being combined with other remote sensing data to help direct on-the-ground exploration.
  • ABM start augur drilling this week in areas of stunted vegetation within the license. Augur drilling can cover as much as 100m per day in holes up to 20m deep.
  • The team are looking to test mineralisation in the ‘Grand Conglomerate’ which also hosts Kamoa-Kakula, the world’s largest undeveloped copper project run in jv by Ivanhoe Mines.
  • Kamoa-Kakula is scheduled to produce some 284,000tpa of copper from 6.4% copper ore over its first 10 years of operation.
  • Management are also conducting due-diligence on copper/cobalt licenses introduced by two further groups in the DRC.
  • The company is operating in a relatively safe part of the DRC, well away from the troubles in the East of the country.
  • Sierra Leone: a third party is undertaking due dilligence on the Ferensola Gold project in Sierra Leone with a second interested group looking for access to project data.
  • The DRC government has proposed raising the royalty on cobalt to 5% from 2% currently and on base metals to 3.5%.
  • Given the price rise in cobalt and other battery related metals over the past year it is unsurprising to see the royalty rates rise. The DRC parliament passed the new royalty rates though the President has yet to pass the new royalties into law. The Upper House in the DRC government has raised rates for strategic substances to 10%.
  • For further information and maps on Kisinka and Sakania see: www.abmplc.com

Conclusion: African Battery Metals is an exploration play with the potential for significant discovery. Cobalt and copper mineralisation is present on the licenses in artisanal workings with verification of this through X-ray Niton-gun analysis indicating a good start to the exploration program. We look forward to seeing the drill results in the next few weeks as the team works to better delineate and define the scale, grade and potential of the project.  

*SP Angel act as broker to African Battery Metals

 

Dalradian Resources (LON:DALR) 61p, Mkt Cap £217m – Drilling results from a further 16 holes at Curraghinalt

  • Dalradian Resources has reported the results of a further 16 drillholes (6,798m) from its infill programme at Curraghinalt. Thirteen of the holes were drilled from the underground workings.
  • The results “support delivery of a positive resource update in Q2 2018, which will then feed into an updated feasibility study planned for Q3 2018.”
  • The results are reported to “correlate with and improve the current geological model with respect to the continuity and smoothness of the individual wireframes.”
  • Among the results reported today are:
    • intersections of four individual veins in hole 17-CT-445 including 00.62m intersection of the T17 vein averaging 34.35g/t gold from a depth of 100m; a 0.32m wide section of the Slap Shot Vein averaging 69.7g/t from 232.62m; a0.72m wide section of the V75 Vein averaging 24.32g/t and a double intersection of the Bend Vein with 318g/t gold over 0.44m from a depth of 314.16m and 0.32m averaging 48.9g/t from 343.46m;
    • a 0.34m wide intersection of the No.1 Vein averaging 216g/t gold from a depth of 59.95m in hole 17-CT-452;
    • Intersections of eight individual veins in hole 17-CT-459, including a 1.14m wide intersection of the T17 Vein which averaged 45.54g/t gold from a depth of 132.49m, 0.73m of the V55 Vein which averaged 49.8g/t from a depth of 182.31m and 0.86m of the 106-16 Vein which averaged 41.85g/t gold. We note that with the exception of the T17 Vein all the mineralised structures in this hole are less than 1m wide
    • A 1.05m wide intersection of the Mullan-S Vein at an average grade of 53.64g/t from a depth of 465.63m in hole 17-CT-470 which also intersected the Road Vein 0.27m at 46.3g/t) and the Mullan Vein (0.4m averaging 29.6g/t) and
    • A 0.7m wide intersection of the Crow Vein which averaged 73.89g/t gold from a depth of 455.75m in hole 17-CT-471. This hole also intersected the No.1Vein (0.40m averaging 31.1g/t gold) and the Slap Shot-S Vein (0.27maveraging 61.3g/t gold).
    • A tabulation in today’s announcement and a map and cross section available on the company’s website and referenced in the announcement shows up to 13 individual mineralised structures which underlines the complexity of the geological setting and highlights the task facing the resource estimators assigned to the update of estimates for these multiple, high grade structures.

Conclusion: Drilling at Currghinalt continues to encounter multiple high grade gold veins. We look forward to the updated resource estimnate due during Q2 and the subsequent updated feasibility study in Q3.

 

Kodal Minerals* (LON:KOD) 0.19p, mkt cap £12.1m – Gold anomaly in auger drilling at Nielle

  • Kodal Minerals reports that auger drilling at the Nielle prospect located approximately 50km north of Randgold Resources’ Tongon mine in Cote d’Ivoire has identified a new area of gold anomalism.
  • The anomaly was discovered by Resolute Mining as a result of a 542 hole programme  of auger drilling to sample material below the base of transported cover and forms part of Kodal Minerals’ joint-venture where Resolute is earning a 75% interest through the expenditure of $3m.
  • Follow up reconnaissance work involving the completion of 7000m of aircore drilling has shown the mineralisation remains open along strike to both the north and south.
  • Among the results of the aircore programme highlighted in today’s announcement are:
    • 16m at an average grade of 1.14g/t gold from the surface;
    • 4m at an average grade of 3.4g/t from a depth of 12m;
    • 8m at an average grade of 1.53g/t from a depth of 16m;
    • 12m at an average grade of 2.39g/t from surface and
    • 4m at an average grade of 1.76g/t from a depth of 20m.
    • Further results are pending and a “programme of reverse circulation drilling is proposed to further test this area of new gold anomalism”.
    • We note that in its most recent quarterly report, Australian listed Resolute Mining emphasised its commitment to focussed growth through exploration and issued guidance that it proposed to spend A$28m on exploration in 2018. Although much of the budget is likely to be spent on Resolute’s own projects and expanding its existing resources in Ghana and Mali, it would appear that it has funds available and an aspiration to advance other projects such as Nielle.
    • Kodal Minerals has also announced that Newcrest Mining has withdrawn from its exploration joint venture on the Dabakala licence, also in Cote d’Ivoire, and that the licence has reverted to Kodal Minerals.
    • During its exploration programme at Dabakala, Newcrest “completed a regional stream sediment, rock chip and laterite sampling programme” and recovered 315 auger drilling samples which were analysed for “low level gold mineralisation(max 309ppb gold) and multi-element association (31 additional elements analysed)” and “also completed updated geological interpretation and interpretation of geophysical data for regional structural framework”.
    • The basic early stage exploration work completed by Newcrest at Dabakala should provide a solid database to help Kodal assess its future plans for the project or to aid other potential joint venture partners assess their level of interest.

Conclusion: Initial reconnaissance drilling at Nielle has shown relatively shallow gold mineralisation which remains open along strike in both directions. Exploration is currently being funded by Resolute Mining and we look forward to the remaining results of the aircore work and of the follow-up reverse circulation drilling when they become available.

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

 

SolGold* (LON:SOLG) 22.7 p, Mkt Cap £385m – Latest drilling results from Alpala

The following text is a repeat of yesterday’s comment with minor amendment

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold reports the latest drilling and assaying results from holes 26-D3 to 35 on the Alpala project at Cascabel in Ecuador. In addition to the results reported today, results from a number of other holes are pending and the company expects to incorporate this additional information to update the maiden mineral resource estimate within the next two months.
  • Among the results highlighted today, which unfortunately are reported only in terms of copper equivalent grades (CuEq) and from unspecified depths within the drillholes which consequently obscures the underlying tenor and location of the copper and gold assays are:
    • A 1,100m long intersection in Hole 26-D3, from an undisclosed depth, averaging 0.54% copper equivalent  and including 164m averaging 0.76% and 224m averaging 0.75%, also reported in copper equivalent terms; and
    • A 178m long intersection in Hole 29-D1 averaging 0.62% CuEq including 48m averaging 0.82% CuEq; and
    • An 824m long intersection in Hole 33 averaging 0.82% CuEq which includes 576m averaging 0.93% CuEq and a 262m long section averaging 1.15% CuEq though, in the absence of depth information,  it is unclear whether the 262m portion in included within the wider 576m long portion or additional to it, though we assume that the former is the case; and
    • A 604m long intersection in Hole 33-D1 averaging 0.73% CuEq which includes 146m averaging 1.71% CuEq and 106m averaging 2.13% CuEq; and
    • A 302m long section of Hole 35 which averages 0.60% CuEq and includes 160m averaging 0.76% CuEq.
  • In addition to the results reported today, partial results from Hole 36 “indicate very high grades at Alpala Northwest, returning an open ended 82m @ 1.57% CuEq (1494‐1576m). Assays beyond 1576m are pending”.
  • Assays are also awaited from a number of other holes including Hole 36 which intersected visual copper sulphide mineralisation over 568m between 1432m and 2000m;  Hole 37, still in progress where visual copper sulphide mineralisation was encountered between 1620m and the current depth of 1842m; Hole 39 which intersected 205m of visual copper sulphide mineralisation between 665-870m; Hole 42 with 602m of mineralisation, open at depth was found from a depth of 309m; and approximately 205m of visual mineralisation, also open at depth from 665m.
  • The company particularly highlights the significance of Hole 37 at Alpala as it implies “major system extensions northwest towards the Trivinio prospect”, the bornite-chalcopyrite-magnetite mineral assemblage is “characteristic of the high‐grade centres of many porphyry copper‐gold systems”.
  • Taken in conjunction with recent geophysical interpretation which “has demonstrated that mineralisation from Alpala North and Northwest may be continuous with the Trivinio and Moran Targets, which would extend the Alpala System northwards by approximately 1km” the company appears to be building evidence for a broader model linking some of the prospects previously interpreted as discrete individual occurrences into a larger, linked entity.
  • Drilling of the Trivinio prospect is scheduled “following the completion of Holes 34 and 37 at Alpala”.
  • Commenting on the progress of the 120,000m planned 2018 drilling programme at Alpala, the company emphasises that it is directed at “northwest and southeast extensions”. The addition of further drilling capacity, and particularly the track mounted rigs at Alpala, which are now “delivering up to 100m core per day” and the use of directional drilling is delivering significant cost savings reported to “have more than halved from USD1,100 per metre to USD500 per metre”. Simplistically this implies potential savings on the 2018 Alpala work programme of up to around US$70m.
  • The geological team in charge of and directing the exploration programme in Ecuador is made up of Solgold employees including Jason Ward, Chief Geologist and Nick Mather, the SolGold ceo. Newcrest are a 14.54% shareholder of Solgold and Craig Jones, a Mechanical Engineer, joined the board of Solgold on 03 March 2017 as a nominee of Newcrest. Their presence on the register is a testament to the success and opportunity at Cascabel.

Conclusion: We look forward to the forthcoming assay results and subsequent update to the mineral resource estimate for Alpala and further evidence of the possible extension towards Trivinio once drilling there commences.

*SP Angel act as UK broker to SolGold

 

Sunstone Metals (ASX:STM) A$0.03p, Mkt Cap £33m – Results show potential of Bramaderos copper/gold project in Ecuador

  • Malcolm Norris reports the identification of a number of mineralised porphyry and epithermal targets at Bramaderos in Ecuador.
  • The team have so far discovered 10 gold-copper and another 10 gold-silver targets .
  • The Limon gold-copper target now measures some 2km x 1km.
  • Targets are so far defined by soil and chip sampling supported by magnetic and radiometric data.
  • Sunstone is keen to get drilling permits for further target testing particularly at the Limon target where surface outcrops, rock chips, and geophysical signatures make the prospect look promising.
  • Sunstone has much of the renown team which discovered and advanced the Tujuh Bukit deposit for Intrepid Mining.
  • Previous trench assays at Bramaderos show: 74.3m grading 0.69g/t gold and 0.15% copper, including 51.1m at 0.81g/t gold and 0.18% copper.
  • Plus 248.1m grading 0.56g/t gold and 0.14% copper to the end of hole starting at just 9.14m depth with mineralisation at the end of the hole returned 0.93g/t gold and 0.22% copper over 2.2m.

Conclusion:  Sunstone appear to be making good progress in their early-stage exploration at Bramaderos. We suspect Ecuador has much to offer which has yet to be discovered.

 

 

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Tue, 20 Feb 2018 10:45:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29405/sp-angel-morning-view-metals-drift-as-china-celebrates-year-of-dog-29405.html
Base Metals pull back on stronger dollar http://www.proactiveinvestors.co.uk/columns/sp-angel/29399/base-metals-pull-back-on-stronger-dollar-29399.html No 1 Integrated Nomad and Broker for Mining on AIM*

Petra Diamonds (LON:PDL) – Interim results

SolGold* (LON:SOLG) – Latest drilling results from Alpala

Sub-sea mining started off as CIA plot in 1970’s (Nautilus Minerals)

  • A BBC report today tells a remarkable story of a CIA plot to recover a lost Soviet submarine which was carrying nuclear ballistic missiles.
  • Russia’s K-129 submarine had sunk 1,500 miles north-west of Hawaii.
  • The US sent a ship which was said to be financed by billionaire, Howard Hughes, to recover the submarine which was closely watched by Soviet spy ships.
  • Manganese nodules were recovered from the sea floor as a diversion to the Russians, while the American’s grabbed the Soviet sub.
  • The operation showed the way to potential mining of the sea-bed in deep water as is planned by Nautilus Minerals.
  • http://www.bbc.co.uk/news/resources/idt-sh/deep_sea_mining

 

Four nation alliance rising to counter China’s belt and road

  • The US, Japan, India and Australia may join forces to establish an alternative to China's Belt and Road Initiative in attempt to counter Beijing’s growing influence
  • The multi-billion dollar initiative aims to connect Asia, Europe, the Middle East and Africa with a vast logistics and transport network, using roads, ports, railway tracks and fibre optic lines for trade network
  • Control of the logistical network could give significant advantage to trade flows in certain directions to the advantage of the sponsoring economies
  • Donald Trump is meeting with The Australian Prime Minister, Malcolm Turnbull, to discuss the matter this week

 

Dow Jones Industrials

 

+0.08%

at

25,219

Nikkei 225

 

+1.97%

at

22,149

HK Hang Seng

 

-

 

 

Shanghai Composite

 

-

 

 

FTSE 350 Mining

 

+0.06%

at

19,057

AIM Basic Resources

 

+0.28%

at

2,592

 

Economics

Europe - European equities climbed this morning driven by baking and travel shares with both US and Chinese markets shut today.

  • US markets closed higher on Friday with the S&P 500 index reporting the best week in five years (+3.5%) after a strong correction recorded earlier in the month.
  • Gold prices were rangebound around $1,350/oz after briefly touching $1,360/oz on Friday.
  • Base metals are off this morning on the back of a rebound in the US$ index which bounced off a three year low recorded on Friday.

 

US – Consumer sentiment gauge climbed to second-strongest level since 2004 beating market estimates on back of a drop in personal-income tax withholding rates, according to the UoM survey

  • The negative effect of increased stock market volatility has been dominated by reports of “rising incomes, employment growth, and by net favourable perceptions of the tax reforms”.
  • “Purchase plans have been transformed from the attraction of deeply discounted prices and interest rates that outweighed economic uncertainty, to being based on a sense of greater income and job security as the fewest consumers in decades mentioned the favourable impact of low prices and interest rates,” report read.
  • Markets are closed today for President’s Day.

 

Japan – Strong exports growth point to robust overseas demand, although the recent pick up in the yen is likely to put some pressure on outbound shipments.

  • Exports to China were up 30.8%yoy, to the EU up 20.3%yoy and to the US up 1.2%yoy.
  • Imports were also up strongly which saw trade balance posting the first monthly deficit since mid-17.

 

Germany – 464k SPD members are voting in a postal ballot from Tuesday this week on whether the party should form the coalition agreement with Christian Democrats.

  • Local daily Bild polled the mayors of the 35 biggest towns and cities governed by the SPD reporting 26 in favour of the grand coalition.

 

UK – National property prices growth climbed slightly in February recovering from one of the lowest levels in more than five years, Rightmove numbers showed this morning.

  • Despite a slight rebound, monthly sales growth remained below the 10-year average for the time of the year.
  • In London asking prices fell 1%yoy this month marking a sixth consecutive decline with an average time to sell a property in London having climbed to 83 days from 73 days a year ago.
  • Month on month, London prices were up 4.4% amid a seasonal increase.
  • Average asking price in the capital was almost £630k versus a national average of £300k.
  • Rightmove House Prices (%mom/yoy): 0.8/1.5 v 0.7/1.1 in January.

 

South Africa – The Chamber of Mines agreed to postpone a court challenge against new changes to the mining code including an increase black ownership of mines to allow for negotiations with President Cyril Ramaphosa.

 

DRC – Glencore and Randgold are partnering together to lobby a replacement of the existing Chamber of Mines arguing it “was unable to satisfactorily consolidate and communicate” wishes of the industry regarding changes to the Mining Code.

  • China Molybdenum, Ivanhoe Mins, MMG, Zijin Mining and AgnloGold Ashanti have all joined the notion.
  • “Watching people shoot themselves in the head, not even in the foot, is frustrating for me… the mining environment in the DRC needs to be improved, but improved in construction with the main investors, which are China Molybdenum, Glencore and ourselves, Randgold CEO Mark Bristow said.
  • Miners asked President Joseph Kabila for a meeting “to once again put forward our positions” about changes to the mining code approved by lawmakers on January 27.

 

Currencies

US$1.2410/eur vs 1.2534/eur last week. Yen 106.56/$ vs 105.84/$. SAr 11.671/$ vs 11.612/$. $1.401/gbp vs $1.413/gbp. 0.793/aud vs 0.798/aud. CNY 6.342/$ vs 6.342/$.

 

Commodity News

Noble group warns of growing losses

  • Noble Group has warned it is on track for a net loss of $5bn for 2017 with a net loss of $1.9bn in Q4 due to challenging operating conditions
  • The group is reported to be lining up some $700m of financing
  • The board hopes the restructuring plan should restore shareholders equity and create a sustainable capital structure
  • Noble is a major trader of iron ore and coal and has invested in Mkango Resources for its potential future Rare Earth Element supply

 Precious metals:         

Gold US$1,348/oz vs US$1,360/oz last week

   Gold ETFs 72.1moz vs US$71.9moz last week

Platinum US$1,013/oz vs US$1,011/oz last week

Palladium US$1,049/oz vs US$1,027/oz last week

Silver US$16.69/oz vs US$16.92/oz last week

           

Base metals:   

Copper US$ 7,182/t vs US$7,244/t last week - Freeport-McMoRan has secured a one year extension to the permit to export copper/gold concentrate from the Grasberg operation.

  • The Energy and Mineral Resources Ministry approved an application for the export of 1.2mt in the next 12 months.
  • The Company and the government remain in negotiations over the nationalisation of the 51% stake in the operation and the valuation of the stake.

Aluminium US$ 2,193/t vs US$2,173/t last week

Nickel US$ 13,765/t vs US$14,165/t last week

Zinc US$ 3,559/t vs US$3,591/t last week

Lead US$ 2,609/t vs US$2,634/t last week

Tin US$ 21,850/t vs US$21,700/t last week

           

Energy:           

Oil US$65.2/bbl vs US$64.8/bbl last week

Natural Gas US$2.611/mmbtu vs US$2.565/mmbtu last week

Uranium US$21.75/lb vs US$21.75/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.2/t unchanged

Chinese steel rebar 25mm US$638.3/t vs unchanged - Rio Tinto and BlueScope Steel nervously await Trump tariffs

  • Rio Tinto and Bluescope are reported to be facing a nervous wait as Donald Trump considers the imposition of new tariffs and quotas on foreign steel and aluminium
  • Three proposals released last week include blanket tariffs of at least 24% on all foreign steel and 7.7% on all aluminium shipped to US, putting Bluescope and Rio in the firing line
  • The Australian prime minister is likely to ask for an exemption for Australia to exempt Bluescope from the new tariffs
  • We suspect the tariffs are more aimed at the dumping of cheap steel and aluminium from China

Thermal coal (1st year forward cif ARA) US$80.2/t vs unchanged

Premium hard coking coal Aus fob US$233.1/t vs unchanged

 

Other:  

Tungsten APT European US$319-325/mtu unchanged

Cobalt LME 3m US$81,500.0/t unchanged

Lithium – New Water purification technology provide source for lithium

  • Scientists have come up with a new desalination technique to catch lithium ions and purify ocean water
  • The technology uses metal organic frameworks with sub-nanometer particles to catch lithium ions whilst purifying sea water
  • Sadly the technology is not yet ready for the real world but if it does prove to be commercial then it could provide some by-product lithium

 

Company News

Petra Diamonds (LON:PDL) 72p, mkt cap £385m – Interim results

  • After non-cash impairment charges of US$118m arising from the impact of a strong Rand on the carrying value of its Koffiefontein and Kimberley Ekapa Mining joint-venture “compounded by continuing operational underperformance”, Petra Diamonds reports a net after tax loss of US$117.7m for the six months to 31st December 2017 (2016 US$35.2m profit).
  • Although diamond production increased by 10% to 2.2m carats (2016- 2.0m carats), sales volumes declined by approximately 5% to 1.8m carats “mainly due to the blocked Williamson parcel not sold”.
  • Net debt increased to US$644.7m at 31st December (30th June 2017 – US$555.3m) and the “Company's financial position remains highly sensitive to the ZAR:US$ exchange rate; net debt for 30 June 2018 is targeted to fall to ca. US$600 million, assuming an exchange rate of ZAR12:US$1 and the sale of the blocked Williamson parcel in H2.”
  • Capital expenditure reduced by 43% to US$77.5m as the major capital programmes at the Group’s South African mines have been completed.
  • “Petra's main underground expansion projects remain on track, with both Finsch's Block 5 SLC and Cullinan's C-Cut Phase 1 continuing to ramp up during the Period. Finsch's ROM carat production rose 14% to 931,859 carats and Cullinan's ROM carat production rose 68% to 602,594, demonstrating the significant progress made at both assets. Due to the nature of sub level caving and block caving, each month Petra grows the footprint of the existing mining areas and opens up more access to the respective orebodies. These expanding footprints deliver higher production volumes each month, thereby growing access to undiluted ore.”
  • The company expects to produce 2.4-2.5m carats of diamonds during H2 maintaining its revised production guidance in the range 4.6-4.7m carats for the full year to end June 2018.
  • Petra Diamonds comments that “The diamond market is currently experiencing positive momentum post the healthy Christmas sales period, with pricing up ca. 3 - 4% on a like-for-like basis at the Company's first tender of H2 when compared to average prices achieved in H1.” As the Finsch and Cullinan mines produce increasingly from the new mining areas, the product mix is improving and as a result, the company expects improved prices from these mines during H2.

Conclusion: Operational and diamond market improvements are positive indicators for H2, however the company remains sensitive to the recent strengthening of the Rand, particularly in achieving its debt reduction targets.

 

SolGold* (LON:SOLG) 22 p, Mkt Cap £377m – Latest drilling results from Alpala

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold reports the latest drilling and assaying results from holes 26-D3 to 35 on the Alpala project at Cascabel in Ecuador. In addition to the results reported today, results from a number of other holes are pending and the company expects to incorporate this additional information to update the maiden mineral resource estimate within the next two months.
  • Among the results highlighted today, which unfortunately are reported only in terms of copper equivalent grades (CuEq) and from unspecified depths within the drillholes which consequently obscures the underlying tenor and location of the copper and gold assays are:
    • A 1,100m long intersection in Hole 26-D3, from an undisclosed depth, averaging 0.54% copper equivalent  and including 164m averaging 0.76% and 224m averaging 0.75%, also reported in copper equivalent terms; and
    • A 178m long intersection in Hole 29-D1 averaging 0.62% CuEq including 48m averaging 0.82% CuEq; and
    • An 824m long intersection in Hole 33 averaging 0.82% CuEq which includes 576m averaging 0.93% CuEq and a 262m long section averaging 1.15% CuEq though, in the absence of depth information,  it is unclear whether the 262m portion in included within the wider 576m long portion or additional to it, though we assume that the former is the case; and
    • A 604m long intersection in Hole 33-D1 averaging 0.73% CuEq which includes 146m averaging 1.71% CuEq and 106m averaging 2.13% CuEq; and
    • A 302m long section of Hole 35 which averages 0.60% CuEq and includes 160m averaging 0.76% CuEq.
  • In addition to the results reported today, partial results from Hole 36 “indicate very high grades at Alpala Northwest, returning an open ended 82m @ 1.57% CuEq (1494‐1576m). Assays beyond 1576m are pending”.
  • Assays are also awaited from a number of other holes including Hole 36 which intersected visual copper sulphide mineralisation over 568m between 1432m and 2000m;  Hole 37, still in progress where visual copper sulphide mineralisation was encountered between 1620m and the current depth of 1842m; Hole 39 which intersected 205m of visual copper sulphide mineralisation between 665-870m; Hole 42 with 602m of mineralisation, open at depth was found from a depth of 309m; and approximately 205m of visual mineralisation, also open at depth from 665m.
  • The company particularly highlights the significance of Hole 37 at Alpala as it implies “major system extensions northwest towards the Trivinio prospect”, the bornite-chalcopyrite-magnetite mineral assemblage is “characteristic of the high‐grade centres of many porphyry copper‐gold systems”.
  • Taken in conjunction with recent geophysical interpretation which “has demonstrated that mineralisation from Alpala North and Northwest may be continuous with the Trivinio and Moran Targets, which would extend the Alpala System northwards by approximately 1km” the company appears to be building evidence for a broader model linking some of the prospects previously interpreted as discrete individual occurrences into a larger, linked entity.
  • Drilling of the Trivinio prospect is scheduled “following the completion of Holes 34 and 37 at Alpala”.
  • Commenting on the progress of the 120,000m planned 2018 drilling programme at Alpala, the company emphasises that it is directed at “northwest and southeast extensions”. The addition of further drilling capacity, and particularly the track mounted rigs at Alpala, which are now “delivering up to 100m core per day” and the use of directional drilling is delivering significant cost savings reported to “have more than halved from USD1,100 per metre to USD500 per metre”. Simplistically this implies potential savings on the 2018 Alpala work programme of up to around US$70m.

Conclusion: We look forward to the forthcoming assay results and subsequent update to the mineral resource estimate for Alpala and further evidence of the possible extension towards Trivinio once drilling there commences. Newcrest Mining geologists are overseeing the project and are said to be closely involved in its direction. The Newcrest team are expert in the evaluation of deep level, block cave mining.

*SP Angel act as UK broker to SolGold

 

 

]]>
Mon, 19 Feb 2018 11:51:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29399/base-metals-pull-back-on-stronger-dollar-29399.html
Morning View . Ganfeng listing to boost China’s dominance in global lithium http://www.proactiveinvestors.co.uk/columns/sp-angel/29391/morning-view-ganfeng-listing-to-boost-chinas-dominance-in-global-lithium-29391.html Galantas Gold (LON:GAL) – Hearings completed on judicial review of planning consent

Hummingbird Resources (LON:HUM) – Yanfolila ramp up progress shows full capacity on track for the end of Q1/18

Petropavlovsk (LON:POG) – Management change and new Board member

Rio Tinto (LON:RIO) – Evaluating power supply options at Oyu Tolgoi

 

Lithium - Ganfeng Lithium files for $1bn HK IPO

  • Ganfeng Lithium, China’s largest lithium producer, has filed for an initial public offering in Hong Kong
  • The share sale comes as carmakers are scrambling for supplies of lithium to meet their plans for EV’s
  • Genfent will use funds for acquisitions, further exploration and to expand capacity to meet rapidly growing demand for EV’s
  • Ganfeng, plans to extend its global dominance in production of the electric economy metal by deploying proceeds on acquisitions ranging from Ireland to Australia.
  • Based in Jiangxi in China’s southeast the company aims to target expansions through further exploration, and plans “to continue to actively explore the possibility of acquiring further sources of lithium in order to enrich our core portfolio”, according to a filing lodged with the Hong Kong stock exchange.
  • “The lithium industry in 2018 will be characterized by M&A”, notes energy metal analyst at Horse Mountain Partners LLC, and that “Ganfeng’s strategy of vertical integration is the way to survive and thrive as the lithium market grows dramatically”. Proceeds are expected to focus on increasing battery production capacity, particularly targeting next-generation solid-state technology, and to expand a recycling unit able to retrieve raw materials from spent cells.
  • The company aims to remain ahead of the surge in new lithium discoveries, with the requirement from global lithium production needing to quadruple within a decade for electric vehicles. According to Bloomberg New Energy Finance, the industry is likely to require a second wave of new projects beyond the mid-2020s to keep pace with demand.
  • The acquisitions aim to increase its market share to about 17% this year and increase the company’s global standing to second-largest producer. The supplier’s plan to add new production lines in China in 2018 will boost capacity and add a recycling facility capable of handling 34,000 tonnes of spent batteries. The boost to output also aims to expand the sale of products beyond its current 10 countries, and is in discussion with leading global vehicle manufacturers. Funds from the listing will also be used to offer financial assistance to Lithium Americas Corp., a project developer, and to boost research work on solid-state battery technology.
  • It has hired Citi for the IPO and could raise at least $1bn to $1.5bn.
  • Other potential targets are: Birimian Limited, Kodal Minerals*, Plymouth Minerals, Savannah Resources, European Metals, Lithium Power International, Neolithium, Lithium Americas

 

Sweden on the hunt for Cobalt

  • Sweden is to set up efforts to find precious minerals such as cobalt and lithium, government will invest 10 million kronor ($1.26 million) over the next two years to map for metals
  • In addition to the government funded initiative, Sweden has also seen a rise in private investments in the exploration of minerals used in batteries
  • Geological Survey of Sweden has a collection of 18,000 core samples to be analysed and although extraction so far has not proved cost effective it is believed this could change due to research
  • Might we suggest that if Sweden is serious about encouraging the mining of cobalt that it also supports Beowulf in its Kalak North iron ore mining proposal.

 

Bank 2017 commodities revenues fall 42% to lowest since 2006

  • Commodity related revenue at the 12 biggest investment banks fell by 42% last year to its lowest level since 2006 according to a report by Coalition.
  • Revenue from commodity trading, selling derivatives to investors and other activities in the sector fell to $2.5bn in 2017 from $4.3bn the previous year, it said in the report
  • We view the move as partially driven by banks being forced by regulators to de-risk as well as split retail from investment banking.
  • The reduction of the available balance sheet for commodity trading has hit bank’s ability to fund trading activities, reduced volatility and probably by the impact of China inc. and Glencore as dominant forces in the movement and trading of commodities.

 

Cyril Ramaphosa – sworn in as President of South Africa

  • Cyril Ramaphosa is now president of South Africa.
  • He was previously supported by Mandela and respected for his role in negotiating the peaceful transition of power from the Nationalist government to the ANC.
  • Ramaphosa has promised to root out the corruption which became so endemic under Zuma?
  • Will Zuma now face trial on the many charges relating to graft?
  • Will Ramaphosa replace the minister of mines, who is thought not to be popular with mining companies?
  • Will Ramaphosa adjust the BEE scorecard rules to attract investment back into South Africa?
  • Can South Africa fix the many problems at ESKOM and other state-led utilities to improve the functioning of the economy.
  • Will the ANC now focus on improving living standards in the townships?
  • Some talk of Ramaphosa’s reputation being tarnished when he was a NED director at Lonmin at the time of the Marikana strike, though he would have had no involvement in the massacre that followed. While we see this as fundamentally unfair to Ramaphosa it does highlight to us the risk of allowing issues of debt and debt collection from workers to fester in the community.
  • As a former leader of the NUM and later as a company director Cyril Ramaphosa understands well the benefits and issues associated with mining.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+1.23%

at

25,200

Nikkei 225

 

+1.19%

at

21,720

HK Hang Seng

 

+1.97%

at

31,115

Shanghai Composite

 

+0.45%

at

3,199

FTSE 350 Mining

 

+0.66%

at

19,254

AIM Basic Resources

 

+1.36%

at

2,585

 

Economics

US –Latest regional business sentiment measures point to improving outlook with forecast for stronger capital investment and employment; reports also point to increasing cost pressures.

  • Both Philly and New York business surveys reported stronger new orders as well as an increase in prices paid component.
  • Respondents to both surveys highlighted considerable optimism regarding the economic outlook.
  • Empire Manufacturing Index: 13.1 v 17.7 in January and 18.0 forecast.
  • Philly Fed Business Outlook: 25.8v 22.2 in January and 21.8 forecast.
  • In a separate report, industrial production growth moderated in January on the back of lower construction activity and mining and minerals production while colder than usual temperatures led an increase in electrical and natural gas production.
  • A pick up in industrial production translated into an increased pressure on existing capacity the utilisation ratios climbing to 77.5% in January versus 75.7% last year
  • Industrial Production ($mom): -0.1 v 0.4 (revised from 0.9) in December and 0.2 forecast.
  • US Treasury yields paused at around 2.9% after having climbed on the back of strong inflation numbers released previously.
  • The US$ index is hovering around a three year low following six straight daily declines.

 

Japan – Kuroda candidature has been nominated by PM Abe to head the BoJ for another five years with the parliament set to confirm the reappointment.

  • Two deputy governors have been suggested to join the Policy Board including central bank insider Masayoshi Amamiya and university professor Masazumi Wakatabe.
  • Amamiya, 62, has been with the BoJ for almost four decades pointing to an extensive experience in the field after having served under governors with different monetary policy approaches.
  • Wakatabe, 53, is a pro-stimulus future member who previously argued that tightening the policy prematurely would be a mistake and indicated that more monetary policy support may be needed to overcome a planned sales-tax hike in 2019.
  • Next policy meeting is on March 8-9 with new term for the Governor to start on April 9.

 

Germany – Producer prices growth accelerated slightly in January matching earlier reports of intensifying businesses’ cost pressures.

  • Stronger input inflation has been recorded by both manufacturing and services industries on the back of higher salary pressures, oil and fuel prices as well as rental fees.
  • Supportive demand allowed firms to pass on some of the higher costs onto consumers which bodes well for the inflation outlook.
  • PPI (%mom/yoy): 0.9/2.0 v -0.3/+1.8 in December.

 

UK – Retail sales growth recorded subdued performance in January with monthly purchases (in volume terms) increasing the slowest pace since Apr/17.

  • YoY purchases were up 1.6%yoy (volume terms) v 2.4%yoy increase recorded in Jan/17.
  • “Retail sales growth was broadly flat at the beginning of the New Year with the longer-term picture showing a continued slowdown in the sector… this can partly be attributed to a background of generally rising prices,” ONS said commenting on numbers.
  • The main contribution to the YoE growth was in non-food stores category with sports equipment, games and toys increasing sales by 10.9%yoy.
  • The latter category has benefited from the New Year’s resolutions to “get fit and lose weight”, retailers said.
  • Retail sales (%mom/yoy, value): 0.1/1.5 v -1.5/+1.3 in December and 0.6/2.4 forecast.

 

Recovery in metals gives reassurance of underlying fundamentals

  • Goldman Sachs Group Inc. remains reassured in bullish forecasts as broad recovery across metals follows the “stress test” during last week’s global market slump. “To the extent that last week’s sell off was triggered by inflation worries, this week’s experience suggests that higher inflation can be a tailwind, rather than a headwind, for metals”.
  • The resilience to investor panic suggests robust market fundamentals supported by sustained global growth, with both metal producer stocks and commodity futures offering good returns in terms of exposure to higher metal prices.

 

Currencies

US$1.2534/eur vs 1.2494/eur yesterday  Yen 105.84/$ vs 106.48/$  SAr 11.612/$ vs 11.665/$  $1.413/gbp vs $1.405/gbp  0.798/aud vs 0.797/aud  CNY 6.342/$ vs 6.342/$

 

Commodity News

Precious metals:         

Gold US$1,360/oz vs US$1,355/oz yesterday

  • Creeping US inflation and slumping USD are supporting gold’s biggest weekly advance since April 2016, recording 3.2%. The US dollar index recorded its worst performance since March 2015, dropping 2.1% as inflationary expectations return. Confluence of positive factors are driving gold higher with forecasts of $1,430 by June, with the weaker dollar the “bigger trigger” according to director at Commtrendz Risk Management Services.
  • Despite bullion prices rising, North American gold mining stocks reported quarterly earnings losses, highlighting the challenges faced containing costs and defending margins.
  • Kinross Gold Corp. fell as much as 10 percent Thursday after reporting weaker-than-expected fourth-quarter results due to lower production and sales, and higher taxes. Agnico Eagle Mines Ltd. fell as much as 3.3 percent a day after its earnings, while Barrick Gold Corp. slid as much as 5.1 percent, with Chief Operating Officer Richard Williams citing new inflationary trends in inputs from fuel to labor. “There’s inflationary trends that didn’t exist three years ago, be they in fuel, power, consumables, labor costs, contracting, and the works”, according to Williams.

   Gold ETFs 71.9moz vs US$72.0moz yesterday

Platinum US$1,011/oz vs US$1,005/oz yesterday

Palladium US$1,027/oz vs US$1,017/oz yesterday

Silver US$16.92/oz vs US$16.95/oz yesterday

           

Base metals:   

Copper US$ 7,244/t vs US$7,186/t yesterday

  • Copper’s weekly advance is on track for its best since November 2016 as the combined impact of a slumping dollar, global growth and inflation fears stock demand for metals. LME copper rose 0.4% to $7,213/t to support 6.8% growth for the week. “Stronger global growth coupled with weaker dollar will continue to attract a lot of funds in commodities and base metals”, according to head of commodities research at Nirmal Bang Securities Pvt. Ltd.
  • The number of bulls outweigh bears in the weekly Bloomberg poll of copper traders and analysts, with respondents favouring support from accelerating inflation and the potential for supply disruptions (Bullish: 6; Bearish: 3; Hold: 0)

Aluminium US$ 2,173/t vs US$2,190/t yesterday

Nickel US$ 14,165/t vs US$14,330/t yesterday

Zinc US$ 3,591/t vs US$3,586/t yesterday

Lead US$ 2,634/t vs US$2,602/t yesterday

Tin US$ 21,700/t vs US$21,600/t yesterday

           

Energy:           

Oil US$64.8/bbl vs US$64.8/bbl yesterday

Natural Gas US$2.565/mmbtu vs US$2.546/mmbtu yesterday

Uranium US$21.75/lb vs US$21.65/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$77.0/t vs US$76.8/t

Chinese steel rebar 25mm US$638.3/t vs US$638.3/t

Thermal coal (1st year forward cif ARA) US$80.0/t vs US$81.7/t

Premium hard coking coal Aus fob US$233.1/t vs US$233.1/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,500.0/t vs US$81,250.0/t

  • Swedish government looks to commit 10 million Kronor ($1.26 million) in ramping up efforts to explore for key domestic battery component metals, that are increasingly in demand among electric vehicle manufacturers. The investment aims support the Geological Survey of Sweden to map the potential existence of minerals across a nation experienced in base metal mining; expanding the output for more uncommon metals like battery metals, tungsten and rare earths.
  • Enterprise Minister notes “Sweden has unique assets in it bedrock. Historically we have mainly explored minerals such as copper, iron, silver and gold. But the shift to green technologies means there’s an increased need for other minerals.”
  • The move follows manufactures positioning themselves for a post-fossil fuel world, with Sweden’s Volvo Cars recently making global headlines with plans to make all of its new models electric from 2019.
  • Further to government commitment to green technology, Sweden has also seen a rise in private investment in the exploration of minerals used in batteries. For example, Australia’s Talga Resources is actively running exploration activities aiming to extract cobalt and graphite in northern Sweden.
  • The Geological Survey of Sweden aims to build upon 18,000 historical core samples dating back to 1858, which can be analyzed for traces of minerals previously overlooked.

 

Company News

Galantas Gold (LON:GAL) 5.5p, Mkt Cap £10.3m – Hearings completed on judicial review of planning consent

  • Galantas Gold reports that the legal hearings in connection with the third-party appeal against the “positive judicial review judgment, given by Madam Justice McBride, regarding the grant of planning permission at the Omagh gold mine in July 2015” have now been completed and that the Northern Ireland Court of Appeal “will deliver its judgement at a later date, currently unknown.”
  • In September 2017, the company announced that the judicial review supported its planning consent for the underground mine development of gold veins previously worked in an open pit. At that time, the company also reported that “The third party’s request for a quashing of the Consent was denied.”
  • “During the first quarter of 2016 Galantas confirmed that a third party had obtained leave from Belfast High Court to bring a judicial review challenging the actions of the Department of Environment Northern Ireland  in granting planning permission for underground mining beneath the existing open pit.”
  • The original consent was granted in June 2015 and in October 2015 company announced that it had “been made aware of what purports to be pre-action correspondence from an individual who intends to challenge, by judicial review, the actions of the Department of Environment Northern Ireland (DOENI) in granting planning permission for underground mining beneath the existing open pit.” The specific ground for the original challenge are not, however, clear though the drawn out process underlines the strength of opposition by at least one challenger and the difficulties of obtaining permitting.
  • Galantas Gold also encountered a setback last year, now apparently resolved, when concerns over the adequacy of security over the transport and use of explosives led to a temporary suspension of development work. It is tempting to infer that this issue may have been raised as a part of the wider opposition to mine development.

Conclusion: The protracted dispute over the planning consent for underground mining at the Omagh mine appears to be drawing towards an end.

 

Hummingbird Resources (LON:HUM) 36p, Mkt Cap £122m – Yanfolila ramp up progress shows full capacity on track for the end of Q1/18

  • The Company reports on the ramp up progress of the recently commissioned Yanfolila gold mine in Mali.
  • The plant is currently running at 90% capacity with gold recoveries reported at 96% versus budgeted 93%.
  • The Company is processing lower grade stockpiles during the ramp up period before feeding high grade material once the plant is finetuned and is run at planned capacities.
  • 10.7koz of gold has been produced since the start of operations in mid-December with 6.2koz poured in dore (5.5koz shipped to refiners) and 4.5koz estimated to remain in circuit.

 

Petropavlovsk (LON:POG) 7.5p, Mkt Cap £249m – Management change and new Board member

  • Andrey Maruta, CFO, will be leaving the Company and the Board on April 1, but will advise the Company during several months of transition before a successor is found.
  • Adrian Coates will be joining the Board as an Independent Non-Executive Director with immediate effect.
  • Mr Coates has many years of experience in investment banking having previously worked for HSBC and UBS as well as serving on boards of a number of resources companies including Polyus Gold, Kazakhgold and Regal Petroleum.

 

Rio Tinto (LON:RIO) 4,130p, Mkt Cap £74.5bn –Evaluating power supply options at Oyu Tolgoi

 

  • Rio Tinto reports that, following the decision by the Government of Mongolia to cancel the Southern Region Power Sector Co-operation Agreement (PSCA), it is, in conjunction with its partners at the Oyu Tolgoi mine, working to identify the optimum power supply solution.
  • Rio Tinto is the mine operator and owns 51% of Turquoise Hill which owns 66% of Oyu Tolgoi with the Mongolian Government holding the remaining 34% interest.
  • The mine is moving from the existing open-pit mine towards underground operations to exploit the 499mt copper reserve which grade 3.4% copper and is expected to bring the production of mined copper to over 500,000tpa by the early 2020s. We understand that the project requires around US$5bn of capital.
  • The company comments that “Oyu Tolgoi, Rio Tinto and Turquoise Hill Resources are committed to fulfilling all of the commitments under the Investment Agreement and are continuing to evaluate all viable power options, including the construction of an Oyu Tolgoi site-based power plant.” The company also notes that “Rio Tinto will continue to review its capex forecasts for the project but has already earmarked $250 million a year for the development of a power station in Mongolia in its 2019 and 2020 capex forecasts.”
  • Rio Tinto already operates on-site power generation at a number of its iron ore mines in Western Australia as well as in some of its aluminium operations and at the Kennecott copper operations in Utah and will certainly have both the in-house expertise and the wider industry contacts to develop a practical and cost-effective power supply solution for Oyu Tolgoi. 
]]>
Fri, 16 Feb 2018 10:52:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29391/morning-view-ganfeng-listing-to-boost-chinas-dominance-in-global-lithium-29391.html
Fundamentals remain supportive of commodities in 2018 http://www.proactiveinvestors.co.uk/columns/sp-angel/29386/fundamentals-remain-supportive-of-commodities-in-2018-29386.html Botswana Diamonds (LON:BOD) – Scoping study for the Thorny River Project

Bushveld Minerals* (LON:BMN) – Vanadium demand set to rise further as China raises standards for steel for vanadium in high-strength rebar for earthquake resistance

Golden Star Resources (LON:GSC) – Recent drilling implies Wassa may be more extensive than currently thought

SolGold* (LON:SOLG) – Half-year financial report highlights progress at Alpala, Ecuador and other copper exploration

Stratex International (LON:STI) – Exploration agreement for Hasancelebi and Dogala prospects in Turkey

 

Fundamentals remain supportive of commodities in 2018

  • Australia & New Zealand Banking Group Ltd. remain bullish on commodities throughout 2018 despite downward pressure last week following the broad global equity and bond rout. Strategist see “the levels many markets are now trading at present an opportune time for consumers to lock in prices, as we see fundamentals remain supportive of commodities in 2018”.
  • The bank focuses on supply-constrained metals such as copper and zinc, while rising inflation expectations and weaker USD should push gold prices towards $1,400/oz later this year.
  • Despite surging US crude oil output reaching record levels, ANZ remain positive on Brent crude with prices hovering around $70/bbl in the medium term.
  • Constrained supply of mined PGMs combined with robust auto and jewelry demand will drive platinum and palladium prices higher, forecasting $1,100/oz and $1,150/oz respectively.

 

South Africa – Jacob Zuma resigned as South Africa’s President ending his nine year term paving the way for Cyril Ramaphosa to be voted into the office by the parliament.

  • “I have come to the decision to resign with immediate effect, even though disagree with the leadership of my organisation,” Zuma said.
  • South African equities are likely to rerate higher on news of Ramaphosa’s election and if Ramaphosa moves to combat corruption within the ANC and the state in general

 

Tesla’s China factory could hit a roadblock over disagreement

  • Tesla and the Chinese government are reportedly not seeing eye-to-eye with regards to the ownership of the electric car maker’s proposed factory in Shanghai
  • China's central government says the plant must be a joint venture with local partners, while Tesla wants to own the factory completely
  • Tesla could face punitive import taxes if it is not able to open a factory in China

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+1.03%

at

24,893

Nikkei 225

 

+1.47%

at

21,465

HK Hang Seng

 

+1.97%

at

31,115

Shanghai Composite

 

+0.45%

at

3,199

FTSE 350 Mining

 

+1.94%

at

19,139

AIM Basic Resources

 

+0.96%

at

2,550

 

Economics

US – Strong inflation numbers led to a selloff in US Treasury bonds with benchmark 10y bond yields hitting fresh four year highs.

  • Rising interest rates had little effect on equity markets with both S&P 500 and Dow Jones indices closing higher on the day (+1.3% and 1.0%, respectively).
  • CPI (%mom/yoy): 0.5/2.1 v 0.2/2.1 in December and 0.3/1.9 forecast.
  • Core CPI (%mom/yoy): 0.3/1.8 v 0.2/1.8 in December and 0.2/1.7 forecast.
  • White House officials said there is currently no plan in the works for placing trade tariffs on imported steel and aluminium, despite Mr Trump raising the issue several times this week, Bloomberg reports.
  • Additionally, a number of Republican lawmakers argued that tariffs are likely to cause more harm than good costing jobs in auto, aircraft, wiring and beverages industries.
  • Steel and aluminium users argued that proposed tariffs will hike input costs which would inevitably eat in their margins and place a large number of US jobs at risk.

 

Eurozone – Growth momentum is strong in the single currency region with quarterly GDP growth rate confirmed at 2.7%yoy in Q4/17, the data released yesterday showed.

  • The pace is off 0.1pp from the previous quarter when GDP rate hit the strongest level since the eurozone sovereign debt crisis.
  • Growth slowed slightly in Germany and Italy, while the pace accelerated in the Netherlands and Portugal.
  • The latest Makrit PMI data showed composite activity increased to the highest nearly in 12 years on the back of strong new business orders leading firms to expand staff numbers.
  • “The outlook for the eurozone economy also remained bright, with business confidence improving to an eight-month high,” the Markit report read.
  • A good set of sentiment indicators point to a sustained robust momentum through 2018.
  • GDP (%qoq/yoy): 0.6/2.7 v 0.7/2.8 in Q3/17 and 0.6/2.7 forecast.

EU looking at raiding corporate tax receipts to fill Eur15bn black hole left by Brexit

  • News in the FT today highlights radical options being considered by the EU to fill the EUR15bn black hole when the UK finally leaves the union.
  • The EU is considering siphoning a portion of corporate tax receipts from national treasures into the EU common pot. Can not see member states enjoying that.
  • “The plan is linked to EU proposals to harmonise how nations calculate companies’ taxable profits but does not involve imposing a single EU corporate tax rate. The commission believes the levy could bring in between €21bn and €140bn over the seven-year life of the budget. Another plan involves raiding the money that governments collect from issuing CO2 permits to airlines, energy companies and other polluters.” According to the FT.
  • We wonder if Luxembourg and Monaco might be exempt from the tax.

 

France – Unemployment rate recorded the steepest decline since the 2008 financial crisis in the final quarter of last year.

  • Strong uptick in labour numbers match reports of improved business outlook through the quarter with the latest Composite PMI (January) standing close to the highest in years.
  • Unemployment change (‘000): -205 v +66 in Q3/17.
  • Unemployment rate (%): 8.9 v 9.6 (revised from 9.7) in Q3/17 and 9.5 forecast.

 

Australia – Unemployment edged lower in January amid higher participation rate from increased number of women actively looking for job.

  • Part time jobs climbed strongly (+65.9k v +19.5 in Dec) more than offsetting a drop in the number of full time roles (-49.8k v +12.7k in Dec).
  • The national statistics body estimates 292k full time jobs have been added since the start of 2017 with women accounting for 55% of that.
  • The increase is attributed among other things to regulatory changes allowing paid parental leave and more flexible working arrangements.
  • Despite the jobless rate hovering around the lowest level since early 2013, market commentators are estimating unemployment should come down below 5% to sufficiently tighten the labour market to generate upward pressure on wages and prices.
  • Employment change (‘000): +16.0 v +33.5 in December and 15.0 forecast.
  • Unemployment rate (%): 5.5 v 5.6 (revised from 5.5) in December and 5.5 forecast.

 

Currencies

US$1.2494/eur vs 1.2366/eur yesterday  Yen 106.48/$ vs 107.37/$  SAr 11.665/$ vs 11.868/$  $1.405/gbp vs $1.388/gbp  0.797/aud vs 0.787/aud  CNY 6.342/$ vs 6.346/$

 

Commodity News

Precious metals:         

Gold US$1,355/oz vs US$1,332/oz yesterday

  • Spot gold advanced as much as 2% in yesterday’s trading to record the biggest intraday gain since May last year, as the precious metal nears its highest level in almost three weeks. The main culprit fell to USD weakness as investors weigh the impact of rising inflation, disappointing retail sales and concerns over US fiscal and current-account deficits.
  • US consumer prices rose more than expected in January as Americans paid more for gasoline, rental accommodation and healthcare. Inflation fears are prompting investors to purchase precious metals, although a rise in increase rates is expected to make non-yielding gold less attractive.
  • The Commerce Department announced yesterday that US retail sales decreased 0.3% last month, the largest decline since Feb. 2017, as households cut back on purchases of motor vehicles and building materials.

   Gold ETFs 72.0moz vs US$72.0moz yesterday

Platinum US$1,005/oz vs US$977/oz yesterday

  • Falling platinum demand, seeing a sharp contraction in Japanese investment and Chinese jewelry buying as well as a slowdown in consumption by carmakers, is expected to place the market into oversupply with Johnson Matthey estimating a 110,000 ounce excess.

Palladium US$1,017/oz vs US$989/oz yesterday

Silver US$16.95/oz vs US$16.58/oz yesterday

           

Base metals:   

Copper US$ 7,186/t vs US$6,982/t yesterday

Aluminium US$ 2,190/t vs US$2,125/t yesterday

Nickel US$ 14,330/t vs US$13,500/t yesterday

  • Nickel rises to its highest level in more than two years as metals climb on sliding USD which is under threat from widening US fiscal and current-account deficits. The metal climbed as much as 1.4% to $14,275/t, to record its best level since May 2015. Stockpiles tracked by LME shrunk to their lowest levels since 2014, helping the metal rise 12% ytd.

Zinc US$ 3,586/t vs US$3,459/t yesterday

Lead US$ 2,602/t vs US$2,545/t yesterday

Tin US$ 21,600/t vs US$21,600/t yesterday

           

Energy:           

Oil US$64.8/bbl vs US$62.6/bbl yesterday

Natural Gas US$2.546/mmbtu vs US$2.582/mmbtu yesterday

Uranium US$21.65/lb vs US$21.65/lb yesterday

  • Uranium’s recent price rally may be artificially upheld by Japan’s significant stockpile of the nuclear fuel, according to industry consultants Ux Consulting Co. Utilities stockpiled enough fuel to power the nation’s nuclear fleet for at least 6 years, while some generators remain active in accepting deliveries despite the near-total shuttering of the country’s reactors almost seven years earlier following the Fukushima disaster.
  • Japan’s large and growing inventories are certainly something that overhangs the uranium market. If any Japanese utility tries to sell some or all of its nuclear fuel inventory, it will probably try to do so in a discrete manner. The first choice is to sell to another Japanese utility so as to minimise the global market impact” comments Ux. Reintroduction into global markets could have a devastating impact on the recent rally in uranium prices after suppliers cut production across major projects, and reverse the effect of the recovery from the lowest annual average in a decade.
  • Spot uranium slipped more than 68% since the Fukushima disaster, falling to the lowest level in 12 years in November 2016. Coordinated production cuts by miners across Canada and Kazakhstan, the world’s biggest producer, brought spot price to average $22 in 2017.
  • Ux estimate Japanese generators have stockpiled at least 130 million pounds. Domestic sale of the product remains limited with Kansai Electric Power Co. and Kyushu Electric Power Co. representing the only companies with operating reactors, producing electricity from three atomic plants out of a nationwide fleet of 40.
  • Remaining utilities firms are reducing or deferring shipments as stockpile levels climb, with Tohoku Electric Power Co., Hokuriku Electric Power Co., and Tokyo Electric Power Company Holdings, Inc. all in negotiation with their suppliers. Chubu Electric Power Co. has secured enough uranium to operate the Hamaoka plant, while Chugoku Electric Power Co. has no plans to sell its stockpiles.
  • Momentum is on the rise for growing nuclear energy generation, with four more plants due to come online in the next four months.

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$76.8/t vs US$76.3/t

  • Speculation of sustained demand for higher-grade ore is expected to sustain prices as iron ore futures plough onto the highest close in more than five months. In Singapore, most-active SGX AsiaClear futures rose as much as 0.7% to $77.25/t, closing near the highest since Sept. 1, as the high-grade 62% content material surges 5.3% year to date.
  • Iron ore (or at least high-quality iron ore) will be well supported over the medium term. A significant part of the quality premium for iron ore is driven by the change in Chinese steel making philosophy, and we expect this to be permanent”, according to Sanford C. Bernstein Ltd. The benchmark iron ore remains in a sweet spot as China’s curbs on steel supply to fight pollution have underpinned demand for higher-quality ore, supporting preferential output from miners including Rio Tinto Group and Vale SA. Speculation follows that when restrictions are lifted in mid-March, the likely resurgence in activity by mills will be a plus for iron ore.
  • Further, steel inventories remaining low across China and improving mills’ profitability will enable a boost in usage of high-grade ore, according to Citigroup Inc.
  • In addition to the winter production restrictions, policy makers are advancing the drive toward overcapacity across the Asian nation.

Chinese steel rebar 25mm US$638.3/t vs US$637.9/t - China steel demand to aid prices as winter idling ends

  • Seasonal steel demand in China will absorb additional steel production, supporting steel prices
  • As local mills restart in the spring after winter curbs, the bank expects inventory levels may be too low, and lags to rebuild supply to meet higher demand may mean there is upside risk to steel prices
  • The potential constraints to supply contrast with the bank's expectation for Chinese steel demand to grow 25%, or 13 million mt in March from February, and further 1% month-on-month growth in April

Thermal coal (1st year forward cif ARA) US$81.7/t vs US$79.7/t

Premium hard coking coal Aus fob US$233.1/t vs US$230.2/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,000.0/t vs US$81,250.0/t - Umicore says cobalt recycling will be growing source of metal in coming years

  • Chief Executive Marc Grynberg told Financial Times that ‘recycling is an amazing mine of cobalt that is totally untapped’
  • Around 10% of global production goes into smartphones and if it is not extracted from dead batteries, the cobalt is lost forever
  • In order to meet increasing demand for electric car batteries, cobalt supply will need to reach 180,000 tonnes by 2026, up from 48,000 tonnes in 2016, Benchmark Mineral Intelligence says. By that time, recycling will start to make up a growing portion of supply

 

Company News

Botswana Diamonds (LON:BOD) 1.3 pence, Mkt Cap £5.9m – Scoping study for the Thorny River Project

  • Botswana Diamonds reports that it has started a scoping study to evaluate its Thorny River diamond project in the Limpopo Province of S Africa. The work is expected to take up to six months.
  • The project area totalling 2,771 hectares is a consolidation of the Frischgewaagt, Hartebeestfontein and Doornrivier properties which comprise “the eastern extension of the kimberlite dyke/pipe systems on which the Klipspringer & Marsfontein Mines are located, both of which have been economically mined.”
  • The company points out that “Extensive drilling, geophysics and sampling work has been undertaken at Thorny River during the last twelve months” although “The estimated diamond grade range remains at 46-74cpht” and “The estimated volume range remains at 1.2 -2.1 million tonnes of kimberlite”.
  • The company does, however note that “Further analysis of the work completed to date has led to an updated estimate of the diamond value range of US$120-US$220 per carat”. Botswana Diamonds comments that  the grade and value per carat “compares favourably with the published Indicated Resource grade of the neighbouring Klipspringer Mine of 49 carats per hundred tonnes and diamond value of US$130 / carat (2010 value), and value per tonne of US$64 / tonne.”

Conclusion: We look forward to the findings of the scoping study on the Thorny River diamond project in due course.

 

Bushveld Minerals* (LON:BMN) 8.5p, mkt cap £75m – Vanadium demand set to rise further as China raises standards for steel for vanadium in high-strength rebar for earthquake resistance

BUY – Target price 18.28 - (Bushveld Minerals now holds 59.1% of Vametco)

Click here for last Flash note

  • The People’s Republic of China is working to cut the use of substandard steel and improve standards for new high strength rebar.
  • The move is to help make buildings better resistant to earthquakes with the standards coming in to effect on 1 November
  • The standards released last week eliminates low strength Grade 2 (335MPa) rebar and brings in three high-strength standards:
    • Grade 3 (400MPa),
    • Grade 4 (500MPa),
    • Grade 5 (600MPa).
  • Hot-rolled HS rebar,
    • V content will be at 0.03%
    • V in Grade 3, 0.06%
    • V in Grade 4,
    • >0.1% Grade 5 rebar
  • The implementation of the new standard will significantly promote the application of vanadium in Chinese rebar products.

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

 

Golden Star Resources (TSX:GSC) C$0.95, Mkt Cap C$360m – Recent drilling implies Wassa may be more extensive than currently thought

  • Golden Star Resources has released results from drilling undertaken during the second half of 2017 which suggest that the Wassa deposit in Ghana may be more extensive than is reflected in the current resource estimate, which the company’s website reports as 44.3m tonnes at an average grade of 2.33 g/t gold, equivalent to 3.3m oz of contained gold.
  • Investigation of the “B” Shoot and “F” Shoot to the south of the current resource envelope comprise a total of 6,818m of drilling and was undertaken from hole the BS17DD385M “mother” hole, collared 180 metres to the south of Wassa Underground’s current inferred resources, and four “daughter” holes.
  • Results from the “mother” hole, which have been reported  previously, “confirmed that the high grade zone extended 180m to the south of Wassa's Inferred Mineral Resources”. The results from the follow-up “daughter” hole programme tested the extension of the mineralisation in what is interpreted as the “F” Shoot “over approximately 400m of dip extension and intersected the “thickest zone of gold mineralization drilled to date at Wassa … [of] 94.0m averaging 4.4 g/t Au from 1,305.7m” in the third of the daughter holes.
  • The 94m long intersection covered higher grade sections including a 14m long section averaging 18.1g/t gold from a depth of 1305.7m and another 14m long interval averaging 8.6g/t gold from a depth of 1495m. We observe that the 94m long intersection is reported as the true width represented by a 211.3m long down hole intersection which indicates that the drilling is intersecting the mineralisation at an oblique angle of, we estimate, around 25⁰, and may complicate geological interpretation somewhat.
  • Overall, the company interprets the drilling has extended the orebody by “approximately 600m to the south of the current Mineral Reserves and remains open.”
  • Further southward drilling of the “B” Shoot and “F” Shoot is planned during Q2 2018
  • In addition to the drilling towards the south, underground drilling of two holes (612m) has shown continuity of gold mineralisation in the “B” Shoot North to extend 50m further north than the current planned mining area and opened up the possibility of adding additional production stopes in the near term.
  • The first of the new [underground] holes (BS17-720-29), which was drilled across the top of the interpreted zone, confirmed the grades and thicknesses intersected in the earlier hole, including 27.1m1 grading 8.7 g/t Au from 209.9m. The second new hole, (BS17-745-17), drilled approximately 20m up dip of the first new hole, also reported a significant intercept: 11.4m1 grading 7.3 g/t Au from 219.0m. This confirmed the continuity of the gold mineralization 50m to the north of the planned stoping area.”
  • Three holes, extending approximately 300m below the area previously mined were drilled on the 242 FW zone, which is located in the flatter dipping western limb of the Wassa fold structure. The most northerly of these holes “(242-17-DD006) returned an intercept of 6.8m1 grading 8.2 g/t Au from 488.0m and as a result, further drilling has been included in the 2018 exploration budget.” The company comments that “If further drilling of 242 FW is successful, it has the potential to supply additional underground ore to the Wassa processing plant and increase production”
  • Commenting on the results from the “B” and “F” Shoot drilling, CEO, Sam Coetzer, pointed out that the results “continue to support our belief that Wassa has substantial potential at depth … [and that they] … provide further confirmation that the ore body extends approximately 600m to the south of the current Mineral Reserves and remains open.  Importantly, they also suggest that it may widen at depth”. He went on to underline that “Wassa Underground is a central part of our exploration strategy in 2018 and I look forward to releasing further information about our other exploration targets during this quarter."

Conclusion: Drilling results are showing potential to increase the overall resource at the Wassa mine beyond the current 3.3moz of gold as the mineralised structures are being identified laterally well outside the existing resource envelope and at depth. We look forward to results from the future exploration and, in due course to an updated mineral resource estimate.

 

SolGold* (LON:SOLG) 22.7p, Mkt Cap £384m – Half-year financial report highlights progress at Alpala, Ecuador and other copper exploration

(SolGold own 85% of Cascabel in Ecuador)

  • SolGold report the drilling and assaying of holes 26 to 35 on the Alpala project at Cascabel in Ecuador.
  • The project is still open and so far indicates a true width of up to 700m with mineralisation down to 1,600m down hole.
  • The team is directed and supported by Newcrest who are funding some A$60m worth of exploration on the project.
  • Newcrest are expert in block cave mining and are considered to have world-class expertise when it comes to this sort of mining and project evaluation.
  • The recently accelerated drilling program continues to define and expand the mineralised envelope and to increase the scale of the project.
  • Management are preparing to release details on the new Mineral Resource estimate which was announced to the market on 3rd January.
  • The resource estimates: 1.08bnt grading an average 0.4% copper and 0.3g/t gold to give 0.6% copper equivalent.
  • Cascabel other targets; Solgold has only tested five of the 15 targets on the Cascabel license area. Alpala is one of these targets. The others are due for testing this year and may prove significant in adding to the effective resource inventory in the Cascabel area.
  • Other projects: SolGold expanded its licenses in Ecuador significantly last year and now holds 100% interests in some 77 concessions though a number of local subsidiaries. SolGold is using knowledge gained from its work at Cascabel alongside more traditional geological methods to target mineralisation on these concessions.
  • Solomon Islands; SolGold continue negotiations with landowners to gain access to project areas as Kuma and Mbetilonga. The company will start field work on the grant of the relevant licenses and access rights. Several strong copper anomoloies remain untested here.
  • Australia, Queensland; SolGold plan to follow up on numerous anomalous areas including the Mt Compton breccia pope at the Normanby project.
  • Funding: SolGold raised some A$78.4m in the second half last year to give the company a cash balance of A$138.4m at the year end.  This is an almost unprecedented sum for an exploration company.
  • Cash burn; the company spent A$26.6m on exploration and evaluation mainly at Alpala in Ecuador. The work principally covered the drilling and assaying of nine deep drill holes including daughter holes covering some 38,250m
  • Admin expenses; came in at A$9.8m through the second half.
  • Profit / loss; the company recorded a total comprehensive loss of A$14.9m through the second half due to increased exploration activity at Alpala and at a number of other, mainly copper/gold prospects.

Conclusion: SolGold with advice from Newcrest are working tremendously hard to fully evaluate the Alpala project. The company has also added personnel to ramp up other exploration in Ecuador which in our view is highly prospective and may well provide future targets for significant discoveries. SolGold’s very healthy cash balance is also enabling the company to reactivate exploration in Australia and the Solomon Islands.

*SP Angel act as UK broker to SolGold

 

Stratex International (LON:STI) 0.8p, Mkt cap £3.7m – Exploration agreement for Hasancelebi and Dogala prospects in Turkey

  • Stratex reports that it has reached an agreement with a private Turkish company, TET Madencilik Ltd, for TET to fund, over the next two years,  up to US$1.5m of exploration on the Hasancelebi  gold prospect located approximately 500km southeast of Ankara in Turkey.
  • Stratex will manage the exploration and drilling campaigns on behalf of TET, however, the agreement will “significantly reduce … [Stratex’s] operational overheads in Turkey through the transfer off licencing and staffing costs to TET.”
  • Under the agreement, Stratex is to receive US$50,000 within a week of signing the agreement. Provided that the exploration generates “a minimum JORC-compliant indicated or measured gold resource of 100,000oz (with a 0.3g/t cut off) is defined within the oxide and transition zones” within the 2 year exploration period, Stratex will receive a further US$500,000 success fee. Stratex will also receive a 1.5% NSR on any future precious metals production.
  • The trigger for payment of the success fee carries a number of practical conditions including the amenability of the deposit to surface mining, and satisfactory metallurgical test results and Environmental Impact Assessment. In the event that these criteria are met but TET does not proceed to development within a further 2 years, the properties revert to Stratex.
  • In the event that the exploration at Hasancelebi reaches the 100,000oz resource target within the agreed US$1.5m exploration budget, the balance of the funds will be used for exploration of the greenfield Dogala project which is located approximately 225km west of Hasancelebi, and is considered to be prospective for high sulphidation gold.
  • The Hasancelebi project area has been previously drilled in joint-venture with Teck Resources and “has demonstrated the potential for low-grade, high-tonnage gold mineralisation extending over a distance of between 1,000m and 2,000m, and vertical continuity of the system is confirmed down to 300m in some areas”.
  • Commenting on the agreement, interim CEO and founder of Stratex, Bob Foster described the projects as “non-core to Stratex's portfolio over the last few years” and noted that it would start to realise value on behalf of shareholders while it “allows us to share in any upside potential that might be realised, through a success-based payment and a royalty on future production”.
  • Earlier this month, Stratex enunciated its strategy as resting on the fast tracking of its exploration of the Dalafin deposit in Senegal with a reduction of the company’s financial exposure “through the conclusion of a joint-venture arrangement to bring in third party funding and additional expertise”; earning in to or acquiring new projects; monitoring of “its investment in other companies and support of further exploration as appropriate”; and to continue “the realisation of value from existing lower priority projects which are converting to royalty arrangements”. Today’s  announcement represents tangible delivery on the last of these strategic criteria.

Conclusion: Stratex’s agreement with TET over Hasancelebi and Dogala delivers on the recently announced strategy by generating value from a non-core asset while retaining the exploration management of the projects and exposure to exploration success through a discovery bonus and continuing royalty.

 

 

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Thu, 15 Feb 2018 11:21:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29386/fundamentals-remain-supportive-of-commodities-in-2018-29386.html
Market Briefing - Botswana Diamonds and SolGold http://www.proactiveinvestors.co.uk/columns/sp-angel/29379/market-briefing-botswana-diamonds-and-solgold-29379.html Botswana Diamonds (LON:BOD) – Raising £500,000 

SolGold* (LON:SOLG) – Initial Aguinaga drilling programme imminent

South Africa – Gupta business family compounds in South Africa are raided by police forces once President Zuma has been handed the resignation order by the ANC executive committee.
• Guptas are accused of using close connections to Mr Zuma violating anti-corruption regulations.
• The rand continued to strengthen against the US$ and is currently trading 11.85 (+5% YTD) on increasing expectations for Zuma to announce resignation later today.

Stockpiles swell ahead of Lunar New Year
• SHFE inventories of base metals rise as restocking ahead of tomorrow’s Chinese new year festivities. Deliverable aluminium stockpiles in Shanghai Futures Exchange warehouses extend multi-month gains to fresh records, growing 7,544 tonnes to 811,286 tonnes; increasing every week since late June.
• Deliverable zinc stockpiles also grow 4% to 102,557 tonnes, up for the 7th week.
• Deliverable copper inventories boosted levels 5.8% to 197,759 tonnes.
• Levels are expected to continue to rise as traders and mill workers have taken leave during the national holiday running 15th-21st Feb.

Dow Jones Industrials  +0.16% at 24,640
Nikkei 225   -0.43% at 21,154
HK Hang Seng   +2.47% at 30,577
Shanghai Composite    +0.45% at 3,199
FTSE 350 Mining   +0.15% at 18,402
AIM Basic Resources   -0.13% at 2,526

Economics
US – CPI numbers are due later today with markets trying to understand if there is a build-up in inflation pressures.
• Core CPI is expected to come in at 1.7%yoy in January compared with 1.8%yoy the previous month.
• Benchmark 10y bond yields are little change this morning (2.83%) after coming off recent highs hit on Monday (2.89%) while stock markets futures are pointing towards modest equity gains once trading starts later today.
• Fed funds futures markets imply that traders expect at least two rate increases by the end of the year, with a 50% chance of three.

Japan – Weak GDP and inflation numbers point to an extension of the supportive monetary policy
• Positive effect of stronger consumer spending and business investments has been dented by a drop in government spending, weaker inventories and an increase in imports.
• GDP (%qoq annualised SA): 0.5 v 2.2 (revised from 2.5) in Q3/17 and 1.0 forecast.
• GDP deflator (%yoy): 0.0 v 0.2 in Q3/17 and 0.0 forecast.

Germany – The economy recorded robust growth in the final quarter of 2017 driven by strong overseas demand, according to Destatis.
• The statistics agency said “exports increased substantially” while government spending climbed while household consumption was essentially flat.
• Market estimates are for the economic growth to accelerate to 2.4% next year, 2pp up on 2017.
• GDP (%qoq SA): 0.6 v 0.8 in Q3/17 and 0.6 forecast.
• GDP (%yoy WDA): 2.9 v 2.8 in Q3/17 and 3.0 forecast.

Sweden – One of the central banks that keep short term interest rates in the negative territory voted to leave repo rates at -0.50% during today’s meeting.
• Although, one of the six members’ Executive Board voted for an increase in the benchmark rate by 25bp despite downwards revisions to future inflation forecasts.
• The Riksbank highlighted that labour earnings have been growing at a slower pace than previously forecast despite strong labour market and GDP growth data.
• As such the central bank does not see repo rate increases before the start of the second half of the year.

Currencies
US$1.2366/eur vs 1.2326/eur yesterday  Yen 107.37/$ vs 107.65/$  SAr 11.868/$ vs 11.930/$  $1.388/gbp vs $1.386/gbp  0.787/aud vs 0.787/aud  CNY 6.346/$ vs 6.343/$.

Commodity News

Precious metals:         
Gold US$1,332/oz vs US$1,329/oz yesterday
• Gold rises for the third consecutive day as investors eagerly await key US inflation data which may offer fresh clues on monetary tightening. Bullion for immediate delivery climbed as much as 0.6% to $1,337.02 to add almost 2% to yearly gains for the precious metal. Gold’s increase was matched by a fourth day of losses for the Bloomberg Dollar Spot index, its worse run in a month to fall more than 3% lower for the year to date.
• “Some G-10 traders (are) arguing this is the most significant economic release in the past three years” according to Oanda analysts, with the looming inflation print “critical” following “last week’s market carnage in the wake of an inflationary uptick in wage growth”. “With the US dollar once again striking a bearish chord among G-10 traders, the long gold set up looks favourable. However, with nearly 100% of gold’s appeal trading off the back of US dollar weakness, the US CPI reading could be a day of reckoning for gold bulls”.
• Economists at Oversea-Chinese Banking Corp. suggest “gold’s reaction to inflation data is profoundly hard to predict. Given how markets have been pricing in more Fed rate hikes into 2018, faster-than-expected inflation pressures would likely persuade higher policy rates across key central banks and pressure prices lower, rather than lift gold’s status as an inflation hedge”.
• Data this week also indicates Dalio’s Bridgewater Associates raised its stakes across SPDR Gold shares and iShares Gold Trust in the final quarter of 2017, with recommendations for investors to consider placing 5-10% of assets in gold.
   Gold ETFs 72.0moz vs US$71.8moz yesterday
Platinum US$977/oz vs US$974/oz yesterday
Palladium US$989/oz vs US$984/oz yesterday
Silver US$16.58/oz vs US$16.64/oz yesterday
           
Base metals:   
Copper US$ 6,982/t vs US$6,919/t yesterday
Aluminium US$ 2,125/t vs US$2,144/t yesterday
Nickel US$ 13,500/t vs US$13,185/t yesterday
Zinc US$ 3,459/t vs US$3,416/t yesterday
• Zinc prices are expected to fade in the second-half of the year, as the metal reaches a 10-year closing high of $3,557/t on Feb. 1. Expectations for a slowdown in China’s property sector is forecast to soften demand for ferrous commodities according to senior research analyst at Macquarie Group Ltd, with Lloyd seeing prices drop to $2,850/t.
• Zinc will also face “headwinds from substitution pressure” as the price surges higher than aluminium, a common substitute metal.
Lead US$ 2,545/t vs US$2,510/t yesterday
Tin US$ 21,600/t vs US$21,200/t yesterday
           
Energy:           
Oil US$62.6/bbl vs US$62.9/bbl yesterday
Natural Gas US$2.582/mmbtu vs US$2.610/mmbtu yesterday
Uranium US$21.65/lb vs US$21.65/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$76.3/t vs US$74.9/t
• Iron ore futures in China surged to their strongest in three-weeks on expectations for firm steel demand in the world’s top consumer during 1H 2018. The most-traded iron ore contract for May delivery on the Dalian Commodity Exchange jumped as far as $85/t, the highest since Jan. 23. The climb marked the second straight session of sharp gains in steelmaking raw materials, as price movements become exaggerated by low liquidity as many market players have taken off for the week-long Lunar New Year holiday.
• “Many mills have good profit expectations for the first and second quarter, so they have increased purchase of iron ore” according to a Beijing trader.
• A Chinese government think-tank warned earlier that the debated “unfair and unreasonable” US trade measures on steel will be met with “counter-measures” under World Trade Organization rules.
Chinese steel rebar 25mm US$637.9/t vs US$638.2/t
• Industrial buyers of steel in the US are appealing to President Donald Trump to protect the US steelmaking industry by directly negotiating with China, the main culprit driving global overcapacity, instead of instating trade restrictions on imported steel. Executive director of American Wire Producers Association penned the president a letter on behalf of steel consumers in the US arguing that restrictions on imports of foreign metal could be potentially ‘disastrous’.
• “We should be dealing with the overcapacity situation, not trying to plug one part of the industry that’s going to harm another industry”. The appeal follows on on-going investigation by the Commerce Department to prove whether imports of steel and aluminium represent a threat to US national security, under the premise of a seldom-used law, Section 232 of the Trade Expansion Act of 1962.
• Steel-import restrictions being considered by the US could have “unintended and disastrous consequences” for the domestic economy and manufacturers in his address written on behalf of 15 US industrial groups. The association represent more than 1 million jobs spread across 30,000 facilities. “Restrictions on basic steel imports will actually adversely impact national security, the economy, and the steel industry itself because it will undermine our competitiveness and limit our ability to make value-added products here”. 
China urges US to exercise restraint on steel trade actions
• China's Ministry of Commerce has urged the US to exercise restraint in using trade restrictions on steel imports ahead of a meeting between President Donald Trump and US lawmakers to discuss steel and aluminium trade issues
• Director of Chinese Ministry of Commerce, Wang Hejun, said ‘China is worried about the serious tendency of US protectionism in the field of steel products’
• He urged the US to exercise restraint in using trade restrictions and abiding by the multilateral trading rules with all parties so as to give a positive impetus to the development of world economy

Thermal coal (1st year forward cif ARA) US$79.7/t vs US$78.8/t - Global thermal coal demand to outstrip supply in 2018
• Powered by Asia’s continuing demand, the global seaborne thermal coal market is expected to grow by around 48mt or 5% from 2017 to 974mt in 2018, trading house Noble Group said
• While the spike in demand will largely come from Asia, the market is contemplating the supply to be short by about 10 million mt
• China is at the beginning of a new construction cycle looking at the increase in land purchase, also Indian steel production was expected to increase by about 10% in 2018, which would have a knock-on effect on power demand and hence coal consumption
Premium hard coking coal Aus fob US$230.2/t vs US$231.7/t

Other:  
Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week
Cobalt LME 3m US$81,250.0/t vs US$81,250.0/t - Cobalt cannot be eradicated from electric car batteries – Umicore
• Makers of electric vehicle batteries will have to keep using scarce, expensive cobalt in their products for the foreseeable future despite a push towards higher nickel compositions, materials technology company Umicore said
• Whilst technology was evolving towards higher nickel loadings, not possible to completely design out cobalt as cobalt is the element that gives nickel stability
• Reducing cobalt has impact on cycle life and charging

Company News
Botswana Diamonds (LON:BOD) 1.1 pence, Mkt Cap £4.8m – Raising £500,000
• Botswana Diamonds has raised £500,000 through the placing of 50m new shares at 1p/share. The new shares represent approximately 9.8% of the enlarged capital of the company.
• The funds are to be used for continuing diamond exploration in Botswana, where Botswana Diamonds is working with the Russian diamond major, Alrosa, on projects in the Orapa region and in the central Kalahari, and in South Africa, where the company is evaluating ground in close proximity to the former Marsfontein diamond mine.
• Speaking in Cape Town last week, Managing Director, James Campbell, indicated that, among other initiatives, the company intended to commence drilling  to determine the size and shape of the kimberlite body at its Ontevreden project in South Africa within the next three months.

SolGold* (LON:SOLG) 22.25p, Mkt Cap £377m – Initial Aguinaga drilling programme imminent
(SolGold own 85% of Cascabel in Ecuador)
• Solgold has announced plans to mobilise two man-portable diamond drilling rigs to the Aguinaga prospect within its Cascabel exploration area in Ecuador. The Aguinaga area is located approximately 3km northeast of the Alpala project area where the company announced a maiden resource estimate in January.
• The initial programme, which is expected to start in early March, is planned to consist of five holes to depths up to 1200m although success at this relatively early stage of exploration will no doubt trigger further drilling.
• Aguinaga is one of 15 priority targets which Solgold has identified within the Cascabel project area and the recent arrival of five large rigs to continue the detailed deep drilling work at Alpala has freed up the man-portable rigs for deployment on the initial drilling at Aguinaga.
• The Aguinaga discovery occurred in 2015 when “field teams discovered porphyry copper-gold, quartz stock-work veining and telescoping of epithermal-gold style veining within potassic altered porphyritic diorite.  Rock saw-channel sampling over the limited exposure, returned an open-ended nine metres grading more than 1.0% copper and 0.7 g/t gold” in the upper part of the Aguinaga Creek.
• Since the original discovery, follow up exploration has assembled a compelling body of coincident geological, structural, geochemical and geophysical evidence which characterises Aguinaga as a potentially significant large porphyry centre located at the junction of “a deep seated regional north-west trending structure with major north-east- and north-trending lineaments”.
• A large scale positive magnetic anomaly some 500m x 500m in size, surrounded by an annular magnetic low is also “characteristic of a large porphyry centre … similar to magnetic signatures at the Bajo de la Alumbrera, Grasberg and Batu Hijau porphyry deposits”
• Additional chargeability and magneto telluric resistivity anomalies reinforce the geophysical case for an underlying porphyry beneath Aguinaga while “Coincident highs in copper, gold, molybdenum and the Cu-Zn ratio in soil and auger results are supported by a surrounding zone of low manganese-in-soil, which is likely to be related to intense late-stage hydrothermal alteration above the centre of the Aguinaga porphyry system.  These soil geochemical relationships are characteristic of the metal zonation around porphyry copper-gold deposits”.
• The Cascabel area hosts a number of high priority targets in addition to the Alpala cluster and the Aguinaga target and Solgold has also secured a number of other licences elsewhere in Ecuador including the Timbara prospect where the company recently announced the discovery of copper porphyry style mineralisation in outcrop.
• The company has budgeted for 120,000m of exploration drilling in 2018 with the majority focused on infill and expansion work at Alpala where a maiden resource of 1.08bn tonnes at an average grade of 0.68% copper equivalent was announced in January.
Conclusion: The imminent commencement of early stage drilling at the Aguinaga property is supported by a substantial body of geological, structural , geophysical and geochemical evidence and is no doubt also informed by the detailed knowledge and understanding of the controls to mineralisation the exploration team has accumulated during the continuing exploration of Alpala. We look forward to the initial drilling results from Aguinanga as well as results from the continuing drilling at Alpala.
*SP Angel act as UK broker to SolGold

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Wed, 14 Feb 2018 10:57:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29379/market-briefing-botswana-diamonds-and-solgold-29379.html
Today's Oil and Gas Update - Union Jack Oil http://www.proactiveinvestors.co.uk/columns/sp-angel/29377/today-s-oil-and-gas-update-union-jack-oil-29377.html In Brief
• Union Jack Oil*** (LON:UJO) – $37.4mm (0.65p) – Brighter 2018 to Follow Disappointing 2017: Today’s update from the company reminds us that a lot of progress was made in 2017, all of which, however, was overshadowed by Wressle’s planning rejection. While this is undoubtedly disappointing, it is by no means the only flight in the company's quiver. With an active programme over the coming 12 months, such as Biscathorpe, Holmwood and the results of the Fiskerton workover, not to mention the revision to Wressle’s development, there is a lot planned for 2018. We are reiterating our $37.4mm (0.65p) valuation.

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Wed, 14 Feb 2018 08:55:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29377/today-s-oil-and-gas-update-union-jack-oil-29377.html
Morning View . Next-generation batteries to sustain cobalt demand http://www.proactiveinvestors.co.uk/columns/sp-angel/29375/morning-view-next-generation-batteries-to-sustain-cobalt-demand-29375.html Amur Minerals* (LON:AMC) – £10m convertible loan issued

Atalaya Mining (LON:ATYM) – Settling royalty for shares

Kodal Minerals* (LON:KOD) – Confirmation of Sogola-Baoule extension at Bougouni lithium project

MC Mining (formerly Coal of Africa) (LON:MCM) – Integrated water use licence secured for Vele Colliery

 

Lunar New Year

  • Trading activity is winding down ahead of the week-long Lunar New Year break that kicks off on Thursday. Many traders and workers across mills in China, the world’s top commodity producer, have taken leave and expectations are the market may only see a sharp revival in appetite next month.
  • Iron ore and steel demand is expected to remain in a lull into March, with no “major restocking activity soon after the holiday” according to a Shanghai iron ore trader.
  • Gold demand is expected to remain high during the festive period, building on the 3% rise in annual jewelry demand throughout 2017.

Demand growth combined with low stock levels and inelastic supply could make 2018 a good year for base metals

ABC News comments today that renewed demand and low stockpiles could make 2018 the year of the base metal

  • They highlight that wide industrial application and new technologies are driving demand, particularly from China which uses 50% of all base metals globally

BMW still looking for 10 year’s worth of Cobalt and Lithium supply

  • BMW’s procurement department continue to look ahead to secure 10 year supply of cobalt and lithium for EV batteries as part of new strategy according to comments to Germany’s Frankfurter Allgemeine Zeitung last week.
  • The head of supply chain, Markus Duesmann, said that ‘aim is to supply all the way down to the level of the mine, for 10 years. The contracts are ready to be signed,’
  • BMW is looking to release a series of all new electric vehicles starting with an electric mini next year, with plans for all 12 electric cars to be on the market by 2025

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

 

Dow Jones Industrials

 

+1.70%

at

24,601

Nikkei 225

 

-0.65%

at

21,245

HK Hang Seng

 

+1.29%

at

29,840

Shanghai Composite

 

+0.98%

at

3,185

FTSE 350 Mining

 

+0.42%

at

18,147

AIM Basic Resources

 

+1.72%

at

2,529

 

Economics

US – The volatility in equity market is seen subsiding after the worst week in years has been followed by the strongest two-day increase in just over two years on Monday.

  • The S&P 500 closed 2.9% over the past two sessions.
  • The volatility index based on the CBOE VIX measure has come down to 27.2 this morning, down from a high of 37.3 recorded last week.

 

China – New credit surged in January ahead of Chinese New Year, although, the trend in money supply growth remains downward as the government continues with the deleveraging programme.

  • Despite stronger than forecast new credit numbers for January, the gauge was down 17.2%yoy.
  • Aggregate Financing (CNYbn): 3,060 v 1,140 in December and 3,150 forecast.
  • M2 Money Supply (%yoy): 8.6 v 8.2 in December and 8.2 forecast.

 

UK – Inflation data came in stronger than forecast in January raising expectations for a rate hike this year.

  • Weak price pressures in auto fueld and food prices were compensated by increasing costs in the recreation and culture sectors; additionally, clothing prices recorded weaker losses than last year as seasonal discounts failed to match those in 2017.
  • Markets currently price in around three interest rate hikes over the next three years, with the first coming as early as May.
  • The pound jumped past the 1.39 mark on the back of the news before coming off slightly trading at 1.388.
  • CPI (%mom/yoy): -0.5/+3.0 v 0.4/3.0 in December and -0.6/+2.9 forecast.
  • Core CPI (%yoy): 2.7 v 2.5 in December and 2.6 forecast.

 

South Africa – The ANC party has asked President Jacob Zuma to resign paving the way for Cyril Ramaphosa to take power, according to people familiar with the decision BBC report.

  • The ANC national executive committee has reached the decision following a 13-hour meeting with an official letter confirming the ousting of Mr Zuma to be sent later today.
  • Interestingly, the NEC has not legal binding power to remove Mr Zuma from the office and should the President disagree with the decision the official no-confidence vote will have to be launched through parliament.
  • In case of a resignation, Mr Ramaphosa will immediately replace the President for a period of up to 30 days before parliament confirms his candidature.
  • The rand has been little changed against the US$ this morning hovering around the strongest level since mid-2015 on the back of expected changes in the government.

 

Currencies

US$1.2326/eur vs 1.2263/eur yesterday  Yen 107.65/$ vs 108.54/$  SAr 11.930/$ vs 11.967/$  $1.386/gbp vs $1.382/gbp  0.787/aud vs 0.781/aud  CNY 6.343/$ vs 6.324/$

 

Commodity News

Precious metals:         

Gold US$1,329/oz vs US$1,321/oz yesterday

  • Gold advances for its second day as the dollar retreats and equity markets begin to stabilize following last week’s selloff. The S&P 500 regained 1.4% during yesterday’s trading following the biggest weekly rout in two years. Oanda trading analysis note “prices were supported by a weaker dollar and physical demand ahead of the Chinese Lunar New Year. The equity market carnage has abated, and the waves of cross-assets selling to replenish equity margins have temporarily decreased, providing calmer market to reestablish gold longs”.
  • Investors await tomorrow’s US consumer-price index data as a signal on inflation views and indication of the pace of monetary tightening. “Prices should remain within a range ahead of this weeks’ US inflation data as the CPI will be a monster print for the markets’ inflation views, and could provide a catalyst for gold to bounce higher”.
  • As yields on 10-year Treasuries sit near 2014 highs at 2.83%, billionaire hedge fund manager Ray Dalio notes the risk of recession in the next 18 to 24 months is rising.

   Gold ETFs 71.8moz vs US$71.8moz yesterday

Platinum US$974/oz vs US$968/oz yesterday

Palladium US$984/oz vs US$987/oz yesterday

Silver US$16.64/oz vs US$16.43/oz yesterday

           

Base metals:   

Copper US$ 6,919/t vs US$6,825/t yesterday

  • Higher copper prices and new labour rules in Chile are driving broad wage negotiations across the world’s top supplier of the red metal. One of the most anticipated at BHP Billiton’s Escondida mine lies in the hands of the company, according to Union No.1 spokesman Carlos Allendes. Despite the historically fractious relationship, the doors are open to dialogue. If the company maintains the same position as the last negotiation, the union doesn’t rule out actions including a strike.
  • This intensifies concerns over significant supply disruptions as wage talks between Union No.1 and BHP failed in February last year and workers went on a 44-day strike that ended with no accord.

Aluminium US$ 2,144/t vs US$2,130/t yesterday

Nickel US$ 13,185/t vs US$13,030/t yesterday

Zinc US$ 3,416/t vs US$3,385/t yesterday

Lead US$ 2,510/t vs US$2,520/t yesterday

Tin US$ 21,200/t vs US$21,140/t yesterday

           

Energy:           

Oil US$62.9/bbl vs US$63.4/bbl yesterday

  • Hedge funds have begun liquidating record bullish positions in crude oil and refined fuels as the recent rally reverses amid signs that US shale production is surging. The hedge funds and other money managers cut their combined long position in six most important futures and options contracts linked to petroleum by the equivalent of 41 million barrels in the week to Feb. 6.

Natural Gas US$2.610/mmbtu vs US$2.575/mmbtu yesterday

Uranium US$21.65/lb vs US$21.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.9/t vs US$74.0/t

Chinese steel rebar 25mm US$638.2/t vs US$640.1/t

Thermal coal (1st year forward cif ARA) US$78.8/t vs US$75.8/t

Premium hard coking coal Aus fob US$231.7/t vs US$228.4/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,250.0/t vs US$81,250.0/t

  • Despite next-generation lithium-ion batteries evolving towards higher nickel consumption, markers of electric vehicle batteries will have to continue using the scarce, expensive cobalt for the foreseeable future according to materials technology company Umicore. Manufacturers are trying to redesign battery compositions to increase the proportion of nickel used in electric vehicle batteries to boost energy density, while reducing cobalt use to cut costs.
  • South Korea’s SK Innovation and LG Chem have recently announced plans to produce NMC (nickel-manganese-cobalt) 811 batteries (80%-10%-10%) this year. However, Umicore chief executive Marc Grynberg noted that while the technology was evolving toward higher nickel loadings, it was not possible to design cobalt out of the batteries. “If you increase the nickel proportion, you reduce the stability of the battery and so it has an impact on cycle life, the ability to charge it fast. Cobalt is the element that makes up for the lack of stability of nickel. There isn’t a better element than nickel to increase energy density, and there isn’t a better element than cobalt to make the stuff stable. So (while) you hear about designing out cobalt, this is not going to happen in the next three decades.”
  • Belgium’s Umicore raised $1.1 billion in an equity placing to fund investment in its fast expanding rechargeable battery material business, supplying broad materials including cobalt.
  • In the near-term, enough cobalt is being produced to meet demand from the electric vehicle industry, with Umicore sourcing Congolese metal via a responsible supply agreement audited by PwC. Long-term supply will require significant advancement in recycled material. The company expects to ramp up recycling of spent electric vehicle batteries to “significant” levels in the next seven to nine years, when more feedstock returns to the market. “If you look at a more mature market, like the market for catalysts that contain platinum group metals, about half of our supply is coming from recycling”.
  • Further minor metals trading house Darton Commodities forecast a 40% growth in cobalt usage in electric vehicle batteries to 12,600 tonnes in 2018. This represents a 1,500 tonne surplus this year as global supply increases.
  • Deficits are expected to return in 2021, and deepen in following years as EV sales surge. “Any surplus availability, be it as unrefined feed or refined downstream products, is likely to be absorbed and stockpiled by other market players in anticipation of renewed, future supply constraints”.

 

Lithium

  • South Korean entities are “moving faster than just about everybody else”, including Europe and North America to lock in sources of lithium supply; second only to China in seeking deals. Pilbara Minerals Ltd. CEO Ken Brinsden has been in discussions with LG Chem Ltd. and Polaris Shipping Co. on a potential South Koreas JV. Meanwhile, the company has multiple engagements with other SK entities not focused on vehicle manufacture, and is continuing to work on potential supply deals with the aim of being a diversified supplier by customer, segment and country.
  • The major Australian spodumene hard rock producer has ~200,000 tonnes of output from its expansion project that is currently uncommitted, with Pilgangoora on track to begin commissioning in 2Q, with first shipment by end of July.  

 

Company News

Amur Minerals* (AMC LN) 6.0p, Mkt Cap £38.1m - £10m convertible loan issued

  • The Company agreed a 8% up to $10m loan facility with an investment consortium of Cuart Investments and Y A II PN arranged by RiverFort Global Capital.
  • Loan proceeds will be used for resources/reserves update, update of the economic model, metallurgical test work and G&A.
  • The loan will consist of three tranches ($4m, up to $3m and the remainder of $10m) to be made available to the Company through the year and to be drawn at the Company discretion, approximately 120 days apart between each tranche.
  • The first $4m drawdown to be made tomorrow with a maturity of 13 March 2019.
  • Each drawdown is repayable in 12 equal instalments, including accrued interest.
  • Should the Company elect not to make a periodic repayment, loan providers can convert the instalment into new shares at own discretion.
  • The conversion price is the lower of 130% of the Reference Price (the 20 trading days VWAP immediately prior to the date of each drawdown) or 90% of the lowest daily VWAP over the five trading days before the conversion.
  • The Company can repay all outstanding amounts of an advance before the end of the loan facility if VWAP for five trading days prior to the redemption notice comes in below 130% of Reference Price, but the amount payable will be 110% of the amount due.
  • Additionally, investors will receive warrants for 30% of the value of each drawdown with an exercise price of 130% of the price of the advance and an exercise period of three years.
  • Following the draw down of the first $4m tranche, the Company will issue 9.3m warrants with an exercise price of 9.3p (implying 7.2p the Reference Price).
  • At no point investors can convert into new shares if doing so will take their stake in the Company to 25% or more.

Conclusion: The funds secured will help the Company to advance the Kun Manie nickel/copper sulphide project as the management is studying long term financing alternatives with Medea Financial Partners. Using the 7.2p Reference Price for the first tranche and 1.4 GBPUSD exchange rate as well as assuming share price trades around the Reference Price during the conversion period, we estimate the first tranche (including accrued interest) potentially amounting to 47.6m in new shares or 7.5% of outstanding share capital (excluding 9.3m in warrants).

*SP Angel act as Nomad and Broker to Amur Minerals

 

Atalaya Mining (LON:ATYM) 191 pence, Mkt Cap £258m – Settling royalty for shares

  • Atalaya Mining reports that it has issued 192,540 shares at a price of 186.7p/share in settlement of a US$500m outstanding royalty to the former owner of certain plots of land at its Proyecto TioTinto mine.
  • The royalty holder, Rumbo, “is entitled to receive a royalty payment of up to US$250,000 per quarter if the average copper sales price or LME price for the period is equal to or above $2.60/lb. As such, and given the fact that the average copper price for the third and fourth quarter of 2017 was above $2.60/lb, the Company is obliged to pay US$500,000 to Rumbo”.
  • The company and Rumbo “remain engaged in discussions over how to satisfy future payments, should they be required as per the Royalty Agreement.”

Conclusion: The company’s website discloses that at 1st January 2017, it had 116,679,555 shares in issue. The issue of shares to Rumbo to settle the outstanding royalty represents, therefore, less than 0.2% of the capital of Atalaya Mining. We look forward to further news on the outcome of the discussions regarding future royalty payments to Rumbo.

 

Kodal Minerals* (LON:KOD) 0.19p, mkt cap £12.6m – Confirmation of Sogola-Baoule extension at Bougouni lithium project

  • Kodal Minerals reports that the final assay results from its recently completed 1263m of reverse circulation drilling in ten holes at the Sogola-Baoule prospect have confirmed the south-western extension of multiple mineralised pegmatite veins which were previously identified in drill hole MDRCO15 including 12m at an average grade of 1.68% Li2O from a depth of 216m, a second 12m long intersection averaging 1.59% Li2O from 241m and 17m at an average grade of 1.79% Li2O from 277m depth.
  • The recent programme was intended to explore the “continuity of these intersections, to target the up-dip and potential near-surface mineralisation and extend the project.”
  • “Geological logging and evaluation of the drilling has confirmed multiple mineralised pegmatite veins and extensions to the defined bodies.” Among the new results highlighted in today’s announcement are:
    • A 24m long intersection at an average grade of 1.58% Li2O from a depth of 115m in hole MDRC026;
    • An 8m long intersection at an average grade of 1.50% Li2O from a depth of 133m in hole MDRC025, which also contained a second 2 metres wide zone of mineralisation averaging 1.71% Li2O from 148m;
    • A 13m long intersection at an average grade of 1.17% Li2O from a depth of 101m in hole MDRC027, which contained three additional mineralised zones at shallower depths, including 1m averaging 1.16% Li2O from 23m, 6m averaging 1.12% Li2O 33m and 7m averaging 0.70% Li2O from 86m; as well as
    • 3 separate intersections exceeding 1% Li2O in hole MDRC021B - 5m averaging 1.50% from a depth of 81m; 6m averaging 1.0% from 91m and 12m averaging 1.69% Li2O from a depth of 110m.
  • The company points out that the mineralisation lies beneath up to 14m of alluvial cover and that “Additional drill testing is proposed to target the extensions both to the southwest and northeast and provide additional data to allow an evaluation of the prospect.”
  • Confirming that “The geological interpretation is showing continuity of high-grade pegmatite bodies that currently remain open along strike”, CEO, Bernard Aylward noted that Sogola Baoule was the second of the targets at Bougouni “that we have now been able to drill test over a consistent strike length”. He went on to comment that “As our exploration campaign continues at Bougouni we anticipate further results from the Ngoualana prospect where geological logging of drill holes indicates further strike extensions, and geological reconnaissance has located evidence of pegmatite bodies beyond the current drilling”.

Conclusion: The recent drilling by Kodal Minerals continues to extend the footprint of the lithium mineralisation at Bougouni. Although there is not yet a resource estimate and consequently no mine plan, the identification of multiple mineralised structures within the licence has the potential to generate operational cost savings through a possible future bulk mining development.

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

 

MC Mining (formerly Coal of Africa) (LON:MCM) 39.5 pence, Mkt Cap £55.6m –Integrated water use licence secured for Vele Colliery

  • MC Mining , which changed its name from Coal of Africa in December 2017, has announced that the South African Department of Water and Sanitation has granted its Vele Colliery an Integrated Water Use Licence for colliery’s “stream diversion and associated infrastructural activities.”
  • The company comments that “This approval completes the full regulatory suite of all authorisations required for the Vele Colliery.”
  • This now clears the way for the MC Mining Board to consider “the final decision on whether to proceed with the Plant Modification Project”.
  •  The Vele Colliery, which lies close to the Zimbabwe border, has been on care and maintenance since October 2013, however with 362mt of mineable resources and a planned 16 year mine life as an open-pit mine with the potential to extend into underground operations, it represents a significant asset. The plant Modification project, if approved, enables upgrading of the previously produced thermal coal product to include a semi-soft coking product.

 

Conclusion: We understand that the project has suffered issues of product quality and relatively poor yields in the past, and we await further news of the Board’s decision on whether to proceed with the development following resolution of the regulatory issues.

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Tue, 13 Feb 2018 12:01:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29375/morning-view-next-generation-batteries-to-sustain-cobalt-demand-29375.html
Morning View - Metals and equities recover from last week’s selloff; Zimbabwe – farmers who lost farms may soon be compensated http://www.proactiveinvestors.co.uk/columns/sp-angel/29368/morning-view-metals-and-equities-recover-from-last-weeks-selloff-zimbabwe-farmers-who-lost-farms-may-soon-be-compensated-29368.html  

Anglo Asian Mining* (LON:AAZ) – Refinancing locks in cheaper rates and extends debt maturity

Acacia Mining (LON:ACA) – 2017 results show net loss of US$707m

Bluebird Merchant Ventures* (LON:BMV) – Second gold, silver mine added to portfolio in South Korea

Savannah Resources (LON:SAV) – Further drilling results from Mina do Barroso

Strategic Minerals;* (LON:SML) – Extension of access to Cobre magnetite stockpile

Thor Mining (LONTHR) – Resource estimate for Kapunda Copper Project

 

Cape Town – SP Angel wish to thank the 121 team for organising such a successful conference

  • Over 300 investors and analysts attended the event with more than 1,700 meetings booked giving an average of 20 meetings per company
  • Around 450 people attended the late Monday drinks highlighting the growth in interest in the Cape Town event
  • The event is open to investors, mining analysts and sponsoring companies only

 

Commodities claw back volatile losses

  • The Bloomberg Commodity Index, measuring returns on 22 basic resources, regained 1.1% after tumbling 5.7% over the past two weeks as raw materials are swept up in a global rout of risk assets. Despite the boost in broad pricing, the gauge remains 4.9% below the more than two-year high of 90.8 scaled last month.
  • Raw materials were hit by the same concerns that sparked last weeks’ broad sell-off in stocks; the prospect of higher interest rates. However, market fundamentals remain positive with all eyes on China. “No other country has a greater impact on global commodity prices than China. As Chinese New Year approaches, the uncertainties ahead provide risks to our base case of: steady Chinese economic growth, commodities demand improvement and supply rationalisation via capacity reductions and environmental regulations”.

China demand to support commodities into 2018

  • Citigroup analysts foresee sustained support for commodities as demand will continue to expand in China as government policy supports steady economic growth. Infrastructure spending is expected to grow +16% yoy, with downside risk to demand from property slowdown appears limited for the year with the market steadied by growth in rental/social housing and easing of property restrictions in some cities.
  • Supply-side policies shift from capacity closures to controlled expansion with a focus on replacement of outdated polluting systems.
  • Winter supply curbs could expand to copper, zinc, and nickel, and could intensify if air quality in north China disappoints.

Steel - China’s top steel city to extend winter output curbs

  • City of Tangshan said it would extend restrictions on production beyond the end of winter heating season on March 15
  • Documents say the city will draw up a plan to continue some curbs including eight central steel mills by the end of this month
  • Eight steel mills near city centre include the main site of Tangsteel, a unit of HBIS Group, will face unspecified ‘normalized’ production limits after March 15 and others will be required to stagger production

 

Zimbabwe – farmers who lost farms may soon be compensated

  • Zimbabwe could recover fast as President Mnangagwa sets reforms in place
  • Restitution and new investment in farms could lead to a rapid recovery in farming in the country.
  • The Zimbabwean government is said to have set up a committee to advance a process of compensating farmers whose farms where taken during the country's land reform programme.
  • President Emmerson Mnangagwa’s administration has appointed permanent secretary of the land and agriculture ministry, Ringson Chitsiko, to chair the committee until October next year.
  • The appointment of Chitsiko is part of a drive to make agricultural production attractive again.
  • Some of the evicted farmers have demanded $9bn in compensation for expropriated assets.

 

South Africa – Ramaphosa promises to end Zuma transition limbo

  • Cyril Ramaphosa has promised to end the situation with President Zuma.
  • While Zuma is still president, the ANC refused to allow the President to swear himself in again by postponing the State of the Nation ceremony in Cape Town last Thursday.
  • The leadership of the ANC is in discussion over the transition.
  • The ANC National Executive committee is meeting today to discuss and finalise the transfer of power with Cyril Ramaphosa as leader of the ANC expected to become president of South Africa once Zuma has been dispatched.
  • The transfer of power is a sensitive issue as Zuma still has some support in his tribal homeland and within the ANC though most voters would prefer Zuma to go.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+1.38%

at

  24,191

Nikkei 225

 

-2.32%

at

  21,383

HK Hang Seng

 

+0.19%

at

  29,563

Shanghai Composite

 

+0.78%

at

   3,154

FTSE 350 Mining

 

-0.06%

at

  17,691

AIM Basic Resources

 

-1.62%

at

   2,487

 

Economics

Fidelity is reported to have temporarily suspended new clients from buying three ETFs developed for betting on market volatility falling or staying low following heavy corrections in value of such products last week.

  • One of such products (XIV) dropped around 96% last week with Credit Suisse acting as the issuer of the security saying it will halt trading in it on February 20.
  • The decision has also affected the SVXY ETF which lost more than 90% and ZIV ETF whish was down 26% last week.
  • The correction in value of ETFs has come on the back of a sharp drop in equity markets last week which saw the CBOE VIX hitting the highest level in more than two years

 

European equities post a broad-based recovery following worst two-weeks in two years and US equity indices’ futures also trading higher.

  • Oil is stronger this morning halting breaking a run of consecutive losses in the last six days.
  • 10y US Treasury bond yields are trading higher hovering around the 2.9% mark, the highest level in four years.
  • Markets will be closely watching US inflation numbers due tomorrow for signs of the strength of a recent pickup in consumer prices growth rate with estimates for a slight slowdown in CPI in January (1.9%yoy v 2.1%yoy in December).

 

China – The nation is due to start New Year celebrations this Thursday running through February 21 with mainland markets shut for the period.

 

UK – Shoppers spent less last month than the year before causing spending to drop in January for the first time since 2013, according to the payments processing company Visa.

  • Household spending dropped 1.2%yoy and spending in shops was 4%yoy down as people stayed away from the traditional post-Christmas sales month.
  • “Consumer spending entered the new year on a downbeat note, falling for the eighth time in the past nine months, as Britons continued to cut back on spending,” Visa said.
  • HIS Markit which produces the survey for Visa highlighted consumers’ concerns over Brexit weighing on spending and confidence.
  • Visa accounts for a third of payments made by debit and credit cards in Britain.

 

South/North Korea – North Korean leader invited South Korean President to meet in Pyongyang with a potential which may signal of improving relations between neighbouring states.

  • Should South Korean President accept the invitation it would be the first time two leaders meet in the last 11 years.
  • In October 2007 then President Roh Moo-hyun and Kim Jong Il, the father of the current North Korean leader, signed a peace declaration calling to end the armistice with a permanent treaty, although progress stalled since then.
  • Technically, two nations remain at war.
  • “I hope President Moon will take the leading role to open a new chapter for unification and accomplish a legacy that will be remembered for long,” Kim Jong Un sister said acting as a broker for the meeting.

 

Russia – The central bank cut the benchmark rate by 25bp to 7.5% on Friday as inflation remained “sustainably low”.

  • Authorities said further cuts are possible given some subdued inflationary pressures.
  • Coupled with weaker oil prices, the decision saw the rouble falling to 58.5 against the US$ last week; the currency has gained slightly this morning with the USDRUB pair hovering around 58.0.

 

South Africa – New head of ANC is planning to hold a meeting with other party members to discuss a potential replacement of Jacob Zuma as the nation’s president.

  • The National Executive Committee which has the power to demand that Zuma step down will be meeting on Monday, Cyril Ramaphosa said at a rally in Cape Town yesterday.
  • The ANC leader and Zuma are holding direct talks over the transfer of power, Ramaphosa added.

 

Currencies

US$1.2263/eur vs 1.2271/eur yesterday  Yen 108.54/$ vs 109.17/$  SAr 11.967/$ vs 12.100/$  $1.382/gbp vs $1.396/gbp  0.781/aud vs 0.778/aud  CNY 6.324/$ vs 6.300/$.

 

Commodity News

Precious metals:         

Gold US$1,321/oz vs US$1,315/oz last week

  • Gold prices regained portions of last weeks’ losses as the US dollar slips and investors await inflation data from the US later this week for signs of the intensity of expected interest rate increases. US consumer price data will be released on Wednesday that is expected to give a clearer indication on the pace of inflation and therefore the frequency of the anticipated interest rate rises. Consumer price data is also expected to confirm concerns of rising inflation which triggered the global equity drop last week.
  • After last week’s sell off in risk assets, we expect gold to be well supported, especially if volatility in financial markets persists” according to chief economist at gold trader ABC Bullion. Last week, the S&P 500 dropped 5.2%, its biggest decline since January 2016.

   Gold ETFs 71.8moz vs US$72.0moz last week

Platinum US$968/oz vs US$971/oz last week

Palladium US$987/oz vs US$965/oz last week

Silver US$16.43/oz vs US$16.34/oz last week

           

Base metals:   

Copper US$ 6,825/t vs US$6,791/t last week

Aluminium US$ 2,130/t vs US$2,144/t last week

  • Aluminium prices fall as stockpiles across China expand to record highs of 1.805 million tonnes, up 25,000 tonnes from last week, according to researcher SMM Info & Tech Co.

Nickel US$ 13,030/t vs US$12,910/t last week

Zinc US$ 3,385/t vs US$3,372/t last week

  • Control remains firmly in the hands of the miners as zinc companies begin negotiations with smelters over processing fees at an industry conference in California, as dwindling stockpiles are a key bargaining tool. Miners will be hoping to erode at the $172/t level set last year with higher stockpiles. According to senior energy and mining equity analyst at Bloomberg Intelligence, “The market is super-tight right now. Miners are reportedly pushing for below half of last year’s level. They have the upper hand”.
  • Inventories tracked by the London Metal Exchange record the lowest levels since October 2008, with the metal expected to ring up a deficit of 230,000 tonnes. Bank of America Merrill Lynch analysts note with “LME stocks low, holdings concentrated and to a large extent not available, there is a risk of a short supply”. The rising deficit is enough to justify a 10% increase in price, with Wood Mackenzie forecasting the metal price to rise to $4,000/t by the third quarter.
  • Supply is expected to expand to match growing demand with “sufficient new mine supply to allow the world’s zinc smelters to collectively increase output by 6.5% or 880,000 tonnes, whilst high zinc prices will ensure that this can be produced profitability”. China boosted production in the close of last year to meet demand as zinc ended the year with gains on 30%.
  • Producers have been able to capitalise on attractive spot treatment charges, which dropped 22% to $180/t from 2015 highs of $220/t. Cosgrove forecast the benchmark treatment charge could land in the region of $120-130/t as tight conditions drive competition for smelter output.

Lead US$ 2,520/t vs US$2,494/t last week

Tin US$ 21,140/t vs US$21,265/t last week

           

Energy:           

Oil US$63.4/bbl vs US$64.3/bbl last week

Natural Gas US$2.575/mmbtu vs US$2.630/mmbtu last week

Uranium US$21.50/lb vs US$21.50/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.0/t vs US$75.3/t

Chinese steel rebar 25mm US$640.1/t vs US$642.6/t

Thermal coal (1st year forward cif ARA) US$75.8/t vs US$78.0/t

Premium hard coking coal Aus fob US$228.4/t vs US$228.6/t

 

Other:  

Tungsten APT European US$319-325/mtu vs US$317-325/mtu last week

Cobalt LME 3m US$81,250.0/t vs US$81,250.0/t

Samsung SDI turns to used phones for cobalt as prices surge

  • Samsung SDI Co. a battery supplier to carmakers including BMW plans to recycle cobalt from used mobile phones as companies around the world scramble to secure supplies of the metal amid surging prices
  • Will buy stake in company with recycling technology and sign deal to ensure long term cobalt supplies
  • Plan fuels trend among battery makers to reduce dependence on Democratic Republic of Congo as source of cobalt

 

Lithium - New desalination membrane produces both drinking water and lithium

  • Team of scientists in Australia and US have developed a new desalination technique that can not only make seawater fresh enough to drink but can recover lithium ions for use in batteries
  • Key to the process is metal-organic frameworks (MOFs), which boast the largest internal surface area of any known material, which enable them to filter materials
  • The technique could also be put to work filtering waste water from industrial processes like fracking.

Tightening market drives lithium carbonate outside of Asia

  • As the majority of global lithium production flows into China, nations outside of Asia are receiving a boost in price in North America and Europe as limited short-term availability is tightening market conditions.
  • Global lithium carbonate rose 9.4% in January to an average $17,338/t; global lithium hydroxide +0.6% to avg. $19,238/t; and spodumene concentrate avg. $810/t.
  • Carbonate prices across Europe rose 7% and North America prices grew 3%, while a seasonal slowdown in consumption in China caused prices to fall.

 

Company News

Anglo Asian Mining* (LON:AAZ) 43p, Mkt Cap £48.9m – Refinancing locks in cheaper rates and extends debt maturity

  • A syndicated, two-year term loan has been secured with Pasha Bank as arranger for $15m at 7% (arrangement fee 0.25%).
  • Proceeds will be used to refinance existing loans to the amount of $13.5m including:
    • $3.7m owed to ATB (9.6% and was due this year);
    • $3.7m owed to Gazprombank (9.6% and was due this year);
    • $2.2m owed to Yapi Credit Bank (9.5% and was due this year);
    • $3.9m owed to Company CEO Reza Vaziri (7.0% and was due this year).
  • The facility is repayable in eight equal quarterly instalments with interest payments due monthly.
  • A rescheduling of principal repayments releases $8.4m in extra funds to be used in a capital programme including an installation of a second crusher, replacement/expansion of the mining fleet and purchase of new drilling rigs as well as exploration.
  • Interest on the remaining debt to the IBA in the amount of $2.1m has been revised down to 7% from previous 12%.
  • The Company presented at a well attended Proactive Investors Conference yesterday reiterating strong production guidance for 78-84koz GE in FY18.

Conclusion: Refinancing helps the Company to lock in lower interest rates (estimated $0.1m saving on interest payments), but more importantly allows the Group to smooth out loan repayments providing additional funds to help business development.

*SP Angel acts as nomad and broker to Anglo Asian Mining

 

Acacia Mining (ACA LN) 156 pence, Mkt Cap £640m – 2017 results show net loss of US$707m

  • Acacia Mining has reported a net loss of US$707m for 2017 (2016 – profit US$95m) including a US$644m non-cash impairment charge arising from the “uncertainty in the operating environment and the ban on exporting concentrate, resulting in US$264m of lost revenue in the last year.”
  • Despite these difficulties, the company also reports “its “lowest ever” all-in sustaining cost of US$875/oz of production (2016 – US$958/oz) on the 767,883 oz of gold production. Cash operating costs in 2017 were US$587/oz (2016 – US%640/oz).
  • The company notes that its sales of 592,861 ounces of gold (2016 – 816,743 oz) were 22% lower than production. Cash flow was, however, impacted by “Acacia’s inability to export and sell a total of 158,500 ounces of gold, 12.1 million pound of copper and 158,900 ounces of silver contained in concentrate as a result of the concentrate export ban.”
  • Acacia Mining highlights a successful drilling programme at its North Mara mine which has “more than doubled the Mineral Reserve at the Gokona Underground to 1.3Moz”
  • The CEO is quoted as saying that “The company recorded a resilient performance in what became a difficult operating environment in 2017 and expects to return the business to free cash generation during the forthcoming year.”

Conclusion: Acacia Mining has battled external conditions this year and produced record low sustaining costs of production. We wish the company well in its efforts to return to positive cash flow this year.

 

Bluebird Merchant Ventures* (LON:BMV) 3p, Mkt Cap £5.5m – Second gold, silver mine added to portfolio in South Korea

  • Bluebird is spending just US$500,000 to earn into a 50:50 jv with Southern Gold Ltd on the Kochang gold, silver mine in South Korea.
  • Kochang is just 130km south east of Bluebird’s main Gubong project.
  • The Korean Resource Corporation ‘KORES’, a government backed body funded 70% of last year’s Kochang campaign .
  • The Kochang assets were valued at around A$2m last year but could easily demonstrate greater value on further drilling and evaluation.
  • Kochang operated from 1928-1975 and produced some 110,000oz of gold and 5.9moz of silver between 1961 and 1975 according to a KORES report.
  • Bluebird have moved fast and have already dewatered the mine and gained access to the lowest levels of production. .
  • The mine has a series of parallel and vertical orebodies which could make for relatively simple and potentially low cost development depending on the width and consistency of the veins.
  • The Kochang mine closed at a time when the gold price was US$140/oz.
  • Bluebird’s geologists reckon that a number of separate veins associated with the ‘main’ gold vein were not exploited in the past while a number of additional veins have also been found at the ‘silver’ mine.
  • The ‘Main Vein’ runs for around 2km with a further 0.5km of strike identified through surface mapping.
  • Surface rock-chip samples show gold grades of: 8.2 g/t, 15.3 g/t, 3.61 g/t, 10.5 g/t, 6.35 g/t and 23.9 g/t.   
  • A further 500 metres of additional Main Vein strike has been identified to the south of known workings.  Assays from rock-chip sampling confirm high tenor, gold mineralisation along the entire strike of the newly mapped Main Vein trend.  This is now visually confirmed on surface from a newly located and significant open stope that was historically developed on high grade.
  • Bluebird previously published a Competent Persons Report on 26 January 2018 which included details of the Kochang project.
  • The acquisition of Bluebird’s share of the jv is funded through the last round of funding with sufficient funding to complete the feasibility reports on the Gubong and Kochang projects.
  • See company website for further details www.bluebirdmv.com

Conclusion: Bluebird is pressing ahead fast with evaluation ahead of potential mine development. The quick dewatering and access of Kochang the mine should make further evaluation much quicker than for many mining projects. We await further news on the potential mineable resource, metallurgy and permissions required for making the project viable.

*SP Angel act as broker to Bluebird Merchant Ventures

 

Savannah Resources (LON:SAV) 6.1p, Mkt cap £38.9m – Further drilling results from Mina do Barroso

  • Savannah Resources has provided further news on the progress of its reverse circulation drilling programme at its Mina do Barroso lithium exploration project in Portugal where a total of 7,081m has been drilled, to date, in 87 holes.
  • The drilling is aimed at increasing the estimated inferred mineral resource beyond the 3.2mt averaging 1.0% Li2O which was announced for the Reservatorio deposit in December 2017. The company expects to add a resource estimate for the Grandao deposit, which is located to the south-east of Reservatorio, during Q1 2018. A second drilling rig is expected to be deployed at Grandao during the second half of February in order to test depth extensions to the mineralisation.
  • Among the results from the drilling at Grandao which are highlighted today are:
    • A 59m wide intersection of the newly discovered vertical pegmatite body at an average grade of 1.13% Li2O from a depth of 5m in borehole 17GRARC31;
    • A 33m wide intersection of the flat-lying pegmatite body at an average grade of 1.22% Li2O from a depth of 40m in borehole 17GRARC41; and
    • A 31m wide intersection of the flat-lying pegmatite body at an average grade of 1.07% Li2O from a depth of 40m in borehole 17GRARC25. This intersection includes a higher grade section of 24m averaging 1.31% Li2O.
  • In addition to the drilling at Grandao, further exploration targets, described as “high priority” have been identified at Romainho, Campo de Futebol and Peigro Negro north-east of Grandao.
  • Results of drilling from 10 holes (768m) at the NOA deposit north-east of Reservatorio are also reported today, including:
    • 15m at an average grade of 0.83% Li2O from a depth of 9m in hole 17NOARC06 and
    • 14m at an average grade of 0.73% Li2O from 19m in hole 17NOARC10.
  • The company explains that “Results [from the NOA drilling] have been encouraging with 10m-15m wide zones of pegmatite being intersected over a strike length of 200m and a down dip depth of around 50m … . Further work is now required to access the full potential of the deposit.”
  • “Based on the new results an additional 16 RC drill holes have been added to the programme at Grandao, Romainho, Campo de Futebol and Piero Negro in order to further evaluate the potential of the wider project area.” A 1500m diamond drilling programme is also planned to provide samples for further metallurgical test work and to assist in the geological interpretation.
  • The current metallurgical testing programme, which is investigating the crushing characteristics of the mineralisation and its amenability to gravity separation processing,  is expected to be completed in Q1 2018.

Conclusion: Exploration drilling at Mina do Barroso is continuing to identify additional targets and we look forward to the publication of an initial resource estimate at the Grandao deposit later this quarter.

 

Strategic Minerals* (LON:SML) 2p, Mkt Cap £26.7m – Extension of access to Cobre magnetite stockpile

  • Strategic Minerals reports that it has received a further one year extension of its rolling agreement with the owner of the Cobre magnetite stockpile in New Mexico securing guaranteed access until 31st March 2019.
  • The agreement, between Strategic Minerals’ wholly owned subsidiary, Southern Minerals Group, and the owner of the stockpile, is subject to automatic one year extensions and Managing Director, John Peters commented that “We have a good working relationship with the mine owner and, on this basis, it would suggest that the contract will ultimately continue to rollover until the entire stockpile is removed.”
  • During 2017, sales revenue from Cobre increased by some 260% to US$5.64m from the sale of 84,980 tonnes of material  compared to 25,383 tonnes in 2016.
  • Mr. Peters went on to underline the importance of Cobre as a source of funding for the company’s wider exploration and development projects; “The expected Cobre sales and existing cash balances place the Company in a strong position from which we hope to be able to internally fund exploration programmes at Hanns Camp/Mount Weld and Redmoor and provide capital to restart the Leigh Creek Copper Mine operations.”
  • Strategic Minerals has also announced the appointment of Jeffrey Harrison as a non-executive director where Mr. Harrison’s expertise in mineral development in south-west England where he previously served as operatioons manager at the Wolf Minerals tungsten operation in Devon is particularly relevant to the continuing exploration of the Redmoor tin tungsten deposit. Mr Harrison has been a consultant to the project and the company comments that his appointment to the Board “will not preclude him from undertaking further consulting work…”.

Conclusion: The rollover of the Cobre agreement, though not unexpected, provides certainty of continued access and with the significant build-up of sales achieved in 2017 expected to continue into 2018 should enable the company to press ahead with its exploration programmes in the UK and Australia and with the acquisition and re-start of the Leigh Creek Copper mine in Australia.

*SP Angel act as Nomad and broker to Strategic Minerals

 

Thor Mining (LON:THR) 3.8p, Mkt Cap £23.5m – Resource estimate for Kapunda Copper Project

  • Thor Mining has announced that Environmental Copper Recovery (ECR) has announced an inferred resource estimate of 47.4mt at an average grade of 0.25% copper for the Kapunda copper project in South Australia. The estimate, which uses a cut-off grade of 0.05% copper,  incorporates a review of historical drilling information as well as hydrogeological parameters considered likely to influence recovery rates and yields.
  • Thor Mining is earning up to a 60% interest in ECR which is, in turn earning a 75% interest in the project from Terramin, giving, we estimate, Thor Mining a 45% interest in the possible in-situ leaching copper project.
  • The estimate published today relates to the upper 100 metres of the deposit and only relates to the portion expected to recoverable by in-situ leaching technique.
  • The company comments that “Further work is required to advance a range of areas prior to commercial development including ongoing local government and community engagement, continuing technical assessment and various environmental and regulatory issues.”

 

Conclusion: The initial resource estimate will need to be firmed up from the current inferred status but provides a firm base for continuing work as the company pursues the continuing technical, governmental and social issues and regulatory permitting. We look forward to further news as the project proceeds.

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Mon, 12 Feb 2018 13:04:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29368/morning-view-metals-and-equities-recover-from-last-weeks-selloff-zimbabwe-farmers-who-lost-farms-may-soon-be-compensated-29368.html
Morning View . Copper topples on surging inventories http://www.proactiveinvestors.co.uk/columns/sp-angel/29361/morning-view-copper-topples-on-surging-inventories-29361.html Cape Town’s mining conferences, seminars and lunches are drawing to a close

  • The 10,000 miners, geologists, financiers, drillers and other services are packing up to return back to base.
  • Cape Town’s water shortage highlights the need to preserve scarce resources.
  • With the taps due to be turned off in April everyone is focussed on how to preserve supply.
  • Politics, as always, play the largest part with central government seemingly happy to do nothing despite warnings over many years, preferring to wait for the inevitable catastrophe which many will blame on local government which is no the ANC.
  • The water shortage is exacerbated by the influx of some 3,000 new families into the municipality each month and the refusal of some communities to cut back on usage
  • Similarities exist in the world of mining where financial liquidity is seemingly insufficient to fund many new mines and where the world risks shortages of most if not all metals even without rapid growth in Electric Vehicles
  • Politicians through regulators are restricting  reservoirs of liquidity managed by banks. Fortunately traders and other capital sources are funding the better projects while more forward looking juniors and miners are working on the next generation of new mines with the collaboration between Newcrest and SolGold showing the way ahead

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

-4.15%

at

23,860

Nikkei 225

 

-2.32%

at

21,383

HK Hang Seng

 

-3.10%

at

29,508

Shanghai Composite

 

-4.05%

at

3,130

FTSE 350 Mining

 

-0.29%

at

17,650

AIM Basic Resources

 

-0.41%

at

2,528

 

Economics

 

US – Equities reported heavy losses on Thursday taking the market into a correction territory, defined as a 10% drop from recent highs.

  • Three major indices reported losses with S&P500 down 3.75%, Dow down 4.15% and Nasdaq off 3.90% erasing all gains from the beginning of the year.
  • Asian markets followed Wall Street lower with Hang Seng off 3.10%, SCI 300 -4.27% and Nikkei off 2.32%.
  • European equities are faring relatively better with UK FTSE100 down 0.35% and German DAX off 0.19%.
  • Among reasons behind a strong correction were expectations for increasing interest rates as well as algorithmic trading strategies triggered by a hike in volatility measures.
  • Yields returned on an increasing trend climbing as high as 2.88% for 10y Treasuries yesterday following a weak auction of government debt.
  • The CBOE volatility index hovered around 31.62 in European trading, higher than the long-term average of 20, but below the 50.3 reading hit on Tuesday; the index ended at 33.46 on Thursday.
  • The US government has been shut down for the second time in three week son Friday morning; although, the bill covering increased spending and debt levels have been passed in the Senate and following a vote in the House should give the bill green light shortly.
  • A Republican senator Rand Paul held up the two-year spending bill to protest his party’s spending plans but was later overcome just before 2am when the Senate passed the legislation 71-28.

 

China – Inflation slowed in January form a higher base last year which included seasonal increase in food prices ahead of the Lunar New Year holiday.

  • PPI has been coming off lately following a strong recovery recorded through H2/16 and H1/17 which in turn may see reduced pressure on final goods prices.
  • The data is consistent with the latest PMI numbers also showing softening inflation pressures.
  • CPI (%yoy): 1.5 v 1.8 in December and 1.5 forecast.
  • PPI (%yoy): 4.3 v 4.9 in December and 4.3 forecast.

 

UK – The pound is trading higher this morning as the BoE guided for a potential acceleration in tightening the monetary policy on the back of rising inflation expectations.

  • “It will be likely to be necessary to raise interest rates to a limited degree in a gradual process but somewhat earlier and to a somewhat greater extent than what we had thought in November,” Mark Carney said.
  • “Demand growth is expected to exceed the diminished supply growth.”
  • Rates have been left unchanged at 0.5% yesterday in a unanimous decision.
  • Market expectations of a rate hike in May have gone up on the back of the announcement with markets assigning a 75% chance of 0.25bp increase, up from 55% seen before the MPC statement.
  • GDP, CPI and bank rate estimates have all been revised upwards from previous forecasts in November.
  • GDP: 1.7 (+0.2) for Q1/18, 1.8 (+0.1) for Q1/19, 1.7 (-) for Q1/20;
  • CPI: 2.9 (+0.3), 2.3 (-), 2.2 (-);
  • Bank Rate: 0.5 (-), 0.8 (-), 1.0 (+0.1).

 

France – New industrial production numbers came ahead of expectations continuing to demonstrate strengthening growth momentum in the economy.

  • Manufacturing production reported a whopping 4.7%yoy increase in December.
  • Industrial Production (%yoy): 4.5 v 2.5 in November and 3.5 forecast.

 

Currencies

US$1.2271/eur vs 1.2235/eur yesterday  Yen 109.17/$ vs 109.63/$  SAr 12.100/$ vs 12.102/$  $1.396/gbp vs $1.385/gbp  0.778/aud vs 0.781/aud  CNY 6.300/$ vs 6.321/$

 

Commodity News

 

Precious metals:         

Gold US$1,315/oz vs US$1,310/oz yesterday

  • Gold remains on track for its second weekly decline on speculations on a firming dollar and concerns over the pace of global interest rate increases, despite late week rebound amid tumbling equity markets. Spot gold remains down 1% for the week as the dollar index rises more than 1% to record its best week since Oct. 27 2017.
  • Asian stock followed suit of Wall Street shares to tumble amid worries over rising bond yields. The benchmark 10-year Treasury note yield rose as high as 2.884% on Thursday as the Bank of England signaled more aggressive rate hikes, to fall just below the four-year high mark set on Monday this week. “The surge in US Treasury yield looks set to continue and this will keep a lid on gold prices due to the likelihood that real rates will be dragged up”, noted BMI Research. “However, we expect a continued rise in inflation expectations to cap real yields, which will limit the downside pressure on gold”.
  • The Bank of England announced it was likely to raise interest rates sooner and by more than it thought only three months ago, as Britain’s slow moving economy receives a boost from the global recovery.
  • ETF’s decrease their gold holdings for the fifth trading day, favouring silver amid market turmoil. Exchange-traded funds cut 69,511 troy ounces, drawing the net purchases for the year to 492,249 ounces. Meanwhile, 103,237 troy ounces of silver was accumulated during the last trading session, bringing net sales to 12.3 million ounces, recording the third day of growth.

   Gold ETFs 72.0moz vs US$72.1moz yesterday

Platinum US$971/oz vs US$974/oz yesterday

Palladium US$965/oz vs US$986/oz yesterday

  •  

Silver US$16.34/oz vs US$16.27/oz yesterday

           

Base metals:   

Copper US$ 6,791/t vs US$6,832/t yesterday

  • Copper price continues to unwind, touching its lowest in nearly eight weeks, following another significant rise in inventories. The red metal futures in China head for the worst week since November 2016 as rout in domestic stocks fuels negative mood amid global volatility. Copper on SHFE traded at 51,480 yuan/ton, down 3.8% for the week, and registered a 7.2% fall since the beginning of the year to the worst-performing metal in Shanghai.
  • Metals have been hit by panic sentiment this week as short position bets swell to the most since 2016 in domestic stock market. A combination of rising copper open interest and falling prices suggest further declines to come, especially as physical markets are also weakening.
  • On-warrant copper inventories in warehouses certified by the London Metal Exchange, not earmarked for delivery, rose 25,700 tonnes yesterday to support the surge by 75% over the past three weeks. Rising warehouse levels are signaling healthy and abundant market supply. “This correction has been needed to put metals prices in line with the fundamentals, which are not bearish but also not that bullish. T-Commodity analysis also see “copper has broken its $6,860 support level, so there’s still space for more of a correction lower. I don’t think we’ll go much lower than $6,500, which would be a good buying area”.
  • However, copper weakness is expected to be short-lived as risks of further supply disruptions remain high and China’s curbs on scrap purchases are set to boost imports of refined metal. Australia & New Zealand Banking Group maintain target price for $7,200/t as broad global recovery is also expected to support copper. The bank also raised its disruption allowance to 6% in 2018 (from normal 5%) to suggest the market will slip into 250,000 tonne deficit this year. Over the next three months, labour negotiations at Los Pelambres and Chuquicamata present this greatest supply risk.
  • China’s ban on imports of some copper scrap products could cut purchases by as much as 200,000 tonnes, presenting further opportunity for refined cargo to increase.

Aluminium US$ 2,144/t vs US$2,153/t yesterday

Nickel US$ 12,910/t vs US$12,905/t yesterday

Zinc US$ 3,372/t vs US$3,380/t yesterday

Lead US$ 2,494/t vs US$2,497/t yesterday

Tin US$ 21,265/t vs US$21,365/t yesterday

           

Energy:           

Oil US$64.3/bbl vs US$65.3/bbl yesterday

Natural Gas US$2.630/mmbtu vs US$2.720/mmbtu yesterday

Uranium US$21.50/lb vs US$22.15/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$75.3/t vs US$74.5/t

Chinese steel rebar 25mm US$642.6/t vs US$640.5/t

Thermal coal (1st year forward cif ARA) US$78.0/t vs US$78.7/t

  • In an effort to boost the environmental drive, coal companies will be encouraged to close inefficient and polluting mines and replace them with larger ones if they meet specific standards. The National Development and Reform Commission plans to increase high-quality coal supply by allowing companies to boost capacity if they agree to shut outdated production processes. The latest effort by authorities hopes to further streamline the industry and stabilize coal prices.

Premium hard coking coal Aus fob US$228.6/t vs US$224.5/t

 

Other:  

Tungsten APT European US$317-325/mtu vs US$315-320/mtu last week

 

Cobalt LME 3m US$81,250.0/t vs US$80,750.0/t

]]>
Fri, 09 Feb 2018 12:13:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29361/morning-view-copper-topples-on-surging-inventories-29361.html
Palladium and platinum price parity draws nearer http://www.proactiveinvestors.co.uk/columns/sp-angel/29355/palladium-and-platinum-price-parity-draws-nearer-29355.html Highland Gold (LON:HGM) – Belaya Gora/Blagodatnoye PFS and MRE update

Rio Tinto (LON:RIO) –Stronger commodity markets in FY17 drive a surge in Group earnings

 

Cape Town’s mining conferences, seminars and lunches are drawing to a close

  • The 10,000 miners, geologists, financiers, drillers and other services are packing up to return back to base.
  • Cape Town’s water shortage highlights the need to preserve scarce resources.
  • With the taps due to be turned off in April everyone is focussed on how to preserve supply.
  • Politics, as always, play the largest part with central government seemingly happy to do nothing despite warnings over many years, preferring to wait for the inevitable catastrophe which many will blame on local government which is no the ANC.
  • The water shortage is exacerbated by the influx of some 3,000 new families into the municipality each month and the refusal of some communities to cut back on usage
  • Similarities exist in the world of mining where financial liquidity is seemingly insufficient to fund many new mines and where the world risks shortages of most if not all metals even without rapid growth in Electric Vehicles
  • Politicians through regulators are restricting  reservoirs of liquidity managed by banks. Fortunately traders and other capital sources are funding the better projects while more forward looking juniors and miners are working on the next generation of new mines with the collaboration between Newcrest and SolGold showing the way ahead

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

-0.08%

at

24,893

Nikkei 225

 

+1.13%

at

21,891

HK Hang Seng

 

+0.42%

at

30,451

Shanghai Composite

 

-1.43%

at

3,262

FTSE 350 Mining

 

-1.41%

at

17,978

AIM Basic Resources

 

+1.84%

at

2,538

 

Economics

 

China – Exports and imports beat estimates in January on the back of the timing of New Year celebrations and higher oil prices.

  • Inbound shipments jumped 36.9%yoy with imports of crude oil coming in at a record 40mt, up 7m on December and a new record high in volume terms based on customs data from 1993.
  • Lunar New Year holiday fell in January in 2017 skewing numbers compared to this year’s celebrations which are scheduled for mid-February.
  • Exports (%yoy): 11.1 v 10.9 in December and 10.7 forecast.
  • Imports (%yoy): 36.9 v 4.5 in December and 10.6 forecast.

 

Germany – SPD members are due to vote on the third “grand coalition” with Merkel’s conservatives with results due on March 4.

  • Coalition partners have been offered a control over the finance ministry with the SPD leader suggesting to increase the government spending programme.
  • Trade levels climbed to record high levels last year with increase exports and imports recorded both inside as well as outside the EU bloc.
  • Exports climbed 6.3%yoy to €1.3tn, while imports were up 8.3%yoy to €1.0tn.
  • Exports (%yoy): 0.3 v 4.1 in November and -1.0 forecast.
  • Imports(%yoy): 1.4 v 2.2 in November and -0.7 forecast.

 

UK – The BoE is expected to vote unanimously to hold rates unchanged with a quarterly inflation report to provide MPC guidance on projected GDP and CPI growth rates.

  • Regions of the UK that voted Leave in the 2016 EU referendum are estimated to post the strongest declines in forecast growth rates, FT reported based on government data.
  • While nationwide losses in potential growth rates over the next 15 years varied from 2% to 8% depending on terms of the Brexit deal, London which voted heavily for Remain would be least affected with a forecast drop in rates of 1-3.5%; whereas, the north-east and West Midlands losses are estimated to range between 2.55 and 16%.
  • Property sales and buyer enquiries continued to decline at the start of 2018, according to the RICS data.
  • While prices climbed higher at the national level, regional price performances varied with London, the South East, East Anglia and the North East recording declines.
  • “Divergent regional trends remain very much to the fore with the market in many parts of the country still actually behaving in a solid if unspectacular way despite the downbeat headlines,” RICS reported.
  • The agency forecasts prices to be somewhat flat at a national level over the next three months, but to rise over the course of the year everywhere except London; although, the projected prices decline in the capital over the next 12 months is smaller than it had been predicted before.
  • Reuters forecasts prices to grow by 1.3%yoy in 2018, but decline by 0.3%yoy in London.

 

Currencies

US$1.2235/eur vs 1.2407/eur yesterday  Yen 109.63/$ vs 108.95/$  SAr 12.102/$ vs 12.084/$  $1.385/gbp vs $1.397/gbp  0.781/aud vs 0.787/aud  CNY 6.321/$ vs 6.276/$

 

Commodity News

 

Precious metals:         

Gold US$1,310/oz vs US$1,343/oz yesterday

  • Gold spot retreats toward $1,300 level to its lowest in almost one month, hurt by stronger dollar and bond yields holding around four-year highs. Bullion for immediate delivery lost as much as 0.7% to $1,309.83, the lowest since Jan. 10 as the dollar index climbed 0.6% to record its biggest one-day gain in more than three months. “The current weakness in gold is largely due to a recovery in the US dollar. We are also seeing some position-squaring in commodities ahead of the Lunar New Year holidays”.
  • The Federal Reserve will stick to its plan for “steady, gradual” interest-rate increases, despite market gyrations and strong data on US wage growth that has bond traders pricing in faster rising inflation. Chicago-Fed President Charlie Evans also notes that sustained inflation would warrant further rate increases, however sluggish price increases in the US give the reserve room to hold off on interest rate increases until at least mid-2018.

   Gold ETFs 72.1moz vs US$72.4moz yesterday

Platinum US$974/oz vs US$998/oz yesterday

  • The platinum/palladium price parity is nearing as last year’s gains in palladium begin to unwind as the price falls below the $1,000 mark. Platinum recorded a limited 3% yoy gain in 2017, rocked by a decline in the popularity of diesel vehicles in Europe and therefore catalytic demand, while its frequent substitute palladium surged more than 50% on increasing demand in gasoline vehicles and supply constraints.
  • As both metals contract from highs on the resurgent dollar, head of Asia Pacific trading at Oanda Corp. foresees “more downside on palladium than platinum over the near term” as speculative long positions unwind. Money managers increased their net bullish bets on platinum futures in New York to the highest since 2016 in the closing week of January, while those on palladium dropped to the lowest since November. Further, refiner Heraeus Holding GmbH expects a rebound in industrial consumption and small shortage in platinum supply this year.
  • Russia is looking to capitalise on shortening supply to become the biggest producer of platinum and palladium to double the nation’s output. MNC Norilsk Nickel PJSC, Russia’s top platinum group metal (PGM) miner looks to joint develop three deposits with a local rival to access one of the world’s largest untapped resources. The $4 billion investment venture was sealed this week as Chief Executive Officer Vladimir Potanin signed the deal with Russian Platinum. The joint venture looks to deliver as much as 100 metric tonnes (3.5 million ounces) of palladium and platinum per year, approx. half of the output from South Africa, the world’s largest supplier.
  • The Maslovskoye deposit is also rich in nickel, copper and cobalt, positioning the project to capitalise on more stringent demand for catalytic converters and rising electric-vehicle production. The combined reserves at the three fields are an estimated 3,100 tonnes of palladium, 1,200 tonnes platinum, 2.7 million tonnes of nickel and 3.6 million tonnes of copper.

Palladium US$986/oz vs US$1,024/oz yesterday

Silver US$16.27/oz vs US$16.88/oz yesterday

           

Base metals:   

Copper US$ 6,832/t vs US$7,097/t yesterday

  • Copper prices dropped by almost 3% as broad base metals retreat during a week of volatile trading. Investor concerns are rising that fundamentals do not justify the current elevated price for the red metal with Julius Baer analyst commenting that “instead of just focusing on the global growth outlook, which is positive, you should keep an eye on what we call China’s old economy – the property market, the infrastructure segment. That’s where we expect a slowdown sometime this year”.
  • Concerns over supply disruptions from Chile, the world’s top supplier, extend beyond ongoing wage negotiations as copper shipments slump as heavy swells interrupt operations across the country’s main ports. The major copper-producing nation shipped $2.58 billion of the red metal during January, recording the biggest monthly decline of 33%. The Mejillones port, which serves copper mines in the Antofagasta region was closed from Jan. 20 to Jan 28. as stormy seas restrict operation.

Aluminium US$ 2,153/t vs US$2,189/t yesterday

Nickel US$ 12,905/t vs US$13,380/t yesterday

Zinc US$ 3,380/t vs US$3,481/t yesterday

Lead US$ 2,497/t vs US$2,615/t yesterday

Tin US$ 21,365/t vs US$21,635/t yesterday

           

Energy:           

Oil US$65.3/bbl vs US$66.9/bbl yesterday

  • Oil prices faltered as US crude oil production is set to increase by more than 1.2 million barrels per day in 2018 as oil exports spread to more than 30 nations. Since the repeal of a 40-year ban on oil exports two year ago, a flood of US shale oil has effectively undercut global crude prices and eroded the clout of the Organization of Petroleum Exporting Countries.

Natural Gas US$2.720/mmbtu vs US$2.777/mmbtu yesterday

Uranium US$22.15/lb vs US$22.25/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$74.0/t

  • China’s iron ore imports surge to the second highest levels on record in January as the world’s top buyer continues to enhance stockpiles ahead of the Lunar New Year holiday and the immanent lifting of the steel production curbs scheduled next month. Shipments of the steelmaking raw material rose 19% into the new year to 100 million tonnes, according to customs data. The delivery settles second on the highest delivery, with September 2017 figures recording 102.8 million tonnes.
  • There is also strong demand, restocking before the holiday and some mills were also preparing for restarts after the winter season”, according to CRU analyst. In mid-March China is set to lift steel production curbs across 28 cities as the winter heating season clears and air particulate levels subside.

Chinese steel rebar 25mm US$640.5/t vs US$645.0/t

Thermal coal (1st year forward cif ARA) US$78.7/t vs US$81.4/t

Premium hard coking coal Aus fob US$224.5/t vs US$221.9/t

 

Other:  

Tungsten APT European US$317-325/mtu vs US$315-320/mtu last week

 

Cobalt LME 3m US$80,750.0/t vs US$80,750.0/t

]]>
Thu, 08 Feb 2018 13:09:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29355/palladium-and-platinum-price-parity-draws-nearer-29355.html
Morning View - Palladium and platinum price parity draws nearer http://www.proactiveinvestors.co.uk/columns/sp-angel/29356/morning-view-palladium-and-platinum-price-parity-draws-nearer-29356.html Highland Gold (LON:HGM) – Belaya Gora/Blagodatnoye PFS and MRE update

Rio Tinto (LON:RIO) –Stronger commodity markets in FY17 drive a surge in Group earnings

 

Cape Town’s mining conferences, seminars and lunches are drawing to a close

  • The 10,000 miners, geologists, financiers, drillers and other services are packing up to return back to base.
  • Cape Town’s water shortage highlights the need to preserve scarce resources.
  • With the taps due to be turned off in April everyone is focussed on how to preserve supply.
  • Politics, as always, play the largest part with central government seemingly happy to do nothing despite warnings over many years, preferring to wait for the inevitable catastrophe which many will blame on local government which is no the ANC.
  • The water shortage is exacerbated by the influx of some 3,000 new families into the municipality each month and the refusal of some communities to cut back on usage
  • Similarities exist in the world of mining where financial liquidity is seemingly insufficient to fund many new mines and where the world risks shortages of most if not all metals even without rapid growth in Electric Vehicles
  • Politicians through regulators are restricting  reservoirs of liquidity managed by banks. Fortunately traders and other capital sources are funding the better projects while more forward looking juniors and miners are working on the next generation of new mines with the collaboration between Newcrest and SolGold showing the way ahead

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

-0.08%

at

24,893

Nikkei 225

 

+1.13%

at

21,891

HK Hang Seng

 

+0.42%

at

30,451

Shanghai Composite

 

-1.43%

at

3,262

FTSE 350 Mining

 

-1.41%

at

17,978

AIM Basic Resources

 

+1.84%

at

2,538

 

Economics

 

China – Exports and imports beat estimates in January on the back of the timing of New Year celebrations and higher oil prices.

  • Inbound shipments jumped 36.9%yoy with imports of crude oil coming in at a record 40mt, up 7m on December and a new record high in volume terms based on customs data from 1993.
  • Lunar New Year holiday fell in January in 2017 skewing numbers compared to this year’s celebrations which are scheduled for mid-February.
  • Exports (%yoy): 11.1 v 10.9 in December and 10.7 forecast.
  • Imports (%yoy): 36.9 v 4.5 in December and 10.6 forecast.

 

Germany – SPD members are due to vote on the third “grand coalition” with Merkel’s conservatives with results due on March 4.

  • Coalition partners have been offered a control over the finance ministry with the SPD leader suggesting to increase the government spending programme.
  • Trade levels climbed to record high levels last year with increase exports and imports recorded both inside as well as outside the EU bloc.
  • Exports climbed 6.3%yoy to €1.3tn, while imports were up 8.3%yoy to €1.0tn.
  • Exports (%yoy): 0.3 v 4.1 in November and -1.0 forecast.
  • Imports(%yoy): 1.4 v 2.2 in November and -0.7 forecast.

 

UK – The BoE is expected to vote unanimously to hold rates unchanged with a quarterly inflation report to provide MPC guidance on projected GDP and CPI growth rates.

  • Regions of the UK that voted Leave in the 2016 EU referendum are estimated to post the strongest declines in forecast growth rates, FT reported based on government data.
  • While nationwide losses in potential growth rates over the next 15 years varied from 2% to 8% depending on terms of the Brexit deal, London which voted heavily for Remain would be least affected with a forecast drop in rates of 1-3.5%; whereas, the north-east and West Midlands losses are estimated to range between 2.55 and 16%.
  • Property sales and buyer enquiries continued to decline at the start of 2018, according to the RICS data.
  • While prices climbed higher at the national level, regional price performances varied with London, the South East, East Anglia and the North East recording declines.
  • “Divergent regional trends remain very much to the fore with the market in many parts of the country still actually behaving in a solid if unspectacular way despite the downbeat headlines,” RICS reported.
  • The agency forecasts prices to be somewhat flat at a national level over the next three months, but to rise over the course of the year everywhere except London; although, the projected prices decline in the capital over the next 12 months is smaller than it had been predicted before.
  • Reuters forecasts prices to grow by 1.3%yoy in 2018, but decline by 0.3%yoy in London.

 

Currencies

US$1.2235/eur vs 1.2407/eur yesterday  Yen 109.63/$ vs 108.95/$  SAr 12.102/$ vs 12.084/$  $1.385/gbp vs $1.397/gbp  0.781/aud vs 0.787/aud  CNY 6.321/$ vs 6.276/$

 

Commodity News

 

Precious metals:         

Gold US$1,310/oz vs US$1,343/oz yesterday

  • Gold spot retreats toward $1,300 level to its lowest in almost one month, hurt by stronger dollar and bond yields holding around four-year highs. Bullion for immediate delivery lost as much as 0.7% to $1,309.83, the lowest since Jan. 10 as the dollar index climbed 0.6% to record its biggest one-day gain in more than three months. “The current weakness in gold is largely due to a recovery in the US dollar. We are also seeing some position-squaring in commodities ahead of the Lunar New Year holidays”.
  • The Federal Reserve will stick to its plan for “steady, gradual” interest-rate increases, despite market gyrations and strong data on US wage growth that has bond traders pricing in faster rising inflation. Chicago-Fed President Charlie Evans also notes that sustained inflation would warrant further rate increases, however sluggish price increases in the US give the reserve room to hold off on interest rate increases until at least mid-2018.

   Gold ETFs 72.1moz vs US$72.4moz yesterday

Platinum US$974/oz vs US$998/oz yesterday

  • The platinum/palladium price parity is nearing as last year’s gains in palladium begin to unwind as the price falls below the $1,000 mark. Platinum recorded a limited 3% yoy gain in 2017, rocked by a decline in the popularity of diesel vehicles in Europe and therefore catalytic demand, while its frequent substitute palladium surged more than 50% on increasing demand in gasoline vehicles and supply constraints.
  • As both metals contract from highs on the resurgent dollar, head of Asia Pacific trading at Oanda Corp. foresees “more downside on palladium than platinum over the near term” as speculative long positions unwind. Money managers increased their net bullish bets on platinum futures in New York to the highest since 2016 in the closing week of January, while those on palladium dropped to the lowest since November. Further, refiner Heraeus Holding GmbH expects a rebound in industrial consumption and small shortage in platinum supply this year.
  • Russia is looking to capitalise on shortening supply to become the biggest producer of platinum and palladium to double the nation’s output. MNC Norilsk Nickel PJSC, Russia’s top platinum group metal (PGM) miner looks to joint develop three deposits with a local rival to access one of the world’s largest untapped resources. The $4 billion investment venture was sealed this week as Chief Executive Officer Vladimir Potanin signed the deal with Russian Platinum. The joint venture looks to deliver as much as 100 metric tonnes (3.5 million ounces) of palladium and platinum per year, approx. half of the output from South Africa, the world’s largest supplier.
  • The Maslovskoye deposit is also rich in nickel, copper and cobalt, positioning the project to capitalise on more stringent demand for catalytic converters and rising electric-vehicle production. The combined reserves at the three fields are an estimated 3,100 tonnes of palladium, 1,200 tonnes platinum, 2.7 million tonnes of nickel and 3.6 million tonnes of copper.

Palladium US$986/oz vs US$1,024/oz yesterday

Silver US$16.27/oz vs US$16.88/oz yesterday

           

Base metals:   

Copper US$ 6,832/t vs US$7,097/t yesterday

  • Copper prices dropped by almost 3% as broad base metals retreat during a week of volatile trading. Investor concerns are rising that fundamentals do not justify the current elevated price for the red metal with Julius Baer analyst commenting that “instead of just focusing on the global growth outlook, which is positive, you should keep an eye on what we call China’s old economy – the property market, the infrastructure segment. That’s where we expect a slowdown sometime this year”.
  • Concerns over supply disruptions from Chile, the world’s top supplier, extend beyond ongoing wage negotiations as copper shipments slump as heavy swells interrupt operations across the country’s main ports. The major copper-producing nation shipped $2.58 billion of the red metal during January, recording the biggest monthly decline of 33%. The Mejillones port, which serves copper mines in the Antofagasta region was closed from Jan. 20 to Jan 28. as stormy seas restrict operation.

Aluminium US$ 2,153/t vs US$2,189/t yesterday

Nickel US$ 12,905/t vs US$13,380/t yesterday

Zinc US$ 3,380/t vs US$3,481/t yesterday

Lead US$ 2,497/t vs US$2,615/t yesterday

Tin US$ 21,365/t vs US$21,635/t yesterday

           

Energy:           

Oil US$65.3/bbl vs US$66.9/bbl yesterday

  • Oil prices faltered as US crude oil production is set to increase by more than 1.2 million barrels per day in 2018 as oil exports spread to more than 30 nations. Since the repeal of a 40-year ban on oil exports two year ago, a flood of US shale oil has effectively undercut global crude prices and eroded the clout of the Organization of Petroleum Exporting Countries.

Natural Gas US$2.720/mmbtu vs US$2.777/mmbtu yesterday

Uranium US$22.15/lb vs US$22.25/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$74.0/t

  • China’s iron ore imports surge to the second highest levels on record in January as the world’s top buyer continues to enhance stockpiles ahead of the Lunar New Year holiday and the immanent lifting of the steel production curbs scheduled next month. Shipments of the steelmaking raw material rose 19% into the new year to 100 million tonnes, according to customs data. The delivery settles second on the highest delivery, with September 2017 figures recording 102.8 million tonnes.
  • There is also strong demand, restocking before the holiday and some mills were also preparing for restarts after the winter season”, according to CRU analyst. In mid-March China is set to lift steel production curbs across 28 cities as the winter heating season clears and air particulate levels subside.

Chinese steel rebar 25mm US$640.5/t vs US$645.0/t

Thermal coal (1st year forward cif ARA) US$78.7/t vs US$81.4/t

Premium hard coking coal Aus fob US$224.5/t vs US$221.9/t

 

Other:  

Tungsten APT European US$317-325/mtu vs US$315-320/mtu last week

 

Cobalt LME 3m US$80,750.0/t vs US$80,750.0/t

]]>
Thu, 08 Feb 2018 13:09:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29356/morning-view-palladium-and-platinum-price-parity-draws-nearer-29356.html
Morning View -DRC cobalt production surges as major mine restarts http://www.proactiveinvestors.co.uk/columns/sp-angel/29349/morning-view-drc-cobalt-production-surges-as-major-mine-restarts-29349.html Highland Gold (LON:HGM) – Belaya Gora/Blagodatnoye PFS and MRE update

Rio Tinto (LON:RIO) –Stronger commodity markets in FY17 drive a surge in Group earnings

 

Cape Town Mining Investment Conference

 

  • The 121 Conference in Cape Town more than doubled the number of investors attending this year creating a busy and effective environment for companies to meet investors.
  • The informal garden setting works particularly well with the warm Cape Town weather and in contrast to the stark environment of other venues.
  • The 121 conference has definitively taken over as the place for companies to meet investors.
  • Reports the ‘doughnut’ conference down the road paint a picture of an event which has been hollowed through years of overcharging and focus on trade suppliers.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

  

Dow Jones Industrials

 

-4.60%

at

24,346

Nikkei 225

 

-4.73%

at

21,610

HK Hang Seng

 

-5.12%

at

30,595

Shanghai Composite

 

-3.35%

at

3,371

FTSE 350 Mining

 

-1.76%

at

18,217

AIM Basic Resources

 

-2.12%

at

2,543

 

Economics

 

Currencies

US$1.2407/eur vs 1.2424/eur yesterday  Yen 108.95/$ vs 109.22/$  SAr 12.084/$ vs 12.075/$  $1.397/gbp vs $1.398/gbp  787/aud vs 0.788/aud  CNY 6.276/$ vs 6.278/$

 

Commodity News

 

Precious metals:         

Gold US$1,343/oz vs US$1,341/oz yesterday

  • Gold prices begin to regain positive momentum after posting its biggest drop in two months as investors seek protection against wider market fluctuations. Bullion for immediate delivery rose 0.4% to $1,329.88/oz following Tuesday’s closure 1.2% lower, the largest fall since Dec. 7. While the equity markets continue to oscillate, with the S&P 500 falling 4.1% on Monday (biggest loss since Aug. 2011), market participants are resorting to the safe haven asset for non-correlated hedging. There’s “far too much volatility in the market and investors across all asset classes remain spooked”, head of Asia Pacific trading at Oanda.
  • The precious metal climbed to around $1,366 in intraday trading over the last month, the highest level since 2016, as inflation concerns and dollar weakness drive demand. The outlook for more increases in Federal Reserve borrowing costs and bond yields rising to four-year highs has put downward pressure on bullion. “When you see rate hikes, you typically see gold start to trend down. It has to do with the fact that gold is negatively correlated with real interest rates”.
  • However, Goldman Sachs see worsening geopolitical stability driving gold prices to higher levels, with the bank targeting £1,375 at year-end on ‘modest fear’. The bank note that gold’s role as a haven in times of conflict or heightened geopolitical risk could propel prices to levels last seen in 2013. Global head of commodities research, Jeffery Currie, notes prices will probably top $1,400/oz, or even $1,500, if the geopolitical situation gets a lot more dangerous.
  • Downward pressure from interest rates are also being suppresses from rising wealth in China, and unprecedented demand from Southeast Asia and emerging markets. China’s growing group of affluent customers is driving a rebound in Asia demand for gold jewelry as the property boom and high stock market valuations boost wealth in the largest bullion market. Home sales climbed to a record in December, shares hit the highest in two years last month and the economy accelerated last year for the first time since 2010.
  • The nation’s demand for gold jewelry climbed 10% during 2017 to almost 700 metric tonnes as the wealthy increased purchases and consumption improved across second and third-tier cities, according to the China Gold Association. The ornate demand represents more than 60% of the total gold buying as China consumed 1,090 tonnes of the precious metal.
  • Rising demand in China could help boost global prices due to the vast market size. Analysts at brokerage CLSA Ltd. foresee the precious metal maintaining double-digit growth in the same jewelry across China and Hong Kong because of better consumer sentiment. Another driver is that the expiring Year of the Rooster was an unusually long one, spanning two springs, which is auspicious for marriages, and could lead to more births across 2018. Gifts of gold are traditional for weddings and births.
  • Gold in London advanced to its highest since 2016 last month, while holdings in bullion-backed exchange-traded funds are up about 40% in the past two years and increased to the largest stash since 2013 in January.

   Gold ETFs 72.4moz vs US$72.4moz yesterday

Platinum US$998/oz vs US$997/oz yesterday

Palladium US$1,024/oz vs US$1,022/oz yesterday

Silver US$16.88/oz vs US$16.86/oz yesterday

           

Base metals:   

Copper US$ 7,097/t vs US$7,092/t yesterday

Aluminium US$ 2,189/t vs US$2,188/t yesterday

Nickel US$ 13,380/t vs US$13,365/t yesterday

  • Metal prices firm following early week market turmoil as Goldman Sachs Group Inc. reminds investors to keep focus on the global growth outlook. “We’ve got synchronised global growth, which we have not had in a long time, and that’s what’s going to play out for commodities over the next 12 months”, say analysis at Fat Prophets.
  • Nickel rose 0.9% after dropping 2.6% on Tuesday as investors overreacted to signs of inflation in system in “typical market panic”.

Zinc US$ 3,481/t vs US$3,492/t yesterday

Lead US$ 2,615/t vs US$2,617/t yesterday

Tin US$ 21,635/t vs US$21,690/t yesterday

           

Energy:           

Oil US$66.9/bbl vs US$67.2/bbl yesterday

Natural Gas US$2.777/mmbtu vs US$2.773/mmbtu yesterday

Uranium US$22.25/lb vs US$22.25/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.0/t vs US$74.0/t

  • Shipping exports of iron ore swelled to record levels as Australia’s Port Hedland rose to 41.1 million tonnes in January, according to the Pilbara Ports Authority. Last week, Brazil also reported its biggest ever shipments for January. Rising mine supply has created tension as Barclays Plc and Goldman Sachs Group Inc. duel over whether prices will remain elevated under the prospect of faltering China demand. While Barclays said in January that the commodity’s set to tank as mills’ margins recede, Goldman Sachs predicts that prices may rally to as much as $85/t within three months.
  • When you look at the supply-side reforms in China, they’ve been absolutely brilliant. In that environment, they need to have the high-grade, high-quality iron ore” notes Goldman’s global head of commodities research, adding high-grade material’s in short supply. This is expected to sustain the price premium for the high-grade product.

Chinese steel rebar 25mm US$645.0/t vs US$644.8/t

Thermal coal (1st year forward cif ARA) US$81.4/t vs US$82.5/t

Premium hard coking coal Aus fob US$221.9/t vs US$221.9/t

 

Other:  

Tungsten APT European US$317-325/mtu vs US$315-320/mtu last week

Cobalt LME 3m US$80,750.0/t vs US$80,750.0/t

  • Electric vehicle raw material production rises in the Democratic Republic of Congo as major Glencore begins to ramp-up output across its Katanga operation. Copper production from Africa’s top producer rose 6.9% to 1.09 million tonnes, while cobalt surged 15.5% to 73,940 tonnes according to the industry-led chamber of mines during the 121 conference in Cape Town.
  • The Swiss miner is flagging a big increase in cobalt production as one of its biggest copper mines restarts with the production of 2,200 tonnes of copper cathode by the end of December as the new whole ore leach processing project was commissioned. Full capacity production is expecting 39,000 tonnes of copper while cobalt output could rise to as much as 20,000 tonnes by 2019.

 

Company News

 

Highland Gold (LON:HGM) 146p, Mkt Cap £475m – Belaya Gora/Blagodatnoye PFS and MRE update

  • The Company released results of a Belaya Gora (BG) and Blagodatnoye PFS studying an optimization of the BG treatment plant and a processing of ores from two deposits, as well as a new resources/reserves statement as of Jan/18.
  • The Blagodatnoye is a greenfield project located 39km to the southeast of BG with the Company having been studying the potential for using the existing infrastructure at BG to develop the adjacent deposit.
  • A combined mineral resource for BG and Balgodatnoye is 31.3mt at 1.40g/t for 1,366koz in Indicated and 0.2mt at 1.98g/t for 12koz in Inferred categories:
    • BG total resource includes 12.6mt at 1.53g/t for 601koz (98% of which is in the Indicated category);
    • Blagodatnoye total resource includes 19.3mt at 1.25g/t for 777koz (all of it in the Indicated category).
  • A combined mineral reserve for BG and Blagodatnoye is 20.1mt at 1.44g/t for 932koz including:
    • BG reserves of 9.9mt at 1.45g/t for 460koz;
    • Blagodatnoye reserves of 10.2mt at 1.43g/t for 472koz.
  • A CIP leaching circuit to be installed at BG is expected to improve gold recoveries from the current 72% to 86-91% and to yield 90% recoveries for the Blagodatnoye ore.
  • Estimated capex for the BG processing plant upgrade is $15m.
  • BG is expected to be mined first to completion for seven years (2018-2025) followed by Blagodatnoye for eight years (2025-2032).
  • Estimated capex to move mining operations from BG to Blagodatnoye is estimated at $21m to be incurred in 2023.
  • LoM production from two mines is estimated at 820koz (55kozpa) at an average TCC of $802/oz and AISC $848/oz.
  • NPV(10%) and IRR of the project is estimated at $97m and 142% at $1,250/oz and USDRUB of 60 since all major infrastructure including the processing plant and mining fleet is already in place.

Conclusion: Updated mineral resources/reserves brings modelled grades closer to mined/processed grades recorded in the past at BG and is a better reflection of the deposit. Processing plant optimisation is estimated to translate into a 14-19pp step up in gold recoveries significantly helping operating margins. Overall, PFS guides for a lower LoM annual production (55kozpa v 68kozpa) and higher costs (TCC $802/oz v $658/oz) than we used in our previous estimates on the back of a lower utilization of the processing plant, higher waste stripping ratios and lower processed grades slightly compensated by a longer LoM and higher gold recoveries at BG.

 

Rio Tinto (LON:RIO) 3,830p, Mkt Cap £69.6bn –Stronger commodity markets in FY17 drive a surge in Group earnings

  • Revenues climbed $6.2bn to $40.0bn helped by stronger commodity prices.
  • EBITDA was up 38%yoy to $18.6bn, broadly in line with market estimates, with all segments posting strong increase (Iron Ore +35%, Aluminium +38%, Copper&Diamonds +37%, Energy&Minerals +55%).
  • EBITDA margins hit a ten year record of 44% (2016: 38%).
  • Underlying PAT increased to $8.6bn, up 69%yoy, (v $8.7bn market forecast) with higher prices accounting for $4.1bn (post-tax).
  • Free cash flow generation improved substantially to $9.5bn (2016: $5.8bn) after accounting for capital expenditures of $4.5bn (2016: $3.0bn).
  • Net Debt reduced to $3.8bn, down $5.8bn from YE16, with Net Debt to EBITDA ratio falling to 0.2x (FY16: 0.7x).
  • The Company announced $3.2 (180USc) in final dividend on top of $2.0bn (110USc) paid in Sep/17 bringing total dividend distribution to 290USc (2016: 170USc)

Additionally, another $1bn share buy back programme to be completed by the end of 2018 on top of $1bn completed last year

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Wed, 07 Feb 2018 11:55:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29349/morning-view-drc-cobalt-production-surges-as-major-mine-restarts-29349.html
Today's Market View - The US and China continue to lead synchronised global growth in commodity consumption http://www.proactiveinvestors.co.uk/columns/sp-angel/29329/today-s-market-view-the-us-and-china-continue-to-lead-synchronised-global-growth-in-commodity-consumption-29329.html Key Themes

  • The US and China continue to lead synchronised global growth in commodity consumption
  • The EU is also reinvesting in manufacturing growth as it targets recovery
  • China’s anti-pollution drive has forced the closure of many polluting plants with particular impact on industrial commodities
  • The US dollar fell last year against many currencies helping metals prices higher in the short term despite rising Fed interest rates.
  • Going forward ongoing capacity closures in China should continue to raise commodity prices as anti-pollution enforcement distorts markets
  • Prices should continue to rise as Supply constraints act against Demand growth as ongoing low interest rates and rising inflation promote coordinated global GDP growth

Battery Metals

  • Lithium: Rapid adoption of lithium-ion battery technology across vast end-use markets is driving expansive growth in raw compound consumption by battery manufacturers. Significant market undersupply created surging battery-purity prices, which are forecast to contract following the resolution between Chile’s Corfo and major SQM to drive output to equivalent 78% global production 2017 (216,000 tpa).
  • Cobalt: LME probe into ethical, inelastic supply from the DRC combined with updated and unattractive mining legislation is expected to increase the strain on transparent, responsible mining operations and boost investment and development of Australian and Canadian projects. Rapidly rising high-purity premium prices are increasing substitution risk as battery manufacturers look to phase out cobalt in next generation Nickel-Manganese-Cobalt (NMC) chemistries.

Reference SP Angel – Battery Raw Material Review 2017 for further battery analysis.

CLICK FOR PDF

Base Metals

  • Copper: Strengthening manufacturing sentiment, demand for electric vehicles, renewables, and infrastructure are expected to boost consumption of copper. Concerns surrounding wage negotiation and supply disruptions, focussed in South America forecast to support copper prices in 2018.
  • Nickel: Rapid advancement of nickel-heavy battery technology is expected to boost consumption requirements, combined with a growing shortfall of high-grade sulphide deposits should see nickel prices rise into 2019. 
  • Zinc: A supply led shortage, based on 20 years of under exploration resulting in few new zinc orebodies in accessible locations. The market is now dependent on smaller mines and some lower grade orebodies to remain fully supplied. Demand follows general economic activity and steel production with galvanising representing the bulk of demand.

Precious Metals

  • Gold: Safe-haven investors favour gold during growing concerns surrounding economic policy uncertainty, mounting possibility of financial market disruption, global debt level swelling above $230 trillion and global geopolitical tension. Meanwhile softer physical demand, surging equities and disruptive cryptocurrency investments are applying short-term downward pressure.
  • Palladium: Demand expected to remain high as global emission standards tighten and consumption for auto-catalysts advances in place of diesel.
  • Platinum: Growing substitution of palladium in catalytic converters is expected to drive demand for Platinum into 2019. With production in South Africa threatened by the strength of the rand-dollar exchange and global stockpiles falling to lowest levels since 2016, supply may tighten to drive Platinum Group Metals higher through 2018.

Energy

  • Oil: Sustained cooperation by OPEC and non-OPEC member producers is expected to maintain effective supply cuts beyond 2018 as major Saudi Arabia publicaly agrees to curbing output. Meanwhile global stocks are edging nearer to the five-year average target. Downside threat expected from rapid increase in US shale production capitalising on current elevated crude prices.
  • Uranium: Combination of sustained depressed prices, high-profile supply cuts, notably major producer Cameco and Kazatomprom, and budding global nuclear demand are expected to boost uranium prices. Utilities will be entering a major contracting cycle as 30-35% requirements in 2020 are not under contract. 

Bulk Commodities

  • Steel & Iron Ore: Global manufacturing and construction output is forecast to remain high, boosting demand for steel production and associated raw materials. Low interest rates are expected to fuel infrastructure spending and private investment, advancing manufacture supply. Tightening environmental legislation is expected to create a price disparity and boost premiums as a focus on higher-quality will extend throughout the supply chain.
  • Coal: While short-term electricity demand across emerging nations is expected to sustain current output, trends favouring cleaner supply, including the ‘Powering Past Coal Alliance Initiative’, would drag down future consumption. Growing environmental and ethical concerns are removing significant portions of investment from the sector, including Norway’s sovereign wealth fund.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc

Overall SP Angel ranked:

  • 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

We are immensely proud of our team’s price forecasting performance against the world’s major investment banks and broking institutions

 

See the MB APEX report link for further details

]]>
Fri, 02 Feb 2018 10:18:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29329/today-s-market-view-the-us-and-china-continue-to-lead-synchronised-global-growth-in-commodity-consumption-29329.html
Morning View . China steelmakers find support in proposed extension of China cuts http://www.proactiveinvestors.co.uk/columns/sp-angel/29323/morning-view-china-steelmakers-find-support-in-proposed-extension-of-china-cuts-29323.html The SP Angel Mining research team will be presenting at the 121 conference in Cape Town next week

  • We will be putting our research in front of >400 investors are presenting directly to investors in a solid two days of 121 meetings
  • If you think your company might pass our strict client admissions process then please contact us by return

 

Acacia Mining (LON:ACA) – Cutbacks at Bulyanhulu reduce production guidance by 100,000 oz of gold.

Altus Strategies* (LON:ALS) Buy – 12.2p – Exploration works on gold assets in Mali start

Bacanora Minerals (LON:BCN) – Update on cornerstone investment

IronRidge Resources* (LON:IRR) – Update on exploration in Chad

Metminco* (LON:MNC) – Quarterly report and Miraflores update

 

Ilmenite – Further news on RBM roaster failure and potential shortfall in Ti-slag supply

  • Rio Tinto has declared force majeure at its Richards Bay Minerals ‘RBM’ operations in South Africa.
  • The failed roaster at RBM means that the operations have been forced to suspend the four furnaces which depend on the one roaster.
  • Low inventory levels of roaster ilmenite suggest RBM will be looking for low C42O3 material.
  • Normally this might be supplied by Base Resources or Kenmare but both are thought to be low on stocks.
  • RBM could borrow treated ilmenite from Tronox or import ilmenite from QIT Madagascar minerals ‘QMM’ which is 80% owned by Rio Tinto. This material does not need roasting making it suitable for the RBM furnaces but again QMM may not have much stock as they are under contract to supply large volumes elsewhere.

Conclusion: The RBM supply shock, combined with low supplier stock levels, a shortfall in forecast production and rising demand looks likely to tip ilmenite contract prices higher to higher levels this month. Base Resources and Kenmare are well placed to take advantage of higher prices thought they may struggle to meet the expected increases in demand.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+0.28%

at

26,149

Nikkei 225

 

+1.68%

at

23,486

HK Hang Seng

 

-0.71%

at

32,652

Shanghai Composite

 

-0.97%

at

3,447

FTSE 350 Mining

 

-0.08%

at

19,008

AIM Basic Resources

 

-0.49%

at

2,650

 

Economics

US – The FOMC highlighted upbeat economic data while leaving rates on hold during the last meeting chaired by Janet Yellen.

  • “Gains in employment, household spending, and business fixed investment have been solid, and the unemployment rate has stayed low,” the Fed said in the statement.
  • The committee has further suggested that inflation expectations has been going up lately boding well with prospects for future monetary policy tightening.
  • Markets are currently suggesting a nearly 100% chance of rate hike during the next policy meeting in March.
  • 10y Treasury bond yields climbed to 2.75% yesterday marking the highest level in four years.
  • Equities dipped following the announcement but recovered most of the losses thereafter.

 

China – Manufacturing sector growth remained unchanged in January as stronger production, work backlogs and employment sub-indices came amid slightly weaker new business and new export orders, according to a private PMI gauge.

  • Meanwhile, inflation pressures are reported to have eased “markedly” on the back of a slowdown in both input and final goods’ prices growth.
  • Firms held an optimistic view over the year ahead with the sub-index climbing to a four month high in January.
  • Manufacturing PMI: 51.5 v 51.5 in December and 51.5 forecast.

 

Eurozone – Final manufacturing PMIs for January confirmed robust growth momentum in the single currency region.

  • Italy posted the strongest growth  in the manufacturing sector in nearly seven years, business sentiment in France reached a record high while Germany continued to post “buoyant” economic performance, according to the IHS Markit data.
  • “Output grew at one of the fastest rates recorded over the survey’s 20-year history, matched by a further near-record surge in new orders.”

 

UK – Property prices growth surprisingly picks up in January on the back of supply shortage; although, the outlook remains weak.

  • The stock of available properties is running at the lowest level in nearly 40 years, according to the RICS data.
  • However, forward looking indicators including the RICS house price expectations survey balance and a drop in mortgage approvals suggest house price growth is due to slowdown in the coming months.
  • Nationwide House Prices (%mom/yoy): 0.6/3.2 v 0.6/2.6 in December and 0.1/2.5 forecast.

 

Currencies

US$1.2430/eur vs 1.2444/eur yesterday  Yen 109.55/$ vs 108.68/$  SAr 11.874/$ vs 11.867/$  $1.424/gbp vs $1.418/gbp  0.802/aud vs 0.809/aud  CNY 6.298/$ vs 6.292/$

 

Commodity News

Precious metals:         

Gold US$1,340/oz vs US$1,343/oz yesterday

  • Gold reverses previous gains following a rebounding dollar index as investors weigh in on the Federal Reserve’s hawkish tone at the policy-setting meeting. “The US dollar index has been on a downward trend for a long time, and with Fed’s slightly hawkish tilt, we’re seeing some position squaring”, Kotak Commodity Services analyst. The fed commented inflation is likely to quicken this year, bolstering expectations that borrowing costs will continue to climb under incoming central bank chief Jerome Powell, reinforcing views of three further interest rate hikes this year.
  • Marwan Younes, the chief investment officer of Massar Capital Management LP, sees inflation accelerating to 3% at the close of 2018 as tightening labour market will push wages higher. Market participants turn their attention to US jobs data Friday, while Labour Department figures reported total US employee compensation matched the biggest 12-month gain since 2008. “The psychological aspect of inflation overshooting the Fed target will be more powerful. It will usher in a slew of demand for gold from fund managers seeking to hedge against inflation”.
  • Further, the impact of the passed tax reform are unclear on the markets, but unfavorable expectations on gold will weigh on longer term prices. Chief analyst at Shandong Gold Group “see the US dollar to be soft in the first half of the year until there is some information on how the US tax reforms have really worked. Even though gold’s recent rally has been too quick, we expect the strength in prices to continue and even go past previous year’s highs”.

   Gold ETFs 72.5moz vs US$72.6moz yesterday

Platinum US$993/oz vs US$1,002/oz yesterday

Palladium US$1,025/oz vs US$1,061/oz yesterday

Silver US$17.25/oz vs US$17.22/oz yesterday

           

Base metals:   

Copper US$ 7,086/t vs US$7,118/t yesterday

Aluminium US$ 2,206/t vs US$2,222/t yesterday

  • China’s total aluminium capacity continues to rise despite supply-side reforms, as additional supply in the Asian nation drags the metal on the Shanghai Futures Exchange lower. SHFE aluminium dropped 0.7% to 14,335 yuan/ton, closing 5.2% lower in January to finish the month on a seven-week low.

Nickel US$ 13,525/t vs US$13,550/t yesterday

Zinc US$ 3,515/t vs US$3,525/t yesterday

Lead US$ 2,634/t vs US$2,595/t yesterday

Tin US$ 21,700/t vs US$21,785/t yesterday

           

Energy:           

Oil US$68.9/bbl vs US$68.6/bbl yesterday

  • OPEC concerns over rising US shale production are being realised as US crude oil production in November surpassed 10 million barrels per day (bpd) for the first time since 1970, nearing all-time output record according to the Energy Information Administration. Oil output rose 384,000 bpd from October to settle at 10.038 million bpd
  • Geopolitical tensions are rising surrounding trade exemptions to North Korea, as Moscow’s ambassador to Pyongyang comments that the delivery of oil and oil products to North Korea should not be reduced, and added that a total end to deliveries would be interpreted by North Korea as an act of war.

Natural Gas US$2.937/mmbtu vs US$3.074/mmbtu yesterday

Uranium US$22.25/lb vs US$21.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$71.4/t vs US$72.5/t

Chinese steel rebar 25mm US$661.1/t vs US$661.8/t

  • China’s largest steelmaking province is contemplating plans to extend winter output curbs by a further two months to improve air quality, which was met with resounding positivity as shares of steel mills surged on the news. Baoshan Iron & Steel Co. jumped as much as 5.7%, while Angang Steel Co. surged 6.8% on the circulating rumours. The provincial government in Hebei is considering proposals under which limitations imposed over the winter to fight pollution will be extended until May 15 from March 15.
  • The scheme by the Ministry of Environmental Protection shook the commodities markets by ordering steel and other plant closures across northern industrial heartlands to bring PM2.5 particulate levels below targets. The curbs emplaced in November have ensured unusually clean air across Chinese cities, while tightening supplies and supporting prices of steel as reinforcement bar reached a nine-year high in December. The drive for better air quality also boosted demand for higher-quality iron ore, widening the gap on premium quality raw materials.

Thermal coal (1st year forward cif ARA) US$83.0/t vs US$84.0/t

Premium hard coking coal Aus fob US$214.5/t vs US$214.5/t

 

Other:  

Tungsten APT European US$315-320/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$80,250.0/t vs US$79,750.0/t

  • Miners are immediately facing sudden financial cost increases following the sweeping new Congolese law which overrides miners’ 10-year fiscal and customs regime. The county’s parliament finalised a revised mining code on Jan. 27, after both the lower and upper house introduced increasingly onerous fiscal and regulatory reforms to already contested legislation. The modifications will significantly boost the cost of doing business for investors in Africa’s biggest copper and cobalt producer, while boosting the state’s share of mining revenue.
  • In the most dramatic overhaul, lawmakers overrode a measure in the previous law adopted in 2002 that protected license holders from complying with changes to the fiscal and customs regime for 10 years. Consequently, current operating miners including Glencore, Randgold Resources Ltd. and Ivanhoe Mines Ltd. will immediately be subjected to higher royalties on metals including copper, cobalt, and gold, as well as a new 50% tax on so-called super profits – income realised when commodity prices rise 25% above levels included in a project’s bankable feasibility study.
  • The provisions of the new law “are immediately applicable to all holders of mining rights valid” on the date it comes into force. All that remains is Kabila’s signature, which is expected before the end of next week according to Evariste Mabi Mulumba, the president of the Senate’s economics and finance commission.
  • If deemed a “strategic substance” by the government, the updated mining code also permits Congo, the world’s biggest supplier of cobalt, to raise the royalty on the crucial battery metal to 10% from 2%. The metal has already experienced a dramatic 120% yoy rally in price on rapid growth of lithium-ion battery demand, with manufacturers and automakers struggling to secure long-term supply. The risk of substitution is growing as rising prices are forcing battery chemistries away from an even split of nickel-manganese-cobalt (NMC 1:1:1) to nickel-heavily compositions (NMC 8:1:1). Further aggravation of the supply via an unattractive mining regime in the nation will only develop concerns and drive the price higher.
  • Last month, miners including Glencore, Randgold and China Molybdenum Co. sent a letter to the president of the two houses of parliament asking them to suspend the adoption of the new code and promising they would defend their investments “by all domestic and international means at their disposal”.

 

Company News

Acacia Mining (LON:ACA) 187 pence, Mkt Cap £765m – Cutbacks at Bulyanhulu reduce production guidance by 100,000 oz of gold.

  • As it continues efforts to mitigate the impact of the concentrate export ban in Tanzania on its operations, Acacia Mining has announced that it has purchased put options over 120,000 oz of gold at a strike price of US$1320/oz. The cost of the options is reported to be US$2m.
  • The options expire in equal monthly instalments of 30,000oz between March and June.
  • In September 2017, the company bought options put over 210,000oz of gold production at a strike price of US$1300/oz.
  • Referring to today’s purchase the company commented that These options, in addition to those bought in September 2017 … provide a minimum price for the majority of the Group’s expected production for the first half of 2018 above our budgeted gold price of US$1,200 per ounce, with full upside exposure should the gold price continue to trade above the respective strike prices.”

 

Altus Strategies* (LON:ALS) 8.5p, Mkt Cap £12.6m – Exploration works on gold assets in Mali start

Buy – 12.2p

  • Following the completion of a merger with Legend Gold and a consolidation of gold licenses in western and southern Mali into its portfolio, Altus team announced the commencement of exploration works on newly acquired assets.
  • Exploration team is currently on the ground in western cluster of licenses carrying out mapping and sampling programmes at the Lakanfla, Sebessounkoto and Djelimangara projects to identify priority targets.
  • The Company provided a summary of the work completed to date and future exploration plans on the project-by-project basis regarding the Legend portfolio of assets.
  • Western Mali hosts Korali Sud (Diba project), Lakanfla, Djelimangara and Sebessounkoto Sud licenses covering 190km2 of land and located broadly on strike of the 13moz Sadiola gold mine and 4.5moz Yatela historic gold operation.
  • The Korali Sud license (83km2) hosts the Diba gold project which is located c.13km southwest of the 13moz Sadiola gold mine. Gold mineralisation is found in shallow dipping lenses with a NI43-101 resource statement (AMEC, 2013) estimating 6.3mt at 1.35g/t for 275koz in Indicated and 0.7mt at 1.40g/t for 33koz in Inferred categories (0.5g/t COG, $1,200/oz gold price). A total of 32,000m of DC, RC and RAB drilling has been completed on the project by previous owners with the latest series of infill drilling not yet incorporated into the latest mineral resource estimate The sulphide section of the deposit located beneath the 50m layer of oxide and transition zones has been previously intersected in historic drilling programmes (45m at 1.32g/t from 93m) and remain open at depth. The team is planning to carry on the ground sampling ahead of the follow up trenching as well as re-logging the drill core to better define oxide zone ahead of an updated NI 43-101 statement.
  • The Lakanfla license (24km2) is located 6.5km southwest of Sadiola and is “considered be geologically analogous to the 4.5moz Yatela karst-type gold deposit mined between 2001 and 2015”. A number of artisanal workings are found on the property coincident with major geochemical and gravity anomalies covering an area of around 900x500m. Historical drilling returned exciting near surface high grade intersections with the next phase of works at the license expected to be drill testing of previously identified karsts targets.
  • The Sebessounkoto license (29km2) is located 15km east of the Diba project hosting an identified 2.7km long gold in soil anomaly with a number of artisianal workings (some of pits are 30m deep and 120m long). Historical exploration works at the license included geophysics, soil sampling and trenching (under the JV with Randgold in 2016). The plan is to continue exploration programme including channel sampling, trenching and infill auger sampling to identify priority drill targets.
  • The Djelimangara license (55km2) is located 15km southeast to the Diba project and is found to host a number of gold in soil anomalies up to 2.5km in length coincident with hard rock and artisanal workings. DC, RC and RAB drilling completed over the project returned wide above 1g/t intersections (30m at 1.34g/t from 32m) with further exploration works planned including channel sampling and trenching t identify further drilling targets.
  • The Company also owns two prospective licenses in the southern part of Mali – Pitiangoma Est and Tabakorole projects.
  • The Pitiangoma Est license (106km2) is located in southern Mali, 40km south of the operating 200kozpa Syama mine, and is currently under the JV with Resolute which has the right to earn up to 70% in the license by spending $3m and completing a feasibility study. Altus has an option to stand maintain their 30% interest on a pro rata basis or exchange it for a 2% NSR. Resolute completed 4,900m of drilling focused on the Misseni prospect in 2016 followed by a 3,200m RC drilling programme in 2017.
  • The Tabakorole license (100km2) is located in Southern Mali with a NI 43-101 resource estimate (2007) of 2.0mt at 1.07g/t for 69koz (oxide) and 16.4mt at 0.99g/t for 525koz (sulphide) in both Indicated and Inferred categories. A total of c. 128,000m of DC, RC and RAB drilling has been completed on the project with the next phase of wrk to include scoping studies and resource definition drilling.

Conclusion: The Company has just closed the deal with Legend Gold securing access to highly prospective gold licenses in western and southern Mali and adding another jurisdiction to its diverse portfolio of African assets. The exploration team is already on the ground at the Lakanfla, Sebessounkoto and Djelimangara to prioritise exploration works. The management suggested that a target of “over one million ounces of oxide gold resource (over one or several projects in the area) is realistic”.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Bacanora Minerals (LON:BCN) 113p, Mkt Cap £151m – Update on cornerstone investment

  • Bacanora Minerals reports that its previously announced agreement with the Chinese investor, NextView Capital for the injection of approximately £31m, to acquire approximately 20% of the company, is continuing.
  • “The previously estimated date for completion (being end of January 2018) is being extended and both parties remain committed to proceeding with the Placing.”
  • The agreement remains that NextView Capital is to invest in approximately 32.98m shares at a price of 94.53p per share and today’s announcement confirms that “NextView's strategic aim is to become a long-term strategic partner of listed companies by investing in them and assisting in the realisation of their long-term investment value”.

Conclusion: Despite adjustments to the timetable, both parties remain committed to complete the NextView Capital investment in Bacanora.

 

IronRidge Resources* (LON:IRR) 27p, Mkt Cap £76m – Update on exploration in Chad

  • IronRidge Resources reports that its recently completed aeromagnetic survey over the northern portion of its Dorothe exploration licence and the central part of the Am Ouchar licence in Chad revealed previously undetected structures beneath cover sediments .south of the known mineralisation in the Dorothe licence.
  • The results, in conjunction with the discovery of “new artisanal workings and secondary copper mineral staining in the southern half of the Dorothe license provided the Company with sufficient encouragement to fly the southern half.  Additionally, the Company committed to fly the Echbara license at wider 100m line spacing.”
  • The company also discloses that “Approximately 2km of the planned 8km infill trenching programme has been completed to date” and that it is continuing with soil sampling and mapping programme in the southern half of the Dorothe licence area. Currently approximately 5000 of the planned 6000 samples have been recovered and “the first batch dispatched to the lab for preparation and analysis”.
  • A structural geological specialist from the international geological consultants, SRK, is currently on site and working on detailed mapping of the exposed walls of the trenches. Detailed work of this nature should provide data for interpretation which should significantly improve the knowledge of the structural geological controls to mineralisation and help to guide the future exploration programme.

Conclusion: Detailed exploration work including airborne geophysics detailed geological and structural mapping and geochemical soil sampling is underway and should provide significant improvements in understanding the character of the mineralisation and its genesis and structural setting and enable the exploration team to refine their target definition and future programme.

*SP Angel act as nomad and broker to IronRidge Resources

 

Metminco* (LON:MNC) 2.4p, Mkt Cap £3.1m – Quarterly report and Miraflores update

  • Metminco reports on the continuing work during the quarter ending 31st December 2017 at its flagship, Miraflores underground gold development project in Colombia.
  • Key achievements during the quarter included the approval to construct up to 2km of underground development at Miraflores, which was received in September, the completion of the Feasibility Study in October and of an updated mineral ore reserve estimate in November.
  • The principal conclusions of the feasibility study which envisages the extraction of 4.3mt of ore over a 9 years mine life  to produce a total of 420,000oz of gold and 210,000oz of silver is that total capital investment of approximately US$90m over the life of the mine generates an after tax  NPV8% of US$72.3m, an  IRR of 25% and a 3.6 years payback. All-in sustaining costs are expected to be US$643/oz.
  • As previously announced, “The critical path for the development of the project remains the completion of the EIA including the validation of the impacts on the local communities and the gaining of the social licence for the project.”
  • The social baseline study covers 8 areas of population within the Quinchia municipality deemed to be influenced by the development of Miraflores and includes data collection and analysis from sources including surveys, workshops and community meetings as well as integration with wider Municipal development plans.
  • The company confirms that it “is still on track to have all of its approvals for mine development during 2018.”
  • The company reports a 31st December 2017 cash balance of A$833,000.

Conclusion: The company is confident that all the required approvals for the development of Miraflores will be forthcoming during 2018.

 

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

]]>
Thu, 01 Feb 2018 15:30:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29323/morning-view-china-steelmakers-find-support-in-proposed-extension-of-china-cuts-29323.html
Morning View . China?s crackdown on smog weighs on future metal supply http://www.proactiveinvestors.co.uk/columns/sp-angel/29318/morning-view-chinas-crackdown-on-smog-weighs-on-future-metal-supply-29318.html Altus Strategies* (LON:ALS) – Completion of the merger with Legend Gold

Arc Minerals* (LON:ARCM) – Arc Minerals settles Slovak liability for £50,000

Asiamet Resources (LON:ARS) – Maiden resource estimate at BKZ expected in May

Centamin (LON:CEY) – Guiding to a 6% increase in Sukari gold output in 2018

Cradle Arc (LON:CRA) – Test work confirms DMS is suitable for the Mowana copper mine in Botswana

The SP Angel team will be presenting their best corporate ideas to investors in Cape Town next week

  • If you would like SP Angel to review your company / project for potential inclusion in our list please contact us on John.Meyer@spangel.co.uk
  •  

China – new anti-pollution rules planned for 2018-2020 crackdown (Reuters)

  • Officially the previous plan for Beijing’s war on emissions closed in 2017, with sweeping regulations and actions across smog-prone Beijing-Tianjin-Hebei regions aimed at reducing concentrations of hazardous particles PM2.5 by more than 25%. Despite near-record PM2.5 measurements in January and February last year, northern China managed to meet 2013-2017 targets, largely thanks to a campaign forcing polluting factories across 28 cities to reduce output over the winter heating period.
  • Further action will be required to sustain the declining air emissions, with the Ministry of Environmental Protection working on “a three-year battle plan in the war to protect blue skies”. While the new scheme looks to tighten regulations for major industrial regions like Beijing-Tianjin-Hebei, the plan also aims to expand into the Yangtze and Pearl River deltas.
  • The campaign is already seeking to impose new ‘special emissions restrictions’ on enterprises in major industrial sectors, with Beijing also trying to ‘normalise compliance’ as the winter curbs will come to a close in March. This move will place firms under more permanent scrutiny amid concerns that enterprises and local governments could lower their guard after meeting 2017 targets. While Chinese output is expected to rise across mills and smelters beyond March, the focus on air quality is expected to apply downward pressure on demand for key industrial commodities.

 

Ilmenite and rutile – All not as it seams

  • The market for ilmenite and related products is a clear as a room full of smoke and mirrors.
  • Demand is driven by pigments for paint, paper and plastics which represent around 94% of the market according to Titanium Corporation
  • The rest is Titanium metal 3% and growing, Welding 2% and Others eg chemicals etc..
  • The problem is that refiners are said to be promising growth numbers which are unattainable.
  • Worse still, rumour has it that they refiners are also running short on feedstock.
  • Anti-pollution measures in China have all but killed off titanium supply from titano-magnetite produced as a by-product of iron from magnetite production
  • And to exacerbate the problem a major Chinese producer is having technical difficulties commissioning a new refinery.
  • If ilmenite and rutile prices don’t rise with all this going on then I’ll eat a famous Kazak delicacy.

 

Capital Economics Commodities seminar brings industry and finance together

  • Capital Economics, the expert economics forecasting group gave a brave and very well presented series of presentations yesterday in London.
  • The team look at commodities from a broad economic perspective focussing mainly on the key economic drivers for demand and the surrounding global environment.
  • This fits well with our granular intelligence on commodity supply, its risks and investment programs and while many have their own views on specific commodities all appreciate the overview as presented.
  • Capital Economics stand out in a world where few organisations employ the range of economic talent necessary for this type of forecasting.
  • Moreover they present as a well-coordinated team under the guidance and leadership of legendary economist, Roger Bootle.
  • Accepting that economics is an imprecise science Capital Economics appear better placed than other economic forecasters to judge an increasingly complex and fast moving global environment and we view their work as hugely supportive from a forecasting perspective.

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

·         1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc, 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

-1.37%

at

26,077

Nikkei 225

 

-0.83%

at

23,098

HK Hang Seng

 

+0.97%

at

32,924

Shanghai Composite

 

-0.21%

at

3,481

FTSE 350 Mining

 

-0.65%

at

19,035

AIM Basic Resources

 

-1.93%

at

2,663

 

Economics

US – S&P 50 0 Index shed 1.5% over the last two days led by losses in healthcare and energy stocks as investors have been taking profits following one of the best January’s for global equities on record.

  • Oil prices continued to weaken from three-year highs of $71.3/bbl reached last week.
  • Bond market has not fared better with benchmark 10-year US Treasury yields hitting 2.73%, the highest since Apr/14, yesterday marking a 32bp increase since the start of January.
  • The FOMC monetary policy announcement later this afternoon is unlikely to bring any surprises as the last Janet Yellen meeting is handing the role to Jerome Powell.
  • There will be no post-meeting press conference and economic/interest rate updates are not due before March.
  • Markets are not expecting changes to rates before the next meeting in March (rates futures are implying a 90% of hike in Mar) with the next rate hike in June (62%) and a third one later in the year (60%).

 

China – Official manufacturing gauge came in at an eight-month low in January as government policies to reduce pollution and excessive borrowing along with weaker exports weighed on the sector.

  • On the positive side a pick up in the services sector left the composite measure unchanged.
  • The PMIs are based on surveys of 3,000 manufacturing and 1,200 service-sector companies.
  • The measure of Chinese new exports dropped the most since 2012 on the back of stronger yuan and as New Year holidays near.
  • Chinese New Year celebrations will run between 15 and 21 of February.
  • Official Manufacturing PMI: 51.3 v 51.6 in December and 51.6 forecast.
  • Official Services PMI: 55.3 v 55.0 in December and 54.9 forecast.

 

Germany – Inflation growth dipped more than forecast according to preliminary numbers in January

  • The nation is the first to have released CPI numbers for January yesterday with Eurozone wide inflation data is due later today and estimates for the headline number to come down 0.2pp to 1.2%.
  • On a separate note, employment numbers continued to beat expectations with jobless rate grinding lower.
  • Workers at more than 250 firms including Siemens, Thyssenkrupp and Daimler are planning to go on strike over the three days demanding a higher pay rate after failed wage negotiations between companies and labour unions.
  • One union reporting inconclusive talks with the management represents around 3.9m employees and has already rallied almost a million protesters since the start of the year (IG MEtall).
  • CPI (EU Harmonised, %mom/yoy): -1.0/+1.4 v 0.8/1.6 in December and -0.7/+1.6 forecast.
  • Unemployment Change: -25k v -30k in December and -17k forecast.
  • Jobless Rate (%): 5.4 v 5.5 in December and 5.4 forecast.

 

UK – BuzzFeed got hold of a draft government report on a Brexit economic impact suggesting leaving the EU would adversely affect almost every sector and every UK region.

  • The assessment is reported to look at three most the most probable Brexit scenarios as of January 2018.
  • Brexit is estimated to cost 5pp in growth over the next 15 years compared to current forecasts with no scenario resulting in an improvement of economic growth rates.
  • Estimates range from a loss of 8pp over the period on the “no deal” scenario and 2pp on the softest option involving a continued single-amrket access through a membership in the EEA.
  • The British PM insisted that the leaked report is “very preliminary” and did not reflect the government’s official thinking.
  • May pledged to release the report once the final divorce deal is reached allowing parliament to use the final version of the economic assessment.

 

France – Consumer prices inflation surprisingly beat estimates in January on the back of an “acceleration in services prices and in energy prices and a slight rebound in “manufactured product” prices”.

  • Numbers come in sharp contrast to a weakening inflation pressure registered in the regions largest economy Germany.
  • CPI (EU Harmonised, %mom/yoy): -0.1/+1.4 v 0.3/1.2 in December and -0.3/+1.2 forecast.

 

Currencies

US$1.2444/eur vs 1.2346/eur yesterday  Yen 108.68/$ vs 108.73/$  SAr 11.867/$ vs 12.038/$  $1.418/gbp vs $1.400/gbp  0.809/aud vs 0.805/aud  CNY 6.292/$ vs 6.343/$.

 

Commodity News

Precious metals:         

Gold US$1,343/oz vs US$1,336/oz yesterday

  • Market participants are expecting the bullish sentiment in the precious metal to advance as investors take a shine to the second-largest exchange-traded fund backed by bullion. Early week trading saw buyers add 38,412 ounces to their holdings in iShares Gold Trust, taking assets to a record 8.3 million ounces. The fund has attracted $673 million in January, the biggest monthly inflow in almost two years, as dollar weakness boosts the appeal of spot gold.
  • Bullion extended its run towards 3rd monthly advance, as the dollar retreats following President Donald Trump’s State of the Union address, with the metal for immediate delivery grew 0.4% to $1,342.62. “Trump’s speech focused on national security and immigration…that’s why gold prices are going up. As for infrastructure (spending), there was nothing special”.
  • Traders are awaiting the outcome of the US Federal Reserve’s two-day meeting and to Janet Yellen’s final policy meeting as Fed chair. “Yellen may deliver a hawkish surprise setting the stage for a possible policy pivot while trumpeting in the Powell era. Gold bears may take advantage of this move” according the Oanda. Investors are also waiting for the US jobs report Friday that will include data on nonfarm payrolls and average hourly earnings.

   Gold ETFs 72.6moz vs US$72.5moz yesterday

Platinum US$1,002/oz vs US$991/oz yesterday

Palladium US$1,061/oz vs US$1,078/oz yesterday

Silver US$17.22/oz vs US$17.09/oz yesterday

           

Base metals:   

Copper US$ 7,118/t vs US$7,015/t yesterday

Aluminium US$ 2,222/t vs US$2,203/t yesterday

Nickel US$ 13,550/t vs US$13,545/t yesterday

  • A combination of surging China imports, tightening supplies and fund interest are expected to sustain prices of stainless steel and its fundamental ingredient nickel, supporting prices from their highest level in more than two years. Benchmark nickel on the London Metal Exchange hit $14,040/t in early week trading, the highest since May 2015, representing more than a 55% gain since June last year.

Zinc US$ 3,525/t vs US$3,507/t yesterday

Lead US$ 2,595/t vs US$2,598/t yesterday

Tin US$ 21,785/t vs US$21,820/t yesterday

           

Energy:           

Oil US$68.6/bbl vs US$69.0/bbl yesterday

 

Natural Gas US$3.074/mmbtu vs US$3.216/mmbtu yesterday

Uranium US$21.40/lb vs US$21.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.5/t vs US$72.6/t

Chinese steel rebar 25mm US$661.8/t vs US$656.8/t

Thermal coal (1st year forward cif ARA) US$84.0/t vs US$86.3/t – Trading activity in coal fell by one third last year

  • Activity in the world’s most widely used power-plant fuel plunged more than a third last year, the steepest decline in more than two decades, signaling the close of the halcyon days of coal trading. For years the coal market defied a global pushback against the commodity by lawmakers and money managers, with buying and selling movements almost triple in five years.
  • A trending global decline in coal consumption and focus on air quality has severely hampered the dirty fuels demand, with Europe being on the forefront of the battle against climate change and setting more ambitious goals for reducing its carbon-dioxide emissions. “European utilities have long been important traders, but they have reduced their physical coal consumption,” Prospex said in a report. “This trend can be expected to accelerate in the coming years as coal loses market share in European power generation”. Not even Donald Trump’s coal-friendly policies in the US and energy-hungry southeast Asia were able to reverse the trend toward replacing the fossil fuels with cleaner forms of energy such a solar and wind.
  • The value of the market slid almost 12% to $299 billion last year as money managers, including Norway’s $1.1 trillion sovereign wealth fund and California State Teachers’ Retirement system, have exited or divested coal assets as investors favour more environmentally friendly strategies. The Amsterdam, Rotterdam or Antwerp market, by far the biggest, declined for the first time since 2009, sliding 42 percent. Trading of Richards Bay coal in South Africa slumped as much as 51 percent. Newcastle volumes bucked the trend, rising 23 percent because demand in Asia is still strong. Nations from the UK to Chile have also agreed to phase out the fuel altogether.

China aims to boost rail freight capacity to ensure coal supplies

  • China will add at least 200mt of rail freight capacity in 2018, including at least 150mt of thermal coal capacity.
  • Government is working with national rail operator to ensure coal supplies after surge in demand for power and is trying to push more transportation of goods from coal to agricultural produce onto the rail network and reduce transport by road as part of its effort to reduce pollution.
  • Adding 200mt to the rail network would mark an increase of 5% from 2017 rail cargo volumes of 3.69bnt.

Premium hard coking coal Aus fob US$214.5/t vs US$214.3/t

 

Other:  

Tungsten APT European US$315-320/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$72,305.0/t vs US$79,750.0/t

  • Speculations of rising cobalt prices on tightening market balances are drawing Brazilian miner Vale to seek pioneering Canadian cobalt stream. Vale are sourcing investors to make upfront payment for cobalt worth hundreds of millions of dollars in exchange for future production at a discounted price, expanding the form of financing previously adopted for precious and base metals companies. The Brazilian mining giant is searching for bids to buy cobalt from its Voisey’s Bay complex that predominantly produces nickel, with proceeds to be used to help finance an extension of the mine. Vale had hired Bank of Montreal to raise approx. $500 million in the cobalt streaming deal.
  • Securing long-term supply is a critical for the component in rechargeable lithium-ion batteries and its price has benefitted from a push by governments and automakers to promote electric vehicles to cut emissions from diesel and petrol cars.  

Vale pioneering $500m Canadian cobalt streaming deal

·         Vale is seeking to sell un-mined cobalt worth hundreds of millions of dollars to investors, as speculation rises over a shortage of the metal needed to make batteries.

·         Streaming allows investors to make upfront payment in exchange for future production at discounted prices in the first deal of its kind for the cobalt sector.

·         Vale has hired Canada’s Bank of Montreal (BMO) to raise around $500 million from bidders for cobalt that will be produced at its Voisey’s Bay nickel mine in eastern Canada.

·         Problem is that not all cobalt is created equal in the ground. Cobalt in sulphide ores which are generally mined are not like cobalt oxides which are mainly found in the DRC. LCO batteries used cobalt oxides while NMC and NCA prefer cobalt sulphates. Tesla is using NMC batteries, hand held devices use LCOs.

 

Lithium - Ford exec says no Gigafactory for Ford

  • The Vice president of product development for Ford, Hau Thai-Tang, said Ford would not be building its own Gigafactory to rival Teslas, as it believes solid state batteries could rapidly make a lithium ion battery factory obsolete.
  • Hau said that Ford was waiting for the market to mature, as he believes that technology landscape is going to change and Ford does not want to ‘invest billions of dollars of capital, have inefficient scale, be over-capacitated, and then have the technology landscape change and be stuck with the asset’
  • Wise works from a company which has been remarkable for selling assets ahead of the Global Financial Crisis and remaining at the top of its game since 1908.

 

Company News

Altus Strategies* (LON:ALS) 8.5p, Mkt Cap £9.2m – Completion of the merger with Legend Gold

Buy – 12.2p

  • The Company reported a completion of the merger with TSX listed Legend Gold and an issue of 41.1m shares.
  • Legend shareholders will account for around 27.6% of combined company.
  • The Company continues preparations for the dual listing of Altus Strategies on the TSX-V market.

*SP Angel acts as Nomad and Broker to Altus Strategies plc

 

Arc Minerals* - new ticker (LON:ARCM) 2.4p, Mkt Cap 7.9m – Arc Minerals settles Slovak liability for £50,000

Formerly Ortac Resources (LON:OTC)

  • Arc Minerals reports it has settled what it describes as a major liability related to the Sturec gold project in Slovakia for the princely sum of £50,000.
  • The liability relates to a $3.75m vendor royalty relating to the original purchase agreement for the mine from Tournigan in 2010.
  • The settlement also includes a 2% Net Smelter Royalty which could also have been purchased for $2m from Tournigan.
  • The £50,000 settlement completely extinguishes the original agreement and contingent liability.

Conclusion: It is possible that the settlement of the NSR and other royalty might allow for further developments at the stalled Sturec Gold project in Slovakia

*SP Angel acts as nomad and broker to Arc Minerals

 

Asiamet Resources (LON:ARS) 9.5p, Mkt Cap £80.7m – Maiden resource estimate at BKZ expected in May

·         Asiamet Resources reports that it expects the final eight holes of its current 3500m drilling programme at the BKZ property in Kalimantan to be completed by mid-February and that a maiden resource estimate for both the BKZ Polymetallic Zone and the underlying BKZ Copper Zone is expected by May.

·         Assay]]> Wed, 31 Jan 2018 11:29:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29318/morning-view-chinas-crackdown-on-smog-weighs-on-future-metal-supply-29318.html Morning View . Metals and equities slump as the dollar index advances http://www.proactiveinvestors.co.uk/columns/sp-angel/29308/morning-view-metals-and-equities-slump-as-the-dollar-index-advances-29308.html Arc Minerals* - new ticker (LON:ARCM) – Casa Misisi (Akyanga) project

Anglo American (LON:AAL) –De Beers diamond sales see restocking post the Christmas holiday season

Ferrum Crescent (LON:FCR) – Maiden resource estimate for Toral project

Phoenix Global Mining* (LON:PGM) – Initial cobalt exploration results

Wolf Minerals (LON:WLFE) – Process plant improvements

Petropavlovsk (LON:POG) – Q4 production update

 

Active funds: managers keep 75% of gains – according to FTfm - ‘Analysis shows just 16p benefit per £100’

  • Active fund managers took home three quarters of the value they created for pension scheme clients according to analysis carried out for FTfm by CEM Benchmarking, which evaluates investment performance and costs.  8,000 pension funds worldwide gave CEM information with the median size of fund at £7bn.
  • The good news is that Active managers beat the market by 60 basis points the bad news is that 44bp was consumed in costs and even the managers themselves think this is too high.
  • While it’s great to see active managers doing so well it would be nice to feel that more was being spent on the research which helps to fuel their performance.
  • It is tempting for us to rate the active fund managers we know according to the quality of questions they ask but we will save this for another day.

 

Dow Jones Industrials

 

-0.67%

at

26,439

Nikkei 225

 

-1.43%

at

23,292

HK Hang Seng

 

-1.14%

at

32,591

Shanghai Composite

 

-0.99%

at

3,488

FTSE 350 Mining

 

-1.57%

at

19,191

AIM Basic Resources

 

+0.16%

at

2,716

 

Economics

 

US – Robust consumer spending numbers released for the November/December but continuing modest inflation pressures reflected in the latest PCE set of data.

  • Private consumption is being driven by strong increase in wage and salary income which climbed 0.5%mom in December v 0.4%mom in November and 0.3%mom in October.
  • Personal Income (%mom): 0.4 v 0.3 in November and 0.3 forecast.
  • Personal Spending (%mom): 0.4 v 0.8 in November and 0.4 forecast.
  • PCE (%mom/yoy): 0.2/1.5 v 0.1/1.5 in November and 0.2/1.5 forecast.

 

Germany – Major states reporting CPI numbers show inflation rates being largely level with previous months readings and holding up at 1.5-1.8%, depending on the region.

  • Nationwide CPIs are due later this afternoon with estimates for no change in rates and inflation (EU harmonised) running at 1.6%yoy in January.I

 

UK – Consumer confidence jumped by the most in a year in January, according to YouGov and the Centre for Economics and Business Research.

  • “Higher-than-expected GDP figures, a drop in inflation and now an uptick in consumer confidence -the new year to a promising start; with household finances and upcoming business activity metrics both on the rise, the 2018 slowdown that many had expected looks less likely to materialise,” the CEBR said.

 

France – GDP growth rate accelerated to the strongest annual level since 2011 on the back of new administration economic reforms, previous government business tax cuts and a general pickup in the eurozone economic activity.

  • Growth in the final quarter has been broadly led by an increase in business investment (+1.1%qoq) and consumer spending (+0.3qoq).
  • FY17 growth totalled 1.9%yoy, far ahead of the 0.8%yoy average recorded in the 10 years through 2016.
  • Q4/17 GDP (%qoq): 0.6 v 0.5 in Q3/17 and 0.6 forecast.
  • Q4/17 GDP (%yoy): 2.4 v 2.3 in Q3/17 and 2.3 forecast.

 

Spain – Economic growth came in above 3% for a third consecutive year suggesting the political crisis in Catalonia late last year did little to alter robust growth momentum.

  • Growth totalled 0.7%qoq in Q4, in line with market estimates.
  • Markets expect growth to slowdown this year to 2.6% with official estimates have now been upgraded to above 2.5% compared to previously suggested 2.3% (October estimates).
  • The Catalan parliament is due to convene later today to elect the next president; previously the court ruled that Carles Puigdemont can have a shot at the office only if he is present before the Catalan parliament in person.
  • Former Catalan head is facing almost certain arrest on charges of rebellion and sedition if he returns to Spain; although, Puigdemont’s lawyer did not completely rule out a potential surprise appearance of his client in the Catalan assembly.
  • Q4/17 GDP (%qoq): 0.7 v 0.8 in Q3/17 and 0.7 forecast.
  • Q4/17 GDP (%yoy): 3.1 v 3.1 in Q3/17 and 3.1 forecast.

 

Currencies

US$1.2346/eur vs 1.2443/eur yesterday  Yen 108.73/$ vs 109.25/$  SAr 12.038/$ vs 11.871/$  $1.400/gbp vs $1.424/gbp  0.805/aud vs 0.809/aud  CNY 6.343/$ vs 6.328/$

 

Commodity News

 

Precious metals:         

Gold US$1,336/oz vs US$1,353/oz yesterday

  • Gold retreats from last week highs for a second session after yields on benchmark Treasuries touch the highest level since 2014, as the dollar strengthens ahead of the Federal Reserve policy-setting meeting and US jobs data this week. Spot gold closed 0.7% lower as yield on 10-year Treasuries rose +2 bps to 2.71%, the highest since 2014. The sudden repricing in global bond markets caught a consolidating market off guard, triggering profit-taking according to Oanda analysis. Higher yields are expected to bring a stronger dollar, giving headwind for gold prices. Commodity analyst at Fat Prophet notes that the Fed revenue’s heading lower with US tax cuts and Trump still has his plan for infrastructure spending.  “If that’s implemented, then we’re going to see higher debt, lower revenue, and you’d expected to start seeing US yields rising”.
  • However, some market participants are betting Janet Yellen won’t act to tackle inflation at her final Federal Reserve meeting. The Fed is widely expected to interest rates unchanged at its two-day policy meeting that starts today, however investors will be keen to focus on the central bank’s assessment of the economy and inflation for hints on the monetary policy outlook.
  • Meanwhile Bloomberg technical analysis highlight gold forming a Rounding Bottom pattern just as US bond yields are poised to end a down trend that’s held since the mid-1980s based on Ichimoku cloud analysis. If the January 2018 close for the 10-year yield exceeds 2.66%, this will be the first time in 35 years that he falling cloud pattern would have been taken out. With bond yields on the verge of an upside breakout amid rising inflation expectations, this could provide a tailwind for gold after a seven-year bear market.
  • Physical demand across India, the world’s second-biggest consumer of the precious metal, is waning as prices are at discount as jewelers were postponing purchases on the expectation that the government will announce an import tax cut in its annual budget on Thursday. The lower import tax could boost India’s overall gold demand, supporting elevated global prices.

   Gold ETFs 72.5moz vs US$72.5moz yesterday

Platinum US$991/oz vs US$1,020/oz yesterday

  • After trading at an all-time high following its rapid accent of more than 50% during 2017, Palladium’s premium is beginning to be eroded as manufacturers favour substitution by its sister metal, Platinum. Platinum is expected to see a small shortage during 2018 as growth across recycling fails to offset production cuts in South Africa, while industrial demand rebound and jewelry usage is set for a modest rise, according to refiner Heraeus Holding GmbH.

Palladium US$1,078/oz vs US$1,097/oz yesterday

Silver US$17.09/oz vs US$17.41/oz yesterday

           

Base metals:   

Copper US$ 7,015/t vs US$7,099/t yesterday

  • Significant portions of global copper production could experience severe output disruptions as a wave of labour negotiations are expected to sweep across 33 operating mines in Chile and Peru. Among discussions beginning Jan. 29 and running through 2018 are BHP-operated Escondida mine, Antofagasta’s Los Pelambres, Freeport-McMoRan’s Cerro Verde mine and Antamina mine. Elevated copper prices have driven the need for labour unions to renegotiate wage contracts, potentially disrupting supply from 8.2 million tonnes.

Aluminium US$ 2,203/t vs US$2,240/t yesterday

  • Despite rising near five-year highs on Monday, metals slumped as equities contracted and the dollar index advances 0.2% for its second daily increase. While the biggest loss was nickel, shrinking 1.6% on LME and 2% of ShFE, expanding stockpiles cause ShFE to close 1.4% lower to 14,470 yuan/ton to its worst close since Dec. 15.

Nickel US$ 13,545/t vs US$13,730/t yesterday

Zinc US$ 3,507/t vs US$3,473/t yesterday

Lead US$ 2,598/t vs US$2,604/t yesterday

Tin US$ 21,820/t vs US$21,685/t yesterday

           

Energy:           

Oil US$69.0/bbl vs US$70.2/bbl yesterday

  • A strong shift in positioning of large-scale derivatives speculators such as hedge fund indicates the most bullish sentiment for crude oil. Funds have pushed their long positions to all-time record levels across five energy markets including US benchmark West Texas Intermediate crude, Brent international oil futures, and US gasoline and diesel fuel.
  • According to CFTC’s weekly Commitment of Traders data for the period to Jan. 23, managed money investors on Nymex in New York and ICE Futures in Europe now hold the equivalent of more than 1 billion barrels of oil on a net basis. This compares to lows of just over 200m barrels in 2014.

Natural Gas US$3.216/mmbtu vs US$3.481/mmbtu yesterday

Uranium US$21.40/lb vs US$23.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.6/t vs US$73.9/t

Chinese steel rebar 25mm US$656.8/t vs US$660.7/t

Thermal coal (1st year forward cif ARA) US$86.3/t vs US$87.8/t

Premium hard coking coal Aus fob US$214.3/t vs US$213.7/t

 

Other:  

Tungsten APT European US$315-320/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$72,305.0/t vs US$79,750.0/t

 

Company News

Arc Minerals* - new ticker (LON:ARCM) 2.5p, Mkt Cap 8.3m – Casa Misisi (Akyanga) project

Formerly Ortac Resources (LON:OTC)

 (Ortac has an effective economic interest of 62.3% in the Misisi Gold project through it’s 87.4% interest in Casa Mining Ltd which holds a 71.25% interest in project)

  • Arc Minerals report a number of high-grade gold intersections from ongoing drilling at their Misisi project in the DRC.
  • The mineralisation is relatively shallow at between 49-85m downhole with intersections of 5-6g/t.
  • Deeper down the team assayed 8.02g/t over 7.5m from 174.5 down hole including a super-high grade section of 108g/t from 179.5m which might eventually be mined in the bottom of an open pit or by underground working.

Hole MSDD0121

    • 7.50m @ 8.02 g/t Au from 174.50m
      • incl. 0.50m @ 108 g/t Au from 179.50m 

Hole MSDD0121

    • 11.40m @ 2.31 g/t Au from 48.70m
      • incl. 3.20m @ 5.93 g/t Au from 48.70m
    • 7.70m @2.04 g/t Au from 77.40m
      • incl. 2.20m @ 5.34 g/t Au from 77.40m

Previously reported:

Hole MSDD0119

o    1m @ 5.23g/t from 247.39m

§  7.56m @ 4.97g/t

§  0.66m @ 24.77g/t

§  0.50m @ 23.13g/t

Hole MSDD0120

o    3.3m @ 3.13g/t from 200.60m

Conclusion: The results appear to indicate that the structure is coming closer to surface at Akyanga with relatively high gold grades seen in relatively shallow intersections. This suggests to us that the value and prospect for a new gold mine at Misisi is growing in its potential.

*SP Angel acts as nomad and broker to Arc Minerals

 

Anglo American (LON:AAL) 1708 pence, Mkt Cap £22.1bn –De Beers diamond sales see restocking post the Christmas holiday season

  • Anglo American reports that De Beers achieved sales of US$665m for its 1st diamond sale of 2018. Equivalent figures for the 1st sale of 2017, which benefitted from restocking in India following delays to purchases as a result of the Indian Government’s demonetisation programme.
  • De Beers CEO, Bruce Cleaver, commented that “Following positive early signs for diamond jewellery sales over the holiday season in the US, the need for the industry to restock led to increasing demand for our rough diamonds in the first sales cycle of 2018.”
  • He went on to comment that the seasonal re-stocking after the holiday season in the US typically sees a larger than average share of annual sales taking place during the first sales cycle of the year.

 

Ferrum Crescent (LON:FCR) 0.11 pence, Mkt Cap £3.4m – Maiden resource estimate for Toral project

  • Ferrum Crescent reports a maiden inferred resource estimate for its wholly owned Toral zinc/lead/silver deposit in the Province of Leon, Spain.
  • The estimate, prepared in accordance with the JORC (2012) Code by Addison Mining Services, shows 16mt at an average grade of 4.0% zinc, 3.3% lead and 25g/t silver (6.9% zinc equivalent) using a 4% zinc-equivalent cut-off grade.
  • The estimate is “based on all the available historical data from three drill campaigns conducted on the 15.199 licence area (the 1972 - 1984 Peñarroya-Adaro campaign, the 2006 - 2008 Lundin Mining campaign and the 2016 - 2017 FCR campaign), along with underground channel sampling results from the numerous adits.” The estimate uses a zinc price of US$2400/t, a lead price of US$2000/t and a silver price of US$17/oz “which, although conservative, was deemed appropriate at this stage in the project's development.”
  • The maiden resource has identified potentially economic mineralisation ranging from surface to approximately 1,100m below surface.” The resource assessment process and construction of the block model of the deposit “has increased the level of understanding of the mineralogical and geological controls at Toral and the Company is therefore confident of being able to enhance and potentially expand the resource going forwards, subject to undertaking additional drilling and exploration activities.”
  • The company comments that the “Deposit [is] open along strike to the east and down dip.” Commenting on the future plans for Toral, Executive Director, Laurence Read, said “Our immediate objective now is to build on this maiden JORC resource estimate and increase its size and thereafter carry out a preliminary economic assessment. … During the coming months we intend to carry out review work and present this project to our shareholders, major mining companies and the general zinc-trade sector in order to maximise exposure to what is a potential new major zinc-lead opportunity.”

Conclusion: The initial inferred resource provides a basis for the future exploration of the Toral deposit and for the preparation of a preliminary economic assessment. In our experience, the Province of Leon takes a supportive and constructive view of potential mining projects and we look forward to further news on how the company plans to progress its exploration at Toral.

 

Phoenix Global Mining* (LON:PGM) 4.2p, Mkt Cap £9.6m – Initial cobalt exploration results

  • Phoenix Global Mining reports the results from two scout holes (534m) drilled into polymetallic mineralisation hosted in sulphide bearing skarns beneath the oxide mineralised zones at the historic Empire mine in Custer Count, Idaho.
  • “The two scout holes have demonstrated favourable primary sulphide ore hosting geology is present below the proposed open pit oxide resource and the presence of the predicted larger sulphide zone beneath the present oxide resource and both holes intersected the skarn structures over much of their length.  Much of the core is mineralised throughout its length, with higher grade polymetallic values being returned, including significant occurrence of tungsten values”.
  • The results reported include:
    • A 10.7m wide intersection at an average grade of 0.42% copper, 0.74% zinc 0.03% tungsten and 12.6g/t silver from a downhole depth of 73.2m in hole KXD17-10 which also includes a 4.6m wide section from 213.5m depth with an average grade of 1.34?% copper,0.82% zinc,0.01% tungsten, 27.5g/t silver and 0.72g/t gold as well as narrower intesections of 1.6m, from 227.2m averaging 0.85% copper, 0.43% zinc, 0.02% tungsten, 25.5g/t silver and 0.23g/t gold, and a 1.5m wide intersection averaging 0.53% copper, 0.14% zinc, 3.9g/t silver and 0.1g/t gold; and
    • A 1.6m wide intersection from a depth of 251.6m in hole KXD17-8 at an average grade of 0.11% copper, 0.65% zinc, 63.8g/t silver and 0.02g/t gold. The hole contains a second 1.5m wide intersection from a depth of 259.3m at an average grade of 0.04% copper but with grades of 0.18% tungsten and 83.1g/t silver.
  • The main purpose of this drilling was to “determine geological structure beyond the old workings and specifically to locate the skarn structures which host the mineralisation” and so while achieving this objective it is encouraging that the assay grades are at potentially mineable tenor.
  • The company plans to follow up these results with further deep exploration drilling as a foundation for a targeted drilling programme.
  • Commenting on the results, CEO, Dennis Thomas, highlighted the tungsten results which he described as “particularly exciting as it positively reinforces the predictions of the Empire system hosting significant values of tungsten at depth. We have gained valuable information regarding the polymetallic “roots” of the mineralised system at the Empire Mine.”
  • Mr Thomas went on to point out that “Historically, production from the mine was at a head-grade of between 6 and 8% copper and this new information enables us to target additional, higher-grade zones at greater depths and along strike.  The recent acquisition of the Horseshoe Mine, adjoining the Empire Mine, has considerably increased the strike length of the mineralised structure under the Company’s ownership, further adding to the exploration potential for both oxides and deeper sulphides”.

Conclusion: The scout drilling of the sulphide bearing skarns beneath the oxide zone at the historic Empire mine has established polymetallic mineralisation at depth and confirmed the exploration potential for longer term, deeper mineralisation of the type which underpinned operations during the historic mining. We look forward to further results as exploration progresses.

*SP Angel acts as Nomad to Phoenix Global Mining

 

Wolf Minerals (LON:WLFE) 4.3p, Mkt Cap £46.3m – Process plant improvements

  • Wolf Minerals reports that output of tungsten in concentrate at its Drakelands mine in Devon rose by 22% during the quarter ending 31st December 2017 to 43,498 metric tonne units (mtu). The company also reports that sales increased by 36% compared to the previous quarter.
  • Plant throughput increased by around 2.5% during the quarter to 485,788 tonnes implying that the increased output of tungsten in concentrate stems largely from grade and recovery improvements as the operating team implements their turnaround plan.
  • The company also comments that it “has initiated a pre-processing trial on lower quality ore feed to identify potential improvements in processing efficiency and project cashflows. The trial is expected to commence pre-processing in February and will run for the next two quarters on a range of ore feed quality and mineralised waste.” However, in the shorter term, “significant gains were constrained by commissioning the improvements in the gravity fines circuit under the operating turnaround plan.”
  • In our opinion, the earlier operating issues at Drakelands come from the difficulty of processing finer size fractions of partially weathered ore and any improvements which can be achieved in dealing with this material should prove beneficial in the longer term.
  • The dense-media separation circuit “continued to provide improvements in tungsten pre-concentrate recovery, with further optimisation activities being driven by higher circuit run time and new performance data analytics. The improvements in the gravity fines circuit are expected to provide a further lift to pre-concentrate recovery towards target levels, once stable operating parameters are achieved.”
  • Following intensive investigation into the low frequency noise generated by the vibrating screens in the process plant and consultation with experts and the Environment Agency (EA) “Subsequent to Quarter end, the noise and vibration management plan has been agreed with the EA, with the solution identified from best available techniques being to re-clad the existing building structure with a proprietary acoustic panelling system at an estimated cost of up to £7.5 million.”
  • Despite the continuing operational improvements, the Drakelands operation continues to consume cash at the operating level with an operating cash outflow of A$8.5m during the quarter and a 12 month outflow of A$26.0m leaving a 31st December cash balance of A$6.6m.
  • The company “has engaged in negotiations with RCF VI, its senior lenders and offtakers to provide further funding support for short term working capital as the Company progresses towards long term self-sustainable operations at Drakelands.” Negotiations continue and are targeting a conclusion in February 2018and “to accommodate this timetable, a one month extension of the standstill period on the senior debt funding arrangements has been agreed. This includes deferring the £1 million principal debt repayment due on 31 January 2018 by one month.”
  • The company has, however, benefitted from continuing strength in the tungsten market with the price for the benchmark intermediate product, ammonium paratungstate (APT) “initially holding steady between US$270 - 280 per mtu before rising to US$293 per mtu by the end of the Quarter. The average for the Quarter was US$282 per mtu up from US$265 per mtu in the September quarter - an increase of 6%. Subsequent to Quarter end, the APT price has risen further to US$315 per mtu.”

Conclusion: Operational improvements at Drakelands are beginning to come through, however, the operation continues to consume cash at the operating level and discussions with lenders and shareholders for the provision of continuing financial support are targeted for completion in February 2018.

 

Petropavlovsk (LON:POG) 8.4p, Mkt Cap £279m – Q4 production update

  • FY17 gold production totalled 439.6koz (FY16:416.3koz) including gold in circuit (GIC) of 70.9koz recovered during the year.
  • Production was in line with the management 420-460koz annual guidance.
  • Underground development at Pioneer has been delayed due to a higher than expected inflow of water with commercial production now moved from Q4/17 to Q1/18.
  • At Malomir, stope mining started in December with mining rates improved through the quarter and a total of 74kt at 8.03g/t mined in FY17.
  • Gold sales amounted to 439.8koz at an average realised price of $1,262/oz.
  • TCC are forecast to come in slightly above $700/oz on the back of a stronger rouble.
  • Malomir flotation plant is expected to come online in Apr/18 with first ore treated shortly after.
  • POX development is on schedule for the start of commissioning in Sep/18 and processing of the Malomir flotation concentrate in Q4/18.
  • Outstanding forward sales stand at 400koz at a price of $1,252/oz.
  • Capex during the year totalled $93m ($33m – POX; $9m – other refractory ore treatment spend (Malomir flotation plant, most likely); $35m – underground development; $16m – other)
  • Loan facilities with Sberbank and VTB have been replaced with proceeds from a $500m 8.125% 2022 bond placement in November.
  • FY18 guidance for 420-460koz and TCC at around $700-750/oz assuming USDRUB at 58.
  • Capex forecast is for $105m ($62m – POX; $6m – Malomir flotation; $10m – underground development at Malomir and Pioneer; $15m – exploration; $12m – other).

 

Conclusion: Annual production numbers coming in line with the guidance benefited from the release of the GIC. The management is guiding stable production in FY18 on the back of a ramp up in underground operations at Malomir and Pioneer as well as first production of gold in concentrate at Malomir.

]]>
Tue, 30 Jan 2018 11:11:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29308/morning-view-metals-and-equities-slump-as-the-dollar-index-advances-29308.html
Morning View - US FOMC and payrolls to dominate dollar and metals this week http://www.proactiveinvestors.co.uk/columns/sp-angel/29299/morning-view-us-fomc-and-payrolls-to-dominate-dollar-and-metals-this-week-29299.html Herencia Resources (LON:HER) – High grade copper intercepts in Pastizal drilling

Metminco* (LON:MNC) – Miraflores Plan of Work submitted

Petra Diamonds (LON:PDL) – FY 2018 production guidance reduced

 

Lithium - Tesla eyes global lithium dominance in talks with Chile’s SQM over lithium investment

  • Tesla in talks with Chile’s largest lithium producer SQM about investing in supplies of the key battery material as it ramps up production of its first mass market electric car.
  • Could agree to build processing plant in Chile to produce high quality lithium it needs for its batteries and if successful would mark first foray into securing battery raw materials
  • SQM has recently just resolved long running dispute with Corfo which will allow the miner to quadruple lithium production by 2026
  • Eduardo Bitran of Chilean development agency Corfo, commented that Tesla could invest in processing technology in Chile to produce the high-grade lithium hydroxide, marking the first foray into securing battery raw materials. It could also bring a partner to make the battery cathode in the country, as Chile has some of the world’s cheapest solar power.
  • With an increasing supply of lithium, Chile is key for any company that wants to become global in electro-mobility. Being close to Chile or having a strategic alliance in Chile becomes a strategic factor for a company like Tesla”.

 

The Men Who Built the Liners (BBC4 Timeshift)

  • A magnificent program about the decline of the shipyards on the Clyde and the way in which the shop stewards worked to keep the yards going.
  • ‘Despite some of the harshest working conditions in industrial history and dire industrial relations, it was here that the Queen Mary, the Queen Elizabeth and the QE2 were built.’
  • http://www.bbc.co.uk/programmes/b00nnm7k

 

Cryptocurrency $534m theft

  • The world of cryptocurrencies was rocked on Friday by the hacking of Coincheck, Japan’s largest digital exchange which affected 260,000 customers.
  • The exchange has promised to refund some $423m worth of stolen cryptocurrency coins covering nearly 90% of the value of the coins stolen to those customers who lost their NEM cryptocurrency coins.
  • The exchange suspended trading in all cryptocurrencies except Bitcoin and mainly its NEM coin.
  • While the exchange knows the digital address of where the assets were transferred to we suspect the hackers may be one step ahead. MtGox, another Japanese cryptocurrency exchange lost some 850,000 bitcoins though some 200,000 bitcoins in an old digital wallet.
  • Japan is global leader in crypto currency - as of January 15th 2018
  • yen accounted for 56.2% of bitcoin (source: Japan Times/coinhills.com)  
  • This recent news follows South Korea Police and tax authorities raiding Cryptocurrency exchanges on January 10th 2017.
  • $400m value in gold weighs around 8.3 tonnes making it a safer investment, less easily stolen and potentially easier to trace.

 

SP Angel Mining team will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February

  • The event is hosting 85 mining companies and ~400 investors at the historic Welgemeend Farm in the Gardens district of Cape Town
  • >1,500 meetings have been organised with an average of 18 pre-arranged meetings per company
  • We look forward to meeting investors and companies at the 121 event or by appointment thereafter.
  • See:  https://www.weare121.com/121mininginvestment-cape-town/

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:  See MB APEX report link for further details

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc

3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

+0.54%

at

26,393

Nikkei 225

 

-0.16%

at

23,632

HK Hang Seng

 

+1.53%

at

33,154

Shanghai Composite

 

+0.28%

at

3,558

FTSE 350 Mining

 

-0.73%

at

18,944

AIM Basic Resources

 

+0.57%

at

2,719

 

Economics

US – Q4 GDP came in below market estimates weighed down volatile trade and inventories performance; while underlying growth drivers like consumers and business investments performed well during the quarter, markets are doubting prospects for sustained growth of 3%-plus recorded in the previous two quarters.

  • Private spending saw the best quarter in more than a year while business investment growth picked to the strongest pace in three years.
  • Government expenditures climbed 3.0%qoq, the most since 2015, contributing 0.5pp to GDP growth in the wake of post-hurricane rebuilding costs.
  • Trade and inventories made negative contributions deducting 1.8pp from the headline number; this compares to a 1.1pp contribution from net exports and inventories in Q3.
  • S&P 500 Index recorded its best day since March last year closing at another record high on the back of strong earnings from pharmaceuticals and tech sectors.
  • Nearly 120 companies included in the S&P 500 Index are due to report this week including the biggest tech companies such as Amazon, Apple, Alphabet, Facebook and Microsoft.
  • FOMC is meeting on Tuesday/Wednesday with expectations for no change in rates; non-farm payroll numbers are due this Friday with market estimates for a normalisation in the labour statistics following a series of significant swings recorded through Sep-Dec/17 reflecting weather related disruptions (+180k in Jan v 148k in Dec).
  • The market is looking for robust NFP payroll numbers at the end of the week
  • GDP (%qoq annualised): 2.6 v 3.2 in Q3/17 and 3.0 forecast.
  • Personal Consumption (%qoq annualised): 3.8 v 2.2 in Q3/17 and 3.7 forecast.
  • Core PCE ($qoq annualised): 1.9 v 1.3 in Q3/17 and 1.9 forecast.

 

Eurozone – Q4 GDP and inflation numbers are due Tuesday/Wednesday with expectations for robust output growth numbers (+2.7%yoy v +2.8%yoy in Q3/17) and a relatively modest reading of consumer prices changes (+1.3%yoy v +1.4%yoy in December).

 

Germany – Five year bond yields turned positive for the first time since late 2015 this morning amid improved economic growth outlook in the region and strong performance recorded by riskier equities.

 

UK – The EU counterparts to Brexit negotiations are demanding the UK to obide by the bloc’s laws “as if it were a member state” during a transition period starting in Mar/19 and lasting for 20 months.

  • Unconditional instructions are reported to have caused discontent among pro-Brexit Conservatives and are risking complicating and delaying any transition deal.
  • The pound is off 2.1% from highs of 1.43 against the US$ recorded on Thursday following a strong run recorded since the start of the year.

 

Miners hit as Congo Parliament approves reforms to mining legislation

  • Democratic Republic of Congo’s parliament adopted a major reform of the country’s mining legislation last week which will see a raise in royalty rates on key commodities including copper, cobalt and gold. According to Patrick Kakwata, the president of the National Assembly’s natural resources commission, and Evariste Mabi Mulumba, the president of the Senate’s economy and finance commission, the bill was accepted on the 27th Jan. and will now be sent to President Joseph Kabila to be signed into law. A Congolese government spokesman said the new taxes would give the country’s 80 million people “a fair share” of its natural resources.  
  • The move has been opposed by major miners, including Glencore, as the change of legislation is expected to suppress the supporting environment and detract foreign investment. Further to the hike in royalty payments, the bill introduces a profit windfall tax and is expected to double the state’s free stake in new project to 10%, having serious consequences on future project economic viability.
  • As demand from electric vehicles is expected to intensify, and the fundamental battery metal cobalt supply is dominated by DRC production, concerns are growing over the security and price of long-term output.

 

Currencies

US$1.2443/eur vs 1.2469/eur yesterday  Yen 109.25/$ vs 108.98/$  SAr 11.871/$ vs 1.842/$  $1.424/gbp vs $1.423/gbp  0.809/aud vs 0.808/aud  CNY 6.328/$ vs 6.320/$

 

Commodity News

Precious metals:         

Gold US$1,353/oz vs US$1,356/oz last week

  • Chair Janet Yellen’s concluding Federal Reserve policy meeting this week is expected to bring investors insight into the future path of monetary policy as gold steadies after posting its sixth weekly gain in seven. Bullion for immediate delivery topped $1,366.15 last week, the highest since August 2016 as the dollar slumped on conflicting comments on the US currency from President Donald Trump and his top officials.
  • While Fed officials aren’t expected to raise interest rates at Jan. 30-31st meeting, Goldman Sachs Group Inc. sees slightly hawkish upgrade of language. “A hawkish statement will likely put a dampener on the gold price. Gold continues to remain the preferred store in value in comparison to other options such as the cryptocurrency, bitcoin. US dollar weakness and continued uncertainty about global trade will limit any fallout”.
  • The dollar index continues to hover near three-year lows in early trading as Asian shares stretch their recent bull run amid upbeat corporate earnings and strong global economic growth, while more rumblings from the White House about ‘unfair’ trade practices keep the US dollar on the defensive.

   Gold ETFs 72.5moz vs US$72.5moz last week

Platinum US$1,020/oz vs US$1,020/oz last week

Palladium US$1,097/oz vs US$1,101/oz last week

Silver US$17.41/oz vs US$17.52/oz last week

           

Base metals:   

Copper US$ 7,099/t vs US$7,126/t last week

Aluminium US$ 2,240/t vs US$2,234/t last week

Nickel US$ 13,730/t vs US$13,800/t last week

Zinc US$ 3,473/t vs US$3,453/t last week

  • Zinc spot has soared to the highest level in more than a decade as inventories on the London Metal Exchange slump to 2008 lows. Supplies have consistently dwindled amid the closure of several large mines and sweeping environmental reforms that have curbed Chinese output, driving LME zinc as much as 3.1% higher to $3,584/t, its highest since July 2007, while gaining 3.3% to 27,055 yuan on the Shanghai Futures Exchange.
  • “It seems a supply squeeze is taking place on the LME, given stockpiles are so low and canceled warrants are rising”, according to SMM Information & Technology Co. analysis, while it is expected a big trader is behind the squeeze, aiming to drive the market into a deeper backwardation in order to profit from higher immediate prices. The spot zinc premium has risen to $41.50 in recent months over the three-month contract.
  • As the greenback steadied near a three-year low against a basket of currencies last week, other metals have also received a lift while benefiting from the surge in zinc prices, with LME nickel gaining as much as 2.9% to $14,040/t to its highest since May 2015.

Lead US$ 2,604/t vs US$2,600/t last week

Tin US$ 21,685/t vs US$21,290/t last week

           

Energy:           

Oil US$70.2/bbl vs US$70.4/bbl last week

  • Hedge funds and money managers raised their bullish bets on US crude to fresh record highs, with prices remaining at three-year peaks curtesy of continued declining inventories. The speculator group increased its combined futures and options positions in New York and London by 7,612 contracts to 549,602 in the week Jan. 23rd, according to US Commodity Futures Trading Commission. Drill
  • Meanwhile, US energy companies ramp up the number of oil rigs, adding 12 additional rigs last week, the biggest weekly increase since March, as supportive crude prices hover near their highest levels since 2014. Drillers boosted the oil rig count to 759, the highest level since September, according the General Electric Co’s Baker Hughes energy services.

Natural Gas US$3.481/mmbtu vs US$3.487/mmbtu last week

Uranium US$23.00/lb vs US$23.00/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.9/t vs US$73.9/t

  • Iron ore futures fall to six-week lows, contracting 0.9% to end at 514.5/t on Dalian Commodity Exchange as Mills’ demand is expected to slow. The most-active contract fell 4.5% last week to its lowest close since Dec. 15th, while nationwide rebar holdings have climbed for 6 weeks to the highest since November according to Steelhome Data.
  • While current steel inventory still seems relatively low, its sufficient to use over a number of days despite the winter restrictions in place”, according to Sinosteel futures, while “the pace at which mills would require iron ore will slow”.

Chinese steel rebar 25mm US$660.7/t vs US$661.5/t

Thermal coal (1st year forward cif ARA) US$87.8/t vs US$87.0/t

Premium hard coking coal Aus fob US$213.7/t vs US$213.7/t

Anglo American continues coal exit with $71m sale

  • Anglo American has agreed to sell its New Largo coal project in South Africa for approximately $71m marking its exit from South African domestic coal mining.
  • The miner announced a sweeping asset-sale program in February 2016 following a plunge in commodity prices, and outlined plans to focus on diamonds, platinum and copper.
  • The transaction is subject to conditions including regulatory approvals in South Africa and is expected to close in the second half of 2018.
  • It is ironic that Anglo American are selling South African coal assets at a time when Cyril Ramaphosa is poised to push out President Zuma and clean up much of the corruption which has become endemic in the ruling party.
  • It is believed that ESCOM may have been used by some for corrupt practices which may have had a knock-on impact on consumers and local coal producers.

 

ArcelorMittal and Nippon steel joint bid for Essar steel

  • ArcelorMittal and Nippon Steel, two of the world’s largest steel companies in the world are planning to put joint bid in for bankrupt Essar Steel
  • Both ArcelorMittal and Nippon Steel had initially planned to submit separate bids for Essar Steel, with Tata Steel and Vedanta Resources also contenders in the bidding for the steel maker

 

Other:  

Tungsten APT European US$315-320/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$79,750.0/t vs US$75,250.0/t

  • Supply disruptions at the Ambatovy mine in Madagascar this month reinforce concerns over global output, driving the metal to its highest levels since July 2008.

 

Company News

Herencia Resources (LON:HER) 0.07p, mkt cap £7.2m – High grade copper intercepts in Pastizal drilling

  • Herencia Resources has announced a number of high grade copper assays from its reverse-circulation drilling programme at the Pastizal / Picachos lease in Chile.
  • Initial drilling “of 25 holes for 2,400 metres demonstrated that the copper mineralised zones within the limestone and chert were near surface when compared with the copper zones identified at the adjacent Picachos lease.”
  • Initial indications are that the results “suggest further expansion of the zones is possible at depth and along strike.”
  • The Picachos-Pastizal exploration area is located on the western part of the Andacollo Copper-Molybdenum porphyry which has produced several millions tonnes of copper and significant silver over, at least, the last 30 years.
  • Among the results highlighted in today’s announcement are:
    • 4m at an average grade of 1.47% copper from a depth of 31m in hole PZ17051;
    • 4m at an average grade of 2.72% copper from a depth of 52m in hole PZ17057 which also contains a second intersection of 3m at an average grade of 4.13% copper from a depth of 59m
    • 4m at an average grade of 2.21% copper from a depth of 16m in hole PZ17063 which also contains a second intersection of 5m at an average grade of 1.69% copper from a depth of 32m and a third intersection of 2m at an average grade of 3.03% copper from a depth of 60m;
    • 3m at an average grade of 1.94% copper from a depth of 19m in hole PZ17064;
    • 3m at an average grade of 1.39% copper from a depth of 15m in hole PZ17065 and
    • 3m at an average grade of 1.44% copper from a depth of 32m in hole PZ17066
  • The copper silver mineralisation is reported to remain open to the east “where the extension and continuity of South East-North West faults from Picachos to the south need to be tested”.
  • Commenting on the results, Non-Executive Chairman, Peter Reeve, said “Herencia has completed its first RC drill program at the Pastizal project which identified high grade copper mineralisation over a 2-kilometre strike zone and a high success rate per hole.  We have an enviable ground position in an established copper belt and within 10 km of the Teck Resources Andacollo open pit copper mine processing up to 20 million tonnes per year at around 0.4% copper."

Conclusion: The initial results from Pastizal have shown encouraging results in close proximity to an established large scale mine. We look forward to further news as the company follows up the initial drilling with further exploration.

 

Metminco* (LON:MNC) 2.4p, Mkt Cap £3.1m – Miraflores Plan of Work submitted

  • Metminco has submitted its Plan of Work to the Colombian Mining Agency for the development of the Miraflores underground gold mine in Colombia.
  • The Plan of Work is a key approval, however, the company points out that, currently, “The critical path for the development of the project remains the completion of the EIA including the validation of the impacts on the local communities and the gaining of the social licence for the project.”
  • Completion of the EIA has been delayed by 4 months as a result of “Changes to the Terms of Reference including further water monitoring requirements” but, Managing Director, William Howe, confirmed that “Although further testing of water for the EIA will delay the submission of the document to the CARDER for approval, the Company is still on track to have all of its approvals for mine development during 2018.”

Conclusion: The Miraflores Work programme has been submitted for approval and, despite delays to the Environmental Impact Assessment, the Company remains confident that all required approvals for mine development will be forthcoming during 2018.

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

 

Petra Diamonds (LON:PDL) 65p, mkt cap £346m – FY 2018 production guidance reduced

  • Petra Diamonds reports that it is reducing its diamond production guidance for the year to 30th June 2018 to 4.6-4.7 million carats from the previously announced 4.8-5.0m cartas. The lowering of expectations reflects a reduction in the expected grades at the Cullinan mine as well as the impact of industrial action in South Africa which occurred during Q1.
  • The guidance revision follows record six-monthly production during H1 to 31st December 2017 of 2,208,056 carats; in line with the 2.2-2.3m carats guidance and 10% higher than the 2,015,087 H1 production in FY 2017.
  • Production at the Cullinan mine, where throughput at the new plant is reported to be ramping up well, is likely to encounter lower grades  and although the smaller stones are recoverable, “Petra’s initial assessment that it would be uneconomic to do so and would not be in line with the Company’s strategic focus on value rather than volume production.”
  • On the positive side, however, The Cullinan mine has recovered five diamonds larger than 100 carats in size during H1. Although these were of “poor quality” they include a 574.15 carat diamond “being the largest stone recovered by Petra at Cullinan to date”.
  • In addition to the issues at Cullinan, Petra’s Williamson mine in Tanzania has been adversely affected by the Government’s action to block the export of a parcel of approximately 71,000 carats.
  • Operationally, Williamson’s production increased by 64% to 174,834 carats as a result of higher throughput and a 40% increase in grade to 7.0cpht. Among the stones recovered were two “of record size … a poor quality stone of 461.5 carats and a near gem stone of 396.1 carats. The largest diamond previously recovered bat the mine was 260 carats in 1959”.
  • The company reports that, following a dip in diamond prices between July and October 2017, there is a recovery underway with “higher average values … realised at Finsch, Cullinan and Koffiefontein further to the improved product mix associated with higher production levels of undiluted ore and lower contribution of tailings carats.”
  • An increased marketing budget by the Diamond Producers Association is expected to expand marketing efforts in the US “as well as supporting its first full year investment in India … as well as its commencement of marketing in China in April 2018”. Overall, Petra “expects market conditions to remain stable in H2 FY 2018”.
  • The company reports that “Net debt of US$644.7 million (30 September 2017: US$613.8 million) is at the high end of expected levels as it was impacted by the labour action and working capital locked up in the block Williamson parcel”. “Net Debt for 30 June 2018 is expected to fall to US$560-600 million.”
  • As previously guided to the market, Petra expects to be in breach of the 31 December 2017 EBITDA related covenant measurement ratios associated with its banking facilities; the Company has therefore commenced formal discussions with its lender group, evaluating both the December 2017 and June 2018 measurements, bearing in mind the risks to covenant compliance associated with potentially not selling the blocked Williamson parcel and the potential further strengthening of the Rand. These discussions are expected to be concluded during Q3 FY 2018. Petra remains confident that the lender group will continue to support the Company as it progresses towards its targeted production profile.”
  • Commenting on the decision to forego the recovery of smaller stones at Cullinan and the resulting expected decline in volumes, CEO, Johan Dippenar, commented “This has led to lowered production guidance for FY 2018, but does not materially impact our expected revenue, further to the positive uplift in Cullinan's average value per carat. Likewise, we have been very encouraged by the recovery of large diamonds and other higher value single stones through the new Cullinan Plant to date, which was in line with our expectations that the incidence of such stones would increase as they are historically associated with the Western side of the orebody.”

Conclusion: Petra Diamonds has faced a difficult half year impacted by industrial action, a stronger Rand, reduced production at Cullinan as well as the embargo on exports from its Williamson mine in Tanzania.  Even so, as its net debt is projected to decline, it expects continuing support from its lenders and operationally the recovery of large diamonds at Cullinan and the largest diamond for more than sixty years at Williamson offer the prospect of enhancements to revenue in future.

 

 

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Mon, 29 Jan 2018 10:42:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29299/morning-view-us-fomc-and-payrolls-to-dominate-dollar-and-metals-this-week-29299.html
Morning View - Vanadium tipped to peak battery metal performance on new power demand http://www.proactiveinvestors.co.uk/columns/sp-angel/29290/morning-view-vanadium-tipped-to-peak-battery-metal-performance-on-new-power-demand-29290.html Amur Minerals* (LON:AMC) – On course for a mineral resource upgrade
Bluebird Merchant Ventures* (LON:BMV) – Competent Persons Report indicates >1moz of gold at Gubong
Planetary Resources (U.S. private) – launches Arkyd-6  spacecraft into orbit
Serabi Gold (LON:SRB) – Palito technical report
SolGold* (LON:SOLG) – Acceleration of Alpala drilling programme after maiden resource estimate


Commodity prices boosted by tumbling dollar
• The falling dollar and hopes of a further boost to the global economy drove continue to drive commodity prices higher, sending the Bloomberg Commodity index to a 2 year high and extending gains seen since mid-December to >10%.
• US Treasury secretary said that weaker dollar was ‘good for trade’ and added to bullish sentiment in raw materials, sending gold, oil and metals to multiyear highs
• Industrial metals gained ground, with the London Metal exchange index of six metals rising 2.5% to a new five-year high

Vanadium price rise makes vanadium the best performing battery metal
New demand to come through from new China 100MW (500MWh) vanadium redox battery instillation
Vanadium price US$59.75/kgV vs ~US$25.25/kgV yoy
• The irony about vanadium is that its performance is not down to new demand for vanadium redox batteries just yet.
• Vanadium demand has grown through the better application of rules in China specifying how much vanadium should be contained in certain grades of steel, namely rebar which is used for the reinforcement of concrete and as such is contained in the vast majority of construction project. Steel manufacturing, still accounts for >90% of demand today though this may change going forwards if vanadium redox batteries take off.
• China has cut back on its worst polluting industries restricting production of vanadium from blast furnace slag while Chinese construction continues to grow.
• US construction has also taken off in recent months with higher prices seen in the US than China for some producers.
• The situation has caused Ferro-Vanadium prices to more than double over the past six months.
• While producers are working on increasing production we feel that production capacity is relatively constrained and it may take some time for the major South African producers to react to fill the supply / demand gap which appears to be opening up.
• Vanadium’s use as a battery metal is still very much in its infancy but trials suggest a new future for vanadium redox batteries and this may drive a very substantial increase in demand in future years.  For now it is demand for steel, in particular, rebar and tightening pollution regulations in China which may serve to hold prices at elevated levels.
• Vanadium Redox Batteries - The shift toward green energy is generating a substantial new market, where the metal in broadly incorporated within industrial-scale redox batteries, which help to even out daily cycles in peak energy output associated with sporadic renewable energy. Managing Director at Pala Investments Ltd. notes “energy-storage technology itself isn’t new, but we’re seeing this moment where a company like Tesla comes along and changes the way people think about its potential”. Advantages to vanadium-flow batteries favour widespread adoption in stationary storage and large-scale grid applications where energy-density isn’t critical, with batteries lasting longer while sustaining performance over multiple charge/discharge cycles (cyclability). The predominantly vanadium batteries are also easy to recycle.
• Emerging vanadium-flow batteries are being tipped as an alternative to lithium-ion in China, with strong government promotion of the technology and among projects under construction is a backup facility in Dalian expected to be twice the operating capacity of Tesla’s plant in Australia.
• Vanadium-flow battery makers are, however, vulnerable to steel movements because they are reliant on the single-niche material. Prices have already received a boost from China, where authorities are demanding stronger steel for buildings in earthquake-prone areas, and growing demand across both sectors may start a scramble for new supply.

SP Angel Mining team will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February
• The event is hosting 85 mining companies and ~400 investors at the historic Welgemeend Farm in the Gardens district of Cape Town
• >1,500 meetings have been organised with an average of 18 pre-arranged meetings per company
• We look forward to meeting investors and companies at the 121 event or by appointment thereafter.
• See:  https://www.weare121.com/121mininginvestment-cape-town/

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report
SP Angel analysts ranked:
• 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc
Overall SP Angel ranked:
• 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4
We are immensely proud of our team’s price forecasting performance against the world’s major investment banks and broking institutions
See MB APEX report link for further details

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

• https://www.research-tree.com/blogs/research-tree/the-annual-research-tree-analyst-rankings-2017
• ‘Research Tree’ see top demand in SP Angel ‘Resource Sector’ research notes according to investor downloads

Dow Jones Industrials  +0.54% at 26,393
Nikkei 225   -0.16% at 23,632
HK Hang Seng   +1.53% at 33,154
Shanghai Composite    +0.28% at 3,558
FTSE 350 Mining   -0.09% at 19,066
AIM Basic Resources   +0.57% at 2,719

Economics
US – The US$ dollar is range bound this morning as markets assess differing comments among US officials on the national currency.
• Trump stance on the US$ who is expecting “ultimately” the US$ to increase reversed comments by Steven Mnuchin who suggested a weak dollar would benefit the US.
• First estimates of Q4 GDP are due later today with market expectations for growth to slowdown slightly in the final quarter but register strong around 3% annualised growth.
• Q4 GDP (%qoq annualised): 3.0 v 3.2 in Q3.

China – Industrial production growth accelerated to the strongest in more than six year in 2017 on the back of government stimulus and improved pricing as authorities continue to reduce overcapacity in selected industries.

  •  Profits climbed 21%yoy in 2017, more than double the pace reecorded in 2016, with 37 of 41 large scale industrial companies posting increases in annual profits, three recording profits drops and one seeing no change.


ECB – The central bank kept rates at record low and reiterated its commitment to continue with bond purchases until September this year at least and expand the programme if necessary.

  • Separately, Mario Draghi highlighted that recent appreciation in the euro presented risks to growth adding that it was “source of uncertainty which requires monitoring”.
  • Improving economic momentum has “strengthened further out confidence that inflation will converge to close to but below 2%”.
  • In response to hawkish statement expectations, Draghi said “discussion hasn’t really started” on completing the assets purchasing programme as “there hasn’t been much of a change in outlook, except a strengthening of the economy”.
  • While ECB President suggested that an interest rate hike is very unlikely this year the euro continued stronger against the US$ crossing the 1.25 level.


UK – GDP growth slowed to 1.8% last year marking the slowed pace in five years as strong performance from the manufacturing sector has been outpaced by a slowdown in the services industry output.

  • “Despite a slight uptick in the latest quarter, the underlying picture is of slower and uneven growth across the economy,” the ONS said commenting on numbers.
  • Growth is expected to further slowdown this year to 1.4%, as living standards remain under pressure from the sterling-induced increase in inflation and as companies delay investment.
  • Mark Carney said the economy is estimated to be 1% smaller due to Brexit with the gap to expand to 2% by the end of the year as businesses are holding back investments ahead of the trade the government is able to secure with the EU.
  • BoE Governor highlighted the UK could “recouple” with the global economy, which is enjoying its fastest growth since the financial crisis.
  • Philip Hammond argued in favour of a soft Brexit deal causing a backlash from Eurosceptic Conservatives and the government which put out a separate statement.
  • Commentators argued Hammond comments were not in line with the PM’s Lancaster House speech or Conservative manifesto.
  • The soft Brexit speech at Davos has also led to increased speculation at Westminster of a possible challenge to Mrs May’s leadership.
  • The government’s policy is that we are leaving the single market and the customs union,” the press release read; “whilst we want a deep and special economic partnership with the EU after we leave, these could not be described as very modest changes.”
  • Q4/17 GDP (%qoq): 0.5 v 0.4 in Q3/17 and 0.4 forecast.
  • 2017 GDP (%yoy): 1.8 v 1.9 in 2016.


France – Business confidence is running close to the highest level in 10 years on strong growth momentum and iomproving employment prosepcts.

  • Insee headline business climate index dropped two points to 110 in January, down from a decade high of 112 in December and well above a long term average of 100.
  • The employment gauge remained steady at 109, the strongest level since Aug/11.


Currencies
US$1.2469/eur vs 1.2412/eur yesterday  Yen 108.98/$ vs 109.12/$  SAr 11.842/$ vs 11.917/$  $1.423/gbp vs $1.426/gbp  0.808/aud vs 0.808/aud  CNY 6.320/$ vs 6.334/$

Commodity News
Precious metals:         
Gold US$1,356/oz vs US$1,359/oz yesterday

  • Early trading boosted gold towards its sixth weekly gain in seven as the metal hit $1,366.15 on Thursday before retreating on comments by President Donald Trump opposing Treasury Secretary Steven Mnuchin’s endorsement of a weaker US currency. The Bloomberg Dollar Spot Index remains on track for its seventh straight weekly drop, the longest stretch since 2010, before Trump commented that his country was “becoming so economically strong again, and strong in other ways”, and foreseeing “the dollar is going to get stronger and stronger and ultimately I want to see a strong dollar”.
  • Market participants will be monitoring Trump speaking in Davos at the annual World Economic Forum, while analysis broadly favours a continuing gold rally as expectations are that “the greenback (will) be plagued by US geopolitical uncertainties and rosier prospects on G10 currencies for now”.
  • GFMS analysis at Thomson Reuters see gold breaking above $1,500/oz this year for the first time since its 2013 crash, despite “the gold retracement not threaten long-term positions whose view are cemented around a probable equity market correction and an extension of the US dollar downtrend”, APAC trading head at Oanda.
  • Physical demand is expected to be constrained as prices rise, with Chinese demand having historically peaked, while Indian consumption matches previous year’s levels.

   Gold ETFs 72.5moz vs US$72.5moz yesterday
Platinum US$1,020/oz vs US$1,016/oz yesterday
Palladium US$1,101/oz vs US$1,109/oz yesterday
Silver US$17.52/oz vs US$17.53/oz yesterday
           

 

Base metals:   
Copper US$ 7,126/t vs US$7,152/t yesterday

  • Reuters poll indicates slowing Chinese demand is expected to weigh on overcooked base metal prices, despite broad supply threats on wage focused striking action and pollution-linked shutdowns across smelters suggest diminishing metal output.

Aluminium US$ 2,234/t vs US$2,255/t yesterday

  • China’s swelling aluminium stocks are expected to be dealt a blow with looming US-China trade showdown discouraging growing global trade. Despite China closing significant ‘illegal’ capacity and smelters across regions surrounding Beijing curtailing output to comply with winter environmental restrictions, inventories registered with the Shanghai Futures Exchange (ShFE) continue to build. Levels surged by 653,411 tonnes over 2017, with an additional 30,000 tonnes bringing fresh record highs of 783,759 tonnes last Friday.
  • Chinese aluminium is well established in the US, accounting for 31% of overseas purchases of the metal in semi-finished form. Trump is currently weighing the findings of the Section 232 study into imports submitted by Commerce Secretary Wilbur Ross, with Chicago-based Century Aluminium Co, calling for a 20% tariff on supply from most countries.

Nickel US$ 13,800/t vs US$13,625/t yesterday
Zinc US$ 3,453/t vs US$3,458/t yesterday
Lead US$ 2,600/t vs US$2,645/t yesterday
Tin US$ 21,290/t vs US$20,915/t yesterday

           
Energy:      
     
Oil US$70.4/bbl vs US$71.0/bbl yesterday
Natural Gas US$3.487/mmbtu vs US$3.534/mmbtu yesterday
Uranium US$23.00/lb vs US$23.15/lb yesterday
           
Bulk:
   
Iron ore 62% Fe spot (cfr Tianjin) US$73.9/t vs US$72.8/t

  • Volumes of Iron ore stocks held across mills “has risen significantly, suggesting that future demand will weaken”, following an extensive buying spree. Findings from Huatai Futures Co. suggest that steelmakers have built up sufficient quantities of the raw materials, with “the level of holdings sustaining them for quite a long period”. Mills have significant purchasing options as stockpiles across Chinese ports rose to record levels, with miners adding cargoes equivalent to 50 days’ of imports or 154.4 million tonnes according to Shanghai Steelhome E-Commerce Co. data.
  • Meanwhile steel sentiment falls to the lowest reading since June 2016, as the S&P Global Platts China Steel Sentiment Index slumped to 21.95 out of 100 points in January.

 

Chinese steel rebar 25mm US$661.5/t vs US$660.1/t - Chinese steel mills win domestic iron ore pricing in some 2018 contracts

  • Chinese steelmakers succeeded in a push to include domestic iron ore price indices in some 2018 annual supply contracts with global miners, as worlds top buyer boosts its clout over pricing of major commodities
  • Move marks a major step in the evolution of iron ore pricing after the industry abandoned decades-old closed door talks between miners and steelmakers in 2010 in favour of a daily price index
  • While it’s not expected to have a big impact on prices, it will boost the confidence of Chinese buyers that prices reflect domestic demand and is in line with China’s desire to increase its influence over commodity pricing

Thermal coal (1st year forward cif ARA) US$87.0/t vs US$85.5/t - China’s 2017 coal imports from Russia surge after North Korea ban

  • Customs data showed China’s coal imports from Russia and Mongolia soaring in 2017 as the two countries filled a supply gap caused by trade sanctions on North Korea
  • Arrivals from Russia surged 36.3% to 25.3 million tonnes and imports from Mongolia were up 27.6% to 33.58 million tonnes
  • Australia still largest supplier, as it has lower pollutants such as sulphides and ash and a higher energy value
  • Premium hard coking coal Aus fob US$213.7/t vs US$213.7/t


Other:  
Tungsten APT European US$310-318/mtu vs US$310-318/mtu last week
Cobalt LME 3m US$79,750.0/t vs US$75,250.0/t


Company News
Amur Minerals* (LON:AMC) 7.3p, Mkt Cap £46.3p – On course for a mineral resource upgrade

  • The Company received analytical data for 2017 drilling programme results from SGS Minerals confirming previous ASL numbers.
  • Following the validation of the data by a second independent laboratory, the management engaged RPM Global to use results to update the latest Mineral Resource Estimates (Feb/17).
  • SGS assays returned nickel grades of 0.94% versus 0.96% estimated by ASL originally (cut-off grade 0.40% Ni).
  • Copper grades in samples came in at 0.23% Cu, in line with ASL results.
  • Updated resource statement would update IKEN and KUB deposits and include the mineral inventory intersected along the 1,900m long area in between.
  • “The Company anticipates a substantial increase to the MRE of Feb/17,” Amur concluded in the announcement.

*SP Angel act as Nomad and Broker to Amur Minerals

Bluebird Merchant Ventures* (LON:BMV) 3p, Mkt Cap £5.5m – Competent Persons Report

  • BlueBird Merchant Ventures report today on the Competent Persons Report on the Gubong gold mine in South Korea.
  • Resource: The good bit is that the Competent Person reckons the mine still has potential for >1moz of gold and that the satellite orebodies could contain another 300,000oz.
  • Independent verification: This is great news as it provides a degree of independent verification and gives us greater confidence in the project going forward.
  • The report goes some way to proving the theory that the mine was closed due to low gold prices of <US$40/oz at the time and not through any lack of gold resource.
  • The highly experienced team have been relatively quick to identify historic portals, reopen the mine and gain access.
  • Gubong has nine tenement areas granted to Bluebird covering an area of ~25sqkm. More than nine stacked gold veins were partially mined over the life of the mine indicating to us that there is much more to explore here and that the gold resource at Gubong may exceed the 1moz gold resource estimate mentioned today.
  • The report goes on to recognise the potential to delineate an immediate resource without the need for expensive exploration as well as the potential of reopening the historic Gubong mine.
  • The Competent Person is for the report is Geoff Boswell who has visited the Gubong project at the end of last year and has formerly managed exploration teams and technical programs and has formerly worked at MRL Gold Inc (Red Mountain Mining Ltd), OceanaGold Ltd, Crazy Horse Resources and Copper Development Corp.
  • Mining: According to the report Bluebird the re-entering of the mine will allow access to the mining faces and unstoped remnant ore that may contain economic ore at today's gold price.
  • Tailings: the report highlights an area for outlines the potential to quickly evaluate a tailings disposal area.
  • Metallurgical test work has started and should give figures for expected recovery rates better economic evaluation.
  • Economic Evaluation Study done in 2011 estimated a potential cash flow of >USD200m in the first 8 years.
  • Throughput: treatment of 2.7mt
  • Grade: 7g/tGold production: >500,000oz gold

• Assumed gold price: A$1,350/oz. 
• Regulatory climate: in South Korea is said to be very supportive for mining with the government providing incentives including funding environmental protection measures. 
• Approvals: Management expect to receive formal approval to expand and reopening the Gubong mine in Q2.
• Funding: Bluebird also report that they have drawn down a first £150,000 of funding from one of their existing substantial shareholders.
• See company website for further details www.bluebirdmv.com
*SP Angel act as broker to Bluebird Merchant Ventures

Planetary Resources (U.S. private) – launches Arkyd-6  spacecraft into orbit
• Space asteroid explorer Planetary Resources announced this week that its Arkyd-6  spacecraft launched on January 12th 2018 had gone into orbit.
• The team is now receiving data from the craft which is now tested for delivery infrared images which can capture the presence of water and hydrated materials.
• Planetary Systems note that there are 16,000 near-Earth asteroids that it sees as more accessible than the moon. The first missions are to seek out asteroids with water.
• The company raised $21m of Series A funding in May 2016. Investors include Larry Page (Google), Eric Schmidt (Alphabet) and Richard Branson (Virgin).
• Planetary Systems is also developing the Ceres System of 10 Arkyd satellites able to provide Earth observational Data – this giving a supporting revenue stream
• We can’t wait for the first Anti-Asteroid Mining  Groups to get going. Maybe Green-Space, Friends-of-the-Asteroids, Client-Asteroid. Maybe there could be Asteroid Economic Empowerment to help to enrich a few historically disadvantaged Asteroids.

Serabi Gold (LON:SRB3.5p Mkt value £24.6m – Palito technical report

• Serabi Gold report the filing of its technical report on the Palito mine with the Canadian SEDAR archive. The highlights of the updated reserve/resource report, prepared by the respected international consultants, SRK, to NI43-101 standards have been announced previously.
• The report details a proven/probable ore reserve of 613,000 tonnes at an average grade of 7.99 g/t gold and 0.37% copper within an overall measured/indicated resource of 717,000 tonnes grading 11.74g/t gold and 0.59% copper at Palito. The mineral reserves, which are reported at a cut-off grade of 3.7 g/t gold include external mining dilution and mining losses which dilutes the in situ resource grade.
• At the nearby Sao Chico operation, the report shows a proven and probable reserve of 90,000 tonnes at an average grade of 8.43 g/t gold at a cut-off grade of 3.45g/t gold within a measured/indicated resource of 82,000t at a grade of  13.7 g/t. Slightly unusually, therefore, the reserve tonnage exceeds the resource tonnage a feature we ascribe to the additional tonnes of mining dilution.
• Commenting on the study, Mike Hodgson, CEO, pointed out that “it is a very healthy position for an underground, vein mining operation to have over four years of mineral reserves defined.  This is a reflection of the investment that the Company has made in ensuring that exploration and development is completed well in advance of production, thereby generating the levels of geological data required to define new mineral resources and mineral reserves.”
Conclusion: Serabi Gold’s Palito/Sao Chico operation has established a solid reserve resource base to underpin production. We look forward to the company’s plans to integrate the recently acquired Coringa deposit in due course.

SolGold* (LON:SOLG) 23.7p, Mkt Cap £401m – Acceleration of Alpala drilling programme after maiden resource estimate

(SolGold own 85% of Cascabel in Ecuador)
• Solgold reports that it now has twelve operational drilling rigs working at Alpala where earlier this month the company published a maiden resource estimate of 1.08bn tonnes at an average grade of 0.4% copper and 0.3g/t gold (0.6% copper equivalent).
• Work is being targeted at “Significant Mineral Resource extensions … along the open margins of the deposit and at depth”.
• The company reports that assay results from hole 33, which we understand was directed at the Alpala Central target and had previously been reported to have intersected 977m of visible mineralisation between 585m and 1562m depth, has shown an 824m long mineralised intercept at an average grade of 0.54% copper and 0.42g/t gold.
• The exact depth of the assay results is not reported, however, the broader zone includes higher grade portions of 576m averaging 0.61% copper and 0.51 g/t gold and 206m averaging 0.75% copper and 0.92g/t gold although the depth of these intersections is unclear or whether the 206m long section is contained within or in addition to the 576m long portion.
• Currently, three holes, 33-D1, 36 and 41 are drilling within mineralisation with and a further 9 holes “have yet to reach target depth”.
• Hole 33-D1 which we imagine is a daughter hole of hole 33 reported above “has drilled across the orebody from northeast to southwest, intersecting intensely mineralised diorite porphyry from 1042m to 1161m and is continuing onwards to test for extensions to the west of a late-mineralisation "D20" diorite dyke.  Assay results are pending.”
• “Hole 36 has intersected an intensely mineralised diorite intrusion and is expected to extend the Mineral Resource down dip and to the northeast” and “Hole 41, drilled from the northeast side of the deposit and collared near the Parambas anomaly, has intersected very shallow epithermal (low temperature) mineralised vein sets between 60m and 100m depth.”
• Drilling is expected to commence during the March quarter at the Aguinaga prospect which is located to the north-east of Alpala and is one of the 15 high priority targets the company has identified for follow up exploration within the wider Cascabel licence area.
• The arrival of the additional drilling equipment has significantly reduced drilling costs and the company reports that “The 20,000m drilled since November 2017 has been completed at a cost of $530/m.  This is the result of scale efficiencies, use of directional drilling technology (Devico) and increased rig supervision.  To date, the use of 'daughter holes' off a single 'parent' hole has saved over 12,000m of drilling.”
• Commenting on the impact of drilling efficiencies on costs, CEO, Nick Mather, said “it is pleasing to see that the new track-mounted rigs are already performing beyond expectations, delivering up to 60 metres/day each.” With plans to drill in excess of 120,000m this year we estimate that the reduction in costs from around $1100/m to $530/m represents a huge saving in the order of US$68m.
Conclusion: The company’s planned ramp up of drilling to deliver 120,000m during 2018 should enable regular upgrades to the maiden resource for Alpala and allow testing of additional targets within the wider Cascabel project, including Aguinaga where drilling is expected to start during the March quarter. Substantial drilling cost savings have been achieved through improved efficiencies, greater supervision and the implementation of additional more sophisticated techniques.
*SP Angel act as UK broker to SolGold and have acted as placing agent in relation to the recent £45m new share issue

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Fri, 26 Jan 2018 11:47:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29290/morning-view-vanadium-tipped-to-peak-battery-metal-performance-on-new-power-demand-29290.html
Morning View . US import tariffs fuel concerns over global trade and boost gold spot http://www.proactiveinvestors.co.uk/columns/sp-angel/29279/morning-view-us-import-tariffs-fuel-concerns-over-global-trade-and-boost-gold-spot-29279.html Altus Strategies (LON:ALS) 8.5p, Mkt Cap £9.2m – Liberia exploration update

SolGold* (LON:SOLG) 25p, Mkt Cap £424.1m – New copper mineralisation discovered at Timbara

Strategic Minerals* (LON:SML) 2.017p, Mkt Cap £26.7m – Exploration results from Hanns Camp

Tri-Star Resources* (LON:TSTR)  0.0375p, mkt cap £23.9m – Additional investment in SPMP

Bushveld Minerals* (BMN) BUY – Target price rises to 18.28 from 14p – Vanadium price rise more than offsets SA rand strength (correction)

 

SP Angel rank No 1 in Copper price forecasting in the Q4 2017 MB APEX report

SP Angel analysts ranked:

  • 1st for copper, 1st = for gold, 2nd for Palladium, 3rd for Coking Coal, 5th for Zinc

Overall SP Angel ranked:

  • 3rd in Q4 Precious Metals forecasts in Q4, 4th in Base Metals forecasting in Q4

We are immensely proud of our team’s price forecasting performance against the world’s major investment banks and broking institutions

See MB APEX report link for further details

 

China expected to ramp up its battle against pollution

  • Beijing acting mayor expects its battle against air pollution to take time and will be very tough to win despite recent improvements. The nation has been combatting emissions and cleaning its notoriously smoggy air through steps such as pushing households and factories to switch away from coal to cleaner fuels like natural gas, while across mills industrial and base metal output has been curbed across hazardous regions during the winter heating period.
  • Beijing has experience short-term success, reducing annual average level of breathable particulate matter (PM2.5) to 58 micrograms per cubic metre in 2017 and beating its target set by the State Council in 2012. However, the nation will be required to strengthen its controls on emissions to reach its official PM2.5 standard of 35 micrograms and the recommended level of no more than 10 micrograms set by the World Health Organisation.

 

121 Conference, Cape Town – 5-6 February 2018

SP Angel Mining Analysts will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February

  • We look forward to meeting investors and companies at the 121 event or by appointment thereafter.

 

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

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FTSE 350 Mining

 

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2,728

 

Economics

US – The US$ index is below the 90.0 level for the first time since the end of 2014 on the back of concerns over US politics and protectionist trade policies enacted by the Trump administration.

 

Japan – The nation posted the strongest year in terms of exported goods since the financial crisis with robust growth recorded in December on the back of a recovery in the global growth momentum.

  • The value of exports climbed 9.3%yoy in December and 11.8%yoy for the full year, the most since 2010, to the highest level since 2008.
  • Volume wise exports were up 4.5%yoy in December and 5.2%yoy in 2017.
  • The PMI survey showed the economic growth accelerated at the start of the year as new orders continued to grow with jobs seen growing at a faster pace.
  • The report also pointed out higher inflation rates saying that “with a low rate of unemployment and sustained growth in official GDP data, inflationary pressures should continue to mount”.

 

Germany – Business sentiment at its highest since the start of the series in 2012, according to the latest set of PMI data.

  • The composite PMI came in close to last month’s six-and-a-half year high in January matching strong economic sentiment reading released yesterday.
  • The “economy maintained strong growth momentum at the start of 2018 thanks to the fastest rise in service sector business activity for nearly seven years... growth in the manufacturing sector was meanwhile below the record level seen at the end of 2017 but still among the highest seen over the past two decades,” the report read.
  • New orders continued to flow in with employment growth gathering pace reaching the strongest since early 2011.
  • Consumer prices growth has also picked up with selling prices for goods and services reported to have increased at the fastest rate in seven years.
  • Manufacturing PMI: 61.2 v 63.3 in December and 63.0 forecast.
  • Services PMI: 57.0 v 55.8 in December and 55.5 forecast.
  • Composite PMI: 58.8 v 58.9 in December and 58.5 forecast.

 

UK – The pound climbs above the 1.40 level against the US$ placing the currency among the strongest performers in 2018 amid a continuing donward trend in the US$ and expectations for a special deal for the UK leaving the EU.

  • Net long positions were at their highest level since 2014, according to the latest positioning data from the CFTC.
  • Employment unexpectedly jumped in the tree months to November with wages climbing at their fastest rate in nearly a year.
  • Jobs climbed by 102k during the period taking total employment to a record 32.2m against estimates for a drop of 13k.
  • Earnings increased by an annual 2.4%, the highest increase since Dec/16 and compared to a 2.3% in the three months to October; total pay including bonuses was up at 2.5% unchanged from the rate recorded in the previous three months.
  • “With the employment rate returning to a joint-record high and the number of vacancies setting a new record, demand for workers clearly remained strong… nevertheless inflation remains higher than pay growth and so the real value of earnings continues to declines,” ONS commented on numbers.

 

France – Business activity growth notched up in January coming a little chy of the six and a half year high recorded in November last year.

  • New orders advanced at their fastest pace since Apr/11 with growth especially strong in the service sector.
  • Like in Germany, businesses reported the fastest inflation rate since Aug/11 as firms passed on higher input costs onto consumers.
  • “The French private sector economy started 2018 where it left off last year, with the headline flash composite output PMI figure remaining among the highest recorded in the survey’s near 20-year history.
  • Services PMI: 59.3 v 59.1 in December and 58.9 forecast.
  • Composite PMI: 59.7 v 59.6 in December and 59.2 forecast.

 

Currencies

US$1.2322/eur vs 1.2236/eur yesterday  Yen 109.88/$ vs 110.94/$  SAr 12.027/$ vs 12.106/$  $1.405/gbp vs $1.395/gbp  0.803/aud vs 0.796/aud  CNY 6.388/$ vs 6.405/$

 

Commodity News

Precious metals:         

Gold US$1,346/oz vs US$1,337/oz yesterday

  • Gold extends its rally for the fifth consecutive session as investors add purchases through exchange-traded funds and support the biggest annual surge in seven years. The precious metal is up almost 3% in the spot market this year, sustaining the surge throughout 2017 as the dollar continues to slide. The total known holdings in bullion-backed ETF’s rose to 2,254 tonnes as of Tuesday, the highest since May 2013.
  • The dollar touched a four-month low against the yen on simmering concerns that the US currency’s yield advantage will start to erode as major central banks head towards unwinding excessive stimulus. Further Trump’s decision to slap import tariffs on washing machines and solar panels is marring global trade outlook, when its recent revival has fueled hopes for stronger global economy. “Global investors are also concerned about potential trade wars…which is stirring up some risk-aversion trade, so that, in turn, is supporting gold”, according to HuaAn Gold fund manager.

   Gold ETFs 72.5moz vs US$72.3moz yesterday

Platinum US$1,008/oz vs US$994/oz yesterday

Palladium US$1,099/oz vs US$1,094/oz yesterday

Silver US$17.13/oz vs US$17.05/oz yesterday

           

Base metals:   

Copper US$ 6,953/t vs US$7,042/t yesterday

  • Copper slumps to a one-month low on the London Metal Exchange as inventories jump by the most in more than 10 months, continuing the trend of oscillating LME stocks throughout 2017. Prices fell as much as 2.6% to $6,885/t as manufacturers in China are also preparing to halt output during the week-long Lunar New Year next month, adding to the evidence that copper demand is hitting seasonal lows during the early part of the year.
  • Seasonal shuttering of production is expected to continue throughout the winter heating period as futures for March delivery dropped 2.7% to 3.1/lb, the lowest since December. Bloomberg Intelligence analysis understand copper “may see more sideways-to-downward movement in the short run, while a weakening US dollar has helped, a relief rally or stabilization in the interim may remove a tailwind the red metal’s enjoyed”.

Aluminium US$ 2,211/t vs US$2,232/t yesterday

Nickel US$ 12,820/t vs US$12,800/t yesterday

Zinc US$ 3,392/t vs US$3,418/t yesterday

Lead US$ 2,603/t vs US$2,614/t yesterday

Tin US$ 20,710/t vs US$20,685/t yesterday

           

Energy:           

Oil US$69.8/bbl vs US$69.3/bbl yesterday

Natural Gas US$3.592/mmbtu vs US$3.278/mmbtu yesterday

Uranium US$23.15/lb vs US$23.15/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.1/t vs US$74.5/t

  • Iron ore futures in China fell for the second session as surging supply will swell already record stockpiles across ports in the world’s largest consumer. Stocks of imported ore reach an all-time high of 154.4 million tonnes last week as additional tonnage from major miners could find its way into Chinese ports. Top iron ore producer Vale is forecasting output to rise to 6.8% to 390 million tonnes as the company ramps-up production at its S11D project.
  • Australian exports have surged almost 40% as shipments climbed to 13.15 million tonnes last week following severe disruptions to operations hit by the latest cyclone. Global Ports data in Noon Iron will only serve to elevate stock levels across Chinese ports brimming with ore.
  • The iron ore for delivery to port on the Dalian Commodity Exchange slid 3% to the weakest level since Dec. 2, as analysis at CMC Markets note that “it’s more a case of markets looking at the potential for increased supply and also the possibility that demand might slow down seasonally”. Profit markets at Chinese steel mills are also expected to narrow as supply normalises after production curbs in the Asian nation are lifted in March, potentially limiting the buying appetite for the raw material.

Chinese steel rebar 25mm US$654.8/t vs US$656.8/t

  • Asian exports were dealt a blow as the Trump administration’s decision to slap tariffs and quotas on solar-panel imports gives hope to US steel executives and workers in future intensions to insulate the domestic industry. “Now that President Trump has taken action in these high profile cases (solar panels and washing-machine imports), we hope that he will also keep his promise to defend American-made steel and aluminium”, Scott Paul, president of the Alliance for American Manufacturing.

Thermal coal (1st year forward cif ARA) US$85.6/t vs US$85.9/t

Premium hard coking coal Aus fob US$217.8/t vs US$224.1/t

 

Other:  

Tungsten APT European US$310-318/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$79,750.0/t vs US$75,250.0/t

 

Company News

Altus Strategies (LON:ALS) 8.5p, Mkt Cap £9.2m – Liberia exploration update

  • The Company provided an update over the first phase of an exploration programme at the 100%-owned 466km2 Zolowo license in NW Liberia.
  • Initial reconnaissance identified over 50 alluvial gold mining sites with 35 of those being active and the largest of sites extending for 250m.
  • The work followed upon an inhouse analysis of geological maps and satellite imagery.
  • The licence is located within a prolific regional geological trend hosting Bella Yella exploration license and New Liberty operating gold mine.
  • A number of rock samples have been collected for assays and the team is planning to carry out a systematic stream sediment sampling programme tracking the hard rock source of alluvial gold.

 

SolGold* (LON:SOLG) 25p, Mkt Cap £424.1m – New copper mineralisation discovered at Timbara

(SolGold own 85% of Cascabel in Ecuador)

  • Solgold reports that it has discovered two outcrops of porphyry copper style mineralisation at its wholly owned Timbara exploration project in southern Ecuador.
  • Timbara is located in the “eastern Jurassic Belt [of Ecuador] which contains the Fruta del Norte epithermal gold deposit (14 million ounces Au), the Mirador copper porphyry deposit (3 million tonnes copper) and the Saint Barbara gold (copper) porphyry deposit (8 million ounces Au).”
  • Assay results from rock chip sampling at Timbara highlighted in today’s announcement include:
    • A sample grading 28.89% copper and more than 100g/t silver taken from a northeast trending bornite /chalcopyrite vein; and
    • A further sample grading 4% copper and over 100 g/t silver.
    • A number of other samples reporting grades in excess of 1% copper
  • Solgold is planning to follow up these initial results with “systematic mapping and rock chip sampling of anomalous streams and outcrops to gain a better understanding of the geological controls, hydrothermal alteration and style of copper mineralisation at Timbara. An aeromagnetic survey will also be carried out over the Timbara Project.”
  • Solgold has gained considerable technical and operational expertise in Ecuadorean exploration through the development of its Cascabel project where the company recently published a maiden resource estimate of over 1bn tonnes at an average grade of approximately 0.7% copper equivalent.
  • The company has deployed this expertise on a number of other exploration projects in Ecuador and the results reported from Timbara follow other encouraging results reported in December from the La Hueca project.

Conclusion: Solgold has identified high grade copper mineralisation at surface in the Timbara prospect in southern Ecuador.  We look forward to further news as the company starts systematic exploration mapping and sampling.

*SP Angel act as UK broker to SolGold and have acted as placing agent in relation to the recent £45m new share issue

 

Strategic Minerals* (LON:SML) 2.017p, Mkt Cap £26.7m – Exploration results from Hanns Camp

  • Strategic Minerals has released results from its aircore drilling programme at the Hanns Camp nickel/cobalt project near Laverton, W Australia.
  • The results, from 49 drill holes, of which 23 encountered mineralisation, have confirmed a zone of mineralisation extending over an area of some 1000m x 500m.
  • Today’s announcement describes the results of samples taken over single metre long intervals and refines the results from 4m long samples which were reported in early November.
  • Among the results reported today are:
    • A 1 metre long intersection averaging 1.66% nickel and 0.09% cobalt from a depth of 29m in hole HCA024; and
    • A 3m long intersection averaging 1.04% nickel and 0.07% cobalt from a depth of 34m in hole HCA025; and
    • A 17m long intersection averaging 1.20% nickel and 0.07% cobalt from a depth of 31m in hole HCA028; and
    • A 12m long intersection averaging 1.04% nickel and 0.06% cobalt from a depth of 29m in hole HCA048
    • The company also reports that work by the renowned expert on ultramafic hosted nickel sulphide mineralisation, Dr. Martin Gole, has “identified the existence of komatiite lava channel facies rocks within the Hanns Camp ultramafic which is one of the key requirements for the potential accumulation of nickel sulphides.”
    • Commenting on these developments and the improved insight into the mineralisation at Hanns Camp, Strategic Minerals’ Chairman, Alan Broome, commented “In the light of this recent review of nickel potential, the Board feels justified in undertaking further significant exploration at Hanns Camp over the course of 2018 and expects to be able to fully fund these activities internally.”
    • Hanns Camp is located within the East Yilgarn nickel sulphide province of W Australia where the Mt Windarra and South Windarra deposits, approximately 12km west of the Hanns Camp site, have “together produced 8.1m metric tonnes (Mt) at 1.5% nickel (Ni) between 1974 and 1992.”

Conclusion: The improved understanding of the mineralisation at Hanns Camp as a result of the recent drilling and Dr. Gole’s insight will guide the 2018 exploration programme. We look forward to further news as the campaign, within an established nickel producing region, proceeds.

*SP Angel act as Nomad and broker to Strategic Minerals

 

Tri-Star Resources* (LON:TSTR) 0.0375p, mkt cap £23.9m – Additional investment in SPMP

  • TriStar Resources reports that it has invested a further US$2.8m as a mezzanine loan into its 40% owned Strategic Precious Metals Processing (SPMP) which is constructing the new antimony roasting facility in Sohar, Oman.
  • The additional funds are available from the recent £4.4m fundraising and represent TriStar’s share of the additional capital required to complete the roaster where the most recent estimates indicate an overall capital cost of US$109m compared to a previous estimate of $96m.
  • We note, however, that at the time of the fundraising in December 2017, the total estimated capital was US$110m.  TriStar ascribes part of the increased capital estimate “to the impact of movements in exchange rates.”
  • The company reports that “Of the $109 million, $74 million has been committed and SPMP expects all items of major equipment will be on site by the end of this month”.
  • At the Oman site, “the first batch of antimony concentrate has been delivered to the OAR’s warehouse in Sohar” and discussions are continuing with multiple providers to source future offtake agreements.
  • There appears to have been minor delays relating to the late delivery of necessary switchgear and associated regulatory and compliance issues relating to the switch-over to medium voltage power which may result in minor delays to commissioning.

Conclusion: We look forward to the impending delivery of the Oman Antimony Roaster.

*SP Angel acts as Nomad and Broker to Tri-Star Resources

 

We repeat the following comment from yesterday where we have corrected our 2018 vanadium price assumption in our text to US$36.25/kgV from US$38.75/kgv as used in our modelling and published table, sorry.

Bushveld Minerals* (BMN) 8.6p, mkt cap £75m – Vanadium price rise more than offsets SA rand strength

BUY – Target price rises to 18.28 from 14p - (Bushveld Minerals now holds 59.1% of Vametco)

Click here for Flash note

  • Previously we commented on the impact of lower vanadium production in Q4 ’17 caused by repairs and upgrades to the kiln at the Vametco plant in South Africa.
  • Today we focus on the impact of higher FerroVanadium prices and the impact of the markedly stronger South African rand.
  • FerroVanadium prices: The FerroVanadium price has more than doubled over the past six months to US$60/kGV and while Bushveld Vametco does not receive these prices till three-months after we see them, due to delayed pricing formulae, they do feed through.
  • We know the FerroVanadium price has averaged US$42.1/kgV over the past three months and we could fairly safely assume around US$50/kgV for the next three months followed by a fairly conservative US$25/kgV for the rest of the year.  US$25/kgV is still markedly higher than 2016 so while its half the current price it still feels cautiously realistic given where prices have come from.
  • This gives a price assumption of US$36.25/kgV which is 17% higher than our previous US$33/kgV forecast.
  • We then raise our longer term forecast by 9% to US$30/kgV from US$27.5/kgV previously which may again feel conservative in time and will hopefully give room for further upgrade in time.
  • Forex: The election of Cyril Ramaphosa to the head of the ANC has caused the ZAR:USD rate to strengthen significantly with the rand strengthening by a whopping 20% since its low in November.  It’s a big move for a major currency. 
  • We had previously assumed a ZAR:USD rate of 13.6 which we have cut to 13.0. While this is not the spot rate of around 12.1 it does reflect the view that SA growth forecasts may take some time to recover and the ANC still has much to do to clean up corruption.
  • Production forecasts: Following discussion with Bushveld Minerals we have raised our production forecasts to match the guidance given by the company.
  • Valuation: The net effect is to strengthen our valuation to 18.28 pence per share though we would caution that with the South African rand and vanadium prices both showing unusually large movements that the company’s cash flows and valuation are also liable to unusually large changes depending on the spot prices used or assumptions being made.

 

Figures based on 100% of Vametco plant. Bushveld now hold an effective 59.1% of the Vametco plant

 

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

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Wed, 24 Jan 2018 11:55:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29279/morning-view-us-import-tariffs-fuel-concerns-over-global-trade-and-boost-gold-spot-29279.html
Morning View - Copper falls as Chile looks to restart major projects http://www.proactiveinvestors.co.uk/columns/sp-angel/29272/morning-view-copper-falls-as-chile-looks-to-restart-major-projects-29272.html Base Resources (LON:BSE) – Completion of Toliara acquisition

Bushveld Minerals* (BMN) BUY – Target price rises to 18.28 from 14p – Vanadium price rise more than offsets SA rand strength

Phoenix Global Mining* (LON:PGM) – Initial cobalt exploration results

Serabi Gold (LON:SRB) – US$3m loan post the Coringa acquisition

 

Copper falls as Chile looks to restart five to six new mining projects

  • Elevated red metal prices combined with the prospect of a more investor-friendly government in the world biggest supplier, Chile, is encouraging a resumption of hopeful mining projects following years of operations sitting on care and maintenance. As President Sebastian Pinera’s four-year term begins in March, mining companies could pull the trigger on five or six large projects sinking more than $1 billion investment. With prices rising to two-year highs in the second half of 2017, signs of a renewed bull market have encouraged mining employment to increase and the pipeline for projects for the next decade grew for the first time in four years.
  • The chain reaction for new projects started as BHP Billiton were given the greenlight for the $2.5 billion expansion of the Spence mine in August. Initial projects to follow suit will be those with environmental and community licenses, including Antofagasta Plc’s expansion of its Centinela mine, Capstone Mining Corp.’s Santo Domingo project and Barrick Gold Corp. and Goldcorp Inc.’s Cerro Casale gold-copper venture.
  • In the short-term, copper is expected to pull back from recent highs as global stockpiles swell to their highest level since November as China’s refined-copper output climbed to a record. Zaner Group analyst notes that “if these stockpiles continue to rise, we could see a stagnation” in price.

 

Rising mineral prices trigger artisanal and small scale mining explosion

  • According the report, produced by Canada’s Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, an estimated 40.5m people were directly engaged in Small scale mining (ASM) last year, up from 30m in 2014, 13m in 1999 and 6m in 1993
  • The report shows that the Artisanal mining share of global mineral production is rising, despite the sector’s low productivity representing around ~20% of global supply

 

121 Conference, Cape Town – 5-6 February 2018

SP Angel Analysts will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February

  • We look forward to meeting investors and companies there or by appointment thereafter.

 

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Dow Jones Industrials

 

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at

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+1.29%

at

3,547

FTSE 350 Mining

 

-0.63%

at

19,250

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+0.02%

at

2,748

 

Economics

IMF revised its global growth forecasts upwards 0.2pp to 3.9% for 2018 and 2019 “reflecting increased global growth momentum and the expected impact to maintain near-term momentum”.

  • In particular, the US growth is estimated to pick up from 2.3% recorded last year to 2.7% in 2018 and 2.5% in 2019, up 0.4 and 0.6pp from previous estimates, on the back of positive effect of US tax changes dirving increased investments.
  • The tax rate overhaul and its effect on US trading partners accounted for around half of the cumulative revision to global growth over 2018/19.
  • Growth rates in the Eurozone economies have been upgraded (2.2/2.0 in 2018/19 up 0.3/0.3pp on previous numbers) and in Germany, Italy and Netherlands, in particular, “reflecting the stronger momentum in domestic demand and higher external demand”.
  • In Japan, growth estimates have been also brought up (1.2/0.9 in 2018/19 up 0.5/0.1pp) “reflecting upwards revisions to external demand, the supplementary budget for 2018, and carryover from stronger-than-expected recent activity”.
  • Aggregate growth forecasts for the emerging and developing markets have been left unchanged.
  • In China, in particular, growth is expected to moderate gradually (6.6/6.4 in 2.018/19 up 0.1/0.1pp) with estimates revised marginally upwards on stronger external demand.
  • On potential risks to growth momentum, the IMF mentioned low risk premiums and high asset valuations which increase the possibility of financial market correction that “could dampen growth and confidence” with a potential trigger being “faster-than-expected increase in advanced economy core inflation and interest rates”.
  • The IMF argued nations should use current cyclical upswing for “structural reforms to boost potential output and making growth more inclusive”.

 

US – The Senate reached a deal to end the federal government shutdown that lasted less than three days seeing equity markets posting new record highs.

  • Senate Democrats supported the notion allowing to extend the government funding for about another three weeks after accepting Republican leaders’; assurances that an immigration bill will be brought to the floor in the coming weeks.
  • The bill has gone through in a 81-18 vote passing the required 60 votes threshold with two Republicans joining 15 Democrats and one independent in opposing the measures.

 

Japan – The yen is rangebound this morning as the BoJ reiterated its commitment to continue with loose monetary policy dampening market speculation that the central bank might soon follow its US and European counterparts.

  • “We haven’t reached the stage of thinking about how to handle an exit (from monetary easing),” Kuroda said during the press conference.
  • The BoJ kept rates unchanged at -0.1% and said to continue buying government debt at a rate of up to ¥80tn targeting ten year bond yields at close to 0%.

 

Eurozone – The ECB to hold its monetary policy meeting this Thursday against building up expectations for an indication of future tightening monetary policy amid hawkish December minutes, strengthening eu euro and rising oi prices.

 

Germany – Economic sentiment index which is supposed to measure investor expectations over a six months’ span continued to post new gains in this month laying good tone for the coming year

  • ZEW Current Situation Index: 95.2 v 89.3 in Dec and 89.6 forecast.
  • ZEW Expectations Index: 20.4 v 17.4 in Dec and 17.7 forecast.

 

UK – The pound has broke the 1.40 level against the US$ earlier today and climbed to a month-high against the euro on hopes for softer Brexit.

 

Zimbabwe – Grace Mugabe’s son crashes supercars as he crosses boarder from Botswana into South Africa

  • Three high-performance cars were damaged in the crash involving a Rolls Royce, a Range Rover and a Porsche
  • Grace owns the Range Rover and her son is reported to own the other two cars
  • There were suggestions that the former first lady and her son might have been trying to avoid having the cars seized when an amnesty expires for the return of all money illegally spirited from Zimbabwe during Mugabe's long rule.

 

 

Currencies

US$1.2236/eur vs 1.2238/eur yesterday  Yen 110.94/$ vs 110.84/$  SAr 12.106/$ vs 12.039/$  $1.395/gbp vs $1.389/gbp  0.796/aud vs 0.800/aud  CNY 6.405/$ vs 6.403/$.

 

Commodity News

Precious metals:         

Gold US$1,337/oz vs US$1,331/oz yesterday

  • Gold resumes its climb as the dollar hovers around three-year lows despite President Donald Trump signs the spending bill Monday evening which ends the partial government shutdown. Trading has been within a tight range defined on the low end by safe-haven demand amid the US government closure, while the gains capped by resiliency of the wider financial markets and surging global equities, including Wall Street’s main indexes rising to record highs.
  • Commodity research at Geojit Financial Services foresee support for the precious metal “as there could be some correction in the equity markets and cryptocurrencies have started to fall again. We can see more investors coming into gold, which could be positive for prices”. Since the start of 2018 the total cryptocurrency market capitalization has faltered 15.9% to settle around $520 billion, as Asian investors withdraw from the digital market ahead the Lunar New Year and market participants weigh in on more stringent regulations on the volatile currency. During the early-year digital consolidation investors will be favouring safe-haven gold with MKS Pamp Group traders seeing psychological support at $1,350/oz.

   Gold ETFs 72.3moz vs US$72.3moz yesterday

Platinum US$994/oz vs US$1,016/oz yesterday

  • Following last weeks’ 79% surge in money manager net-long positions to 19,806 futures and options, the precious metal shows strong signals of being overbought and records the biggest decline since early December. Platinum for immediate delivery previously climbed to $1,019.42/oz with a 14-day relative strength index of 81, giving market participants signs that the price was set for a decline.
  • The metal lost 1.6% during yesterday’s trading amid profit taking with further loss warnings as platinum is “an illiquid metal, so once the market starts going the same way, it can get substantial momentum”.

Palladium US$1,094/oz vs US$1,108/oz yesterday

Silver US$17.05/oz vs US$17.00/oz yesterday

           

Base metals:   

Copper US$ 7,042/t vs US$7,107/t yesterday - China’s December Scrap Copper imports fall sharply on waste crackdown

  • Imports of scrap copper fell 19.8% in December from a year earlier customs data showed as country continues crackdown on foreign waste
  • China imported 260,000t of copper scrap last month, which was down 4.1% from 271,000t in November.
  • Full-year imports of 3.56mt were still up 6.2% from 2016
  • Trading firms are now unable to import scrap copper into China unless they can prove they are end-users of the material
  • China has moved to ban imports of Category 7 scrap - such as coiled copper cable and waste motors - from 2019

Aluminium US$ 2,232/t vs US$2,228/t yesterday

Nickel US$ 12,800/t vs US$12,830/t yesterday

Zinc US$ 3,418/t vs US$3,423/t yesterday

Lead US$ 2,614/t vs US$2,604/t yesterday

Tin US$ 20,685/t vs US$20,615/t yesterday

           

Energy:           

Oil US$69.3/bbl vs US$68.9/bbl yesterday

  • Oil bull concerns rise as the recent OPEC-led rally in crude prices hit refinery prices hard, with a wave of scheduled maintenance in spring expected to apply some downward pressure on the commodity.
  • Bearish sentiment is also growing as US crude production is on course to overtake Saudi Arabia and rival Russia, as the International Energy Agency revises its 2018 growth forecast while stressing that “explosive” expansion in shale was offsetting OPEC-led supply cuts. Big producer nations have feared a price rebound in recent weeks, climbing to a 2014 high of about $70 a barrel, could spur a flood of new supply from shale companies, undermining the effort by global producers to curb output.

Natural Gas US$3.278/mmbtu vs US$3.243/mmbtu yesterday - China switches to natural gas

  • China’s domestic natural gas output rose 7.7% year on year to reach 147.42bcm in 2017 according to the National Bureau of Statistics China (NBS)
  • Growth has accelerated in recent years against the backdrop of coal to gas switching policies spurred by Chinese government
  • Meanwhile, robust winter gas demand and widespread shortages in northern China have pushed average domestic trucked LNG prices in China up nearly 50% since mid-November
  • China’s gas demand this year is estimated to be nearly 260bcm, state owned company CNPC said recently

Uranium US$23.15/lb vs US$23.40/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.5/t vs US$74.7/t

Chinese steel rebar 25mm US$656.8/t vs US$622.7/t

Thermal coal (1st year forward cif ARA) US$85.9/t vs US$85.6/t - Lloyds of London to divest from coal over climate change

  • Lloyds is the latest financial firm to announce its plans to stop investing in coal companies
  • Lloyds will start to exclude coal from its investment strategy from April 1st, , with the definition of what a coal company is and the criteria for divestment set over the coming months  
  • The move follows a number of other large investors such as Aviva, Axa, SCOR, Swiss Re and Zurich have been shifting away from coal and other fossil fuels, with about £15bn being divested by insurers in the past 2 years  

Premium hard coking coal Aus fob US$224.1/t vs US$224.0/t

 

Other:  

Tungsten APT European US$310-318/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$79,750.0/t vs US$75,250.0/t

 

Company News

Base Resources (LON:BSE) 15.8p, Mkt Cap £178m – Completion of Toliara acquisition

  • The Company has announced the completion of its acquisition of the Toliara mineral sands project in Madagascar.
  • “With payment of the US$75 million up-front consideration by Base Resources, the initial 85% interest in the … Toliara Sands Project in Madagascar …  has now been transferred to the Company.  Base Resources will acquire the remaining 15% interest, with a further US$17 million payable on achievement of key milestones as the project advances to mine development.”
  • Describing the Toliara sands acquisition as “transformational” for the company, Managing Director, Tim Carstens, said “We are excited to now proceed with the development of what we consider to be one of the very best mineral sands projects in the world.  The strong support demonstrated by institutional and retail shareholders, as well as the Base Resources management team, through participation in the capital raising reflects a shared enthusiasm.”
  • We understand that the deposit contains a measured and indicated resource of 612m tonnes at an average grade of 6.7% heavy minerals with a further, implied, inferred resource of 245mt at an average grade of around 5%.

Conclusion: The Toliara acquisition provides Base Resources with an alternative asset to the declining Kwale mineral sands operation in Kenya. We look forward to further news as the project progresses.

 

Bushveld Minerals* (BMN) 8.6p, mkt cap £75m – Vanadium price rise more than offsets SA rand strength

BUY – Target price rises to 18.28 from 14p - (Bushveld Minerals now holds 59.1% of Vametco)

  • Yesterday we commented on the impact of lower vanadium production in Q4 ’17 caused by repairs and upgrades to the kiln at the Vametco plant in South Africa.
  • Today we focus on the impact of higher FerroVanadium prices and the impact of the markedly stronger South African rand.
  • FerroVanadium prices: The FerroVanadium price has more than doubled over the past six months to US$60/kGV and while Bushveld Vametco does not receive these prices till three-months after we see them, due to delayed pricing formulae, they do feed through.
  • We know the FerroVanadium price has averaged US$42.1/kgV over the past three months and we could fairly safely assume around US$50/kgV for the next three months followed by a fairly conservative US$30/kgV for the rest of the year.  US$30/kgV is still markedly higher than 2016 so while its half the current price it still feels cautiously realistic given where prices have come from.
  • This gives a price assumption of US$38.75/kgV which is 17% higher than our previous US$33/kgV forecast.
  • We then raise our longer term forecast by 9% to US$30/kgV from US$27.5/kgV previously which may again feel conservative in time and will hopefully give room for further upgrade in time.
  • Forex: The election of Cyril Ramaphosa to the head of the ANC has caused the ZAR:USD rate to strengthen significantly with the rand strengthening by a whopping 20% since its low in November.  It’s a big move for a major currency. 
  • We had previously assumed a ZAR:USD rate of 13.6 which we have cut to 13.0. While this is not the spot rate of around 12.1 it does reflect the view that SA growth forecasts may take some time to recover and the ANC still has much to do to clean up corruption.
  • Production forecasts: Following discussion with Bushveld Minerals we have raised our production forecasts to match the guidance given by the company.
  • Valuation: The net effect is to strengthen our valuation to 18.28 pence per share though we would caution that with the South African rand and vanadium prices both showing unusually large movements that the company’s cash flows and valuation are also liable to unusually large changes depending on the spot prices used or assumptions being made.

 

Figures based on 100% of Vametco plant. Bushveld now hold an effective 59.1% of the Vametco plant

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

 

Phoenix Global Mining* (LON:PGM) 5.0p, Mkt Cap £11.5m – Initial cobalt exploration results

  • Phoenix Global Mining reports the highlights of results of assaying 46 grab samples from its recently acquired copper cobalt exploration licences located in Lemhi County, Idaho. “All of the sample results showed cobalt mineralisation above detection limits and ranged from 2.0ppm to 3120ppm, or 0.31% Co.”
  • The company reports the results from 2 of the 26 samples taken on the Bighorn property where one sample assayed at 1.55% copper and 1360ppm cobalt and the other at 4.12% copper and 1705ppm cobalt.
  • At the Redcastle property, where 20 samples were recovered, the company reports 6 results ranging between 153ppm and 3120ppm cobalt. Copper assays are not reported for the Redcastle samples.
  • Encouraged by these results, PGM plans “additional detailed ,mapping and sampling at both the Redcastle and Bighorn projects, as well as to conduct a focused drilling programme in 2018.”
  • Commenting on the results from the initial sampling, CEO, Dennis Thomas, explained that “The 2017 field season has significantly increased our understanding of the intricacies of the structural geology and geochemistry of the Idaho Cobalt Belt in general, and our own claim blocks in particular.”
  • Mr. Thomas went on to point out that drilling results obtained by US Cobalt from its Iron Creek Mine, located close the PGM’s Redcastle licence area, “have further underpinned this area of Idaho as the most prolific trend of cobalt mineralisation in the country”.

Conclusion: Although grab sampling is a relatively early stage exploration tool, it has confirmed the cobalt mineral potential of both the Bighorn and Redcastle properties, improved the company’s geological understanding and laid the groundwork for further exploration during 2018 which may include drilling. Exploration by PGM and others in the area is establishing the cobalt mineral potential of this part of Idaho. We find the high copper grades associated with the cobalt at the Bighorn property intriguing and look forward to further results as the 2018 exploration season progresses.

*SP Angel acts as Nomad to Phoenix Global Mining

 

Serabi Gold (LON:SRB) 3.8p Mkt value £26.2m – US$3m loan post the Coringa acquisition

  • Serabi Gold has reported that, following the completion of its acquisition of the 370,000oz Coringa gold deposit, its existing lender, Sprott Resource Lending Partnership, has granted an additional US$3m loan in order to replenish working capital and “to replace funds used to make the initial US$5 million cash payment upon completion of the acquisition.”
  • The new loan is repayable “in equal monthly instalments commencing 30 September 2018 with a final payment due 22 months later on 30 June 2020.”
  • In addition to the new loan, the terms of the existing loans with Sprott have been “extended to 30June 2020 and [the loan] is now repayable in 30 equal monthly instalments.”
  • Serabi Gold has been using loans from Sprott since September 2014 and seems to have established a productive working relationship with CEO, Michael Hodgson commenting that “Over this period Sprott have shown great flexibility and have been a strong contributor to Serabi’s current success”.
  • “Following completion of the New Facility the Company now has aggregate loans with Sprott of US$8 million which carry an interest rate of 10 per cent per annum.”
  • Work is continuing on the permitting and technical work to advance Coringa as well as the evaluation of financing requirements to develop the deposit.

 

Conclusion: Serabi Gold is building on its established lending arrangements with Sprott as it presses ahead with the work to develop the recently acquired Coringa deposit, which we understand is located some 200km from Serabi’s existing Palito mine.

]]>
Tue, 23 Jan 2018 14:22:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29272/morning-view-copper-falls-as-chile-looks-to-restart-major-projects-29272.html
Morning View - Platinum set to outperform as money managers boost holdings http://www.proactiveinvestors.co.uk/columns/sp-angel/29265/morning-view-platinum-set-to-outperform-as-money-managers-boost-holdings-29265.html Altus Strategies* (LON:ALS) BUY – Target price 12.2p – Ethiopia licenses exploration update

Bushveld Minerals* (OTC:BMN) – BUY, Target price adjusted to 14 from 14.3p – Bushveld accelerates expansion to capitalise on higher vanadium price levels

Atalaya Mining (LON:ATYM) – Production for 2017 and 2018 guidance

Gem Diamonds (LON:GEMD) – Another large diamond recovered from Letseng

Lonmin PLC (LON:LMI) – 2017 results, maintained 2018 guidance and update on offer from Sibanye

 

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

 

Tractor beam – for levitating larger objects

  • New breakthrough could lead to futuristic new uses of tractor beam technology and open doors to levitating larger objects
  • Engineers from university of Bristol have been able to trap objects using acoustic tractor beam that is larger than the wavelength of sound used by the device
  • By changing the twisting direction of the vortices, the researchers were able to stabilise the tractor beam and increase the size of the silent core allowing it to hold larger objects
  • Applications could include touchless drug capsules or micro surgical implements inside the human body, could also become possible to manipulate fragile items in whole new way – including assembling objects without touching them

 

Chile looks to further boost lithium supply with $1.4bn proposal

  • State development agency Corfo is undergoing study of 6 firm offers interested in developing lithium projects across the South American nation. Proposals have arisen from Rosatom ($17m), Posco-Samsung JV ($285m), Sichuan Fulin ($100m), Jiangmen Kanhoo ($468m), Gansu Daxiang Energy technology ($200m) and Molymet ($360m).
  • The investment is expected to boost Corfo and InvestChile’s plan to diversify production of lithium-derived products, while enhanced output from SQM is expected to encourage the supplier to begin production of high-grade lithium hydroxide for Tesla.

Lithium equity indices fall following announcement that Chile will allow SQM and Albemarle to expand lithium production

  • Lithium stocks fell last week following news that Chile will allow a significant expansion in lithium production by SQM , the world’s second largest lithium producer
  • Global X Lithium & battery Tech (LIT:US) down 5%
  • Solactive Global Lithium (SOLLIT ) lithium Index down by 6.5%.
  • While the pull back in lithium stock prices is relatively small given the three and four fold expansion in index levels over the past two years the indexes are likely to fall further as investors take a more cautious approach to the sector.
  • While the expansion by SQM will impact lithium supply and prices it will take 3-5 years for SQM to expand to >3 times their current allowance to 216,000 from 60,000t currently.  We believe the expansion in demand should absorb all this new supply and still demand more enabling many new projects to still enter the lithium space.

 

121 Conference, Cape Town – 5-6 February 2018

SP Angel Analysts will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February

  • We look forward to meeting investors and companies there or by appointment thereafter.

Dow Jones Industrials

 

+0.21%

at

26,072

Nikkei 225

 

+0.03%

at

23,816

HK Hang Seng

 

+0.43%

at

32,393

Shanghai Composite

 

+0.39%

at

3,501

FTSE 350 Mining

 

-0.21%

at

19,441

AIM Basic Resources

 

-0.14%

at

2,748

 

Economics

US – The government shutdown stretched into its third day on Monday after the Senate failed to clear a notion allowing the government to be funded through February 8.

  • Democrats are reported to have declined to support the government funding bill as Republicans declined to extend the financial support for the DACA programme (Deferred Action for Childhood Arrivals) past the planned March 5 expiry date.
  • The spending bill was blocked on Friday after a 50-49 vote failed to reach the required threshold of 60 votes.
  • Lawmakers are expected to hold another vote at noon today.
  • Despite uncertainties regarding the government funding extension bill US equity indices closed at record levels on Friday.

 

Germany – Centre left Social Democrats voted to start coalition talks with the Merkel’s CDU getting one step closer to a formation of the government.

  • The narrow vote (362 of 642 delegates supported the notion) preceded a concerns the party may reject the offer from the conservative block over a potential grand coalition with opponents blaming previous alliance for losses at the latest general elections.
  • Merkel welcomed the decision marking the start of official coalition talks and potentially leading to a new government by Easter.
  • Snap elections remain a possibility should the coalition talks fail in the end with opinion polls suggesting that a re-run in elections may see same inconclusive result to last September’s with no clear majority in the Bundestag.
  • The euro is trading slightly higher (+0.2%) against the US$ on the news this morning.

 

Spain – Fitch rating agency has upgraded Spain’s sovereign credit rating by one notch to A-, up from BBB+.

  • The move has been driven by a relatively broad base economic recovery and further deleveraging in the private and public sectors.
  • Unemployment has been coming down while the government is forecast to see a reduction in fiscal deficit to 2.0% of GDP in 2019 compared to around 3.1% recorded last year.
  • The rating compares to BBB+ assigned by S&P and Baa2 rated by Moody’s.

 

South Africa – Local media reported that the ruling ANC party asked its top six officials including its new leader Cyril Ramaphosa to plan details and timing of Mr Zuma’s exit from the office before his mandate ends in 2019.

  • The currency traded 1.2% stronger against the US$ this morning extending gains recorded lately and nearing the 12.0 mark, the strongest level since mid-2015.

 

Greece – S&P upgraded sovereign credit rating to B from B- citing improved growth and fiscal outlooks.

  • “The upgrade reflects Greece’s steadily improving general government finances and tis gradually recovering economic prospects… the government ran primary fiscal surpluses in 216 and 2017 while the economy exited a multiyear recession last year,” the agency said.

 

Currencies

US$1.2238/eur vs 1.2272/eur yesterday  Yen 110.84/$ vs 110.62/$  SAr 12.039/$ vs 12.158/$  $1.389/gbp vs $1.392/gbp  0.800/aud vs0.803/aud  CNY 6.403/$ vs 6.403/$

 

Commodity News

Precious metals:         

Gold US$1,331/oz vs US$1,336/oz last week

  • Spot gold fades from last week highs, topping £1,344.81, despite US Federal government shutdown and advancing euro optimism as Germany’s Angela Merkel makes a breakthrough towards securing her fourth term. While Republican and Democratic leaders of the US Senate failed to break an impasse amid a dispute between US President Donald Trump and Democrats over immigration, the “US shutdown should not affect gold too much…it’s a political issue more than an economic one”.
  • Exchange-traded funds added 250,728 troy ounces of gold to their holdings in the last trading session, recording the fourth straight day of growth. The purchases were equiValent to £333.9 million at the previous spot price, and have supported total gold held by ETFs to climb 1.1% this year to 72.3 million ounces.

   Gold ETFs 72.3moz vs US$72.1moz last week

Platinum US$1,016/oz vs US$1,013/oz last week

  • The recently unloved precious metal, fundamental for pollution-control catalysts for vehicles, finally begins to outperform and gain the attention of hedge fund managers. Surging prices brought palladium above and beyond the price parity with the commonly substituted platinum throughout 2017, and closed the year with a $100 premium for palladium.
  • After Volkswagen AG admitted falsifying pollution data for its vehicles in 2015, the outlook for platinum had faded as purchases of diesel-fueled autos fell across Europe. However, recent implementation of more stringent emissions standards in China is expected to boost demand for the metal.
  • Precious metals have also benefitted from a lull in dollar strength, as the currency trades near a three-year low against a basket of 10 currencies. Collectively precious metals have continued to climb as traders seek a storage of value and hedge against uncertainty as the government services enter the first working day during the closures. Money manager sentiment towards the metal is changing with a raise in the net-long position, or difference between bets on a price increase and wagers on a decline, by 79% to 19,806 futures and options, according to US Commodity Futures Trading Commission data; the highest since mid-September. ETF Securities director of investment strategy notes the “the price rebound since the Fed raised rates last year, platinum is beginning to catch up with palladium and gold“, with futures having climbed 8.5% in January to $1,017.80/oz. The boost in price compares with gains of 3.9% for palladium, 1.7% for gold and 0.7% slide for silver.
  • Market fundamentals favour a rising platinum price, with consumption set to rise, stockpiles in warehouses tracked by the New York Mercantile Exchange have shrunk to their lowest since 2016. With 70% global supply sourced in South Africa, improving rand-dollar exchange is raising the relative cost of producing the metal and applying significant pressure on miners already struggling to stay afloat.

Palladium US$1,108/oz vs US$1,110/oz last week

Silver US$17.00/oz vs US$17.10/oz last week

           

Base metals:   

Copper US$ 7,107/t vs US$7,139/t last week

Aluminium US$ 2,228/t vs US$2,261/t last week

Nickel US$ 12,830/t vs US$12,570/t last week

Zinc US$ 3,423/t vs US$3,403/t last week

Lead US$ 2,604/t vs US$2,616/t last week

Tin US$ 20,615/t vs US$20,540/t last week

           

Energy:           

Oil US$68.9/bbl vs US$68.6/bbl last week

  • Global oil producers are in full agreement that cooperated efforts to maintain supply cuts should extend beyond 2018, as Saudi Arabia for the first time publicaly states the need for OPEC and non-OPEC producers to coordinate output controls.
  • The International Energy Agency expect global oil markets to tighten rapidly on falling supply from Venezuela, as debt and infrastructure problems cut the nations December output to 1.61 million barrels per day to record a 30-year low.

Natural Gas US$3.243/mmbtu vs US$3.156/mmbtu last week

Uranium US$23.40/lb vs US$23.40/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.7/t vs US$73.2/t - China’s iron ore stocks could make enough cars to reach the moon

  • The mountain of portside imports of iron ore continues to swell into unchartered territory, as stocks reach record after record as policy makers in Beijing continue to restrict steel production across the world’s largest consumer. Holdings rose for a 14th consecutive week to 154.43 million tonnes on Friday, the longest buildup since 2014, according to Shanghai Steelhome E-commerce Co. figures. Applying Bloomberg average daily shipment figures across 2017, current levels equate to more than 50 days’ of imports, crimping near-term consumption.
  • The record stockpiles across Chinese ports could produce enough steel for 107 million cars, more than three-times the Asian nations annual auto sales, or enough to reach the moon if lined up nose to tail.
  • Iron ore’s bull market rally is underpinned by demand for higher-quality ore, which is expected to reverse as the winter production restrictions close in March, driving mills toward an abundant supply of lower-grade material. Head of International business at Shanghai Metals Market notes that “Iron ore has clearly been oversupplied, and we’re still digesting the traditionally strong fourth-quarter shipments at a time when Chinese steel production is being reduced”, while “fundamentals will become a driving force over prices again, but that’s unlikely in the very near term. Steel demand should do well post-winter restrictions”.
  • Winter emission limitations have so far boosted spot ore with 62% iron ore delivery by 5.7% in the first month of 2018, supporting the margins of majors Rio Tinto Group, BHP Billiton Ltd., and Vale SA.

Chinese steel rebar 25mm US$622.7/t vs US$622.7/t - China steel output under control despite record 2017

  • Japan Iron and Steel federation chairman Kosei Shindo said steel output remains under control despite record output from world’s top prodcucer in 2017, citing abolition of illegal steel production and solid local demand
  • Although said he is worried about higher prices of steel making raw materials such as coking coal and iron ore, especially as cyclone season approaches in Australia

 

Thermal coal (1st year forward cif ARA) US$85.6/t vs US$85.8/t

Premium hard coking coal Aus fob US$224.0/t vs US$228.3/t

 

Other:  

Tungsten APT European US$310-318/mtu vs US$310-318/mtu last week

Cobalt LME 3m US$79,750.0/t vs US$75,250.0/t

Soybean shipment to China became the first commodity deal to use blockchain tech

  • Cargo of US soybeans shipped to China from Louis Dreyfus Co have become first fully fledged agricultural trade conducted using blockchain
  • Traders hoping that technology will lead to faster, cheaper and more secure ways of settling transactions with oil trading houses and energy groups now actively trialling platforms based on blockchain
  • Head of global trade at LDC, a Chinese agricultural processer said ‘expectations were high, but results even higher as processing time for documents was a fifth of a paper based process’ – benefits include ability to monitor operations in real time, data verification and reduced risk of fraud

 

 

Company News

Altus Strategies* (ALS LN) 8.0p, Mkt Cap £8.6m – Ethiopia licenses exploration update

BUY – Target price 12.2p

  • The Daro license is the recently granted 100%-owned permit covering 412km2 located in northern Ethiopia and 95km west of the Company’s Tugray-Afar Cu-Ag project.
  • The license covers the area within the Nakfa terrane prospective in VMS deposits including Nevsun’s Bisha (190km NW of Daro), East African Metals’ Harvest and Adyabo projects (35km west) and Sichuan Road & Bridge Mining Investment’s Asmara project (100km north).
  • The on the ground exploration followed upon targets previously identified by a remote sensing programme leading to a delineation of the Teklil gold-copper prospect.
  • The Teklil area has been mapped for 2.5km with a grab sample of a 2kg of present mineralised gossan rock returning grades up to 34% Cu, 0.54g/t Au, 10g/t Ag and 0.04% Zn consistent with a potential kuroko style rich in base metals VMS system.
  • The in-situ gossan and gossanous float has been mapped discontinuously along the strike.
  • The area also hosts a number of alluvial and hard rock gold workings including one target 7km north and along strike of Teklil with artisanal mines covering a 900mx500m zone.
  • The team is planning to carry a comprehensive stream sediment sampling programme with expected completion in February to establish the source of primary gold/copper mineralisation.

Conclusion: The team is continuing with a grass roots exploration programme at its Ethiopian licenses targeting the region prospective in polymetallic VMS deposits.

*SP Angel acts as Nomad and broker to Altus Strategies

 

Bushveld Minerals* (BMN) 8.9p, mkt cap £76m – Bushveld accelerates expansion to capitalise on higher vanadium price levels

BUY – Target price adjusted to 14 from 14.3p - (Bushveld Minerals now holds 59.1% of Vametco)

  • Bushveld Minerals are accelerating the expansion at Vametco bring forward expansion plans and maintenance activities.
  • Vametco reached a run rate of 3,035mtV (vanadium) will shortly raise to 3,650mtV by June 2018 and will then go on to 5,000mtV by 2019.
  • This makes the 2018 target of 3,050mtV plus 630mtV of FeV for the year look understated.
  • Last year Vametco produced some 2,649mtV of Nitrovan, Vametco’s key branded product though this was lower than 2016 due to increased maintanence.
  • Repairs and upgrades to the kiln caused vanadium production to fall 19.4% in Q4 QoQ.
  • The expansion to 3,750mtV should cost some US$2.5m and is to be self funded within Vametco while the expansion ot 3,035mtV cost just US$0.5m.
  • Costs are expected to fall next year to ZAR 205/KgV from ZAR221/KgV mainly due to the ramp up in production.
  • Sales of vanadium fell by only 14.5% due to the lag in sales versus production.
  • It is worth noting that pricing for Vametco’s sales also lags by three-months due to the way in which vanadium industry pricing works so that material produced today will effectively be sold at prices seen in three month’s from now.
  • Bushveld Energy (vanadium redox batteries): Bushveld signed an agreement with Eskom in partnership with the IDC to install a 450kWh vanadium redox flow battery with a peak power capacity of 120kW with co-developer UniEnergy Technologies based in the US.
  • Site preparations and procurement started in Q4 ’17 and operation should start in the first half.
  • Vanadium electrolyte: Bushveld Vametco has jointly produced laboratory batches of vanadium electrolyte for various types of battery-grade electrolyte.
  • If the new battery plant works well then Bushveld Vametco may develop into a significant producer of higher-value vanadium electrolyte products.
  • Lemur Resources: signed a 30-year power purchase agreement with the Madagascar state power utility and appointed Worley Parsons to manage the BFS and other technical aspects of the project.
  • The coal mine plan is being matched to feed a 30-year minimum life project.
  • Local consultants selected to work on the Social Environmental Impact Assessment alongside Worley Parsons.
  • Valuation: We have adjusted our forecasts and valuation based on last year’s actual production, next year’s costs forecasts and on adjustment to the US$/rand rate. The exchange rate was ZAR/US $13.3 for Vametco last year. We are using the futures market rand rate of 12.59 for 2018 and we have reverted to 13.6 from 2019.
  • Our valuation pulls back slightly to 14 pence per share from 14.3 previously though we note our cash flow forecasts and valuation are highly sensitive to the rand. 
  • We are using a FerroVanadium price of US$33.0/kg discounted to account for marketing and other costs for 2018 but pull this back to US$27.5/kg.
  • Prices: The FerroVanadium price has risen again, against almost all expectations to US$60/kg and this will almost certainly cause us to raise our raise our forecasts yet further as Vametco should benefit from these higher prices in the next quarter.

Conclusion:  Vametco’s lower Q4 production pulled back our numbers though this was offset by lower than expected costs through the second half.  The business is most sensitive to the vanadium price and to the South African Rand.  While the vanadium price has roughly doubled on last year the rand has significantly strengthened offsetting some of this benefit.  We will continue to work through our forecasts in relation to higher vanadium prices and our rand rate assumptions and will update the market in due course.

 

Figures based on 100% of Vametco plant. Bushveld now hold an effective 59.1% of the Vametco plant

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

 

Atalaya Mining (LON:ATYM) 181 pence, Mkt Cap £244m – Production for 2017 and 2018 guidance

  • Atalaya Mining reports that, during its first full year of commercial production at Proyecto Rio Tinto, it increased copper output by almost 11,000 tonnes (over 40%) to 37,164 tonnes during 2017.
  • The mine processed 8.8m tonnes of ore at a grade of 0.49% copper (2016 – 6.5m tonnes at a grade of 0.48%) with averaging metal recovery improving for 82.99% to 85.45%.
  • The company reports that “operations are now running stable quarter-on-quarter” and that in 2018 it expects to produce between 37-40,000 tonnes of copper.
  • Operating costs for 2017 were impacted by US$/€ exchange rates and are to be confirmed when the financial statements are published but in the meantime, “Management expects AISC to be in the range of $2.05/lb to $2.20/lb.”
  • The company is considering the addition of an additional secondary cone crusher to the circuit as part of its continuing process management.
  • On the larger scale, however, the approval during December 2017 of a further expansion of the RioTinto operation to 15mtpa throughput followed by a successful fundraising of £31m leaves the company confident that the expansion project “is on track to deliver increased production by 2019.”
  • At its Proyecto Touro in northern Spain, the permitting process is reported to be on schedule and “The technical report is substantially completed at pre-feasibility level of detail … The report will be released when the additional project improvements are incorporated to accommodate the final permitting process.”

Conclusion: Proyecto RioTinto is operating in a stable state with copper output in 2018 expected to increase slightly before the major expansion of throughput to 15mtpa comes through in 2019. Technical and feasibility work at Proyecto Touro seems to be proceeding on track and we look forward to the publication of the pre-feasibility level report when the modifications arising from the permitting consultations have been incorporated.

 

Gem Diamonds (LON:GEMD) 88p, Mkt Cap £122m –Another large diamond recovered from Letseng

  • Gem Diamonds reports that it has recovered a 149 carat type IIa diamond at its 70% owned Letseng mine in Lesotho.
  • News of the discovery of this stone comes shortly after the announcement last week that Gem Diamonds had recovered a 910 carat stone that is believed to be the fifth largest diamond ever recovered.
  • Today’s announcement points out that “This is the fourth high quality diamond of over 100 carats recovered so far this year”. We believe that Letseng produced seven stones of this size throughout 2017 and hence it appears that the mine has made a particularly strong start to 2018.

Conclusion: Although the recovery of large diamonds is an unpredictable event, with 4 stones greater than 100 carats in size reported so far this year it appears that the company’s work to minimise losses through breakage of large stones during the recovery process has been effective. We look forward to news on the values realised for these diamonds in due course.

 

Lonmin PLC (LON:LMI) 85 pence, Mkt Cap £241m – 2017 results, maintained 2018 guidance and update on offer from Sibanye

  • Lonmin reports a 2017 pre-tax loss of US$1.17bn after an impairment charge of US$1.05bn arising from the changes to the business plan arising from the decision to reduce production levels in order to focus on the core profitable “Generation 2” shafts.
  • Lonmin exceeded its published sales guidance of 650-680,000 oz of platinum with sales totalling 706,030 oz of platinum. The increased sales benefitted from the release of metal held within the pipeline as well as from 31,682 oz of platinum released from the smelter clean-up project. Unit costs rose by 8.9% to R11,701 per PGM oz.
  • The company’s move to concentrate on the “Generation 2” shafts (K3, Saffy & Rowland) saw the tonnage from these production units increase by 7.1% increase (to 6.9mt) while output from the  “Generation 1” shafts reduced by 15.6% to 1.9m tonnes. The 4B shaft, which is also a Generation 2 shaft, though not classed a core shaft, suffered a 16.9% reduction in production tonnage as a result of “worse than anticipated geological conditions and was also impacted by safety stoppages and the disruption associated with two fatalities.”
  • Commenting on the state of the market for its key commodities, Lonmin comments that although PGM pricing has recovered “from prior year lows [it] remained weak. In the short term, we expect markets to remain subdued, however we still believe the long term market fundamentals are strong. PGMs have a vital role to play as we move towards a greener global economy.”
  • Lonmin notes that “During the financial year, Rhodium and Palladium prices performed strongly, gaining 72% and 30% respectively. However, Platinum underperformed with the price declining 11% which resulted in Palladium trading at a premium to Platinum in September 2017 for the first time since 2001.”
  • Considering the outlook for prices in 2018, Lonmin points to “Cuts to production by South African producers initiated in 2017 are expected to result in reduced platinum output next year, while demand is forecast to recover to 2016 levels leaving the market in a fundamental deficit.”
  • Lonmin is subject to a recommended all share offer from Sibanye-Stillwater. The transaction is expected “to close in the second half of the 2018 calendar year.” Regulatory approvals in a number of jurisdictions as well as shareholder approval by both the Lonmin and Sibanye-Stillwater shareholders and court approvals will be required to implement the transaction and contribute to the relatively protracted timetable.
  • Sales guidance for the full financial year “is maintained at between 650,000 and 680,000 Platinum ounces. We are maintaining unit cost guidance of between R12,000 and R12,500 per PGM ounce produced.”
  • Capital cost guidance for 2018 is also maintained at between R1.4 to 1.5 billion.

Conclusion: Lonmin is pressing ahead with its refocussing of the business on its core shafts. If the company’s predictions of an emerging supply deficit in platinum are realised, the Sibanye-Stillwater offer for the company may been seen, in retrospect, as particularly astutely timed.

 

 

]]>
Mon, 22 Jan 2018 11:13:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29265/morning-view-platinum-set-to-outperform-as-money-managers-boost-holdings-29265.html
Morning View . Metals prices rise as US dollar slips on Treasury selloff http://www.proactiveinvestors.co.uk/columns/sp-angel/29257/morning-view-metals-prices-rise-as-us-dollar-slips-on-treasury-selloff-29257.html Altus Strategies* (LON:ALS) BUY – Target price 12.2p – Legend shareholders approve the merger with Altus

Goldstone Resources (LON:GRL) – Akrokeri Gold mine shows potential to restart production

Mkango Resources* (LON:MKA) – Shareholders approve Talaxis deal

Serabi Gold (LON:SRB ) – Q4 and 2017 results

SP Angel ranked No 1 for research by ‘Research Tree’ according to investor demand

Nickel – greater use of nickel in batteries should extend range and environmental credentials of battery packs

  • The Nickel Institute is busy promoting the virtues of increasing nickel content in Li-Ion batteries.
  • They point out that ‘The development of a mass market in electric vehicles hangs on improvements in battery technologies to extend the range and reduce the time batteries take to recharge’.
  • We know battery manufacturers are looking to reduce cobalt content in future battery technologies and that the new batteries should have higher lithium and nickel loadings to increase power density and hopefully reduce recharge times.
  • We should qualify that cobalt supply will struggle to keep pace with increasing demand despite this thrifting, particularly as much of the world’s cobalt outside the DRC is in sulphide form and is associated with arsenic. DRC cobalt is oxidised into a heterogenite cobalt-oxy-hydroxide where the cobalt is more simply extracted using heap or vat leaching.
  • The institute highlight that the next generation of batteries will be 100% better than the last and that nickel is fully recyclable.
  • EU auto manufacturers are working on 50-60kWh batteries for 120km range with 1kWh requiring some 0.5kg of nickel indicating 25-30kg of nickel per battery for basic battery packs.
  • Battery manufacturers require nickel sulphate for battery manufacture enabling certain miners who produce nickel sulphate directly to gain a significant advantage over more normal nickel producers as creating nickel sulphate from nickel metal is more expensive to do.
  • China cut import taxes on nickel sulphate (sulfate) to 2% in 1st January this year indicating the importance of securing imports for their growing domestic battery industry.

 

Lithium stocks stutter on SQM deal

  • Lithium stocks have tumbled after major Chilean lithium producer SQM resolves its years-long dispute with the government concerning output ceilings. The deal will allow SQM, the world’s biggest exporter of lithium carbonate, to ramp up production more than three-fold and also follows the withdrawal of the government’s bete noire, Julio Ponce, from control of the company.
  • The release of lithium carbonate stocks comes as consumption requirements from battery manufacturers is expected to take off on rapid electric vehicle demand, removing potential supply risks, but has strongly hit competing miners with Albemarle shares falling as much as 11%. Long-term price forecasts for lithium carbonate are expected to contract to $8,000/t as more output comes online, and Morgan Stanley now foresee highly elevated prices to diminish at a quicker pace.
  • Market experts foresee some silver lining, as SQM has a track record of avoiding oversupply and is unlikely to flood the market with vital green materials. The SQM deal will not affect global lithium supply for at least three-five years given the time requirements for expansion and an extended concentration period in the vast evaporation ponds before first production. UBS analysis foresee the production increase as a major support for the industry, as timing for the expansion will match the surging demand and help avoid a shortage of lithium. “This new deal will require the biggest expansion in lithium brine production ever. Even for a company with SQM's technical proficiency, getting the studies, permitting, financing, a final investment decision and construction done on the scale we are talking about, is going to be three to five years before you get first production”.

 

121 Conference, Cape Town – 5-6 February 2018

SP Angel Analysts will be at the 121 Mining Investment Conference in Cape Town on 5th & 6th February

  • We look forward to meeting investors and companies there or by appointment thereafter.

 

Dow Jones Industrials

 

-0.37%

at

26,018

Nikkei 225

 

+0.19%

at

23,808

HK Hang Seng

 

+0.41%

at

32,255

Shanghai Composite

 

+0.38%

at

3,488

FTSE 350 Mining

 

+0.76%

at

19,559

AIM Basic Resources

 

-0.53%

at

2,752

 

Economics

US – Yields on 10y US Treasuries climbed to 2.63%, the highest level in three years amid strengthening economic growth momentum and as expectations of three rate hikes (guided by the Fed) crossed over 50% this week.

  • 2y Treasury notes saw yields climbing 17bp to 2.05% since the start of the year hitting the strongest level since 2008.
  • In the meantime, the US$ index headed for a sixth weekly decline amid concerns over a potential US government shutdown.
  • The House voted through a resolution to fund government operations until 16 February with the bill now facing a vote in the Senate ahead of a Friday midnight deadline.
  • A number of conservative in the Senate are reported to be hesitant to support the bill demanding more military spending which means Republican leaders will need some support from the Democrats.

 

China – Commodity prices are climbing higher on the back of a supportive downward trend in the US$ as well as better than forecast Chinese GDP numbers released yesterday.

  • The headline GDP came in at 6.8%yoy in the final quarter of the year taking 2017 growth rate to 6.9%, up on 6.7% recorded in 2016.
  • Additionally, higher growth rate is accompanied by a slower increase in credit when compared to 2016, Bloomberg Intelligence estimates.
  • In particular, debt to GDP ratio is suggested to have climbed 5pp to 264% last year compared with a 19pp increase in 2016.
  • The data showed that environmental issues are being addresses with a contained effect on GDP growth rates; pollution levels in Beijing are reported to be down 70% from their levels a year ago.
  • While strong economic numbers point to a robust growth momentum, a little volatility in the gauge as well as recent reports over miscalculations in GDP estimates in a couple of regions lead to concerns over the reliability of the data.

 

Germany – Social Democrats, former Angela Merkel’s CDU coalition partners, are due to vote this weekend on a new coalition deal.

  • Producer prices are reported to have posted the first annual increase in 2017 in half a decade amid increasing cost pressures which is likely to filter through an accelerating headline consumer inflation.
  • Industrial products price index climbed 2.6%yoy last year compared to a fall of 1.7%yoy in 2016.

 

UK – Retail sales drop more than forecast in December from high base in the previous month amid increased spending during the Black Friday period while economic fundamentals are not providing support either.

  • After Black Friday sales have neem widely introduced in the UK in 2010 spending has been brought forward from December.
  • Annual growth rate surprisingly fell last month compared to market estimates for a step up in spending rate.
  • “The longer-term picture is one of slowing growth with increased prices squeezing people’s spending,” the ONS said commenting on numbers.
  • Retail sales ex auto fuel (%mom/yoy): -1.6/+1.3 v 1.1/1.5 in November and -1.0/2.6 forecast.
  • The pound is little changed keeping on a growth trajectory towards the 1.40 level against the US$.

 

France – Manuel Macron opposed the idea of granting British financial services sector special access to the EU single market after Brexit.

 

Currencies

US$1.2272/eur vs 1.2212/eur yesterday  Yen 110.62/$ vs 111.18/$  SAr 12.158/$ vs 12.248/$  $1.392/gbp vs $1.384/gbp  0.803/aud vs 0.798/aud  CNY 6.403/$ vs 6.426/$

 

Commodity News

Precious metals:         

Gold US$1,336/oz vs US$1,329/oz yesterday

  • Despite late week gains, the precious metal remains on track for its first weekly drop since early December, as the dollar slips amid selloff in Treasuries and rising concerns over the possibility of US government shutdown. Bloomberg dollar spot index closed down 0.2%, to head for its 6th straight week of declines as the deadline closes and the House acts to avoid the shutdown.
  • Bullish sentiment for gold can also be signaled as the metal is trading near the cheapest relative to crude oil in more than two years. While both commodities have gained on dollar weakness and intermittent geopolitical tensions, oil has risen at a faster pace amid collective production cuts. Bloomberg Intelligence analysis see the gold-oil ratio “has backed up into the key support zone, favouring the metal”.

   Gold ETFs 72.1moz vs US$71.6moz yesterday

Platinum US$1,013/oz vs US$999/oz yesterday

Palladium US$1,110/oz vs US$1,108/oz yesterday

Silver US$17.10/oz vs US$17.07/oz yesterday

           

Base metals:   

Copper US$ 7,139/t vs US$7,079/t yesterday

Aluminium US$ 2,261/t vs US$2,194/t yesterday

Nickel US$ 12,570/t vs US$12,505/t yesterday

Zinc US$ 3,403/t vs US$3,386/t yesterday

  • Zinc is forecast to continue its strong rally as global production is on track to trail demand for a third straight year, according to Japan’s top smelter Mitsui Mining & Smelting Co. The metal, primarily consumed in galvanized steel manufacture, is expected to be sustained near the highest levels in a decade as the prices inch above $3,400/t, and average 2018 prices are forecast at £2,950/t.
  • A combination of synchronised global growth and sustained under-investment in new supply has driven metal prices up more than 120% in the past two years, increasing profit margins for biggest producers with miner’s cash costs of about $2,100/t. General manager of metal sales at Mistui noted that “at current prices, every miner is able to make money, and it just isn’t normal for this situation to last for such a long time”.
  • Supply has undergone sustained restrictions as Glencore Plc’s cut group mining production and Chinese environmental limitations have shuttered domestic output, while synchronised efforts to restart mines without spoiling the rally see Baar, the Swiss-based giant raising production by 195,000 tonnes through end-2020, less than half the 500,000 tonnes closed in 2015.
  • Continued bullish sentiment is felt across the industry as Goldman Sachs Group Inc. boosted zinc prices to $3,500/t in 6 months on supply tightness, while leading producer Hindustan Zinc Ltd., a unit of billionaire Anil Agarwal’s Vendanta Ltd., is bullish about prices and premiums as consumption is expected to outpace mine supply and tighten the concentrate market, “we will end the year with another record performance in production and profitability”.

Lead US$ 2,616/t vs US$2,568/t yesterday

Tin US$ 20,540/t vs US$20,495/t yesterday

           

Energy:           

Oil US$68.6/bbl vs US$69.2/bbl yesterday

  • OPEC has raised its forecast oil supply from non-member countries as sustained higher prices look to encourage US shale drillers to break record production, offsetting the collaborative OPEC-led deal to clear a supply glut and a deepening plunge in Venezuelan production. The latest monthly report forecast outside production would boost supply by 1.15 million barrels per day this year, up from 990,000 bpd expected previously.
  • Meanwhile, Venezuelan crude oil production contracted more than 13% last year, striking a 28-year annual low point that only serves to deepen the economic crisis and elevate debt defaulting.

Natural Gas US$3.156/mmbtu vs US$3.222/mmbtu yesterday

Uranium US$23.40/lb vs US$23.50/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.2/t vs US$72.7/t

Chinese steel rebar 25mm US$622.7/t vs US$634.7/t

Thermal coal (1st year forward cif ARA) US$85.8/t vs US$84.4/t

Premium hard coking coal Aus fob US$228.3/t vs US$240.8/t

 

Other:  

Tungsten APT European US$310-318/mtu vs US$307-318/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

Innovative new battery supply

  • MGX Minerals and Highbury Energy have partnered to prepare a detail process to extract metals such as nickel, vanadium, and cobalt, vital for supporting battery growth, from petroleum coke. Highbury’s experts in thermochemical gasification are assisting MGX in designing a proprietary flow to generate hydrogen gas and concentrate metals in the form of ash by-product. Petroleum coke concentrates denser impurities, ranging across metals and sulphur compounds.
  • The project initially targets 106 million tonnes petcoke stockpiles found around the Alberta oil sands, with phase 2 of the study focusing on analysis of locations, laboratory bench top feedstock results, advanced process design and initial plant design parameters.
  • The study looks to build on further studies which looks to recover minerals from treated wastewater brines.

 

Company News

Altus Strategies* (LON:ALS) 8.0p, Mkt Cap £8.6m– Legend shareholders approve the merger with Altus

BUY – Target price 12.2p

  • Legend Gold received 100% approval from its shareholders in favour of n all-share merger with Altus Strategies.
  • Legend now plans to secure the approval of the Supreme Court of British Columba to the deal and subject to that parties are expecting to close the merger on or oabout 25 Jan/18.
  • Under the agreement, Legend shareholders will receive three new shares in Altus Strategies for each common share they hold in the Company.
  • Following the completion, Legend and Altus shareholders will hold around 27.6% and 72.4% of the combined company, respectively.
  • Additionally, Altus Strategies is preparing an application for a dual listing of its share on the TSX-V.
  • Legend Gold holds a portfolio of early stage prospective gold exploration projects in Mali most of which are located within 10-20km radius of the operating 4.9mtpa 170kozpa Sadiola mine as well as one project in southern Mali (Pitiangoma Est) currently under the JV with Resolute.

*SP Angel acts as Nomad and broker to Altus Strategies

 

Goldstone Resources (LON:GRL) 2.1p, mkt cap £5.2m – Akrokeri Gold mine shows potential to restart production

  • Goldstone Resources is looking at potentially restarting the historic Akrokeri underground gold mine in Ghana.
  • The old Akrokeri underground mine is just 1.5km along from Goldsonte’s proposed AK01 South Pits.
  • Akrokeri produced some 75,000oz between 1904 and 1909 at an impressive grade of around 24g/t from quartz veins running around 1.2m wide.
  • The mine produced free milling, non-refractory ore indicating low process costs going forward.
  • More recent drilling of 5,200m has identified previously unmapped high-grade narrow quartz veins with sample grades running up to 51g/t offering tantalising potential for the mine going forward.
  • The team have now located all 5,200m of drill core drilled by Birim and Pan African Resources with the core now re-located to Goldstone’s core shed.
  • The mine had two shafts running to 427m and 152m deep though given their age they may not be useable.
  • Recent drilling late last year showed the following grades from 26 holes at Goldstone’s proposed open pit on the Akrokeri license.
  • Best results were:
  • 30m grading 2.22g/t gold in hole AKRC018 at 27m depth;
  • 12m grading 3.78 g/t gold in hole AKRC012 at 15m depth;
  • 1m grading 12.4 g/t gold in hole AKRC017 at 13m depth - one of the best results from the Akrokeri pit prospect to date.
  • A sub- parallel second zone may be available for mining within the proposed pit.  Metallurgical testing and ore resource estimation work is continuing.

Conclusion: Goldstone appear to be putting together the elements for a credible mining plan under the leadership of Emma Priestly who has taken over as CEO and is supported by the infamous Bill Trew, ex Oxus Gold and under the watchful eye of Richard Wilkins also ex Oxus and current CFO at Phoenix Global Mining. We look forward to news of further progress on the future mining potential for the underground and open pit prospects at Akrokeri.

 

Mkango Resources* (LON:MKA) 11.3p, mkt cap £11.6m - Shareholders approve Talaxis deal

  • Shareholders have approved the previously announced transaction which will see Noble Group's subsidiary, Talaxis, invest £5m in the Mkango subsidiary Lancaster Exploration in order to progress the feasibility study on the Songwe Hill rare-earths deposit in Malawi.
  • In addition, Talaxis will invest £1m in Maginito Limited which holds Mkango's interest in its collaboration with Metalysis Limited to advance the development of specialist alloys using rare-earths to produce neodymium and praseodymium based magnets.
  • ln November 2017, Mkango entered into an agreement with Talaxis, a wholly owned subsidiary of Noble Group Limited, whereby, subject to regulatory approval, Talaxis will fully fund a feasibility study for Songwe by investing £12 million (C$20 million) for a. 49% interest in the project. Talaxis will also have the option to acquire a further 26% interest in the project by arranging funding for project.

Conclusion: Subject to the formal approval of the TSX Venture Exchange, the shareholder approval should see Mkango in a position to press ahead at Songwe Hill with an influential and well-funded industry partner behind it. We await further news as the feasibility study proceeds.

*SP Angel act as Nomad and broker to Mkango Resources

 

Serabi Gold (LON:SRB) 3.8p Mkt value £26m - Q4 and 2017 results

  • Serabi Gold has reported Q4 gold production from its Palito/Sao Chico operation in the Tapajos region of Brazil of 9,334 oz bringing the total for 2017 to 37,004 oz (2016 - 39,390 oz). 
  • An increased milling rate of 172,565 tonnes (2016 - 158,966 tonnes) failed to offset a year on year decline in head grade to 7.11g/t from 8.11g/t. Recovery rates of approximately 94% seem in line with 2016.
  • Commenting on the results, which saw a second half recovery from the setbacks encountered earlier in 2017, CEO, Mike Hodgson, said "

"Overall I am delighted with the Company's performance over the second half of the year.  Total gold production for the year of 37,000 ounces compares with our initial guidance at the start of 2017 of 40,000 ounces.  Approximately 2,000 ounces of this shortfall arose during the second quarter from short term operational problems, now fully resolved, commissioning new underground fleet.  Since then, we have seen two strong quarters, with the mine running well and the plant at capacity.  We remain mill constrained as the static stockpile levels illustrate and the reported operational statistics for both the third and fourth quarters could not, realistically, have been improved by much. I am, therefore, more than happy with the recent performance and the year end results."

  • Although at this stage the company is not reporting production cost information, operations at Palito seem to be going well as it diversifies its sources of plant feed, Mr Hodgson commented that "At the Palito orebody, seven veins out of the 25 veins that comprise the total geological resource are now in various stages of development and production.  The Pipocas, G3, and Senna veins remain the backbone of our sources of ore, with smaller contributions from the newly developed Jatoba, Mogno, Zonta and G1 veins"
  • The company provides 2018 production guidance for 2018 that it expects to exceed 2017 production and may reach output of up to 40,000 oz.
  • The other highlight of the quarter according to the company was the "acquisition of Chapleau Resources Ltd and its wholly owned 370,000 ounce Coringa gold deposit.". Mr Hodgson described Coringa as "an asset we have been keen to acquire for some time and one that I feel will serve the Company well and bring great value over the coming years."

Conclusion: Serabi Gold's Palito Sao/Chico operation seems to have recovered from the setbacks earlier this year and the company is guiding to at least matching 2017's production in 2018. The acquisition of the Coringa deposit in Q4 2017 will add a potential additional feed source and we look forward to news on how Serabi Gold will integrate it with existing operations.

 

 

]]>
Fri, 19 Jan 2018 11:30:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29257/morning-view-metals-prices-rise-as-us-dollar-slips-on-treasury-selloff-29257.html
SP Angel . Morning View . Chile approves lithium expansion for SQM http://www.proactiveinvestors.co.uk/columns/sp-angel/29250/sp-angel-morning-view-chile-approves-lithium-expansion-for-sqm-29250.html Apple to repatriate hundreds of billions of dollars back into the US

The effect of the repatriation of potentially >US$1tr into the use by Apple, Amazon, Google, Starbucks and others could cause some unpleasant moves in overseas stock markets and currencies over the next few years.

  • Trump’s tax reforms appear to be sufficient to persuade Apple to repatriate hundreds of billions of dollars of investment back into the US.
  • The reforms may see Apple pay some US$38bn to the US treasury while also investing billions in new US based manufacturing, data centers, research centers and.
  • Apple is planning some US$30bn of investment in the US over the next five years creating some 20,000 new jobs at existing sites and at the new campus it is planning.
  • Apple is also planning to issue new $2,500 stock based bonuses to employees.

 

Global lithium supply concerns quashed as top Chilean (SQM) output cleared to rise

  • Following years of bitter dispute with Chilean authorities, operator of one of the world’s richest lithium deposits, Soc. Quimica & Minera de Chile SA (SQM) has been cleared to ramp up production. Development agency Corfo and SQM signed an agreement on Wednesday covering royalties, investments and corporate governance which will govern production from the Santiago-based company. The deal, which looks to more than double production quota for the Salar de Atacama brine project, also includes a $17.5 million end-of-dispute payment to Corfo.
  • SQM’s initial quota of 1 million tonnes of lithium carbonate was expected to run out by 2022. Now the quota has been raised to 2.2 million tonnes through 2030. Corfo executive vice president, Eduardo Bitran notes “the increase in supply will be very significant” while the “deal has consequences for the long-term prices, but we aren’t worries about sending this signal because electric vehicles will keep driving demand”.
  • The increased quota allows SQM to boost capacity from 66,000 tonnes lithium carbonate to as much as 216,000 tonnes by 2025, or more if it made additional investments and approvals. The move is expected to boost output from the South American nation, with combined production across SQM and Albemarle reaching as much as 500,000 tonnes of lithium as “Chile will recover its leading place as a lithium producer”. The boost in production could supply as much as 90% global lithium demand from the nation, with Deutsche Bank forecasting 534,000 tonnes 2025 consumption by end-use.
  • The end of dispute also opens to option for SQM to partner with state-owned copper producer Codelco to extract lithium from one of the world’s highest-grade discoveries from the Maricunga salt flat in northern Chile. Both companies hold large properties in the salt flat and a partnership would allow economically viable production.

 

Dow Jones Industrials

 

+1.25%

at

26,116

Nikkei 225

 

-0.44%

at

23,763

HK Hang Seng

 

+0.43%

at

32,122

Shanghai Composite

 

+0.87%

at

3,475

FTSE 350 Mining

 

+0.25%

at

19,505

AIM Basic Resources

 

-0.80%

at

2,766

 

Economics

China GDP growth surprises at 6.9% last year

  • Chinese economic growth grew at a substantial 6.9% last year according to official data ahead of the official target of 6.5%
  • The figure is particularly surprising given the crackdown on corruption and on polluting industries
  • Makes you wonder if they closed energy-intensive industries to free up power capacity for other industrial growth
  • Other observers, such as Capital Economics estimate real China GDP growth to be less than the official figures though the increase in GDP will still surprise many
  • Officials in Inner Mongolia and Tianjin have commented that their figures for 2016 were overstated.
  • China is moving to restructure its economy away from less energy efficient, polluting industries towards more modern and efficient concerns and continues to encourage growth in new high-tech industries.
  • While there are concerns over debt levels the Chinese government has demonstrated its willingness to do whatever it takes to promote continued growth rates and the restructuring of industry.
  • The IMF now states Chinese debt as equivalent to 234% of the total output which looks manageable given the high growth rate.

 

Currencies

US$1.2212/eur vs 1.2230/eur yesterday  Yen 111.18/$ vs 110.78/$  SAr 12.248/$ vs 12.317/$  $1.384/gbp vs $1.377/gbp  0.798/aud vs 0.797/aud  CNY 6.426/$ vs 6.433/$

 

Commodity News

 

Precious metals:         

Gold US$1,329/oz vs US$1,336/oz yesterday

  • Gold spot retreats as US equities continue to shine amid optimism on global growth while concerns surrounding the US government shutdown subside. The S&P 500 index closed on a record following yesterday’s trading, with the biggest gain in more than a month. GoldSilver Central note “the strengthening of the dollar and capital flows are the main reasons for gold’s decline”.
  • However, tailwinds in both Asian physical and paper markets suggest the precious metal will continue its rally. Chinese New Year buying and option prices are expected to boost prices with marketing director of bullion dealer GoldCore Ltd. foreseeing the metal breaking highs above $1,400/oz. Gold tends to perform well in the opening two months of the year, with the metal advancing on average 6% in January and February combined over the past decade.

   Gold ETFs 71.6moz vs US$71.6moz yesterday

Platinum US$999/oz vs US$1,002/oz yesterday

Palladium US$1,108/oz vs US$1,102/oz yesterday

Silver US$17.07/oz vs US$17.20/oz yesterday

           

Base metals:   

Copper US$ 7,079/t vs US$7,083/t yesterday

  • Disrupted supply from the world’s largest producer of copper, Chile, is expected to boost copper prices as the nation’s state copper commission, Cochilco, raises its estimated 2018 price for the metal to £3.06/lb from previous $2.95/lb forecast. Vice President Sergio Hernandez cited a “perception of vulnerability” linked to a large number, “between 20 and 25 collective (labour) negotiations” expected in Chile, and in neighbouring Peru.
  • Given the potential for supply issues, Cochilco forecast as global copper supply deficit of 175,000 tonnes in 2018, compared to 67,000 tonnes in 2017. The commission expects Chile to increase production by 4.9% to 5.74 million tonnes, principally from normalised output from the world’s largest Escondida copper mine operated by BHP.  

Mitsubishi considers raising stake in Anglo’s Quellaveco copper project

  • Anglo’s board will decide later this year whether to give greenlight to $5.5bn development plan at Quellaveco, one of world’s largest copper orebodies.

Aluminium US$ 2,194/t vs US$2,186/t yesterday

Nickel US$ 12,505/t vs US$12,530/t yesterday

  • Jinchuan Group Co., China’s top nickel supplier, is expecting to boost output to meet surging demand for battery materials. According to vice general manager of its marketing unit, Jinchuan aims to lift supply of nickel sulphate by 40%, from 50,000 tonnes in 2017 to 70,000 tonnes this year. “While physical demand hasn’t picked up too significantly yet, it may surge in about two years”, particularly as the Asian nation is leading global advance in electric vehicle manufacture with sales of new-energy vehicles forecast to top 1 million in 2018, having risen to 700,000 last year.
  • Global major miners are also ramping up efforts to match rapidly advancing consumption for battery materials. BHP Billiton Ltd. has started construction on a giant US$55 million nickel sulphate plant at the Kwinana Refinery in Western Australia, aiming for first production in H1 2019. Looking to capitalise on the forecasted demand for lithium-ion batteries, stage one of the facility is expected to boost global production by 100,000 tonnes of nickel with the option for double capacity via a second phase.
  • The positive demand outlook supported prices 27% higher in London last year, the biggest gain since 2010. However, rising Indonesian production of nickel pig iron, a low-quality alternative to refined metal, is expected to boost global stockpiles and apply some downward pressure on prices. Surging demand from high-quality battery-grade nickel is expected to generate a significant price disparity surrounding the quality of nickel products, with a large premium (as observed with different lithium products) for the Lithium-ion ready material.

Zinc US$ 3,386/t vs US$3,406/t yesterday

Lead US$ 2,568/t vs US$2,563/t yesterday

Tin US$ 20,495/t vs US$20,470/t yesterday

           

Energy:           

Oil US$69.2/bbl vs US$69.2/bbl yesterday

Natural Gas US$3.222/mmbtu vs US$3.155/mmbtu yesterday

Uranium US$23.50/lb vs US$23.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.7/t vs US$73.5/t

Chinese steel rebar 25mm US$634.7/t vs US$631.4/t - Toyota clears all its vehicles of Kobe Steel scandal

  • Has found no issue with safety and performance of its vehicles after completing inspections of materials supplied by Kobe Steel linked to its data falsification scandal.
  • The company has conducted tests on aluminium plates, aluminium extrusion, copper pipe and steel wires, and has completed checks on materials purchased overseas, concluding inspecting all materials potentially affected

Thermal coal (1st year forward cif ARA) US$84.4/t vs US$84.5/t

Premium hard coking coal Aus fob US$240.8/t vs US$249.7/t

 

Other:  

Tungsten APT European US$310-318/mtu vs US$307-318/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

Lithium - Lithium miner SQM gets green light to expand production

  • SQM, the world’s second largest lithium producer, has resolved long running dispute with the Chilean government, on agreeing to expand its production.
  • SQM said it would pay $17.5m to Chilean regulator Corfo and agree to pay royalties linked to the price of lithium to settle the dispute
  • In return SQM will be able to produce an extra 349,553 tonnes of lithium until 2030 from the Atacama desert

 

Company News

Aston Bay Holdings* (CVE:BAY) 0.14c/s, Mkt cap C$10.5m – Seal Zinc resource shows 1mt grading 10% zinc

  • Aston Bay Holdings has filed an initial NI 43-101 Mineral Resource Estimate for their Seal Zinc project of 1.006mt grading 10.24% zinc and 11.44% zinc equivalent.
  • The project shows strata-bound zinc and silver mineralization over 450m of strike with a true thickness of  10-~25m.

Mineralization remains open along strike and down dip with previous drilling showing

    • 18.8m core length grading 10.58% zinc and 28.7 g/t silver from 51m depth.
    • 30.8m core length grading 5.11% zinc and 23.0 g/t silver from 101m depth..
  • Storm Copper: The publication of the resource is a step forward for Aston Bay Holdings which is looking to identify the source of very high-grade copper chalcocite mineralisation which has come to surface naturally after a process of hydrocarbon replacement.
  • BHP conducted ran a $2m soil survey which saw the collection of 2,005 soil samples over an area of approximately 120 km north-south and 20 to 40 km east-west on the property.
  • This added to previously released drill results show visible copper mineralisation:  (true widths estimated to be 75-100% of core)
    • 16m at 3.07% copper and 12.26g/t silver from 93m down hole
    • 4m at 1.17% copper
    • 20m at 0.44% copper
  • There has been >9,000m of historical drilling on the Storm copper property trying to find the source of high-grade copper chalcocite which lies at surface in small lumps
  • The chalcocite so far discovered is thought to be from mineralisation bleeding to surface in historical events in mineralisation which dates back to the Polaris age 378m years ago.
  • The Mineralogy, zonation and grade are all characteristic of sediment-hosted copper and zinc systems with structural setting which looks similar to Ivanhoe’s giant Kamoa-Kakula discovery in the DRC which shows an Indicated Mineral Resource of 116mt grading 6.09% copper, plus Inferred Resources of 12mt grading 45% copper, at a 3% cut-off.
  • An updated presentation can be found at: https://astonbayholdings.com/wp-content/uploads/2018/01/Aston-Bay-Corporate-Presentation-January-2018.pdf
  • The Aston Bay team is led by Thomas Ullrich, ex Antofagasta and David Broughton who is an acknowledged world expert in sediment-hosted copper deposits and who discovered Ivanhoe’s massive Kamoa copper project in the Central African Copper Belt in the DRC. The team are further supported by Michael Dufresne who is also President of Apex Geoscience and Dwight Walker the CFO.

Conclusion: The Seal Zinc project on Somerset Island is not large by many standards but with zinc prices >$3,000/t the project may be worth investigating further to define a larger resource for economic extraction.
*SP Angel act as broker to Aston Bay

 

BlueRock Diamonds* (LON:BRD)  2p, Mkt Cap £2.8m – Encouraging results from K5 kimberlite sampling

BUY

  • BlueRock Diamonds report results from its recent 7,500t bulk sample at its Kareevlei ‘K5’ kimberlite diamond pipe are encouraging.
  • The results are sufficiently good for the team to undertake a second bulk sample to further check the grade, consistency and quality of stones from K5 pipe.
  • Kareevlei K2 pipe: Management report further details of their operations for the three months to end November 2017.
  • BlueRock sold some 2,110cts as previously reported at an average price of US$374/ct.
  • This gives average sales per tonne of ore of US$11.6/t on the 64,442t processed and an implied a grade of 3.27cpht ‘carats per hundred tonnes’.
  • Costs: The average on-mine cash cost was US$6.2/t or ($189/ct) recovered giving a margin of US$5.4/t (US$184.7/ct) assuming an exchange rate of ZAR13.7 for the three months to end November last year.
  • Unit costs should fall below the US$6.2/t  level on more consistent performance if production targets are met this year.
  • Production: Management are targeting 25,000t per month going forward indicating potential for some 300,000t of ore to be processed for the full year.  This should significantly raise operating profits assuming the team are able to roughly meet the production target for mining and processing.
  • Margins should increase further if management continue to see this consistency of grade and quality of diamonds recovered as seen in recent months.
  • Management and other admin costs are relatively low and the cost of exploring and evaluating the other diamond pipes on the property is also relatively cheap due to the ability to simply put the bulk sample through the nearby plant at the K2 pipe.
  • Today’s statement appears to confirm the positive effects of the increase in production and turnaround effected in the last few months of last year.
  • Quality: There is always the chance of recovery of some larger and more valuable gem-quality diamonds as production progresses and the move to potentially mine the K5 diamond pipe close by should add to production and increase operational flexibility.
  • Grades jumped by 37.5% to 3.63cpht from 2.64cpht in October indicating higher grades in the lower kimberlite levels and also potential for higher sales values as the November sales rose to 957.70cts at $404.45/ct.
  • This gives further margin potential as the November numbers are replicated through much of this year now that mining is well into the fresh ‘Level 2’ kimberlite which should contain higher diamond grades.
  • BlueRock should be able to recover around 1,125cts of diamonds on average a month which could raise sales to around US$454,500 a month or potentially US$5.5mpa.
  • The turnaround seen in the last quarter was a direct result of the overhaul of the process plant and increase in mining capacity.
  • Bringing the mining back in house is producing benefits and should lower costs
  • The turnaround team is led by Adam Waugh, BlueRock’s ceo who now appears to be ahead of schedule in terms of the restructuring.
  • The grades seen now appear to support the development of a significant profit at the K2 pipe and bode well for the potential development of the new K5 diamond pipe.
  • New crusher: The new primary crusher should continue to reduce costs while the pre-screening circuit should further expand capacity and improve efficiency.
  • Blasting contractor: The new blasting contractor is now working on site and will hopefully provide consistent run of mine material.
  • Management support: The board is supported now by Johan Milho, as mine manager, and by Dr Kurt Petersen, a highly respected consultant metallurgist, who has advised on changes to the Company's plant. A new geologist should also be joining the team.
  • Larger stones: The recovery of a number of 5-10ct stones indicates potential for the recovery of some larger and significantly more valuable diamonds as the year progresses with the K2 pipe already demonstrating good gem quality stones at the upper end of diamond values seen from most diamond mines.
  • Throughput and sales have risen since Waugh’s reorganisation of the mining and process plant and recovered grades have improved towards the 4.5cpht estimated in the CPR.
  • H2 ’17: The recovery seen in the second half of last year was tempered by rain in October which caused mine production to pull back to just 17,000t for the month from the 22,010t in September with grades slipping to an effective 2.64cpht from the 3.01cpht seen in the September sale. We expect December and January production rates may also be affected by the extended ‘seasonal holiday’ seen over Christmas in South Africa when much of the country appears to shut down for several weeks.
  • Geologist: The team have also appointed a new consultant geologist, Jock Robey who is a Fellow of the Geological Society of South Africa and has a PHD from the University of Cape Town. Jock previously worked for De Beers as a kimberlite petrologist specialising in kimberlite mapping logging and petrology.
  • Kareevlei K1 & K3: while blasting has started at the K5 pipe for bulk sampling plans are being made for the future development of the K1 and K3 kimberlite pipes which would again give the company greater flexibility in its mining program as well as the potential to increase production rates for an expanded diamond recovery plant.
  • Pipe
  • Tonnes
  • Carats
  • Grade (cpht)
  • Classification
  • Total
  • 7,984,000
  • 359,000
  •  
 
  • 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
  • Koedonza (Jubilee pipe): not wishing to be constrained by the one diamond mine, BlueRock are busy evaluating another kimberlite some 40km north of Kimberley with a 2,500t bulk sample now taken.  BlueRock completed the first stage of its bulk sampling at Jubilee in October last year comprising the processing of some 480t of kimberlite excavated from 10m below surface level.  4.75 carats were recovered, with the largest diamond being 1.65 carats.  In total, 11 diamonds were recovered, all of which were of high gem quality. While the implied grade is not good at <1cpht the="" sample="" is="" small="" and="" recovery="" of="" a="" 1="" 65ct="" stone="" positive="" as="" it="" indicates="" better="" potential="" may="" be="" present="" li="">
  • Drought: While the Cape is suffering its worst drought in 100 years, the Kimberley area suffered severe flooding last year indicating sufficient water should be available for processing. Heavy rain does tend to slow mining and processing and is a risk from a production target perspective.
  • Expansion potential: The investigation of two more diamondiferous pipes at Kareevlei alongside the Jubilee Pipe at Koedonza suggests potential for greater flexibility and further expansion. The cost of bringing the Kareevlei pipes into production will be relatively low while the cost of expanding the process plant should also be relatively modest. It is possible that management might look to expand the plant as the operation settles down.

Conclusion:  There is good potential for BlueRock to lower unit costs if it raises production on a consistent basis. Grades and diamond values have been rising which also indicate better potential for significant margin expansion. If all goes to plan this could be a good year for BlueRock diamonds with new performance and rising sales highlighting the undervaluation of the market capitalisation today.

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

KEFI Minerals* (LON:KEFI) 3.6p, Mkt Cap £11.8m – Funding and operations update

  • Operationally, the Company continued to progress the Tulu Kapi project through the pre-development stage.
  • The Company confirmed costs and commissioning schedules for the final project models and populated formal financing data rooms.
  • Amid a strong growth momentum in gold price seen lately, the base case has been upgraded to $1,300/oz, up from $1,250/oz assumed previously.
  • The upgrade brings significant economic benefits including:
  • NPV (100% based, 8% discount rate) at start of construction $92m, up from $74m at the lower gold price;
  • NPV (100% based, 8% discount rate) at start of production of $152m, up from $131m at the lower gold price.
  • Equipment procurement and development will be managed together with community resettlement once “due diligence, regulatory approvals and execution of binding documentation”.
  • State power and roads authority confirmed their “budgets and schedule commitment to construct the project’s off-site infrastructure”.
  • The Mining License transfer to local subsidiary TKGM has been cleared.
  • The Company and Oryx Management, a private Jersey-based funding partner, terminated their agreement regarding the financing facility for the Tulu Kapi project.
  • The Tulu Kapi development financing structure involving other members to the consortium including the Government of Ethiopia, Ausdrill and Lycopodium is reported to remain the same.
  • The government of Saudi Arabia lent its support behind the pro-mining policy with the Company to update the market once “the new regulatory details are clarified along with G&M’s particular tenements”.
  • The Company will host an investor event on Tuesday 13 February at Davy’s at Woolgate and Brasserie (25 Basinghall Street, London, EC2V 5HA) from 6pm with a presentation followed by a Q&A session.

*SP Angel act as Nomad and broker to Kefi Minerals

 

Kodal Minerals* (LON:KOD) 0.2p, mkt cap £14.7m - Further encouraging drilling results from Bougouni lithium project

  • Kodal Minerals has announced assay results from the reverse-circulation drilling programme at its Bougouni lithium project in Mali where drilling is expected to resume shortly following the Christmas and New Year break.
  • The results come from the Ngoualana prospect. where recent work has concentrated on both infill drilling and on identifying extensions to the mineralisation, and at the Sogola-Baoule prospect where the work has been aimed at identifying extensions towards the south-west of the known mineralised pegmatite.
  • At Ngoualana, where 32 holes totalling 4,023m have been completed do far, drilling has shown the mineralised pegmatite veins extend along stike and that "the shallow infill drill holes are returning wide zones of pegmatite consistent with the previous drilling."
  • Among the results highlighted from Ngoualana today are:
    • A 31m wide intersection averaging 1.61% Li2O from a depth of 65m in hole KLRC061; and
    • A 20m wide zone averaging 1,69% Li2O from 71m in hole KLRC061; and
    • An 18m wide intersection averaging 1.66% Li2O from a depth of 66m in hole KLRC058.
    • Work at Sogola-Baoule "Drilling has successfully delineated extensions to the pegmatite bodies with the prospect remaining open along strike and at depth."
    • Results from Sogola-Baoule highlighted in today's announcement include:
      • A 12m wide intersection averaging 1.69% Li2O from a depth of 110m in hole MDRC021B; and
      • A 10m wide intersection averaging 1.56% Li2O from 128m in hole MDRC022.
      • We note that results reported from thework at Sogola-Baoile in addition to the results noted above, include multiple mineralised intercepts within both holes MDRC021B and MDRC022 which may have potential to increase the tonnage available in any future resource estimates.
      • Commenting on the results, which he described as "very pleasing", CEO, Bernard Aylward said "
      • "Our exploration campaign is ongoing with drilling expected to recommence shortly following a Christmas break and the awarding of the bulk sampling contract to be finalised and activities shortly to commence.  Additional assay for the drilling completed in December 2017 will be reported to the market as soon as they become available."
  • License update: The company has also confirmed that Mali's Directorate Nationale de l Geologie et des Mines (DNGM) has approved the application over two new 100km2 licence areas covering the high priority target areas in the Kolassokoro area. The new licences will have an initial validity of 3 years and are eligible to two further extensions each of a further 2 years.
  • "Kodal confirms that all key target areas and prospects within the Bougouni Lithium project are retained within concession areas that the Company has full and exclusive rights to explore and operate."
  • Kodal is continuing to enquire of the DNGM regarding the status of the  "Kolassokoro licence that had previously been issued to EMAS Mining SA ("EMAS") and in which the Company had a 90 per cent economic interest." and will provide an update in due course. 

Conclusion: Recent drilling continues to expand the footprint of lithium mineralisation at Bougouni; with drilling set to reume shortly, we look forward to further updates as exploration proceeds.

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

 

Highland Gold (LON:HGM) 166p, Mkt Cap £539m – FY17 production comes ahead of guidance

  • Q4 gold production totalled 68.7koz (Q4/16: 68.8koz) bringing total for the year to 272.3koz (FY16: 261.2koz).
  • This compares to a previously guided range of 255-265koz.
  • Regarding the mine-by-mine performance:
    • MNV produced 24.4koz (Q3/17: 27.4koz; Q4/16: 26.4koz) with an increase in grades partly compensating for a decline in processing rates due to a failure of a feed trunnion on one of the mill lines with a replacement due in Mar/18.
    • Belaya Gora (BG) produced 10.9koz (Q3/17: 12.3koz; Q4/16: 10.9koz) with c.4/5s of the plant feed drawn from stockpiles and gold recoveries holding up at improved levels compared to H1/17 (74-76% in H2/17 v 67-70% in H1/17).
    • Novoshirokinskoye (Novo) produced 33.5koz (Q3/17: 32.1koz; Q4/16: 31.5koz) on stable plant throughput and better grades compared to the previous quarter (5.97g/t v 5.47g/t in Q3/17).
  • Average realised gold price for the yer climbed to $1,260/oz, up from $,1247/oz in FY16.
  • Work on Belaya Gora/Blagodatnoye PFS and update Mineral Resource as well as Kekura DFS is being finalised with a release scheduled for Q1/17.
  • Updated JORC mineral reserve at MNV is expected to be completed in Q2/18.
  • Works on the 1.3mtpa Novo project continued during the quarter with design documentation for the mining capacity and respective infrastructure expansion filed with authorities for approval; full capacity is expected to be reached in 2020.
  • FY18 guidance is set at 265-275koz.

Conclusion: A positive set of production results with robust Novo performance compensating for operating challenges experienced at the MNV processing plant. The latter is expected to be fixed in Mar/18 with the management expecting production to hold up well in FY18 guiding for 265-275koz. FY17 output came ahead of the top end of the guidance and the level we used in our estimates on the back of better processed grades at Novo and MNV in the final quarter of the year.

 

Ortac Resources (LON:OTC) 2.65p, Mkt Cap 8.8m – Continuation of high grade gold seen at Casa Misisi (Akyanga) project

Arc Minerals* (new ticker  (ARC LN) 2.5p, Mkt Cap 8.3m –

 (Ortac has a effective economic interest of 62.3% in the Misisi Gold project through it’s 87.4% interest in Casa Mining Ltd which holds a 71.25% interest in project.

  • Ortac Resources, shortly to be renamed Arc Minerals, reports that given the encouraging results obtained so far from its 3500m of drilling at Casa Mining's Akyanga gold project in DRC.
  • Casa are moving to install a third drill at Misisi to increase the rate of diamond drilling on the project and reduce unit drilling costs.
  • The move follows the release of significant higher gold grades than previously seen in sections of >3m in drilling in MSDD0119 and MSDD0120
  • Recent results have confirmed the down-dip continuity of mineralisation by a further 100 meters and have also confirmed "the high grade nature of the deposit which has so far surpassed our expectations."
  • Among the assay results reported today are:
    • A 7.56m wide intersection at an average grade of 4.97 g/t gold from a depth of 259.14m in borehole MSDD0119.
      • This intersection includes a higher grade section of 0.66m averaging 24.77 g/t gold from a depth of 263.3m; and
    • A 3.13m wide intersection averaging 3.13g/t gold from a depth of 200.60m in borehole MSDD0120.
  • Hole 119 "was collared approximately 100m down dip of recently announced hole MSDD0118. This hole not only confirmed the downdip
  • continuity of the mineralisation along this section (extended by a further 100m down dip), but also the high grade nature of the mineralisation, as previously referenced to with hole MSRC0002 (18m @ 4.63g/t Au) on this drill profile"
  • "Diamond drill hole MSDD0120 was collared between existing holes MSDD0077 and MSDD0079. These existing holes are spaced approximately 200m apart and MSDD0120 successfully confirmed the +2 g/t Au continuity of the mineralisation between these two holes".
  • Table 1. Drill Intercepts for Hole MSDD0119

 

  • Hole ID
  • From
  • To
  • Length (m)
  • Gold (g/t)
  •  
  • MSDD0119
  • incl.
  • incl.
  • 247.39
  • 248.39
  • 1.00
  • 5.23
  • 259.14
  • 266.70
  • 7.56
  • 4.97
  • 259.14
  • 259.80
  • 0.66
  • 24.77
  • 263.30
  • 263.80
  • 0.50
  • 23.13

 

Table 2. Drill Intercepts for Hole MSDD0120

 

  • Hole ID
  • From
  • To
  • Length (m)
  • Gold (g/t)
  • MSDD0120
  • 200.60
  • 203.90
  • 3.30
  • 3.13

 

  • Conclusion: The success of the drilling program at Akyanga so far has encouraged the company to increase its program through the deployment of a third drilling rig.

*SP Angel acts as nomad and broker to Ortac Resources which is to be renamed Arc Minerals on 22 January. 

 

Shanta Gold (LON:SHG) 5.7p, Mkt Cap £44m – Q4 production climbs as underground operations ramp up to full capacity

  • Q4 gold production totalled 21.3koz (Q3/17: 18.2koz; Q4/16: 18.9koz) on the back of increased supply of high grade ore from the underground.
  • A total of 143.1kt at 4.7g/t was mined from the underground during the quarter, nearly double 76.0kt at 5.83g/t mined in Q3/17 and slightly in excess of the budgeted mining capacity of 45ktpm.
  • The share of treated ore from the underground has been increasing through the year and accounted for most of the feed in Q4/17 with underground operations yielding more than 250kt at 6g/t in FY17.
  • The plant processed 162kt at 4.48g/t (Q3/16: 163kt at 3.83g/t) during the quarter demonstrating stable gold recoveries of 91.1% (Q3/17: 90.9%; Q4/16: 90.9%).
  • FY17 gold production totalled 79.6koz, broadly in line with a 80.0koz management target and 80.3koz our estimate.
  • AISC costs averaged $747/oz versus guided $781/oz (FY16: $659/oz) for the year and an average realised gold price of $1,263/oz (FY16: $1,222/oz).
  • FY17 gold sales amounted to 79.9koz (FY16: 86.3koz).
  • Cash balances climbed to $13.5m (Q3/17: $8.0m) reducing net debt to $39.9m (Q3/17: $45.5m).
  • While the Company received a VAT refund of $3.4m during the quarter, the outstanding account finished at $14.5m by the end of Q4/17 versus $15.8m as of Q3/17, implying a $2.1m build up in the account after adjusting for the refund received.
  • $5m run-rate savings are expected to be reached by the end of Q1/18 with the management planning to extend further optimisation programmes seeing expenses cuts reaching a sustainable $7m rate by the end of Q3/18 (cuts are excluding changes to the mining method to be used at Luika underground operation).
  • The management is planning to provide further update regarding the Investec loan facility restructuring and a potential repurchase of the Convertible Loan Notes by the end of Q1/18.
  • FY18 guidance is set at 82-88koz at AISC of $680-730/oz.

 

Conclusion: While production numbers came broadly in line with our estimates, operations performed better on costs side leading to a lower closing net debt position as of FY17. The update highlights ramped up underground operations at New Luika gold mine with operations on course to generate positive FCF in FY18 to be directed at deleveraging of the balance sheet.

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Thu, 18 Jan 2018 12:10:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29250/sp-angel-morning-view-chile-approves-lithium-expansion-for-sqm-29250.html
Today's Market Review -Focus on quality raises iron ore premiums http://www.proactiveinvestors.co.uk/columns/sp-angel/29242/today-s-market-review-focus-on-quality-raises-iron-ore-premiums-29242.html Acacia Mining (LON:ACA) – Hounde royalty sale completed

Firestone Diamonds (LON:FDI) – Mixed Q2 results but output, quality, and demand improvements expected in H2

Georgian Mining* (LON:GEO) STRONG BUY – Michael Struthers appointed as COO to transition to mine development

IronRidge Resources* (LON:IRR) – Expanding its lithium exploration area in Ghana

Lucapa Diamonds (ASX:LOM) – More large diamonds recovered from Lulo

Sula Iron & Gold* (LON:SULA) – Sula changes name to African Battery Metals

African Battery Metals* (LON:ABM) – Sula changes name to African Battery Metals

Tahoe Resources (TSE:THO) C$5.8, mkt cap C$1.8bn – cuts quarter of workforce in Guatemala as courts delay mining license for Escobal silver mine

 

UK raises ambitious electric car targets

  • The official watchdog – Committee on Climate Change – offers a warning that three-fifths of all new cars must be electric by 2030 to meet greenhouse gas targets. While the government acknowledges the UK is raising the bar by cutting emissions faster than any other G7 nation, it has also expressed concerns that pledges need to be converted to reality unless falling short of ambitious targets. The warning arrives less than a week after the prime minister launched the ‘Clean Growth Plan’, a 25-year strategy to protect the environment.
  • The committee want 30-70% new cars to be ultra-low emission by 2030, as well as up to 40% of new vans, as part of efforts to phase out sales of conventional petrol and diesel versions by 2040. Currently fewer than 5% of new car sales, rising to 2.7 million over 2016, are ‘alternatively fuelled’. The rapid uptake in sustainable vehicles will require supportive government policies including cutting company car tax for electric vehicles and repealing the ban on onshore wind power to support the clean growing energy demands. With copper consumption alone rising 80-500% per electric vehicle (SP Angel Commodity Research Book 2017 – Battery Raw Material Review) the requirements for battery material is expected to generate significant demand across the entire supply chain.

 

DRC revises mining code to make most of battery driven cobalt boom

  • New code passed by National Assembly and now in hands of senate, provides for a ‘broadening of the base and raising of mining royalties’
  • Sets out taxes of up to 5% on strategic minerals – most likely including cobalt, and 6% on precious stones
  • Also raises stake of the state in capital of mining companies and outsourcing tasks related to the industry ‘only to firms in which the majority of the capital is owned by Congolese nationals,’ authorities want to ensure the repatriation of at least 40% of revenue of minerals sold for export
  • Many firms have fired back, stating that new code would ‘significantly weaken confidence of investors’

 

Canadian companies looking to extract nickel, cobalt and vanadium from petcoke

  • MGX Minerals and Highbury Energy have partnered to extract the metals from petroleum coke, designing a process to generate hydrogen gas and concrete metals in the form of ash by-product
  • Highbury has already completed a Phase I report on potential processes and markets for primary and secondary by-products, whilst Phase II study has started for analysis of locations and advanced design process

 

Dow Jones Industrials

 

-0.04%

at

25,793

Nikkei 225

 

-0.35%

at

23,868

HK Hang Seng

 

+0.25%

at

31,983

Shanghai Composite

 

+0.24%

at

3,445

FTSE 350 Mining

 

+0.10%

at

19,560

AIM Basic Resources

 

-0.73%

at

2,789

 

Economics

US – American automakers are warning of tougher conditions for 2018 on the back of “higher commodity costs and further adverse exchange”, Ford said announcing EPS forecasts for 2018.

  • Previously, GM also suggested the Company will not report earnings growth this year following five years of increasing profits on the back of stronger car sales in the US and China.

 

Eurozone – The euro has come off against the US$ this morning as one of the ECB policymakers expressed his concerns over the currency strong rally.

  • “I am concerned about sudden movements (in the euro) which don’t reflect changes in fundamentals,” Vitor Constnacio, vice-president of the ECB said.
  • The euro was off 0.3% in early hours on Tuesday with the EURUSD exchange rate trading around 1.2236 reducing YTD gains to 2.0%.

 

Greece – The parliament voted through another set of austerity measures as part of the nation’s bailout package including new bankruptcy procedures and limits on unions’ ability to go on strike and paving the way for the disbursement of the next bailout tranche for €6-7bn.

  • Eurozone finance ministers are expected to approve the next tranche at their meeting in Brussels on Jan 2.
  • The nation is targeting to exit the bailout programme in August this year shifting fund raising activities to debt markets given strong demand for higher yielding government bonds from investors.
  • In recent weeks yields on 10y benchmark Greek bonds dropped to the lowest level in a decade while the nation’s debt management agency rolled over a 3m bill last week at less than 1%, a nine year low.
  • Nevertheless, given the amount of exposure of European creditors to the Greek government, lenders will continue supervising the government until 75% of the debt is paid off, which is currently expected to happened in 2060.
  • What form the supervision will come in at has not been decided yet and is the subject of discussions in the coming months.

 

Currencies

US$1.2230/eur vs 1.2255/eur yesterday  Yen 110.78/$ vs 110.75/$  SAr 12.317/$ vs 12.254/$  $1.377/gbp vs $1.379/gbp  0.797/aud vs 0.797/aud  CNY 6.433/$ vs 6.436/$

 

Commodity News

 

Precious metals:         

Gold US$1,336/oz vs US$1,339/oz yesterday

  • Gold spot slips back from four-month highs as Bloomberg’s dollar index rises 0.3% from its lowest close in three-years on Tuesday. The precious metal contracted 0.3% to $1,334/54/oz, while the 14-day RSI continues to hover above 70 to give an indication the metal has been overbought.

   Gold ETFs 71.6moz vs US$71.5moz yesterday

Platinum US$1,002/oz vs US$994/oz yesterday

Palladium US$1,102/oz vs US$1,119/oz yesterday

  • Even among bearish forecasting, palladium is tipped for another record performance in 2018, according to Reuters surveying. However, the rapid surge in pricing could also lead to the trend of broad substitution for cheaper platinum in autocatalysts, reducing the market demand for palladium, and higher recycling volumes.

Silver US$17.20/oz vs US$17.26/oz yesterday

           

Base metals:   

Copper US$ 7,083/t vs US$7,124/t yesterday

  • Copper pulls back to 3.5 week low after strong profit-taking, steadying dollar and concerns are raised over fading demand in China ahead of the Lunar New Year. The dollar index against a basket of six major currencies stood at 90.73, climbing from Monday’s three-year low, and causing three-month copper on the London Metal Exchange to fall 2.3% to $7,046.50/t as dollar-priced metals become more costly for non-US investors.
  • Commodity strategists at ETF Securities also note “a bit of profit-taking on the back of a strong run. Beyond that we had some trade data from China last week which indicated imports of refined metals have been somewhat slow” as the world’s largest consumer of copper approaches the Lunar New Year in Feb. 16th. Beyond the festive lull in industrial activity, “The demand picture looks robust, global PMIs are running close to seven-year highs while supply is likely to remain constrained, so we could see price growth above 5 percent in copper this year”.
  • Shanghai Futures Exchange metals came under pressure as investors liquidated positions across broad base metals, with open interest on copper, aluminium, zinc and nickel falling sharply during yesterday’s trading session.
  • Headline LME copper inventories have also risen 12% since the beginning of December, boosting the global balance by 204,650 tonnes.

Rio Tinto hikes 2018 copper target to 28% on year

  • Hiking target for mined copper output to 510,000 – 610,000 mt in 2018, up to 28% higher than its realised output of 478,000 mt in 2017
  • Also raised refined copper output to 225,000-265,000 mt in 2018, up to 34.4% higher than the 197,200 mt it produced in 2017
  • The bullish outlook comes after both its mined and refined copper output declined on a year-on-year basis in 2017; mined copper output was down 8.6% from 523,300 mt in 2016 and refined output down 21% from 250,100 mt – which it attributed to a 43 day strike at its copper venture in Chile

Aluminium US$ 2,186/t vs US$2,195/t yesterday

  • Contracting smelting capacity since 2011 across China is expected to close on a permanent basis as the nation’s Ministry of Industry and Information Technology (MIIT) rule that output that is not updated by the end of 2018 will not be able to count as replacement capacity. Chinese aluminium firms, producing a range of products including molten aluminium and aluminium ingots, are entitled to replace their capacity (internally or via mergers and acquisitions) with more modern facilities. The move, which builds on Beijing’s supply-side reforms, looks to enhance its emissions protection and permanently remove 3-4 million tonnes of illegal smelting capacity.

Nickel US$ 12,530/t vs US$12,480/t yesterday

Zinc US$ 3,406/t vs US$3,394/t yesterday

Lead US$ 2,563/t vs US$2,543/t yesterday

Tin US$ 20,470/t vs US$20,295/t yesterday

           

Energy:           

Oil US$69.2/bbl vs US$69.9/bbl yesterday

Natural Gas US$3.155/mmbtu vs US$3.117/mmbtu yesterday

Uranium US$23.75/lb vs US$23.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.5/t vs US$75.7/t

  • The global focus on iron ore quality is becoming more apparent as China’s prioritization on its environmental clean-up is generating a surging discount gap in material grades. The price premium between ore with 58% content and 62% has ballooned, widening from less than 15% at the start of 2016 to more than 45% yesterday, as benchmark ore sits at $41.76 and $75.71 respectively.
  • The attention to quality has increased massively, with steelmakers focusing on higher-quality ore to boost productivity in China’s capacity-constrained environment with a focus on cleaner air. The Ministry of Environmental Protection’s clampdown on steel supply has cut pollution over the winter warming period, prompting mills to gravitate toward batter-quality material that is cleaner and more efficient.
  • Supportive pricing is encouraging Australia’s Mount Gibson Iron Ltd. to commit millions of dollars to restart production in a flooded pit, betting the premium 66% ore will remain in high demand. Other mines are focusing on variable supply with demand pattern shifts, as Fortescue Metals Group Ltd. is now seeking to deliver a majority production above 60% during the winter while dropping to an average 58% as restrictions diminish.
  • Shipments of iron ore from Australia have been severely disrupted, as port closures due to cyclones drops exports by 35% to 9.37 million tonnes in the week to Jan. 15th.

Chinese steel rebar 25mm US$631.4/t vs US$629.7/t

Thermal coal (1st year forward cif ARA) US$84.5/t vs US$85.8/t

Premium hard coking coal Aus fob US$249.7/t vs US$254.3/t

 

Other:  

Tungsten APT European US$310-318/mtu vs US$307-318/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

 

Company News

Acacia Mining (LON:ACA) 193 pence, Mkt Cap £793m – Hounde royalty sale completed

  • Acacia Mining reports the completion of its previously announced US$45m sale of its royalty over the Hounde mine in Burkina Faso.
  • The company has held the royalty over the mine, which is owned by Endeavour Mining and reached commercial production in October, since 2010 and the announcement of the sale, in mid-December, identified the purchaser as Sandstorm Gold.

Conclusion: The successful completion of the sale of the royalty, considered to be a non-core asset, should help to strengthen Acacia’s balance sheet as it addresses the challenges of the new regulatory regime for mining in Tanzania.

 

Firestone Diamonds (LON:FDI) 9.4 pence, Mkt Cap £47.2m – Mixed Q2 results but output, quality, and demand improvements expected in H2

  • Firestone Diamonds reports a 9% decline in diamond output during the quarter ending December 2017 from its 75% owned Liqhobong mine in Lesotho of recovering higher quality stones with 180,709 carats recovered compared with 199,007 carats in the preceding quarter.
  • The mine treated marginally more ore but at a lower grade of 18.8 carats per hundred tonnes (cpht) (Q1 - 21.1 cpht) as it mined through a lower grade block of the resource. The  situation is expected “to improve in the second half as mining moves to higher grade areas of the pit.”
  • Mining produced 80 “special” stones (>10.8 carats in size) compared to 45 stones recovered during the previous quarter, though “the average quality remained somewhat below expectation”.
  • Over the next eighteen months, management expects mining to move into an area of the pit where it expects to “improve the likelihood of recovering higher quality stones”.
  • Operationally, management reduced costs by approximately 5% to $11.60/tonne during the quarter but “with the stronger local currency, cost per tonne is expected to increase over the second half of the year.”
  • During the quarter, 156,942 carats of diamonds were sold (Q1 – 195,330 carats) for an improved average price of US$80/carat (Q1 – US$69/ carat). Sales included “Liqhobong’s second >US$1 million stone, a 45 carat clean white stone”.
  • The company comments that the market for its diamonds is improving with “the two sales in the quarter … better than in Q1 with the December sale stronger than the October sale.” Demand for the better quality stones, particularly the special yellow stones from Liqhobong is showing strength and the company is cautiously optimistic on 2018 diamond pricing as a result of positive retail sales reported from the US and China.

Conclusion: Firestone Diamonds is expecting improvements in the quality and volume of diamond production as it moves into higher grade areas of the pit during the 2nd half of its financial year. Welcome cost reductions achieved during Q2 may be difficult to maintain in the face of strength of the local currency but the company expresses cautious optimism on future demand and pricing for its diamonds.

 

Georgian Mining* (LON:GEO) 16.3.4p, Mkt Cap £18.6m – Michael Struthers appointed as COO to transition to mine development

(Georgian’s assets in Georgia are held in a 50:50 joint venture)

STRONG BUY

  • Georgian Mining has appointed Michael Struthers, it’s COO to the board with immediate effect.
  • Struthers replaces Martyn Churchouse’s board position with Martyn remaining as a senior advisor focussed on business development.
  • Michael Struthers is a chartered engineer with 37 years of international mining experience. He was formerly project director and senior project manager for Lundin Mining Corporation overseeing Lundin’s operations in Chile.  Struthers also led studies for expansions at Neves Corvo in Portugal and a US$300m expansion plan for its zinc mining operations which started execution in April last year. Michael was formerly a director and principal geotechnical engineer for AMC Consultants in the UK.
  • Georgian Mining recently reported that it is in the process of closing negotiations with ‘CMC’ Caucasian Mining Group, its 50% partner in Georgian Copper & Gold JSC (‘GCG’), to finalise the 2018 exploration and development programme within the 860sqkm licence on the Tethyan Belt in Georgia.
  • The program, expected early 2018, incorporates a comprehensive business plan, work programmes while strengthening the board of the GCG to develop and exploit the gold oxide production target at Kvemo Bolnisi East.
  • Georgian management look to be ahead of their 3-5mt resource target with drilling ongoing at the Kvemo Bolnisi site.
  • The resource shows a substantial tonnage of brecciated and broken rock with assays confirming relatively good copper grades of copper.
  • A weathered layer of relatively soft oxide material appears to host economic gold grades which will be simply processed at one of the Madneuli heap leach sites.
  • Gold recoveries should run at >90% as seen in initial test work.
  • The topography and layout of the mine should see a near zero strip ratio and low crushing costs as the rock is highly fractured, broken and weathered with
  • Inspection of the gold heap leach operation at Madneuly confirmed the functionality of the mine's gold process plant while the large copper flotation plant looked like it could use some TLC.

Conclusion:  Greg Kuenzel and Mike Struthers are in Georgia at present advancing discussions on all aspects of the operation.  The relationship between the two partners and discussions are said to be progressing well and range from the technical details for mining to further exploration of the license area.  The developing scale of the underlying copper mining project is such that a greater degree of forward planning is prudent at this stage of development.

We are happy to continue to recommend Georgian Mining as a Strong Buy

*SP Angel acts as Nomad and Broker to Georgian Mining. 

 

IronRidge Resources* (LON:IRR) 30.5p, mkt cap £85.6p – Expanding its lithium exploration area in Ghana

  • IronRidge Resources reports that it is expanding its lithium exploration area in Ghana through a combination of a deal with a local Ghanaian company holding licences adjacent to its Ewoyaa lithium prospect and by a direct application for further licences covering potential southward extensions of the mineralised structures at Ewoyaa.
  • Subject to conditions including the successful conclusion of due diligence, IronRidge has reached agreement with the local company, Joy Transporters, to secure exploration rights over the Saltpond exploration licence and the Cape Coast application representing some 318km2 within the Cape Coast Lithium project area.
  • In addition, the company is applying for 13km2 of further exploration areas to the south of Ewoyaa.
  • The two additional areas, with a combined area of 331m2 more than double the company’s lithium exploration area in its Cape Coast project to a total of 645km2.
  • Currently the site work is relatively early stage exploration pitting aimed at identifying drilling targets for a maiden drilling programme planned for Q1 2018.
  • The company also comments that preliminary mineralogical studies of samples from Ewoyaa have identified spodumene as the principal lithium bearing mineral which offers the possibility that it may be amenable to a relatively simple process flow-sheet.
  • IronRidge also highlights the project location as particularly advantageous as it is sited within 90km of the deep water port at Takoradi, within 100km of the Ghanaian capital, Accra and served by bitumen roads and by an electricity transmission line.

Conclusion: The expansion of the exploration area within the Cape Coast Lithium Project should enhance the target generation potential ahead of the initial drilling while the mineralogical work implies that any resulting lithium discovery may be amenable to relatively straightforward processing. We look forward to further news as the exploration progresses.

*SP Angel act as nomad and broker to IronRidge Resources

 

Lucapa Diamonds (SX:LOM) A$0.25, Mkt Cap A$95.2m – More large diamonds recovered from Lulo

  • Lucapa Diamonds has announced the recovery of more large diamonds from its Lulo mine in Angola. Today’s announcement reports the recovery of a 43 carat yellow gem diamond described as “the largest coloured gem-quality diamond recovered to date from Lulo, surpassing the 39 carat pink recovered in September 2016.”
  • In addition, a 116 carat diamond has been recovered, though this is described as  “a low-quality boart stone” though the company draws encouragement from the fact that it demonstrates the potential for Lulo to deliver large diamonds.

 

Sula Iron & Gold* (LON:SULA) 0.085p, Mkt Cap £2.8m – Sula changes name to African Battery Metals

African Battery Metals* (LON:ABM)

  • Sula Iron and Gold is moving to target cobalt and other battery metals in Africa.
  • The new strategic direction marks a clear move away from gold exploration in West Africa.
  • Management recently announced that it has acquired a controlling, 70% interest, in a cobalt licence in the DRC.
  • The licence is located “close to a number of existing cobalt / copper mines …” and is underlain “by the type of rocks which hosts most of DRC’s cobalt and copper”.
  • Grades reported on grab samples analysed in the field by a portable XRF analyser are reported to range up to 2.5% cobalt.
  • We look forward to further news on assays from the new assets in cobalt and other battery metals in the near  future.
  • Management have also revamped the company website see: www.abmplc.com indicating a new professionalism within the business

Conclusion: The new direction marks a new energy in the company and a new determination to develop the company at a faster pace than seen under previous management.

*SP Angel act as broker to African Battery Metals (formerly Sula Iron & Gold)

 

Tahoe Resources (TSE:THO) C$5.8, mkt cap C$1.8bn – cuts quarter of workforce in Guatemala as courts delay mining license for Escobal silver mine

  • Tahoe Resources has cut 250 employees from its 1,030 workforce due to delays in the receipt of its mining license at the Escobal mine in Guatemala.
  • Escobal had Proven & Probable mineral reserves of 23.7mt with an average silver grade of 351g/t containing 267.5moz silver as of January 2017.
  • The mine has been running for three years and produced around 20mozpa of silver in concentrate over the past three years. The mine produced 3,500oz of gold last year.
  • Fortunately Guatemala has a very low official unemployment rate of just 3.1% suggesting that jobs are not so hard to come by though wages in coffee, sugar and banana plantations will not match those seen in mining.
  • he Escobal license was provisionally suspended by Guatemala’s Supreme Court in July after an anti-mining organization alleged that the country’s mining ministry had not consulted with an indigenous group before awarding it to Tahoe.
  • The Escobal mining licence was reinstated by the Supreme Court in September but was appealed in the Constitutional Court in October.
  • Guatemalan law reportedly states the court must rule within five calendar days of the hearing but has not done so as yet.
  • Tahoe is hoping the Constitutional Court will honour their own legal procedures and precedents with a fair and transparent ruling quickly to show Guatemala remains open to foreign investment.
  • Holding up the mine development is costing Guatemala around US$4mpa in royalties and taxes.
  • Tahoe currently had around US$182m in cash and equivalents at end September.

 

 

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Wed, 17 Jan 2018 12:14:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29242/today-s-market-review-focus-on-quality-raises-iron-ore-premiums-29242.html
Today's Market View - Copper rally halts as investors reduce bullish bets http://www.proactiveinvestors.co.uk/columns/sp-angel/29235/today-s-market-view-copper-rally-halts-as-investors-reduce-bullish-bets-29235.html Anglo Asian Mining* (LON:AAZ) – Q4 production up 31%qoq; net debt down 47% in FY17
Phoenix Global Mining* (LON:PGM) – Executive Chairman appointed
Rio Tinto (LON:RIO) ––2017 production meets guidance for all major product groups
Savannah Resources (LON:SAV) – Mining lease applications at Mutamba
Strategic Minerals* (LON:ML) – Update on Leigh Creek Acquisition
RNC Minerals (TSE:RNX) – Canada’s RNC Minerals in talks to fund world’s largest nickel and cobalt project

Toyota move to secure crucial battery metal
• Toyota Group’s trading unit have opted to take a 15% stake in Australian lithium miner Orocobre Ltd., in a move which looks to secure long-term supply of battery metals as the industry accelerates in development of electric vehicles. The investment brings A$292 million ($232 million), principally for the expansion of Orocobre’s Olaroz facility, which will more than double its capacity to 42,500tpa from 17,500tpa previously.
• Toyota reckon the investment will provide ‘long term stable supply to meet growing demand’
• Orocobre and Toyota are also finalising plans to jointly develop a 10,000tpa lithium hydroxide plan in Japan’s Fukushima prefecture, with a final investment decision expected in mid-2018.
• Figures from the Australian producer indicate growth across the space, with Orocobre reporting production of lithium carbonate rising 84% in the three months to December as demand across all battery metals is set to rapidly advance.
• The investment follows the trend of automakers pouring money into Australian miners, with production from the nation topping global output, in an attempt to secure supplies of resources including lithium and cobalt for electric vehicle batteries. In September, Great Wall Moto Co. agreed to invest in Pilbara Minerals Ltd., which owns the Pilgangoora lithium-tantalum project in Western Australia.

Rio Tinto meets 2017 iron ore export target but is hit by demand for back taxes in Mongolia
• Set a new quarterly record by shipping 90 tonnes of iron ore from Western Australia, taking the companies exports to 330.1 million tonnes, eclipsing its goal of 330million tonnes
• Chief executive said record shipments were testimony to increasing flexibility in Rio’s rail networks, which have been the bottle neck in recent years
• However, with Oyu Tolgoi copper operation  in Mongolia, government has requested $195 million in arrears, despite Rio stating it was of the ‘firm view’ the mine had paid all required taxes and charges

Dow Jones Industrials  +0.89% at 25,803
Nikkei 225   +1.00% at 23,952
HK Hang Seng   +1.66% at 31,861
Shanghai Composite    +0.77% at 3,437
FTSE 350 Mining   -1.11% at 19,738
AIM Basic Resources   -0.00% at 2,809


Economics
US – Dagong, a Chinese rating agency, downgraded US local and foreign-currency credit rating one notch to BBB+ with a negative outlook.
• The agency criticised “the debt-driven model of economic development” and argued that proposed tax cuts are due to further deteriorate state fiscal balance.

China – Hong Kong listed Chinese blue chip stocks climbed to the highest in more than two years led by financial, basic materials and energy sectors.
• On a separate note, foreign direct investment (FDI) in China reported a 9.2%yoy decline in December, normalising post a 90.7%yoy surge recorded in the previous month.
• FY17 FDI were up 7.9%yoy at $136bn.
• Nevertheless, the commerce ministry suggested large external pressures to attract foreign investment in China this year.
• At the same time, outbound non-financial investments recorded the first annual drop since at least 2009 as authorities tightened control on capital outflows and increase scrutiny on overseas deals.
• Overseas investments declined 29.4%yoy to $120bn last year.

Germany – The Berlin local branch of the Social Democrats party suddenly voted down the notion to form a grand coalition with Angela Merkel’s Christian Democrats.
• The news comes ahead of a party conference next Sunday where a general vote is planned to be held on whether to start formal coalition negotiations.
• Berlin members will represent 23 of 600 delegates to be present at the vote.
• The euro is off 0.3% against the US$ this morning following a strong rally recorded from the start of the year (+1.9% YTD).

UK – Inflation rate notched down a little from the highest pace in five years coming in line with estimates.
• This marks the first slowdown in six months, although the ONS said that that it is too early to say if the change is the “start of any longer-term reduction in the rate”.
• A separate report on factory gate prices showed PPI picked up to 3.3%yoy last month ahead of market expectations for a 2.9%yoy increase following a 3.1%yoy change in November reflecting building up price pressures on the supply side.
• The pound dropped 0.16% against the US$ on the news.
CPI (%mom/yoy): 0.4/3.0 v 0.3/3.1 in November and 0.4/3.0 forecast.
• A list of stricter conditions for a post-Brexit transition deal for the UK drafted by EU member states appeared in the press.
• These include extending free movement rights and a special status to all EU citizens before the end of 2020 and an EU authorisation of bilateral trade deals of the UK with other states for nearly two years after Brexit.
• Additionally, EU officials are considering plans to hold the UK liable for additional payments on top of the agreed £39bn bill should the nation decide to allow banks access to the European financial services market.

Currencies
US$1.2255/eur vs 1.2219/eur yesterday  Yen 110.75/$ vs 110.67/$  SAr 12.254/$ vs 12.372/$  $1.379/gbp vs $1.376/gbp  0.797/aud vs 0.795/aud  CNY 6.436/$ vs 6.441/$.

Commodity News
Precious metals:         
Gold US$1,339/oz vs US$1,342/oz yesterday

• Gold spot eases 0.1% to US$1,338.71/oz as the dollar advances from Monday’s three-year low. Investors are weighing in the effects of a pick-up in inflation, signaled by recent slumping in longer-dated bonds, and potentially hawkish policy shifts from central banks in Europe and Japan.
• The euro stands near a three-year peak on rising expectations that the European Central Bank could pare its monetary stimulus, with ECB rate-setter Ardo Hansson noting that the central bank could end the entirety of its bond purchase scheme after September if the economy and inflation develop as expected. The dollar looks set to continue to stumble as markets grow increasingly confident that global recovery will outpace US growth, which is expected to prompt other major central banks to hastily unwind their easy money strategy.
• MKS PAMP Group traders foresee support for the precious metal, with “further short squeezes over the near-term pushing the metal toward $1,350/oz”. Reuters retracement technical analysis also points towards a buoyant gold price, with spot potentially revisiting its Sept 8th high of $1,357.64/oz.
  

Gold ETFs 71.5moz vs US$71.5moz yesterday

Platinum US$994/oz vs US$1,001/oz yesterday


Palladium US$1,119/oz vs US$1,136/oz yesterday - Palladium prices hit new high as vehicle sales in China climb to record levels while
• Palladium which is principally used in gasoline catalysts as well as in three-way diesel catalysts with platinum and rhodium saw its price rise to a new high level.
• The metal rose 56% last year on tightening supply as consumers increasingly switch to gasoline from diesel in Europe and Asia, though diesel was never encouraged in many Asian countries due to pollution issues.
• Supply deficit: Palladium supply may continue to struggle to meet demand due to platinum mine shaft closures in South Africa and a general lack of new investment in the South African mining sector in recent years.
• The election of Cyril Ramaphosa as leader of the ANC is a positive step and an early exit for President Zuma could help transform the South African mining scene.  Ramaphosa is an ex NUM leader, he understands mining and is seen as a pragmatic and commercial as a businessman.
• If Ramaphosa ousts Zuma and takes over as president we may see a return to investment in underground gold and platinum mining in SA raising production rates once again.
• Auto producers may adjust metal weightings in catalysts back towards platinum from palladium in response to higher prices leading the market to rebalance.
Silver US$17.26/oz vs US$17.38/oz yesterday
           
Base metals:   

Copper US$ 7,124/t vs US$7,231/t yesterday


• Global copper markets ease as the dollar pulls up from Monday’s three-year low of 90.279. Copper in London fell 0.9% to $7,142.25/t, while some early Asian trade strengthening limited the loss of the most-traded copper contract on the Shanghai Futures Exchange SCFcv1 to 0.6% at $8,435.61/t.
• After amassing their most-bullish holdings since September and supporting copper prices to their highest in almost three years, money managers have cut their bets on a sustained rally and reducing their net-long positions. While strong end market consumption developed over last year, there are growing speculations that demand gains may be overwhelmed by new supply from mines that have an increased incentive to boost output. Global copper production, which contracted across 2017 on global supply disruptions, is likely to expand into 2018 and 2019 with broad projects expecting to come online across Peru, Chile, the Democratic Republic of Congo, Zambia and Panama.
• Rio Tinto Group have booked copper output from the giant Grasberg mine for the first time since 2014, while discussions look to determine a possible entry strategy for the new joint venture pact incorporating state-owned PT Indonesia Asahan Aluminium. Indonesia’s government is seeking to complete a negotiation with Freeport McMoRan before June to lift local control of the asset to 51%, after which production from the world’s second largest copper mine is expected to continue undisrupted.
• Strategists at Aberdeen Standard Investments note that “China’s not necessarily wanting as much copper”, while the Chinese government’s decision to crack down on pollution from some industrial operations has halted output across refining facilities and therefore demand for copper ore. While other market participants (Prudential Financial Inc.) see a “growing consensus that the Chinese economy won’t slow down as dramatically as initially projected”, there still remain “questions regarding Chinese demand as they transition more and more into a consumer-led economy”.
• Money managers cut their net-long positions by 5.9% to 106,471 futures and options contracts in the week ended Jan 9th according to US Commodity Futures Trading Commission data, the first reduction since mid-December. The number of short bets have also been creeping back into the Global X Copper Miners ETF.

Aluminium US$ 2,195/t vs US$2,244/t yesterday
Nickel US$ 12,480/t vs US$12,870/t yesterday
Zinc US$ 3,394/t vs US$3,429/t yesterday
Lead US$ 2,543/t vs US$2,569/t yesterday
Tin US$ 20,295/t vs US$20,270/t yesterday

           
Energy:           
Oil US$69.9/bbl vs US$69.9/bbl yesterday
• Record breaking shale production is set to push US oil output to more than 10 million barrels per day, above historically high levels set in 1970. US government forecasts the figure to rise to 11 million barrels per day by late 2019, rivalling production by the world’s largest producer, Russia. The rapid uptake of US shale in the face of OPEC production cuts are likely to undo the joint work to reduce global supply glut and drive prices to lower levels.
• In the face of lower oil prices, Royal Dutch Shell have agreed to acquire a stake in a US solar company, representing the first investment in the sector after exiting 12 years ago.
Natural Gas US$3.117/mmbtu vs US$3.144/mmbtu yesterday
Uranium US$23.75/lb vs US$23.75/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$75.7/t vs US$75.7/t
Chinese steel rebar 25mm US$629.7/t vs US$629.1/t
Thermal coal (1st year forward cif ARA) US$85.8/t vs US$84.8/t
Premium hard coking coal Aus fob US$254.3/t vs US$261.1/t


Other:  
Tungsten APT European US$310-318/mtu vs US$307-318/mtu last week
Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t


Company News
Anglo Asian Mining* (LON:AAZ) 44p, £49.5m – Q4 production up 31%qoq; net debt down 47% in FY17


FY17 GE production totalled 71.5koz (FY16: 72.3koz) coming in at the top end of the guided 64.0-72.0koz GE range.
Q4 gold equivalent (GE) production climbed 31%qoq/24%yoy to 23.2koz in Q4/17 including:
• 21.9koz in gold dore (Q3/17: 14.5koz)
• 119t in copper from SART alone (Q3/17: 550t Cu)
• Strong gold production in the final quarter of the year (+52%qoq) was attributed to increased supply of high grade Ugur oxide ore and improved gold recoveries.
• Ugur supplied 181.7kt of ore at 3.2g/t during the quarter (Q3: 57.2kt at 3.3g/t) accounting for most of the plant feed.
• The Gedabek agitation leaching plant processed 211.4kt at 2.9g/t (Q3/17: 177.0kt at 2.0g/t) producing 17.0koz of gold in dore implying gold recoveries of 86% compared to sub-70% recorded previously during the year.
• Copper concentrate production came solely from the SART unit in Q4/17 as the floatation circuit was temporarily idled with the Ugur ore being copper free.
Annual bullion gold sales totalled 43.5koz (ex PSA) at an average price of $1,265/oz (FY16: 53.3koz at $1,253/oz).
Annual copper concentrate sales totalled 8.5k dmt for $16.8m, excluding PSA share (FY16: 6.8k dmt for $12.3m), benefiting from higher copper prices.
• Gedabek open pit restart is expected in Q1/18 while the installation of a second crushing line should allow the Company to re-commence the flotation circuit for copper rich sulphide ores and run it in parallel to the agitation leaching plant.
Net debt continued to come down with $18.3m outstanding as of YE17 which is nearly a half of $34.6m reported as of YE16.
Conclusion: This is an impressive set of results with Q4/17 GE production ramping up in the final quarter of the year accounting for 32% of FY17 output and hitting the higher end of the annual guidance. Processing of Ugur ores allowed to take benefit of higher grade plant feed and better gold recoveries and keep cash costs down translating into an accelerated deleveraging of the business.
*SP Angel acts as nomad and broker to Anglo Asian Mining

Phoenix Global Mining* (LON:PGM) 5.025p, Mkt Cap £11.5m – Executive Chairman appointed
• Phoenix Global Mining has announced the appointment of the current non-executive Chairman, Marcus Edwards-Jones as Executive Chairman; effective immediately.
• The acceleration of the exploration programme at the historic Empire Copper Mine in Idaho, where a significant resource upgrade was announced in November and the acquisition of the adjacent ground surrounding the former Horseshoe mine as well as the  securing of the Bighorn and Redcastle copper cobalt exploration licences in Idaho will no doubt have substantially increased the workload of the management team.
Conclusion: The transition from a non-executive to an executive role for the Chairman highlights the increasing momentum at Phoenix Global Mining and we look forward to further news when the technical team gain approval from the authorities at MHSA to re-enter the old Empire mine.
*SP Angel acts as Nomad to Phoenix Global Mining

Rio Tinto (LON:RIO) – 4130p, Mkt Cap  £74.7bn –2017 production meets guidance for all major product groups
• Rio Tinto described its 4th quarter production results as showing that the business was performing well and its 2017 annual production was “in line with guidance across all major product groups.”
• The company highlights the record quarterly production of its Pilbara iron ore operations where shipping of 90m tonnes of ore during the final quarter brought the total for the year to 330.1m tonnes – 1% above 2016.
• Production of iron ore is ramping up at the Silvergrass operation following the completion of the conveyor system while the plans for automation of the Pilbara iron ore rail system are progressing strongly “with greater than 60 per cent of all train kilometres now completed in autonomous mode with a driver on board for supervision. The project is on schedule to be completed by the end of 2018.”
• Rio Tinto’s guidance for 2018 iron ore shipments lies in the range 330-340 million tonnes “subject to market conditions and any weather constraints and partly reflects rail maintenance required in 2018”.
• The company’s bauxite production of 50.8m tonnes during the year increased by 6% and met the upward revision of guidance reflecting “strong operational performance at both Gove and Weipa. Alumina output of 8.1mt was in line with the previous year reflecting “a strong performance at Yarwun partially offset by lower production at the Queensland Alumina refinery due to major maintenance.”
• Guidance for 2018 bauxite production is in the range 49-51m tonnes while alumina is expected in the range 3.7-3.7m tonnes.
• Copper production from the mines declined by 9% compared to 2016 at 487,100 tonnes “due primarily to the impact of the 43 day strike at Escondida in the first quarter. Production was in line with revised guidance.” Copper production at Escondida declined by 11% to 270,800 tonnes.
• Copper output fell by 22% at Oyu Tolgoi “as phases 2 and 3, which were source of higher grade ore, were fully depleted by the end of 2016. The company notes, however, that Oyu Tolgoi established “new records for rates of total material moved and mill throughput in the year. Copper production in the fourth quarter was 23 per cent higher than the previous quarter due to improved mill availability and reduced ore hardness.”
• Guidance for 2018 mined copper production is in the range 510-610,000 tonnes
• Diamond production rose by 23% at the Argyle mine to 17.1m carats (2016 14.0m carats) while Rio Tinto’s share of production at Diavik rose by 12% to 4.5m carats (2016 4.0m carats).
• Guidance for 2018 production is between 17 to 20m carats suggesting a slight decline compared to 2017.
• The company currently has active exploration projects in 16 countries focussing on eight main commodity targets, however “The bulk of the exploration expenditure in this quarter was focussed on copper targets in Australia, Chile, Kazakhstan, Mongolia, Papua New Guinea, Peru, Serbia, United States and Zambia.”
Conclusion: Rio Tinto is expecting increased copper production in 2018 as Escondida recovers from the strikes in early 2017. Iron ore and bauxite production is expected to be broadly similar to 2017 while diamond output is forecast to decline by around 10-20%.

Savannah Resources (LON:SAV) 6p, Mkt cap £38.2m – Mining lease applications at Mutamba
• Savannah Resources has announced that it has submitted applications to the Ministry of Mineral Resources and Energy in Mozambique for the mining of the Jangamo, Ravene and Chilubane minerals sands deposits.
• The Ministry has  up to six months to process  the applications, which cover a total area of 417.32 square kilometres. If the applications are approved, “Mining Leases are generally awarded for a term of 25 years and can be renewed at the end of their terms.”
• The pilot processing plant at Mutamba was commissioned during December and will provide important data to the continuing feasibility studies and process design work as well as furnishing samples of the product to potential customers.
• Describing the licence submissions as a key milestone, CEO, David Archer, commented that “We believe our timing means we are well placed to take advantage of the increasing global demand for titanium feedstocks.”
Conclusion: Savannah Resources is pressing ahead with the licence applications in Mozambique while, in parallel, evaluating the Portuguese lithium project at Mina do Barroso and moving ahead on the copper projects in Oman where mining applications to reopen areas of former production have also been submitted.

Strategic Minerals* (LON:SML) 2.125p, Mkt Cap £28.1m – Update on Leigh Creek Acquisition
• Strategic Minerals has provided further information on the timetable for the acquisition of the Leigh Creek copper mine in South Australia.
• The December holiday period, in conjunction with “the need to satisfy a number of conditions precedent associated with the purchase being of an existing company, inclusive of mineral rights” means that “binding contracts will be exchanged in the coming weeks and settlement will occur once all conditions precedents are met”
• Strategic Minerals had originally indicated that it expected to complete the acquisition of Leigh Creek on 16th January, however, in reference to the amended timetable, Managing Director, John Peters, stated explicitly that “We have no concerns about completing the transaction but want to ensure that all procedures are completed properly to reduce risk to the Company.”
• The acquisition and resumption of production at Leigh Creek will provide Strategic Minerals with a second revenue stream alongside its Cobre magnetite operation in New Mexico.
Conclusion: In our view, the business model of operating assets generating cashflow to help fund the company’s exploration programmes and growth aspirations has served Strategic Minerals well. The addition of a second operating business at Leigh Creek builds on the success of this strategy and, although the short delay in completing the acquisition is frustrating, maintains the company’s momentum.

RNC Minerals (TSE:RNX) C$0.25, Mkt Cap £77m - Canada’s RNC Minerals in talks to fund world’s largest nickel and cobalt project
• RNC Minerals (formerly Royal Nickel) is in talks with commodity traders, mine operators and financiers to help secure $1bn to build the world’s largest nickel and cobalt project next year. The project ranks as the world’s 2nd largest nickel and 8th largest cobalt reserve
• Plans to begin construction at the Dumont Nickel and Cobalt project in Quebec, which contains one of the world’s largest undeveloped reserves of both cobalt and nickel, with 1.18bt of ore containing 3.15mt of nickel and 126,000t of cobalt
•  RNC in talks with large Japanese trading houses, companies that offer ‘streaming’ deals and miners interested in offtake arrangements to feed their smelters
• Initial annual production of 33,000tpa could produce some 73mlbs of nickel and 1,000tpa of cobalt in concentrate
• There is potential to expand the project in year five to 51,000tpa for 113mlbs of nickel and 2,000tpa of cobalt

]]>
Tue, 16 Jan 2018 11:22:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29235/today-s-market-view-copper-rally-halts-as-investors-reduce-bullish-bets-29235.html
Morning View . Japanese smelters see $8,000 copper to support vital new development http://www.proactiveinvestors.co.uk/columns/sp-angel/29221/morning-view-japanese-smelters-see-8000-copper-to-support-vital-new-development-29221.html Golden Star Resources (CN:GSC) – Production guidance for 2018

Mkango Resources* (LON:MKA) – Exercise of Warrants

Ortac Resources* (LON:OTC) – Name change to Arc Minerals

Cobalt - harder to source metal for electric car batteries

  • Automakers ambitious plans to fill line-ups with EV’s and hybrids could face major roadblock due to rising price of cobalt, scarcity of the metal and corruption in largest supplier of Congo
  • Much of the Cobalt mining in Congo is now controlled by Chinese enterprises along with many of the attached cobalt refineries making it more difficult for non-Chinese companies to access supply
  • BMW are concerned over the potential for supply difficulties in Cobalt and Lithium as highlighted in the failure of last year’s tender for longer term cobalt supply

Dow Jones Industrials

 

+0.81%

at

25,575

Nikkei 225

 

-0.24%

at

23,654

HK Hang Seng

 

+0.78%

at

31,363

Shanghai Composite

 

+0.10%

at

3,429

FTSE 350 Mining

 

-0.33%

at

19,709

AIM Basic Resources

 

+0.09%

at

2,782

 

Economics

More reports are coming in over miscalculations of official GDP numbers with the latest case at the northern port city of Tianjin suggesting local GDP may be revised by almost 20% in 2017.

  • Tianjin authorities confirmed production estimates included contributions from companies registered in the district taking advantage of favourable tax regime, looser FX regulations or other incentives, while actual commercial activity carried by firms was taking place elsewhere in China.
  • One of districts at Tianjin which accounts for as much as half of its GDP is reported to have revised downwards local 2016 GDP by more than 30%.
  • The news comes on the heels of a separate case reported by Inner Mongolia where local 2016 GDP had to be brought down by around 20% reflecting previous miscalculations.

 

US – Factory gate price inflation dipped more than forecast in December with CPI numbers due later today.

  • Closely watched by Fed official PCE numbers are due towards the end of the month with the gauge recovering from a dip through a mid-year and on course to reach the target 2.0% level.
  • PPI (%mom/yoy): -0.1/+2.6 v 0.4/3.1 in November and 0.2/3.0 forecast.
  • PPI ex food and energy (%mom/yoy): -0.1/+2.3 v 0.4/2.4 in November and 0.2/2.5 forecast.

 

China – A mixed bag of economics data released today including weaker than estimated credit growth and imports numbers and continuing strong exports statistics.

  • Total credit dropped from November levels last month and underperformed market estimates as credit expansion slowed towards the end of the year driving local yields up in the final quarter.
  • Credit data are notoriously volatile and authorities are unlikely to follow an aggressive deleveraging that would jeopardise growth targets, Bloomberg Intelligence writes.
  • “China’s policy makers have so far looked more to strong nominal growth rather than slower credit expansion as the key to stabilising the leverage ratio (debt to GDP),” BI said.
  • As such “efforts to tamp down financial risks will come more from tighter macro-prudential regulation than tighter monetary policy”, BI concluded.
  • Aggregate Financing (CNY bn): 1,140 v 1,598 in November and 1,500 forecast.
  • On trade data, robust exports led by strong overseas demand came in together with soft imports numbers which raise concerns over the strength of domestic demand.
  • Exports (US$, %yoy): 10.9 v 11.5 in November (revised from 12.3) and 10.8 forecast.
  • Imports (US$, %yoy): 4.5 v 17.6 in November (revised from 17.7) and 15.1 forecast.

 

Germany – A breakthrough in a potential new grand coalition between Christian Democrats and Social Democrats is reported to have been achieved following inconclusive elections in September.

  • The three leaders including the representative of the CDU’s Bavarian sister party the Christian Social Union will recommend to their parties to start official talks.
  • Coupled with hawkish ECB meeting minutes released yesterday where authorities are said to review its loose monetary policy early this year, the news saw the euro climbing 1.5% against the US$.

 

France/Spain – Both nations saw downward revisions to December inflation rates in an unwelcome news regarding ECB efforts to reach the target rate of 2% in the single currency region.

  • In France, consumer prices rate of change came in at 1.2%yoy last month, down 0.1pp on previous estimates.
  • In Spain, change in CPI was 1.2%yoy, down 0.1pp on previous estimates and 0.6pp on a reading in November.

 

Currencies

US$1.2066/eur vs 1.2002/eur yesterday  Yen 111.28/$ vs 111.46/$  SAr 12.422/$ vs 12.495/$  $1.355/gbp vs $1.355/gbp  0.787/aud vs 0.786/aud  CNY 6.470/$ vs 6.508/$

 

Commodity News

Precious metals:         

Gold US$1,328/oz vs US$1,325/oz yesterday

  • Spot gold continues its advance and is on track to record its longest stretch of weekly gains in nine months as the dollar weakens and volatility in Treasuries market subsides. The precious metal rose as high as $1,329.15 during Asian trading following hawkish language contained within the European Central Bank’s (ECB) December meeting minutes and softening US data weighed in on the dollar.
  • ANZ Research notes "ECB minutes were interpreted on the hawkish side due to a discussion of a “gradual shift” in guidance from “early 2018” – much earlier than had previously been discussed". The euro jumped against the dollar as the ECB signalled it could begin to wind down its 2.5 trillion euro stimulus program starting this year. Meanwhile, US data showed December producer price index fell 0.1% against an expected increase of 0.2%, while unemployment figures rose to more-than-three-month highs at 261,000 this week.
  • While the future status of the digital currency bitcoin has created a market frenzy in recent months, analysts at Goldman Sachs conclude the world’s largest cryptocurrency represents the new gold. The results of the released nine-page report titled “Bitcoin as Money” expect the cryptocurrency market to grow in the new year, with success forming if it is capable of facilitating transactions at a low cost or can provide better risk-adjusted returns for portfolios. “Our working assumption is that long-run cryptocurrency returns should be equal to—or slightly below—growth in global real output”, while “digital currencies should be thought of as low/zero return or hedge-like assets, akin to gold”. With the total market capitalisation of the crypto-space sitting at $688 billion and growing, traditional safe-haven investor interest will continue to be drawn toward the innovative new digital space.

   Gold ETFs 71.5moz vs US$71.6moz yesterday

Platinum US$993/oz vs US$967/oz yesterday

Palladium US$1,089/oz vs US$1,100/oz yesterday

Silver US$17.10/oz vs US$17.16/oz yesterday

           

Base metals:   

Copper US$ 7,152/t vs US$7,165/t yesterday

  • Despite winter capacity restrictions hampering domestic production, Chinese unwrought copper imports fell 4.3% into December from a month earlier on signs of demand edging lower. According to Chinese customs data last month’s arrivals of unwrought copper, including anode, refined and semi-refined copper products stood at 450Kt, and sat 8.2% lower year-on-year. Annual imports for 2017 fell 5.1% to 4.69 million tonnes, the lowest annual figures since 2013.
  • Hong Kong Argonaut Securities analysis comment “Production came down but imports didn't pick up, so I think that reflects that the year-end demand is not really that strong, especially in the power sector, and a lot of construction activity has stopped during the winter season."
  • However, future consumption looks brighter as Japan’s biggest smelter foresees increasing demand for the metal in everything from smartphones to electric and self-driving vehicles, supporting the price from current levels. The metal has surged over 60% since falling to a multi-year low in early 2016, with President of JX Nippon Mining and Metals Corp forecasting prices to be above $7,150/t by the end of the year at least, with trading likely to be volatile. Shigeru Oi notes diminishing supply within the project pipeline, and notes current levels are still not high enough for miners to feel confident about starting development projects and they would theoretically need something near to $8,000/t to cover the costs.
  • PT Freeport Indonesia negotiations close as Papua signs the agreement setting out the regional governments of Papua and Mimika as beneficiaries of dividends from 10% stake in the company after the divestment. Inalum expects to hold a 51% stake in Freeport Indonesia following the divestment, and will pay out the dividends to the regional govts. The signing on Friday marks a big step in the Grasberg Mine Deal, with the next steps focusing on “discussions on rights and responsibilities. And the last step is the valuation”.

BMW and Codelco set up responsible copper initiative

  • BMW is setting up new project alongside Codelco, the Chile state copper mining company, with the aim of providing the industry with a sustainable and transparent supply of copper.
  • BMW plans to offer 25 electrified models from 2025, increasing copper demand by >20,000tpa on top of the 42,000tpa of copper which they bought last year for more conventional models.

Aluminium US$ 2,196/t vs US$2,173/t yesterday

Nickel US$ 12,680/t vs US$12,905/t yesterday

Zinc US$ 3,401/t vs US$3,346/t yesterday

Lead US$ 2,559/t vs US$2,573/t yesterday

Tin US$ 20,205/t vs US$19,970/t yesterday

           

Energy:           

Oil US$69.0/bbl vs US$69.1/bbl yesterday

  • Oil prices are expected to remain close to current levels, ranging $60-70/bbl, through to 2020 according to Reuters annual survey of energy professionals.

Natural Gas US$3.119/mmbtu vs US$2.959/mmbtu yesterday

Uranium US$23.90/lb vs US$24.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$76.1/t vs US$76.7/t

  • Iron ore futures slump -2.2% for May to close at 544 yuan/t, representing the biggest drop since Dec. 25th, as Chinese port inventories continue to climb. While exports from Western Australia and Brazil have declined due to limiting severe weather events, port inventories continue to edge higher suggesting a slowing pace of restocking by mills. Ore holdings across mainland ports jumped to all-time high of 150.8 million tonnes as of Jan 5th according to Steelhome E-Commerce Co.
  • Despite Chinese iron ore imports falling 11% in December from the previous month, full-year shipments fall at record highs. With mills restocking at slowing levels, maintaining high imports could be a signal for the rapid escalation of output following the winter pollution curbs.

Chinese steel rebar 25mm US$637.3/t vs US$643.9/t

Thermal coal (1st year forward cif ARA) US$84.3/t vs US$84.8/t

Premium hard coking coal Aus fob US$261.1/t vs US$259.1/t

 

Other:  

Tungsten APT European US$307-318/mtu vs US$294-301/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

 

Company News

Golden Star Resources (CN:GSC) C$1.1, Mkt Cap C$415m – Production guidance for 2018

  • Golden Star Resources has announced that it produced a total of 267,565oz of gold in 2017. The figure lies in the upper part of the previously published guidance range of 228-280,000oz.
  • Costs for 2017 on both a cash and all-in-sustaining (AISC) basis are to be released with the annual financial results on 20th February, however the company reminds the market that the mid-point of its 2017 guidance range stands at US$820/oz for cash costs and US$1020/oz for the AISC.
  • The Wassa mine increased gold production by 31% during the year to 137,234 oz and Prestea increased output by 45% to 130,331oz.
  • The company’s guidance for 2018 gold production is in the range 230-255,000oz at a cash cost between US$650-730/oz and an AISC between US$850-US$950/oz.
  • The 5-14% lower overall production for 2018 reflects the “transition to being primarily underground focussed producer” and, in our opinion, is more than offset by the forecast 11-21% decline in cash costs and 7-17% reduction in AISC.
  • In detail, the Wassa operation is expected to produce 137-142,000oz of gold at a cash cost of US$600-650/oz and the Prestea mine is to produce 93-113,000oz at a cash cost between US$650/oz to US$730/oz.
  • Capital cost guidance for 2018 amounts to US$36.5m with US$18.8m of development capital, including US$6.6m of exploration, and the balance of US$17.7m for sustaining capital needs. The company points out that capital expenditures are budgeted to be significantly lower in 2018 than in 2017. US$5.9m of development capital at the Wassa mine “are expected to be incurred primarily on the construction of a ventilation intake/exhaust raise and a rock pass and on the purchase of additional mining equipment.”
  • Capital expenditures at the Prestea mine are expected to be lower than at Wassa “due to the existing historical workings within the Prestea Underground and the smaller scale of operations. The cost to modernise historical workings is lower than the cost to build new workings and therefore the sustaining capital required for Prestea Underground is anticipated to be significantly lower than for Wassa Underground going forwards.”
  • Commenting on the results for 2017 and outlook for 2018, President and CEO, Sam Coetzer said “I’m particularly pleased to see strong results from Wassa Underground in the fourth quarter of 2017 including a 55% increase in grade compared to the third quarter and I look forward  to stronger production in 2018 as we increase the mining rate further.” He went on to say “Although production in 2018 is anticipated to be lower than in 2017, our operating cost guidance is also significantly reduced and thus we believe this strategy delivers the best value for all of our stakeholders.”

Conclusion: Golden Star is delivering its strategic transition from mining high cost metallurgically complex ores from open pit mines to higher grade more easily treatable material from underground mines. The rationale for this strategy is demonstrated by the lower unit costs expected in 2018 which should produce a significant improvement in margins and profitability.

 

Mkango Resources* (LON:MKA) 9.3p, Mkt Cap £9.5m – Exercise of Warrants

  • Mkango Resources reports that 2,006,060 warrants  at 6.6p each plus a further 150,000 warrants at 3.5p each have been exercised leading to the issue of a further 2,156,060 shares in the company.
  • The exercise of the warrants has raised a further £137,650 for the company. The balance sheet for 30th September 2017 shows a total of 45.37m warrants outstanding exercisable at a weighted average price of 6.6p each.
  • The latest announcement follows previous announcements in December where the exercising of some 4m warrants at, we estimate, a weighted average price of approximately 6.3p, raised approximately £250,000.
  • Since Mkango announced, in November, that Noble Group’s Talaxis had agreed to fund the feasibility study for its Songwe Hill rare-earths project in Malawi, a clear pathway to develop the project has become apparent to the market. The agreement with Talaxis also identified Mkango as Talaxis’ preferred partner for all rare-earths projects world-wide.
  • In addition to Noble’s initial £12m investment for a 49% direct interest in the project it also has an option to increase its holding to 75% and to secure rights to 100% of the production for the cost of implementing the BFS and funding the project through to production.

Conclusion: Mkango is assuming a higher profile since the Noble Group identified it as its preferred partner for rare-earths projects and agreed to fund the Songwe Hill feasibility work.

*SP Angel acts as Nomad and Broker to Mkango Resources

 

Ortac Resources* (LON:OTC) 2.5p, Mkt Cap 8.3m – Name change to Arc Minerals

(new ticker LON:ARC) (Ortac an effective 49.9% stake in the Akyanga project)

  • Ortac Resources has announced that it is changing its name, with immediate effect, to Arc Minerals which will now trade under the ticker ARCM LN.
  • Over the recent past, Ortac has identified a clear, African focussed, strategy and brought in experienced management with relevant expertise to reflect the shift in emphasis away from its previous Slovakian focus.
  • Commenting on the change, Executive Chairman, Nick von Schirnding said “The renaming of the group to Arc Minerals represents an exciting new chapter for us.  This follows a number of material changes that have been implemented over the past few months including executing a clear strategy focusing on our high quality African exploration assets”.
  • Recent drilling at Akyanga (part of Missisi) appears to be extending the footprint of the known mineralisation in the DRC leading to better definition and expansion of the gold resource.
  • Zamsort: in Zambia, the company is “now actively pursuing discussions with fellow stakeholders at Zamsort, which is an attractive Zambian copper/cobalt asset.”

 

Conclusion: The change of name comes as the company moves towards a new phase focussed on its African projects.

]]>
Fri, 12 Jan 2018 10:58:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29221/morning-view-japanese-smelters-see-8000-copper-to-support-vital-new-development-29221.html
Today's Market View - Miners climb on positive economic growth data http://www.proactiveinvestors.co.uk/columns/sp-angel/29211/today-s-market-view-miners-climb-on-positive-economic-growth-data-29211.html Anglo Asian Mining* (LO:AAZ) – CEO loan update

Asiamet Resources (LON:ARS) – Drilling potential feeder zone at BKZ

Kenmare Resources (LON:KMR) – 2018 production guidance and update

Tri-Star Resources* (LON:TSTR) – Oversubscribed open offer raises £4.42m

 

Rio looks to alternative investment to capitalise on the electric-car boom

  • Rio Tinto Group has removed itself from bidding for a $5 billion stake in Soc. Quimica & Minera de Chile SA (SQM) as it pursues other ways to capitalise on the electric-car boom. The 32% stake in one of the world’s top lithium producers is currently held by Nutrien Ltd., who are permitted to sell their holding to meet a condition imposed by Indian regulators following the Canadian firms recent merger between Potash Corp. of Saskatchewan Inc and Agrium Inc. While Rio’s withdrawal comes as a blow, Nutrien CEO Jochen Tilk told analysts that the company has seen “significant interest” for the biggest share in SQM.
  • Rio decided not to proceed with an offer after studying information in the data room, a move which is likely welcomed by investors concerned over the prospect of hasty acquisitions. The EV focus remains on the ongoing development study for its Serbian Jadarite lithium project which could meet 10% of global demand as production comes online in 2023. Investors are urging biggest miners not to repeat past mistakes on failed acquisitions, and major deals to add lithium would risk eroding trust as the commodity is likely at the top of its price cycle.
  • London-based Rio remains “well placed to benefit from the growth of EVs with our copper and aluminium offering”, while continuing to evaluate investments and partnerships in commodities outside of Rio’s core portfolio with exposure to green technologies via its Ventures unit.

 

Dow Jones Industrials

 

-0.07%

at

25,369

Nikkei 225

 

-0.33%

at

23,710

HK Hang Seng

 

+0.15%

at

31,120

Shanghai Composite

 

+0.10%

at

3,425

FTSE 350 Mining

 

+0.72%

at

19,639

AIM Basic Resources

 

+0.05%

at

2,782

 

Economics

 

US – The US$ index briefly dipped yesterday before recovering its losses and edging higher this morning amid the news that China is considering to slow or even halt purchases of US Treasuries.

  • China is the largest foreign creditor of the US government holding $1,189bn or nearly 20% of total foreign holders of US Treasury securities as of Oct/17.
  • 10y bond yields climbed higher yesterday eyeing the 2.6% level but came off in the afternoon and were slightly lower this morning at 2.54%.
  • On Thursday, Chinese authorities questioned the accuracy of a circulating news suggesting the story might have been “fake news”.
  • “In recent days there have been some media reports… we believe this information may have been attributed to the wron source or could be fake news,” the Chinese regulator statement read.

 

China – Chinese Premier Li Keqiang is expecting the economy to post a 6.9% growth in 2017, according to reports from a speech given by PM at a meeting of regional leaders in Cambodia yesterday.

  • This compares to a state target of “around 6.5%” and market estimates for 6.8%.
  • According to official estimate, the economy posted a robust 6.9% growth in H1/17 with the pace coming off only slightly to 6.8% in Q3/17 with the momentum driven by improving overseas demand as well as strong government stimulus during the year.

 

Germany – The economy expanded at the fastest pace in six years, the latest government GDP numbers showed this morning.

  • Private consumption contributed more than half to growth while positive contributions from trade and inventories allowed GDP rate to accelerate compared to last year.
  • Business investments performed in line with last year contributing around a third to GDP growth.
  • GDP (%yoy): 2.2 v 1.9 in 2016 and 2.3 forecast.

 

France – The central bank upgraded its economic growth forecasts on the back of strong business confidence among industrial and service firms which climbed to an almost seven year high.

  • An upgrade constitutes a 0.1pp upwards revision to Q4 growth estimates to 0.6%qoq, in line with the previous three quarters.

 

Currencies

US$1.2002/eur vs 1.1947/eur yesterday  Yen 111.46/$ vs 111.94/$  SAr 12.495/$ vs 12.385/$  $1.355/gbp vs $1.351/gbp  0.786/aud vs 0.783/aud  CNY 6.508/$ vs 6.522/$

 

Commodity News

 

Precious metals:         

Gold US$1,325/oz vs US$1,314/oz yesterday

  • Gold maintains its advance as the equity rally stalls on fading demand for risk-assets as government bond volatility increases. The New Year rally in Asian shares petered out due to rising concerns over US protectionism. The precious metal climbed to $1,327.77, the highest since Sept. 15, following reporting that China may halt or slow US Treasuries purchases.
  • APAC head of trading at Oanda see “rising oil prices and strong global growth suggest gold will remain supported as investors look for inflation protection”, while “a highly-anticipated stock market correction is providing support on dips which continues to support the bullish gold narrative”.
  • Exchange-traded funds also cut 108,885 troy ounces of gold from their holdings in the last trading session, removing equivalent $143.4 million at yesterday’s spot price.
  • Investors will focus on the raft of important data releases later this week, including the US consumer price index and retail sales due Friday.

Gold ETFs 71.6moz vs US$71.6moz yesterday

Platinum US$967/oz vs US$964/oz yesterday

Palladium US$1,100/oz vs US$1,100/oz yesterday

  • After rallying 56% last year, spot palladium has risen to within 1% of its record $1,125/oz. The consumption of palladium has grown alongside auto sales in the US and China, while in Europe demand spiraled higher as buyers shifted from diesel in the wake of the Volkswagen emissions scandal. As the metal approaches the most expensive levels on record, automakers may begin to design changes to take advantage of the cheaper substitute platinum, sitting over $100 cheaper.

Silver US$17.16/oz vs US$17.02/oz yesterday

           

Base metals:   

Copper US$ 7,165/t vs US$7,132/t yesterday

Aluminium US$ 2,173/t vs US$2,164/t yesterday

  • LME Aluminium rose as much as 1.2% weakening dollar boosts base metals and global growth optimism. Further to the two-day gain on LME paring the decline since the start of the year to 2.9%, the outlook remains positive with Bank of China foreseeing commodities poised to benefit from upbeat economic growth, dollar weakness, falling bond prices and elevated equity valuations.

Nickel US$ 12,905/t vs US$12,735/t yesterday

Zinc US$ 3,346/t vs US$3,327/t yesterday

  • Zinc tightening becomes more evident as China’s zinc and zinc alloy production dropped 1.5% in 2017 to 4.73 million tonnes on low processing fees, inadequate concentrate supply and the impact of environmental inspections according to Antaike.
  • After rising to decade highs at the beginning of the week on historically low zinc concentrate and ingot inventories, elevated prices are expected to encourage rising output as new smelters come on stream, including Baiyin Nonferrous Group having already launched new capacity in Q4 last year.

Lead US$ 2,573/t vs US$2,554/t yesterday

Tin US$ 19,970/t vs US$19,935/t yesterday

           

Energy:           

Oil US$69.1/bbl vs US$69.1/bbl yesterday

Natural Gas US$2.959/mmbtu vs US$2.980/mmbtu yesterday

Uranium US$24.00/lb vs US$24.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$76.7/t vs US$76.7/t

Chinese steel rebar 25mm US$643.9/t vs US$642.5/t

Thermal coal (1st year forward cif ARA) US$84.8/t vs US$85.6/t

Premium hard coking coal Aus fob US$259.1/t vs US$259.1/t

 

Other:  

Tungsten APT European US$307-318/mtu vs US$294-301/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

  • Demand for cobalt is surging due to expected growth in the electric vehicle sector, drawing strong investor interest and a global scramble for producers to ramp up output necessary to meet battery manufacture orders. With a strong focus on global resources in the Democratic Republic of Congo supporting nearly two-thirds of the world’s production, the single-source risk looks set to increase as the government is considering more than doubling royalties on cobalt from 2% to 5%.
  • The new mining code, which is nearing parliamentary approval, could significantly hamper project viability and further tighten the market balance. Operating mining companies including Glencore and Randgold argue that the proposed code would make investments unprofitable.

 

Company News

 

Anglo Asian Mining* (LON:AZ) 42p, Mkt Cap £47m – CEO loan update

  • The Company agreed with Reza Vaziri, CEO and major shareholder at Anglo Asian, to extend the term of the loan and decrease the interest rate.
  • The term of the $4m loan facility with the balance currently standing at $3.9m has been moved to 8 Jan/19 from the previous 8 Jan/19.
  • The interest rate has been reduced to 7% from previous 10%.

Conclusion: Rescheduling of the loan is a welcome development as the Company continues with repayments to Amsterdam Trade Bank and Gazprombank which amount to c.$5m per 6m with outstanding balance of $9.8m as of Sep/17. The latest operational update showed an acceleration in gold production rates led by the start of production at Ugur bringing total GE output in the first nine months of 2017 to 48.3koz and putting the Company on course to reach the guided 64-72koz GE target.

*SP Angel acts as nomad and broker to Anglo Asian Mining

 

Asiamet Resources (LON:ARS) 10.6p, Mkt Cap £90m – Drilling potential feeder zone at BKZ

  • Asiamet Resources reports that recent drilling, now characterised as “delineation drilling” at the BKZ deposit, approximately 800m north of its feasibility stage BKM copper project in Kalimantan, “continues to intersect shallow, high grade base and precious metals rich mineralisation.”
  • Mineralisation has now been confirmed “over a strike length of 300m and up to 110m in width. Thickness is variably 5m to 40m.” The company says that “mineralisation remains open to the south, east, west and down-dip.”
  • The recent results are interpreted as coming from the feeder zone and contain high grade copper-silver mineralisation and include:
    • 5m averaging 4.4% zinc, 1.6% lead, 46 g/t silver and 0.11g/t gold from a depth of 44m in hole BKZ33550-01, and
    • 38m averaging 1.24% copper, 9 g/t silver and 0.13g/t gold from a depth of 49m also in hole BKZ33550-01, and
    • 12m averaging 4.0% zinc, 1.7% lead, 9 g/t silver and 0.1g/t gold from a depth of 54.5m in hole BKZ33550-01
  • Commenting on the results, CEO and Deputy Chairman, Peter Bird, said “The footprint of mineralisation at BKZ remains open in all directions and ongoing drilling will continue to concurrently infill and expand the deposit”.

Conclusion: We look forward to further results from the BKZ deposit and also to the results of the feasibility work currently being conducted on the nearby, flagship, BKM deposit.

 

Kenmare Resources (LON:KMR) 0.280 pence, Mkt Cap £307m – 2018 production guidance and update

  • Kenmare Resources reports a record production year for ilmenite, rutile and zircon at its  Moma mineral sands operation in northern Mozambique. Ilmenite output rose by 11% during the year to 998,200 tonnes, zircon production rose by 9% to 74,000 tonnes and rutile rose by 17% to 9,100 tonnes.
  • Ore production increased by 12% to 33.6mt, reflecting an “improved dredge mining operation and a higher dry mining contribution” and offsetting a 12% decline in grade to 4.46%. The lower grade was expected as the mining plan moves into lower grade areas of the deposit in the Namalope Zone.
  • The company comments that, subject to the completion of its financial accounts, “total cash operating costs are expected to be within the guided range of US$120-132 per tonne for FY 2017.”
  • The company’s production guidance for 2018 shows expected ilmenite output broadly in line with 2017’s performance at 900,000 to 1 million tonne. Other products are expected to be slightly weaker than 2017 with expected zircon output of 65-72,000 tonnes and rutile in the range 7-8,000 tonnes.
  • Cost guidance for 2018 is for US$130-143 per tonne of finished product – approximately 8% higher than the 2017 guidance figure.
  • Kenmare plans to upgrade the capacity of the wet concentrator plant by up to 20% to offset the expected lower grades. “US$19 million has been approved for expenditure on growth projects and studies in 2018, the main elements of which are represented by the WCP B upgrade project, a monazite concentrate project and feasibility studies to increase mining capacity.”
  • The company discloses a US$10.7m reduction in net debt during 2017 to US$34.1m from US$44.8m. A year end cash balance of US$68.8m offsets gross debt of US$102.9m.
  • The company considers the outlook for ilmenite pricing to be positive for 2018 as a result of “favourable supply demand fundamentals” arising, in part, from increasing Chinese import demand as more stringent environmental standards limit domestic output.
  • “Zircon prices grew strongly through 2017, supported by increased demand, falling global inventories and limited supply growth. These market dynamics are expected to persist in 2018, potentially supporting further price increases.”

Conclusion: Kenmare is looking to offset declining grades by increasing throughput capacity at a time when it expects firm markets for its ilmenite and zircon products.

 

Tri-Star Resources* (LON:TSTR) 0.04p, mkt cap £7.9m – Oversubscribed open offer raises £4.42m

  • Tri-Star Resources reports that its previously announced open offer, which closed for acceptances at 11:00 am yesterday, has raised approximately £4.42m in an oversubscribed offer.
  • The offer, which was deeply discounted was oversubscribed 7.9 times and has resulted in the issue of 108,994,666,346 additional shares bringing the total shares in issue to 63,850,388,257.
  • Executive Chairman, Mark Wellesley-Wood, thanking shareholders for their support said “The Open Offer has significantly de-geared our balance sheet and provides your company with greater flexibility in completing the Oman Roaster Project, where plant commissioning starts next month.”

Conclusion: The strengthening of the balance sheet comes as the commissioning of the Oman Roaster is about to start. We look forward to news of progress with the commissioning.

 

*SP Angel acts as Nomad and Broker to Tri-Star Resources

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Thu, 11 Jan 2018 12:12:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29211/today-s-market-view-miners-climb-on-positive-economic-growth-data-29211.html
Morning View - Strengthening dollar draws metals lower http://www.proactiveinvestors.co.uk/columns/sp-angel/29204/morning-view-strengthening-dollar-draws-metals-lower-29204.html Ortac Resources* (LON:OTC) – Update on Acquisition of Casa Mining
Bacanora Minerals (LON:BCN) – Expanding exploration area at Zinnwald
Centamin (LON:CEY) – Guiding to a 6% increase in Sukari gold output in 2018

China’s war on smog to hamper commodity demand
• Ever stringent legislations and regulations to combat winter smog shows first signals of denting factory demand for raw materials as producers prices rose at their slowest pace in 13 months in December for the world’s second largest economy. According to the National Bureau of Statistics, the producer price index (PPI) rose 4.9% in December, recording the slowest growth since November 2016. Capital Economics analysts note that the high base last year would draw price gains in raw materials from their peak, and supports the view of a softening economy.
• While the government crackdown on smog in the heavily industrialised northern provinces have triggered fears of supply shortages, giving a major boost to iron ore and steel futures prices, slowing construction activity is expected to draw end-use consumption lower and create market surplus.

Citigroup focus 2018 commodity risk on US policy
• Analysis from Citigroup comment on top risks to commodities throughout 2018, citing US policy under President Donald Trump as a principal disruptor. Risks include:
o U.S. exits Iran nuclear deal and re-imposes waived sanctions, triggering dislocation of crude oil supplies
o U.S. imposes new sanctions on Iran and Hezbollah aimed at Iran missile program and the country’s regional activities
o Disruptions to oil supply in Iran, Iraq, Libya, Nigeria, Venezuela reach 3m b/d, lifting oil to $70-$80/bbl
o Overtightening of Chinese environmental regulations, raising compliance costs sharply and supporting prices for steel, coal, copper, aluminium, nickel and zinc
o Major escalation of U.S.-China trade tensions, presenting major headwind for Chinese export industries and resulting in lower commodity consumption and prices
o Growth slowdown in China in which “old economy” and GDP expands at less than 6% via range of tighter financial policies
o Gold price spikes on equity market unwind, with bitcoin crash lending further support
o U.S. military action against North Korea: an unlikely but “non-negligible” risk that would badly damage commodity trade flows in North Asia
o Significant dollar appreciation amid tighter monetary policy and looser U.S. fiscal policy
o “Lumpy” oil supply scenarios in which U.S. shale suppliers over-produce or under-produce, and OPEC/Russia end cuts early or bring output back quickly

World Bank hiked its global growth forecasts as world recovery is gaining momentum.
• World GDP is expected to increase 3.1% this year, up 0.2pp on previous forecasts released in June and 0.1pp on growth estimated to have been recorded last year.
• Stronger investment and manufacturing activity is leading a broad cyclical recovery coupled with loose monetary policy and improved confidence, the lender said.
• US, Eurozone and China growth rates have been increased to 2.5%, 2.1% and 6.4% for this year, up 0.3pp, 0.6pp and 0.1pp on previous estimates, respectively.
• On the other hand, the Bank highlighted risks to growth of a sudden tightening of financing conditions and a spike in market volatility.
• Amid narrowing global production gap between actual potential outputs, the Bank is expecting central banks to continue or start raising interest rates after a decade of easing.

Dow Jones Industrials  +0.41% at 25,386
Nikkei 225   -0.26% at 23,788
HK Hang Seng   +0.11% at 31,046
Shanghai Composite    +0.23% at 3,422
FTSE 350 Mining   -0.56% at 19,263
AIM Basic Resources   -0.68% at 2,800

Economics
US – Job openings unexpectedly declined in November hitting a six-month low, although the numbers remain consistent with an improving labour market, Bloomberg reports.
• Strong jobs data and tightening labour market should help to accelerate pay growth filtering into stronger consumer spending and stronger inflation levels.
• Job Openings: 5,879k v 5,925k in October and 6,025k forecast.

China – Inflation numbers released today showed producers enjoyed the year of increasing factory prices helping their earnings while consumer prices came in below government targets dragged by benign food sector.
• PPI climbed 6.3% in 2017 marking the fastest pace in a decade and the first increase after five years of falling prices.
CPI advanced 2.0%, down 0.4pp on 2016 and well below the state 3.0% target.
• PPI (%yoy): 4.9 v 5.8 in November and 4.8 forecast.
• CPI (%yoy): 1.8 v 1.7 in November and 1.9 forecast.

UK - Businesses are expecting more price increases in coming months putting more pressure on the BoE as inflation continues to run above the 2% target rate, the latest British Chmabers of Commerce survey showed.
• The share of services firms planning to raise prices in the next three months increased to 36% in Q4/17, marking the highest level since 2008, while the proportion of manufacturers looking to implement higher prices increased to 50%, up from 35%, previously.
• “While inflation is likely to peak in the coming months it is likely to remain stubbornly above the BoE 2% inflation target for a prolonged period,” the BCC said.
• “The UK economy is set to continue on an underwhelming growth trajectory over the near term with uncertainty over the impact of Brexit coupled with high inflation and weak productivity.”
• On a separate note, UK manufacturing recorded a seventh consecutive month of gains in November led by strong overseas demand (Eurozone, in particular).
• Ten of 13 manufacturing sectors recorded an increase in November with the headline gauge climbing 3.5%yoy versus 4.7%yoy in October and 2.8%yoy forecast.
• However, construction sector performance remained subdued with growth falling to 0.4%yoy in November, down from 1.3%yoy in October, and housebuilders hoping government initiatives for housebuilding of affordable homes to improve the outlook in the sector.

DRC – The government is considering to more than double an export tax on cobalt shipments, according to Mines Minister.
• The DRC accounting for roughly two-thirds of global cobalt supply may raise exports tax to 5% form current 2% should authorities start to categorise the metal as a “strategic substance”, Mines Minister Martin Kabwelulu tol the nation’s Senate last week.
• Considered mining law changes and an introduction of the strategic status of the mineral include other changes including (Bloomberg reports):
o Increases in royalties in copper (3.5% v 2.0%) and gold (3.5% v 2.5%);
o Introduction of a profit-windfall tax;
o Doubling the government free interest to 10%:
o Reduction in the period during which contract stability is guaranteed to five years from ten.
• The draft law was adopted by the National Assemble on December 8 and is currently discussed in the Senate in an extraordinary session that started January 2.
• Once approved by the Upper House, the draft will be taken to President to sign into law.

Currencies
US$1.1947/eur vs 1.1945/eur yesterday  Yen 111.94/$ vs 112.83/$  SAr 12.385/$ vs 12.421/$  $1.351/gbp vs $1.354/gbp  0.783/aud vs 0.784/aud  CNY 6.522/$ vs 6.517/$.

Commodity News

Precious metals:         
Gold US$1,314/oz vs US$1,317/oz yesterday
• Spot gold remained under pressure on strengthening US dollar index, rising to 92.44 from lows of 91.75 on Jan 2nd, and robust equity markets. Wall street’s major indexes extended the New Year rally, recording surging levels over six consecutive trading days. Oanda analysis note a “stronger equity market is also taking some shine of gold as investors pare back early year equity market hedges as global stock equity markets remain on the ups”. However, the growing dollar may be short-lived as “much of the [dollar] appeal is being expressed via the euro suggesting this mini dollar revival is little more than traders unwinding overextend EUR bets and with no evidence that the broader US dollar downtrend has run its course.”
• Precious metals contract for the second day after yields on 10-year US Treasuries climb to their highest level in almost 10 months following the tweak to the Bank of Japan bond-buying programme. Benchmark US yield rose 7 basis points to top 2.56% for the first time since March, likely a function of higher risk appetite; “Risk appetite continued to stay buoyant into the second trading week of the year, which suggests duller interest for safe-haven assets like gold” economist at Oversea-Chinese Banking Group.
• With investors betting on more US interest rate hikes into 2018, some participants remain cautious about the pace of monetary policy tightening with Minneapolis Federal Reserve President Neel Kashkari commenting that rates should remain low so that wage gains accelerate and inflation continues to rise.
   Gold ETFs 71.6moz vs US$71.7moz yesterday
Platinum US$964/oz vs US$964/oz yesterday
Palladium US$1,100/oz vs US$1,109/oz yesterday
Silver US$17.02/oz vs US$17.09/oz yesterday
           
Base metals:   
Copper US$ 7,132/t vs US$7,160/t yesterday
Aluminium US$ 2,164/t vs US$2,164/t yesterday
Nickel US$ 12,735/t vs US$12,570/t yesterday
Zinc US$ 3,327/t vs US$3,383/t yesterday
• Strengthening dollar eclipses supply concerns as zinc contracts 1.3% from decade highs. Earlier prices had risen as much as 0.4% to record the best intraday level since August 2007 at $3,400/t. Despite views that the market will remain tight into 2018, with LME inventories accounting for just five-six days of consumption, base metals broadly fell as the dollar rallies for the second day.
Lead US$ 2,554/t vs US$2,594/t yesterday
Tin US$ 19,935/t vs US$19,990/t yesterday
           
Energy:           
Oil US$69.1/bbl vs US$68.1/bbl yesterday
• Tightening market balances have supported oil price gains as US crude futures hit three-year high. OPEC’s decision to extend the global production cuts and a sharp fall in US crude inventories have drawn Brent crude 0.6% higher to $69.22 per barrel, nearing on mid-2015 highs. The American Petroleum Institute note crude inventories falling 11.2 million barrels in the week to Jan 5th, 187% higher than the 3.9 million barrel expectation.
• Support for oil is creating concerns over the impact of shale as some in OPEC fear the gains could prompt shale companies to crank open their spigots and flood the market.
Natural Gas US$2.980/mmbtu vs US$2.904/mmbtu yesterday
Uranium US$24.00/lb vs US$24.00/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$76.7/t vs US$76.3/t
• Abundance in low-grade ore boosts stockpiles at Chinese ports to record levels as environmental curbs bring a focus on higher-quality, lower emission product. Port stockpiles have now risen above 150 million tonnes, predominantly low-grade material, as steel mills are still lacking high-grade material. Despite tightness in high-grade iron ore, growing oversupply in lower-grade iron ore has drawn futures for May 0.5% lower to 557.5 yuan/t on Dalian Commodity Exchange.  
Chinese steel rebar 25mm US$642.5/t vs US$648.1/t
Thermal coal (1st year forward cif ARA) US$85.6/t vs US$86.0/t
Premium hard coking coal Aus fob US$259.1/t vs US$260.7/t

Other:  
Tungsten APT European US$307-318/mtu vs US$294-301/mtu last week
Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

Company News
Ortac Resources* (LOHN:OTC) 2.7p, Mkt Cap 8.9m – Update on Acquisition of Casa Mining
• Ortac Resources reports that it has now increased its holding in Casa Mining from 84.7% to 87.4%.
• Casa Mining holds the Misisi gold exploration project in the DRC where additional drilling is underway to expand and firm up the existing resource estimate.
• The offer remains open until 10th May and the company reports that "acceptances continue to be received daily".

Bacanora Minerals (LON:BCN) 138p, Mkt Cap £183m – Expanding exploration area at Zinnwald
• Bacanora Minerals has been awarded an additional exploration licence covering 295 hectares in close proximity to the company's 50% owned Zinnwald Lithium Project in southern Saxony.
• The licence, which is valid for 5 years,  covers the previously mined Falkenhain lithium deposit and is located approximately 5km from Bacanora's 50% owned Deutsche Lithium project at Zinnwald.
• "Deutsche Lithium plans to explore the deposit over the next five years and to combine its exploration and development with Zinnwald."
• The company is currently carrying out a feasibility study to establish a route to the viability of the Zinnwald deposit and as part of this effort, a 15 holes, 4458m, drilling programme was recently completed. A 100 tonnes bulk sample has also been recovered to provide material for metallurgical testing and to help establish process parameters.
• "Chemical processing (roasting, leaching, precipitation) will now be carried out to develop the final flowsheet to produce downstream lithium compounds, focusing on the production of higher value lithium battery chemical products"
• Commenting on the addition of the Falkenhain licence, CEO, Peter Secker, said "The issue of the exploration licence is a key milestone for Bacanora's activities in Germany.  Falkenhain will supplement our two significant lithium assets at Zinnwald and Sonora, each of which have the potential to become major suppliers of high value products to fast growing end markets, such as electric vehicles and energy storage, in the strategically important European and Asian lithium markets. "
• Conclusion: The additional exploration ground in Saxony may extend the scope of the Zinnwald project with the possibility of ultimately establishing a larger scale project. We look forward to further news on the feasibility work at Zinnwald and on exploration work at Falkenhain.

Centamin (LON:CEY) 159p, Mkt Cap £1,828m – Guiding to a 6% increase in Sukari gold output in 2018
• Centamin has published production guidance for expected gold output in 2018. The company expects to deliver a 6% increase in gold output from Sukari to 580,000oz of gold compared to the 544,656oz produced in 2017. 
• The 2017 output exceeded the 540,000oz guidance.
• The company expects cash costs of US$555/oz and an all-in-sustaining costs of US$770/oz at Sukari in 2018.
• In addition, the company has published its updated mineral resource estimate effective 30th June 2017. The overall measured and indicated resource stands at 11.75m oz of gold at an average grade of 0.95g/t compared with the previous year's estimate of 12.9m oz at an average grade of 1.03 g/t of gold. Both estimates are reported at a cut-off-grade of 0.3 g/t.
• The underground mine component of the resource amounts to 1.6moz at an average grade of 6.8g/t compared to the previous year's estimate of 1.0moz at a grade of 6.8g/t.

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Wed, 10 Jan 2018 13:25:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29204/morning-view-strengthening-dollar-draws-metals-lower-29204.html
Morning View - Zinc advances to decade highs on waning global stockpiles http://www.proactiveinvestors.co.uk/columns/sp-angel/29197/morning-view-zinc-advances-to-decade-highs-on-waning-global-stockpiles-29197.html Amur Minerals* (LON:AMC) – Assay results point to a potential significant expansion of IKEN and KUB mineral resources
Bluebird Merchant Ventures* (LON:BMV) – Grab sampling results from the Gubong gold project in South Korea
Ortac Resources* (LON:OTC) – Akyanga drilling results
Strategic Minerals* (LON:SML) – Cobre delivers record quarterly sales

Metal bull phase expected to continue into 2018
• Positive sentiment continues toward London Metal Exchange index of six contracts into 2018 as metals resume their December rally. The index climbed 29% last year, the biggest increase since 2009.

UK diesel auto sales which fell 17.1%yoy last year are forecast to post a 10% decline in 2018, according to Aston Universtiy estimates.
• The segment which accounted for 50% at its peak is estimated to contract to just 15% in the UK by 2025 on the back of “environmental pressures and consumer confusion”.
• Diesel car sales dropped by almost a third in December following November’s Budget which introduced a levy on new diesel engines.
• Forecasts for a reduction in diesel powertrain share in Europe which is the core market for diesel engines does not bode well for platinum demand in autocatalysts.

Dow Jones Industrials  -0.05% at 25,283
Nikkei 225   +0.57% at 23,850
HK Hang Seng   +0.46% at 31,043
Shanghai Composite    +0.13% at 3,414
FTSE 350 Mining   +0.77% at 19,277
AIM Basic Resources   +0.99% at 2,800

 

Economics

US – Outstanding consumer credit increased the most in 16 years in November as people stepped up spending amid festive season.
• Strong numbers also reflect positive outlook held by households over its finances amid rising house prices and record stock market values.
• Total credit climbed $28bn v $18bn forecast amounting to an annualised 8.8% increase.
• Real Cash Earnings (%yoy): 0.1 v -0.1 in October and -0.1 forecast.

Japan – Real labour earnings climbed 0.1%yoy in November despite the lowest unemployment rate in decades and amid businesses’ reluctance to raise wages amid strong corporate profits.
• Weak growth in wages weighs on consumer spending which in turn limits a potential pick up in the inflation rate.

Germany – A set of positive economic data point to a solid growth momentum in the economy demonstrated through final months of last year.
• Industrial production and trade numbers beat market expectations in November on the back of demand for investment goods and strong overseas shipments.
• Production of capital goods climbed 5.7%mom following declines in October and September while consumer goods output increased 3.6%mom.
• The data comes ahead of FY17 GDP numbers due this Thursday with estimates for a 2.4%yoy reading which would mark the strongest increase since 2011.
• Industrial Production (%mom/yoy): 3.4/5.6 v -1.2/+2.8 in October and 1.8/3.9 forecast.
• Exports (%mom): 4.1 v -0.3 in October and 1.2 forecast.
• Imports (%mom): 2.3 v 1.8 in October and 0.4 forecast.

UK – The cabinet reshuffle saw most of senior ministers keeping their places with the process having been far from flawless as one minister stepped down and the other refused to move.
• Former Education Minister decided to resign rather than head the Department for Work and Pensions while the Education Secretary refused to switch to the business department
• Among senior ministers who avoided changes were Mr Hammond (Chancellor of Exchequer), Ms Rudd (Home Secretary), Mr Johnson (Foreign Secretary) and Mr Davis (Brexit Secretary).
• Remain supporter and former Immigration Minister, Brandon Lewis, was appointed as Conservative Party Chairman.
• A pro-European former Justice Secretary David Lidington was appointed as Cabinet Office minister replacing Damien Green.

North/South Korea – Pyongyang indicated interest in the nation’s team participating in Olympic Games in South Korea next month during a meeting between two countries’ representatives today.
• This was the first time representatives met in two years and is viewed by many as a sign of de-escalation of the conflict between two nations.
• Seoul also offered to resume military and denuclearisation talks with little information on how proposals have been taken by its neighbour.

Currencies
US$1.1945/eur vs 1.1999/eur yesterday  Yen 112.83/$ vs 113.32/$  SAr 12.421/$ vs 12.375/$  $1.354/gbp vs $1.353/gbp  0.784/aud vs 0.784/aud  CNY 6.517/$ vs 6.494/$

Commodity News

Precious metals:         
Gold US$1,317/oz vs US$1,316/oz yesterday
• Gold prices showed minor recovery as weakening of the dollar index provided support to the precious metal, despite expectations for more US interest rate increases beginning March to underpin the currency. “Gold prices edged a bit lower overnight after the US dollar took back some lost ground from the EUR, but as the USD mini-correction ran out of steam, gold prices quickly retraced earlier loses” according to Oanda analysis. Weakness in the euro lent support to the dollar as disappointing euro area inflation data drew the currency lower. “Given the very tight current correlation between gold and USD coupled with relatively sparse news flow, bullion dealers will be keying on Fed speak to provide a catalyst for the dollar ahead of Friday's key US CPI, but so far the Fed rhetoric as contributed few sparks”.
• The precious metal’s 14-day RSI has been hovering above 70 since the start of January, giving technical indication for a pullback in price as the security is overbought. Analysis at Shandong Gold Group see short-term pressure on gold under strengthening US tax reforms and rate hikes, but also foresee the market to “get used to” the rate hike expectations to drive gold higher.
Gold ETFs 71.7moz vs US$71.6moz yesterday
Platinum US$964/oz vs US$969/oz yesterday
Palladium US$1,109/oz vs US$1,101/oz yesterday
Silver US$17.09/oz vs US$17.15/oz yesterday
           
Base metals:   

Copper US$ 7,160/t vs US$7,138/t yesterday
• Disruptions to output from the world’s largest supplier, Chile, continue as production at the nation’s largest mines fell in November according to Chile copper commission Cochilco. Total output across Codelco divisions fell 6.7% in November to 163,000 tonnes, while production at Antofagasta’s Zaldivar mine contracted the most.
Aluminium US$ 2,164/t vs US$2,208/t yesterday
Nickel US$ 12,570/t vs US$12,560/t yesterday
Zinc US$ 3,383/t vs US$3,370/t yesterday
• Zinc continues its rally, rising almost every single day since Dec. 19th, to settle at decade highs. LME price rose as much as 0.4% to $3,400/t, the best intraday price since August 2007, with Shanghai following suit and climbing 1.1%. The metal, used predominantly to galvanize steel for cars, has more than doubled since early 2016 as global production cuts stimulated prices. Limitations on supply combined with sustained demand from top consumer China have heavily increased the reliance on global stockpiles, with LME warehouses falling to the lowest since 2008 and in Shanghai since 2009. Orders to withdraw zinc from London Metal Exchange warehouses have climbed to the highest levels since 2012.
• Expectations are for the market to remain in tightness despite the run rate at Chinese zinc smelters falling 4.2% in December mom on maintenance and ongoing environmental checks curbed production. SMM Information & Technology Co. analysis see “the consensus in the market is that prices will
probably stay strong in the first half of the year as tightness persists, before easing later when mine supply recovers”.
• Supporting production maybe found in the rebound in newly announced mining and energy projects in Australia, boosting output across A$52.5 billion of assets through to October according to the Department of Industry, Innovation and Science.
Lead US$ 2,594/t vs US$2,570/t yesterday
Tin US$ 19,990/t vs US$19,940/t yesterday
           
Energy:           
Oil US$68.1/bbl vs US$67.7/bbl yesterday
Natural Gas US$2.904/mmbtu vs US$2.862/mmbtu yesterday
Uranium US$24.00/lb vs US$24.00/lb yesterday
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$76.3/t vs US$74.0/t
• Iron ore spot surges 3.1% to their highest in four months as investors respond to Beijing’s tightening steel production capacity. Further to current Ministry of Environmental Protection legislation, the world’s biggest steel producer ordered mills in environmentally sensitive regions, including its steel hub Hebei, to phase out at least 1.25 tonnes old capacity before building one tonne of new capacity. The move by the producers falls off the back of Beijing’s vow to continue to “unswervingly” cut existing steel capacity and “strictly” ban the launch of any new steelmaking facilities in 2018.
• Investors also see positive short-term expectations for iron ore as they expect strong restocking demand across steel mills ahead of China’s Lunar New Year, starting on Feb. 15th.
• The metal set to be whipsawed as investors and users navigate the cross-currents thrown up by China’s efforts to manage steel production and rising global mine production. While the clampdown has resulted in an initial drop off in steel output, production is expected to reverse with a vengeance when the winter air emission-related curbs are relaxed in spring. Consequently, it is predicted that there will be robust growth in steel production and therefore iron ore demand as restrictions are lifted, with prices set to decline beyond first half of 2018 as the market tightness relaxes.
Chinese steel rebar 25mm US$648.1/t vs US$657.2/t
Thermal coal (1st year forward cif ARA) US$86.0/t vs US$85.6/t
• The world’s largest insurers are opening up a new front in efforts to cut down on the coal use by refusing to offer cover to miners and power generators consuming the fuel. Industry executives are worried about the potential for global warming to drive up insurance claims, leading to debate about whether to cover companies that contribute to the problem.
• Fifteen insurers have taken action, including Zurich, Scor and Swiss Re, and between them pull $20bn out of industry, including insurance cover that enables plants to undergo construction.
Premium hard coking coal Aus fob US$260.7/t vs US$261.7/t

Other:  
Tungsten APT European US$307-318/mtu vs US$294-301/mtu last week
Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t
• CRU International are moving to predict the cobalt market could move into surplus in 2018 as Glencore turns on its majority-owned Katanga cobalt operation in the Democratic Republic of Congo, the largest producing mine in the world. They are forecasting that this could significantly impact supply and demand dynamic over next 2 years – with cobalt market re-entering a surplus in 2018 to 2019, then from 2019 onwards, accelerating demand from nascent EV industry will draw oversupply.
• It is also highlighted that market deficit would not necessarily translate to lower prices as large future consumers of cobalt invest and hold stockpiles in order to mitigate long term supply risk.

Company News

Amur Minerals* (LON:AMC) 7.5p, Mkt Cap £48m – Assay results point to a potential significant expansion of IKEN and KUB mineral resources
• The Company received all drilling assay results from the 2017 field programme pointing to the potential of a significant increase of the latest mineral resource.
• Of 107 diamond drill holes completed for 26,486m, 74 holes intersected ore grade mineralisation (COG 0.4% Ni and a minimum thickness of 3.0m) returning average mineralised thickness per hole of 22.4m at 0.80% Ni and 0.25% Cu.
• The programme focused on infill as well step out drilling at IKEN, KUB and ISK (the area connecting IKEN and KUB) extended known mineralisation strike by 2,260m to 3,650m which in turn the management suggests could expand combined mineral resources at IKEN and KUB towards the current largest deposit of MKF, a 3,500m long deposit hosting 60.9mt at 0.78% Ni and 0.22% Cu.
• Both IKEN and KUB are currently estimated to host 35.6mt at 0.72% Ni and 0.19% Cu as of Feb/17 MRE.
• “The Company anticipates there is the potential to nearly double the IKEN and KUB resource,” the announcement read.
• Expanded 3,650m long mineralisation zone has now been confirmed to consist of three blocks (IKEN, ISK and KUB all 1,000m and longer in strike) with the mineralisation thickness and grades starting at 33.1m at 0.95% Ni and 0.26% Cu at IKEN and averaging 19.8m at 0.75% Ni and 0.20% Cu at KUB.
• RPM mining consultants are in the process of reviewing new drilling results with a view to update the available mineral resources in early 2018.
• On a cost side of exploration, Company owned drill rigs allowed for a considerable cost saving on drilling works with all-in costs coming in at a record low $35/m which is more than four times lower compared to costs involving drilling contractors.
Conclusion: An efficient and low cost infill and step out drilling programme at IKEN and KUB returned ore grade mineralised intersections in 70% of completed holes which is expected to significantly expand the mineral inventory in the area and potentially expand the life of mine and improve economics of the Kun Manie project.
*SP Angel act as Nomad and Broker to Amur Minerals

Bluebird Merchant Ventures* (LON:BMV) 2.8p, Mkt Cap £5.2m – Grab sampling results from the Gubong gold project in South Korea
• The company reports that having gained access to the historic underground workings of the Gubong mine at Adit 4 and at Decline Shaft Number 2 its engineers have been able to recover grab samples of fines, broken ore and rail ballast.
• Among the ten results reported today are gold assays in the range 1 – 21g/t and silver assays ranging between 8g/t and 40g/t. Results from the Adit 4 area range between 1g/t to 21 g/t for gold and 10g/t to 40g/t for silver. The results at Decline 2 range between 1.2 g/t to 13.3g/t for gold and 8g/t to 20g/t for silver.
• The old mine workings at Gubong are extensive with “30 to 40 kilometres of railed tunnels”. The company comments that “Historical drill results … indicate that the structure continues below the 500 metre level so the mine has significant upside potential.” Overall, the company indicates that “The mine has over 120 kilometres of underground tunnels and was South Korea’s second largest gold mine.”
• The mine was closed at a time when the gold price was around US$40/oz and “These results demonstrate that many areas of the mine were undoubtedly left unmined due to what was, at the time, unpayable grades”.
Conclusion: It is encouraging to learn that the company has now gained access to some of the underground workings at Gubong and that initial early stage grab samples from the underground workings at Gubong have yielded encouraging assays. With extensive underground workings there is clearly a great deal of detailed mapping and sampling work ahead but as the company points out with the mine closure occurring at a gold price of around US$40/oz there are likely to be opportunities to develop a mine plan based on grades considered uneconomic at that time. We look forward to further news as the company accesses and documents the old workings.
*SP Angel act as broker to Bluebird Merchant Ventures

Ortac Resources* (LON:OTC) 3.2p, Mkt Cap £10.7m – Akyanga drilling results
• Ortac Resources reports results from its most recent two drill holes at the Akyanga project in DRC where historic drilling of more than 100 holes has generated a JORC compliant resource of approximately 1.5m oz of gold at an average grade of 1.65g/t.
• The current drilling programme, which comes against the background of Ortac’s continuing acquisition of the licence holder, Casa Mining, has generated higher grade intersections including:
o A 4.55m wide intersection averaging 3.15g/t gold from a depth of 189.45m in hole MSDD0117 which also contains a 6.7m wide drill interval averaging 2.01g/t gold from 209.80m depth; and
o A 5.85m wide intersection averaging 2.47g/t gold from a depth of 199.40m in hole MSDD0118,  with a further 7.8m wide drill interval averaging 2.67g/t gold from 240.70m depth.
• The company drilled over 3300m at Akyanga, which forms part of the wider Misisi project area, during 2017. Hole MSDD0117  was drilled “between existing and previously unannounced holes MSDD0083 and MSDD102. These holes are spaced approximately 200m apart and MSDD0117 successfully confirmed the continuity of the mineralisation between these two holes.” The Misisi project area covers 133 square kilometres over some 60km of strike length along the Tanganyika graben and in addition to Akyanga contains prospects at Lubitchako, Tulongwe, Kilombwe and Mutshobwe.
• Hole MSDD0083 contained an intersection grading 2.29g/t gold over an 11.20m wide interval from a depth of 131.80m.
• Hole MSD0118 was a re-drill of the previous hole MSDD0116 which was abandoned, presumably as a result of drilling difficulties at a depth of 85m. “This hole was collared approximately 80m from existing and previously unannounced hole MSRC0002, which reported a highlight intersection of 4.63 g/t Au over 18m from 138m depth. MSDD0118 successfully extended the down dip continuity of the mineralisation reported in hole MSRC0002”
• As drilling proceeds and the Ortac team review the historic drilling data, evidence appears to be emerging of opportunities to expand the existing 1.5m oz resources estimate. Commenting on the results, Executive Chairman, Nick von Schirnding said “We are now evaluating the possibility of expanding certain conceptualised pits – with all the economic advantages that scale brings.”
Conclusion: Ortac is moving ahead with exploration of Casa Mining’s Misisi project and is investigating opportunities to expand the existing 1.5m oz resource. On the corporate side, Ortac now owns 84.7% of Casa Mining and is expecting to complete the acquisition shortly.
*SP Angel acts as nomad and broker to Ortac Resources

Strategic Minerals* (LON:SML) 2.2p, Mkt Cap £29.4m – Cobre delivers record quarterly sales
• Strategic Minerals has announced that its Cobre magnetite operation in New Mexico has delivered record quarterly sales volumes and revenues with 30,730 tons sold for US$2.14m during the three months ending 31st December 2017.
• The final quarter of 2017 brought the total sales for the year to 84,980 tonnes generating sales revenue of US$5.64m representing a 260% increase on the revenue of US$1.55m generated in 2016.
• The December quarter represents a 4% increase in tonnage and a 5% increase in revenue compared with the previous quarter and maintains unit sales revenue at over US$69/tonne.
• Based on the results, “the Board anticipates 2017 will see the Company record its first before tax profit in excess of US$1m.”
• The company reports a healthy year-end cash balance of US$3.81m representing a US$2.2m increase during the quarter. “This strong cash position has enabled the Company to settle the cash component of the Leigh Creek Copper Mine acquisition, internally fund the start up of Leigh Creek, internally fund the CARE 2018 drilling programme and internally fund the expected share of 2018 Redmoor exploration expenses.”
Conclusion: The December quarter results from Cobre build on the previous record quarter in September and puts Strategic Minerals on course for its first annual pre-tax profit in excess of US$1m. Cobre’s cash-flow has been an important engine of growth for the company and the forthcoming acquisition and resumption of operations at the Leigh Creek copper operation in Australia should provide Strategic Minerals with a second source of cash as it builds its exploration efforts at CARE and Redmoor.
*SP Angel act as Nomad and broker to Strategic Minerals
 

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Tue, 09 Jan 2018 09:46:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29197/morning-view-zinc-advances-to-decade-highs-on-waning-global-stockpiles-29197.html
Morning View - Equities extend gains ahead of earnings season http://www.proactiveinvestors.co.uk/columns/sp-angel/29192/morning-view-equities-extend-gains-ahead-of-earnings-season-29192.html Asiamet Resources (LON:ARS) – Production licence for Beutong

Edenville Energy (LON:EDL) -  Plant moves to two shift working to help offset impact of wet season

Gem Diamonds (LON:GEMD) –Letseng yields two more large diamonds

Lucapa Diamonds (ASX:LOM) –9th diamond larger than 100 carat diamond recovered from Lulo

Shanta Gold (LON:SHG) – Luke Leslie appointed as permanent CFO

 

China’s lithium conversion crucial to 2018 pricing

  • China’s lithium conversion capacity bottleneck will have significant bearing on prices in early 2018, as the ability of chemical conversion from spodumene ore to battery-grade lithium products could limits electric vehicle uptake. Rising output across December from Chinese conversion facilities helped meet demand and maintain stable pricing, with global lithium carbonate -0.2% in December to avg. $16,000/t; global lithium hydroxide 1.2% to avg. $18,813/t.
  • Global demand from the battery sector is expected to rise rapidly, with strong Chinese EV production outlook and SK Innovation Co.’s plan to develop a 7.5 GWh plant in Europe.
  • Potential restrictions in battery-grade supply highlights limitations with China exports, indicating nations outside of China targeting rapid expansion in battery capacity will need to bolster supply chains. President Donald Trump’s executive order to reduce critical mineral reliance aims to draw focus away from imports and support domestic mining projects across the US.
  • The rapid ramp-up in raw material to conversion facilities in China could see Lithium hydroxide prices settle at slightly lower levels into 2018, although the slowdown in production around China’s Spring Festival is likely to support pricing across Q1. 

As China restricts scrap metal, companies look to process copper abroad

  • As China tightens restrictions on imports of foreign waste, Chinese metal recyclers and smelters like Jiangxi Copper Co are looking to use Southeast Asian countries as alternative location for processing of scrap copper.
  • Vietnam, Indonesia, Myanmar, Laos and India were named by industry sources as possible alternative scrap-processing destinations. 

Dow Jones Industrials

 

+0.88%

at

25,296

Nikkei 225

 

+0.89%

at

23,715

HK Hang Seng

 

+0.15%

at

30,861

Shanghai Composite

 

+0.52%

at

3,409

FTSE 350 Mining

 

+0.51%

at

18,943

AIM Basic Resources

 

+0.89%

at

2,772

 

Economics

 

US – Jobs numbers came in lower than forecast in December after a bounce recorded in the previous month on a recovery from weather related disruptions in Q3/17.

  • Weak numbers were largely driven by slower hiring in the private sector (91k v 176k in Nov) with most deceleration coming from trade, transportation, utilities and retail sector.
  • Earnings growth improved only marginally from the previous month as November data has been revised down 0.1pp with the headline growth rate continuing to range bound between 2.4% and 2.9% of the past two years.
  • Both US Treasury bond yields and US$ index closed higher on Friday following a brief dip on the announcement of weak labour numbers.
  • Both major US equity indices closed higher on the day as well with S&P500 up 0.7% and Dow up 0.9% on the day.
  • NFP: 148k v 252k in November and 190k forecast.
  • Unemployment rate (%): 4.1 v 4.1 in November and 4.1 forecast.
  • Av hourly earnings (%mom/yoy): 0.3/2.5 v 0.1/2.4 in November and 0.3/2.5 forecast.

 

China – Inner Mongolia, one of the top 10 Chinese regions based on GDP per capita, admitted to rigging economic statistics.

  • The region said its industrial production for 2016 should be revised down by 40% to $44.7bn, while fiscal revenue for the same year should have been 26% lower than first reported.
  • This marks the second region to have confirmed to data manipulation lately with the north-eastern province of Liaoning previously saying it had fabricated economic numbers from 2011 to 2014.
  • The news highlights the government drive to improve state reporting standards which if left unchanged risk reliability and accuracy of incoming data and my potentially provide wrong signals to the state of the economy and the policy response required.

 

Germany – Factory orders contracted in November with export bookings sliding more than domestic ones; although, orders remained strongly up on the previous year.

  • “Overall, orders in the second half of 2017 developed extremely dynamically… this lays the foundation for a strong start to the year in industry,” the Economy Ministry said in a statement.
  • Factory Orders (%mom/yoy): -0.4/+8.7 v 0.7/7.2 in October and 0.0/7.8 forecast.
  • Chancellor Merkel is looking to secure a commitment from the rival Social Democrats to start formal negotiations over a potential coalition this week.

 

UK – Consumer spending dropped for the first time in five years in 2017, accosting to the Visa data.

  • The index tracking private consumption slipped 0.3%yoy last year with sales in December reported to have dropped 1%yoy, highlighting subdued Christmas shopping season sentiment.
  • The momentum is unlikely to turn this year, the payments processing company said.
  • While online sales took up some slack, the rate of growth slowed from 2.0%yoy in December, down from 2.0%yoy in the previous month.
  • On a separate note, house prices growth is reported to have dropped from the previous month marking the first decline in six months amid “a squeeze on real-wage growth and continuing uncertainty over the economy”, Halifax data showed.
  • Annual price change came in at 2.7%yoy, down 1.2pp on the previous month and the lowest since Aug/17.
  • Halifax house prices (%mom/3myoy): -0.6/+2.7 v 0.3/3.9 in November and 0.2/3.3 forecast.

 

Currencies

US$1.1999/eur vs 1.2052/eur yesterday  Yen 113.32/$ vs 113.18/$  SAr 12.375/$ vs 12.353/$  $1.353/gbp vs $1.355/gbp  0.784/aud vs 0.784/aud  CNY 6.494/$ vs 6.485/$.

 

Commodity News

 

Precious metals:         

Gold US$1,316/oz vs US$1,317/oz last week

  • Gold continues to trade in a tight range following four weeks of increases, as Friday’s US payrolls report missed expectations and the dollar fades. Non-farm payrolls increased by 148,000 jobs last month, with employment data for October and November being revised to show 9,000 fewer jobs created than previously reported, signaling a slowdown in US jobs.
  • Expectations for further US interest rate hikes and anticipation of subdued physical demand ahead of the Chinese New Year could draw the metal away from recent 3.5 month highs. Physical gold demand across Asia remained deflated as retail buyers find prices “too hard to shallow”, However, demand is expected to increase nearer to New Year celebrations, with hedge funds and money managers raised their net long positions in COMEX gold last week, on the bet of rising prices.
  • Tightening Federal Reserve monetary policy and increasing yields on US Treasury is expected to draw gold prices lower over the next two years according to the world’s second-largest producer, Australia. The Department of Industry, Innovation and Science forecast an average $1,250/oz in 2018, falling to $1,205/oz into 2019. “Real yields on 10-year U.S. Treasury bonds are expected to average near 1 percent over the next two years, propelled by rising official interest rates in the U.S”, according to the department.

Gold ETFs 71.6moz vs US$71.6moz last week

Platinum US$969/oz vs US$961/oz last week

Palladium US$1,101/oz vs US$1,096/oz last week

  • Investors in one of 2017’s hottest commodities expect the bullish run to continue as palladium production will continue to lag behind consumption through to 2022, according to Morgan Stanley analysis. The metal, which is used in vehicle pollution-control devices, recorded its best annual performance since 2010, pushing palladium’s price relative to gold up to a 15-year high.

Silver US$17.15/oz vs US$17.16/oz last week

           

Base metals:   

Copper US$ 7,138/t vs US$7,169/t last week

Aluminium US$ 2,208/t vs US$2,237/t last week

Nickel US$ 12,560/t vs US$12,525/t last week

Zinc US$ 3,370/t vs US$3,355/t last week

  • Zinc continues to extend recent gains, rising 0.5% as the metal draws closer to its highest close since 2007. LME cash zinc is trading at a $26 premium to the benchmark contract CMZN0-3, up from $10 in early December, encouraging deliveries to SHFE warehouses.

Lead US$ 2,570/t vs US$2,579/t last week

  • LME lead rallied 1.2% as traders are being forced to cover growing short positions in the metal. In particular, a very big short-position holder has emerged in lead futures, with 20-29% of outstanding positions for February which rise to 30-39% in March. A significant 40-50% of LME stock holding of lead warrants could also suggest an impending tumble in price.

Tin US$ 19,940/t vs US$19,880/t last week

           

Energy:           

Oil US$67.7/bbl vs US$67.9/bbl last week

  • 136,000 tonnes condensate, equivalent to one million barrels of crude oil, is at risk of exploding onboard the Panama-flagged Sanchi tanker in the East China Sea. After colliding with a Hong Kong-registered freighter CF Crystal, the contents of the tanker have been spilling into the sea causing a huge environmental impact with the potential loss of cargo of $60m.

Natural Gas US$2.862/mmbtu vs US$2.809/mmbtu last week

Uranium US$24.00/lb vs US$24.00/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$74.0/t vs US$73.8/t

  • Australian government projections for iron ore prices foresee a 20% contraction from 2017 levels to settle to an average $51.5/0/t. Rising global supply and moderating steel sector demand from top importer China are expected to draw prices lower.

Chinese steel rebar 25mm US$657.2/t vs US$673.8/t

  • Steel rebar contracts after closing last week 0.5% higher, as steel holdings begin to climb. Rebar stocks across China rose 8.4%, the most since February, after bottoming out at the lowest levels since 2010, according to Steelhome.

Thermal coal (1st year forward cif ARA) US$85.6/t vs US$85.6/t

Premium hard coking coal Aus fob US$261.7/t vs US$261.9/t

 

Other:  

Tungsten APT European US$307-318/mtu vs US$294-301/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

 

Company News

 

Asiamet Resources (LON:ARS) 10.65p, Mkt Cap £90.5m – Production licence for Beutong

  • Asiamet Resources reports the granting of a 20+ year production licence for its 40% owned Beutong copper-gold project  in the Nagan Raya Regency, Aceh, Indonesia.
  • The Beutong deposit, which “is located … in Aceh in Indonesia, some 60 kilometres inland from the coastal city of Meulaboh on the island of Sumatra”, has a JORC compliant measured/indicated resource of 93mt at an average grade of 0.61% copper and 97ppm molybdenum with minor gold and silver and an additional inferred resource of 418mt at an average grade of 0.45% copper and 129ppm molybdenum.
  • “Asiamet has a 40% equity interest in the Beutong Project which subject to meeting certain expenditure and site based activity milestones can increase to 80%”.
  • The Beutong deposit outcrops at surface and remains open in multiple directions including to depth “where the geology indicates potential for the discovery of a deep high-grade copper-gold zone”
  • Beutong is described as the company’s “second large copper-gold project” in addition to its BKM project in Kalimantan where “negotiations aimed at finalising amendments to the KSK CoW and providing the certainty required for proceeding the BKM copper project to the project financing and development phase in 2018 are nearing completion."

Conclusion: The award of the Beutong licence de-risks the project while the company moves in parallel to advance the BKM project in Kalimantan. We look forward to further news of the progress of both projects as work proceeds.

 

Edenville Energy (LON:EDL) 0.54 pence, Mkt Cap £7.2m -  Plant moves to two shift working to help offset impact of wet season

  • Edenville Energy reports that it is moving to double shift production on its coal plant at its Rukwa coal project in south west Tanzania.
  • In anticipation of the Company's planned increase in production, and as heavy wet season rains are affecting both production and transport logistics, the decision has been taken to initiate two shifts on the plant to help ensure production can be maximised”.
  • We note that, while two shift working on the plant may provide the planned production and logisitics benefits it may be harder to maintain mine production during periods of excessive rainfall.
  • The company is supplying washed coal to a number of customers in the region and is “in detailed discussions on contractual terms with several of these groups and others on potential orders that total over 10,000 tonnes of coal per month.  One group is requesting a regular order of 5,000 tonnes per month, whilst two others are requesting 3,000 tonnes each per month.”
  • “If these discussions result in firm orders then monthly revenue to the Company is projected to be in excess of US$300,000, depending on the calorific value of the product taken” although the company emphasises that, at this stage, there is no assurance that it will conclude these negotiations successfully.
  • The longer term ambition is to develop Rukwa as an integrated coal-to-power project supplying an initial 120MW with potential to expand to 300MW. In the interim, the revenue generated from coal sales will no doubt be welcome.

Conclusion: The company is seeking to secure plant output of washed coal to regional customers through the implementation of double-shift working on the plant. Ensuring continuity of supply to existing customers during the wet season when production and transport issues are more challenging may prove an important negotiating point as the company seeks to secure longer term and larger supply contracts.

 

Gem Diamonds (LON:GEMD) 80p, Mkt Cap £110.9m –Letseng yields two more large diamonds

  • Gem Diamonds reports that its 70% owned Letseng mine in Lesotho has recovered two further large diamonds;  a 117 carat and a 110 carat stone both of which are described as type IIa D colour stones.
  • The Letseng mine has an enviable track record of recovering large, high-quality diamonds, including the 123 carat "Star of Lesotho", the 603 carat, Lesotho Promise and the 357 carat Letseng Dynasty diamond which was recovered in July 2015 and sUBSequently sold for US$19.3m. In November, 2017, the mine announced the recovery of a 202 carat diamond which appears to have been the seventh stone larger than 100 carats in size recovered in 2017.
  • These included a 115 carat D colour Type IIa diamond was reported in September; a 126 carat stone in July; a 105 carat and 152 carat stone were reported in June; and a 114 carat diamond in April.

Conclusion: Having recovered 7 diamonds over 100 carts in size during 2017, the announcement of two further large stone so early in 2018 is a welcome start to the year.

 

Lucapa Diamonds (ASX:LOM) A$0.21, Mkt Cap A$80m –9th diamond larger than 100 carat diamond recovered from Lulo

  • Lucapa Diamonds has announced the recovery of two large diamonds weighing 103 carats and 83 carats from Mining Block 8 at its Lulo mine in Angola.
  • The larger, 103 carat stone is described as a “light brown diamond” while the 83 carat stone is a Type IIa diamond.
  • The announcement follows the recovery “of two exceptional Type IIa D-colour gems weighing 129 carats and 78 carats” which was announced on 13th November.
  • Commenting that the 103 crat stone was the ninth largest diamond recovered from Lulo, the company points out that the largest was “the Angolan record 404 carat 4th February Stone which sold for US$16 million in 2016.”

 

Shanta Gold (LON:SHG) 6.1p, Mkt Cap £47.2m – Luke Leslie appointed as permanent CFO

  • Luke joined the management team in Sep/17 as Interim CFO after having served as a NED of the Company since 2012.
  • He previously worked as a Co-Head of Trafigura-Origo, a member of UBS Investment Banking Corporate Finance team and a management consultant with Accenture focusing on post-acquisition and cost reduction strategies.

 

 

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Mon, 08 Jan 2018 13:12:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29192/morning-view-equities-extend-gains-ahead-of-earnings-season-29192.html
Morning View . Mining stocks at close to 5y high on a rally in commodity prices http://www.proactiveinvestors.co.uk/columns/sp-angel/29182/morning-view-mining-stocks-at-close-to-5y-high-on-a-rally-in-commodity-prices-29182.html Base Resources (LON:BSE) – A$89m raised in the institutional placement

Kibo Mining (LON:KIBO) – Mbeya Coal to Power Project update

Premier African Minerals (LON:PREM) – Operations update

 

Chile and Argentina to lead lithium output growth after 2018

  • New report by BMI Research states that based on project pipelines, Chile and Argentina will lead lithium production in coming years, with the bulk of new capacity coming in 2019.
  • Predicted that will be slow moving project pipeline in 2018, due to regulatory hurdles in Chile and growing exploration projects, which will eventually boost long term output in Argentina.

 

Dow Jones Industrials

 

+0.61%

at

25,075

Nikkei 225

 

+0.89%

at

23,715

HK Hang Seng

 

+0.25%

at

30,815

Shanghai Composite

 

+0.18%

at

3,392

FTSE 350 Mining

 

+0.13%

at

18,946

AIM Basic Resources

 

+0.82%

at

2,748

 

Economics

Global – World manufacturing activity climbed to a near seven-year high in December driving commodity prices higher.

  • The Bloomberg Commodity Spot Index following 22 raw materials climbed to the highest level since 2014 yesterday.
  • Stronger production was recorded in both the manufacturing and service sectors with economic activity being broad based across the six sectors covered by the sector in the JPM/Markit survey (consumer, intermediate and investment goods and business, consumer and financial services).
  • “Forward-looking indicators such as new orders and backlogs of work also point to the current solid upturn being extended into the start of 2018,” JPM/Markit said.

 

US – Employment numbers are due later this afternoon with preliminary ADP data pointing to a strong increase in jobs in December exceeding all market estimates.

  • ADP payroll numbers climbed 250k, the most in nine months, compared to 190k forecast.
  • Nonfarm Payrolls: 190k forecast v 228k in November.
  • Unemployment Rate: 4.1% forecast v 4.1% in November.
  • Av Hourly Earnings (%mom/yoy): 0.3/2.5 forecast v 0.2/2.5 in November.

 

Germany – Consumers increased spending in November reflecting the start of the sales season as well as extra day of shopping compared to the previous year.

  • Retail Sales (%mom/yoy): 2.3/4.4 v -1.0/-0.9 in October and 1.0/2.3 forecast.

 

France – Higher consumer inflation numbers came in December amid other reports showing consumer confidence strengthened during the period running above its long term average.

  • The consumer sentiment index increased to 105 last month, up 2 points on November numbers.
  • CPI (EU Harmonised %mom/yoy): 0.4/1.3 v 0.1/1.2 in November and 0.4/1.3 forecast.

 

North/South Korea – Two states are due to hold high-level talks later next week regarding a potential participation of North Korea in the Winter Olympics which is expected to contribute to peace talks over escalated tensions in the region lately.

 

Argentina – The government is looking to raise $9bn offering three bond tranches including 5y yielding 4.625% ($1.75bn), 10y at 6.0% ($4.36bn) and 30y at 6.95% ($3bn).

Moody’s and S&P are expected to rate bonds B2 and B+, four and three notches below the investment grade level, respectively.

 

Currencies

US$1.2052/eur vs 1.2028/eur yesterday  Yen 113.18/$ vs 112.65/$  SAr 12.353/$ vs 12.275/$  $1.355/gbp vs $1.353/gbp  0.784/aud vs 0.785/aud  CNY 6.485/$ vs 6.498/$

 

Commodity News

Precious metals:         

Gold US$1,317/oz vs US$1,311/oz yesterday

  • Bloomberg’s weekly poll of trader and analysts move from bullish sentiment over the previous three weeks to neutral (Bullish:4, Bearish: 4, Neutral: 5) despite the precious metal rising 1.3% this week to head for a 4th consecutive weekly gain. Spot gold’s 14-day relative strength index recorded 72.59, indicating technical analysis toward the commodity being overbought and suggesting a price correction.
  • Spot gold was boosted by early weakness in the dollar against the euro. Despite positive late-2017 US employment data with private employees adding better-than-expected 250,000 jobs in December, the index against a basket of six major currencies is poised for a 0.3% loss to a three-month low of 91.751. Investors will now be focused on today’s US non-farm payrolls report, which is expected to show job gains of 190,000 for December.

Gold ETFs 71.6moz vs US$71.6moz yesterday

Platinum US$961/oz vs US$950/oz yesterday

Palladium US$1,096/oz vs US$1,095/oz yesterday

  • Palladium’s price surged 56% over 2017 as supply shortage concerns were fueled by Chinese car sales growth, tightening emissions controls and a move away from diesel cars across Europe.

Silver US$17.16/oz vs US$17.09/oz yesterday

           

Base metals:   

Copper US$ 7,169/t vs US$7,222/t yesterday

  • Bloomberg’s weekly poll of traders and analysts see copper prices rising (Bullish: 7, Bearish: 4, Neutral: 5), with bulls expecting a tighter market as China ramps up its curbs on scrap imports and ongoing wage negotiations a major mines have the potential for supply disruption.
  • China’s second batch of 2018 scrap copper sees a massive 73% reduction in tonnage as the Ministry of Environmental Protection’s Solid Waste and Chemical Management Division sets quotas amid a major clampdown on the country’s imports of waste. In addition to paper, plastics and other metals, the reduction in tonnage from the first batch at 110,770 tonnes to the second at 29,715 tonnes moves to improve the nations polluted environment. The move by Beijing to cut its quotas for the first batches into 2018 shows a 94.3% cut compared to 2017 levels, with data showing there were far fewer refineries applying for licenses.
  • Beijing has also moved to exclude traders from participating in the scrap copper business, with a recent move to issue new rules on firms allowed to handle imports. Meanwhile, demand from China for refined copper has risen 10% from the previous year, fueling the rising prices.

Aluminium US$ 2,237/t vs US$2,229/t yesterday

Nickel US$ 12,525/t vs US$12,585/t yesterday

Zinc US$ 3,355/t vs US$3,347/t yesterday

  • Rising concerns over market deficit is driving zinc to 10-year highs, as stocks held in London Metal Exchange warehouses fell 250 tonnes to their lowest levels since 2008. The three-month zinc on the LME rose 0.8% to its highest since August 2007 at $3,359/t. The dramatic fall in stocks, contracting by a third from its October peak, resulted from mine supply falling off in the preceding year.
  • Although mine supply was showing signs of picking up, Goldman Sachs still forecast the price to keep rising over the next six to nine months, based on continued refined stocks drawing down and Chinese zinc mine supply being unlikely to respond to higher prices.

Lead US$ 2,579/t vs US$2,574/t yesterday

Tin US$ 19,880/t vs US$19,905/t yesterday

           

Energy:           

Oil US$67.9/bbl vs US$68.1/bbl yesterday

Natural Gas US$2.809/mmbtu vs US$3.035/mmbtu yesterday

Uranium US$24.00/lb vs US$23.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$73.8/t vs US$72.6/t

Chinese steel rebar 25mm US$673.8/t vs US$685.0/t

Thermal coal (1st year forward cif ARA) US$85.6/t vs US$89.5/t

Premium hard coking coal Aus fob US$261.9/t vs US$261.9/t

 

Other:  

Tungsten APT European US$294-301/mtu vs US$293-300/mtu last week

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

  • Last year cobalt prices recorded $75,500/t, with the 129% annual surge sparked by supply fears and expected demand from battery markets, leading battery makers to work hard to find substitute for the metal.
  • Christopher Wolverton at Northwestern University, has developed lithium battery which replaces cobalt with iron, which is not only significantly cheaper but can also cycle more lithium ions.
  • The battery remains under lab development with typical timelines to commercialisation around 5-10 years, but with fears over supply chain of cobalt it is expected that EV makers will favour new battery compositions.

Vanadium Pentoxide 98%, fob China US$11.6-12.0/lb

  • Chinese vanadium market is expected to swing into deficit this year as revisions for standards for the tensile strength of rebar products combined with a ban on vanadium slag imports put pressure on supply. A newly proposed standard looks to eliminate 335MPa-tensile strength rebar and replacing it with minimum 600MPa-tensile strength rebar in an effort to provide greater earthquake resistance. The move looks to enhance the overall consumption of vanadium in crude steel, which sits at an average 37g/kt in China, compared to 73g/kt and 93g/kt in Europe and North America respectively.
  • Despite the delay to the revision, due December, the updated standard is receiving internal and external pressure to refocus production toward higher quality steel with a market source noting that “relevant authorities have been told to properly enforce the regulations on steel product standards since the massive damage caused by a series of earthquakes”.
  • With the ban on vanadium slag imports, the squeeze on vanadium pentoxide supply is becoming more apparent. The extremely tight flake supply is under pressure from strong procurement demand, with 20-30% Chinese production supplied to Pangang and few materials available for other buyers. Tranvic and Jianlong are supplying material only for regular customers, with some purchasers failing to secure supply even at 160,000 rmb/t purchasing prices. Further, Hongjing is seeing small output and makes no delivery, while in northern area Jinzhou Guangda and Jinxin have suspended production.

 

Company News

Base Resources (LON:BSE) 16.3p, Mkt Cap £171.9m – A$89m raised in the institutional placement

  • The Company raised A$89.3m in gross proceeds from the issue of 350m new shares at A$0.255 to institutional investors.
  • This brings total number of share in issue to 1,097m.
  • The retail component of the 1 for 3 rights issue involving 42m new shares is currently in progress and is scheduled to close on the 17th of January.
  • Proceeds will be used in a $75m acquisition of a 85% initial interest in the Toliara Sands Project in Madagascar from World Titane holdings.
  • The project hosts 857mt at 6.2% heavy mineral in mineral resources with 612mt included in the Measured and Indicated categories at 6.7% heavy mineral.

 

Kibo Mining (LON:KIBO) 6.0p, £24m – Mbeya Coal to Power Project update

  • The Company is set to meet with the Ministry of Energy and the Tanzania Electric Supply Company (Tanesco) to discuss the Mbeya Coal to Power Project (MCPP) MOU.
  • The update follows the previously announced plan to secure the MOU with the Ministry in December that would outline the framework for the Power Purchase Agreement (PPA).
  • A final PPA is expected to be completed during Q1/18.

 

Premier African Minerals (LON:PREM) 0.22p, Mkt Cap £14.5m – Operations update

 

  • The RHA tungsten mine will be put on care and maintenance on the back of lower than estimated processed grades.
  • Plant has lately been processing development ores with diluted grades “insufficient to achieve planned profitable production”.
  • The team highlighted that “mining of undiluted ore from stopes will now only be possible from the latter part of Q1 and accordingly, RHA requires additional financial support until this time”.
  • Additional funds would allow to carry a short-hole drilling programme to better delineate the orebody and plan waste stripping work, accordingly.
  • Additionally, the Company announced that it is considering a separate listing of its Zulu hard rock lithium project (Zimbabwe) in London.
  • “The listing is intended to take place as soon as possible, subject to regulatory and other approvals… Premier intends, subject to appropriate legal and taxation advice, to distribute (at nil cost) to Premier shareholders at the time of listing a substantial proportion of Premier’s retained interest in Zulu Newco,” the Company said. 
]]>
Fri, 05 Jan 2018 10:52:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29182/morning-view-mining-stocks-at-close-to-5y-high-on-a-rally-in-commodity-prices-29182.html
Morning View - Copper rises as China curbs scrap imports http://www.proactiveinvestors.co.uk/columns/sp-angel/29175/morning-view-copper-rises-as-china-curbs-scrap-imports-29175.html  

New lithium rich battery replaces cobalt with iron  

  • Researchers at Northwestern university developed lithium battery which replaces cobalt with iron, enabling the battery to cycle more lithium ions.
  • Result is cheaper and much higher capacity battery which could enable devices and electric vehicles to last much longer.

 

Dow Jones Industrials

 

+0.40%

at

24,923

Nikkei 225

 

+3.26%

at

23,506

HK Hang Seng

 

+0.52%

at

30,721

Shanghai Composite

 

+0.49%

at

3,386

FTSE 350 Mining

 

+0.56%

at

18,944

AIM Basic Resources

 

+0.64%

at

2,726

 

Economics

 

US – Record US construction spending in November

  • US construction spending rose to record highs, surging better-than-expected investment in private residential and non-residential projects. The Commerce Department noted that construction spending rose 0.8% to an all-time high of $1,257 trillion. The increase outshone the Reuters economist poll who had forecast a 0.5% increase in November, and brings the year-on-year advance up 2.4%.
  • Spending on private residential projects surged 1.0% to the highest levels since February 2007, and supports the view that housing would finally boost economic growth in the fourth quarter after dragging the gross domestic product since April-June. Further spending on non-residential structures jumped 0.9% in November.
  • Strong construction data could support a rising US GDP, suggesting economic growth could be in line with 3.2% in the third quarter.

 

Asia – Asian shares top 10-year peak

  • Asian shares scaled to 10-year highs on Thursday, with MSCI’s broadest index of Asia-Pacific shares outside of Japan rising 0.3% to extend its gain this year to 2.4%. Further Japan’s Nikkei jumped 3.3% on its first trading day of the year, hitting its highest level in a quarter of a century.
  • Economic data across global markets support expectations that solid global growth will continue to boost demand of goods, including oil which hovers near 2.5 year highs, and lift corporate earnings.

 

Currencies

US$1.2028/eur vs 1.2036/eur yesterday  Yen 112.65/$ vs 112.34/$  SAr 12.275/$ vs 12.387/$  $1.353/gbp vs $1.360/gbp  0.785/aud vs 0.784/aud  CNY 6.498/$ vs 6.501/$

 

Commodity News

 

Precious metals:         

Gold US$1,311/oz vs US$1,315/oz yesterday

  • Gold slips from Wednesday highs of $1,321.56/oz, and records its first back-to-back drop since Dec. 7 as minutes from the Federal Open Market Committee signal economic tightening. Bullion’s eight-session rally through Tuesday was the longest growth streak since mid-2011. Majority of participants in the Dec. 12-13 meeting back “continuing a gradual approach to raising the target range” for the benchmark policy rate, reminding investors that the FOMC have still scheduled three provisional rate hikes in 2018.
  • Minutes also discussed resulting risks from a faster pace of increases including “the possibility that inflation pressures could build unduly if output expanded well beyond its maximum sustainable level”, owing to fiscal stimulus or “accommodative” financial conditions.
  • The precious metal looks set to continue its fall with technical indicators showing the metal was in overbought territory for past two days, recording 71.89 on Wednesday, with some traders linking a 14-day relative strength index above 70 with unsustainable climbing. Investors will also focus to US December jobs data due Friday.

   Gold ETFs 71.6moz vs US$71.5moz yesterday

Platinum US$950/oz vs US$946/oz yesterday

Palladium US$1,095/oz vs US$1,088/oz yesterday

Silver US$17.09/oz vs US$17.12/oz yesterday

           

Base metals:   

Copper US$ 7,222/t vs US$7,175/t yesterday

  • Industrial metals snap a 3-day decline, with copper rising on China’s decision to curb copper scrap imports. The move heightens concerns over supply constraints while the nation advances its environmental protection campaign. LME copper rose as much as 1.2% to $7,231.50/t (0.7% on SHFE) as China lowers its quota for the 2nd batch of 2018 copper scrap imports at 25.9k tonnes. Mysteel calculate the two import quotas for 2018 so far fall 94% lower than the first equivalent batches last year, igniting concerns over environmental campaign’s import on metal supplies.

Aluminium US$ 2,229/t vs US$2,256/t yesterday

Nickel US$ 12,585/t vs US$12,605/t yesterday

  • Reporting by BMI research says that refined nickel prices will continue to fall in coming months due to increased supply from Indonesia, combined with subdued demand from China and fading overly optimistic demand expectations from EV production. They forecast prices at $10,000/tonne for 2018 with the expectation to head lower once investors realize any significant impact of EV’s is years away. Analysis from the SP Angel Battery Raw Material Review notes current end-market use for lithium-ion batteries accounts for only 3% global total.

Zinc US$ 3,347/t vs US$3,335/t yesterday

Lead US$ 2,574/t vs US$2,567/t yesterday

Tin US$ 19,905/t vs US$19,840/t yesterday

           

Energy:           

Oil US$68.1/bbl vs US$66.6/bbl yesterday

  • Oil prices continue to trade at a premium compared to economic fundamentals over concerns surrounding unrest in Iran, stoking supply disruption concerns.

Natural Gas US$3.035/mmbtu vs US$3.017/mmbtu yesterday

Uranium US$23.90/lb vs US$23.90/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$72.6/t vs US$73.3/t

Chinese steel rebar 25mm US$685.0/t vs US$678.1/t

  • China’s steel rebar futures fell on Thursday, breaking three day rising streak, on concerns of waning demand in construction sector because of snow forecasts in northern part of country. Disruptions at construction sites will strike demand from downstream users as temperatures are expected to drop across the country with frequent snow and rain. The most-active construction steel rebar on the Shanghai Futures Exchange closed 0.7% lower to $587.15/t.
  • Additionally, more steel plants are set to close as further pollution and smog warnings are issued in biggest steel making city of Tangshan. The second-level pollution alert was issued effective starting 8am on Tuesday with steel mills being ordered to cut some sintering and shaft furnace production.

Thermal coal (1st year forward cif ARA) US$89.5/t vs US$86.3/t

Premium hard coking coal Aus fob US$261.9/t vs US$261.4/t

 

Other:  

Tungsten APT European US$294-301/mtu vs US$293-300/mtu last week

 

Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t

]]>
Thu, 04 Jan 2018 10:34:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29175/morning-view-copper-rises-as-china-curbs-scrap-imports-29175.html
Today's Market View . Gold contracts on robust closing 2017 US data http://www.proactiveinvestors.co.uk/columns/sp-angel/29168/today-s-market-view-gold-contracts-on-robust-closing-2017-us-data-29168.html SolGold* (LON:SOLG) – Maiden resource exceeds >1bn tonnes of copper equivalent mineralisation at Alpala

Dow Jones Industrials  +0.42% at 24,824
Nikkei 225   -0.08% at 22,765
HK Hang Seng   +0.15% at 30,561
Shanghai Composite    +0.62% at 3,369
FTSE 350 Mining   -0.74% at 18,776
AIM Basic Resources   +0.13% at 2,708

 

Economics

Asian – Global growth optimism peaks in Asia shares as ex-Japan approaches historic highs.
• MSCI’s index of Asia-Pacific shares outside of Japan rose a further 0.4%, having jumped 1.4% on Tuesday to record the best performance since March 2017. The index closed in on its all-time peak of 591.50, recording 579.46.

Eurozone – Eurozone factories recorded their fastest pace of growth in more than two decades as the December final manufacturing Purchasing Managers’ Index (PMI) rose to 60.6, the highest since the survey began in June 1997.
• Germany and France, the euro zone’s two largest economies expanded in tandem, boosting manufacturing to the highest levels for 17 years. British manufacturers are failing to make the most of a rebound in global trade as growth tailed off from a four-year high in November.
• Strong activity in Europe boosted bond yields and drove the euro shy of its highest in three years against a contracting US dollar.

Currencies
US$1.2036/eur vs 1.1962/eur yesterday  Yen 112.34/$ vs 112.62/$  SAr 12.387/$ vs 12.293/$  $1.360/gbp vs $1.349/gbp  0.784/aud vs 0.780/aud  CNY 6.501/$ vs 6.512/$.
 

Commodity News

Precious metals:         
Gold US$1,314/oz vs US$1,296/oz last week
• Gold prices weaken in early Asian trading as the dollar rebounds on the release of strong US economic data. The US dollar index rose 0.06 to 91.89 following the strongest manufacturing growth since March 2015 on the release of December’s manufacturing PMI. The latest growth follows the fall to three-month lows on Tuesday, with the greenback posting its biggest annual drop last year since 2003.
• Expectations of a slower pace of interest rate hikes by the US Federal Reserve helped to boost gold prices to 3.5 month highs to start 2018. Key factors for the bullion market into the year will focus on the rate of normalisation of interest rates by the central banks, the length of the current equity rally, the longer-term impact of US tax reforms, and the timing for a pick-up in inflation.
• Growth in physical gold demand from the world’s second largest consumer, India, is expected to support global prices into the new year. Jewellers replenished inventories amid a rebound in retail demand as imports surged 67% in 2017 to 855 tonnes. The significant rise in demand followed last quarter demonetization in 2016 as Prime Minister Narendra Modi scrapped 500- and 1,000-rupee banknotes as part of a crackdown on corruption, tax evasion and the financing of militant groups, dampening purchasing. A combination of revived farmers income from strong monsoon rains in 2017 and mid-December deflated gold prices helped boost rural demand as overseas gold purchases in December rose 40% to 70 tonnes.
• Reuters technical analysis is pointing towards continued support for the precious metal, as wave pattern and Fibonacci ratio prediction suggest spot gold may break a resistance at $1,326/oz and rise to $1,380/oz by the end of the first quarter of 2018.
• President Donald Trump escalated his words of war with North Korean leader Kim Jong Un, giving further support for the safe haven investment. In a response to Kim’s annual New Year’s Day speech, the US president asserts that his “nuclear button” is “much bigger and more powerful”.
  

Gold ETFs 71.5moz vs US$71.5moz last week

Platinum US$946/oz vs US$929/oz last week
Palladium US$1,090/oz vs US$1,068/oz last week
Silver US$17.12/oz vs US$16.86/oz last week
           
Base metals:   
Copper US$ 7,183/t vs US$7,257/t last week
• Extended discussions surrounding Freeport McMoRan’s Indonesian mining licen