column http://www.proactiveinvestors.co.uk Proactiveinvestors column RSS feed en Tue, 17 Oct 2017 04:58:00 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28791/in-the-news-amani-gold-28791.html COMPANIES

AMANI GOLD††

ASX:ANL | A$0.029 | US$35m | Speculative Buy

Amani Kicks Off Latest Drilling Programme at Giro Gold Project

Amani Gold has announced the details of a new drilling programme that will see up to 30,000m of RC and diamond drilling at Kebigada, 6,345m of RC drilling at Douze Match, and additional drill programmes planned for newly defined target areas. Drilling at Kebigada will focus on upgrading the existing resource, with other drilling focused on adding ounces from potential satellite pits. An updated resource combined with planned metallurgical testing will form the basis of a feasibility study.

COMMENT: With this latest release, Amani has provided details of an extensive drill program. The infill drilling will upgrade the resource ahead of a feasibility study, while the addition of a higher-grade satellite pit would add meaningful value. We expect the general pace of execution to accelerate as Amani and its new partners look to advance the project to feasibility and production over a short period. The company expects that in late-October they will have the first results from Phase 1 drilling at Douze Match, and in Q1 2018 they will have completed the infill drilling programme, upgraded the mineral resource and completed a scoping study by BGRIMM leading towards feasibility studies.

Giro Gold Project background — Amani is focused on advancing its 55%-owned Giro Gold Project in the DRC. The majority of activity on the licence has focused on the Kebigada Zone, which was the basis of a maiden resource. A number of other targets, including areas of historical mining, have been outlined by soil sampling and some followed up by drilling. Most significantly, at Douze Match, in the north of the licence area, initial drilling returned some spectacular high-grade results, although follow-up drilling has so far not lived up to earlier results. After putting out a maiden resource in July 2017, the company has concentrated on upgrading and expanding the resource, as well as the metallurgical drilling needed to complete pre-feasibility and feasibility studies. In the near-term, the company has engaged the Beijing General Research Institute of Mining and Metallurgy (BGRIMM) to complete an initial scoping study at Kebigada.

RC drilling at Douze Match has already started — Drilling is focused on the Tango Shear, and is being scheduled in two phases. Phase 1 will involve 77 RC drill holes or 3,645m over a strike length of 1 km to define the orientation and continuity of the northern shear zone. Phase 2 will involve 50 holes for 2,700m targeting areas between the more widely spaced Phase 1 drill holes to ensure full coverage. First drill results are expected in late-October, while final grid spacing is expected to be 50m by 25m to deliver a maiden resource at Douze Match in Q1 2018. Operationally, Douze Match is being viewed as a source of higher grade material that will be blended with material from Kebigada to increase the head grade during processing.

There are plans to upgrade the resource at Kebigada — The current resource consists of 16.5mt of ore grading 1.5 g/t for 800koz in the Indicated category and 29.1mt of ore grading 1.4 g/t for 1,330koz in the Inferred category. Previous infill drilling to define the Indicated resource resulted in an increase in grades. Management is looking to continue this trend as they infill drill 167 RC holes for 25,000m in a 25m x 25m grid that they expect will form the basis of a Measured resource. Furthermore, a significant portion of the Inferred resource sits below 100m. To date, 29 diamond drill holes have served to define this area. Management now plans to add a further 14 holes resulting in a 50m x 50m grid to bring this deeper resource into the Indicated category. In preparation for feasibility studies, a further 3 diamond PQ/HQ holes will be drilled for metallurgical testwork, and Geotech logging will be carried out on all diamond tails. Additional holes will be drilled for hydrological studies and monitoring of water levels. This work programme will commence once Amani has complete access to the area of drilling with management expecting work to be completed in H1 2018.

Further drilling to focus area surrounding Kebigada and Adoku — High-grade soil anomalies previously resulted in targets in the immediate area surrounding Kebigada. Many of these anomalies are associated with artisanal mining or with chargeable IP anomalies. A programme of 40 shallow scout RC drill holes for 2,170m has been planned to cover selected anomalies with the goal of identifying potential satellite pits. An additional potential satellite pit, Adoku, is within 5km of Kebigada and is associated with artisanal mining that has supported a village for a number of years. Channel samples showed strong gold mineralisation, but follow-up diamond holes showed no significant mineralisation. Management believes drilling at Adoku may have been east of a fault and is planning to follow up with 12 RC holes for 1,200m.

Amani’s current market cap is A$45m/US$35m — The company has 1,566m shares outstanding, with 47m options exercisable at prices ranging from A$0.03 to A$0.10/share expiring from November 2019 to December 2020. Cash as of 30 June 2017 was A$1.1m, with the A$25m Luck Winner Investment Limited (LW) transaction closing subsequently. The terms of the binding subscription agreement with LW included 300m shares for A$10m at a price of A$0.05/share, and a commitment to provide a further A$10m subject to an Amani shareholder vote in November 2017 and other conditions precedent. As part of the deal, LW is to receive 250m options exercisable at A$0.07/share with a two-year term from the date of issue. Management expects these financings to help cover the costs of pre-feasibility and feasibility studies on the Giro Gold Project. While Amani is seeking to grow the size of the deposit to the multi-million ounce scale, there is a contingency payment that becomes payable should Amani define 3Moz in the Measured and Indicated categories at a cut-off grade of 2.5 g/t. At such a scale and cut-off grade, however, having to cover the US$5.35m payment would be a welcome development.

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Wed, 11 Oct 2017 13:56:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28791/in-the-news-amani-gold-28791.html
In the news: Base Resources & KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28770/in-the-news-base-resources-kefi-minerals-28770.html In the news: Base Resources & KEFI Minerals

 

FROM THE BROKING DESK

Base Resources (LON:BSE) *† has published an updated Resources and Reserves Statement for its 100%-owned Kwale Project in Kenya. This reflects depletion from mining that occurred over FY17 as well as the previously-announced resource update for Kwale South Dune: the effect of depletion was in line with our projections, while the resource update is pending the extension of the company’s mining licence. Currently all the South Dune area is covered by the prospecting licence SPL 173, while only a portion is covered by the mining licence SML 23. In the coming months Base will be performing economic analysis on the updated South Dune Resource, which will then form the basis of the application to the Kenyan Ministry of Mines for an extension of SML 23.

We reiterate our Buy rating and target price of A$0.49. It should be noted that the coming update to reserves may provide a 5-10% uplift to our target price from an extended mine life. To view our most recent report on the company, please see Base Resources — FY17 Financial Report, 29 August 2017.

COMPANIES

KEFI MINERALS†

LON:KEFI | 4.1p | US$18m | Buy | TP : 9.0p

Quarterly Update — More Details on Intended Project Funding

KEFI Minerals has announced a quarterly update that provides more detail on its proposed funding package for the development of its Tulu Kapi Gold Project in Ethiopia.

Oryx Management is continuing to work towards closing the funding package this year and has submitted a draft financing agreement to the Ethiopian authorities for approval. Oryx expects to raise US$140m towards the project’s financing requirement and the government has agreed to fund offsite infrastructure to a maximum of US$20m, for a total of US$160m.

COMMENT: With respect to the residual capital requirement, the company is considering offering third parties a stake in the project. It stated that it is in discussions with a number of potential project-level investors and that it will now bring these discussions to a head.

The company stated that Oryx has increased the amount of funding that it intends to secure from US$135m to US$140m and that this is part of the arrangements to allow a 25% increase in the processing plant throughput (from 1.5-1.7Mtpa to 1.9-2.1Mtpa) to be considered. The additional cost of this increase is to be offset by the move from a fixed price lump sum project construction to an open book, cost-based arrangement with incentivisation based on target costs and schedule.

We reiterate our Buy rating and target price of 9.0p. Our target price is based on a risked SoTP NAV for the company and assumes a gold price of US$1,250/oz and a 0.75x P/NAV8 multiple for the Tulu Kapi Project. It also includes allowances for the underground potential at Tulu Kapi, other exploration assets and G&A costs. While the upside to the share price implied by our target price is already substantial, it is worth noting that the current price implies a 0.37x P/NAV to our unrisked NAV8 of 11.9p. With the Ethiopian state of emergency having ended and the financing package in the process of being secured, we believe that there is a near-term re-rating opportunity. To view our most recent report on the company, please click here.

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Mon, 09 Oct 2017 11:22:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28770/in-the-news-base-resources-kefi-minerals-28770.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28734/in-the-news-base-resources-28734.html COMPANIES

Base Resources*†

ASX:BSE LON:BSE | A$0.295 | US$172m | Buy | TP : A$0.49

36% Increase in M&I Resource Tonnage at Kwale South Dune

Base Resources has released an updated Mineral Resource Statement for the Kwale South Dune that incorporates the extensional and infill drilling previously outlined in announcements between March and May 2017. Total Resource tonnage increased 29%, with an overall increase in Contained Heavy Minerals of 13% from the addition of a large volume of material at a grade below the previous average. As the mining licence has yet to be extended to include all of the South Dune area, management has not yet updated the Reserve. In the coming months Base will perform an economic analysis to form the basis of its application to the Kenyan Ministry of Mines either to amend the existing mining licence or receive a new one.

COMMENT: The Resource update shows a significant increase in tonnage and HM contained, albeit at a lower grade. Based on our estimates, the upcoming Reserve update will extend the life of mine and provide a material economic benefit. We believe that 1.0-1.5 years of additional mine life may be added, providing an additional 5-10% of value above our current target price.

We are maintaining our Buy recommendation and A$0.49 target price, but note the additional value that the pending Reserve is likely to provide. For details on the company’s latest financial results, please see Base Resources — FY17 Financial Report, 29 August 2017.

The South Dune Measured category grew due to tonnage additions and resource upgrades — The drilling campaign in 2017 included both extension and infill drilling on South Dune. As a result, the Measured Resource tonnage increased 89%, while Indicated and Inferred Resource tonnage decreased due to upgrading by 20% and 96%, respectively. Overall grades declined from 3.5% to 3.0%, which we believe to be attributable to the new material added. The net addition to the total resource implies that the new material added has a grade of 1.6%.

We believe that the coming Reserve increase is likely to extend the life-of-mine — Grades have fallen across all Resource categories, with Measured & Indicated decreasing 0.5%. However, the increase in tonnage (+36% for M&I) has more than offset the decreased grade and resulted in a higher HM contained (+19% for M&I). This has resulted in additional material that will extend the life-of-mine if converted to Reserves. Assuming that M&I tonnage and HM contained get converted to Proven and Probable Reserves on a similar ratio as in the Resource Statement of 30 June 2016, we believe the life-of-mine may be extended by 1.0-1.5 years. We estimate that the economic impact will be positive.

Mafisini deposit has the potential to extend the mine life — Mafisini is interpreted to be a continuation of mineralisation at the South Dune, separated by a narrow, alluvial lowland. Mineralised intervals occur over a contiguous 1,240m of strike and up to 480m in width. Notable results for Mafisini include the previously reported Line 13 cross-section showing 10.5m at 4.4% HM and 12m at 4.2% HM, both from surface, compared with a grade of 3.8% HM on the South Dune reserve. Other drill hole grades appear to be broadly in line with the South Dune.

NE Sector shows longer-term potential, but has been suspended pending the resolution of access issues — Only four drill holes with mineralised intercepts were reported for the NE Sector, so the story is still developing. The company intersected a surface zone where 2 of 3 drill holes were low-grade and narrow, as well as a deeper mineralised zone sitting ~20m below surface with higher grades. Base has yet to complete most of the proposed drilling; this has been put on hold due to community issues. The company believes these arose as a result of political posturing associated with the 2017 general election in Kenya. Base intends to re-engage with the community after the election to obtain informed consent and access the target drill sites.

Target price — We are maintaining our Buy rating and target price of A$0.49. However, we estimate that the coming update to reserves may provide a 5-10% uplift from an extended mine life. Furthermore, we note that Mafisini offers additional resource potential.

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Wed, 04 Oct 2017 10:14:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28734/in-the-news-base-resources-28734.html
In the news: Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28724/in-the-news-metal-tiger-28724.html COMPANIES

Metal Tiger*†

LON:MTR | 1.8p | US$22m

Potential Major Strike Extension at the T3 Deposit at its 30%-owned Botswana Cu/Ag JV

Metal Tiger has updated the market on the results of work at the T3 Deposit at its 30%-owned Botswana Copper/Silver JV. Highlights included the intersection of visible copper mineralisation that has extended known mineralisation by 300m to the west and north-east of the planned pit to 1.5km along-strike. Drilling was also reported to have intersected vein-hosted copper mineralisation down-dip from the planned pit. Assays are awaited and drilling is ongoing, with seven rigs now operating on-site.

The announcement also stated that the throughput of the project being considered in the PFS — planned for completion by the end of 2017 — is to be increased by 25% from 2.0Mtpa to 2.5Mtpa. Confidence in an increased mining inventory and an improved copper price have led to the consideration of a larger project, which will be designed to allow for an expansion to 4.0Mtpa should further additions to resources justify it. Other study work, including metallurgical test-work, water bore testing, environmental approvals and stakeholder engagement, are also underway.

COMMENT: Metal Tiger and JV partner MOD Resources are continuing to make good progress advancing the T3 deposit, on which a robust scoping study was completed in December 2016. Since the completion of that study, resources were updated in August, showing a 17% increase in contained copper. The reported intersection of visible copper mineralisation is a reminder that exploration at T3 remains at a relatively early stage and continues to deliver results that bode well for the discovery of additional mineralisation along-strike and below the planned pit.

T3 is already an attractive project. The scoping study indicated the potential for the project to produce 22,000tpa of copper, with associated silver, at a C1 cash cost of US$1.29/lb and capex of US$135m, equivalent to a very competitive capital intensity rate of US$6,200/t. At a copper price of US$3.00/lb, the pre-tax NPV10 was US$297m and the IRR 42%. The larger scale and potential additions to the mining inventory bode well for the PFS results.

With regard to its Thai assets, the company expects that during 1Q18 the authorities will make their decision regarding the designation of the area hosting two brownfield silver/lead/zinc mines, Boh Yai and Song Toh, as Mineral Deposit Areas (MDAs). This would allow the company to progress the work towards the re-development of the two mines, which previously operated from the late 1970s until 2002. The company’s ownership structure gives it a 78% interest in the project, on which a final draft of a Competent Person’s Report produced by SRK in June 2017 estimated the NPV10 at US$46m and the IRR at 31%. The company plans to undertake an IPO of its Thai assets once the decision on the land designation has been made.

The company’s current market cap is approximately £15.3m. At the end of June it had £4.0m in cash and a portfolio of equity investments with a value of £6.4m, for an EV of £4.9m, or US$6.4m. We expect that the publication of the PFS on the T3 Project and the decision of the Thai authorities (expected early next year) could have a significant impact on the value of the company.

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Tue, 03 Oct 2017 10:34:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28724/in-the-news-metal-tiger-28724.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28707/in-the-news-amani-gold-28707.html COMPANIES

AMANI GOLD††

ASX:ANL | A$0.025 | US$31m | Speculative Buy

Annual Results for FY17

Amani Gold has released its 2017 Annual Report. This outlined a number of near-term goals under the leadership of its new Chairman, Yu Qiumin, including the possibility of early production.

COMMENT: With the A$25m financing deal largely finalised (A$10m is subject to a shareholder vote in November 2017), the company is now well positioned to focus on a number of value-generative activities, including the preparation of pre-feasibility and feasibility studies on Kebigada, defining a resource at Douze Match in 2018, and adding ounces from prospective satellite deposits.

 

Giro Gold Project background — Amani is focused on advancing its 55%-owned Giro Gold Project in the DRC. After putting out a maiden resource in July 2017, the company has concentrated on upgrading and expanding the resource, as well as the metallurgical drilling needed to complete pre-feasibility and feasibility studies. Near-term work is to include drilling and metallurgical testing at Kebigada in preparation for the studies, further drilling at Douze Match in order to define a resource in 2018, and follow-up exploration on soil samples at Kolongoba. Drilling at Kebigada will include infill drilling to upgrade resources from the Indicated to Measured category, while recent diamond drilling has shown that there are areas of mineralisation below the depth of previous RC drilling. The most promising depth extension showed 88m at an Au grade of 2.13 g/t from 221m. At Douze Match, in the north of the licence area, initial drilling returned some spectacular high-grade results, although follow-up drilling has so far not matched these results. A programme of vertical holes at Douze Match targeting the flat-lying structures is being planned. Further exploration at Kolongoba is part of a plan to explore high-grade soil anomalies that have the potential to add satellite resources.

Amani’s current market cap is A$39m/US$31m — The company has 1,566m shares outstanding, with 47m options exercisable at prices ranging from A$0.03 to A$0.10/share expiring from November 2019 to December 2020. Cash as of 30 June 2017 was A$1.1m, with the A$25m Luck Winner Investment Limited (LW) transaction closing subsequently. The terms of the binding subscription agreement with LW included 300m shares for A$10m at a price of A$0.05/share, and a commitment to provide a further A$10m subject to an Amani shareholder vote in November 2017 and other conditions precedent. As part of the deal, LW is to receive 250m options exercisable at A$0.07/share with a two-year term from the date of issue. Management expects these financings to help cover the costs of pre-feasibility and feasibility studies on the Giro Gold Project. While Amani is seeking to grow the size of the deposit to the multi-million ounce scale, there is a contingency payment that becomes payable should Amani define 3Moz in the Measured and Indicated categories at a cut-off grade of 2.5 g/t. At such a scale and cut-off grade, however, having to cover the US$5.35m payment would be a welcome development.

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Fri, 29 Sep 2017 12:33:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28707/in-the-news-amani-gold-28707.html
In the news: KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28695/in-the-news-kefi-minerals-28695.html FROM THE BROKING DESK

KEFI Minerals†  (LON:KEFI) has published its interim 1H17 financial results. The company has signed a mandate letter and heads of terms for the US$135m financing of its Tulu Kapi Gold Project in Ethiopia, which KEFI is aiming to commence construction of this year. An updated DFS for the project was published in May 2017 that confirmed the project’s attractions, including production of 980,000oz of gold over a ten-year mine life, AISC of US$777/oz and estimated initial capital costs of US$161m.

KEFI remains committed to reducing capex and finalising its financing plan. After announcing a further reduction in planned capex in August 2017, including reducing contingency provisions, we estimate that the total project funding requirement is US$152m, with an additional US$33m required for 30 months of interest charges before project cashflows start covering debt payments. To fund the US$185m, the company plans to receive US$135m from the Oryx financing and US$20m from the Ethiopian Government to cover offsite infrastructure, with the balance of US$30m to come from other sources. The company had previously stated that US$6m had been committed by Lycopodium and Lanstead, although the Sharing Agreement with Lanstead is now expected to provide less cash than expected. As of 30 June 2017, we estimate that a further £3.3m in payments to KEFI had been planned for; however, at the current share price of 4.39p, we estimate that only £1.9m will be received. This shortfall led to a write-down in the period’s financials. The cash balance at 30 June 2017 was £1.6m.

We reiterate our Buy rating and target price of 9.0p. Our target price is based on a risked SoTP NAV for the company and assumes a gold price of US$1,250/oz and a 0.75x P/NAV8 multiple for the Tulu Kapi Project. It also includes allowances for the underground potential at Tulu Kapi, other exploration assets and G&A costs. While the upside to the share price implied by our target price is already substantial, it is worth noting that the current price implies a 0.37x P/NAV to our unrisked NAV8 of 11.9p. With the Ethiopian state of emergency having ended and the financing package in the process of being secured, we believe that there is a near-term re-rating opportunity. It should be noted though that it remains to be seen whether peace will hold in Ethiopia, and there are still details of the financing to finish; the opportunity lies in the uncertainty of these two factors being reduced. To view our most recent report on the company, please click here.

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Thu, 28 Sep 2017 11:39:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28695/in-the-news-kefi-minerals-28695.html
In the news: Wave Swell Energy, Metminco & Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28611/in-the-news-wave-swell-energy-metminco-metal-tiger-28611.html FROM THE BROKING DESK

We have been appointed to raise A$12m by Wave Swell Energy Limited***. This private Australian company is — as the name suggests — focused on wave energy. This lesser-known area of renewable energy could be the ‘third leg of the stool’, along with wind and solar power, as it relies on neither of these two for its generation. The technology used by Wave Swell Energy (WSE) converts renewable energy from ocean waves via a 1MW modular oscillating wave column unit into electricity for connection into national electricity grids. Full details on this and the company can be found here.

WSE has a Memorandum of Understanding with Hydro Tasmania to install a full-scale test unit at King Island (Bass Strait, Tasmania, Australia). This unit will complement the existing renewable energy generation units at King Island (which are solar- and wind-driven), and is designed to demonstrate the full-scale commercial viability of WSE’s UniWave™ energy converter unit. To support this, WSE has appointed RFC Ambrian to arrange a private placement of up to 2,500,000 new ordinary shares at A$4.80/share to raise a minimum of A$12m. Following the placement, WSE is anticipated to have 7.5m shares on issue and a value of A$36m.

The global wave resource represents twice the world’s current energy usage. Hawaii is a standout early-stage target market for WSE — the lowest of the low-hanging fruit. It currently draws most of its electricity from diesel generation; WSE can provide clean electricity in Hawaii at a significantly reduced cost. The company thinks that the potential Hawaiian market for wave energy is 1,800MW, or some US$2bn pa in revenue. Other diesel-reliant islands could represent a further US$10bn pa. The total global potential for wave energy is 425,000MW (12% of current global capacity), or US$120bn pa.

So, it’s a large, highly receptive target market. This market is critically underserved, and a clean renewable energy source that can compete with traditional energy sources on price is an exceptional value proposition. Moreover, WSE’s highly innovative product has well protected IP.

WSE’s technology is efficient and commercially competitive — it’s a game-changer. It’s likely to prove very attractive to industry, and has a strong, sustainable advantage in a nascent sector. This is a high-margin business with low overheads; WSE’s EBIT is at the top end of industry margins, giving it a significant competitive advantage. Finally, the management team is highly experienced, and is well respected domestically and internationally.

COMPANIES

Metminco*†

ASX:MNC | A¢4.8 | US$4m | Speculative Buy

Update on Interim Results and Underground Development Approval at Miraflores

Metminco recently published its interim results to June 2017. It also announced that it had received approval from the regional environmental agency allowing it to construct 2km of underground development at its 100%-owned Miraflores Gold Project in Colombia. This will allow access to the orebody and infill drilling ahead of a decision to construct the project.

The key timeline items remain in line with those announced at the beginning of August, namely:

• 3Q17 — Completion of Miraflores feasibility study

• October 2017 — Completion of baseline monitoring for the Environmental Licence (EIA)

• End-2017 — Submission of EIA application

The announcement also presented a mining schedule that showed life-of-mine production from the project of 416,000oz of gold over a ten-year life, with steady-state, nameplate production of 45,000oz pa.

COMMENT: Although the main development permit is not expected to be received until early 2018 and requires the completion of the feasibility study and the EIA, the granting of a permit to undertake underground development will allow the company to establish an operating presence at the site and appears to indicate growing support for the project.

The nominal annual production rate of 45,000oz referred to in the announcement is slightly lower than the 50,000oz pa targeted by the company; this is due to throughput and average head grade being around 6% lower than previously suggested.

We note that the current market cap of A$5m is slightly lower than its net cash, and also that A$6m of deferred cash payments for the acquisition of Miraflores are expected to fall due next year. Nonetheless, the upside represented by the potential value of the project does not appear to be reflected in the company’s current market price. In the mining study of September 2016, at a gold price of US$1,300/oz, Miraflores had an NPV8% of US$73m and the IRR was 26%.

We await the announcement of the results of the feasibility study — particularly operating and capital costs — with interest, along with progress towards securing the permits necessary for the main project development. Pending the results of the feasibility study, we continue to recommend Metminco as a Speculative Buy.

 

Miraflores is 100% owned, subject to up to A$13m of deferred acquisition payments — Metminco acquired Miraflores from RMB in May 2016. A total of A$6m of deferred cash payments remain outstanding over the coming three years: A$1m in June 2018, A$3m in 2019 and A$2m in 2020. The last two of these payments would be triggered earlier by a production decision, meaning that — if the project progresses as expected — the company could be obligated to pay the full A$6m around the middle of next year. A royalty of up to A$7m is also payable from project cashflow.

Miraflores scoping study of September 2016 delivered an NPV8% of US$73m and an IRR of 26% at US$1,300/oz — In September 2016 SRK completed an updated scoping study for an underground-only mining operation, with a mining schedule containing 451,000oz at a grade of 3.5 g/t. The operation was planned with steady-state production of 50,000oz pa and a nine-year mine life for total recovered gold production of 414,000oz. Underground mining using longhole stoping with backfill was planned in conjunction with a gravity concentration, flotation and cyanidation processing route. Initial capex was US$81m, while cash costs and AISC were US$555/oz and US$648/oz, respectively. At a gold price of US$1,300/oz, the NPV8% was US$73m and the IRR was 26%.

Feasibility study to be completed within the next few weeks — The company commenced a feasibility study work programme in November 2016, and this remains on track to be completed around the end of September 2017. The updated mining plan announced with the 2017 interim results showed a mining inventory of 4.3Mt grading 3.29 g/t for 457,000oz of gold, slightly higher than the previous scoping study. At planned steady-state throughput of 467,000tpa and with recoveries of 91%, the rate of production is planned to be 44,952oz pa, some 10% lower than suggested in the previous scoping study. The project is planned to recover a total of 416,000oz of gold over a planned ten-year mine life.

Permitting and associated approvals key to timeline — The company plans to submit the EIA for approval by the regional environmental authority by the end of this year. The process includes approval of the feasibility study and the Terms of Reference, and the submission of the completed environmental baseline studies, the approved development plan and the Social and Environmental Management Plan (particularly focused on the relocation of up to 70 homes and a number of illegal miners). It also incorporates the process of consultation and assessment of the impact of the project that forms the project’s Social Licence. The project’s design includes underground mining and dry stacked tailings, limiting its surface footprint, a factor that is hoped to help speed the EIA approval process.

Net cash at end of June of A$5.5m — The company had cash outflows from operations and expenditures on exploration of A$2.8m in the first six months of 2017. It received A$6.6m from the sale of its remaining 49% interest in the Los Calatos Project in Peru and a further A$1.7m from an equity issue and A$0.75m from the issuance of convertible notes, which are due to expire in May 2018. As a result, the company finished the period with A$6.3m in cash, or A$5.5m of net cash. The company had 102m shares outstanding and a further 25.3m partly-paid shares, which were issued to Lansted in January, and which we estimate would generate around A$1.1m if fully paid at today’s prices.

 

Metal Tiger*†

LON:MTR  | 1.9p | US$19m

IPO of Thai JV Postponed until 1Q18

Metal Tiger has announced that the planned IPO of its Thai-based JV, which includes interests in the potentially near-production stage Boh Yai and Song Toh silver/lead/zinc mines, has been delayed until 1Q18. The company has taken this decision as it is seeking clarification on certain aspects of the new Thai Minerals Act that came into effect in late August 2017.

A key requirement of the new act is that mining will only be allowed in areas that have been designated as being mineral-abundant with high economic value; these are known as Mineral Deposit Areas (MDA). Exploration, however, will be allowed to continue in areas outside the MDAs. Also, mining in preserved areas, or mining of preserved minerals, will be prohibited.

A draft of the areas being proposed to be designated as MDAs is expected to be submitted for approval in November 2017, with approvals expected in December. Metal Tiger expects that by 1Q18 the designation of the MDAs will have been made.

As part of the new act, the company is also working towards holding a public hearing for stakeholders (including villagers within 3km of the project, NGOs and government officials) before the end of the year, with the result to be reported to the Provincial Governor and the Director of the Department of Primary Industries and Mines for consideration.

COMMENT: The company is confident that the areas of interest to the Thai JV will be designated as MDAs, as not only is the project area a brownfield site at which operations were conducted from 1978 until 2002, but also given the economic potential.

We await further news of the results of the public hearing and designation of areas to be included in the MDAs with interest, and note that the company has stated that the value of 80% of the Thai project has a post-tax NPV10 of US$37m.

We expect that market attention will now focus on the results of the pre-feasibility study on the T3 Project in its 30%-owned Botswana copper JV, which is due to be completed by the end of the year.

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Mon, 18 Sep 2017 11:07:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28611/in-the-news-wave-swell-energy-metminco-metal-tiger-28611.html
In the news: Resolute Mining http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28597/in-the-news-resolute-mining-28597.html FROM THE BROKING DESK

A reminder that Jim Taylor released an initiation piece earlier this week: Resolute Mining (ASX:RSG) — Determined to Deliver Profitable Growth, 11 September 2017. Jim started coverage with a Buy rating and a target price of A$1.63. Resolute is an ASX-listed middle-tier gold company that could be looking to list in London at some stage. It is set for production of 300,000oz this year from operations in Africa and Australia.

Resolute is a mid-cost producer with ongoing programmes that are planned to raise capacity to 400,000oz pa in FY19. There’s also a potential development project that could increase this to 500,000oz in FY20. We believe that share price performance will be driven by the de-risking of these development programmes and the de-bottlenecking of the company’s Syama plant in Mali, where the definition of a new discovery, and plans for its integration into the plant, also offers upside.

We base our A$1.63 target price on the SotP NAV of the company. Our NPV8, at a gold price of US$1,350/oz, is US$1,036m (A$1.77/share), equivalent to a current P/NAV of 0.70x. At gold prices of US$1,250/oz and US$1,450/oz, our TPs would be A$1.25 and A$2.00 respectively.

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Fri, 15 Sep 2017 09:53:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28597/in-the-news-resolute-mining-28597.html
In the news: Mineral Sands Pricing, Base Resources & Resolute Mining http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28571/in-the-news-mineral-sands-pricing-base-resources-resolute-mining-28571.html FROM THE BROKING DESK

Some excellent news for mineral sands producers has come out. Iluka Resources has announced a 12% increase (to US$1,230/t) in its reference price for zircon for the next six months. Iluka usually only reports price increases around its quarterly reports; this interim announcement was made owing to the significance of the increase. This reflects the continuing strength in the zircon price, for which we estimate that Base Resources*† received US$800/t in FY17 (to June), and for which we currently forecast US$990/t in FY18. Zircon represents approximately 20% of Base’s (LON:BSE) revenue mix.

Jim Taylor has a new initiation piece out: Resolute Mining — Determined to Deliver Profitable Growth, 11 September 2017. (Believe me, that was quite an achievement given that our office had a new bunch of computers installed and a software upgrade over the weekend.) Jim has started coverage with a Buy rating and a target price of A$1.63. Resolute is an ASX-listed middle-tier gold company that could be looking to list in London at some stage. It is set for production of 300,000oz this year from operations in Africa and Australia.

Resolute (ASX:RSG) is a mid-cost producer with ongoing programmes that are planned to raise capacity to 400,000oz pa in FY19. There’s also a potential development project that could increase this to 500,000oz in FY20. We believe that share price performance will be driven by the de-risking of these development programmes and the de-bottlenecking of the company’s Syama plant in Mali. Also, the definition of a new discovery and the plans for its integration into Syama offers significant upside.

We base our A$1.63 target price on the SotP NAV of the company. Our NPV8, at a gold price of US$1,350/oz, is US$1,036m (A$1.77/share), equivalent to a current P/NAV of 0.70x. At gold prices of US$1,250/oz and US$1,450/oz, our TPs would be A$1.25 and A$2.00 respectively.

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Tue, 12 Sep 2017 10:09:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28571/in-the-news-mineral-sands-pricing-base-resources-resolute-mining-28571.html
In the news: Peak Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28539/in-the-news-peak-resources-28539.html FROM THE BROKING DESK

Peak Resources (ASX:PEK) †† has announced a significant milestone. The company has lodged an application for a Special Mining Licence (SML) for its Ngualla Rare Earths Project in Tanzania. This follows the award of an Environmental Impact Assessment Certificate in March and the release of a definitive feasibility study in April. An SML is superior to a standard Mining Licence in that it is granted for 31 years (ie, the life of the project defined in the DFS) and is over a greater land position (more than 18km2 in this case), as opposed to ten years and 10km2.

Despite the recent changes in the Tanzanian Mining Law, the backdrop for Ngualla’s main products is continuing to improve. Neodymium and praseodymium (Nd/Pr) are key components in traction motors for electric vehicles, and have seen spectacular price gains this year; as the move towards mainstream acceptance of electric vehicles has gathered pace, prices have risen almost 110% YTD. China accounts for 90% of the world’s supply, but it is also the largest user, and on current growth projections it will be forced to be a net importer by 2023. The increase in prices led China’s National Rare Earth Office to issue a statement on 8 August to the country’s six largest rare earth groups asking them to help stabilise the market. This led to a month of flat prices, but prices have begun to rise again and they are now at a five-year high of US$78/kg.

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Wed, 06 Sep 2017 09:56:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28539/in-the-news-peak-resources-28539.html
In the news: Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28518/in-the-news-metal-tiger-28518.html COMPANIES

Metal Tiger*†

LON:MTR | 2.2p | US$22m

Exploration Budget of A$10m for 30%-owned Botswana Copper/Silver Project JV

Metal Tiger has announced that the exploration budget for its 30%-owned Botswana Copper/Silver JV has been set at A$10m for the year to October 2018, the company’s share of which is A$3.0m/£1.85m.

COMMENT: This represents nearly double last year’s exploration budget for the JV and should provide a significant acceleration in the pace of exploration at the project. Work at the JV is currently focused on completing a pre-feasibility study on the T3 deposit by the end of this year, with a feasibility study currently planned to be completed by mid-2018.

The new budget will enable the company to test targets already established and to undertake geochemical and geophysical surveys over the JV licence area, at which soil and electro-magnetic anomalies cover a combined strike length of 150km.

T3 is an attractive project. The scoping study of December 2016 indicated the potential for the project to produce 22,000tpa of copper, with associated silver, at a C1 cash cost of US$1.29/lb and capex of US$135m, equivalent to a very competitive capital intensity rate of US$6,200/t. As pointed out in the latest announcement, the current copper price of US$3.08/lb represents an increase of 50% over the past year, further focusing attention on copper development opportunities.

A$10m exploration budget for Botswana Copper JV, which covers 8,000km2 area of the Kalahari Copper Belt — Expenditures include the funding of a 70-hole drill programme at the T3 deposit (announced in August) and a further 160 diamond drill holes and 40 RC holes on the 50km-long T3 Dome, with additional exploration at the 60km-long T20 Dome to the south-west. Exploration over the coming year is planned to include the following.

T3 Dome

• Funding the current T3 drilling programme, including up to 70 diamond drill holes:

o Drilling at the project re-commenced on 9 August following the approval of the Environmental Management Plan (EMP), which is valid until December 2018.

o To test for extensions at T3 to the east and west of the planned pit.

o To test the extent of Zone 3 mineralised contact 300m below the current T3 resource.

o To test for high-grade, vein-hosted copper mineralisation that could potentially support underground mining beneath the planned open pit.

o To undertake hydrological and sterilisation holes required for project studies.

o To test geophysical anomalies to the north and north-east of the T3 resource.

o Currently seeking approvals for the drilling of 14 electro-magnetic (EM) and copper soil anomalies along the dome.

o The majority of this programme is planned to be completed by the end of the year.

T20 Dome

• Airborne EM geophysical survey over a large area of the T20 Dome.

Metal Tiger owns a 30% interest in the Botswana Copper/Silver Project JV — Metal Tiger holds 30% and MOD Resources (MOD: ASX) 70% in the JV that owns exploration rights over an area of over 8,000km2, covering 150km of the western end of the Kalahari Cooper Belt in western Botswana. Metal Tiger also owns 95.5m MOD shares (5.0%) and 1.5m MOD warrants at a price of A$0.060/share (the current share price is A$0.068). Metal Tiger also has a portfolio of other minerals interests, including exploration and development assets in Thailand and exploration licences in Spain, as well as a portfolio of mining equity investments.

Robust scoping study into 22,000tpa copper operation at T3 completed in December 2016 — The pace of progress at the T3 Project has been impressive: after discovery in March 2016, a maiden resource statement was published in September 2016 and a scoping study completed in December 2016. The positive scoping study was based on the maiden resource of 350,000t copper and 14Moz of silver. It considered the development of an open-pit copper mine producing 22,000tpa of copper and 665,000oz of silver in concentrate over a mine life of over nine years. Average life-of-mine C1 cash costs were estimated to be US$1.29/lb after silver credits. Capital costs were estimated at US$135m, equivalent to US$6,200/tpa of annual capacity. At a copper price of US$3.00/lb (compared with the current price of US$3.07/lb), the pre-tax NPV10 was US$297m and the IRR 42%.

Resources increased by 17% to 409,000t of copper in August 2017 — A resource update was announced in late August 2017. Updated total resources comprised 36Mt, grading 1.1% Cu and 13 g/t Ag, increasing copper content by 17% to 409,000t and silver to 14.8Moz. Some 28% of the copper was contained within Measured resources, and a further 33% in Indicated resources.

Pre-feasibility study planned to be completed by the end of the year — The company plans to complete a pre-feasibility study by the end of the year and a feasibility study in 3Q18.

The company is well funded — Cash at the end of 2016 was £1.4m and the company raised a further £4.85m in April 2017 at 3p/share.

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Fri, 01 Sep 2017 11:54:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28518/in-the-news-metal-tiger-28518.html
In the news: Base Resources, Peak Resources & KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28488/in-the-news-base-resources-peak-resources-kefi-minerals-28488.html FROM THE BROKING DESK

Base Resources*† (LON:BSE) has released its full FY17 results. Jim Taylor has already swooped on this one, and has put out Base Resources — FY17 Financial Report, 29 August 2017. As a quick summary, the results highlighted the benefit that stronger prices have had on the company’s cashflow and net debt position. With the retirement of the Taurus Debt Facility, and with it one of the cash sweeps, the company’s cash flexibility has materially improved.

Revenue increased 28% due to both higher prices and volumes, while net debt dropped US$53m to US$99m by period end. Base continues to offer high-quality exposure to a strong market for mineral sands. We maintained our Buy rating and target price of A$0.49.

Not altogether coincidentally, we have Base MD Tim Carstens here with us in London on Thursday and Friday this week. Spots are pretty limited now, but let us know if you’d like to see or speak to Tim and we’ll try and squeeze you in.

Elsewhere, Peak Resources†† (ASX:PEK) has updated the market on optimisation work completed at its Ngualla Rare Earths Project in Tanzania. This work was done after the company released a bankable feasibility study on the project in April 2017. For those of you who don’t know the Peak story, the rare earths in question are neodymium-praseodymium oxide (NdPr), ie, the metals that are used in electric motors, making Peak an important player in the forthcoming electric car revolution.

Its release highlights that EBITDA can be improved by 20%, or US$29m, to US$174m pa. Furthermore, unit operating costs can be reduced by 5.7% to US$32.24/kg NdPr, with post-tax and royalties NPV10 and IRR increasing from US$445m and 21% to US$579m and 24%. Annual production is set to increase 16% to 2,810tpa.

Managing Director Darren Townsend said: “This is an outstanding outcome by the Peak team that drives Ngualla’s already low unit costs even lower, and delivers a large increase in operating margin, reinforcing Ngualla as the leading development project for NdPr. The more than 100% increase in NdPr prices this year, combined with these significant operating improvements, support our main focus now, which is to progress a mining licence application in order to fast track Ngualla towards production in time for the increased demand for NdPr from electric vehicles.”

It was also good to hear some more from KEFI Minerals† (LON:KEFI). This came in the form of an update on progress at its 1.0Moz Tulu Kapi Gold Project in Ethiopia. Financing plans are continuing to move ahead, with Oryx Management (which was mandated in July) compiling the documentation required for the planned US$135m bond issue that will lease finance the project’s infrastructure. The mining licence is being transferred to the joint-venture company in which KEFI will own 75-80%, and the government the remaining 20-25%. Progress was also reported towards calculating the final compensation amounts to be awarded under the resettlement plan following updated property surveys and associated data. This all bodes well for the planned completion of the financing later this year and for the commencement of construction early in 2018.

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Tue, 29 Aug 2017 11:40:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28488/in-the-news-base-resources-peak-resources-kefi-minerals-28488.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28455/in-the-news-amani-gold-28455.html COMPANIES

AMANI GOLD††

ASX:ANL | A$0.03 | US$37m | Speculative Buy

Revised Resource Estimate

Amani Gold has announced a revision to the resource estimate at its 55%-owned Giro Gold Project in the DRC. The change comes from including low-grade samples that had previously been excluded from the modelling. At a 0.9 g/t cut-off, total contained ounces fell 7%, largely as a result of lower tonnage in the Inferred category, with grade remaining consistent. The revised total resource shows ore tonnage of 45.6Mt at an Au grade of 1.46 g/t, for contained Au of 2.14Moz.

COMMENT: With most of the decrease in the size of the resource coming from a drop in the Inferred tonnage while grades were largely unchanged, our view of the deposit has not materially shifted. While lower tonnage and contained ounces appear a little disappointing, the Inferred category is inherently less accurate. The company’s focus remains on the various drilling programmes that should upgrade and expand the resource. For further details on the company, please see: Amani Gold — Kebigada Maiden Resource of 2.3Moz, 5 July 2017.

Giro Gold Project background — Amani is focused on advancing its 55%-owned Giro Gold Project. After putting out a maiden resource in July 2017, the company has concentrated on upgrading and expanding the resource, as well as the metallurgical drilling needed to complete pre-feasibility and feasibility studies. Preparations have started for an infill drilling programme that will define Measured resources, and there are plans to commence a shallow RC drilling programme of targets showing high-grade soil anomalies that have the potential to add satellite resources. Most significantly, at Douze Match, in the north of the licence area, initial drilling returned some spectacular high-grade results, although follow-up drilling has so far not matched these results. A programme of vertical holes at Douze Match targeting the flat-lying structures is being planned. Recent diamond drilling at Kebigada has shown that there are areas of mineralisation below the depth of previous RC drilling. The most promising depth extension showed 88m at an Au grade of 2.13 g/t from 221m.

 

Amani’s current market cap is A$47m/US$37m — The company has 1,566m shares outstanding, with 52m options exercisable at prices ranging from A$0.03 to A$0.10/share expiring from November 2019 to December 2020. The company has also agreed to a binding subscription agreement with Luck Winner Investment Limited (LW), whereby LW acquired 300m shares for A$10m at a price of A$0.05/share, and committed to provide a further A$10m, subject to Amani shareholder approval and other conditions precedent. As part of the deal, LW is to receive 250m options exercisable at A$0.07/share with a two-year term from the date of issue. After cash outflows during the June quarter of A$2.3m, cash at the end of the period was A$1.1m, which excludes cash received from LW subsequently.

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Wed, 23 Aug 2017 11:38:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28455/in-the-news-amani-gold-28455.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28442/in-the-news-base-resources-28442.html FROM THE BROKING DESK

A reminder that we’ll soon be marketing Tim Carstens of Base Resources (LON:BSE) *† in London. He’ll be here on Thursday 31 August and Friday 1 September. All seems to have calmed down in Kenya after the recent election, so this should be an excellent time to catch up with the company.

Base’s full-year FY17 results come out on 28 August. Tim will be able to expand on these, and also to update on the expected resource for Kwale Phase 2. For a bit of background, please see our latest report. Let us know quickly if you’d like a meeting as slots are filling up.

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Tue, 22 Aug 2017 10:08:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28442/in-the-news-base-resources-28442.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28396/in-the-news-base-resources-28396.html FROM THE BROKING DESK

(LON:BSE)

In a quick update to our piece yesterday, it seems the opposition’s call for a general strike in Kenya was largely ignored. The defeated presidential candidate, Raila Odinga, had hoped to continue to generate support for his claims that some of the voting in the recent election was rigged; foreign observers declared the poll free and fair. Thus, things seem to be calming down, and it looks like Uhuru Kenyatta will continue to head the government with an increased majority.

This is positive stuff for Base Resources*†. The company has an excellent relationship with the government, particularly with Mining Minister Dan Kazungu. We’ll be marketing Tim Carstens of Base in London on Thursday 31 August and Friday 1 September.

Tim will be around after the company’s full-year FY17 results come out on 28 August. This should also be slightly before an expected resource update for Kwale Phase 2.

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Tue, 15 Aug 2017 11:39:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28396/in-the-news-base-resources-28396.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28385/in-the-news-base-resources-28385.html FROM THE BROKING DESK

We will be marketing Tim Carstens of Base Resources (LON:BSE) *† in London on Thursday 31 August and Friday 1 September. This will be on the back of the company’s next full quarterly results release, which is due on 28 August, and shortly before the expected resource update for Kwale Phase 2 (KP2). This is the exploration area on the South Dune extension that should increase mine life at the Kwale Project. Our estimates are that a one-year mine life extension could add as much as US$50m to the NPV of Kwale, with a corresponding 13% increase to our A$0.49 price target.

Cash generation is front and centre of the Base story. This was shown in its 4QFY17 update in July, where net debt fell US$24m to US$99m. This compares with net debt of US$188m and US$151m at the ends of 4QFY15 and 4QFY16 respectively. We project that the company will have a net cash position by the end of FY19. For full details on this, please see Base Resources — June Quarterly Activities Report, 13 July 2017.

Stronger mineral sands pricing through 2016 and 2017 has plateaued somewhat. Ilmenite is now trading around the US$160/t level after peaking at US$200/t in April 2017. Tim Carstens has commented that this is a good level as it discourages incremental production from countries like Vietnam and China coming onto the market. Also, this is being offset to a degree by higher rutile prices; these have been as much as US$100/t this quarter, and western pigment producers are pushing through price rises to their customers. Tim described pricing to me now as “balanced and sustainable”.

The Kenyan elections have overshadowed the stock price over the summer. On the face of it, the elections progressed well, with an increased majority for the government of Uhuru Kenyatta. However, the opposition, led by presidential candidate Raila Odinga, is claiming that the electronic voting IT system was hacked, a claim that has led to sporadic violence in some of the major towns and cities, as well as a call for strikes. These claims have been vehemently denied by the head of the Kenyan electoral commission and international observers; former US Secretary of State John Kerry publicly stated that he was happy with the voting process. The situation is tense as the widespread rioting and loss of life that marred the elections ten years ago are fresh in people’s minds, although the election of four years ago passed without any major incident. Odinga has now contested four presidential elections unsuccessfully and a number of his coalition partners were not standing with him when he called for a general strike, so it could be that support for him is draining.

Another Kenyatta government is good news for Base, and the hope is that Mining Minister Dan Kazungu stays in his position. Tim has an excellent relationship with Kazungu and Kenya has been increasingly vocal in wanting to attract more mining investment into the country.

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Mon, 14 Aug 2017 09:56:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28385/in-the-news-base-resources-28385.html
In The News - Dalradian Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28310/in-the-news-dalradian-resources-28310.html FROM THE BROKING DESK
We’ve released an introductory piece on Dalradian Resources, the TSX- and AIM-listed gold development and exploration company. Given that its Curraghinalt deposit in Northern Ireland is one of the world’s highest-grade, undeveloped gold projects, and it is the largest in the UK, we thought it about time that we took a closer look at progress to date and the outlook for the project. Jim Taylor’s document can be accessed here: Dalradian Resources — Introducing the UK’s Largest Gold Deposit, 1 August 2017.


Dalradian completed a positive feasibility study on the 100%-owned Curraghinalt Gold Project in December 2016. An updated study, due in 1Q18, should benefit from a probable increase in reserves as a result of a recent infill drilling programme and soon to be completed beneficiation test-work. Permitting is also a focus, with a planning application set to be submitted for review soon.


Resources at Curraghinalt currently contain 4.4Moz of gold. The feasibility study proposed narrow vein underground mining and a flotation and CIL processing route, defining a reserve of 1.4Moz grading 8.5 g/t, which is sufficient to support average gold production of 130,000oz pa for a mine life of 8.5 years. The project has attractive operating costs (AISC of US$674/oz) and moderate initial capital costs (US$192m, or US$142/oz produced); assuming a gold price of US$1,250/oz, these combine to produce an NPV5 of US$301m and an attractive IRR of 24%.

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Wed, 02 Aug 2017 09:11:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28310/in-the-news-dalradian-resources-28310.html
In the news: Metminco http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28304/in-the-news-metminco-28304.html Metminco*†

ASX:MNC LON:MNC | A¢5.0 | US$5m | Speculative Buy

2Q17 Report —Miraflores Feasibility Study On Track for Completion in 3Q17

Metminco’s June quarterly report provided an update on progress towards the completion of the feasibility study at its 100%-owned Miraflores Gold Project in Colombia. The study was reported to be 70% complete. The current project milestones include:

• 3Q17 — Completion of Miraflores feasibility study

• October 2017 — Completion of baseline monitoring for the Environmental Licence (EIA)

• End-2017 — Submission of EIA application

The company also reported that the final mining report had been received and that life-of-mine operating costs were 19% lower than in previous studies, mainly due to changes to development and backfilling requirements. Also, the final metallurgical report has been received, confirming previous work and reporting recoveries of 93%.

COMMENT: We believe that the completed feasibility study has the potential to firm up the value proposition at Miraflores. We continue to recommend Metminco as a Speculative Buy.

Miraflores is 100%-owned, subject to A$13m of deferred acquisition payments — Metminco acquired Miraflores from RMB in May 2016 for 8m shares and A$0.5m in cash. Further deferred cash payments totalling A$7m were due over four years (with A$1m paid in June 2017 and A$1m due in 2018, A$3m in 2019 and A$2m in 2020). A royalty of up to A$7m is also payable from project cashflow.

Miraflores scoping study of September 2016 delivered an NPV8 of US$73m and an IRR of 26% at a gold price of US$1,300/oz — In September 2016 SRK completed an updated scoping study for an underground-only mining operation, with a mining schedule containing 451,000oz at a grade of 3.5 g/t. The operation was planned with steady-state production of 50,000oz pa and a nine-year mine life for total recovered gold production of 414,000oz. Underground mining using longhole stoping with backfill was planned in conjunction with a gravity concentration, flotation and cyanidation processing route. Initial capex was US$81m, while cash costs and AISC were US$555/oz and US$648/oz, respectively. At a gold price of US$1,300/oz, the NPV8 was US$73m and the IRR was 26%.

Feasibility study to be completed during 3Q17 — The company commenced a feasibility study work programme in November 2016, which is now 70% complete. Positively, the company has received the final mining study from Ausenco, which estimates that life-of-mine mining costs will be 19% lower than those in previous studies owing to the use of less backfill and less development.

Permitting and associated approvals key to timeline — The company plans to submit the EIA for approval by the regional environmental authority by the end of this year. The process includes: approval of the feasibility study and the Terms of Reference; and the submission of the completed environmental baseline studies, the approved development plan and the Social and Environmental Management Plan (particularly focused on the relocation of up to 70 homes and the issue of illegal miners). It also incorporates the process of consultation and assessment of the impact of the project that forms the project’s Social Licence. The project’s design includes underground mining and dry stacked tailings, limiting the surface footprint of the project, a factor that is hoped will speed the EIA approval process.

Net cash at end of June of was A$6.4m — During the quarter the company received US$5m proceeds from the sale of its 49% stake in the Los Calatos Copper Project in Peru.

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Tue, 01 Aug 2017 10:35:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28304/in-the-news-metminco-28304.html
In the news: The Alchemist http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28292/in-the-news-the-alchemist-28292.html FROM THE BROKING DESK

We’ve put out our latest edition of The Alchemist, looking at the strength of the Australian dollar. This short piece looks at a currency near a two-year high (at US$0.797/A$). While this has largely been put down to Australian macroeconomic and global factors (eg, Australian unemployment is near its lowest point in 3.5 years and the more dovish interest rate policy from the US Federal Reserve), in commodity-based terms this strength looks well supported. We feel that it’s likely to continue.

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Mon, 31 Jul 2017 09:20:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28292/in-the-news-the-alchemist-28292.html
In the news: Weatherly International http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28285/in-the-news-weatherly-international-28285.html WEATHERLY INTERNATIONAL*†

LON:WTI | 0.4p | US$5.6m | Speculative Buy

Guidance Met in June 2017 Quarterly Results

Weatherly International has announced its latest quarterly numbers. Copper production for the quarter was 3,386t at a C1 cost of US$6,344/t, bringing FY17 total production to 14,759t at a C1 cost of US$5,288/t. The FY17 total production and C1 costs were in line with the most recently issued guidance. Higher volumes mined and stacked, along with lower output, have driven C1 costs 7% higher (from a historical high of US$5,907/t in the prior quarter). Over the four quarters prior to March 2017, C1 costs averaged US$4,353/t.

To accelerate construction of the extended heap leach pad, Orion has provided Weatherly with a US$10m facility at a rate of Libor +2%, due 28 February 2020, which will also be used for operating costs and general working capital requirements at Tschudi. This facility was announced previously, although the terms have now been revealed.

COMMENT: Operating costs and recovery rates reveal an increasingly difficult situation at Tschudi as it transitions through a ~20m zone of mixed ore before reaching sulphides. With C1 costs at US$6,344/t and an estimated average price received of US$5,526/t in the June 2017 quarter, Weatherly appears to have realised an operating loss in the quarter. The new US$10m facility is thus needed to cover operating expenses and working capital, along with the extended heap leach pad area. Furthermore, at current production rates, Weatherly’s sales prices are fully hedged for the next two quarters when including Orion’s option on volume, so even a rising copper price will not help in the near term. The majority of hedged volume going forward is at a price of US$6,000/t, which is below C1 costs of US$6,344/t in the most recent quarter.

Given the debt situation and higher operating costs, Weatherly is fully dependent on its relationship with Orion. This is likely to remain the case until both copper prices and operating results improve. Orion has regularly been proven to be a supportive partner, and the latest financing reaffirms this view.

We reiterate our Speculative Buy rating on the basis that Weatherly offers significant operational and financial leverage to the price of copper. We do not consider it appropriate to have a target price at this time given the ongoing support needed from Orion.

 

Construction of the extended heap leach pad is ongoing — The extended heap leach pad is meant to provide additional capacity to allow for the longer-than-expected leach times of mixed ore. It remains unclear why the leach time has exceeded expectations, but the company has increased stacking rates to compensate. In the June 2017 quarter, total material mined, ore tonnes stacked and ore stacked grade were all significantly above the March 2017 quarter (18%, 29% and 15%, respectively), but copper cathode production increased by only 5%. While this discrepancy is at least partially explained by the long leach time of mixed ore, we note that there may also be an issue with recovery rates given the performance over the past few quarters.

Hedging and Orion option constrain upside exposure — In the six months ending 30 June 2017, 3,400t were hedged at US$5,077/t, 1,650t at US$6,000/t and the balance of production (we assume) was captured by Orion’s option to receive 3,500t at US$5,000/t. We estimate that the average price received in the June 2017 quarter was US$5,526/t. Beyond 30 June 2017, there are hedges of 550t/month at US$6,000/t until December 2017, and an additional 450t at US$5,102/t that we assume will be fulfilled in the coming quarter. Furthermore, Orion has an option on 700t/month at US$6,000/t until the end of April 2018. Combined, this means hedged production of 4,200t in the September 2017 quarter, 3,750t in the December 2017 quarter, 2,100t in the March 2018 quarter and 700t in the June 2018 quarter. With further debt rescheduling expected in August, we expect that any remaining unhedged production will either be hedged or covered by a new option for Orion.

Support from Orion continues to be necessary — Weatherly has again announced that it does not expect to be able to meet its debt obligations if copper prices remain at current levels. On several occasions Orion has agreed to defer debt repayments and has just finalised the terms of a US$10m facility that Weatherly will use to accelerate the building of the leach pads, and fund operating costs and general working capital at Tschudi. The company is expected to remain dependent on Orion until operating results and copper prices improve. For reference, the mixed ore extends for approximately 20m.

Debt outstanding was US$110m at 31 December 2016 — The repayment due 31 August 2017 under Facilities C & D is US$8.6m. We estimate that the first repayment under Facility B due 31 August 2017 to be approximately US$11.8m. The first payment under Facility B was originally due 30 November 2015, but was recently rescheduled to 31 August 2017.

 

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Fri, 28 Jul 2017 14:19:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28285/in-the-news-weatherly-international-28285.html
In the news: Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28233/in-the-news-metal-tiger-28233.html FROM THE BROKING DESK

RFC Ambrian is pleased to announce that we have been appointed Nomad and Broker to Metal Tiger plc*† (MTR LN) with immediate effect. This is a really interesting company that is developing a number of projects around the world. It’s growing a portfolio of investments in the resource space and runs an asset trading desk that covers equities, warrants and royalty trading. The group is headed up by CEO Michael McNeilly, Non-executive Chairman Charles Hall, FD Keith Springall and Technical Director Geoff McIntyre. Non-executive Directors are Geoff McIntyre, Terry Grammer and Mark Potter, founder and partner of Sita Capital Partners LLP and a former Director and CIO for the Anglo Pacific Group and Audley Capital.

The company’s flagship project is its 30% stake in the ‘T3’ high-grade copper/silver deposit in Botswana. T3 had a maiden JORC mineral resource estimate released in September 2016 of 28.36Mt @ 1.24% Cu and 15.7 g/t Ag, containing around 350,200t of copper and 14.27Moz of silver, with a high-grade core of 8.48Mt @ 2.16% Cu and 30.6 g/t Ag. Work to build on the scoping study announced in December 2016 and progress to a PFS is underway.

Metal Tiger has been active in Thailand since October 2014 after the acquisition of South East Asia Exploration and Mining (SEAM). It’s developing a pipeline of mining and exploration projects here, including the Boh Yai and Song Toh silver-lead-zinc mines and processing plants in Kanchanaburi Province. In Spain, the group is developing the Logrosan Tungsten Gold Exploration Project in a joint venture with Finnish company Mineral Exploration Network.

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Fri, 21 Jul 2017 09:35:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28233/in-the-news-metal-tiger-28233.html
In the news: KEFI Minerals & Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28200/in-the-news-kefi-minerals-base-resources-28200.html FROM THE BROKING DESK

Jim Taylor has put out KEFI Minerals† (LON:KEFI) — Tulu Kapi Financing Package Takes Shape, 17 July 2017. KEFI is continuing to make progress towards the financing and construction of its Tulu Kapi Gold Project in Ethiopia. Having announced the results of an updated DFS in late May, KEFI has agreed innovative, conditional arrangements for the provision of US$155m of its estimated financing requirement of US$193m. On-site infrastructure is to be funded by an SPV that will raise US$135m through debentures, with construction of the project via a fixed-price contract with the experts Lycopodium. Off-site infrastructure to the value of US$20m is to be provided by the Ethiopian Government.

We reiterated our Buy rating and have revised our target price up from 8.8p to 9.0p. We are adjusting our target price after assuming that the company raises US$32m in equity at a price of £0.05/share, resulting in the issuance of 490m shares, equivalent to 147% of the outstanding share capital. We note that, should the company secure a working capital facility for the project, the equity issue could be significantly reduced, leading to a lower level of dilution. The stock is currently trading at a P/NAV of 0.5x, a significant discount to its peer group. We believe it offers a re-rating opportunity once the Ethiopian state of emergency has ended and the finance package has been completed.

COMPANIES

Base Resources*†

ASX:BSE | A$0.26 | US$152m | Buy | TP : A$0.49

Repays Taurus Debt Facility

Base Resources has repaid the final US$11.8m of the US$20m debt facility provided by Taurus Funds Management, one of its major shareholders. The repayment is ahead of the scheduled repayment date, which was at the end of September.

COMMENT: The repayment exemplifies the significant improvement in the company’s finances over the past year. It also increases financial flexibility, removing the 75% sweep of cash at the corporate level to repay this facility. The 50% cash sweep at the project level, to pay down the project debt, remains in place.

The US$20m Taurus loan was put in place in December 2014 to satisfy the requirement of the rescheduling of the project loan to provide US$15m of additional liquidity to the project, with the remaining US$5m providing corporate liquidity. This satisfying news continues the positive developments in debt reduction, with a decrease in net debt from US$188m at the end of FY15 to US$151m at June 2016, followed by a US$52m decline in FY17 to US$99m (announced last week). With the continuing positive outlook for mineral sands pricing, we expect a similarly strong cashflow performance from Kwale in FY18, with forecast net debt set to fall to US$50m by June 2018.

We maintain our Buy rating and our target price (TP) of A$0.49. Our TP is based on long-term prices of US$180/t for ilmenite, US$1,050/t for rutile and US$1,150/t for zircon. Using a flat price deck based on estimated prices from last quarter (US$175/t, US$750/t and US$890/t respectively), our target price would be A$0.36/share, some 38% above the current share price.

Near-term upsides include ongoing exploration. We anticipate that drilling on the extensions of the South Dune to the south-west and its eastern edge could have added 1.0-1.5 years to the mine life. For reference, we estimate that a one-year mine life extension would add US$50m to the NPV for Kwale, and lead to a 13% increase to our target price (net). Base currently expects to publish a resource update in the coming quarter; this will serve as a basis for extending the mine life. Beyond these near-term targets, the NE Sector has shown high-grade drill results, but remains largely untested. Drilling of the NE Sector was put on hold earlier this year; the company now expects to resume exploration at the start of 2018.

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Tue, 18 Jul 2017 08:58:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28200/in-the-news-kefi-minerals-base-resources-28200.html
In the news: KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28188/in-the-news-kefi-minerals-28188.html FROM THE BROKING DESK

There’s been some excellent news out on KEFI Minerals (LON:KEFI). Financing is near for the construction of its Tulu Kapi Gold Project in Ethiopia. KEFI has agreed innovative, conditional arrangements for the provision of US$155m of its estimated financing requirement of US$193m. On-site infrastructure will be funded by an SPV that will raise US$135m through debentures, with construction of the project through a fixed-price contract with the construction experts Lycopodium. Off-site infrastructure to a value of US$20m will be provided by the Ethiopian Government.

Tulu Kapi is an attractive gold development project, with planned production of 980,000oz over a ten-year mine life at LoM average AISC of US$779/oz. The company just announced an updated DFS in May. Reserves at Tulu Kapi stand at 1.05Moz, grading 2.1 g/t. This conventional open pit and CIL-based project is expected to have a competitive operating cost structure. Construction capex is estimated at US$161m, of which US$16m is deferred for a year, resulting in net initial capex of US$145m. The total funding requirement of US$193m includes US$15m of corporate working capital and US$33m relating mainly to rolled-up interest during the construction period. We’ll have a full piece out after we’ve gone over the full announcement.

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Mon, 17 Jul 2017 09:52:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28188/in-the-news-kefi-minerals-28188.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28178/in-the-news-base-resources-28178.html FROM THE BROKING DESK

Yesterday we made some initial comments on the 4QFY17 activities report of Base Resources*†. To follow this up, Jim Taylor has put out the snappily titled Base Resources — June Quarterly Activities Report, 13 July 2017. This provides a thorough overview of this release, and we have maintained our Buy rating and target price of A$0.49 (the current price is A$0.26).

Recent softness in the share price reflects a slight decline in momentum for the price of ilmenite. We believe that this is not representative of Base’s strong cashflow generation and upside potential. As ilmenite prices are expected to remain near current levels, we believe that there is an opportunity for the focus to return to the quality of Base’s underlying fundamentals.

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Fri, 14 Jul 2017 09:20:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28178/in-the-news-base-resources-28178.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28167/in-the-news-base-resources-28167.html FROM THE BROKING DESK

Base Resources (LON:BSE) *† has put out some spectacular full-year numbers. We have some initial comments below. It’s important to note that these are the company’s first full-year figures with the higher ilmenite pricing we began to see in spring 2016, so the revenue increases are very strong, with the corresponding reduction in net debt a pleasure to see. As mineral sands pricing has remained, ahem, ‘strong and stable’ over this year and is forecast to be so for some time, we could well see Base being debt free during 2018. Thus, this is a very important set of results.

The company’s newsflow doesn’t stop here. In September we should have a maiden resource statement on the south-west sector of the Kwale Phase 2 Project. This is expected to add to mine life and, as Jim Taylor pointed out in Base Resources — Enhanced Economics from Phase 2, 23 May 2017, each year of mine extension adds a 13% net increase to our target price. This currently sits at A$0.49/share, or just under 30p for the UK stock, and the shares are trading at A$0.255 (15.75p), so there’s plenty of upside from here.

Base’s 4QFY17 activities report showed a healthy concentration on output at a time of strong pricing. Both grades and volumes improved over the prior quarter as the company remained focused on a high-grade zone, and hydraulic mining progressed according to plan. Revenues were helped by the timing of shipments, with rutile and ilmenite sales both exceeding production. Production itself was in line with guidance.

Total production increased 5% QoQ, with most of this coming from ilmenite. The significantly higher volume of ore mined (+12% QoQ) and improved grades (8.4% HM) have not yet benefited tonnes produced as some 40,000t of HMC had previously been stockpiled. Recoveries from the MSP were in line with the prior quarter, although zircon recoveries of 73% remained below the design target of 78% as circuit optimisation and modifications continued.

Revenue was up 35% due to the timing of shipments, higher volumes and higher prices. Bulk rutile shipments were up 30% QoQ at 28,000t as there were three bulk rutile sales in the quarter vs. the usual 1-2. Zircon sales (+6% QoQ to 8,500t) were largely in line with the slight increase in production in the quarter. Ilmenite sales rose 16% QoQ to 142,000t, well in excess of production of 119,000t.

Net debt was down US$24m to US$99m. After the repayment of US$11m of debt during the period, total debt at the end of June 2017 was US$153m. Our research team will release further comment after a full analysis of the numbers.

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Thu, 13 Jul 2017 09:55:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28167/in-the-news-base-resources-28167.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28149/in-the-news-amani-gold-28149.html FROM THE BROKING DESK

Amani Gold†† has completed Stage 1 of its recently-signed subscription agreement for A$25m with Luck Winner Investment Limited. Amani confirmed that it had issued 300m shares at A$0.005/share upon receipt of A$15m in subscription funds. Completion of Stage 2 is subject to Amani shareholder approval on or before 15 September 2017; this would involve Luck Winner investing a further A$10m in return for 200m shares at A$0.005/share and 250m options (exercisable at A$0.07/share for two years). This funding will allow Amani to commit fully to the ongoing exploration and study work at the 55%-owned Giro Project, and also at the adjacent Tendao Project, the acquisition of which remains subject to ongoing due diligence by the company.

It was announced last week that the original non-binding MoU had converted into a binding subscription agreement. We think that this conversion was a positive development given both the scale of the investment and the 25% premium to current market prices.

In addition to the financing, Amani just announced a Maiden Indicated and Inferred Mineral Resource at Kebigada of 2.3Moz of gold at 1.5 g/t Au (at a 0.9 g/t Au cut-off grade). The company is now planning an additional infill diamond and RC drilling programme aimed at defining a Measured Mineral Resource in part of the deposit for inclusion in the pre-feasibility studies. Additional drilling will also be carried out for resource definition at Douze Match. Both Kebigada and Douze Match are within the Giro Project area.

Jim Taylor released a piece on Amani last week: Amani Gold — Kebigada Maiden Resource of 2.3Moz, 5 July 2017. In this he addressed both the Maiden Resource and looked forward to the financing, maintain our Speculative Buy rating. At Kebigada, mineralisation remains open to the north-east and at depth. Given the potential for infill drilling to increase grade, we think resources at Kebigada will increase further.

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Tue, 11 Jul 2017 10:45:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28149/in-the-news-amani-gold-28149.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28126/in-the-news-amani-gold-28126.html AMANI GOLD††

ASX:ANL | A$0.040 | US$38m | Speculative Buy

Binding Agreement for A$25m equity investment at A$0.05/share from Cornerstone Investor

Amani Gold has announced that the non-binding MOU for an equity investment of A$25 million that it signed with Luck Winner Investments Ltd (LW) on 10 May has now been converted into a binding subscription agreement.

LW will invest A$25 million in 2 stages. Under Stage 1, LW will subscribe for 300m shares (representing 19.4% of Amani’s share capital) at A$0.05/share for an investment of A$15 million. This is expected to settle within 2 business days after the execution of the agreement, i.e. on or around 10 July.

On completion of Stage 1, Klaus Eckhof will step down as executive Chairman, remaining as Director, where he will continue to be involved in policy making and remain actively involved in key decision-making by the company. Director Kevin Thomson will step down from the Board. LW nominee Mr Yu will replace Mr Eckhof as non-executive Chairman and Mr Fu and Mr Chan will also join the Board as non-executive directors.

Under Stage 2, LW will invest A$10 million in return for 200 million shares at A$0.005/share and 250 million options (exercisable at A$0.07/share for two years). Completion of Stage 2 is subject to Amani shareholder approval on or before 15 September 2017 and other conditions precedent including Amani negotiating with Sokimo, the DRC state entity, for a 2 year extension on the preparation of a feasibility study on the Giro Project on or before 15 September 2017 (the announcement notes that Sokimo agreed to this in principle in March).

LW is a Hong Kong investment company whose two key shareholders are Mr Yu Quiming and Mr Fu Sheng, both of whom have a long involvement in the mining industry.

COMMENT: We consider that the conversion from the non-binding MOU to a binding agreement is a positive development, given the scale of the investment and the 25% premium to current market prices.

Assuming the satisfactory completion of this financing, we consider that the introduction of a supportive cornerstone investor is a positive development for the company and will allow Amani to commit fully to the ongoing exploration and study work at the 55% owned Giro Project and also the adjacent Tendao Project, the acquisition of which remains subject to ongoing due diligence by the company.

Given the changes to the Board, we expect that the market will be keen to find out whether this will result in a change in strategy for the company.

We continue to recommend the company as a Speculative Buy following the announcement on 5 July of the maiden resource estimate at Kebigada of 2.3Moz grading 1.5g/t.

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Fri, 07 Jul 2017 10:45:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28126/in-the-news-amani-gold-28126.html
In The News - Tanzanian Mining Laws, Base Resources, Amani Gold & The Alchemist http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28116/in-the-news-tanzanian-mining-laws-base-resources-amani-gold-the-alchemist-28116.html FROM THE BROKING DESK


The passing of two new mining laws and the proposal of a third in the Tanzanian Parliament this week looks like a right royal muck-up. This has led to declines in mining company share prices across Africa. The laws passed allow the Tanzanian Government to force mining and energy companies to renegotiate contracts, which President John Magufuli claims will increase transparency and revenues. These are called the Natural Wealth and Resources (Permanent Sovereignty) Bill and the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Bill.


These bills deal with sovereignty over mineral wealth and contracts. The Tanzanian Chamber of Minerals and Energy has described the implications of the bills as “vast”. They will allow the government to dissolve existing contracts and to prohibit the involvement of foreign courts or tribunals in disputes that arise between the government, companies and their investors.


President Magufuli wants to double the mining industry’s contribution to GDP to 10% by 2025. The bills follow the ban he imposed on mineral exports in March. The rationale behind all this is to compel companies to process minerals within the country rather than export them as raw materials. The president has ordered an audit to identify loopholes in current legislation that he says results in income losses for the Treasury. Just for good measure, he fired the Mines Minister Sospeter Muhongo, and has ordered the Energy and Minerals Ministry not to issue or renew any new or expired mining licences. Last month he accused Acacia Mining of operating illegally in the country and of failing to pay billions of dollars in taxation. Acacia Mining is majority owned by Barrick Gold Corp.


So, will this kind of legislation spread across Africa like a ‘Mexican Wave’? While there’s no doubt that strong-man presidential rhetoric on resource nationalisation can spur populist sentiment, as soon as the economic reality kicks in that this is a sure fire way not to double an industry’s contribution to GDP, it tends to die down.


The share price of Base Resources*† has wobbled a bit, with some fearing that Kenya could follow Tanzania down the rabbit hole. The truth is that the two countries could not be going in more different directions. The Kenyan Cabinet Secretary for Mining, Dan Kazungu, has been going out around the world to attract new investment over the past couple of years, often travelling with Tim Carstens from Base to events like Indaba and Africa Downunder, stressing how attractive Kenya is to resource investment.


He’s been quite vocal about the country’s aims. In an interview with Bloomberg this week he said: “We obviously are starting from the position that we want to be competitive… Investors have options. If you frustrate them here, they will probably go somewhere else.” Kenya probably can’t believe its luck about how irresponsible its southern neighbour is being. We’re so confident about Base that we recently raised our target price from A$0.43 to A$0.49

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Thu, 06 Jul 2017 10:01:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28116/in-the-news-tanzanian-mining-laws-base-resources-amani-gold-the-alchemist-28116.html
In the news: Weatherly International http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28092/in-the-news-weatherly-international-28092.html COMPANIES

WEATHERLY INTERNATIONAL*†

LON:WTI | 0.325p | US$4m | Speculative Buy

Operational Issues Deepen Dependency on Orion

Weatherly International has announced that it is continuing to experience slower-than-expected recoveries at Tschudi, and it is now uncertain whether leach rates will ever match those predicted in its bankable feasibility study (BFS) from 2012. In order to help address the issue, management has been looking to construct Stage Two leach pads; while previously, the company had said that it would not have sufficient cash to meet all its obligations, we now see more specifically that this includes the capital for the Stage Two leach pads, additional working capital for accelerated stacking rates in addition to the obligations to Orion. As such, Orion has agreed to provide an additional US$10m uncommitted facility, the terms of which have yet to be finalised.

Weatherly also announced a further extension to its repayment terms from Orion, with payments under Facilities B, C & D now deferred to 31 August 2017. Facility B has also had its maturity date extended to 28 February 2020, and the remaining repayments increased in order to spread the obligation over 11 equal repayments.

COMMENT: Production issues now appear worse than was initially believed. Management had previously stated that it expected the leaching rate to recover during the June quarter. Weatherly had already rescheduled its debt a number of times due to low copper prices and performance issues. With the prospect of improved leaching rates now gone, the path to repaying its debts now depends on even higher copper prices than before.

With the latest restructuring, Orion does appear to be continuing its support for Weatherly; furthermore, Orion has agreed to provide an additional US$10m facility. This exemplifies the relationship between the two companies, and illustrates how Orion’s support is needed for Weatherly to remain a going concern.

We reiterate our Speculative Buy rating on the basis that Weatherly offers significant operational and financial leverage to the price of copper. We do not consider it appropriate to have a target price at this time given the ongoing support needed from Orion.

Hedging and Orion option constrain upside exposure — An option contract with Orion to provide copper volumes was signed as part of the debt rescheduling on 2 June 2016. The terms stipulated that Orion had a right to buy 700t of cathode per month from Weatherly’s Tschudi operations from July 2016 to May 2017 at a price of US$5,000/t. We expect that this, along with the company’s hedges, would have negatively affected revenue for November 2016 and December 2016, when the copper price averaged US$5,670/t. Looking forward, for the six months ending 30 June 2017, 3,400t are hedged at US$5,077/t and Orion is entitled to 3,500t at US$5,000/t. With production guidance of 8,863t for 2HFY17, 1,963t remains unhedged. Assuming a market copper price of US$6,000/t, we estimate that the average copper price that would be received by the company would be US$5,251/t. Beyond 30 June 2017, 450t remains hedged, although the terms of the additional US$10m facility have yet to be agreed.

Support from Orion continues to be necessary — As expected, the company was unable to meet its debt obligations. Orion agreed to defer the repayments for Facilities B, C & D, and also agreed to provide a facility of US$10m. The company has stated that, at current copper prices, it expects to have to re-schedule its debt repayments further to continue as a going concern.

Debt outstanding was US$110m at 31 December 2016 — The repayment due 31 August 2017 under Facilities C & D is US$8.6m. We estimate that the first repayment under Facility B due 31 August 2017 to be approximately US$11.8m. The first payment under Facility B was originally due 30 November 2015, but has just been rescheduled to 31 August 2017.

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Mon, 03 Jul 2017 12:33:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28092/in-the-news-weatherly-international-28092.html
In the news: Pallinghurst Resources/Gemfields & Poldark http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28023/in-the-news-pallinghurst-resourcesgemfields-poldark-28023.html FROM THE BROKING DESK

The takeover battle for Gemfields has been getting a lot of press attention this week. The company always seems to give editors an excuse to put a picture of Mila Kunis in their business pages, but we wouldn’t know about that. Actually, neither would Marcus Leroux of The Times, who has illustrated his piece with a Fabergé egg. On 19 May, Gemfields’ majority shareholder Pallinghurst Resources bid the equivalent of 38.5p/share in an all-share offer, valuing Gemfields at £211.5m. This zero premium offer (with some analyst price targets at as high as 93p) infuriated minority shareholders, and led to Gemfields’ Board not being able to recommend the offer. It was an insulting bid that only served the interests of Pallinghurst and its shareholders, which include South African billionaire Christo Wiese. Still, it’s a capitalist society (at least until Jeremy Corbyn assumes power).

As I said back then, the deal is more a reflection of what’s going on at Pallinghurst than at Gemfields. At least as far as I understand it, the Pallinghurst fund faced a shareholders’ vote in September on whether to continue for a further year or be wound up. Gemfields is by far the fund’s most attractive asset, and if it were wound up the Gilbertsons could have lost control. As for Weise, the largest shareholder in Pallinghurst, he’s very keen on these assets as they fit in well with his wider diamond interests.

A counter-offer was subsequently made by the Chinese group Fosun International at 45p/share. It’s tough to say which offer was the more disappointing; it should have come out with a knockout bid of 100p/share and all hell would have broken loose. No doubt a little begrudgingly, the Gemfields’ Board approved this bid, but in reality it’s not in control of this and Pallinghurst is claiming victory. Question marks must surely be raised now as to what the company’s management will look like after the takeover. Needless to say, Ian Harebottle has been tricky to pin down, but his management of Gemfields over the past few years is not in question — it’s been nothing short of outstanding. The next few weeks could be very interesting.

So, whither the minority shareholders in Gemfields? These were the great believers and supporters of the assets and management. Well, they could look towards TSX-listed Fura Gems Inc (CVE:FUR). Fura is a shell run by former Gemfields’ COO Dev Shetty. He has recently appointed an ex-Gemfields guy as VP of Operations and raised C$4m in a private placement. Dev is looking to build a coloured gemstone portfolio of assets and was a keen supporter of expanding into Colombia during his time at Gemfields, so I await his first deal with great interest.

By the way, I just about got through Poldark 3:2 last night. I’m sorry to say it was extremely disappointing. I can’t bear it anymore; the scriptwriters will definitely come to regret shifting the plot completely away from mining onto affairs of the heart. They have lost one keen viewer. I suspect many more will follow.

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Wed, 21 Jun 2017 10:59:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28023/in-the-news-pallinghurst-resourcesgemfields-poldark-28023.html
In the news: Metminco http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27975/in-the-news-metminco-27975.html COMPANIES

Metminco*†

LON:MNC | A¢5.7 | US$5m | Speculative Buy

Set to Sell 49% Interest in Los Calatos to CD Capital for US$5m in Cash

Metminco has executed a binding agreement with CD Capital to sell its remaining 49% interest in the Los Calatos Project for US$5m (~A$6.7m). The sale is subject to a number of tax-related matters and is anticipated to be completed by no later than 11 July 2017.

The decision to monetise its remaining interest in Los Calatos was taken by the Board in order to provide non-dilutive financing that would fund the ongoing work towards the advancement of the Miraflores Gold Project in Colombia, where the company is aiming to complete a feasibility study in 3Q17.

COMMENT: In the context of the company’s market cap of A$7.3m (US$5.5m), a US$5m cash sale of its interest in Los Calatos is very positive.

However, we doubt that this was an easy decision to make given the company’s long history with Los Calatos and the significant expenditure that it has made into it. Although probably not economic at current copper prices, the project is relatively well defined, with work moving towards the completion of a pre-feasibility study, and we have viewed it as having significant option value. Ultimately, however, it has not been possible for Metminco to maintain this interest.

Assuming that the sale proceeds as planned, the proceeds would allow Metminco to continue to advance Miraflores. We believe that the planned completion of the feasibility study in 3Q17 has the potential to firm up the project’s value proposition (previously described in a scoping study in September 2016). We expect clarification regarding permitting at the project early in 2018 following the planned submission of the EIA at the end of 2017. We continue to recommend Metminco as a Speculative Buy.

 

Miraflores acquired in May 2016 — Metminco acquired Miraflores from RMB for 8m shares and A$0.5m in cash. Further deferred cash payments totalling A$6m are due annually over four years (A$1m in June 2017, A$1m in 2018, A$3m in 2019 and A$2m in 2020). A royalty of up to A$7m is also payable from project cashflow.

The Miraflores scoping study of September 2016 delivered an NPV8 of US$73m and an IRR of 26% at US$1,300/oz — In September 2016 SRK completed an updated scoping study for an underground-only mining operation, with a mining schedule containing 451,000oz at a grade of 3.5 g/t. The operation was planned with steady-state production of 50,000oz pa and a nine-year mine life for total recovered gold production of 414,000oz. Underground mining using a longhole stoping with backfill method was planned in conjunction with a gravity concentration, flotation and cyanidation processing route. Initial capex was US$81m, while cash costs and AISC were US$555/oz and US$648/oz, respectively. At a gold price of US$1,300/oz, the NPV8 was US$73m and the IRR was 26%.

Feasibility study to be completed during 3Q17 — The company commenced a feasibility study work programme in November 2016 and expects it to be completed during 3Q17. The project’s use of underground mining and dry stacked tailings limits its surface footprint, a factor that is hoped to help speed the EIA approvals process. Current project milestones include:

• 3Q17 — Approval of commencement of underground development

• 3Q17 — Completion of Phase 2 metallurgical test-work to confirm process design

• 3Q17 — Completion of Miraflores feasibility study

• October 2017 — Completion of baseline monitoring for the Environmental Licence (EIA)

• End-2017 — Submission of EIA application

Net decrease in cash before financing was A$1.9m during the March 2017 quarter — The company had approximately A$10,000 in cash at the end of the March quarter. In May the company announced that it had received A$0.8m from the issuance of a convertible loan to Redfield Asset Management. The company also receives funding monthly from the estimated A$2.6m equity facility with Lanstead Capital. ‎

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Wed, 14 Jun 2017 11:55:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27975/in-the-news-metminco-27975.html
In the news: Poldark http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27964/in-the-news-poldark-27964.html FROM THE BROKING DESK

The most exciting televisual event of 2017 took place on Sunday night. That’s right — Series 3 of Poldark began! It’s finally here, and the world drew a collective breath to see how long it would take before our hero Ross Poldark took his shirt off. Of more interest to me though was how much airtime Poldark’s copper mine would get. Surely Series 3 was not going to start as Series 2 had finished, with unspeakably boring relationship issues for all the major characters as if it’s some kind of ‘drama’.

Sadly, it’s looking like more of the same, with disappointment on all three fronts. He didn’t get his shirt off at all, we had to wait until we were 17:36 minutes into it before we got any mining whatsoever (even then, plot development around actual mining was extremely limited) and, yes, Ross is still torn between the two loves of his life: his wife, the lovely Demelza, and his ex Elizabeth, who was married to his Poldark’s cousin (before he drowned in a flooded mine shaft) and is now hitched (and with child) to the dastardly banker George Warleggan. In reality, Elizabeth doesn’t love George, which is quite understandable. She even tried to terminate the pregnancy by throwing herself down a staircase. All this led to was a premature birth and an heir to the Warleggan name. Or is it? The sprog may really be a Poldark, so expect more here.

There are also relationship issues for (classic posh totty) Caroline Penvenen and her man, the drippy Doctor Dwight Enys. They got married in secret so as not to upset her guardian Uncle Ray Penvenen, who thinks the doctor is punching way above his weight on the social standing front. Anyway, the uncle’s dying so that’s moot. Poor Dr Dwight didn’t even get the chance to consummate the marriage as he gets whisked away to help deliver Elizabeth’s baby. The actress who plays Caroline Penvenen is called Gabriella Zanna Vanessa Anstruther-Gough-Calthorpe; I found my notes on this a little difficult to decipher today, but that may have been due to the fact that I’d had to reach for a second bottle of wine to get through an hour of this. The next five episodes are going to be a struggle.

So, why no mining news? It’s clearly getting in the way of the bodice ripping, and I also suspect that all the early travails getting the mines up and running in difficult market conditions are behind them. It just goes to show that when prices are depressed and finance is difficult to get it’s worth persevering as things seemed to be going along just fine at Wheal Grace. Analysis of copper prices between 1760 and 1820 put together by Jim Taylor (see below) showed that it was only a matter of time before things started to turn around.

 

Source: John Symons 2003, RFC Ambrian

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Tue, 13 Jun 2017 14:59:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27964/in-the-news-poldark-27964.html
In the news: Uranium Seminar & KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27916/in-the-news-uranium-seminar-kefi-minerals-27916.html FROM THE BROKING DESK

Last week we hosted a Uranium Seminar in our London office. First up we had Adam Christopher from TradeTech take us though the market’s supply-demand fundamentals and pricing. Questions came thick and fast, with one of the most interesting points being that China is looking to build five years of inventory ahead of its ambitious reactor build-out plan (it is usually 2-3 years). The main implication from this is that near-mid-term demand may be stronger than some expect. It was also something of an eye-opener to learn that off-takers generally hold uranium inventory in its different states of processing (eg, U3O8 and UF6) and that each uranium product is specifically designed for each individual reactor.

After a quick lunch, Mike Young, CEO of Vimy Resources went through the company’s development of the Mulga Rock Project. This is a 76.8Mlb operation in Western Australia, targeting 3Mlb pa of U3O8 production over 17 years. One of the most exciting points he made was about the expected improvements from the November 2015 PFS’ costs and inputs. If these are achieved, the project could experience up to a 250% increase in its NPV10 at US$55/lb U3O8. Julian Tapp, the Executive Director at Vimy, also a caused a stir when he voiced his opinion that, in its quest to become the ‘OPEC of uranium’, Kazatomprom might have influenced its JV partners to cut production.

KEFI Minerals† has published its final 2016 financial results. The company is continuing to work towards completing the financing package for the construction of its Tulu Kapi Gold Project in Ethiopia, which it is aiming to commence this year. An updated DFS for the project was published in May 2017 that confirmed the project’s attractions, including production of 980,000oz of gold over a ten-year mine life, AISC of US$777/oz and estimated initial capital costs of US$161m. After some additional non-project related costs and deferrals of payments to contractors, the estimated net funding requirement is US$160m.

We reiterate our Buy rating and target price of 8.8p. Our target price is based on a risked SoTP NAV for the company and assumes a gold price of US$1,250/oz and a 0.5x P/NAV8 multiple for the Tulu Kapi Project. It also includes allowances for the underground potential at Tulu Kapi, other exploration assets and G&A costs. While the upside to the share price implied by our target price is already substantial, it is worth noting that the current price implies a 0.24x P/NAV to our unrisked NAV8 of 23p. We believe the stock offers a substantial re-rating opportunity once the Ethiopian state of emergency has ended and financing is secured.

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Tue, 06 Jun 2017 12:12:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27916/in-the-news-uranium-seminar-kefi-minerals-27916.html
In the news: Peak Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27875/in-the-news-peak-resources-27875.html FROM THE BROKING DESK

As regular readers of our Comment will know, we’re big fans of the ‘mobility metals’ theme. A story that we’ve been highlighting here is that of the Australian-listed Peak Resources††. The company has the Neodymium and Praseodymium (Nd/Pr) Ngualla Project in Tanzania, processing facility plans for Teesside in the UK and it’s recently been involved in a consortium to bid for the assets and property rights associated with taking the Mountain Pass Rare Earth Project in California out of administration. The auction is set for 14 June.

You may recall that Peak and Pala Investments are working with Tom Clarke’s US group ERP on this. They’re providing financial, technical and operational support in order to restart Mountain Pass. Peak’s COO Rocky Smith was previously Managing Director of Mountain Pass, so obviously Peak’s knowledge of the assets is pretty superb. It’s also worth noting that Mountain Pass has the same rare earth mineralogy as Peak’s Ngualla Project.

Nd/Pr are key components of permanent magnet drive motors. They’re now being used in 80% of electric vehicles, wind turbines, marine engines and a whole range of new electric mobility technology. The massive projected growth in demand is beginning to be seen in prices: these metals have risen over 11% YTD. We expect this to accelerate.

Global supply is currently dominated by Chinese producers. That’s not the ideal scenario for Western manufacturers over the long term. Thus, Peak is looking to position itself to take full advantage of this generational shift in technology and demand.

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Wed, 31 May 2017 11:23:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27875/in-the-news-peak-resources-27875.html
In the news: Base Resources, KEFI Minerals & Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27852/in-the-news-base-resources-kefi-minerals-amani-gold-27852.html FROM THE BROKING DESK

A quick reminder that we’ve released a couple of pieces this week. First we have Base Resources† — Enhanced Economics from Phase 2, 23 May 2017. The Kwale Phase 2 Project at its mineral sands operations in Kenya will increase throughput and offset declining grades. This will come with slightly higher capex, but this is more than offset by efficiency gains and the positive NPV impact of bringing production forward. With the end of the mine life brought forward on the basis of existing reserves, the likely life extension from exploration at Kwale has become even more significant. We increased our target price from A$0.43 to A$0.49 and maintained our Buy rating.

And second, to follow up the latest release from KEFI Minerals†, we put out KEFI Minerals — Tulu Kapi 2017 DFS Update, 25 May 2017. The company updated its DFS for the Tulu Kapi Gold Project in Ethiopia. Reserves and the mining schedule remain the same as our previous estimates, and cash costs are marginally lower. There were minor changes to capex too and an increased level of disclosure, plus the presentation of management’s upside case. Our target price has been revised downwards (from 10.5p to 8.8p) to reflect the new capex information and the latest FX rates. Our Buy rating was reiterated.

COMPANIES

Amani Gold

ASX:ANL  | A$0.038 | US$36m | Speculative Buy

More Drill Results from Kebigada

Amani Gold is continuing to work towards the completion of a maiden mineral resource estimate this June at its Kebigada deposit on its 55%-owned Giro Gold Project in the north-eastern DRC. It has just announced the results from a further three diamond drill holes and one reverse circulation hole. These were positive, and included 63m grading 2.40 g/t in Hole GRDD 025 in the west-central portion of the deposit. The drill programme for the resource estimate has been completed and the results from the final 11 (reverse circulation) holes are expected shortly.

We also note that the proposed A$25m investment by a Chinese investor (500m shares, and 250m options exercisable at A$0.07/share for two years) remains subject to the completion of due diligence by the investor (which was due to be completed yesterday) and to approval from Amani shareholders.

COMMENT: We have previously suggested that the maiden resource could contain around 2Moz of gold at a grade of around 2 g/t. There has been a string of apparently better-than-expected infill drill results, implying that there may be upside to the scale of our suggested resource. We continue to recommend the company as a Speculative Buy.
 

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Fri, 26 May 2017 09:06:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27852/in-the-news-base-resources-kefi-minerals-amani-gold-27852.html
In the news: KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27843/in-the-news-kefi-minerals-27843.html FROM THE BROKING DESK

To follow up the latest release from KEFI Minerals†, Jim Taylor has put out KEFI Minerals — Tulu Kapi 2017 DFS Update, 25 May 2017. The company updated its DFS for the Tulu Kapi Gold Project in Ethiopia. Reserves and the mining schedule remain the same as our previous estimates, and cash costs are marginally lower. There were minor changes to capex too and an increased level of disclosure, plus the presentation of management’s upside case. Our target price has been revised downwards to reflect the new capex information and the latest FX rates.

We reiterated our Buy rating, with our target price going from 10.5p to 8.8p. We are adjusting our target price based on additional capex not previously captured in our model and the latest FX rates. While the upside to the current share price implied by our target price remains substantial (+61%), it is worth noting that the current share price implies a 0.2x P/NAV to our unrisked NAV. We believe the stock offers a substantial re-rating opportunity once the Ethiopian state of emergency has ended and financing is secured.

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Thu, 25 May 2017 08:56:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27843/in-the-news-kefi-minerals-27843.html
In the news: Mineral Sands Prices, Base Resources & KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27836/in-the-news-mineral-sands-prices-base-resources-kefi-minerals-27836.html FROM THE BROKING DESK

We’ve some more very positive news from the mineral sands space. Whenever I talk with investors about mineral sands, their primary concern is invariably related to what will happen to pricing after the strong performance seen over the over the past year and a bit. Well, Iluka Resources, the market leader, has announced that it will increase its Zircon Reference Price by US$130/t to US$1,100/t effective 1 July 2017. Most of the recent price strength has come from ilmenite, while zircon and rutile have been treading water, so this development is extremely welcome and should reassure investors that the supply-demand equation in mineral sands remains very much in our favour.

This good news follows the announcement by Base Resources*† about its Kwale Phase 2 (KP2) approval. We highlighted this in Jim Taylor’s report Base Resources — Enhanced Economics from Phase 2, 23 May 2017, where he increased his price target the company.

In summary, the KP2 Project will increase throughput and offset declining grades. This will come with slightly higher capex, but this is more than offset by efficiency gains and the NPV impact of bringing production forward. With the end of the mine life brought forward on the basis of existing reserves, the likely life extension from exploration at Kwale has become even more significant.

Increasing target price from A$0.43 to A$0.49 and maintaining our Buy rating. Project NPV10 has increased from US$377m to US$404m. This assumes long-term mineral sands prices of US$180/t for ilmenite, US$1,050/t for rutile and US$1,150/t for zircon. The NAV comprises: an NPV10 for the Kwale Project of US$404m, US$20m for exploration at Kwale and a G&A adjustment of US$(31)m, giving an operational NAV of US$393m. After adjusting for net debt, this gives an NAV for Base of US$270m (as of end-March 2017). This is equivalent to A$0.49/share.

Upside risks to our target price. Pricing continues to surprise on the upside. Higher sales volumes next quarter would provide leverage to further gains. A maiden resource from the SW Sector (due 1QFY18) may add to mine life. For reference, a one-year mine life extension would provide a 13% net increase to our target price. Furthermore, the Kenyan general election in August 2017 is expected to ease community tension and allow exploration to resume on the NE Sector.

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Wed, 24 May 2017 11:00:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27836/in-the-news-mineral-sands-prices-base-resources-kefi-minerals-27836.html
In the news: Base Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27823/in-the-news-base-resources-27823.html COMPANIES

Base Resources*†

ASX:BSE | A$0.31 | US$169m | Buy | TP : A$0.43

Approves Kwale Phase 2, Optimising the Project and Enhancing Value

Base Resources has approved the ‘Kwale Phase 2’ (KP2) Project to expand the front-end of its operations in order to offset declining grades and maintain final product output. The company plans to increase the mining rate (and concentrator feed rate) by 50% during 2HCY18. This will allow the tonnage of heavy mineral concentrate product from the concentrator and the Mineral Separation Plant throughout and output to be maintained. As a result of bringing forward production, the current reserve is sufficient to support output until November 2022 (previously November 2024). Compared with its previous plans, the incremental capex to complete KP2 is estimated at US$13.1m.

COMMENT: There are a number of significant benefits expected as a result of the KP2 Project. In addition to bringing forward production, the expansion is expected to result in a 20% reduction in unit mining costs as a result of moving exclusively to hydraulic mining over dozer trap mining. It also implies an expected saving of US$60m in fixed costs.

The KP2 Project as described here is based on the ore reserve statement of June 2016 (103Mt grading 4.6% HM) and does not benefit from the addition of the material that has been outlined in the company’s exploration update of 10 May. An updated resource and reserve statement is planned to be completed in the September quarter. The KP2 Project would also increase the value of any reserve additions by bringing production forward by two years.

We should have a full report on this to follow.

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Tue, 23 May 2017 10:02:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27823/in-the-news-base-resources-27823.html
In the news: Uranium Sector/Seminar http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27811/in-the-news-uranium-sectorseminar-27811.html FROM THE BROKING DESK

The painfully slow Japanese nuclear reactor restart programme got a boost last week when Kansai Electric Power Company restarted Takahama #4. Back in late 2015 both Takahama #3 and #4 were restarted, but they were then taken offline again in March 2016 after a court injunction was issued reversing the restart on safety grounds. The Osaka High Court has now lifted that injunction, and with #3 also expected to restart next month, this will bring the number of operational reactors in Japan back to five. Not exactly many. Still, two more reactors are set to restart in the coming months and it’s hoped that a few more will be operational by early 2018. Of a fleet total of 54 reactors, 19 have now applied to restart.

That March 2016 injunction took a lot of momentum out of the restart programme and it remains controversial. While the Osaka High Court’s decision was somewhat buried by news on the same day that Toshiba had put Westinghouse US into bankruptcy protection, this could be the ray of light that the sector has been looking for. On the Westinghouse news, this might imply the end of the NuGen Moorside Project in Cumbria, although I read a report in The Sunday Times that the Chinese state-owned power company SNPTC is sniffing around this.

The uranium space is certainly confused right now. The developed world seems ambivalent about nuclear energy (Switzerland is set to phase out all its reactors), but the macro story of China continues to promise much for this beleaguered sector.

Given all these developments, a small Investor Seminar on the Uranium Market would be very useful. Incredibly, we’ll be hosting one of these events on Friday 2 June at our London office. This will start at 12:00 and will involve:

• a talk by Adam Christopher from TradeTech on the uranium market;

• a follow-up Q&A over a sandwich lunch; and

• a presentation by Mike Young, CEO of Vimy Resources.

We should be finished by 14:00.

TradeTech is the leading independent provider of uranium prices and nuclear fuel market information. Adam’s talk will analyse the uranium fuel cycle. Mike’s presentation on Vimy Resources will cover the company’s development of the 76.8Mlb Mulga Rock Project in Western Australia (targeting 3Mlb pa of U3O8 production over 17 years). The project was approved by the Western Australia Government in 1Q17. Vimy’s major shareholders include Resource Capital Funds, the Forrest Family and the Australian institutions Macquarie and Acorn Capital.

 

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Mon, 22 May 2017 10:33:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27811/in-the-news-uranium-sectorseminar-27811.html
In the news: Pallinghurst Resources/Gemfields & Mining Capital Cycle http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27799/in-the-news-pallinghurst-resourcesgemfields-mining-capital-cycle-27799.html FROM THE BROKING DESK

First thing on a Friday is a sneaky time to launch a takeover bid. However, this is exactly what Pallinghurst Resources (PGL SJ) has done, making an unsolicited offer to minority shareholders of Gemfields plc (GEM LN). Pallinghurst directly owns 47.09% of Gemfields shares and is offering 1.91 Pallinghurst share for each Gemfields share, valuing the company at £211.5m, equivalent to 38.5p/share (ie, a zero premium offer). Pallinghurst is looking to de-list Gemfields from AIM, although it’ll consider a premium listing on the main board.

This doesn’t look generous at all for a share that traded at 57.5p last December. Also, analysts’ target prices range between 69-90p. Still, the offer is said to be a ‘done deal’, although Gemfields’ Independent Board has advised shareholders not to act on the bid. It’s hard to see what minority shareholders can do about it, though; in reality, Pallinghurst controls around 75% of Gemfields through its co-investors, and the two largest minority shareholders have accepted the offer. The main co-investor is the South African entrepreneur Christo Wiese. I note that Ian Harebottle is in Jaipur at the moment conducting what looks to be a pretty successful emerald auction.

This is more a reflection of the situation at Pallinghurst than it is at Gemfields. As I understand it, a Pallinghurst shareholders’ vote is scheduled for September on whether to extend the life of the fund or wind it up. As most of the fund’s other holdings are underperforming Zimbabwe platinum assets, the Gemfields holding was by far its most successful investment.

In fact, the market has not liked the control Pallinghurst has maintained over Gemfields. The shares would probably have performed much better if there had been a larger free float and the merger of the Fabergé luxury goods company into Gemfields just served to confuse investors as there was very little visibility on how that brand was performing and how to value it. Wiese himself has been making wider acquisitions in the diamond space and is obviously looking to extend his influence over Gemfields. How this is all playing out behind closed doors is difficult to ascertain right now, and judging by the private nature of the parties involved I’m not convinced that it’ll be made clearer anytime soon.

I hope Gemfields does re-list on the main board. Newspaper editors and (perhaps) stockbroking morning note writers will be crying into their coffee this morning at the missed opportunities to highlight a story on the company with a picture of a pretty girl wearing some emeralds or rubies.

Finally, a quick reminder that we have a presentation available on where we are in the current mining capital cycle. Ian Rodger from our Corporate Finance team has put together some current quantitative and qualitative data on the mining industry and compared it with previous capital cycles. This can be viewed here.

Ian’s presentation focuses on:

• Exploration & development expenditure by region and by commodity

• Financial performance

• Market-related data

Data was benchmarked against previous cycles and a theoretical capital cycle ‘clock’. Ian used corroborating evidence to show where we are in this cycle and what we should expect over the rest of 2017 and beyond.

This suggested that there are exciting times ahead. If noon represents the ‘peak’ and six o’clock the ‘trough’ of a cycle, then by our reckoning we’re at around five o’clock. Thus, over 2017 and 2018 we would expect to see further M&A, cash takeovers, rising junior equity raises, more capex, increased exploration spending and further relative outperformance by the sector. Happy days!

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Fri, 19 May 2017 09:53:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27799/in-the-news-pallinghurst-resourcesgemfields-mining-capital-cycle-27799.html