column http://www.proactiveinvestors.co.uk Proactiveinvestors column RSS feed en Tue, 22 Aug 2017 02:45:41 +0100 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) 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.

]]>
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.

]]>
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%.

]]>
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.

]]>
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.

]]>
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.

 

]]>
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.

]]>
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.

]]>
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.

]]>
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.

]]>
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.

]]>
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.

]]>
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.

]]>
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

]]>
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.

]]>
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.

]]>
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. ‎

]]>
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

]]>
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.

]]>
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.

]]>
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.
 

]]>
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.

]]>
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.

]]>
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.

]]>
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.

 

]]>
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!

]]>
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
In the news: Mining Capital Cycle http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27784/in-the-news-mining-capital-cycle-27784.html FROM THE BROKING DESK

Everyone knows that the mining industry is a cyclical one. They probably also know Sir John Templeton’s adage that the four most expensive words in the English language are: “this time it’s different”. Taking this into account, it’s worth having a look at the capital cycle in relation to the mining industry to get some pointers as to where we are in the cycle and what we could expect to see happening from here. With the benefit of hindsight, the low point in equity valuations at the beginning of 2016 is looking increasingly like the bottom of the previous cycle.

We need to examine whether the recent pullback in valuations reflects a fundamental change in direction or is just a ‘pause that refreshes’. Ian Rodger from our Corporate Finance team has spent some time putting together some current quantitative and qualitative data on the mining industry and comparing it with what was seen in previous capital cycles. Initially this was purely for an in-house exercise, but we felt the results are interesting and worth sharing. The presentation can be viewed if you click here. This information, much of which has been presented before, comes from various sources, but we think that it’s helpful to combine it together.

Ian’s presentation focuses on:

• Exploration & development expenditure by region and by commodity — This looks at its success (or otherwise) and what the pipeline can tell us.

• Financial performance — Including capex, debt and cash-generation cycles.

• Market-related data — Reviewing valuation metrics, capital raisings and IPOs and M&A activity.

The data was benchmarked against previous cycles and a theoretical capital cycle ‘clock’. Here, Ian looked at piecing together corroborating evidence to show where we are in this cycle and what we should expect over the rest of 2017 and beyond.

Happily, this all suggests that there are more exciting times ahead. If noon represents the ‘peak’ and six o’clock the ‘trough’ of a cycle, by our reckoning we’re at five. If that’s right, 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 as a whole. Even bearing in mind Sir John Templeton’s wisdom, it’s definitely worth a look this time!

]]>
Thu, 18 May 2017 09:13:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27784/in-the-news-mining-capital-cycle-27784.html
In the news: Uranium Seminar & Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27774/in-the-news-uranium-seminar-amani-gold-27774.html FROM THE BROKING DESK

We’ll be hosting an Investor Seminar on the Uranium Market 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.

Please reply to this e-mail or let your RFC Ambrian contact know if you’d like to attend. We hope that you will be able to join us for what promises to be an informative discussion on an often misunderstood area of the mining market. Places are limited, so do come back to us as soon as possible.

 

COMPANIES

Amani Gold††

ASX:ANL | A$0.04 | US$38m | Speculative Buy

Completes Infill Drilling Programme at the Kebigada Deposit

Amani Gold has reported that it has completed the infill drilling programme at the Kebigada deposit on its 55%-owned Giro Gold Project in the north-east of the DRC. Nearly 11,000m were drilled in 48 RC holes (with an average length of 126m) and 13 diamond drill holes (average length of 283m). Assay results in this announcement came from seven RC holes and two DD holes, including:

• Hole RC230 — Another good intersection from near the interpreted western boundary of the deposit, returning 46m grading 3.1 g/t, ending in mineralisation. A diamond drill hole has been planned to test the depth extension of this high-grade zone and also provide further information on the zone’s structural controls.

• Hole RC233 — This indicates that the north-east of the deposit remains open to the east and at depth and returned a long interval of 106m grading 1.24 g/t, including 15m @ 2.44g/t.

The company plans to report the remaining holes from the programme within the next two weeks and the maiden mineral resource estimate remains on track for publication by the end of June 2017. Two further diamond drill holes are underway, although their results are expected to arrive too late to be included in the estimate. These are to test the extensions and structural controls on mineralisation under Hole RC230 at the south-western end of Line 400N and the depth potential of an interpreted high-grade shoot on Line 1200N, towards the northern end of the deposit.

COMMENT: Looking beyond June’s planned resource statement, the company is planning a 3,500m programme of shallow, scout RC drilling to test geochemical targets around Kebigada, which have the potential to provide satellite feed to any future development.

We note that due diligence by a Hong Kong-based investment company relating to its potential A$25m equity investment (500m shares at A$0.05/share and 250m options exercisable at A$0.07/share for two years) remains ongoing and is planned to be completed by Thursday 25 May.

]]>
Wed, 17 May 2017 09:01:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27774/in-the-news-uranium-seminar-amani-gold-27774.html
In the news: Uranium http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27763/in-the-news-uranium-27763.html FROM THE BROKING DESK

We will be hosting an Investor Seminar on the Uranium Market on Friday 2 June at our 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 aim to be finished by 14:00.

TradeTech is the leading independent provider of uranium prices and nuclear fuel market information. It is widely recognised for its expertise in trading activities and its comprehensive knowledge of the technical, economic and political factors affecting the nuclear fuel industry. Adam’s talk will analyse the uranium fuel cycle, including the spot and contract markets, contracting strategies by global utilities, key customers and suppliers, the Kazakhstan ‘OPEC of U’ and the secondary market.

Mike Young will follow that with a presentation on Vimy Resources. The company’s focus is on the development of the 76.8Mlb Mulga Rock Project in Western Australia, which is targeting 3Mlb pa of U3O8 production across 17 years. Vimy completed a DFS in 2016, with approval of the project confirmed by the new Western Australia Government in 1Q17. The company has begun engagement with banks in regard to project financing. Vimy’s major shareholders include mining specialists Resource Capital Funds, the Forrest Family and the Australian institutions Macquarie and Acorn Capital.

Please reply to this e-mail or let your RFC Ambrian contact know if you’d like to attend. We hope that you will be able to join us for what promises to be an informative discussion on a much talked about — but often misunderstood — sector of the mining market. Places are limited, so do let us know of your interest as soon as possible.

]]>
Tue, 16 May 2017 09:51:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27763/in-the-news-uranium-27763.html
In the news: SolGold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27752/in-the-news-solgold-27752.html FROM THE BROKING DESK

We recently met up with Nick Mather from SolGold (LON:SOLG) when he was in London. He shared with us some of the details on the large copper-gold porphyry that the company has been drilling on its Cascabel Project in Ecuador (85%), as well as giving us an update on the broader land package that it holds in the country. Project-wide geophysics and geochemical surveys over the project area have defined 14 targets, with all of the drilling undertaken to date having been focused on one — Alpala.

Results from Alpala have included Hole CSD-15-012 (announced in October 2015): 1.2% CuEq (0.67% Cu and 0.63 g/t Au) over 1,312m from 128m. Alpala is a significant copper-gold porphyry deposit that is open in a number of directions. Three rigs are currently on site, with plans to increase this to ten by this time next year. Alpala is formed of a cluster of deposits along a mineralised corridor, for which management increased its estimated length to 1,300m in April.

The scale of this deposit has put SolGold on the radar of the majors, with Newcrest Mining holding a 10% stake and Guyana Goldfields 7%. Similarly, its progress has not gone unrecognised by the market, with the share price having increased by over 11x during the last 12 months. The company now has a market cap of US$820m.

Management expects to continue drilling, with the aim of publishing a maiden resource at the end of 2017 and a PEA in mid-to-late 2018. The company plans to drill test the next target, Aguinaga (3km from Alpala), in July this year, with others to follow. SolGold also continues to build its portfolio of properties in the country. Given the scale of the discovery and the extent of exploration upside in what looks like a new district, we expect the stock to continue to perform strongly.

]]>
Mon, 15 May 2017 11:48:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27752/in-the-news-solgold-27752.html
In the news: Base Resources & Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27720/in-the-news-base-resources-amani-gold-27720.html COMPANIES

Base Resources*†

ASX:BSE | A$0.32 | US$178m | Buy | TP : A$0.43

Exploration Programme Confirms Resource Additions at Kwale

Base Resources has provided an update on the infill and edge definition drilling programme at the South Dune at its Kwale mineral sands operations in southern Kenya. Exploration was reported to have discovered a discrete area of mineralisation to the east of the South Dune, over an area of 1,000m by 500m. The company confirmed that an updated mineral resource estimate is on track for completion for the September quarter.

COMMENT: Together with the first update on the exploration programme (announced on 2 March 2017), this confirms that the programme has discovered additional mineralisation in a number of locations in close proximity to the existing Kwale operations that could provide a meaningful boost to resources. However, as noted by the company, further work is required, including more information on the mineral assemblage, before the resource can be finalised in the September quarter, as planned. The areas in which additional material has been discovered include:

• the 1,000m by 500m area outlined to the east of the South Dune referred to this announcement. This was reported to have a lower overall total heavy mineral (THM) grade compared with the South Dune, but a higher proportion of high value rutile; 

• a 950m by up to 700m extension of the South Dune to the south-west. THM grades were generally similar to those of the South Dune and visually of a similar mineral assemblage;

• a 1,240m by 480m dunal-heavy mineral sand deposit called Mafisini that is a strike extension of the south-western extension of the South Dune. Again, this material appears to be similar to that of the South Dune; and

• dunal material in the North East Sector, to the east of the Central Dune. However, no additional work has been undertaken in this area since January, pending securing access, which the company hopes will be made easier after the planned general election in August.

These results show the potential to add resources at grades similar to the South Dune, where reserve grades are 3.8% HM; should this lead to an extension of the project’s mine life, significant value would be added. For reference, adding one year to the mine life of South Dune adds ~10% upside to our current target price, assuming grades and costs remain constant.

We are maintaining our Buy recommendation and A$0.43 target price, but we note the upside potential these latest results show. For details on the company’s latest financial results, please see: Base Resources — March Quarterly Activities Report, 12 April 2017.

 

Increasing reserve base would have a significant impact on valuation — At the end of 2016 we estimate that reserves were approximately 100Mt grading 4.5% THM. At the current mining rate of 10Mtpa, this would be sufficient to support the operation for ten years until 2026. However, the company is undertaking the Kwale Phase 2 project studies into the expansion of the mining and mineral concentrator to compensate for the planned decline in grades, with a view to maintaining the production of heavy minerals concentrate and mineral sands products in the future. Although this is the subject of detailed work currently, we suggest that given the current mined grade of around 7% THM and the average grade in the South Dune of 3.8% THM, this could involve an increase in throughput of 75-100% above current levels and a reduction in the mine life to around six years, depending on when the expansion is completed. ‎

Exploration provides upside after having achieved steady-state production — In 2015 an airborne geophysics programme was conducted over the south coast region of Kenya from Mombasa to the Tanzanian border. This identified exploration targets that were subsequently confirmed through ground reconnaissance. In June 2016 Base announced that it had been granted exploration tenure over a significantly expanded land area surrounding its existing Kwale operations, along with plans for its first exploration programme since commencing production. The announcement marked a shift towards extending the mine life at Kwale after having achieved steady-state production.

Reported drill holes similar to South Dune — The drill programme was aimed at exploration, infill drilling and edge definition at the South Dune deposit. The current operation is based on the Central Dune, where the resource grade is 5.5% HM and reserves 5.8% HM. At the South Dune, resource and reserve grades are 3.5% HM and 3.8% respectively.

Newly-identified 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.

South Dune dimensions expanded by exploration — Exploration drilling increased the dimensions of the South Dune deposit, adding 950m to the south end at an average width of 700m. Notable results include the previously-announced Line 7 cross-section, showing 23m at 5.2% HM, 23m at 4.4% HM and 21m at 4.4% HM.

NE Sector shows longer-term potential, but has been suspended pending 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 have arisen as a result of increased political posturing ahead of the August 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.

South Dune infill and edge definition — As this report shows, edge-definition drilling along the eastern margin of the South Dune has discovered discrete lower-grade mineralisation east of the 5km-long South Dune, with mineralisation over an area measuring 1,000m by 500m.

Target price — We are maintaining our Buy rating and target price of A$0.43. We note, however, that the South Dune continues to extend and Mafisini offers additional resource potential. An extension of mine life beyond 2024 could potentially add significant value.

 

Amani Gold††

ASX:ANL  | A$0.04 | US$38m | Speculative Buy

Raises A$25m at A$0.05/share from Cornerstone Investor

Amani Gold has announced that it has signed a non-binding MOU with Luck Winner Investments Ltd (LW) to raise A$25m through the issue of 500m shares at A$0.05/share and 250m options (exercisable at A$0.07/share for two years). Subject to completion, LW would have a 28% interest in Amani and the right to nominate board members. The proceeds are to be used to fund work towards the completion of pre-feasibility and feasibility study work at Kebigada, exploration work on the broader Giro Project area in general and, subject to the completion of its acquisition, exploration on the adjoining Tendao Project.

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.

The transaction remains subject to the completion of due diligence by LW (it has already undertaken a site visit) before 25 May 2017 and also to the approval of Amani shareholders.

COMMENT: Given the substantial scale and 25% premium associated with this proposed placement, we obviously consider it to be a very positive development. However, we note that it remains subject to due diligence by LW, which is to be completed within just over two weeks.

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

We look forward to the completion of the maiden resource estimate for the project before the end of 2Q17. We have previously suggested that the company could have outlined a resource of approximately 2Moz at a grade of around 2.0 g/t. We continue to recommend the company as a Speculative Buy.

 

Giro Gold Project background — Amani is focused on advancing its 55%-owned Giro Gold Project. The majority of activity on the licence has focused on the Kebigada Zone, where drilling of a 2km by 900m soil anomaly has outlined mineralisation over 1,400m by 400m to depths of more than 150m. 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. The focus on the Giro Project has now returned to the completion of the maiden resource at the Kebigada Zone, and also the completion of target generation across the project area.

Infill drilling being completed to allow completion of maiden resource statement — The RC infill drilling programme (of around 4,750m in 38 holes) is designed to confirm the continuity of mineralisation on section and along-strike by reducing line spacing from typically 100m to 50m over the main mineralised zone. Infilling commenced in mid-February on the recommendation of the resource consultant in order to define the high-grade structures more accurately and increase confidence in the resource model. This is aimed to provide improved separation of the high- and lower-grade material in the model and give a better reflection of grade and tonnage at different cut-off grades. A diamond drilling programme (3,500m; 10 hole) is also being undertaken, half of which is to confirm the continuity of mineralisation to depths of over 200m vertically. On completion of the infilling programme, a 3,500m shallow scout RC drilling programme will commence to follow up a number of high-grade soil anomalies near the Kebigada Zone to test their potential to become satellite deposits.

Amani’s current market cap is A$50m/US$38m — The company has 1,257m shares outstanding, with 434m options exercisable at A$0.05/share until July 2017 and 52m options exercisable at prices from A$0.05/share to A$0.10/share expiring from November 2019 to December 2020. The company also has 9m performance rights outstanding. After cash outflows during the March quarter of A$2.6m, cash at the end of the period were A$3.4m.

]]>
Wed, 10 May 2017 09:50:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27720/in-the-news-base-resources-amani-gold-27720.html
In the news: KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27691/in-the-news-kefi-minerals-27691.html COMPANIES

KEFI MINERALS†

LON:KEFI | 5.75p | US$25m | Buy | TP : 10.5p

Agreement on Ownership Structure with Ethiopian Government

KEFI Minerals has announced that, based on the latest project cost estimates, the Government of Ethiopia will receive 20% of Tulu Kapi Gold Mines Share Company Limited (TKM) in exchange for spending US$20m on project infrastructure, as well as a 5% free carry. This would leave KEFI with a 75% ownership stake, in line with our previously-stated expectation. The final ownership stakes remain subject to change should KEFI’s contribution to initial capex differ from those projected.

COMMENT: This agreement adds to a series of positive developments with the Ethiopian Government. KEFI recently announced that resettlement arrangements had been triggered for the Tulu Kapi community and that the first tranche of the VAT refund had been received. While the final compensation amounts remain outstanding, the property survey will form the basis of determining these levels. These announcements show material progress, as well as a strong working relationship with the government.

Combined with the ruling from the Federal Supreme Court of Ethiopia that reduced a damage claim from US$12.0m to US$0.6m, the attractiveness of KEFI has materially improved over the last two weeks. The key issues remaining are the financing package and the Ethiopian State of Emergency, which we believe are closely related.

We maintain our Buy rating on KEFI and target price of 10.5p.

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 — 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, with estimated average life-of-mine AISC at US$779/oz. Including contingencies and overheads, the total funding requirement is US$155m, equivalent to an attractive capital intensity of US$158/oz of life-of-mine production. The project is planned to produce 115,000oz pa on average over the first eight years of operation. Assuming a gold price of US$1,200/oz, management estimates that the open-pit project has an NPV8 of US$77m and an IRR of 47%.

The government’s 25% interest remains subject to KEFI’s contribution to initial capex — The Government of Ethiopia is receiving an equity stake in the project based on its contribution of costs incurred to reach the production stage. Based on the government’s 20% interest, the total costs to bring the project to production are implied to be US$95m, with US$75m being KEFI’s share. Since the company has previously stated it intends to raise US$20m through equity or mezzanine financing, we take this to mean that KEFI has spent US$55m and has US$20m remaining. We have assumed that, should KEFI raise corporate-level mezzanine debt, the related cash contributed to the project would go towards KEFI’s share of costs, while any project-level financing would not.

The company is working towards commencing construction of the project in 2H17 — Key items remaining to complete the process include:

• Resettlement plan and associated compensation — On 26 April 2017 KEFI announced that, along with the Government of Ethiopia, it had triggered the resettlement arrangements for the Tulu Kapi community. The company had previously re-confirmed with the government the methodology for determining the compensation for resettlement in order to ensure the compliance of all parties with Ethiopian law and World Bank guidelines. The property survey now underway will go towards finalising the compensation amounts to be paid for resettlement.

• Project funding, currently estimated at US$155m, is a focus for KEFI — The company has been working with potential co-lenders to satisfy their due diligence requirements. KEFI previously announced that it would be able to announce a co-lender to coincide with the scheduled end of the Ethiopian State of Emergency, but this has since been extended. Although the final make up of project financing will not be known until the package has been finalised, recent indications are that the company has been seeking finance from a number of sources, such as:

o The government — It will invest US$20m into the project in return for increasing its direct interest from 5% to up to 25%, with the final level dependent on KEFI’s equity contribution. The government is contributing US$20m in the form of funding project infrastructure requirements, including road and power lines.

o Senior secured debt of ~US$100m — Negotiations with the Development Bank of Ethiopia were recently reported to be at an advanced stage. The company is engaging with other potential lenders to the project, many of whom are already active in the region.

o Mezzanine or equity finance of ~US$20m — To be provided through some combination of mezzanine debt, off-take finance and equity.

o Cost overrun facility of ~US$15m.

We continue to rate the shares as a Buy and have a target price (TP) of 10.5p — Our TP is based on a risked sum-of-the-parts valuation and the pre-consolidation share count, and assumes a long-term gold price of US$1,350/oz. It includes the Tulu Kapi Project on the basis of an NPV8 to which we have applied a risk multiple of 0.5x. We have added values for potential from the underground development of Tulu Kapi and from the company’s Jibal Qutman Gold Exploration Project in Saudi Arabia, and have adjusted for corporate G&A and net cash.

]]>
Fri, 05 May 2017 11:31:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27691/in-the-news-kefi-minerals-27691.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27677/in-the-news-amani-gold-27677.html COMPANIES

Amani Gold††

ASX:ANL | A$0.039 | US$37m | Speculative Buy

Maiden Mineral Resource Estimate for Kebigada Zone set for Delivery by end-June

Amani Gold has announced assay results from a further two diamond drill holes and nine RC holes from an ongoing infill drilling programme on the Kebigada Zone at its 55%-owned Giro Gold Project in the north-east of the DRC.

The programme (involving around 38 RC holes and 12 diamond drill holes) commenced in February and is planned to be completed in early May, with assays to be reported by the end of May and a maiden mineral resource estimate for the Kebigada Zone to be completed by the end of June.

COMMENT: Most of the holes drilled in this programme are confirmatory by nature, located within the known mineralised envelope and unlikely to change the overall potential of the resource substantially. However, of particular note are a number of holes that have confirmed and extended a zone of high-grade mineralisation to the south. These holes include RC217, which returned 36m @ 6.6 g/t from 14m and 65m @ 7.7 g/t from 74m. This zone remains open at depth and will be followed up with a diamond drill hole to extend mineralisation down-dip, helping to test for potentially mineable underground resources.

We look forward to the completion of the maiden resource estimate for the project, for which we have previously suggested that the company could have outlined a resource of approximately 2Moz at a grade of around 2.0 g/t. We continue to recommend the company as a Speculative Buy.

 

Giro Gold Project background — Amani is focused on advancing its 55%-owned Giro Gold Project. The majority of activity on the licence has focused on the Kebigada Zone, where drilling of a 2km by 900m soil anomaly has outlined mineralisation over 1,400m by 400m to depths of more than 150m. 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. The focus on the Giro Project has now returned to the completion of the maiden resource at the Kebigada Zone, and also the completion of target generation across the project area.

Infill drilling being completed to allow completion of maiden resource statement — The RC infill drilling programme (of around 4,750m in 38 holes) is designed to confirm the continuity of mineralisation on section and along-strike by reducing line spacing from typically 100m to 50m over the main mineralised zone. Infilling commenced in mid-February on the recommendation of the resource consultant in order to define the high-grade structures more accurately and increase confidence in the resource model. This is aimed to provide improved separation of the high- and lower-grade material in the model and give a better reflection of grade and tonnage at different cut-off grades. A (3,500m; 10 hole) diamond drilling programme is also being undertaken, half of which is to confirm the continuity of mineralisation to depths of over 200m vertically. On completion of the infilling programme, a 3,500m shallow scout RC drilling programme will commence to follow up a number of high-grade soil anomalies near the Kebigada Zone to test their potential to become satellite deposits.

Amani’s current market cap is A$49m/US$37m — The company has 1,257m shares outstanding, with 434m options exercisable at A$0.05/share until July 2017 and 52m options exercisable at prices from A$0.05/share to A$0.10/share expiring from November 2019 to December 2020. The company also has 9m performance rights outstanding. After cash outflows during the March quarter of A$2.6m, cash at the end of the period were A$3.4m.

]]>
Thu, 04 May 2017 09:46:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27677/in-the-news-amani-gold-27677.html
In the news: Metminco & Weatherly International http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27656/in-the-news-metminco-weatherly-international-27656.html COMPANIES

Metminco*†

ASX:MNC | A¢6.2 | US$6m | Speculative Buy

1Q17 Report — Ongoing Miraflores Feasibility Study due for Completion in 3Q17

Metminco’s March quarterly report provided an update on progress towards the completion of the feasibility study for its 100%-owned Miraflores Gold Project in Colombia. The current project milestones include:

• 2Q17 — Approval of commencement of underground development

• May 2017 — 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

COMMENT: We believe that the completed feasibility study has the potential to firm up the value proposition at Miraflores and that the company’s interest in the Los Calatos Project represents real option value in a rising copper price environment. 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.

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 (previous guidance was that it would be completed by the end of June 2017). The project’s use of underground mining and dry stacked tailings limits the surface footprint of the project, a factor that is hoped to help speed the EIA process.

CD Capital has a 51% interest in Los Calatos — In October 2017 CD Capital Fund invested US$16m directly into the Los Calatos Project in return for a 51% interest. CD Capital has the option to invest a further US$14.5m in return for increasing its interest by 14% to 65%. It can also increase its interest to 70% by investing a further US$14.5m into the project. The total investment envisaged under the agreement is more than sufficient to cover expected expenditures on both the pre-feasibility (~US$15m) and feasibility (~US$25m) studies.

As per the September 2015 Strategic Mining Study, Los Calatos has the potential to deliver 50,000tpa of copper for 22 years at AISC of USS$1.45/lb — The Los Calatos Project comprises a mineable resource inventory of 134Mt at 0.89% Cu and 0.036% Mo, supporting a long-life 6.5Mtpa underground mining operation. With initial capex of US$655m, the capital intensity is reasonable at US$13,100/tpa of capacity. At a copper price of US$3.00/lb and a molybdenum price of US$11.16/lb, the post-tax NPV8 was US$447m with an IRR of 17%. These returns indicate the project’s development potential in a recovering copper price environment.

Net decrease in cash before financing was A$1.9m in the quarter — The company had approximately A$10,000 in cash at the end of the March quarter. In April it received A$0.3m from the issuance of a convertible loan to Redfield Asset Management and expects to receive the remaining A$0.45m by mid-May. The company also receives funding monthly from the estimated A$2.6m equity facility with Lanstead Capital.

 

WEATHERLY INTERNATIONAL*†

LON:WTI | 0.40p | US$5m | Speculative Buy | TP : 1.3p

Quarterly Update & Debt Facilities Rescheduled

Weatherly International announced last week an update for the quarter ended 31 March 2017. Production was 3,236t of copper cathode, 24% below nameplate capacity. This was in line with the announcement made on 6 April 2017, where management highlighted that slower-than-expected recoveries for mixed oxide/sulphide ore caused production to fall and above-average rainfall prevented it from offsetting this with accelerated stacking rates.

In the prior two quarters management was able to use higher stacking rates to compensate for slower recoveries: in the September quarter there were 670,000t of ore stacked and in the December quarter that figure rose to 702,000t. In the latest quarter we saw the impact of above-average rainfall reducing the stacking rate to 563,000t. The lower stacking rate, combined with a slight drop in ore stacked grade (0.86% compared to 0.88-0.89% for the past three quarters), caused copper cathode produced to fall to 3,236t, which represented a 28% decline in from the 4,496t produced in the December quarter. The lower volume produced caused C1 costs to increase to US$5,907/t from US$4,222/t in the prior quarter.

Management had previously warned about its inability to meet loan obligations, and the reported operational issues did nothing to help the situation. This led Weatherly also to announce that it has deferred the payment of US$17.6m owing to Orion Mine Finance under Facilities B, C and D from 30 April 2017 to 30 June 2017. For reference, cashflow from operations for the six months ended 31 December 2016 was US$3.4m. This deferral highlights the ongoing support and reliance on Orion. The last debt repayment to Orion was when Facility A was repaid in December 2014.

As part of the terms of the deferral, Facility B has been rescheduled from 13 payments to 12, with the final repayment remaining unchanged at 29 February 2020. Furthermore, Orion will have the right to purchase 700t/month of cathode from 1 May 2017 to 30 April 2018 at a price of US$6,000/t. Weatherly also announced that Orion assisted in securing new hedges for 550t/month at US$6,000/t. For the six months ending 30 June 2017, Weatherly will not have exposure to a copper price over US$6,000/t.

COMMENT: Both the operational issues and debt deferral were expected. Orion’s new option on copper production is also in line with the fees taken previously from debt deferrals. This approach continues to constrain Weatherly’s upside exposure to the price of copper; we estimate that ~20% of copper cathode output for the six months ending 31 December 2017 will offer price exposure beyond US$6,000/t. For the 6 months ending 30 June 2018, that amount is currently ~70%, but we expect that share to fall on assumed hedges and options on future production. Debt deferrals are also expected to continue.

]]>
Tue, 02 May 2017 11:00:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27656/in-the-news-metminco-weatherly-international-27656.html
In the news: Mariana Resources, White Rock Minerals, Peak Resources and KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27621/in-the-news-mariana-resources-white-rock-minerals-peak-resources-and-kefi-minerals-27621.html FROM THE BROKING DESK

We have a slew of announcements out today from Mariana Resources (MARL LN), Peak Resources (PEK AU). KEFI Minerals (KEFI LN) and White Rock Minerals (WRM AU).

Full comments from Jim are below, but in summary all the announcements are having a significant impact on share prices this morning.

Mariana Resources have reached an agreement with Sandstorm Gold (SAND US) to be taken over. Sandstorm, which held 7% of Mariana stock, will pay 28.75p and give 0.2573 new Sandstorm shares per Mariana share. On Sandstorm’s closing price of US$4.04/share last night, this values Mariana at around 110p/share, a premium of around 85% and almost 90% to the 20-day VWAP. Mariana shares are trading at around 88p in trading as of time of writing. The combined group will have a portfolio of 155 streams and royalties including 20 producing, 23 development-stage, 26 advanced exploration-stage and 86 exploration-stage assets spread across the world including the very exciting 30% JV interest in the high-grade Hot Maden project in Turkey.

White Rock Minerals, which is advancing the Red Mountain Zinc-Silver-Lead-Gold project in Alaska have released a very exciting maiden JORC resource of 16.9Mt at 8.9% zinc equivalent (ZnE), containing 1.5Mt of ZnE.

Peak Resources, which RFC Ambrian roadshowed in London and Switzerland last week has announced that it is in discussions with ERP Strategic Minerals concerning their bid to purchase assets and property rights associated with the Mountain Pass Rare Earth Project  in California from administration. Peak and Pala Investments are talking to ERP with a view to provide financial, technical and operational support to restart Mountain Pass. Peak’s COO Rocky Smith was previously Managing Director of Mountain Pass so clearly the knowledge within Peak of the assets is superb. We also note that Mountain Pass has the same rare earth mineralogy as Peak’s Ngualla Neodymium and Praseodymium (Nd/Pr) project in Tanzania.

KEFI made a short announcement this morning saying it has begun a property survey and is undertaking data updates and new land preparation with respect to the resettlement of the Tulu Kapi community. This is welcome news for investors and KEFI are hosting a big site visit for investors, financial groups and the government at site at the end of this week.

 

COMPANIES

MARIANA RESOURCES†

LON:MARL | £0.595 | US$96m

Mariana Agrees to Takeover Offer From Sandstorm Gold

Mariana Resources has announced that it has reached an agreement with Sandstorm Gold whereby Sandstorm would acquire Mariana through a split cash/stock deal. Based on closing prices on 25 April 2017, the deal is valued at £1.0971/share, representing an 84% premium. The offer is comprised of £0.2875/share in cash, with the balance consisting of 0.2573 shares of Sandstorm.

Mariana’s Independent Directors have unanimously approved the deal and intend to recommend that Mariana’s Shareholders vote in favour. Shareholders that have irrevocably undertaken to vote in favour include: AngloGold Ashanti (5.0m shares), Australian Investors Pty Ltd (3.8m shares), the Independent Directors (0.9m shares), COO Eric Roth (0.6m shares), and CEO Glen Parsons (0.3m shares) representing a combined 8% of the total shares outstanding.

COMMENT: The pace of development at the Hot Maden Project, in which Mariana holds a non-operating, minority position, has generated substantial returns for Mariana’s investors and more milestones remain. However, a premium of 84% reflects the need to pay for this upside. Furthermore, the liquidity being offered is significant for inventors who have already seen significant gains with the stock and are looking to crystallise. While cash represents only 26% of the deal, the Sandstorm stock investors would receive has been more than 16x as liquid as Mariana’s shares in US$ terms over the past 3 months.

We also note that Mariana’s minority position limits the number of potential bidders for this project.

 

Proposed structure provides significant premium and liquidity — The deal is valued at £1.0971/share based on the closing price of US$4.04 per Sandstorm share and a 0.7788 USDGBP exchange rate on 25 April 2017. This represents an 84% premium to Mariana’s unaffected share price the day prior to announcement, and 88% to the 20-day VWAP. The cash consideration is £0.2875/share, representing 26% of the total deal value. The larger portion of the consideration is comprised of shares of Sandstorm, which would result in Mariana shareholders owning ~19% of the combined entity. Over the past 3 months, Sandstorm’s share price has been 5.3x higher than Mariana’s and was 5.2x higher on 25 April 2017. On a 12 month basis, Mariana’s stock price has surged over 150% while Sandstorm has gained 5%, reflecting the rapid pace of development at the Hot Maden project. Liquidity in Sandstorm shares (US and Canada, combined) has been US$10.3m over the past 3 months, compared to US$0.6m over the same period for Mariana’s shares (London and Canada, combined), which highlights the increased liquidity provided by the stock component of the proposed transaction.

Sandstorm is looking to rationalise its interests in Mariana and Hot Maden — Sandstorm is Mariana’s largest shareholder, holding 9.0m shares representing a 7.0% ownership stake. They also have a 2.0% NSR in the Hot Maden Project and are well familiar with the project’s details. Sandstorm has stated that by acquiring Mariana, it will be able to negotiate a deal to convert the consolidated position in Hot Maden into a gold stream. The resulting structure would provide greater alignment with Sandstorm’s strategy of acquiring streams and royalties.

Mariana’s flagship asset is the Hot Maden Project in Turkey — Hot Maden is a gold-copper project in north-eastern Turkey. It is a joint venture, of which Mariana owns 30%. The JV partner owning 70% is Turkey-based Lidya Madencilik Sanayi ve Ticaret AS (Lidya), the mining arm of Çalık Holding, a private Turkish conglomerate with operations in energy, construction, mining, textile, finance and telecommunications. The company’s 30% interest was acquired as part of its acquisition of Aegean Metals Group (announced in September 2014). Drilling commenced in December 2014 and was performed (and fully funded) by Lidya in order to earn its 70% interest.

Very low capital intensity is key to driving IRR — Upfront capex is expected to be US$169m, which equates to US$51/oz AuEq over life-of-mine. Total capex (upfront + sustaining) is expected to be US$261m, which equates to US$79/oz AuEq life-of-mine.

Low-cost underground mining adds to the positive economics — The mine plan assumed in the PEA is an all underground operation using transverse and longitudinal long-hole open stoping. The base rate for mining and processing is 1.0Mtpa, with an assumed mineable quantity of 7Mt at 11 g/t gold and 1.9% Cu over a nine-year mine life. Mining costs are assumed to be low at US$31.05/t.

The gravity and flotation process delivers high recoveries — Metallurgical testing to date has been done through flotation and concentration, and indicated high recoveries of both copper and silver. The assumed recoveries vary based on grade, but the life-of-mine weighted averages are 88% Au and 90% Cu. The flow sheet for the PEA assumes the production of one standard copper-gold concentrate, and a second gold-bearing pyrite concentrate for sale to smelters. Processing these concentrates is assumed to cost US$15.13/t.

Economics highlight a low-cost operation with a very high NPV — In calculating the NPV, the company assumed a gold price of US$1,250/oz and a copper price of US$2.75/lb. Royalties on the property include a 2.6% state royalty and a 2% NSR to pay to Sandstorm. The PEA highlights an NPV of US$1.4bn using an 8% discount rate, and an IRR of 153%.

The fast pace of development is expected to continue — Lidya and Mariana progressed the asset from early drill results to PEA in 20 months, and are expected to produce a PFS by 3Q17. The PFS is expected to consider the economics of the hanging-wall zinc zone (2.8Mt at 4.0% Zn), which was not considered in the PEA. The study will be conducted concurrently with a 20,000m drill programme planned for this year, including exploration drilling aimed at the discovery of new resources south of the Main Zone in the area of the old Russian mine.

 

WHITE ROCK MINERALS***

ASX:WRM  | A¢1.6 | US$9.7m

High Quality Maiden JORC Resource Estimate at Red Mountain Zinc/Silver Project in Alaska

White Rock Minerals has announced a maiden JORC compliant inferred resource estimate for its Red Mountain Zinc-Silver-Lead-Gold Project in Alaska of 16.9Mt grading 8.9% zinc equivalent (ZnE). At a higher cutoff of 3% Zn, the deposit contains 9.1Mt at 12.9% ZnE.

COMMENT: The re-evaluation of historical exploration work at Red Mountain since its acquisition in April 2016 has paid off with the delivery of a headline maiden JORC compliant resource containing 1.5Mt of ZnE (with zinc representing approximately 50% of the contained value on a recovery adjusted basis). At the elevated 3% cutoff, resources contain 1.2Mt of ZnE at an impressive grade of 12.9% ZnE.

The resources remain open and 30 targets have been identified for follow up. The company now plans to commence fieldwork on the highest priority targets near to Dry Creek and West Tundra Flats including geochemical sampling and ground geophysics to define drill targets for follow-up.

White Rock Minerals is also advancing Mount Carrington Au/Ag Project in New South Wales, where it plans to complete a DFS in Q1 2018.

 

Red Mountain Zinc Silver Project resource contains 1.5Mt of ZnE — The Red Mountain project area covers a number of known VMS deposits, including Dry Creek and West Tundra Flats, at which the majority of historical work had been undertaken. The project now covers an area of 143sqkm in south eastern Alaska. Gravel roads extend to within 40 miles of the project area. Grid power and rail transport to a port are 50 miles from the project area.

Mineralisation was discovered at Red Mountain in 1975 and exploration was conducted by a number of companies from 1976 to 1983. The majority of historical drilling, however, was undertaken by Grayd Resources from 1996 to 1998 and by Atna Resources in 1999.

Having exercised an option to acquire the project in April 2016, the company compiled all historical exploration data. Resource consultants completed a review of the historical drilling database (127 holes for 19,180 metres) in February 2017 and recommended that a selection of intersections from the deposits and from each of the historical work programs be re-sampled and assayed. This program was completed in March 2017 and the assays received in April 2017. As a consequence of the analysis of the results of this program, the consultants advised that the historical assay database could be used to calculate a JORC (2012) inferred resource.

Mineralisation is typical of VMS deposits and pinches and swells along strike and down dip. The Dry Creek horizon extends for 4,500m along strike, within which the central 1,400m hosts the known Fosters and Discovery VMS lenses. Mineralisation outcrops at surface, is steeply dipping and is up to 44m wide. At West Tundra Flats, mineralisation has a shallow dip of around 10 degrees, is 0.3 to 4.4m thick and extends for 1,000m along strike and has been traced for 1,600m down dip, where it remains open.

Preliminary metallurgical test-work indicated recoveries of over 90% Zn, >80% Au and >70% Pb & Ag using  traditional flotation producing a bulk lead concentrate and a zinc concentrate.

Current work at Red Mountain to refine high priority targets for drilling in H2 2017 — In addition to the exploration work undertaken by companies up to 1999, the Alaskan Division of Geological and Geophysical Surveys (DGGS) completed an airborne electromagnetics and magnetics survey in the area in 2007. Work by geophysics consultants together with the company’s analysis of geochemical surveys using vectoring analysis (which uses the geochemical signatures of alteration) has identified 30 high quality VMS targets where conductors are located coincident with anomalous geochemical signatures.

The company now plans to commence field work on the highest priority targets adjacent to Dry Creek and West Tundra Flats. The surface work will include surface geochemical sampling and ground geophysics to define drill targets.

DFS for the Mount Carrington Au-Ag Project planned for late 2017 — The company announced the results of an updated scoping study on the 100% owned Mount Carrington epithermal gold and silver project in March 2016 and commenced a DFS work program in January 2017. This is a relatively small, but high-return, project; comprising two gold-rich open pits and three silver-rich pits together with a flotation/CIL processing route. Capex was low at A$24m, with a capital payback of <1 year. A total of 111,000oz of gold and 6.7Moz of silver were planned to be produced over a mine life of seven years. Project C1 cash costs were estimated to be A$754/oz (~US$550/oz). At a gold price of A$1,600/oz and a silver price of A$22/oz, the project had a pre-tax NPV10 of A$61m and an IRR of 103%.

Management has highlighted a number of potential upsides that it hopes to confirm in the DFS program. It believes that the DFS could incorporate a 20% increase in in-pit mineral resource tonnes compared to the updated scoping study, an increase of up to 50% in the plant throughput to 0.8-1.2Mtpa leading to a 20-40% increase in AuEq production over a similar mine life. Management believes that a feasibility study and EIS can be completed by Q1 2018. Allowing 12 months for construction suggests that the project could potentially be in production in early 2019.

Mount Carrington – A$19m of Streaming Funding from Cartesian Royalty — Under an agreement signed in July 2016, Cartesian Royalty Holdings has invested A$1.0m into the company and has conditionally agreed to provide A$19m in the form of gold and silver streaming-based financing for the development of the project. The terms of the stream included 20% of gold equivalent production from the operation for 7 years, subject to a minimum of 40,000oz of gold equivalent. Conditions include completing the DFS, EIS and full permitting, acceptance of the mine plan and capex included in the DFS, and access to grid power for 100% of the project’s needs.

Current EV of A$8.9m/US$6.7m — We estimate that cash is currently approximately A$4 million. The company currently has 808m shares and 184m options outstanding.

 

PEAK RESOURCES††

ASX:PEK  | A¢9.0 | US$32m

Peak Discussing Collaborating on Bid for Certain Assets Related to Mountain Pass Rare Earth Project

Peak Resources has announced that it and Pala Investments are in discussions to provide financial, technical and operational support to ERP Strategic Minerals LLP, which has made a bid to purchase certain assets and property rights associated with the Mountain Pass Rare Earth Project, from bankruptcy. In return, Peak would receive the right to purchase a stake in ERP.

The Mountain Pass mine is located in California and produced a large proportion of the world’s rare earths from 1965 and 1995, before closing in 2002. Molycorp started the re-development of the operation in 2011 and the mine re-commenced production in August 2012. Following a fall in rare earth prices, the operation filed for bankruptcy in June 2015, since when the operations have been on care and maintenance. In 2012, reserves at a 5% REO cutoff were reported to be 16.7Mt grading 8.0% REO for 1.33Mt of contained REO.

COMMENT: The discussions to participate in the future of the Mountain Pass operations together with ERP and Pala indicate that Peak is keen to build further its exposure to the Nd-Pr market. We also note that Peak is well positioned to offer the potential consortium assistance, given its experience in advancing its Ngualla Nd-Pr Project in Tanzania and the UK and also given that Rocky Smith, Peak’s COO, was formerly the MD of operations at Mountain Pass.

We await further details regarding the assets and liabilities being bid for, the terms of the offer by ERP and the terms of Peak’s potential involvement in the consortium. Pending this further information, we consider that this is represents a potentially exciting development that, assuming a positive outcome of ERP’s bid, has created optionality to participate in the redevelopment of what has been one of the world’s most significant rare earth producers. Watch this space.

]]>
Wed, 26 Apr 2017 10:50:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27621/in-the-news-mariana-resources-white-rock-minerals-peak-resources-and-kefi-minerals-27621.html
In The News - Plateau Uranium http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27580/in-the-news-plateau-uranium-27580.html In the news: Plateau Uranium

FROM THE BROKING DESK
The announcement from Plateau Uranium – see below – that it has signed an LoI for offtake at $42/lb is a positive, but also a seemingly rare piece of news out of the uranium sector. In late March, Donald Trump signed an executive order designed to reform the previous administrations energy policy. Most of the headlines concern coal where Trump has been prominent in arguing for a return to coal mining, and the impact that would have on jobs in regions where he received strong support in the election. Clearly, Obama was allergic to mining of any type, but there are concerns that the US Energy mix has become too narrow. With America needing more and more energy with the advent of electric cars, these concerns are valid. However, the executive order is also being picked up on by the Uranium industry as well. Trumps order is, in essence, an energy independence policy so you can see the excitement. Earlier this week, the Uranium Producers of America called upon the US Department of Energy to halt the transfer of Federal uranium into the spot market until the spot price moves back up above US$35/lb. While selling US stockpiles at spot strikes me as being akin to Gordon Brown selling the UK’s gold reserves at an historic low, you can sense that the UPA’s call will not fall on deaf ears this time around.

COMPANIES


PLATEAU URANIUM††
CVE:PLU | C$0.58 | US$24m

Agrees to negotiate first offtake agreement for future production from Macusani uranium project over next 12 months
Plateau Uranium has signed a non-binding, non-exclusive, Letter of Intent for initial uranium offtake from its Macusani Uranium/Lithium Project in south-eastern Peru. Indicative terms consider the delivery of 2Mlb of U3O8 over 5 years at an average price of US$42/lb. The contract is expected to include elements of both fixed and market-related pricing. The company and Curzon (formerly Interalloys), a European commodity based trading company, have agreed to work towards negotiating a possible uranium offtake agreement over the next 12 months.
COMMENT: Although further work is required to finalise the terms of any offtake agreement as outlined in the letter of intent, this announcement indicates that the company is moving forward to put in place the contracts that are likely to be required in order to finance the project’s development.
Having completed a positive updated PEA on the project in January 2016, the company is now working towards the completion of a PFS in 2017. The scope of the PFS is for a combined underground and open pit mining operation allied to a tank leaching facility, which would not only provide for the recovery of uranium, but also would allow, subject to further test work, the production of lithium, which is also present in a number of the deposits. We also await the results of further drilling to test the extent of the high grade Pinocho area of the Kihitian Complex.
The company is also working with the authorities in Peru in order to develop the permitting regulations that will be required for the development of what could be Peru’s first uranium mine. It also has a number of local community programs underway and is working to complete the Environmental Impact Study that will be submitted together with a BFS as part of the mining license application that the company plans to submit in 2018.
________________________________________
Updated Preliminary Economic Assessment (PEA) completed in January 2016 on 61Mlb U3O8 mining inventory — Plateau Mining completed an updated PEA on its Macusani Project in January 2016. The study focused on the development of the Kihitian, Colibri and Isivilla complexes, which contain 114Mlb of the project’s total 124Mlb resources. The total mining inventory was 61Mlb U3O8 at an average grade of 289ppm. Heap leaching and tank leaching options were evaluated. The tank leach option has the potential advantage of decreased plant footprint and increased uranium recovery (93% vs. 88%), and also entails a higher level of confidence in upscaling from test-work to operating conditions, although the heap leach option demonstrated more favourable economics. The study showed that the inclusion of high-grade underground material from the Kihitian deposit is accretive to economics.
PEA of January 2016 base case considered open pit and underground mining combined with heap leaching to produce 6.1Mlb pa U3O8 at AISC of US$18.26/lb and initial capex of US$300m - The Base Case open pit and underground mining options combined with heap leach processing generated average LoM production of 6.1Mlb pa U3O8 over a mine life of ten years, with an initial capital cost of US$300m. Assuming a uranium price of US$50/lb, the resulting post-tax NPV8 was US$603m, the IRR 41% and the payback period 1.8 years. The sub-US$20/lb operating costs are in the first quartile and are in line with Kazakh ISR projects, whilst at US$49/lb pa of annual capacity, and US$4.90/lb U3O8 recovered over the LoM, capital intensity remains competitive with conventional uranium projects.
Prefeasibility Study (PFS) planned for completion later in 2017 likely to involve tank leach processing and to include trade-offs relating to potential for pre-concentration, lithium production and addition of high grade uranium at Pinocho — Since the completion of the Updated PEA, there have been a number of developments that may lead to changes in the scope of the project.
• In March 2016 the company announced that its resource base also contained 176,000t of lithium oxide at a grade of 0.12% Li2O. Recent test-work has indicated that 61-73% of the contained lithium can be leached into solution using sulphuric acid at moderate temperatures of 65-85°C. Further work is planned to confirm the leaching performance and to test the performance of the minerals in the subsequent precipitation stage to establish overall recovery and cost information. Work is also being conducted to establish whether the lithium mineralisation is co-incident with the uranium mineralisation. Recovery of lithium would require the use of tank, rather than heap, leaching as the processing route.
• The company is investigating the potential to upgrade the plant feed by removing barren material contained in the coarse fractions, to improve project economics. In August 2016, the company announced that historic test-work on the material from a number of the deposits had indicated that it was possible to upgrade the uranium grade by 60% with a recovery of 80% by removing a coarse fraction. Work is planned to be done on a number of deposits and also to test what impact the upgrading had on lithium grades.
• Late in March 2017, the company announced drill results from the Pinocho area, which is part of the Kihitian Complex. Assay results from two drill holes confirmed high grade uranium mineralisation that had been identified in underground channel sampling in 2009. Hole PT-PCH1-TNE showed 8m grading 861ppm U from 53m, including 3m grading 2,160ppm U from 53m. Both of these intervals are much higher than the overall resource of 228ppm U in the Indicated category and 240ppm U in Inferred. High grades were also observed in Hole PT-PCH1-TNW, which showed 9m grading 566ppm U from 53m, including 2m grading 2,182ppm U from 53m. Both of these results were from the same platform (PCH1).

]]>
Thu, 20 Apr 2017 10:23:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27580/in-the-news-plateau-uranium-27580.html
In the news: Base Resources & Peak Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27537/in-the-news-base-resources-peak-resources-27537.html FROM THE BROKING DESK

Base Resources*† has its latest update out, so Jim Taylor was on it immediately: Base Resources — March Quarterly Activities Report, 12 April 2017. The report shows that Base is continuing to offer quality exposure to an improving market for mineral sands. Production was largely stable, while revenue was above the prior quarter due to the timing of the company’s bulk sales and higher ilmenite pricing. Guidance for 2017 production remains unchanged.

Production declined slightly over the prior quarter. Lower volume was put through the WCP in order to improve recoveries. To compensate, management drew down stockpiled inventory for January and February, and focused on mining a high-grade (>10%) zone in March. Ultimately, production of ilmenite, rutile and zircon were largely in line with the prior quarter, with total production down only 3%.

Revenue up 24% due to the timing of shipments and a 30% rise in ilmenite prices. Bulk rutile shipments were up 8% at 21,000t, while ilmenite sales increased 27% to 123,000t. Although the higher proportion of ilmenite in the sales mix had a negative impact, a 30% increase in ilmenite prices offset this. Overall, revenue climbed 24% to US$40m.

Net debt down to US$123m. After the repayment of US$13m of debt during the period, total debt at the end of March 2017 was US$164m.

Our Buy rating was maintained, with our target price raised to A$0.43 from A$0.35. We base our target price on the SotP NAV of the company. 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$377m, US$20m for exploration at Kwale and a G&A adjustment of US$(38)m, giving an operational NAV of US$360m. After adjusting for net debt, this gives a NAV for Base of US$237m (as of end-March 2017). This is equivalent to A$0.43/share. The increase in our target price is driven by recent gains in prices, and a change in our tax assumption resulting in a reduced rate until FY24.

Upside risks to our target price. Pricing continues to surprise on the upside, with the ilmenite price locked in at US$200/t for May deliveries. Higher sales volumes next quarter would provide leverage to further gains. The Kwale Phase 2 DFS due in May 2017 is likely to provide upside to our current modelled NAV, and a maiden resource from the SW Sector (due 1QFY18) may add to mine life. Furthermore, the Kenyan general election in August 2017 is expected to ease community tension and allow exploration to resume on the NE Sector.

 

COMPANIES

Peak Resources††

ASX:PEK | A¢10 | US$36m

Ngualla Rare Earth Project BFS Results

Peak Resources has announced the main findings of a bankable feasibility study (BFS) into the development of an integrated neodymium- and praseodymium-rich rare earths project, comprising the Ngualla rare earths deposit in Tanzania and the Tyne Tees rare earths refinery in the UK.

The project is designed to produce 2,420tpa of a mixed Nd/Pr oxide product (which accounts for 90% of revenues), plus additional refined rare earth by-products. Consolidated capex for the integrated project was estimated at US$356m and operating costs at US$97m pa, equivalent to US$34.20/kg Nd/Pr oxide. Assuming Nd/Pr prices of US$85/kg, the project returned a post-tax NPV10 of US$445m and an IRR of 21%.

The company will now commence the application process for a mining licence and will also work towards securing a strategic partner to help facilitate the project’s development.

COMMENT: The study has confirmed the project’s attractions, with the company noting that the results show that the project has the lowest operating cost structure and the lowest capital intensity per unit output of Nd/Pr of all comparable development projects.

The BFS results represent a net improvement compared to the updated PFS announced in March 2016. Production of Nd/Pr product was 1.4% higher and although capex was 7.9% higher, this was offset by a 14.4% reduction in estimated operating costs.

Nd/Pr accounts for 85% of the value of rare earths used in permanent magnets, which account for 80% of the value of all rare earth elements. We believe that the low prices of Nd/Pr late in 2016 represent a cyclical low and note that price has risen 9% so far this year to around US$43/kg. Given the growth demand for high power permanent magnets for both electric motors and generators, the outlook for the Nd/Pr market is positive, with third-party forecasts of compound annual growth rates in demand over the coming decade for the 8-10% pa range.

 

Peak Resources is focused on delivering an integrated rare earths project — The company’s 75%-owned project combines the Ngualla rare earths deposit in western Tanzania with downstream processing in a solvent extraction separation plant in the UK, producing a range of rare earth products. Approximately 90% of the value of the final product is associated with a high-purity neodymium and praseodymium oxide. With the BFS completed the company is moving towards securing a strategic partner and securing finance, as well as applying for a mining licence for the project.

Ngualla deposit one of the world’s largest Nd/Pr deposits — Ngualla is one of the world’s largest Nd/Pr deposits, with total resources containing 4.6Mt of REO. It also has a low uranium and thorium content. The deposit is host to a thick blanket of weathered, high-grade mineralisation from surface. This weathered bastnaesite zone at a cut-off of 1.0% REO comprises total resources of 21Mt grading 4.7% REO, containing 1.0Mt of REO, of which 89% was in the Measured category.

Tanzanian operations to produce 28,300tpa of beneficiated REO concentrate grading 45% REO — The BFS outlined a mining inventory of 18.5Mt grading 4.80% REO, containing 887,000t REO. Open-pit mining with a waste-to-ore ratio of 1.8:1 is planned to deliver 624,000tpa of dry ore to the plant. The processing route involves crushing, grinding, barite removal through flotation and the regrinding before flotation of the rare earth concentrate to produce 28,300tpa of high-value, 45% REO concentrate containing 12,700tpa of REO.

UK-based rare earth leach recovery and separation processing to produce final products — The processing route for the UK-based plant will involve the roasting of the concentrate with alkali (soda ash), then washing and filtering before being leached using a low-strength hydrochloric acid, a process that selectively targets Nd and Pr. Hydrochloric acid and caustic soda are then used in a series of solvent extraction and precipitation processes that sequentially yield the following final products:

• 530tpa of SEG (samarium, europium and gadolinium) and mixed heavy rare earth carbonate (280tpa oxide equivalent)

• 2,420tpa of Nd/Pr rare earth oxides

• 3,010tpa cerium carbonate (equivalent to 1,660tpa cerium oxide)

• 6,940tpa lanthanum carbonate (equivalent to 3,650tpa of lanthanum oxide)

Compared to the updated PFS of March 2016, BFS numbers showed concentrator throughput was up by 12%, output of concentrate was up 1.4% and output of the final mixed Nd/Pr oxide product was up 5.2%. We also note that the project now provides for the separation of the cerium and lanthanum products.

Key project parameters —In the BFS capex was estimated at US$356m (up 7.9%), comprising US$186m and US$152m for the Tanzanian- and UK-based operations respectively and US$16m owners’ costs. This places the project capital intensity at an attractive US$157/kg Nd/Pr. The project is planned to operate for a total of 30 years and to have operating costs of US$83m pa (down 14% and equivalent to US$34/kg) comprising US$46m to the mine gate and US$37m for the Tees Valley refinery. The study assumed mixed Nd/Pr oxide prices of US$85/kg (compared with current pricing of approximately US$40/kg), at which price Nd/Pr accounts for 90% of revenues. The post-tax NPV10 for 100% of the project was US$445m and the IRR 21%.

Moving to secure strategic partner — Having completed the BFS and having been awarded an Environmental Certificate, the company will now move towards securing a strategic partner for the project, together with potential off-take and debt finance for the project. Once the partner has been secured, Front End Engineering and Design studies would be undertaken. In parallel, the company will apply for a mining licence for the project.

Appian and IFC own direct stakes in the Ngualla Project and are also significant shareholders in Peak — Peak owns 75% of the project and Appian owns 20%, with the IFC owning the remaining 5%. Appian and the IFC also own 16.1% and 6.7% of Peak respectively.

Peak has a current market cap of US$36m and an EV of US$35m — Peak has 478m shares outstanding and a market capitalisation of A$48m/US$36m. The company had A$5.1m in cash and debt of A$4.4m (a three-year, 15% term loan from Appian) at the end of December 2016.

Neodymium and praseodymium exposed to high-growth permanent magnet demand — Nd/Pr are used in combination to create high-power permanent magnets. Prices of rare earths, including those for Nd/Pr oxides, peaked in 2011 and have since fallen back to pre-bubble levels. Owing to the increased use of high-power magnets in electrical motors and generators, particularly in electric cars and bikes, the outlook for demand for Nd/Pr is very positive, suggesting that the prices of US$40/kg reached late last year could represent a cyclical low. Prices have increased by 9% YTD.

 

]]>
Wed, 12 Apr 2017 13:17:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27537/in-the-news-base-resources-peak-resources-27537.html
In the news: KEFI Minerals plc http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27523/in-the-news-kefi-minerals-plc-27523.html KEFI Minerals (LON:KEFI) is an emerging gold developer looking to commence construction of its flagship 115,000oz pa Tulu Kapi Project in Ethiopia. KEFI has been looking to finalise financing arrangements for this 980,000oz LoM project, but a state of emergency declared in Ethiopia in October 2016 has delayed this process. The project enjoys a high level of government backing, with US$20m of direct investment committed at the project level in the form of investments in the project’s infrastructure requirements, and plans to provide long-term debt through the Development Bank of Ethiopia.

We reiterate our BUY rating and revise our target price to 10.5p. We are revising our target price based on the share consolidation, recent financing, and our lower gold price forecast. While the upside to the current share price implied by our target price is substantial, it is worth noting that the current share price is trading at 0.2x P/NAV based on our unrisked NAV. We believe the stock offers a substantial re-rating opportunity once the state of emergency has ended and financing is secured.

RFC Ambrian acts as Broker to this company

]]>
Tue, 11 Apr 2017 10:30:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27523/in-the-news-kefi-minerals-plc-27523.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27510/in-the-news-amani-gold-27510.html COMPANIES

Amani Gold††

ASX:ANL | A$0.036 | US$34m | Speculative Buy

Assays from Kebigada Return High-quality, High-grade Intervals

Amani Gold has announced assay results from a further eight RC holes from an ongoing infill drilling programme on the Kebigada Zone at its 55%-owned Giro Gold Project in the north-east of the DRC. A number of the holes, which were all drilled in the south-eastern portion of the 2.7km-long Kebigada Zone, included high-grade intervals. Results from Hole GRRC 217 were extremely impressive, returning multiple intervals that are the best from the zone to date. Results from this hole included:

• 36m @ 6.6 g/t from 14m (including 14m @ 15.2 g/t)

• 65m @ 7.7 g/t from 74m (including 44m @ 10.7 g/t)

• The hole ended in mineralisation at 139m with an interval of 4m @ 4.6 g/t

High-grade intervals in other holes included 4m @ 22 g/t in Hole GRRC 214 and 3m @ 15.8 g/t in Hole GRRC 216.

Drilling and the reporting of all assays for the current programme is planned to be completed by mid-May, allowing the completion of the planned maiden resource by the end of June 2017.

COMMENT: The results from Hole GRRC 217 are obviously very impressive and, somewhat atypically for an infill drilling programme, are strong enough to suggest that they could have an impact on the overall tenor of the forthcoming maiden resource, which is due in just over two months. However, other than to say that the results are positive and significantly better than those from the holes that surround it, it is difficult to quantify their impact. The company plans to twin this RC hole with a diamond drill hole in order to get a better handle on the structural control on, and the orientation of, the mineralisation. This will give a better understanding of the true width of the high-grade and also on its plunge, which will help target further work to test the extent of the zone.

We look forward to the completion of the maiden resource estimate for the project, for which we have previously suggested that the company could have outlined a resource of approximately 2Moz at a grade of around 2.0 g/t.

We continue to recommend the company as a Speculative Buy.

________________________________________

Giro Gold Project background — Amani is focused on advancing its 55%-owned Giro Gold Project. The majority of activity on the licence has focused on following up a 2km by 900m soil anomaly at the Kebigada Zone, where drilling has outlined mineralisation over 1,400m by 400m to depths of more than 150m. Soil sampling programmes over the project area have also outlined a number of other anomalies, some of which have been 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 these proved difficult to follow up. The focus on the project has since moved to the completion of the maiden resource at the Kebigada Zone and also the completion of target generation across the project area.

These results from Kebigada are from an ongoing infill drilling programme ahead of a planned maiden resource statement – The 3,500m RC infill drilling programme is designed to confirm the continuity of mineralisation along-strike at Kebigada by reducing line spacing from typically 100m to 50m over the main mineralised zone. Infilling commenced in mid-February on the recommendation of the resource consultant in order to define better the high-grade structures and increase confidence in the resource model. This is aimed to provide improved separation of the high- and lower-grade material in the model and give a better reflection of grade and tonnage at different cut-off grades. A 3,500m diamond drilling programme is also being undertaken to confirm the continuity of mineralisation to depths of over 200m vertically.

Amani’s current market cap is A$45m/US$34m — The company has 1,257m shares outstanding, with 434m options exercisable at A$0.05/share until July 2017 and 52m options exercisable at prices from A$0.05/share to A$0.10/share expiring from November 2019 to December 2020. The company also has 9m performance rights outstanding. Cash resources at the end of December 2016 were A$6.2m.

Section across Line 400N (showing Hole GRRC0217 on the left)

 

]]>
Mon, 10 Apr 2017 11:01:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27510/in-the-news-amani-gold-27510.html
In the news: Peak Resources & Weatherly International http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27490/in-the-news-peak-resources-weatherly-international-27490.html FROM THE BROKING DESK

Love them or loath them, electric cars are here to stay. With a clampdown on diesel cars in city centres in the offing, it looks like the tipping point for electric cars is going to come a lot sooner than we thought. This, of course, comes after we’ve been told since the turn of the century to switch from petrol to diesel, only for it now to be admitted that diesel cars are in fact killing us all. Another big winner from Gordon Brown.

As an owner of a brand new diesel car, it is of course me that’s going to have to foot the bill for this. This will come through increased road tax, congestion charges and pump prices. Luckily, I bought the car on a PCP financing scheme, so its value after three years is guaranteed and it’s the manufacturer’s financing arm that’ll have to take the brunt of the residual value fall come 2020. I’d watch out for how exposed auto manufacturers are going to be to this upcoming collapse in resale values at a time when they’re having to divert funds to fast track development of new electric cars. Thus, this could be a good time to short the autos and go long rare earths.

Attention here has so far focused on lithium. Considered by some to be the ‘next oil’, every man and his dog has been peddling lithium projects somewhere or other around the world. While retail has lapped it up, resource-specific funds have been slow on the conviction front. The view has been that once the supply demand curve becomes clearer on lithium, big mining will come into the space, wiping out the juniors, so trying to pick winners at this stage is a bit of a lottery.

Luckily, there is more than lithium to look at. We’re marketing Peak Resources†† in London the week after Easter (on 18 and 19 April to be exact). Peak owns 75% of the Ngualla Rare Earths project in Tanzania, which is one of the world’s largest neodymium and praseodymium (Nd/Pr) deposits. These are the key rare earths for the high-power permanent magnets that are integral in the electric motors and generators that are used in electric cars and wind turbines. As anyone who reads the newspapers regularly will know, these rare earths are extremely difficult to find in economic concentrations outside China, and are therefore going to be strategic for industries across the world, especially in Europe.

Adding even more interest to the Peak story, it is building a downstream processing plant in Teesside in the north-east of England. This is close to where Sirius Minerals is operating, but more importantly it is an area that is blessed with excellent port facilities, a strong chemical and industrial history, and lots and lots of regional and central government grants. It’s also close to the world’s largest wind turbine factory (operated by Siemens in Hull) and the Nissan car plant in Sunderland, which makes the all-electric Nissan Leaf.

So, it’s a pretty useful neighbourhood to be in. The final products from the project are planned to include: 2,300tpa of Nd/Pr rare earth oxides; 250tpa of mixed samarium, europium and gadolinium rare earth oxide; and 5,900tpa of cerium/lanthanum carbonate (equivalent to 4,240tpa of contained REO). Peak has been the best performing rare earths stock on the ASX over the past three months, reflecting high investor interest. London-based Appian Capital Advisory LLP owns 20% of the project, with the IFC owning the remaining 5%.

This is an extremely interesting project and will appeal to mining-specific funds as well as generalist UK long-only institutions. Please take the time to have a meeting with Darren Townsend (CEO), Rocky Smith (COO) and Michael Prassas (GM Marketing).

For us petrol-heads, maybe we shouldn’t be too worried about an electric future for cars. It’s worth remembering that for many of us our happiest, most care-free motoring was probably had driving electric cars. While it’s true that this may have been when we were still schoolchildren, the instant acceleration, low centre of gravity and linear wall of torque still exist in the new generation of cars. I’m looking forward to it.

]]>
Thu, 06 Apr 2017 14:21:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/27490/in-the-news-peak-resources-weatherly-international-27490.html