column http://www.proactiveinvestors.co.uk Proactiveinvestors column RSS feed en Tue, 12 Dec 2017 10:18:06 +0000 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) In The News - Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/29081/in-the-news-metal-tiger-29081.html COMPANIES
Metal Tiger
LON:MTR 


More Positive Drilling Results at T3 Add Confidence to Potential U/G Development
Metal Tiger has announced the assay results for eight more holes from the T3 deposit on its 30%-owned Kalahari Copper/Silver JV in Botswana (MOD Resources holds 70%).
COMMENT: Of the eight holes, seven hit mineralisation (six of which included multiple intersections), extending the deposit down-dip of previous drilling and adding to the potential for the future development of an underground operation, which could augment production from the currently-planned open-pit project.
During 1Q18 the company is planning to announce an updated resource for the T3 Project, and also to release the PFS for the open-pit project, with the DFS to follow by the end of the year. The JV is targeting an open-pittable mineable inventory for the PFS of 25Mt at a grade of 1.1-1.2% Cu, containing around 275,000t of copper.
The JV has stated that it is considering the possibility of developing an underground operation simultaneously with the open pit, and is focused on increasing the production of profitable copper rather than mine life. It also notes the potential of the other satellite deposits in the area, such as the T1 deposit (100%-owned by JV partner MOD Resources), to supply higher-grade material to a central processing facility at T3. This suggests that the focus is on adding higher-grade underground material to increase the grade processed and copper output.
Exploration at T3 is continuing to deliver encouraging results and we await the results of the resource update and PFS with interest. We maintain our Buy rating and our target price of 3.6p. For further details see our initiation piece Metal Tiger — Earning its Stripes, 9 November 2017.

T3 is already an attractive project. The scoping study of December 2016 indicated the potential for the project to produce 22,000tpa of copper, with associated silver, at a C1 cash cost of US$1.29/lb and capex of US$135m, equivalent to a very competitive capital intensity of US$6,200/tpa. At a copper price of US$3.00/lb (cf the current price of US$2.97/lb) the pre-tax NPV10 was US$297m and the IRR 42%.


T3 resource update and PFS on the larger open-pit project due in 1Q18. An interim resource update was announced in August 2017, increasing copper from the 350,000t used in the scoping study to 409,000t. The ongoing infill drilling programme for the open-pit resource is nearing completion, with results planned to be released in January 2018. The PFS, also expected in 1Q18, will consider a throughput rate of 2.5Mtpa, 25% higher than that in the scoping study of late 2016.


Underground potential now the subject of a 30-hole drill programme. A three-rig drill program of around 30 holes is now planned to test the underground resource over a strike-length of 1.7km, initially to a depth of approximately 350-400m. Intersections from the latest announcement included 7.2m @ 1.9% Cu and 5.9m @ 1.7% Cu, with associated silver. Mineralisation dips shallowly to the north-west and is considered likely to be mineable using a room and pillar method. We anticipate that initial study work will be completed on the underground potential during 2018.


Kingsgate to hold a General Meeting on 9 January 2018. Kingsgate Consolidated (KCN AU | Mkt Cap US$69m), in which Metal Tiger holds a 6.7% stake valued at US$4.6m, has called a General Meeting for 9 January 2018. Metal Tiger requested the meeting and is seeking shareholder approval to replace three of Kingsgate’s four directors with five new Metal Tiger appointees. Both companies appear aware of the value of the Chatree mine in Thailand, but have a different view on how to best realise this for shareholders. Metal Tiger believes that it could come to a negotiated settlement with the Thai authorities that would allow a restart of the operation, while Kingsgate is pursuing compensation for the loss of the project under its political risk insurance cover and through arbitration under the Australia Thailand Free Trade Agreement.


BUY rating with a TP of 3.6p. The company’s current market cap is equivalent to approximately US$28m and our TP is based on a risked SoTP value of US$49m. This comprises US$13m of cash and investments, an adjustment of US$15m for corporate overheads, US$10m for the company’s other interests and a risked value of US$41m for its 30% interest in the Kalahari Copper JV.

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Thu, 07 Dec 2017 13:45:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/29081/in-the-news-metal-tiger-29081.html
In The News - Wave Swell Energy http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/29005/in-the-news-wave-swell-energy-29005.html FROM THE BROKING DESK


Wave Swell Energy*** got a fair bit of coverage in the Australian press this morning, with articles such as this. We’re assisting Wave Swell in a capital raising at the moment. The company is developing its wave energy generation technology, and is carrying out commercial trials off Tasmania's King Island ahead of a potential listing. Full details on the company can be found on its website.
The company has signed an off-take agreement with Hydro Tasmania for an initial 200KW trial unit, which it will operate during 2018 after its first funding goals are reached. Wave Swell CEO Tom Denniss has said that all energy generated will initially be provided to the King Island grid and Hydro Tasmania. Current tests put forecast generation costs at A$100/MWh, or A¢10/KWh. Typical solar systems cost around A¢13/KWh and wind about A¢7/KWh, not including grid costs. “This is really about ensuring independent verification, and Hydro Tasmania verifying that we can produce at the low cost of A¢10/KWh," Mr Denniss said.


It has built “big concrete caverns” that use the constant back and forth flow of the ocean to generate energy. “What sets this apart from other wave generation technology is its lack of moving parts," Mr Denniss commented. Its blocks are located in water depths of around 10m, and typically up to 500m offshore. They connect to the mainland via undersea cables and provide energy to the onshore grid via a transformer unit. The units can also be used as breakwaters or as an artificial reef, with trials demonstrating an increase in marine life where they are installed.

Wave Swell is still looking to investors to raise A$8.3m over the coming months, having secured A$2m in investment to date. It has set a goal of raising A$10m in total funding, Mr Denniss told Fairfax Media. “We are targeting anyone for funding, from energy companies, construction companies, or individuals who see upside in investing.”

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Mon, 20 Nov 2017 09:19:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/29005/in-the-news-wave-swell-energy-29005.html
In the news: Plateau Uranium http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28994/in-the-news-plateau-uranium-28994.html FROM THE BROKING DESK
We have some encouraging exploration results from Plateau Uranium’s†† Macusani Uranium Project in south-eastern Peru. The first hole drilled into a new location, Falchani, at which radioactivity is elevated over a 2km2 area, returned assays that showed two significant zones of mineralisation, the first being uranium-rich and the second, deeper zone being lithium-rich. The hole returned 45m from surface grading 633ppm (0.0633%) U3O8 with minor lithium, and also 51m grading 2,712ppm Li (equivalent to 0.58% LiO2) from 95m to the end of the hole at 146m.


As the company highlighted, these results are significant. The uranium grade is twice that of the current resource, while the lithium grade in the lower hole is 6x that of the current resource! Plateau has outlined 124Mlb of U3O8 and 176,000t of LiO2 in resources elsewhere on the project, and completed a scoping study on a uranium heap leaching project in January 2016. However, given the increasing appreciation of the potential for the project to produce lithium along with uranium, the focus has now moved to a tank leach project. In addition to exploration, current work is concentrated on metallurgical test-work to optimise both lithium and uranium production.

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Thu, 16 Nov 2017 10:40:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28994/in-the-news-plateau-uranium-28994.html
In the news: Metal Tiger & Cassini Resources/Oz Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28989/in-the-news-metal-tiger-cassini-resourcesoz-minerals-28989.html
FROM THE BROKING DESK
There are a few things worth mentioning this morning. First off is an announcement by Metal Tiger*† (MTR LN : 2.2p : US$27m : Buy : TP 3.6p) that it has requested that Kingsgate hold a shareholders meeting to consider changes to the Kingsgate Board. MTR owns 6.7% of Kingsgate and is seeking approval to remove three of the four existing directors and replace them with three MTR directors and two independent directors (nominated by MTR). We put out an initiation piece on MTR last week. It can be viewed here.


Also, Metal Tiger - LON:MTR and its JV partner MOD Resources announced the results of six additional holes from their T3 Copper Project in Botswana. MTR has a 30% interest in this. The results point to the extension of mineralisation to the east and west of the main area of mineralisation on which a scoping study was completed towards the end of last year. Four holes tested mineralisation to the east of the planned pit and intersected multiple veins of copper mineralisation between 186m to 448m downhole (including 3m @ 1.4% Cu). The two holes drilled to the west returned multiple intervals between 235m and 492m downhole (including 4.5m @ 4.0%). The results continue to suggest that the project has the potential for underground mining (particularly to the west), in addition to open-pit mining, on which a PFS is planned for completion by the end of this year. Drilling is continuing apace, with a sixth rig now on site.


There was another noteworthy announcement from Cassini Resources (ASX:CZI, US$17m). Oz Minerals is now sufficiently excited by the results of a scoping study into Cassini’s West Musgrave Nickel-Copper Project that it will move to the next stage of its earn-in on the project, putting it firmly on the map. Oz will earn a 51% interest in the project through spending A$19m within 18 months, and will also manage the pre-feasibility study. Oz can earn up to 70% in the project in return for funding all study work up to a decision to mine.


The West Musgrave Project is located in east-central Western Australia. The scoping study on the Nebo-Babel deposits indicated that a large-scale development with 10Mtpa throughput returned the best results. The project would produce around 22,500tpa of nickel, 27,500tpa of copper and 850tpa of cobalt. It’s expected to have attractive C1 costs of around US$1.45/lb nickel in concentrate. With pre-production capex of some US$600m, the study returned a post-tax IRR of 20-25%. The pre-feasibility study is pencilled in for completion by mid-2019, with the DFS a year later.

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Wed, 15 Nov 2017 11:39:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28989/in-the-news-metal-tiger-cassini-resourcesoz-minerals-28989.html
In the news: Great Boulder Resources, Mineral Sands, Metal Tiger & Mining Indaba http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28980/in-the-news-great-boulder-resources-mineral-sands-metal-tiger-mining-indaba-28980.html FROM THE BROKING DESK


We want to highlight some great exploration results from Great Boulder Resources (ASX:GBR: A$0.70 : US$37m). Some of you may remember that this company’s CEO, Stefan Murphy, worked with us here in London and in Perth before taking up his position with GBR just over a year ago. The stock tripled on the announcement of the results, which confirmed potentially economic mineralisation over significant widths in at least four of the nine scout RC holes drilled at the Mt Venn prospect, which is located on the company’s Yamana Project, in which it is earning a 75% interest in return for spending A$2m over five years.


The project is located on the Yamana Belt, east of Laverton, in WA. It benefits from being 25km from the Gruyere Gold Project that is being developed by Gold Fields and Gold Road. Highlights from the results included 48m grading 0.75% Cu, 0.20% Ni and 0.07% Co, and 61m grading 0.50% Cu, 0.15% Ni and 0.05% Co. The holes confirm the presence of copper, nickel and cobalt mineralisation alongside the pyrrhotite that is responsible for much of the extensive EM and magnetic anomalies at the Mt Venn prospect. We await further news with interest.


Elsewhere, a few general reminders. We’ve put out a couple of reports over the last few weeks. First, Jim Taylor released Mineral Sands — Shifting Up A Gear, October 2017. This 76-pager looks closely at the mineral sands space, a small — but significant — part of the mining sector. Over the past 18 months the industry has moved through an inflexion point, creating an extremely favourable outlook. In the piece we have full reports on six companies: Iluka Resources, Base Resources*†, Kenmare Resources, Mineral Deposits, MZI Resources and Sheffield Resources.


This was followed by Jim’s initiation piece Metal Tiger (LON:MTR) *† — Earning its Stripes, 9 November 2017. Metal Tiger plc (MTR) is an AIM-quoted company that owns a portfolio of direct and listed minerals investments. Its main asset is a 30% interest in the Kalahari Copper JV, which it owns together with the ASX-listed MOD Resources. We started coverage with a Buy rating and a target price of 3.6p. We’re marketing MTR’s CEO Michael McNeilly in London on Tuesday and Thursday this week. Please let us know quickly if you’d like a meeting.


Finally, we’re partnering with Mining Indaba in its launch of the Junior Mining Showcase in Cape Town over 5-8 February 2018. The showcase will be a dedicated, deal-making zone with restricted access. It will group over 60 junior miners in one place.
 

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Mon, 13 Nov 2017 11:51:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28980/in-the-news-great-boulder-resources-mineral-sands-metal-tiger-mining-indaba-28980.html
In The News - Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28967/in-the-news-metal-tiger-28967.html Jim Taylor released a new initiation piece yesterday: Metal Tiger (LON:MTR)*† — Earning its Stripes, 9 November 2017. Metal Tiger plc (MTR) is an AIM-quoted company that owns a portfolio of direct and listed minerals investments. Its main asset is a 30% interest in the Kalahari Copper JV, which it owns together with the ASX-listed MOD Resources. Within this, the Copper-Silver T3 Project is currently the subject of pre-feasibility study (PFS) work towards the development of an open-pit copper mine, with the study expected by the end of year It also owns a portfolio of other direct minerals interests, including a lead-zinc-silver project in Thailand, and a significant portfolio of cash and shares.

We started coverage with a Buy rating and a target price of 3.6p. Our target price (TP) indicates more than 50% upside from current levels. At June 2017, 45% of the company’s market cap was accounted for by cash and shares. Our TP is based on the risked NPV10 of the T3 Project assuming a copper price of US$2.72/lb (US$5,995/t). We note that a 10% increase in the assumed copper price to US$3.00/lb (US$6,612/t) increases our TP by 19% to 4.3p.

By lucky coincidence, we’re marketing the company’s CEO, Michael McNeilly, on two days next week: Tuesday 14 and Thursday 16 November. Interest in this is proving to be high, so please let us know quickly if you’d like a meeting.

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Fri, 10 Nov 2017 09:17:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28967/in-the-news-metal-tiger-28967.html
In The News - Metal Tiger http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28950/in-the-news-metal-tiger-28950.html FROM THE BROKING DESK


We are marketing Michael McNeilly, the CEO of Metal Tiger*† (LON:MTR), in London on two days this month: Tuesday 14 and Thursday 16. Metal Tiger is an AIM-quoted investment company whose main asset is a 30% stake in a JV in Botswana on the Kalahari Copper Belt, with the remaining 70% owned by ASX-listed MOD Resources (MOD AU). Within this, the Copper-Silver T3 Project is currently the subject of pre-feasibility study (PFS) work towards the development of an open-pit copper mine, with the study expected early next year.


T3 has a current JORC-compliant resource estimate, updated last August, of 36.0Mt @ 1.14% Cu and 12.8 g/t Ag, containing 409,000t copper and 14.8Moz silver. A potential major strike extension to the deposit was released in early October, which highlighted that the intersection of visible copper mineralisation has extended by 300m to the west and north-east of the planned pit to 1.5km along-strike. Seven rigs are now operating on-site. The throughput of the project being considered in the PFS is to be increased by 25% (from 2.0Mtpa to 2.5Mtpa). Confidence in an increased mining inventory and an improved copper price have led to the consideration of a larger project, which will be designed to allow for an expansion to 4.0Mtpa should further additions to resources justify it. Other study work, including metallurgical test-work, water bore testing, environmental approvals and stakeholder engagement, is also underway.


Metal Tiger is also active in Thailand, with a 72% interest in an entity that has a pipeline of multi-commodity exploration projects. The main focus here is a number of brownfield silver-lead-zinc mines in the Kanchanaburi Province in western Thailand. MTR is looking to have the assets designated as a government-approved ‘Minerals Development Area’. This change of status should ease the path back into production. While the assets are fairly small, they are high-grade and a recent CPR valued them at around US$40m.


The group has a host of other investments. These include a 6.6% stake in Kingsgate (KCN AU), whose focus is the Chatree Gold Project in Thailand, and an interest in Logrosan Minerals, which has a portfolio of tungsten and gold assets in Spain and Finland.


Metal Tiger has a market cap of £24m, with cash of around £4m and £6.4m in shareholdings. We’re expecting interest to be high in seeing the company, so please let us know quickly if you’d like a meeting.

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Tue, 07 Nov 2017 11:40:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28950/in-the-news-metal-tiger-28950.html
In The News - KEFI Minerals & the Mineral Sands Sector http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28924/in-the-news-kefi-minerals-the-mineral-sands-sector-28924.html FROM THE BROKING DESK
As hinted at earlier this week, Jim Taylor has put out KEFI Minerals (LON:KEFI)  — Tulu Kapi Development Update, 1 November 2017. KEFI is now set to develop the Tulu Kapi Gold Project in Ethiopia with a throughput 25% above that used in the updated DFS of May 2017. This will raise average production over the first three years of the project’s life from 115,000oz pa to 144,000oz pa and increase the flexibility to switch between selective and bulk mining.


We reiterated our Buy rating and revised our target price down from 9.0p to 8.0p. We adjusted our model to reflect the current finance structure. We’ve assumed that the company will raise US$25m in equity at a price of £0.05/share, resulting in the issuance of 383m shares, equivalent to 115% of the outstanding share capital.


Jim really has been busy — he released this last week: Mineral Sands — Shifting Up A Gear, October 2017. This 76-page tome has a detailed looked at the mineral sands space, a small — but significant — part of the mining sector. Over the past 18 months the industry has moved through an inflexion point, creating an extremely favourable outlook. Product prices have risen, reflecting stronger housing and construction markets, particularly in developing regions, robust demand for paints and plastics and positive end markets for zircon.


Further positive factors include the draw-down of previously-built inventories, production outages and some capacity cutbacks in China. The space is also benefiting from industry consolidation and producer supply discipline. The medium- and longer-term outlooks for prices of both titanium feedstock and zircon are positive, with robust demand expected and limited new supply on the horizon. In the piece we have full reports on six companies: Iluka Resources, Base Resources*†, Kenmare Resources, Mineral Deposits, MZI Resources and Sheffield Resources

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Thu, 02 Nov 2017 10:43:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28924/in-the-news-kefi-minerals-the-mineral-sands-sector-28924.html
In the News - Amani Gold & KEFI Minerals http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28908/in-the-news-amani-gold-kefi-minerals-28908.html FROM THE BROKING DESK


Amani Gold†† has announced its September 2017 Quarterly Activities and Cashflow reports. Much of the Activities Report summarises previously-announced plans for further exploration around its DRC-based Giro Gold Project, including up to 30,000m of RC and diamond drilling at Kebigada, 6,345m of RC drilling at Douze Match, and additional drill programmes planned for newly-defined target areas. With progress in place, management has now announced that the first 3,645m of drilling at Douze Match is to be completed in the December 2017 quarter. First results of that programme had been expected by the end of October, but management has reiterated that it still intends to publish a maiden resource on Douze Match in 1Q18, indicating that it is still on track to meet this milestone.


Drilling at Kebigada is still expected to be completed in 1H18, though it has yet to commence. This will start once Amani has complete access to the area of drilling. The company is currently working with the Governor of the Haut Uele Province to relocate illegal, artisanal miners, as well as the illegally-established Giro village set up to support artisanal mining in the area. The initial stages of the relocation are expected to be completed within two months, at which point the infill drilling can commence. Amani expects to progress its drilling programmes at Adoku and in the immediate area surrounding Kebigada in the current quarter.


Amani had previously paid US$250,000 for the exclusive right to negotiate an interest in the Tendao Project, which borders its Giro Gold Project. The company has now ceased due diligence activity while a DRC state-owned mining company and the present licence holder resolve contractual issues. Amani may reengage if clear commercial and legal structures can be established.


Amani’s Cashflow Report shows the receipt of A$15m as part of the previously-announced Luck Winner transaction. It also shows spending of A$4m on exploration, with a balance of A$11m at the end of the September 2017 quarter. Management has budgeted for A$5m of additional exploration in the December 2017 quarter. Still outstanding is Stage 2 of the Luck Winner transaction, under which, subject to shareholder approval, Amani will receive A$10m in exchange for 200m shares and 250m options exercisable at A$0.07/share for two years.


COMPANIES


KEFI MINERALS
LON:KEFI, | 4.5p | US$20m | Buy | TP : Under Review


Projections for Expanded Production
KEFI Minerals has announced projections for expanded production from its Tulu Kapi Gold Project in Ethiopia. This follows an announcement on 6 October in which the company said that it is now planning to build a plant with a capacity of 1.9-2.1Mtpa, 25% larger than previously envisaged. The additional capex required for the plant and infrastructure associated with this is estimated at US$12m, although the company noted that this has been offset by expected capex savings related to a move from a fixed-price, lump sum project construction to an open book, cost-based arrangement with incentivisation based on target costs and schedule. The company also stated that it will be further offset by Oryx offering to expand its facility from US$135m to US$140m. The larger throughput enhances the project’s flexibility to switch between bulk mining and selective mining as appropriate.


Oryx Management is continuing to work towards closing the funding package this year and has submitted a draft financing agreement to the Ethiopian authorities for approval. Oryx expects to raise US$140m towards the project’s financing requirement and the government has agreed to fund offsite infrastructure to a maximum of US$20m, for a total of US$160m. With respect to the residual capital requirement, KEFI has previously stated that it is considering offering third parties a stake in the project. It commented that it is in discussions with a number of potential project-level investors and that it will now bring these discussions to a head.


COMMENT: As a result of the increased throughput, gold production during the project’s first three years of operation is planned to increase from 115,000oz pa to 144,000oz. Forecast all-in sustaining costs (AISC) are planned to be slightly lower than previous estimates at US$773/oz. The announcement stated that the post-tax NP

V8 of the project, assuming a gold price of US$1,250/oz, decreased by 24% compared to the updated DFS of May 2017 (US$97m to US$74m).
We expect to update our valuation and target price as a result of this announcement and will provide a more complete commentary later. Our previous target price of 9.0p was based on a risked SoTP NAV for the company and assumed a gold price of US$1,250/oz and a 0.75x P/NAV8 multiple for the Tulu Kapi Project. It also reflected allowances for the underground potential at Tulu Kapi, other exploration assets and G&A costs. To view our previous report on the company, please click here.

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Tue, 31 Oct 2017 13:08:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28908/in-the-news-amani-gold-kefi-minerals-28908.html
In The News - Weatherly International & Metminco http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28901/in-the-news-weatherly-international-metminco-28901.html FROM THE BROKING DESK


Weatherly International*† has announced the rescheduling of repayments to Orion. The first two repayments under Facility B have been pushed back by two months each, with the remaining terms unchanged. The payments under Facilities C & D have been deferred by four months. The current combined payment schedule includes US$21.8m on 31 December 2017, US$9.7m on 31 January 2018 and US$9.7m on 28 February 2018. Weatherly and Orion have also agreed that future missed interest payments will no longer be capitalised and added to the principal, but will instead be due at the same time as the principal. Any unpaid interest will accrue at LIBOR +12%. This stands in contrast to LIBOR +2% for the Orion facility announced in July.
The current total of US$41.2m owing from 31 December 2017 to 28 February 2018 compares to US$3.5m of operating cashflow for the six months ended 31 December 2016. Over these six months the average sales price and C1 costs were US$4,916/t and US$4,603/t, respectively. Prices and costs have both since risen, with hedging expected to provide a realised sales price of ~US$6,050/t in the December 2017 quarter, while C1 costs increased to US$6,344/t and US$5,402/t in the June 2017 and September 2017 quarters, respectively.
The company continues to manage its cashflow with hedges on the price of copper. The company appears to be fully hedged for the December 2017 quarter, with 4,650t hedged between US$6,000-6,077/t, and a further 2,100t under options to Orion to purchase at US$6,000/t. The combined 6,750t under hedging and options for the December 2017 quarter compares to production in June 2017 and September 2017 of 6,344t and 5,402t, respectively.

COMPANIES


Metminco*†


ASX:MNC | A¢5.6 | US$5m | Speculative Buy


Feasibility Study Confirms Miraflores as a Robust Project
Metminco has announced a detailed summary of the feasibility study into the development of the Miraflores Gold Project in Colombia. This follows the announcement two weeks ago of a maiden reserve at the project, which also included the main findings of the study. The reserve included 4.3Mt of ore grading 3.29 g/t Au and 2.57 g/t Ag, containing 456,000oz Au and 357,000oz Ag. The feasibility study showed production of 45,000oz pa Au and 23,000oz pa Ag over a mine life of 9.5 years. At a US$1,300/oz Au price, the after-tax NPV8% was US$72m, with an IRR of 25%.
COMMENT: The feasibility study announcement provides a detailed summary of the project. Earlier in 3Q17 the company received approvals to complete up to 2,000m of underground development, and it is currently evaluating options to finance this work. The company is also advancing the Environmental Impact Assessment, the approval of which is required prior to the main project development. Metminco aims to commence front-end engineering design (FEED) studies in March and to have them completed around mid-2018. Miraflores appears to be a robust project that more than supports the current market cap of just US$5m. We continue to recommend Metminco as a Speculative Buy.

Miraflores is 100%-owned, subject to up to A$13m of deferred acquisition payments — Metminco acquired Miraflores from RMB in May 2016. A total of A$6m of deferred cash payments remain outstanding over the coming three years: A$1m in June 2018, A$3m in 2019 and A$2m in 2020. The last two of these payments would be triggered earlier by a production decision, meaning that — if the project progresses as expected — the company could be obligated to pay the full A$6m around the middle of next year. A royalty of up to A$7m is also payable from project cashflow.
Feasibility study delivered an NPV8% of US$72m and an IRR of 25% at US$1,300/oz — The results of the study were announced in October 2017. Reserves were 4.3Mt of ore grading 3.29 g/t Au and 2.57 g/t Ag for a contained 456,000oz Au and 357,000oz Ag. Underground mining using longhole stoping with backfill was planned in conjunction with a gravity concentration, flotation and cyanidation processing route. The feasibility study showed production of 45,000oz pa Au and 23,000oz pa Ag over a mine life of 9.5 years. At a US$1,300/oz Au price, the after-tax NPV8% was US$72m, with an IRR of 25%.
Permitting and associated approvals key to timeline — The EIA approval process includes approval of the feasibility study and the completed environmental baseline studies, the approved development plan and the Social and Environmental Management Plan (particularly focused on the relocation of up to 70 homes and a number of illegal miners). It also incorporates the process of consultation and assessment of the impact of the project that forms the project’s Social Licence. The project’s design includes underground mining and dry stacked tailings, limiting its surface footprint, a factor that is hoped to help speed the EIA approval process.

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Mon, 30 Oct 2017 11:14:00 +0000 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28901/in-the-news-weatherly-international-metminco-28901.html
In the news: Barrick Gold/Tanzania & Peak Resources http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28856/in-the-news-barrick-goldtanzania-peak-resources-28856.html FROM THE BROKING DESK

The news that Barrick Gold (TSE:ABX) had come to a settlement with the Tanzanian Government was taken very well by the market; shares in Acacia Mining rose over 35%. The settlement Barrick has struck will see the Tanzanian Government take a 16% stake in three gold mines operated by Acacia, an as yet undefined 50/50 split of economic benefits and a one-off payment of US$300m. The deal will need to be approved by both the shareholders and directors of Acacia, but it is effectively a Barrick subsidiary, with the Canadian gold miner owning 63.9% of the company and having two of the seven board seats.

Problems started when the Tanzanian Government banned the export of unprocessed minerals and enacted laws to increase state ownership of mines. This seriously shook investor confidence in the country and threatened a number of mining projects. While the deal looks quite exacting, it should be remembered that just four months ago Acacia was being asked to pay a whopping US$190bn in unpaid taxes. Tanzania is Africa’s fourth largest gold producer, and Acacia is the largest gold miner in the country. It is expected that a slew of similar deals will now be struck across the industry.

A company that we keep a close eye on in Tanzania is Peak Resources (ASX:PEK) ††, which is developing the Ngualla Nd/Pr Project. Peak got a lot of interest from investors at our recent Mobility Metals Conference, but — unsurprisingly — the situation in Tanzania was seen as an issue. Peak has actually received good support from the government so far, with environmental permits being issued and an application for a mining licence already made. The new mining minister, Angellah Kairuki, said this week that her top priority is to improve relations with investors and grow the mining sector for the economic benefit of all. Also, late last month Chiku Galawa, the Songwe Regional Commissioner, met with Peak and made public her support for the project.

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Fri, 20 Oct 2017 11:18:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28856/in-the-news-barrick-goldtanzania-peak-resources-28856.html
In the news: Amani Gold http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28791/in-the-news-amani-gold-28791.html COMPANIES

AMANI GOLD††

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

Amani Kicks Off Latest Drilling Programme at Giro Gold Project

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

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

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

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

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

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

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

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

 

FROM THE BROKING DESK

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

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

COMPANIES

KEFI MINERALS†

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

Quarterly Update — More Details on Intended Project Funding

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

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

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

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

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

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

Base Resources*†

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

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

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

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

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

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

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

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

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

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

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

Metal Tiger*†

LON:MTR | 1.8p | US$22m

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

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

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

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

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

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

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

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

AMANI GOLD††

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

Annual Results for FY17

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

COMPANIES

Metminco*†

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

Update on Interim Results and Underground Development Approval at Miraflores

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

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

• 3Q17 — Completion of Miraflores feasibility study

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

• End-2017 — Submission of EIA application

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

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

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

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

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

 

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

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

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

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

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

 

Metal Tiger*†

LON:MTR  | 1.9p | US$19m

IPO of Thai JV Postponed until 1Q18

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Metal Tiger*†

LON:MTR | 2.2p | US$22m

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

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

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

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

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

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

T3 Dome

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

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

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

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

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

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

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

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

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

T20 Dome

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

AMANI GOLD††

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

Revised Resource Estimate

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

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

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

 

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

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

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

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

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

(LON:BSE)

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

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

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

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

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

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

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

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

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

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


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


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

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

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

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

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

• 3Q17 — Completion of Miraflores feasibility study

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

• End-2017 — Submission of EIA application

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

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

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

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

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

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

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

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

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

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

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

Guidance Met in June 2017 Quarterly Results

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

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

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

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

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

 

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

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

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

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

 

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

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

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

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

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

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

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

COMPANIES

Base Resources*†

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

Repays Taurus Debt Facility

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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


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


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


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


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


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

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

WEATHERLY INTERNATIONAL*†

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

Operational Issues Deepen Dependency on Orion

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

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

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

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

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

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

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

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

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Mon, 03 Jul 2017 12:33:00 +0100 http://www.proactiveinvestors.co.uk/columns/the-rfc-ambrian-metals-mining-and-oil-gas-overview/28092/in-the-news-weatherly-international-28092.html