Author stories http://www.proactiveinvestors.co.uk Proactiveinvestors Author stories RSS feed en Thu, 14 Dec 2017 09:48:40 +0000 http://blogs.law.harvard.edu/tech/rss Genera CMS action@proactiveinvestors.com (Proactiveinvestors) action@proactiveinvestors.com (Proactiveinvestors) Today's market view - Base metals rise as dollar pauses on FOMC announcement http://www.proactiveinvestors.co.uk/columns/sp-angel/29106/today-s-market-view-base-metals-rise-as-dollar-pauses-on-fomc-announcement-29106.html Base metals rise as dollar pauses on FOMC announcement

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Bacanora Minerals (LON:BCN) – Sonora Lithium feasibility study results.
Highland Gold (LON:HGM) – Dividend policy announced
Kodal Minerals* (LON:KOD) – Kodal secures 90% of Bougouni mineral licenses in Mali
Ortac Resources* (LON:OTC) – Update on CASA Mining offer
Pallinghurst – plans to relist Gemfields assets in London
Savannah Resources (LON:SAV) – Drilling report from Mina do Barroso includes discovery of new high grade zone
Stratex International (LON:STI) – Thani Stratex reports maiden Mineral Resource at Anbat project in Egypt

Battery breakthrough triples electric car range
• A new battery breakthrough using negative electrodes made of lithium is said to have the potential to drastically increase storage capacity of batteries.
• The implication is that this may result in cheaper, safer, longer lasting batteries boosting the range electric vehicles to ~600km from ~200km.
• Researchers are also adding chemical compounds of phosphorus and sulphur elements to the charge carrying electrolyte.

Dow Jones Industrials  +0.49% at 24,505
Nikkei 225   -0.47% at 22,758
HK Hang Seng   +1.56% at 29,243
Shanghai Composite    +0.68% at 3,303
FTSE 350 Mining   +0.13% at 16,818
AIM Basic Resources   +0.64% at 2,595

Economics
US – Wholesale prices inflation beats estimates climbing to the highest pace since 2012 on the back of stronger energy prices.
• Price pressures from producers is a welcome news to monetary policy authorities given some FOMC members previously starting to express concerns over hgeadling inflation running below the Fed target.
• Fed rate increase seems to be priced into the dollar with markets’ attention to be drawn to the accompanying statement and the subsequent press conference from Janet Yellen.
• US equity indices continued to power ahead with S&P 500 (2,664) and Dow (24,504) closing at fresh highes yesterday led by gains in telecoms and financials.
• PPI (%mom/yoy): 0.4/3.1 in November v 2.8/0.4 in October and 0.3/2.4 forecast.
• Core PPI (%mom/yoy): 0.3/2.4 v 0.4/2.4 in October and 0.2/2.4 forecast.

UK – Employment dropped more than forecast in October while core jobs earnings growth (excl bonus) inched up latest ONS numbers show.
• The number of people in work dropped by 56k in the three months to October, the most since mid-15 and marking the second consecutive decline.
• Labour earnings (excl bonuses) increased by an annual 2.3% in 3m to October compared with 2.2% in 3m to September.
• Nevertheless, wage growth came short of the latest 3.1% consumer inflation reading in November with the ONS reporting that real wages decline by an annual 0.2%.

DRC – BBC reports on humanitarian crisis in the DRC
• The UN estimate there are ~500,000 severely malnourished children at risk of starvation in the region of Kasai putting the situation on a par with the Yemen, Syria and Iraq.
• Re: mining, the government is also looking at raising taxes and government ownership of mining projects in the DRC in a move which is likely to dissuade investment.
• It is already hugely expensive to operate in the DRC due to the high cost of logistical support and problems associated with exporting metal and concentrates out of the region.
• Poor roads, lengthy boarder checks, corruption and theft are all raise the cost of exports out of the DRC meaning that only higher-grade mineral projects will work in the region.

Currencies
US$1.1741/eur vs 1.1788/eur yesterday   Yen 113.43/$ vs 113.40/$   SAr 13.618/$ vs 13.676/$   $1.332/gbp vs $1.337/gbp   0.757/aud vs 0.753/aud   CNY 6.621/$ vs 6.617/$

Commodity News
Precious metals:         
Gold US$1,242/oz vs US$1,244/oz yesterday
• Gold prices inched higher after hitting an almost five-month low overnight while investors pause ahead of the conclusion of the US Federal Open Market Committee’s two-day meeting (closing today). The metal will remain under pressure as expectations for the meeting are to raise US interest rates before the end of the year.
• “The FOMC statement will be crucial this evening, setting the tone for the trajectory of US rates into 2018. Complacency in the last few months in this regard means that if the Fed holds its intention to hike at least three times next year, we could see an outsized reaction higher in both the dollar and yields. Neither would be good news for long gold positioning,” Senior Oanda market analyst.
• Despite news of a terrorist attack in New York on Monday, “investors seem to have no need of security just now” (Commerzbank AG analyst). A Bloomberg index of senior gold companies fell to their lowest level since July, as the price contracted c. 9% after hitting a one-year high in September.
   Gold ETFs 71.7moz vs US$71.7moz yesterday
Platinum US$878/oz vs US$886/oz yesterday
Palladium US$1,015/oz vs US$1,010/oz yesterday
Silver US$15.71/oz vs US$15.76/oz yesterday
           
Base metals:   
Copper US$ 6,703/t vs US$6,648/t yesterday
• Successful commissioning of the Kamoto Cu-Co whole ore leach plant at Katanga Mining will allow Glencore to double its copper production from the Democratic Republic of Congo over the course of the next two years. Production is expected to surge to 150Kt in 2018, and ramp up to 300Kt by 2019. The operation also represents a significant source of responsible cobalt supply, which is forecast to move into severe market deficit on the back of the electric vehicle story, with investors piling into the company to raise the share price 52% since Monday’s announcement.
• London copper moved higher as the dollar pulled back from one-month highs following expectations of a fifth interest rate hike since 2015.
• Copper jumped on supply concerns while analysts reassess their projections for Chile as the top-producing nation prepares for its busiest year of wage negotiations under the new labour code whilst higher prices inflate pay expectations. Chilean mines are expected to discuss contracts with 32 unions over the next year, representing one-fifth global supply. Barclays Plc estimate potential disruption to 40% worldwide copper supply triggered from future discussions.
• Unsuccessful negotiations earlier this year at BHP’s Escondida extended striking for the longest consecutive period in mining history, while Antofagasta Plc failed to reach an early agreement with workers at its Los Pelambres site after five weeks of talks.
• Chilean mines may be wise to take a leaf out of state-owned Codelco’s book, who avoided strikes in all of its wage negotiations when CEO Nelson Pizarro famously said it didn’t have “a single f---ing peso”.
• Despite signs of slowing Chinese demand, any disruption to supply could rapidly tighten market conditions and draw the metal above $7,000.
Aluminium US$ 2,018/t vs US$2,010/t yesterday
Nickel US$ 11,190/t vs US$11,130/t yesterday
Zinc US$ 3,160/t vs US$3,120/t yesterday - Glencore see fall in zinc production at 1mtpa through 2018 vs 1.1mtpa this year
• Glencore see a small fall in zinc production next year despite the restart of some of its own idled production.
• They also see production rising again to 1.16mt in 2019 as they restart more of their idled 500,000tpa.
• Glencore looks to reduce its zinc output into 2018 to 1.09 million tonnes in a move which was met by positive surge in the metal to settle +1% to $3,157/t yesterday. Further, the company looks to increase production by 195,000 tonnes over 2018-2020 to support prices with “Glencore wanting to see prices above $3,000 for some months to come”, Commerzbank analyst.
• Restarting production falls short of the 500,000 tonnes left idle in 2015 when commodity prices were crashing, and gives the company additional capacity to react to movements in the metal price.
Lead US$ 2,518/t vs US$2,496/t yesterday
Tin US$ 18,830/t vs US$19,405/t yesterday
           
Energy:           
Oil US$64.1/bbl vs US$65.4/bbl yesterday
Natural Gas US$2.716/mmbtu vs US$2.833/mmbtu yesterday
Uranium US$25.00/lb vs US$25.00/lb yesterday

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$68.0/t vs US$67.8/t
Chinese steel rebar 25mm US$755.7/t vs US$758.0/t
• Rebar continued to slide for the second day as spot prices retreat in China on caution surrounding Thursday’s release of economic data. Investors are “extremely cautious” ahead of November figures which include commodities-sensitive data on industrial production and fixed-asset investment, drawing the price nearer to monthly lows as rebar for May on Shanghai Futures Exchange closes -1.4% to 3,831 yuan/ton.
Thermal coal (1st year forward cif ARA) US$90.0/t vs US$88.4/t
Premium hard coking coal Aus fob US$236.2/t vs US$236.1/t
           
Other:  
Tungsten APT European US$293-300/mtu vs US$291-300/mtu last week
Cobalt LME 3m US$72750/t vs US$74700/t yesterday - Glencore to double cobalt production as it negotiates deal with tesla, Apple, VW
• Glencore is to double cobalt production in the next two years, tightening its grip on the market for key battery component
• The company aims to produce as much as 34,000t in 2019, vs 20,000t guidance gave in August. 
• The increase could raise Glencore share of global production to around 40% following the successful commissioning of Katanga Mining’s Cu-Co whole ore leach processing facility.
• The company is in discussions with Volkswagen AG, Tesla Inc, Apple Inc and other battery makers over future supply contracts
• Glencore also reckons the rise in Electric Vehicle production could require a further 390,000t of copper, 85,000t of nickel and 24,000t of cobalt by 2020
• EV’s may still only make 2% of new vehicle sales at this point, by 2030 EV’s are expected to have market share of <32%  
• LME’s ongoing probe into ethical mining practices in the DRC will only emphasize the importance of Katanga supply, as battery and automotive manufacturers (particularly Volkswagen) will look to secure responsible long-term supply of the battery chemical.

Company News:
Bacanora Minerals (LON:BCN) 94.5p, Mkt Cap £126m – Sonora Lithium feasibility study results.
• Bacanora Minerals reports the results of its feasibility study on the Sonora lithium project in Mexico. The study, based on the production of 35,000tpa of battery grade lithium carbonate, shows a pre-tax NPV8% of US$1.25bn and an IRR of 26.1%.
• After tax NPV8% is estimated at US$802m and IRR at 21.2%
• The study envisages an overall 19 years mine life with an initial four-year period at a production rate of 17,500tpa of lithium carbonate before a doubling of capacity to 35,000tpa for the remaining 15 years mine life.
• The capital cost for the initial stage Is estimated at approximately US$420m with the capital for the second stage expansion amounting to a further US$380m. The average life-of-mine operating costs are estimated at US$3910/tonne of lithium carbonate or US$3,418/t after credits for potassium sulphate  by-product.
• The largest element of the capital cost for both the Phase 1 and the Phase 2 projects are the lithium processing plant which represents 38% (US$158m) of the Phase 1 expenditure and 42% (US$18m) of the Phase 2 capital.
• Similarly, the processing costs represent the largest proportion of operating costs in both Phase 1 (US$3,093/t of product or 85% of the cost of lithium carbonate production) and Phase 2 (82% or US$3266/t of lithium carbonate).
• The company estimates that payback is achieved in 4 years.
• A 10% change in the assumed US$11,000/t selling price of the lithium carbonate product equates to a  24.5% change in the pre-tax NPV8%.
• The company makes the point that its preferred process route for the production of lithium carbonate is an established method involving a pre-concentration phase prior to roasting  ahead of a hydrometallurgical recovery  process to produce final battery grade product.
Conclusion: The detailed feasibility work is to be published on the Canadian SEDAR system within 45 days and we look forward to the opportunity to examine the Sonora project in greater detail.

Highland Gold (LON:HGM) 155p, Mkt Cap £504m – Dividend policy announced
• The board adopted a dividend policy to pay out 20% of Net Cash Flow from Operating Activities in each financial year.
• Additional cash dividend is subject to the cash generation of the business including profitability and planned capital expenditures as well as debt repayments.
Conclusion: The Company has doubled its dividend payments in 2016 (10.4p/$42m or 31% of NCFO v 4.5p/$22m or 21% of NCFO in 2015) on the back of strong performance. With 2017 shaping as another good year and interim dividends reiterated at 5p, we expected the Board to reiterate last year’s final dividend of 5.4p bringing total for the year to 10.4p or 6.7% dividend yield (35% of NCFO), the highest level among major London listed precious metals miners. Applying 20% of NCFO policy to H2/17 takes dividends to 3.3p in H2/17 and 8.3p for FY17 (5.4% yield). In 2018e the policy brings dividends to 6p (3.9% yield at $1,225/oz gold price and 265koz assumption), excluding special dividends. We think the dividend policy accounts for a capital intensive 2018-19 period on the back of Kekura development costs, Novo 1.3mtpa project expenses as well as an integration of the Blagodatnoye deposit and optimisation of the processing plant at the Khabarovsk hub with dividends expected to increase once major development projects ramp up raising NCFO.

Kodal Minerals* (LON:KOD) 0.19p, Mkt Cap £12.1m – Kodal secures 90% of Bougouni mineral licenses in Mali
• Kodal Minerals has accelerated payments to secure 90% of its Bougouni mineral licenses in Mali.
• The company has rights to explore and to develop minerals within the 250sqm Kolassokoro licence area which included Bougouni.
• Kodal has also reached agreement with a further company covering 100sqkm of high-priority ground within the Kolassokoro licence area where by Kodal will hold 90% and the Triumvirat Mining Company SARL, a local company will hold 10% of the assets. Triumvirat has the right to be free carried through to feasibility study after which it will have to pay its share of costs.  Kodal is also paying Triumvirat a fee of around £53,000.
• It is interesting to note that Triumvirat, a local Malian company, had managed to stake some ground overlapping Kodal’s mineral licenses in Mali due to an oversight by the registered license holder, EMAS Mining SA, in Mali.
• The ‘Malian National directorate of Geology and Mines’ (DNGM) has worked to resolve the matter so that Kodal has maintained its 90% holding in the ground.
• We also note, legislation in Mali requires the government to hold a 10% free carry on all mines in the region.
Conclusion: Kodal’s listed status has helped the company to resolve this license issue without any meaningful impediment to its holding.  More positively the effective issuance of new licenses on the ground gives the exploration license a longer life span than the older licenses with Triumvirat replacing the 10% stake formerly held by EMAS Mining SA.
*SP Angel act as Financial Advisor and broker to Kodal Minerals. A partner at SP Angel acts as Chairman to the company.

Ortac Resources* (LON:OTC) 2.9p, Mkt Cap £9.6m – Update on CASA Mining offer
(Ortac holds 70.09% of CASA Mining which holds 71.25% of the Misisi Gold project in South Kivu in the Eastern part of the DRC. This gives Ortac an effective 49.9% stake in the Akyanga project)
• Ortac reports that it has increased its holding in Casa Mining “from approximately 45% to 84.7% since the Offer was announced on 10 November 2017”
• “The Offer remains open until 10 May 2018 and acceptances continue to be received daily.”
• To date, Ortac has issued some 66.6m new shares to accepting shareholders of the Offer.
• CASA Mining holds 71.25% of the Misisi Gold project in South Kivu in the Eastern part of the DRC.  CASA’s licenses cover some 60km of the Misisi Corridor which include the Akyanga gold resource as well as the Lubitchako, Tulongwe, Kilombwe and Mutshobwe prospects.
• In June this year, the company published an initial inferred resource for Akyanga of 1moz of gold within 14.3m tonnes at an average grade of 2.27g/t. Subsequent drilling aimed at upgrading some of this to indicated status as well as establishing the geological controls and continuity of the mineralisation has encountered further mineralisation including what the company describes as the “highest ever grade and intersected thickness drilled at the Akyanga Deposit – 24.75m @ 8.04 g/y Au from 200.75m incl. 5m @22.63 g/t Au from 2017.10m” in hole MSDD0110”
Conclusion: Ortac Resources is increasing its interest in Casa Mining where further drilling of the 1m oz Akyanga deposit in the DRC continues to deliver meaningful results and opens up the possibility of further mineralisation towards the south.
*SP Angel acts as nomad and broker to Ortac Resources

Pallinghurst – plans to relist Gemfields assets in London
• Investors may be surprised to learn Brian Gilbertson is looking to relist the assets of Gemfields in London.
• Gilbertson who runs Pallinghurst, a SA based private equity firm may be equally surprised at potentially hostile reactions and opposition from investors who feel legged over by the London delisting process of Gemfields forced through by Pallinghurst.

Savannah Resources (LON:SAV) 5.6p, Mkt cap £35.8m – Drilling report from Mina do Barroso includes discovery of new high grade zone
• Savannah Resources has provided an update on its reverse-circulation drilling programme at Mina do Barroso in Portugal where 66 holes totalling 5558m have now been completed.
• The drilling has focussed on the previously known  Grandao, Reservatorio and NOA deposits but it has also discovered “a newly identified sub-vertical pegmatite body … identifying a new high-grade zone of mineralisation in hole 17GRARC20 which intersected 25m at an average grade of 1.49% Li2O from a depth of 32m, including 14m grading 2.1% Li2O.”
• Other results from this new zone include:
-9m averaging 0.86% Li2O from a depth of 22m also in hole 17GRARC20; and
-A further two mineralised intersections in hole 17GRARC18 where 17m averaging 0.45% Li2O was encountered from a depth of 9m and a further 17m averaging 0.37% Li2O from 40m depth; and
-A 13m wide intersection averaging 0.63% Li2O from 36m in hole 17GRARC14
-Thirty-six holes totalling 2809m have been completed on the flat-lying Grandao pegmatite and a further 16 holes have been added to the programme “to help outline the full potential of the Grandao deposit.”Among the results highlighted today from the Grandao drilling are:
-109m averaging 1.04% Li2O from surface in hole 17GRARC17 which includes a 52m wide section averaging 1.32% Li2O from  a depth of 4m; and
-71m averaging 1.06% Li2O from 88m, including 57m averaging 1.2% from 88m in hole 17GRARC19; and
-31m averaging 1.2% from surface in hole 17GRARC12; and
-25m averaging 1.15% from 36m in hole 17GRARC23
-At the Reservatorio deposit, where the company expects to produce a maiden mineral resource estimate by the end of 2017, “assay results confirm that the lithium mineralisation extends to over 400m, with good down dip extensions of at least 100m”. Among the results highlighted today are:
-32m averaging 1.05% Li2O from a depth of 78m in hole 17GRARC17; and
-15m averaging 1.19% Li2O from a depth of 79m in hole 17GRARC16
-At the NOA deposit, where “further drilling and results [are] pending; drilling of a further 6 holes has confirmed the presence of lithium mineralisation over a 200m strike length together with good down dip extensions of at least 50m and pegmatite widths up to 15m.”
-The company notes that further metallurgical testing is underway and that results from the Grandao, Reservatorio and NOA deposits are expected in early 2018.
-Commenting on the results which he described as “outstanding results that represent some of the best lithium spodumene intersections ever reported for a European deposit.” Chief Executive, David Archer said “The results from Grandao are particularly exciting as there are some exceptional widths and high grades and the geometry of what we are seeing suggests there is potential for a low stripping ratio, open-cut mine development.”
Conclusion: The latest drilling results from Mina do Barroso include high grades and wide intersections as well as the discovery of a previously identified body of mineralisation. We look forward to the forthcoming maiden resource estimate for the Reservatorio deposit later this year and to the metallurgical test results and further news of the extended drilling programme.
LON:STI) 1.1p, Mkt cap £5.0m – Thani Stratex reports maiden Mineral Resource at Anbat project in Egypt
• Thani Stratex Resources has re-reported its maiden mineral resource at its Anbat project in Egypt.
• The original report on 7 December was released prematurely without the permission of CSA consultants and without full disclosure with respect to JORC public reporting requirements.
• Strates states: “The material change to the original announcement and MRE report released by TSR relates to disclosure around the conceptual pit optimisation, as follows:”
• "Inferred Mineral Resources were reported for blocks above 0.5 g/t Au and within a conceptual pit optimisation scenario based on a gold price of $1,500/oz to underpin the JORC (2012) requirement of reasonable chances of eventual extraction.
• The conceptual pit optimisation does not represent an Economic Study, since no such study has been completed, and is based upon an Inferred Mineral Resource which is not suitable for detailed mine planning. Mineral Resources located within the conceptual pit do not have proven economic viability and are not Mineral Reserves."
• “The Inferred Mineral Resources of 5.9 million tonnes, at a grade of 1.11 g/t for a total of 209,000 ounces, remain unchanged.”
• We note that the optimisation shows a smaller resource of 2.9mt grading 1.08g/t assuming a gold price of $1,250/oz though we concede that this might overly constrain the model.
Conclusion:  We see this resource as a platform for future work. While the disclosure is embarrassing for Thani Stratex Resources we are not overly concerned as we see CSA’s work as of good quality with a world-class team of authors and reviewers having signed off on the document.
Click link for the CSA Mineral Resource Estimate and Conceptual Pit Optimisation: http://thanistratex.com/_resources/news/12-12th-December-2017-Anbat-report-by-CSA.pdf

 

 

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Wed, 13 Dec 2017 10:54:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29106/today-s-market-view-base-metals-rise-as-dollar-pauses-on-fomc-announcement-29106.html
Today's market view -Mkango Resources, Patagonia Gold, Serabi Gold Price, Sula Iron & Gold, Strategic Minerals http://www.proactiveinvestors.co.uk/columns/sp-angel/29092/today-s-market-view-mkango-resources-patagonia-gold-serabi-gold-price-sula-iron-gold-strategic-minerals-29092.html Mkango Resources* (LON:MKA) – TSXV grants conditional acceptance of Talaxis deal
Patagonia Gold (LON:PGD) - Proceeding with Calcatreu option
Serabi Gold Price (LON:SRB) – Mineral reserve/resource update
Sula Iron & Gold (LON:SULA) – Acquisition of cobalt licence in DRC and name change
Strategic Minerals* (LON:SML) – Redmoor phase 2 drilling results

Dow Jones Industrials  +0.49% at 24,329
Nikkei 225   +0.56% at 22,939
HK Hang Seng   +1.18% at 28,978
Shanghai Composite    +0.98% at 3,322
FTSE 350 Mining   +0.09% at 16,558
AIM Basic Resources   +1.01% at 2,554

Economics

Currencies

US$1.1788/eur vs 1.1746/eur yesterday.           Yen 113.40/$ vs 113.54/$.         SAr 13.676/$ vs 13.683/$.            $1.337/gbp vs $1.351/gbp
            0.753/aud vs 0.751/aud.            CNY 6.617/$ vs 6.617/$.

Asian – Strong data positive for Asian shares
• Strong US payrolls data and better-than-expected Chinese trade figures boosted Asian shares as every single market bar one showed positive movement.
• The MSCI’s broadest index of Asia-Pacific shares outside of Japan climbed 0.5% to 552.38 above a recent two-month low. Japan’s Nikkei rose 0.6% with China’s blue-chip CSI 300 index up 1.2%.

Commodity News

Australian and Canadian miners benefit from EV boom

• EV and battery makers looking to lock future raw material supply have been investing in lithium and cobalt mines
• String of potential financing deals in Canada comes after handful of lithium miners in Australia secured investment from mainly Chinese automakers and battery makers this year

Beijing issues emergency order to relight coal generators
• Ordered power companies are required to immediately fire up backup coal burning generators in response to a natural shortage in North China during its critical winter heating period
• The city sent notices to the State Grid Corp. of China’s North China division, State Grid Beijing Electric Power Co. and Huaneng Beijing Thermal Power Co. Ltd. to begin emergency coal power generation to reduce the city’s reliance on natural gas

Precious metals:         
Gold US$1,250/oz vs US$1,248/oz last week
• Bearish sentiment toward the precious metal rises to its highest levels since 2015, as traders and analysts surveyed before this week’s meeting of the Federal Reserve (Dec. 12-13) foresee an increase in US interest rates for a third time this year. Money managers have tripled their short positions in gold, which is the fastest pace since record-keeping started in 2006. Rapidly changing sentiment follows a five-year low in short positions last week as North Korea-US tensions and uncertainty surrounding the Senate tax bill supported demand for the safe haven investment.
• Buoyant US payroll data signaled robust economic growth as November figures rise to 228,000, above the 195,000 median economist forecasts. The jobless rate held steady, while wages rose less than expected.
• Traditional investors in the safe haven asset may be drawn towards the rapid ascent of cryptocurrency values, as CBOE launches the debut bitcoin futures markets. The January contract opened at $15,460 in New York on Sunday and rose over 21% to above $18,500 as the exchange is expected to give Bitcoin extra legitimacy. With the rival Chicago Mercantile Exchange opening their derivative contract next week, the increased availability in the digital currency is forecast to draw more finance away from conventional investing.
   Gold ETFs 71.7moz vs US$71.7moz last week
Platinum US$892/oz vs US$896/oz last week
Palladium US$1,011/oz vs US$1,019/oz last week
Silver US$15.87/oz vs US$15.78/oz last week
           
Base metals: 
  
Copper US$ 6,573/t vs US$6,599/t last week
• Following last week’s significant decline across metals, recording the largest fall since 2016, market participants will be looking forward to the release of China’s industrial production data on Thursday to calm concerns over diminishing demand. The combined impact of capacity cuts to China’s second-largest smelter and data indicating surging imports have bitten into the demand-led rally that has lifted prices 19% year-to-date.
Aluminium US$ 2,011/t vs US$2,013/t last week
Nickel US$ 10,900/t vs US$11,020/t last week
Zinc US$ 3,098/t vs US$3,095/t last week
• Zinc leads the rebound of metal prices following last week’s biggest weekly decline since 2016, climbing 0.9% after falling 5.1% last week. Concerns over weakening Chinese demand had drawn LME index of six metals down 3.7%. Although the backdrop for metals over 2018 remains positive, analysts foresee “investors to be looking to lock in any gains and we’re still susceptible to weakness” (Australia & New Zealand Banking Group Ltd).
Lead US$ 2,458/t vs US$2,450/t last week
Tin US$ 19,360/t vs US$19,430/t last week
           
Energy:           
Oil US$63.3/bbl vs US$62.3/bbl last week
• OPEC and its partners have successfully eliminated more than half of excessive global supply this year, and forecast an effective market rebalance through 2018 through an extension of global supply cuts. However, the International Energy Agency foresee rising prices stimulating increased output from US shale drillers and non-OPEC producers, stalling the progress in reducing the remaining global glut.
• Worries over non-OPEC’s reaction to elevated prices has driven hedge funds and money managers to cut their bullish bets on US crude, as the speculator group removed 9,135 contracts in futures and options position in New York to 442,742.
Natural Gas US$2.830/mmbtu vs US$2.778/mmbtu last week
Uranium US$25.00/lb vs US$25.00/lb last week

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$67.8/t vs US$66.1/t
Chinese steel rebar 25mm US$752.1/t vs US$745.2/t
Thermal coal (1st year forward cif ARA) US$87.4/t vs US$86.3/t
Premium hard coking coal Aus fob US$236.1/t vs US$231.2/t
           
Other:  
Tungsten APT European US$293-300/mtu vs US$291-300/mtu last week
Cobalt LME 3m US$74500/t vs US$71000/t last week
• Tightening market conditions are driving concerns over supply as consumers rush to secure units to support the EV story. The surprise move by investment vehicle Cobalt 27 to acquire over 700 tonnes of physical metal prompted the price of high-grade cobalt to experience a dramatic 10% jump to the top end of $32.50-36.29/lb. The new of the recent purchase has since prompted several sellers to raise their offers and bids to secure deals.
• “There’s big tonnage changing hands in a tight market. Market investors have had a big impact on the whole community, and now with profit realization, we can see continued strength.”

Company News
Mkango Resources* (LON:MKA) 6.625p, Mkt Cap £6.5m – TSXV grants conditional acceptance of Talaxis deal
• Mkango Resources reports that the TSXV has conditionally accepted the Talaxis deal under which Mkango is set to receive £12m in three tranches for a 49% interest in the Songwe Hill Rare Earths Project. The transaction is subject to shareholder approval (excluding Talaxis) which is to be sought at a meeting to be held on 18th January 2018.
• “The first and second tranches, totaling £5 million (C$8.6 million), of the investment into the Project will be invested following receipt of Minority Approval, to be sought at a meeting ("Meeting") scheduled for January 18, 2018. The first tranche of £2 million (C$3.4 million) is being placed into escrow by Talaxis pending the Meeting.” In addition, there is an initial £1m investment into the new venture, Newco.
• The third tranche is subject to the completion of the formal documentation following the shareholder meeting. In addition, Talaxis has the option to “acquire a further 26% interest in the Project by arranging funding for Project development, following which Mkango would hold a 25% interest in the Project, free carried until commencement of production.”
• We also highlight the agreement between Mkango and Talaxis for cooperation on rare–earths projects worldwide and all other projects in Malawi, which singles Mkango out as the preferred partner for future rare earths projects as Talaxis owner, Noble Group develops its strategy in rare-earths.
• Commenting on the moves by the TSXV, Mkango’s Chief Executive, William Dawes, noted that “On shareholder approval and receipt of £6 million investment by Talaxis, the Company will commence the initial phase of the feasibility study, including mobilization for an extensive infill, geotechnical and exploration drilling programme starting in the second quarter of 2018, in parallel with ongoing processing flow sheet optimisation and work in relation to the Environmental, Social and Health Impact Assessment.”
Conclusion: We look forward to the shareholder vote in January which should clear the way for the funding needed to start the initial feasibility work at Songwe Hill and to the continuing flow of results from that work.
*SP Angel acts as Nomad and Broker to Mkango Resources
Patagonia Gold (PGD LN) 0.875p, mkt cap £20.7m - Proceeding with Calcatreu option
• Following its recent fundraising, Patagonia Gold is moving ahead with the formalities needed in order to exercise its option to acquire the Calcatreu silver/gold project in the Rio Negro Province of Argentina from Pan American Silver.
• The deposit contains an Ni-43-101 compliant indicated resource of 8mt at an average grade of 25.7 g/t silver and 2.63 g/t gold (6.6moz of silver and 675,000 oz of gold). 
• “The system has a known strike length of over 8 km” and the company intends to undertake detailed geophysical and geochemical surveys to provide insight into the potential scale of the opportunity.

Serabi Gold Price (LON:SRB) 3.25p, mkt cap £22.7m – Mineral reserve/resource update
• Serabi Gold reports its mineral reserves and resources effective 30th June 2017. The proven and probable reserves, in accordance with the CIM / NI-43-101 reporting standard, amount to a total of 182,000 oz of gold contained in 703,000 tonnes at a diluted grade of 8.05g/t gold. The company notes that this supports “in excess of 4 years production”.
• Over 90% of the reserve is contained within the Palito mine reserve inventory with the balance at the nearby Chico mine.
• The company notes that “The mineral resource and reserve estimates exclude previously announced gold discoveries made by Serabi including the Currutela, Copper Hill, Piaui and Palito South areas, where there is currently insufficient geological data to estimate a mineral resource for these discoveries. [However] … An infill drill programme is currently underway that will provide additional geological date on each of these project areas.”
• The company makes the point that, since its last resource estimation in June 2012, and the reopening of the Palito  mine in late 2013, the mine has extracted some 182,000oz of gold have been extracted and the overall measured/indicated resource of Palito has increased by 31percent to 271,000 oz (717,000t at a grade of 11.74g/t) with an additional inferred resource of 177,000oz (784,000t averaging 7.02g/t)
• We interpret this to mean that over the 4 year period since the mine re-opened, Serabi Gold has added an extra 182,000oz of gold to its measured/indicated resource base in addition to the gold produced.
• Similarly, we estimate that at Sao Chico, Serabi Gold has added some 39,000oz of resource in excess of the estimated 28,000oz of gold produced since the mine reached commercial production in January 2016.
Conclusion: Serabi Gold has boosted its overall mineral resources at both its operating mines at Palito and Sao Chico and is currently drilling a number of other prospects which may further add to resources if a sufficient density of drilling is achieved to support a resource estimate on these other properties. We look forward to continuing news as drilling proceeds.

Sula Iron & Gold (LON:SULA) 0.085p, Mkt Cap £2.8m – Acquisition of cobalt licence in DRC and name change
• Sula Iron & Gold has announced that it has acquired a controlling, 70% interest, in a cobalt licence in the DRC. The licence is located “close to a number of existing cobalt / copper mines …” and is underlain “by the type of rocks which hosts most of DRC’s cobalt and copper”.
• Grades reported on grab samples analysed in the field by a portable XRF analyser are reported to range up to 2.5% cobalt.
• The company has, conditionally,  raised £1.75m to progress the cobalt project and assess other similar opportunities in the DRC, via the placing of 3bn shares with new and existing shareholders and “a subscription  for 500,000,000 New Ordinary Shares with a single investor all at a price of 0.05 pence per share. The Fundraising, which has been arranged by SP Angel, is conditional, inter alia, upon Shareholders' approval of each of the Resolutions and Admission.”
• In order to reflect the shift in direction, “the Board has passed a resolution … to change the Company’s name to African Battery Metals plc”.
• A shareholder meeting has been called for 27th December.
• Commenting on the transaction, CEO, Roger Murphy, said “We are bullish on the outlook for cobalt and the other battery metals and believe that the creation of African Battery Metals plc will provide UK equity investors with exposure to cobalt, which some analysts see as the battery metal with the tightest supply/demand fundamentals.” Mr Murphy went on to add “The addition of cobalt to our existing gold assets in Sierra Leone, provides important diversification to our exploration activities. We remain committed to our Ferensola Gold Project and to maintaining and valorising it through a joint venture or farm-out, as previously announced."
Conclusion: The acquisition of a cobalt licence in DRC provides the London market with a new exploration exposure to the growing interest in cobalt as a battery metal. We look forward to developments as exploration proceeds.

Strategic Minerals* (LON:SML) 2.15p, Mkt Cap £28.4m – Redmoor phase 2 drilling results
• Strategic Minerals has released the results of the final 5 boreholes of its drilling programme at the Redmoor tin/tungsten project in Cornwall where it holds a 50% interest in Cornwall Resources with New Age Exploration.
• The results from the Phase 2 drilling show “Considerably higher-grade intercepts than previously reported”, and in our interpretation, show mineralisation within the sheeted vein system (SVS) extending over a vertical interval of up to 500m.
• The results of the full 20 hole, 7,045m programme, in conjunction with pre-existing drilling information, will be used for an update of the mineral resources estimate (currently an inferred resource of 13.3mt at an average grade of 0.21% tin and 0.16% tungsten trioxide) which is “targeted for release in Q1 2018.”
• The company also points out that the recent drilling “appears to indicate that the SVS grade may be increasing with depth.” Among the results reported today from the SVS are:
o An 8.5m wide intersection (7.83m estimated true width) at an average grade of 0.09% tin, 0.23% tungsten trioxide and 0.32% copper from a depth of 320.12m in hole CRD020, which also contained a 3m intersection averaging 1.55% tin, 0.06% tungsten trioxide and 2.45% copper from 301.13m and 4m averaging 0.57% tin, 0.15% tungsten trioxide and 0.75% copper from 354.76m; and
o Intersections of 6m averaging 0.03% tin, 1.29% tungsten trioxide and 0.28% copper from 465.10m and 7m averaging 0.01% tin, 1.79% tungsten trioxide and 0.17% copper from 507.05m in hole CRD019; and
o A 13m wide intersection (8.41m estimated true width) at an average grade of 0.08% tin, 0.43% tungsten trioxide and 1.24% copper from a depth of 357.17m in hole CRD018, which also contained a 2m wide intersection averaging 0.07% tin, 0.81% tungsten trioxide and 0.35% copper from 365.17m..
• We note that the recent drilling is showing potentially significant copper and tungsten trioxide grades while the tin grades, with the exception of those encountered in hole CRD020, are generally lower than those previously encountered.
• Commenting on the results, non-executive director, Peter Wale, highlighted that the “potential for the resource size and grade to improve at depth has opened a substantial opportunity for the projects, extending the depth of known mineralisation at Redmoor.”
• Mr Wale went on to comment that “These results have encouraged us to seriously examine fast-tracking the project to production and we look forward to updating the market after completing the resource update.”
Conclusion: The second phase of drilling at Redmoor has shown wide intersections of the SVS at depth and encouraged the company to examine fast track development opportunities for the project. We look forward to the updated mineral resource estimate during Q1 2018 and to further comment from the company on its view of the development possibilities at Redmoor.

*SP Angel act as Nomad and broker to Strategic Minerals

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Mon, 11 Dec 2017 11:06:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29092/today-s-market-view-mkango-resources-patagonia-gold-serabi-gold-price-sula-iron-gold-strategic-minerals-29092.html
Today's market view - Copper holds despite China credit growth data and FOMC meeting http://www.proactiveinvestors.co.uk/columns/sp-angel/29099/today-s-market-view-copper-holds-despite-china-credit-growth-data-and-fomc-meeting-29099.html Anglo American (LON:AAL) – De Beers diamond sales remain firm
Gem Diamonds (LON:GEMD) – Ghaghoo sale discussions ended – further negotiations underway
Premier African Minerals (LON:PREM) –Latest drilling from Zulu and RHA update
Rainbow Rare Earths Ltd (LON:RBW) – Raising £2.8m for growth plans at Gakara
Savannah Resources (LON:SAV) – Savannah commissions small 20tph pilot plant on Mutamba mineral sands project in Mozambique
W Resources (LON:WRES) – Potential US$30m term loan for La Parilla

Electric Vehicle sales may lose power as China scales back sUBSidies
• Even as long term confidence in role of electric cars grows a great deal of uncertainty remains for raw material producers as China scales back its car sUBSidies and technology that powers the vehicles evolves potentially slashing demand for some battery materials
• Carmakers are already planning to use less cobalt shifting ratios in favour of nickel due to supply chain risks and higher price levels

Dow Jones Industrials  +0.23% at 24,386
Nikkei 225   -0.32% at 22,866
HK Hang Seng   -0.63% at 28,782
Shanghai Composite    -1.25% at 3,281
FTSE 350 Mining   -0.25% at 16,808
AIM Basic Resources   +0.97% at 2,579

Economics
US – The US$ index and precious metals are little changed this morning as the FOMC are holding the last policy setting meeting for this year.
• Both Dow (24,386) and S&P500 (2,660) closed at record levels on Monday led by gains in energy stocks and tech sector.
• The US Treasury latest economic growth projections show that tax cuts may generate around $1.8bn of extra tax revenue over 10 year period.
• The review says the economy will grow at 2.9% per annum over 10 years which is 0.7pp stronger compared to previous predictions.
• The Treasury expects half of the pick up in growth rates to be attributable to a reduction in corporate tax rate (20% down from 35%) with the balance of gains coming from changes to individual and pass-through businesses taxation, regulatory reform, infrastructure development and welfare reform.

Germany – CDU representatives are meeting with the SPD for initial talks over the potential to from the “grand coalition” this Wednesday.
• SPD leaders will decide on Friday whether to launch the process of formal negotiations.

UK – Inflation continued to accelerate through November hitting the strongest level in more than five years.
• The data marginally exceeded market estimates and latest BOE projections for 3.0% in Q4/17.
• Inflation is expected to level off once the effect of the 18% depreciation in the sterling since late 2015 falls away with the BOE guiding for CPI at 2.4% in Q4/18 and 2.2% in Q4/19 and 2.1% in Q4/20.
• Additional pressure came from higher energy prices.
• Input prices are reported to have climbed 7.3%yoy with manufacturers absorbing some of the increase forced by industry competition passing through less than a half of the increase to consumers.
• Mark Carny will now need to write a letter to Chancellor of the Exchequer explaining why inflation is running more than 1pp above the target 2% rate.
CPI (%mom/yoy): 0.3/3.1 v 0.1/3.0 in October and 0.2/3.0 forecast.

South Africa – The National Prosecuting Agency (NPA) extended the deadline for President Zuma to make representations to prevent the corruption charges being brought against him to 31 January.
• The 783 charges against Zuma relate to a R30bn government arms deal arranged in the late 1990s which were then dropped by the NPA before Zuma ran for the presidency.
• The High Court reinstated charges last year with the Supreme Court upholding the decision in October, rejecting an appeal by Zuma and calling NPA decision to set aside the charges as “irrational”.
• Additionally, the High Court ruled that the appointment of the chief state prosecutor by Zuma in 2015 should be considered invalid and should be replaced immediately.
• The President filed an appeal with Abrahams, the chief prosecutor, to remain in office until the appeal is determined.

Currencies
US$1.1788/eur vs 1.1746/eur yesterday.  Yen 113.40/$ vs 113.54/$.  SAr 13.676/$ vs 13.683/$.  $1.337/gbp vs $1.351/gbp.
0.753/aud vs 0.751/aud.   CNY 6.617/$ vs 6.617/$.

Commodity News
Industrial cuts boost Chinese metals
• Effective supply cuts linked to China’s environmental crackdown are leading to great import demand and boosting Shanghai base metal futures. The pollution action plan devised in 2013, which includes the 2+26 plan forcing the closure of aluminium, steel and other industries during the winter heating season from mid-November to March, aims to curtail concentrations of hazardous airborne particles (PM2.5) by 25%.
• UBS see China’s focus on reducing air, land and water pollution to be a major driver for commodities, boosting the importance of higher-quality product and enhanced imports.

Precious metals:         
Gold US$1,244/oz vs US$1,250/oz yesterday
• Gold price climbs from yesterday’s five-month intraday low of $1,240.81/oz, with market participants seeing the key $1,240 support level a short-cover position ahead of the Federal Reserve meeting. However, support for the metal maybe short lived as outgoing Chair Janet Yellen is set to signal that more interest rate increases are due in 2018 after raising the Fed’s benchmark by a quarter of a percentage point.
• Further interest rate increases would steadily grind gold lower, with hawkish comments drawing the metal down toward $1,205-$1,210 forecast INTL Fcstone analyst.
• Market analyst at Oanda linked yesterday’s decline in gold price to increased access to cryptocurrency trading as the CBOE Bitcoin futures went live, suggesting “it is no coincidence that the day that Bitcoin futures officially started trading, gold prices dropped in an otherwise sideways overnight session in most markets”.
   Gold ETFs 71.7moz vs US$71.7moz yesterday
Platinum US$886/oz vs US$892/oz yesterday
Palladium US$1,010/oz vs US$1,011/oz yesterday
Silver US$15.76/oz vs US$15.87/oz yesterday
           
Base metals:   
Copper US$ 6,648/t vs US$6,573/t yesterday
• Subdued investor digest banks’ view on outlook for 2018 draws metals lower. Nickel led the fall with 1.3%, while LME copper contracted 0.4% on subdued demand with an average $6,382/t in 2018.
Barclays and Goldman Sachs are outright bullish concerning supply volatility as labour negotiations could trigger disruptions at mines producing 40% of the world’s raw material. 7.8 million tonnes of annual production could be at risk as a swathe of labour contracts are due for renewal, with labour renegotiations surrounding the 20% rally in copper price this year. Copper surged to a three-year high in October on supply cuts, better-than-expected demand and waning long-term supply concerns. Elevated prices have already attracted strikes and widespread industrial action across Chile and Peru as unions focus on fairer wages.
• Planned winter closure of smelting operations to combat air emissions are ramping up imports of intermediate copper products as unwrought copper and copper-fabricated products were up 42.4% mom, or 24.7% yoy.
Aluminium US$ 2,010/t vs US$2,011/t yesterday
Nickel US$ 11,130/t vs US$10,900/t yesterday
Zinc US$ 3,120/t vs US$3,098/t yesterday - Zinc prices rising in China as top producing areas start environmental checks
• Zinc futures rose 0.8% to 24,910 yuan a tonne amid growing concerns about supplies of zinc concentrate after Huayuan county warned it will carry out more environmental inspections
• As much as 3,000 tonnes – 5,000 tonnes of zinc could be affected by the checks
Lead US$ 2,496/t vs US$2,458/t yesterday
Tin US$ 19,405/t vs US$19,360/t yesterday
           
Energy:           
Oil US$65.4/bbl vs US$63.3/bbl yesterday
• Britain’s largest oil pipeline could shut down for unscheduled repair work as routine inspection works revealed a small leak. The Forties Pipeline System, which carries 450,000 barrels per day of Forties crude from the North Sea to the Kinneil processing terminal in Scotland, has been operating at reduced capacity since December 7. sending the price of crude to new two-year highs.
• Hedge fund managers begin profit taking from strong rally in crude oil and refined product prices, with portfolio managers cutting their combined net long position in the five major futures and options contracts linked to petroleum prices by an equivalent of 34 million barrels last week.  
Natural Gas US$2.833/mmbtu vs US$2.830/mmbtu yesterday
Uranium US$25.00/lb vs US$25.00/lb yesterday
Lithium – new study links trace levels of lithium in drinking water to lower Altzheimer death rates

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$67.8/t vs US$67.8/t
Chinese steel rebar 25mm US$758.0/t vs US$752.1/t
Thermal coal (1st year forward cif ARA) US$88.4/t vs US$87.4/t - China coal prices soar as gas shortages spur unexpected demand
• Coal futures jumped to record high on Monday as natural gas shortages across the north spurred an unexpected demand for the fuel from utilities
• State media reported Beijing would be forced to restart coal fired power plant to help ease the gas shortage
Premium hard coking coal Aus fob US$236.1/t vs US$236.1/t
           
Other:  
Tungsten APT European US$293-300/mtu vs US$291-300/mtu last week
Cobalt LME 3m US$74750/t vs US$74500/t yesterday
• Revision of the mining code in the Democratic Republic of Congo could do lasting damage to investment in the globally leading cobalt and copper producer. The method of revising the 2002 mining code has been a laborious process extending for over five years, but on Friday the National Assembly approved a bill that would increase taxes and royalties. The measure is set to increase the state’s minimum unpaid share of new mining projects and require that Congolese investors hold at least 10% of shares in large-scale mines.
• The government argues that the proposed 3.5% royalties on precious and base metals are lower than in competitor nations such as Zambia, and revenues could boost the country’s annual budget of only around $5 billion.
• The bill could have devastating impacts on the nation’s economy, representing some 95% of the country’s export revenues, while hampering crucial supply for the developing electric economy, with copper and cobalt playing a fundamental role in electric vehicles and renewable technologies.
• LME’s probe into ethical sourcing of cobalt finds its first victim, as China’s Nanjing Hanrui said it was unable to ascertain that its products did not involve the use of child labour in Africa.
China’s Nanjing Hanrui can’t be sure cobalt didn’t use child labour
• China’s Nanjing Hanrui Cobalt, which sells the metal to a firm approved by the London Metal Exchange, said it was unable to ascertain that its products did not involve the use of child labour in Africa.
• Another LME supplier, Yantai Cash is unable to deliver against the LME cobalt contract as has yet to set up a supply chain verification system.

Company News
Anglo American (LON:AAL) 1376 pence, Mkt Cap £17.8bn –De Beers diamond sales remain firm
• Anglo American reports that De Beers achieved sales of US$450m for its 10th diamond sale of 2017. Equivalent sales in 2016 amounted to $422m.
• The sales represent a modest, 3% reduction on the $466m sales achieved during the previous sales cycle, which has been adjusted upwards from the provisionally reported $455m to $466m.
• Commenting on the sales, De Beers CEO, Bruce Cleaver, said that “the sales saw the continuation of good demand for De Beers rough diamonds as we head towards the end of 2017 … with sales slightly ahead of the equivalent period in 2016“.
Conclusion: The upgrading of the provisional value of the 9th sales cycle and the maintenance of this level of demand into the 10th cycle suggests a firming of the demand for rough diamonds in the run up to Christmas and the New Year.

Gem Diamonds (LON:GEMD) 76.3p, Mkt Cap £106m – Ghaghoo sale discussions ended – further negotiations underway
Gem Diamonds reports that the earlier proposal by a third party to acquire 100% of the mothballed Ghaghoo diamond mine has not resulted in agreement and that the offer has been withdrawn.
• The company does confirm, however, that it is “presently in discussions with other parties interested in acquiring 100% of the Ghaghoo asset and will update the market as and when appropriate.”

Premier African Minerals (LON:PREM) 0.4p, Mkt Cap £26m –Latest drilling from Zulu and RHA update
• Premier African Minerals has announced the assay results of the upper portion of its latest drillhole at the Zulu Lithium project near Fort Rixon, Zimbabwe.
• Hole ZDD-45, which is a step-out hole located approximately 220m south of the Main Zone where the company has a maiden resource estimate of 20.1m tonnes grading 1.06% Li2O, has encountered 68m of mineralised pegmatite from a depth of 101m down hole.
• “Assay results from the first 38.84m analysed contains an average of 1.55% Li2O in Multiple intersections including:
o 8.22m at 1.96% Li2O from 101.24m
o 3.53m at 1.06% Li2Ofrom 111.70m
o 1.20m at 2.08% Li2O from 124.40m
o 11.47m at 1.90% Li2O from 126.77m
 Including 0.95m at 4.24% Li2O from 138.96m
• 8.48m at 1.25% Li2O from 138.96m”
• Results from the rest of the hole are still pending.
• The drilling so far adds a further 24 holes (3683.54m) to the 2500m of drilling which was incorporated in the maiden resource estimate of June 2017. “The currents drilling programme is focussed on expanding as well as upgrading the resources in the Main Zone and to delineate further the Li mineralisation in the new south-eastern zone.”
• The company notes that all of the holes in the current programme have intersected mineralisation but that today’s results in Hole ZDD-45 are the best to date and are located at the junction of three zones and that the lithium mineralisation is spodumene rich with only scarce petalite and lepidolite.
• In a separate announcement, the company provides a progress report on its RHA tungsten project in Zimbabwe. A bulk sample of some 8,300 tonnes of open pit ore has been taken and of this around 7,250 tonnes have been processed in order to provide data which “will guide future open pit operations and cost effectiveness”. The remaining ore from the bulk sample will be processed “when the mining contractor has completed fragmentation of large boulders”, suggesting that the initial mining was perhaps not overly efficient.
• The company’s underground operations at RHS are reported to be progressing well although the monthly production remains below the 6000 tpm target projected for profitable operations though the company indicates that this target may have been overstated it expectes to achieve the 6000tpm target rate in December. Plant performance is “encouraging” with throughput at around 700tpd “and plant performance is primarily constrained because of high fine particle percentage in the open pit ore.” The company expects this problem to be alleviated by the blending of underground ore into the plant feed.
Conclusion: Drilling at Zulu appears to be extending the footprint of the mineralisation and offering the possibility of an upgrade to the existing 20mt resource. We await the assays from the lower portion of the current hole with interest. At RHA, it appears that there are continuing operational challenges. Despite a number of improvements relatively high levels of fine ore in the plant feed constricts plant throughput while the underground operation is only expected to reach its target production rate this month.

Rainbow Rare Earths Ltd (LON:RBW) – 15.1p, mkt cap £23.4m – Raising £2.8m for growth plans at Gakara
• Rainbow Rare Earths reports plans to raise between £2.6-2.8m in order to “bring forward its growth plans at its producing Gakara Rare Earth Project in Burundi … including an exploration campaign and the expansion of the mining fleet”.
• The company identifies the principal uses of the proceeds as:
o “Acceleration of the production ramp-up by fast-tracking the development of new mining areas at Gakara
o Purchase of additional mining fleet
o Drilling campaign to investigate recently identified anomalies at Gakara
o Strengthening balance sheet during ramp up.”
o The company confirms that the minimum price at which the funds are to raised is 14p/share.
o Conclusion: Rainbow Rare Earths is raising funds to accelerate the expansion of the Gakara Rare Earths project in Burundi.

Savannah Resources (LON:SAV) 5.4p, Mkt cap £34m – Savannah commissions small 20tph pilot plant on Mutamba mineral sands project in Mozambique
• Savannah Resources report the commissioning of a 20tph pilot plant on the Mutamba mineral sands project in Mozambique.
• The plant, which was opened by the Governor of the Inhambane district, was built by a local subsidiary of the Mutamba consortium is small by most standards but should be sufficient to provide samples for metallurgical work and for testing by potential consumers
• The consortium is made up of Savannah Resources, it’s local subsidiary and Rio Tinto plc with which Savannah has a consortium agreement.
• A scoping study by TZMI, experts in mineral sands, indicates a potential 30 year mine life based on a 451mt resource grading 6.0% Total Heavy Minerals.
• This is based on a very conceptual ‘dry mining’ mine plan utilising 33% indicated resource and 67% inferred resource.
• Production was modelled at 15mtpa with negligible waste to ore ratio for 456,000tpa of ilmenite and 118,000t of non-magnetic concentrate starting in 2020
• The plan shows base case sales of US$3.53bn forecast
• Capita cost, pre-production, are for US$152m + US$74m contingency for an EPCM contract +/-35%.
• Ilmenite prices are currently at around $173/t of 54% TiO2 concentrate FOB Australia according to the Metal Bulletin though this does not reflect premiums paid for better quality material.
• Ilmenite prices are said to have, unusually, continued to rise towards the year end. Anti-pollution action in China should reduce the amount of titanium produced from non-ilmenite sources at a time when demand is expected in the industry to rise.
Conclusion: The modelled project has an IRR of 19% on the base case ilmenite price of $185/t rising to 23% on $204/t and 27% pm $222/t. We do not consider these rates of return should be acceptable to Savannah or its consortium particularly given the +/-35% capital cost variability. We have to wonder why Savannah are spending time and money on the project although speculation indicates that Savannah are warehousing the project for Rio Tinto who are less than popular in Mozambique since the Riversdale disaster. The potential returns may not be good enough for Rio Tinto either.

W Resources (LON:WRES) 0.4p, Mkt Cap £20.4m – Potential US$30m term loan for La Parilla
• The Company reports that the investment committee of an un-named US based fund has granted preliminary approval to provide a US$30m loan to fund the La Parilla tungsten mine development in Extremadura, Spain. If the loan is forthcoming, it “fully funds the development of the 2 million tonnes per annum … La Parilla mine development”.
• The company confirms that development is progressing and that “Engineering is on schedule for completion in Q1 2018 and orders for all long lead items have been placed”.
• W Resources also comments that it “has submitted the environmental approval documentation to expand the mine from 2mtpa to 3.5mtpa”.
Conclusion: The possibility of loan finance for La Parilla should help the company deliver its plans to expand from 2mtpa to 3.5mtpa and comes at a time when the price of the benchmark intermediate product, ammonium paratungstate has recovered by around 50% this year to around $300 per metric tonne unit.
 

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Tue, 12 Dec 2017 11:07:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29099/today-s-market-view-copper-holds-despite-china-credit-growth-data-and-fomc-meeting-29099.html
Today's Oil and Gas Update - Curzon Energy, Europa Oil & Gas, Chariot Oil & Gas http://www.proactiveinvestors.co.uk/columns/sp-angel/29105/today-s-oil-and-gas-update-curzon-energy-europa-oil-gas-chariot-oil-gas-29105.html Headlines
• In Brief:
Curzon Energy (LON:CZN, – 8p) – $32.5mm (37p) – Pudding Ahead
Europa Oil & Gas (LON:EOG, – 6p) – Solid Update
Chariot Oil & Gas (LON:CHAR – 14p) – The Wait is Over

In Brief
Curzon (LON:CZN, – 8p) – $32.5mm (37p) – Pudding Ahead: Today’s announcement is a promising sign in the route towards narrowing down which of the Company’s type curves the is most representative of the performance of the Coos Bay assets. Once the wells are connected to the water and gas handling networks, we would expect the wells to undergo an intensive dewatering programme to elucidate not only the respective wells’ performance but the potential of the wider Coaledo formation, which is potentially productive over the significant majority (~75% - SPA estimates) of the Company’s acreage. This news does not affect our valuation estimate, which remains $32.5mm (37p).
Europa Oil & Gas (LON:EOG, – 6p) – Solid Update: Today’s update is solid reportage of the work that the Company has completed on its Licensing Option 16/20 in the Slyne basin, and is as informative an announcement as we have seen in a long time. While the quality of the announcement doesn’t in any way improve the risks associated with the prospect, what it does do is underline the fact that Management has completed the work and understand (as far as is possible ahead of drilling), the risks associated with the prospect inventory. This also provides some measure of comfort that the Company has been sanguine on its approach to the assessment of the risks. We believe that this approach will also ultimately mean Management is in the right frame of mind when it comes to farmins, which will inevitably be required to drill the prospects that have been identified.
Chariot Oil & Gas (LON:CHAR, – 14p) – The Wait is Over: after what will eventually be an 18 month (well flagged) hiatus, to our mind today’s announcement fires the starting pistol on what will be as an active 18 month forward period as the preceding 18 month period was quiet. We said over 12 months ago that save for sporadic corporate initiatives, that investors could deemphasise their monitoring of the Company until such times as the restart of the programme approaches, whereupon the interest and activity will naturally provide impetus to the share price. This time has arrived, and we believe that the pending work programme, which will include a number of high impact wells, while carrying risks, also has the potential to be transformational. In our opinion, the current valuation is undemanding, and doesn’t reflect the option value inherent with valuations of the exploration projects. We think now is the time to dust down the investment file on the Company and think about selective investment.

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Wed, 13 Dec 2017 10:45:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29105/today-s-oil-and-gas-update-curzon-energy-europa-oil-gas-chariot-oil-gas-29105.html
Today's Market View - Atalaya Mining, Galileo Resources and Metal Tiger http://www.proactiveinvestors.co.uk/columns/sp-angel/29086/today-s-market-view-atalaya-mining-galileo-resources-and-metal-tiger-29086.html Atalaya Mining (LON:ATYM) – Raising £31m in placing at 167p/share
Galileo Resources (LON:GLR) – Interim Results
Metal Tiger (LON:MTR) – T3 underground mine potential

Faltering China drags commodities lower
• Signs of slowing growth in China are limiting successes in the commodity markets as the Bloomberg Commodities Index fell 4.1% in the past month, putting it on course for its sixth year of losses out of seven. Expectations for the transition in economic phase of the Asian nation are concerning investors as metal demand and investment may fall in 2018 on environmental cleanup actions and a cooling property market.
• The nations fixed-asset investment in infrastructure will grow 12% next year, according to the median estimate in a Bloomberg survey, down from almost 20% year-to-date 2017. The recent poor performance of copper can be attributed to early market hesitation.

Dow Jones Industrials  +0.29% at 24,211
Nikkei 225   +1.39% at 22,811
HK Hang Seng   +1.24% at 28,653
Shanghai Composite    +0.55% at 3,290
FTSE 350 Mining   +0.58% at 16,403
AIM Basic Resources   -1.57% at 2,529

Economics

Currencies
US$1.1746/eur vs 1.1790/eur yesterday           Yen 113.54/$ vs 112.66/$        SAr 13.683/$ vs 13.572/$            $1.351/gbp vs $1.338/gbp
            0.751/aud vs 0.753/aud            CNY 6.617/$ vs 6.616/$

Europe – Stocks rallied as Brexit negotiations make headway
• European stocks rose to weekly highs as Britain and the European Union announced a breakthrough in Brexit negotiations while supportive global banking regulations were seen as more beneficial to European banks.
• The early morning breakthrough in Brexit negotiations show a willingness for both parties to compromise with Bloomberg highlighting the main points of the deal:

o The U.K will contribute to EU budgets for the years 2019 and 2020 as if it had remained in the Union.
o The U.K will contribute its share of financing of EU budgetary commitments outstanding at 31 December 2020.
o The U.K. will contribute its share of the financing of the EU’s liabilities incurred before 31 December 2020.
o The citizens’ rights part of the final Withdrawal Agreement is to be interpreted in line with the case law of the Court of Justice of the European Union.
o In the context of the application or interpretation of those rights, U.K. courts shall have due regard to relevant decisions of the ECJ.
o There will be a mechanism enabling U.K. courts to ask the ECJ questions of interpretation and it will last eight years.
o The U.K. will either propose a solution for keeping the Irish border open that will be acceptable to the EU, or continue to by EU’s single market and customs union rules “which, now or in the future, support North-South cooperation, the all-island economy and the protection of the 1998 Agreement”.

Commodity News
Precious metals:         
Gold US$1,248/oz vs US$1,257/oz yesterday
• Gold continues its decline, as the precious metal fell to a four-month low of $1,244/oz, on firming dollar demand. Strong equities markets have continued to draw investment away from gold, with expectations for further growth building from economic stimulus with the passing of the US Republican tax plan. The release of the non-farm payroll data is expected to drive the short-term direction of the dollar, while the upcoming US Federal Open Market Committee meeting will confirm rising interest rates.
• The metal edged up in early Asian trading as bargain hunting investors look to secure growth in the metal, as geopolitical tensions with the Middle East have significant potential to rise. Pressure was building as President Donald Trump recognised Jerusalem as the capital of Israel.
   Gold ETFs 71.7moz vs US$71.9moz yesterday
Platinum US$896/oz vs US$900/oz yesterday
Palladium US$1,019/oz vs US$1,000/oz yesterday
Silver US$15.78/oz vs US$15.89/oz yesterday
           
Base metals:   
Copper US$ 6,599/t vs US$6,600/t yesterday
• China’s tightening controls on copper concentrate imports are forcing low-quality suppliers to find alternative offtake partners. Improving environmental limits are clamping down on foreign solid waste with the General Administration of Quality Supervision, Inspection and Quarantine allowing maximum lead content of 6%, while the threshold for arsenic set at 0.5%, fluorine 0.1%, cadmium 0.05% and mercury 0.01%.
• The cuts in “foreign garbage” are aimed at reducing the strain on toxic and harmful elements within Chinese facilities. New rules are being implemented immediately, with November’s record imports at 1.78 million tonnes expected to contract under the updated limits. In order to match the loss in supply, imports of unwrought copper to the world’s top copper consuming country show a strong rise. Arrivals of unwrought products, which includes anode, refined, and semi-refined, rose 42.3% from October (23.7% yoy) to their highest level since December 2016.
• China’s second largest copper smelter began halting capacity last week at its main production hub in Tongling after local government ordered curbs as part of national plan to ease pollution
• Halted 20-30% of smelting capacity from annual total of 800,000 metric tons – no timetable for how long will last
Aluminium US$ 2,013/t vs US$2,015/t yesterday
Nickel US$ 11,020/t vs US$10,815/t yesterday
Zinc US$ 3,095/t vs US$3,101/t yesterday
Lead US$ 2,450/t vs US$2,508/t yesterday
Tin US$ 19,430/t vs US$19,475/t yesterday
           
Energy:           
Oil US$62.3/bbl vs US$61.5/bbl yesterday
Natural Gas US$2.778/mmbtu vs US$2.856/mmbtu yesterday
Uranium US$25.00/lb vs US$25.50/lb yesterday

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$66.1/t vs US$67.2/t
• Iron ore imports rebounded in November to highest levels on record with appetite in worlds top buyer remaining strong even as steel mills cut output
• Rose 18.9% to 94.54 million tonnes in November and were up 2.8% from a year ago
Chinese steel rebar 25mm US$745.2/t vs US$750.6/t
Thermal coal (1st year forward cif ARA) US$86.3/t vs US$85.9/t
Premium hard coking coal Aus fob US$231.2/t vs US$231.7/t
           
Other:  
Tungsten APT European US$291-300/mtu vs US$275-285/mtu last week
Cobalt LME 3m US$71000/t vs US$69900/t yesterday

Company News
Atalaya Mining (LON:ATYM) 166.5 pence, Mkt Cap £194.3m – Raising £31m in placing at 167p/share
• Following the recent announcement of the decision to expand the operations at Proyecto Riotinto to 15mtpa capacity from its current 9.5mtpa throughput, Atalaya Mining has announced the completion of a placing of approximately 18.57m new shares at a price of 167p/share to raise £31m.
• The placing, which represents around 16% of the company’s current issued capital, was supported by Atalaya’s principal shareholders and leaves Trafigura with approximately 22.8% of the enlarged company, Yanggu Xiangguang Copper with 22.7%, Liberty Metals with 14.5% and Orion Mine Finance with 13.9%.
• Commenting on the transaction, CEO, Alberto Lavandiera said “The Company welcomes the support from existing shareholders and new institutional investors through the Placing. The funds raised will allow the Company to begin executing on its 15 Mtpa Expansion plan immediately."
• We note that the company’s original announcement on 4th December indicated a planned placing of £39m.
Conclusion: The availability of additional financial backing will allow Atalaya Mining to press ahead immediately with its expansion plans at Riotinto. As we commented in relation to the approval of the expansion plan, Atalaya Mining’s plan to increase the capacity of its Riotinto operation is a relatively low-risk incremental expansion of an existing operating mine where management has already delivered previous expansion projects smoothly and we envisage that they will be able to deliver a similar outcome with the latest expansion.

Galileo Resources (LON:GLR) 1.375 pence, Mkt Cap £3.5m – Interim Results
• The company has reported a loss of 0.1p/share for the six months ending 30th September 2017 (2016 interim loss of 0.3p/share).
• Galileo Resources reports a cash balance of £1.13m at 30th September and an operating outflow of cash of £366,000 for the six month period suggesting that, at present, the company is adequately financed for its current activities.
• Exploration activity at the Concordia copper project in S Africa, where the company is in joint venture with Shirley Hayes, has been discontinued and Galileo Resources’ “interest in Concordia will be diluted to 15% from 51%.”
• Pre-feasibility studies are continuing on the Glenover Phosphate project in S Africa where the approval of a Mining Right application from the Department of Mineral Resources is pending.
• In Zambia, an initial 1750m drilling programme is expected to start imminently at the Star Zinc project “and will target a mix of resource confirmation and resource enlargement.”
• In Nevada, following the withdrawal of its joint-venture partner, Orogen Gold from all its exploration activities and a review of the results obtained, Galileo Resources has “decided not to renew the licence for the Silverton project.”
Conclusion: Galileo Resources appears to be focussing on the Star Zinc project in Zambia and its Glenover Phosphate project in S Africa, withdrawing from its US exploration and diluting its interest in the S African Concordia Copper Project.

Metal Tiger (LON:MTR) 1.95 pence, Mkt Cap £20.7m – T3 underground mine potential
• Metal Tiger plc draws attention to the announcement by its partner, MOD Resources on progress with evaluating the underground mining potential of the T3 copper discovery in Botswana (MOD Resources 70%, Metal Tiger 30%).
• The company has now drilled 45 holes since August in areas outside the proposed 10-year open pit mining area at T3 and is aiming to produce an underground mine scoping study during Q3 2018.
• Among the results highlighted from the latest 8 holes drilled are:
o A 7.2m wide intersection at an average grade of 1.9% copper and 39g/t silver from a depth of 218.8m in hole MO-G-82D and
o A 5.9m wide intersection at an average grade of 1.7% copper and 8g/t silver from a depth of 213.1m in hole MO-G-84D and
o A 9.m wide intersection at an average grade of 1.5% copper and 31g/t silver from a depth of 168.3m in hole MO-G-88D and
• “South African mining consultants have conducted a preliminary evaluation of these veins to explore the potential for an underground mine (T3 Underground Project) in addition to the planned open pit. The work done to date assumes good continuity between the mineralised veins, relatively low cost in ore development and room and pillar mining. There may be substantial benefits in developing T3 underground simultaneously with the open pit mine and using shared infrastructure, including the planned T3 processing plant.”
• The company reminds us that the plant capacity “was recently upgraded to 2.5Mtpa (a 25% increase on the scoping study plant capacity) with potential for expansion up to 4.0Mtpa”.
• The T3 open pit resource, published in September 2016, amounts to 13.236m indicated and inferred tonnes at an average grade of 1.84% copper and 24.6g/t silver. In August 2017, following further drilling and the inclusion of additional low grade resources within the proposed pit, the T3 resources was upgraded to 36mt at an average grade of 1.14% copper and 12.8g/t silver.
Conclusion: The recent drilling is indicating potential for underground mining of the deeper mineralisation at the T3 discovery within the Kalahari Copper Belt in conjunction with the planned open pit. We look forward to further news as the programme develops.

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Fri, 08 Dec 2017 12:25:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29086/today-s-market-view-atalaya-mining-galileo-resources-and-metal-tiger-29086.html
Today's Market View - Ariana Resources and Ironveld http://www.proactiveinvestors.co.uk/columns/sp-angel/29079/today-s-market-view-ariana-resources-and-ironveld-29079.html Ariana Resources (LON:AAU) – Increased ore resource estimate at Kiziltepe
Ironveld (LON:IRON) – Final results and update on Middleburg acquisition

SX-EX, LIARS AND LITHIUM DREAMS – is lithium the new oil?
• Investors are faced with a confusion of opportunities in the lithium space.  Below we offer some simple guidance on where to invest:
• Lithium demand looks set to outstrip supply with new supply not likely to catch up with expected demand growth for some years.
• Battery chemistries will change but we believe lithium should remain a core component battery metal due to its lightweight, conductivity and ability to store electrons.
• Tesla cars are already heavy at >2t mainly due to the nickel, steel, copper and other metals used so adding weight in not a popular option.
• Investors: many institutional investors appear reticent to buy into lithium projects in part based on potential changes in battery chemistry though this may partly be an excuse for avoiding the space.
• Bubbles: rapid growth in valuations for junior companies focussed on uranium and rare earths were short lived due to subsequent collapses in uranium and rare earth prices for very differing reasons.  Uranium prices collapsed on the Fukushima event and rare earth prices collapsed on the unwinding of a major REE-based Ponzi scheme in China.
• So why should lithium be different?
• Is lithium the new oil and how long will the supply deficit maintain elevated lithium prices?
• We think the uplift in lithium prices could last much longer than that seen for uranium and REEs as the major global economies drive new demand for battery powered EVs.
• Pollution is a hot political issue and new anti-pollution legislation may well be applied in the developing world as much as in developed nations.
• Investment: For investors the first thing to understand is where does lithium come from?
• Lithium sources:
• Brines – low operating cost for lithium extraction where grades are good, impurity levels are acceptable and where there is enough of a desert to enable sufficient solar evaporation, but long concentration times (12-18 months) limit supply reaction to evolving prices.
• Geothermal brines – are considered to be more environmentally friendly while a new chemical process is claimed can capture 91% of the initial lithium in the brine.
• Clays – largely unproven and don’t work well in the rain.
• Pegmatites – lower capital but higher operating costs. Consumers prefer low mica content and new regulations in China may make high mica concentrates hard to sell.
• Lithium producers:
• Chile (brines) – SQM and Albemarle are the big Chilean lithium miners.  Lithium was originally a by-product of potash production with relatively small demand but SQM and Albemarle are biggish companies and have invested heavily in billion dollar brine plants and evaporation ponds in the Atacama Desert. The evaporation ponds are expensive to construct but they harness the sun to increase lithium concentration in the brine.
• Argentina (brines) – a significant number of new junior lithium companies have set up camp in Argentina.  The problem with Argentina is that it rains allot more than in Chile, it is rarely mining friendly and when the government changes back to a Peronist-style regime the companies might just loose allot of their value. Many companies are proposing to use technology to extract lithium directly from lower grade brines but the economics of these processes are not yet well proven.
• Australia (pegmatites) – good for mining and for process technology.  Lithium contained in hard-rock pegmatites meaning that mining and process costs will be higher than for brines in Chile.  Australia is now the world’s largest producer of lithium proving that lithium extraction from pegmatites is a fair way to go even in a higher cost environment. Rapid production of direct shipping ore is boosting Australia output, however competition for limited Chinese conversion capacity may force operations down the pecking order. Pegmatite concentrates with higher levels of mica may struggle to find a home as the mica reduces energy efficiency and raises dust/pollution levels.
• Portugal / Spain (pegmatites) – a number of explorers are proving up lithium pegmatites in Portugal. Portugal has had a difficult mining history with labour and unions and suffers from the high price of the Euro but may prove to be a beneficial destination for lithium production from a European perspective. Close proximity to European automotive manufacturers will give desirable supply for product which has traditionally been sold for glass & ceramics. Savannah Resources and Plymouth Minerals are two lithium companies in Portugal and Spain.
• Mali (pegmatites) – well known for gold production, Mali offers a low cost destination and a sensible and stable political regime from a mining perspective.  A Chinese lithium processor has already offered to buy Birimian Limited in Mali and has subsequently invested in Kodal Minerals.
• Boliva (brines) – just don’t go there under any circumstances. It’s off the scale from a mining risk perspective and we understand Bolivian lithium brines contain awkward contaminants.
• Investment strategy:
• While it is possible for the major lithium brine producers in Chile to meet demand we believe they are slow in their production growth and are likely to fail to match the new growth in demand over the next 4/5 years. Focus on highest-quality brines to enhance production while minimising concentration period. (Brines can only be concentrated up to a precipitation point of around 6,000ppm so higher initial concentration will reduce evaporation times).
• New technology in the extraction of lithium directly from brines without the use of evaporation ponds is being trialled in Argentina and the US and offers potential for scaling up. The technology is not yet proven at a commercial scale and Argentina can be a difficult mining destination.  Production from Clays is some way off and is also untested from a commercial perspective.
• Hard rock, pegmatites: while lithium from pegmatites is seen as relatively high cost this is now the world’s largest source of lithium due to its relative simplicity and lower capital cost.
• Risks: The rising cost of reagents, chemicals, power and certain capital items is a risk as is the potential for changing battery chemistries. There is political as well as technology risk for the direct brine producers in Argentina and Chile. Government’s may choose to impose additional taxes on lithium producers as well as on EVs and there is always the problem of supplying sufficient electrical power for the new fleet of EVs on our streets. These are just a few of the risks ahead.
• Bank financing: so far banks have been reticent to finance lithium projects but with the LME poised to start trading in lithium futures contract in 2019 banks will have more reason to enter this market.
Conclusion: We advise investors to be careful in investing in the Lithium mining space but we feel there are good opportunities to be had with juniors which have the ability to push projects into production in the next few years.

China’s warm start to winter boosts steel mill profits
• Higher temperatures have allowed new construction projects to proceed that would normally have come to a halt,  pushing profits to highest since at least 2008
• Steady ongoing demand is exacerbating the supply shortfall caused by mills in 28 Chinese cities cutting output from polluting blast furnaces

Vale cuts nickel output but is positive on long term demand
• Brazilian miner, world’s top producer of the metal, pulled back it’s nickel output forecasts by 15% for the next five years
• Vale claims it is looking to preserve its nickel optionality ahead of expected boom in electric vehicles in the next decade
• This is an unusual statement for a mining company and suggests a new discipline coming into producers thinking
• It also indicates that Vale appreciates how difficult it is to find new sources of economically recoverable nickel as well as a realisation that nickel demand and prices are both expected to grow markedly over the longer term

Indices:          

Currencies:          
US$1.1790/eur vs 1.1814/eur yesterday.   Yen 112.66/$ vs 112.20/$.  SAr 13.572/$ vs 13.489/$.  $1.338/gbp vs   $1.340/gbp.     
0.753/aud vs 0.758/aud.  CNY 6.616/$ vs 6.615/$.

Precious metals:          
Gold US$1,257/oz vs    US$1,268/oz yesterday
   Gold ETFs 71.9moz vs           US$71.9moz yesterday
Platinum US$900/oz vs US$915/oz yesterday
Palladium US$1,000/oz vs         US$991/oz yesterday
Silver US$15.89/oz vs   US$16.14/oz yesterday
          
Base metals:    
Copper US$ 6,600/t vs US$6,551/t yesterday
Aluminium US$ 2,015/t vs US$2,048/t yesterday
Nickel US$ 10,815/t vs US$10,850/t yesterday
Zinc US$ 3,101/t vs US$3,080/t yesterday
Lead US$ 2,508/t vs US$2,475/t yesterday
Tin US$ 19,475/t vs US$19,450/t yesterday
          
Energy:
Oil US$61.5/bbl vs US$62.8/bbl yesterday
Natural Gas US$2.856/mmbtu vs US$2.936/mmbtu yesterday
Uranium US$25.50/lb vs US$25.40/lb yesterday
Lithium - New green source of lithium from geothermal power plant brine
• Brine produced by geothermal power plants is seen as an environmentally friendly source of lithium.
• The process works by passing through sorbent that catches ions before pumping back underground and collecting metal
• Researchers found that sorbent of aluminium hydroxide with lithium chloride captured 91% of initial lithium in brine

Bulk:    
Iron ore 62% Fe spot (cfr Tianjin) US$67.2/t vs US$69.5/t
Chinese steel rebar 25mm US$750.6/t vs US$760.9/t
Thermal coal (1st year forward cif ARA) US$85.9/t vs US$85.8/t
Premium hard coking coal Aus fob US$231.7/t vs US$221.8/t
          
Other:  
Iron ore 62% Fe spot (cfr Tianjin) US$69,900.0/t vs US$69,500.0/t - Vale threatens to flood iron ore market if prices surge
• Vale, the world’s largest iron ore producer says it is prepared to unleash as much as 50mt of spare capacity to balance market if prices got too high
• High prices would lure inefficient producers back into market and risk a repeat of past excess that led to $1tr in value destruction

Tungsten APT European US$000.0/mtu vs US$000.0/mtu
Quarterly hard coking coal US$170.0/t vs US$170.0/t

Company News
Ariana Resources (LON:AAU) 1.2p, Mkt Cap £12.6m – Increased ore resource estimate at Kiziltepe
• Ariana Resources has reported on its recent exploration work at the Salinbas project in north-east Turkey, located some 4km north of the 4m Hot Maden discovery. Ariana acquired the project in December 2016 from Eldorado Gold.
• In September 2017, the company re-reported an April 2015 JORC compliant resource estimate of 9.96m indicated and inferred tonnes  at an average grade of 2.03g/t gold  (648,900oz) and 10.2g/t silver (3.27m oz) at Salinbas.
• The recent work, including soil sampling and mapping has identified an anomalous zone of precious and base metals measuring approximately 550m x 150m at Salinbas North and has shown “Several precious and base-metal enriched extensions of the existing Salinbas resource [which]  demonstrate potential for further resource growth”.
• As a result of this preliminary work and revisions to the previously accepted geological interpretation, “The exploration team are currently working on plans for a drilling programme to be conducted on some of the areas referred to above, which is under consideration for 2018.”
Conclusion: The recent work by Ariana has shown possible extensions to the Salinbas mineralisation which may be followed up with drilling in 2018. The location near to the Hot Maden discovery, which was acquired by the US based royalty company, Sandstorm Gold, earlier this year in an all share deal worth a reported £167m, no doubt provides encouragement for the wider exploration potential to expand Salinbas. We look forward to further news when drilling gets underway.

Ironveld (LON:IRON) 2.375p, mkt cap £13.2m – Final results and update on Middleburg acquisition
• Ironveld reports a loss of £0.74m (0.2p/share) for the year ending June 2017 (2016 loss £0.59m or 0.18p).
• The company continues to pursue its acquisition of the smelting facilities at Middleburg where it remains in discussions “with Ironveld Middelburg, a subsidiary of the Company, to acquire the Smelting facility. … [and] … “Offtake agreements are in place for HPI [High Purity Iron], Vanadium and Titanium for the first five years of production”.
• Expressing confidence in a successful outcome to these discussions the company reports that “Considerable time has been spent by management on site at the Middelburg Smelting facility, preparing for the commencement of operations. However, no further work will be done until the funding for the acquisition has been concluded and the necessary upgrades have been made.”
• Negotiations are underway with local landowners for access and licences have been received for Air Emissions from the Department of Economic Development and Tourism. Licence applications for a Water Use Licence have been submitted to the Department of Water Affairs.
• Commenting on developments during the year, which included a strategic shift of direction, CEO, Peter Cox said “During the Period, we shifted our immediate focus from constructing a 15 MW smelter to securing the acquisition of the Middelburg Smelting facility, to enable early production and allow us to begin selling to offtake partners, generating revenue and cash flow for the Company. Although progress has been slower than we hoped, we remain confident in finalising funding arrangements that would allow for the necessary refurbishments to the Smelting Facility to be completed and for smelting and refining of our magnetite ore to commence.”
• Following two  fund-raisings, totaling £2.1m during the year, the company reports cash of £788,000 at 30th June. A subsequent funding round of £1.765m should see Ironveld with sufficient funds to continue its negotiations.
Conclusion: Ironveld is continuing its protracted negotiations to acquire Middleburg and while expressing optimism as to a successful outcome no estimate of the likely timing has been disclosed.

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Thu, 07 Dec 2017 10:48:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29079/today-s-market-view-ariana-resources-and-ironveld-29079.html
Today's Market View - Altus Strategies, Asiamet Resources, Bushveld Minerals, Kibo Mining and others http://www.proactiveinvestors.co.uk/columns/sp-angel/29049/today-s-market-view-altus-strategies-asiamet-resources-bushveld-minerals-kibo-mining-and-others-29049.html Altus Strategies* (LON:ALS) BUY – Target price 12.2p – Tigray-Afar exploration update
Asiamet Resources (LON:ARS) – Metallurgical Drilling at BKM
Bushveld Minerals (LON:BMN) BUY – Target price raised to 14.3p from 11p – Bushveld adds value as it consolidates control over Vametco
Click here for research note
Golden Star Resources (TSE:GSC) – Peer recognition as Mining Company of the year in Ghana.
Kibo Mining (LON:KIBO) –Acquisition of an advanced coal to power project in Botswana
SolGold* (LON:SOLG) – SolGold raises £45m
Vast Resources (LON:VAST) – Carlibaba drilling update

Dow Jones Industrials  +0.44% at   23,941
Nikkei 225   +0.57% at   22,725
HK Hang Seng   -1.51% at   29,177
Shanghai Composite    -0.62% at    3,317
FTSE 350 Mining   -0.22% at   16,623
AIM Basic Resources   -0.30% at    2,656

Economics
US – Q3 GDP has been revised up to 3.3% from 3.0%, beating estimates for 3.2%; although, a third of the upgrade attributed to trade and inventories.
• Business investments picked up while consumer spending was brought down showing little signs of improvement.

China – While both manufacturing and services sectors growth picked up in November on the latest official numbers, a separate Markit survey showed business outlook remained close to a record low in October.
• “Latest data signals subdued levels of confidence across both the manufacturing and service sectors towards future business activity, new orders and business revenues… at the same time, companies revised down their hiring plans, while forecasting stronger cost pressures,” Markit wrote.
• “Projected squeeze on margins fed through to weaker expected profits growth, with optimism towards profitability at its lowest since June 2016.”
• Manufacturing PMI: 51.8 v 51.6 in October and 51.4 forecast.
• Services PMI: 54.8 v 54.3 in October.

Germany – The number of people out of job fell for a fifth consecutive month beating market estimates in November.
• Unemployment rate held at record low of 5.6% amid strong economic growth and positive business outlook.
• German numbers come ahead of Eurozone wide numbers expected to show the jobless rate held at an eight-year low of 8.9%.

UK – House prices growth held steady at 2.5%yoy in November coming slightly below a 2.7%yoy market forecast, according to Nationwide.
• Demand is said to be driven by low mortgage rates and employment growth; although, “this is being partly offset by pressure on household incomes”.
• Initiatives announced by Philip Hammond earlier this month are expected to have only a “modest” effect on demand for properties.
• Consumer confidence fell to a four-month low in November with all five measures used by GfK posting declines and the willingness of consumers to make major purchases recording the biggest decline.
• “Household jitters following the recent interest-rate hike, squeezed incomes, higher inflation and economic uncertainty have dampened the consumer mood across the UK,” GfK said in the commentary.

Italy – Unemployment rate came in line with estimates holding up at 11.1% in November.
• A positive detail in the report is that youth unemployment dropped to 34.7%, the lowest since March this year, down from 35.4%.

Currencies
US$1.1845/eur vs 1.1868/eur yesterday.   Yen 112.42/$ vs 111.42/$.   SAr 13.682/$ vs 13.635/$.   $1.346/gbp vs $1.342/gbp.  
0.757/aud vs 0.759/aud.   CNY 6.611/$ vs 6.598/$.

Commodity News
Precious metals:         
Gold US$1,281/oz vs US$1,296/oz yesterday
• Gold prices edged back as positive US economic data was supported by comments from US Federal Reserve chairwoman Janet Yellen that economic growth was broad based, which saw investors become more convinced that rates would go higher.
• Third-quarter gross domestic product was revised upward to 3.3% from 3.0%, and home sales also improved, recording -0.6% yoy compared with a previous quarter at -3.9%.
• However, underlying geopolitical tensions surrounding North Korea’s insistence to develop its nuclear weapons programme and “continued acts of aggression” give support to the safe haven asset.
• A lack of clear drivers has kept gold between $1,265 and $1,300 an ounce throughout November, its narrowest monthly range in 12 years.
   Gold ETFs 71.6moz vs US$69.4moz yesterday
Platinum US$943/oz vs US$952/oz yesterday
Palladium US$1,017/oz vs US$1,028/oz yesterday
Silver US$16.50/oz vs US$16.90/oz yesterday
           
Base metals:   
Copper US$ 6,762/t vs US$6,805/t yesterday
• Despite encouraging manufacturing reports from key Asian nations, base metals drifted lower as investors locked in profits before the close of year. The downward trend is expected to continue as “There is higher risk aversion among market participants, with the oil price down as well, and there are lingering concerns about China…and rising (U.S.) interest rates” said Commerzbank analyst.
• China’s growth across its manufacturing sector unexpectedly rose, despite a cooling property market and the stringent winter air quality emissions measures cutting output. The official Purchasing Managers’ Index (PMI) for November recorded an increase to 51.8, compared to 51.6 in October, and sits comfortably above the 50-point mark which signifies sector growth. Manufacturing has been boosted by encouraging government infrastructure spending, a resilient property market and unexpected strength in exports, which have ultimately sustained the economy’s forecast-beating growth of 6.9%.
• Japan’s industrial output is expected to rise strongly in November and December as robust overseas demand continues to support factory activity and broader economic growth.
• Despite ongoing divestment issues, Freeport-McMoRan is aiming to increase exports to 1.1 million tonnes concentrate. Global production is, however, being hampered by continued striking in one of the world’s largest copper suppliers. Workers at Southern Copper Corp have completed the ninth day of an indefinite strike following failed wage negotiation attempts.
EV’s to drive long term copper demand
• Electric vehicles bullish driver for global copper demand as copper content higher in electric vehicles,  also require expanded charging infrastructure
• Hybrid vehicle uses 40kg of copper compared to plug-in hybrid electric vehicles and battery electric vehicles, at 60 kg and 83 kg, respectively

Aluminium US$ 2,056/t vs US$2,092/t yesterday
• Emission-related production cuts across China’s polluting provinces are proving to be less stringent, causing Shanghai Futures Exchange (ShFE) aluminium to fall more than 11% this month as supply concerns fade.
Nickel US$ 11,295/t vs US$11,365/t yesterday
• Nickel prices have contracted 8% in November as market participants recognise that despite compelling and rapid demand growth from the electric economy, consumption by end use for battery technology still only represents 2-3% of the global total.
Zinc US$ 3,139/t vs US$3,147/t yesterday
Lead US$ 2,450/t vs US$2,439/t yesterday
Tin US$ 19,475/t vs US$19,485/t yesterday
           
Energy:           
Oil US$63.6/bbl vs US$63.3/bbl yesterday
• The prolonged oil supply cuts of 1.8 million barrels per day agreed by OPEC and Russia will come under review when the committee meet again in June, as concerns rise over sustained oil prices encouraging a spike in U.S. production.
Natural Gas US$3.113/mmbtu vs US$3.182/mmbtu yesterday
Uranium US$23.90/lb vs US$23.50/lb yesterday
Lithium - PotashCorp CEO confirms Chinese interest in lithium producer SQM
• Chief executive Joel Tilk told Reuters there was a ‘broad interest from potential bidders and actual bidders coming from those interested in lithium and many in China’
• Last week was mentioned that Chinese private equity firm GSR capital and Canada’s wealth minerals are latest firms to be weighing an investment in SQM
MGX Minerals targets geothermal market for extraction of lithium and gold
• Partner PurLucid has developed high temperature filtration method to purify geothermal brines – similar to oil field brines
• The brines contain concentrated amounts of metals and dissolved salts including lithium and gold.

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$67.2/t vs US$66.6/t
Chinese steel rebar 25mm US$729.4/t vs US$706.1/t
Thermal coal (1st year forward cif ARA) US$86.0/t vs US$84.6/t
Premium hard coking coal Aus fob US$209.9/t vs US$202.0/t
           
Other:  
Tungsten APT European US$275-285/mtu vs US$271-285/mtu last week
Cobalt LME 3m US$68250/t vs US$61750/t last week - Car makers join forces to drive sustainability in Cobalt mining
• Volkswagen, Toyota, BMW, Jaguar Land Rover and Volvo have joined forces to identify and address the risks posed by crucial materials like cobalt
• Set to unveil action plan by beginning of next year

Company News
Altus Strategies* (LON:ALS) 8.3p, Mkt Cap £8.9m – Tigray-Afar exploration update
BUY – Target price 12.2p
• Prospecting works completed during Q3/17 at the Tigray-Afar license in northern Ethiopia focused on the Asagara copper oxide target.
• Groups of up to 50 artisanal miners have been reported at site working on outcropping oxide copper mineralisation.
• Geological mapping at the site identified semi-continuous mineralisation over a 2.0km strike with recorded widths of up to 20m and a parallel structure of 0.6km strike length and up to 15m wide.
• Channel sampling of outcrops returned 8m at 0.56% Cu and 5m at 0.77% Cu (starting and ending in mineralisation).
• Rock chip sample from located artisanal workings returned grades up to 5.58% Cu.
• The plan is to continue with channel sampling programme in the area ahead of trenching scheduled for Q1/18.
• The Company is also planning to do more work at the Cu-Ag-AU Agamat target (8km away from Asagara) where previously grab samples returned grades of 8.7% Cu, 99g/t Ag and 13.5g/t Au while best drilling intersections came back with 0.70% Cu at 28.2m.
• The plan is to map mineralised structures and progress to channel sampling.
Conclusion: The Company is planning to follow on interesting early stage prospecting results at the Asagara copper target. Further channel sampling and trenching works should help to understand continuity, widths and grades of the mineralisation as well as identify future drilling targets. The team is also looking to do more work at the Agamat Cu-Ag-Au target planning extension of shear zones mapping ahead of systematic channel sampling programme.
*SP Angel acts as Nomad and Broker to Altus Strategies

Asiamet Resources (LON:ARS) 9p, Mkt Cap £77m – Metallurgical Drilling at BKM
• Asiamet Resources reports that it now has results from eight of the nine holes (764m) metallurgical drilling programme at the BKM property in Indonesia.
• The drilling was designed to obtain material for testing the 4 principal zones of copper mineralisation identified at the property and to establish the recovery parameters for heap leaching the different mineralogical domains identified which “vary laterally and vertically across the deposit, [but] however form broad and substantial spatially consistent zones”. These zones are identified as:
o A chalcocite zone
o A mixed chalcocite covellite zone
o A zone of covellite, bornite and chalcopyrite and
o A zone dominated by the primary copper mineral, chalcopyrite.
o Of these, the “most prevalent copper mineral species is chalcocite – covellite dominant which occurs in both the BK44 and BK58 Zones.” Without pre-judging the outcome of the test work, we expect that this should be beneficial as the minerals covellite and chalcocite, in their pure form,  contain approximately 66.5% and 79.9% copper while the other species, bornite (63.3%) and chalcopyrite (34.6%) are not as copper rich.
o Insight into the metallurgical characteristics in terms of recovery under the proposed heap leaching for BKM will be established as a result of the testing.
o Among the assay results reported today are:
 A 115.5m wide intersection at an average grade of 1.01% copper from a depth of 2m in hole BKM32230-01 which terminated in mineralisation grading 2.56% copper and included higher grade sections, for example 13m averaging 1.81% copper and 17m averaging 1.24% copper;
 An intersection of 24.3m averaging 0.82% copper from a depth of 1.7m in hole BKM32425-02 which included 9m averaging 1.42% copper from 9m; and
 An intersection of 41.5m averaging 0.74% copper from a depth of 25m in hole BKM32485-01 which included 9.5m averaging 1.84% copper from a depth of 46m.
 Initial results from the testing are expected in early December with further results from the longer duration tests expected in early January.
Conclusion: Metallurgical results from Asiamet’s shallow copper resource at the BKM project are expected shortly and are expected to enable the company to identify the most favourable metallurgical treatment route for the proposed heap-leaching of copper and to locate the initial mining operation in a position to generate the strongest early cash-flows. We look forward to the results of the test work as it becomes available.

Bushveld Minerals (LON:BMN) 8.8p, mkt cap £70.7m – Bushveld adds value as it consolidates control over Vametco
BUY – Target price raised to 14.3p from 11p
(Bushveld Minerals now holds 59.1% of Vametco)
Click here for research note
• Bushveld Minerals is consolidating its control over Bushveld Vametco and the Vametco vanadium mine and process plant in South Africa.
• The acquisition of the remaining 55% of Bushveld Vametco which Bushveld did not own is value accretive on our modelling and raises Bushveld’s effective stake in Vametco to 59.1% from 26.6%.
• We are upgrading our target price to 14.3p from 11p based on Bushveld’s increased share of the cash flow from Vametco..
• Bushveld Minerals are to acquire a further 55% of Bushveld Vametco raising its stake to an effective 59.1% of the Vametco vanadium mine and process plant.
• The deal is being funded $4.5m in cash with the remainder being paid for on the issuance of new shares. There are also two deferred payments of US$600,000 and a further payment to be calculated by reference to the EBITDA of Vametco which on our modelling costs another US$9.61 in 2020.
• $6.6m worth of new shares are being issued raising the number of shares to around 863m.  The deal appears highly value accretive as we value Vametco more highly than the indicated acquisition price on our vanadium assumptions.
• Vametco produces around 3.5-4% of the world’s vanadium with global demand growth set to take off on the application of new regulations in China causing steel producers to now add regulatory quantities of vanadium to rebar and other types of structural steel.
• Vanadium production is also being curtailed in China where a ban on the processing of slag material is restricting the production of vanadium and other metals from this source as part of the drive to improve air quality standards.
• Bushveld Vametco managed to repay the acquisition costs and associated debt within an impressive four months of the acquisition of their first 26.6% of Vametco. We hope this second deal will result in a similarly quick repayment of the debt associated with the deal.
• The team are looking to expand market share to >10% of global vanadium supply over the next 3-5 years in a move which could add significantly to production expanding nameplate capacity to 5,000tpa of FeV from 3,000 tpa currently.
Conclusion:  We are excited to see vanadium prices take off but cautious in our revised valuation. We see Bushveld as offering unusually good value for investors in its cash flow generation and upside cash flow potential.  Our revised earnings table is for 100% of the Vametco vanadium operations of which Bushveld now has an effective stake 59.1%. The ongoing rise in vanadium prices should have a substantial impact on Vametco’s profit through the fourth quarter as indicated in our revised numbers.
Vametco plant assuming 100%     2017 2018 2019 2020 2021
Price V2O5 $/lb  6.40  7.37  6.01  6.01  6.01
Vanadium flake price US$/kg  30.80  33.00  27.50  27.50  27.50
Vanadium sales kg  2,750  3,390  3,390  4,823  4,823
Sales US$m  80.46  106.28  88.57  125.99  125.99
Operating costs US$m  62.02  72.79  69.39  96.08  96.08
Operating costs US$/kg 22.55 21.47 20.47 19.92 19.92
Operating profit US$m  18.44  33.49  19.18  29.91  29.91
Pre-tax profit US$m  18.20  33.02  17.76  27.60  27.73
tax US$m  5.19  9.41  5.06  7.87  7.90
Post-tax profit US$m  13.01  23.61  12.70  19.74  19.83
EPS US$c/s  1.51  2.74  1.47  2.29  2.30
PE x  6.7  3.7  6.9  4.4  4.4
EV/EBITDA x  4.8  2.6  4.6  2.9  2.9
Figures based on 100% of Vametco plant. Bushveld now hold an effective 59.1% of the Vametco plant
*An SP Angel Mining analyst and nomad have visited the Vametco vanadium mine and processing facilities in South Africa.

Golden Star Resources (TSE:GSC) C$1.1, Mkt Cap C$426m – Peer recognition as Mining Company of the year in Ghana.
• Golden Star Resources’ Bogoso and Prestea operations have been recognised with the local operating subsidiary, Golden Star Bogoso/Prestea Limited receiving the award as Mining Company of the Year in the industry awards judged “by a panel of industry professionals” in Ghana.
• In addition to the corporate recognition, the company’s Chief Operating Officer, Daniel Owiredu, received the inaugural Mining Personality of the Year award while the company also received awards for its breast cancer awareness programme in the Best Performer in Social Investment category and the award for Best Graduate Research was bestowed on the Process Manager from the Prestea mine, Ahmed Salim Adam who was .
• “A student of the Golden Star School in Bogoso village, Winifred Korankye Amoah, was also awarded first prize in the essay-writing competition, which was open to school children across Ghana.”
• Commenting on the company’s success in the awards and highlighting the individual and corporate achievements, Golden Star’s Chief Executive, Sam Coetzer, pointed out the underlying teamwork saying “It is only through working together that we are able to win these awards and more importantly, deliver long term, sustainable benefits for all our stakeholders”.
Conclusion: As in other industries, peer group recognition by other professionals in the mining industry puts a spotlight on the achievements of the entire operating team; we congratulate the Golden Star team and the recipients of the individual awards on their achievements.

Kibo Mining (LON:KIBO) 4.6 pence, Mkt Cap £18.3m –Acquisition of an advanced coal to power project in Botswana
• Kibo Mining reports that it has concluded an agreement to acquire 85% of the Mabesekwa Coal Independent Power Project from Sechaba Natural Resources (a subsidiary of Shumba Energy), for 153.7m shares.
• The project, which builds on the expertise Kibo Mining has developed on its 250-350MW Mbeya Coal to Power project in Tanzania, is located approximately 50km southeast of Francistown, currently has an overall measured/indicated/inferred resource of 777m tonnes defined under the South African SAMREC code.
• “The power plant fuel source is envisaged to be drawn from the MCIPP Resource.  As earlier stated, the Project will consist of a 300Mt subset of this current 777Mt coal Mineral Resource, with the precise subset comprising the MCIPP Resource to be defined during the detailed due diligence”.
• At this stage, it does not appear that the scale of the power generation plant has been disclosed, however, “Certain aspects of the Projects have been advanced previously by Sechaba, including water and land use permits and environmental certification which are now in place.”
o At Kibo Mining’s current share price, the transaction is valued at approximately £7.1m. Among the conditions of the transaction are Sechaba’s right to a US$0.50 per tonne royalty “from …coal sold from the area covered by the MCIPP Resource; and •    US 0.225 cents from revenue received per kilowatt hour produced and sold by any power plant owned by NewCo in Botswana or using coal procured from the area covered by the MCIPP Resource”.
o Kibo Mining is also to “use reasonable commercial endeavours … to free-carry Sechaba for the reasonable funding requirements of the MCIPP until financial close of a project financing, after which Sechaba may be diluted”.
Conclusion: The acquisition of the Mabesekwa project has clear synergies with the company’s flagship Mbeya coal to power project in Tanzania and the expertise gained at Mbeya should benefit Mabesekwa. Despite these obvious benefits, we believe that Kibo Mining will need to make sure that its focus on delivering the  Mbeya project is not impaired by its efforts in Botswana.

SolGold* (LON:SOLG) 27p, Mkt Cap £409m – SolGold raises £45m
• SolGold has raised £45m by way of a fully underwritten placement.
• The company is issuing 180,000,000 new shares which will trade on the London Stock Exchange Standard List.
• The placing price is 25 pence per share.
*SP Angel act as UK broker to SolGold and have acted as placing agent in relation to the SolGold issue

Vast Resources (LON:VAST) 0.5p, Mkt Cap £26.1m – Carlibaba drilling update
• The Company has released further results from its 2,150m drilling programme at the Carlibaba target, which is under consideration as a second open pit mine and the site of a new processing plant at the company’s Manaila polymetallic mine in Romania.
• The results, in combination with the existing database of historic drilling and sampling data, will be used to update the geological model and produce a revised JORC compliant resource estimate during H1 2018.
• The results of the 18 surface, cored, drill holes are reported to validate the existing data on Carlibaba, particularly “on the portion of the mineral resource which was previously identified as having possible open pit mining potential.”
• “The drilling programme appears to support the development of a second open pit operation at Manaila with the construction of a metallurgical processing facility on site, thereby significantly reducing the cost of ore transport incurred at the current operation.”
• Vast Resources’ Chief Executive, Roy Pitchford, commented that “The development of these twin objectives, which we are looking to fund through off-take debt finance, is expected to increase throughput volumes at Manaila considerably and also materially reduce operating costs - which should significantly enhance profitability in Romania moving forwards."
• Among the drilling results highlighted in today’s announcement are:
o A 12.4m long intersection averaging 0.44g/t gold, 14.6g/t silver, 1.11% copper, 0.18% lead and 0.43% zinc from a depth of 114.6m in hole F005;
o A 4.5m long intersection averaging 0.18g/t gold, 9.98g/t silver, 1.17% copper, 0.08% lead and 0.21% zinc from a depth of 109.2m in hole F004; and
o Three separate mineralised intersections encountered in hole F013; 1.5m averaging 0.13g/t gold, 18.3g/t silver, 0.43% copper, 0.45% lead and 14.34% zinc from a depth of 61.3m and  2.7m averaging 0.33g/t gold, 62.4g/t silver, 0.94% copper, 1.18% lead and 11.99% zinc from a depth of 92m and 4.5m averaging 0.26g/t gold, 16.2g/t silver, 0.39% copper, 0.27% lead and 4.37% zinc from a depth of 100.5m.
Conclusion: The drilling at Carlibaba will be used to develop an updated mineral resource estimate which should help the company to make a decision on whether to proceed with plans to develop a second open pit mine and a new processing plant within its Manaila licence in order to reduce operating costs. We look forward to the new resource estimate during H1 2018.

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Thu, 30 Nov 2017 11:43:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29049/today-s-market-view-altus-strategies-asiamet-resources-bushveld-minerals-kibo-mining-and-others-29049.html
Today's Market View - BlueRock Diamonds, Firestone Diamonds http://www.proactiveinvestors.co.uk/columns/sp-angel/29057/today-s-market-view-bluerock-diamonds-firestone-diamonds-29057.html Tesla 129MWh mega-battery gets its first commercial test
• The world’s largest lithium-ion battery was officially activated to support crippling electricity problems in Southern Australia, as Tesla fulfilled the ambitious promise of delivering power within a 100-day window. The 100-megawatt battery is three-times more powerful than the world’s next biggest battery to help avoid the notorious incident where the entire state lost power following intense weather.
• The battery hopes to be used to support and stabilize existing electricity supply and provide power for up to 30,000 home, relying on the same battery technology as the tesla electromobility.
• Commercial scale energy storage systems are driving innovate demand for battery raw materials, with consumption of lithium expected to grow 68% CAGR through to 2025 (SP Angel Commodity Research Book – Battery raw materials)
• The new battery is sited 190km north of Adelaide and should bring stability to power supplies in Southern Australia through better integration of low cost solar and wind power for the national grid.
• Neoen Australia, the owner of the battery, believes this is the signal of the end for coal as prices for lithium batteries fall and renewable energy becomes cheaper 
• It will be interesting to see how well the new lithium-ion battery plant manages to cope with the heat in the Southern Australian Summer and if any of the battery cells will suffer from the degradation and thermal runaway which can occur in one in a million Li-ion battery cells
• Temperatures are cool today in the region at 20c but can hit 41.5c in the area.  The combination of power drawdown
• BHP lost $105m in a day when the Olympic Mine was shut by a power blackout in the state last year.  The new Tesla battery is costing up to $95m by contrast indicating that the battery cost as well as some political ambitions could be covered by saving the state from just one power blackout.

Lithium – recycling to reach 9% of total battery supply in 2025
• A new report by Creation Inn predicts that 5,800t of lithium and 22,500t of cobalt from recycled batteries will reach global markets in 2025
• China will lead recycling activities for both metals with 66% of lithium ion batteries or 191,000t expected to be recycled 
• Cobalt can be drawn from faulty batteries, and could meet 10% of industries need

Dow Jones Industrials  +1.39% at 24,272
Nikkei 225   +0.41% at 22,819
HK Hang Seng   -0.33% at 29,082
Shanghai Composite    +0.01% at 3,318
FTSE 350 Mining   +0.28% at 16,579
AIM Basic Resources   -0.78% at 2,635

Economics
US – The Senate postponed the vote on the US tax reform to today as further changes had been negotiated.
• The US$ index lost around 0.7% yesterday on the back of the news and is being steady this morning ahead of the Senate vote results.

China – Latest PMI numbers point to a divergence in state controlled and private companies’ recorded performance in November.
• The gauge of private manufacturers in China marked a slowdown in the sector’s growth to the weakest pace in five months.
• Companies referred to stricter environmental policies as drivers behind slower expansion.
• This contrasts with official manufacturing PMI which focused primarily on large, state-owned enterprises and recorded a pick-up in activity this month.
• Caixin Markit Manufacturing PMI: 50.8 v 51.0 in October and 50.9 forecast.

Eurozone – Single currency zone manufacturing sector grew to near-record high with strong readings of output and new orders metrics.
• Employment levels increased in all of the nations covered by the survey “with almost all seeing a faster pace of increase (the sole exception being Italy)”.
• Inflation has also been on an increasing trend with input costs climbing at the fastest pace in six-and-a-half years while output charges increased to the greatest extent since Jun/11.
• Stronger economic growth as well as accelerating inflation would be welcome news in the ECB which is looking at gradually reducing the amount of monetary easing.
• “Companies are clearly expanding rapidly… employment growth has hit an all-time high and business investment on machinery is trending sharply upwards, suggesting manufacturers are looking forward to the upturn persisting well into 2018,” Markit said.
• Markit Eurozone Manufacturing PMI: 60.1 (revised from 60.0) v 58.5 in October.

Germany – Chancellor Angela Merkel is due to meet former centre-left partners to discuss a potential coalition today.
• Negotiations with Social Democrats may potentially lead to formation of another grand coalition in the Bundestag.

Spain – More news on the buoyant state of the Spanish recovery.
• Manufacturing sector climbed the most on almost 11 years in November led by strong production and marked increase in new orders, according to Markit PMI.
• Overseas demand was particularly strong with an increase in the rate of expansion in new export orders among the highest since the survey began in Feb/98.
• Positive business outlook led further gains in employment figures.
• Final goods inflation accelerated to a four-month high on the back of rising input costs (commodities especially).
• “The sector is clearly in good shape as 2017 draws to a close, with hopes of continuing strong performance in 2018,” the report said.

Greece – The government is planning to issue a seven-year bond early next year raising at least €6bn with more offerings to come should the deal record good demand.
• The bond together with another €9bn from unused bailout funds should help cover interest payments and principal due next year on the €319bn debt due next year.
• Two more issues of three and 10 year bonds might follow in July, according to people involved in preparing the nation’s borrowing strategy for next year.
• The government has completed a €30bn voluntary bond swap this week exchanging 20 sovereign bonds issued after a debt restructuring in 2012 for five new ones with maturities ranging from six to 25 years.

Currencies
US$1.1927/eur vs 1.1845/eur yesterday.  Yen 112.59/$ vs 112.42/$.  SAr 13.668/$ vs 13.682/$.  $1.352/gbp vs $1.346/gbp
0.758/aud vs 0.757/aud.   CNY 6.607/$ vs 6.611/$.

Commodity News
Precious metals:         
Gold US$1,276/oz vs US$1,281/oz yesterday
• The support from US Senate John McCain toward the Senate tax bill helped draw confidence in the progress and passage of bill and encouraged strength in the dollar index. The index rose to 93.51 on the back of buoyant economic data with “excellent US consumption and preliminary GDP data seeing the US 10-year bond yield rise to 2.435% overnight” (ANZ Research). Comments from Janet Yellen indicated a brightening picture for the US economy, which downplayed the risk of financial instability.
• Despite new support from Senate candidates, the Republican tax overhaul stalled yesterday on a procedural issue, forcing lawmakers to assess new options to an amendment sought by a leading fiscal hawk to address the bill’s projected large expansion of the federal deficit.
• After initial geopolitical tension at the beginning of the week, gold price has contracted further from its 200-day moving average at $1286/t.
• US President Trump is pushing pressure on Chinese diplomatic efforts to rein in North Korea’s weapons program, with Secretary of State Rex Tillerson suggested the nation could do more to limit oil supplies to Pyongyang.
   Gold ETFs 71.5moz vs US$71.6moz yesterday
Platinum US$943/oz vs US$943/oz yesterday
Palladium US$1,015/oz vs US$1,017/oz yesterday
Silver US$16.44/oz vs US$16.50/oz yesterday
           
Base metals:   
Copper US$ 6,789/t vs US$6,762/t yesterday
• Tightening copper conditions are causing prolonged negotiations between China’s smelters and international mining companies over the terms for next year’s treatment and refining charges (TC/RC). The majority of participants see the fees falling from current level of $92.50/t and 9.2c/lb because expanding smelter capacity will cause more competition for materials as mine supply growth is set to stall next year. The TC/RC’s set can have a significant impact on the profitability of the miners and smelters, with negotiations with the largest consumer of copper setting the global industry benchmark.
• For 2018, trading sources and miners have offered $72-78/t, while Chinese smelters are pushing for unchanged prices because of abundant mine output. There remains confusion over the balance of concentrate on the market, with Standard Chartered analyst identifying a 200Kt surplus this year which is expected to move into deficit of the same amount in 2018.
• Deals are often struck during next weeks’ Asia Copper conference that is held this week, although with offers standing so far apart the progress is expected to be slow into the new year. Market consensus suggests a common ground around $85/t will be found, with the vast majority of world’s smelters making a profit at that level.
• The stalemate highlights the industry’s uncertainty about striking action across Chile and Peru, with striking action at Southern Copper Corp. extending into day ten. Ongoing supply disruptions concerning wage negotiations have negatively impacted output, which fell 2% yoy in October, as volumes decreased to 214Kt from Cero Verde, Las Bambas, Antamina and Antapaccay mines.
• Industrial metals are expected to receive robust demand as Asia’s major manufacturing economies saw their fastest expansion in factory activity in November, with strong consumption for electronics driving the rise.
Copper set to fall as China’s output rises and property market slows
• Rising copper output and concerns of slow down in real estate market may threaten coppers electric vehicle fuelled rally
• Expected to see pressure in first half of 2018 because of weakening of real estate market and the 300,000 tonnes of new metal coming into supply
Aluminium US$ 2,056/t vs US$2,056/t yesterday
Nickel US$ 11,135/t vs US$11,295/t yesterday
Zinc US$ 3,170/t vs US$3,139/t yesterday
Lead US$ 2,488/t vs US$2,450/t yesterday
Tin US$ 19,520/t vs US$19,475/t yesterday
           
Energy:           
Oil US$63.1/bbl vs US$63.6/bbl yesterday
• Asian refiners wasted no time to react to the extension of OPEC and Russia’s decision on their agreed production cuts, by boosting orders for more oil from the Caribbean and Gulf of Mexico in a move which removes market share from the global oil cartel.
Natural Gas US$3.092/mmbtu vs US$3.113/mmbtu yesterday
Uranium US$23.25/lb vs US$23.90/lb yesterday

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$68.2/t vs US$67.2/t
Chinese steel rebar 25mm US$742.4/t vs US$729.4/t - G20 agrees steel deal to tackle global over capacity
• Ministers agreed deal aimed at removing excess steel production capacity
• European steel makers unable to compete with cheaper steel from China, which produces and consumes half the world’s steel 
• The new deal is intended to stop unfair subsidiaries which skew the steel market
• China’s domestic stainless steel market narrows downward on pressure from declining nickel prices. The three-month nickel LME contract ended $375/t down this week, matched by a fall to 880 yuan per nickel unit for East China’s Zhangjiagang Pohang Stainless Steel purchasing price (down from 900-910 yuan last week).
Thermal coal (1st year forward cif ARA) US$85.2/t vs US$86.0/t
Premium hard coking coal Aus fob US$211.3/t vs US$209.9/t
           
Other:  
Tungsten APT European US$275-285/mtu vs US$271-285/mtu last week
Cobalt LME 3m US$66750/t vs US$68250/t yesterday

Company News
BlueRock Diamonds* (LON:BRD) 2.1p, Mkt Cap £3m – BlueRock appoints new finance director
• BlueRock Diamonds has appointed David Facey as finance director.
• David is a Fellow of the Institute of Chartered Accountants of England and Wales and has over 20 years’ experience in Corporate Finance and Equity Capital Markets.
• After working at PwC, David spent 10 years at HSBC Investment Bank, where he specialised in raising funds in the UK for companies all over the world, particularly in the EMEA region.
• Throughout his career David has advised governments, large corporates and smaller enterprises on public fund raising, private fund raising and mergers and acquisitions.
• David was also founding partner in SP Angel advising SMEs on raising funds in the London market, both public and private.
• David Facey is also a director of Intoware Limited and PLS Nominees Limited.
• BlueRock is ramping up mining to produce some 25,000t per month as its moves into fresh kimberlite ore.
• The company has been beset with problems through the year recently appointing Adam Waugh as ceo to take over management of the company.
• Waugh has replaced the mining contractor with in-house kit and has improved the process plant for greater throughput and better recovery rates.
• Throughput and sales have risen since the reorganisation and grades have improved towards the 4.5cpht (carats per hundred tonnes) estimated in the CPR.
• Sales rose to US$226,400 for the October tender vs US$175,621 in September with the average value per carat also rising to US$371.25/ct vs US$337/ct seen in the first nine months of the year.  The per carat value remains well ahead of the assumed CRP value of $232/ct.
• Rain in October caused mine production to pull back to just 17,000t from 22,010t reported in September though the grade recorded an effective 2.64cpht in the October tender though this is lower than the 3.01cpht seen in the September sale.
• We look forward to throughput rates rising to 25,000tpm and to the mining of higher grades from fresh kimberlite.
Conclusion: We look forward to further detail on costs and grades as the company moves into mining the fresh kimberlite.  We hope the operations will settle into more consistent production and plant throughput and will show diamond grades closer to the CPR estimates going forward.  Achievement of target throughput, grades and per carat values should imply a significant uplift in the company’s valuation so long as costs are controlled.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds

Firestone Diamonds (LON:FDI) 13.5 pence, Mkt Cap £43.2m – Annual results and potential fundraising
• Firestone Diamonds has reported a pre-tax loss of US$130m (US$151.7m after tax) for the year ending 30th June 2017. The loss includes a non-cash impairment charge of US$122.6m arising from a review of the carrying value of the flagship Liqhobong diamond mine in Lesotho which was commissioned during the year and which declared formal commercial production on 30th June.
• The company held a cash balance of US$17.3m at 30th June 2017.
• The mine was developed within the US$185.4m budget for a total cost of US$183.3m and produced a total of 365,891 carats of diamonds during the year as it ramped up towards the revised 2017/2018 production target of 800-850,000 carats.
• “The ramp-up was not without its challenges, with recovered grade being an initial issue … together with other commissioning issues which are normal in the ramp-up phase of a new plant” compounded by weakness in the market for the smaller sizes of rough diamonds triggered, in part, by India’s demonetisation programme announced in November 2016.
• The operational issues were largely resolved by the end of March, however “which enabled the plant to run at full production levels for a sustained three-month period, achieving commercial production by the end of the financial year”.
• On a quarter –by-quarter basis, production built steadily through the year  to 926,000 tonnes of ore and 550,000 tonnes of waste during the final quarter, with grades improving steadily from 15.15 carats per hundred tonnes (cpht) in Q2 to 22.1cpht in Q4 for an average of 18.61cpht for the three production quarters. The grade improvements, in particular may well be attributable to “access to more areas of the pit, in particular the higher grade K5 ore, increased as mining operations advanced during Q4, also contributing to the increase in grade”.
• Eighty percent of ore production during the year derived from “the lower grade K2 material in the pit which included some dilution, 8% from K5, 7% from K4 and the remaining 5% from historic low grade stockpiles”.
• “The current year has started well with 199,007 carats recovered during the first quarter, including the largest diamond recovered to date, a 133 carat light yellow stone, as well as 45 specials (larger than 10.8 carats).  Mining is proceeding to plan and Firestone is gradually extending operations to additional areas in the pit and, as more detailed knowledge of the pit is acquired over the coming months”.
• The company notes that the rough diamond market during the financial year was “mixed … prices for higher value, better quality goods have been robust with modest growth during the year, while prices for the smaller "Indian market" run of mine production have been more difficult.” The company sees “a modest recovery in the lower priced category goods in the short to medium term. Supply of these category goods will remain robust in the short term but in the medium term, Firestone believes supply will diminish and demand will continue to grow”.
• In addition to the results, Firestone Diamonds has also announced, today, plans for a potential fundraising of up to £18.5m (US$25m) at a price of 10p/share in order to ease pressure on the balance sheet and help to restructure debt which currently stands at US$85.7m (net) or around 80% of capital employed.
• The proposed “Issue Price represents a discount of 49.4 per cent to the Closing Price on 30 November 2017.”
• The revised mine plan reduces the planned life of the Liqhobong mine to 9 years from the previously planned 14 years lowering the total life of mine diamond production from 13.9m carats to 7.7m carats and reducing the volumes of waste removal required 29mt from the previously estimated 105mt.
• The revised mine plan generates an “indicative NPV” at the US$90/carat average price received during the financial year to June 30th 2017 of US$195m. Liqhobong does, however, appear to be strongly geared to diamond prices and at the US$100/carat price level the NPV increases to US$240m.
• The company stresses that the revised mine plan is sufficiently flexible that the longer life operation could be reinstated if the quality of the recovered diamonds improves and the rough diamond market picks up.
Conclusion: The revised mine plan for the Liqhobong mine is aimed at shortening the overall life in order to deliver significant improvements to NPV. The new fundraising is taking place at a significant discount but should help to repair the overstretched balance sheet.

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Fri, 01 Dec 2017 10:51:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29057/today-s-market-view-bluerock-diamonds-firestone-diamonds-29057.html
Today's Market View - Atalaya Mining, Bacanora Minerals and Galileo Resources http://www.proactiveinvestors.co.uk/columns/sp-angel/29063/today-s-market-view-atalaya-mining-bacanora-minerals-and-galileo-resources-29063.html Atalaya Mining (LON:ATYM) – Expansion to 15mtpa approved - £39m placing proposed
Bacanora Minerals (LON:BCN) – President and director resigns
Galileo Resources (LON:GLR) – Drilling at Star Zinc Project

 

China’s ‘New Economy’ threatens commodity bull run
• Encouraging demand is expected to sustain buoyant commodities into 2019, lifted by growth across emerging markets as well as advanced economies. Interest in the commodity sector has flourished this year, as the Bloomberg Commodity Index surged almost 10% since June on improving market conditions, while raw material assets under management in the second half of 2017 were boosted by almost 20% to $417 billion through end-October, representing the highest level since 2014 (Citigroup).
• Tightening balances are expected to support the level of investment in the sector, however with significant risk from the slowing Chinese economy. Uncertainties surround the levels of sustained demand as the largest consumer of commodities transition from ‘Old Economy’ to ‘New Economy’. Growth in China is contracting as President Xi Jinping focuses on the quality of expansion rather than the pace of it.
• Incentives like the ‘One Road One Belt’ will continue to sustain commodity demand as the world’s second largest economy looks to increase its global footprint.

China’s 2018 steel output seen rising even after mill closures
• Crude steel output set to rise 3% to 832mt this year and a further 0.7% in 2018 as major mills ramp up operations offsetting impact of shutdown of outdated plants
• Growth comes after crackdown on illegal low grade steel products which were never included in statistics, supplies now filled in by legal steel mills
China complains about steel glut as nation continues to build capacity
• It’s amazing that the nation that has increased steel production and capacity far beyond any other is now complaining that the rest of the world is not doing its bit to cut capacity.
• The Global Steel Forum, a group of G20 and 13 other nations declared last week in Berlin an ambitious package of policy solutions to tackle global overcapacity.
• Press reports indicate that the US is not happy with the proposals as the forum does not tackle the root causes of excess capacity.
• China is not happy either and does not want to be the one going through the painful process of capacity reduction while the rest of the world just watches, which is faintly amusing since China is principally responsible for the overcapacity.

Electric car push drives premiums for greener metals
• Companies such as VW and BMW are reported to be starting to pay a premium for sustainable and traceable metals.
• Higher prices may also be paid for low carbon products as well as highly processed forms of metals for electric batteries as sustainability issues look set to play increasing focus in raw material procurement

Rio Tinto to develop ‘intelligent’ Australian iron ore mine
• Next year managers at Rio Tinto will seek board approval to develop their first intelligent iron ore mine at a cost of $2.2bn.
• The plan is to fully incorporate technologies such as robotics, driverless trains and trucks on a single site at the new Koodaideri iron ore mine in the Pilbara, Western Australia
• The iron ore mine is planned to produce 40mtpa by 2021 but this may eventually rise to 70mtpa
• The cost of employing and managing staff in this hot and remote region is the principal driver for Rio Tinto with truck drivers thought to be earning >A$100,000pa, supervisors on up to A$230,000 and train drivers on A$250,000 plus.

Dow Jones Industrials  -0.17% at 24,232
Nikkei 225   -0.49% at 22,707
HK Hang Seng   +0.36% at 29,179
Shanghai Composite    -0.24% at 3,310
FTSE 350 Mining   +0.27% at 16,576
AIM Basic Resources   -1.06% at 2,607

Economics
US – US Senate narrowly voted through a tax overhaul on Saturday (51-49) with negotiations between the Senate and the House to begin this week with a view to agree the final version of the bill to go to President
• It is a non-farm payrolls week marking the last jobs report before the December monetary policy meeting.
• The report will provide a mostly clean gauge of labour activity following two months of hurricane distortions.
• Estimates are for the number of new jobs to come in at 199k compared to 261k in October or an average of 140k over two months of October/September.
• Economists are not unanimous on potential effects of tax cuts and infrastructure spending on the economy, according to the latest survey.
• Around half of economists see policy changes adding 0.2-0.4pp to growth in 2018, while 20% forecast a larger gaina dn 20% see no benefit to growth, according to the National Association for Business Economics.
• Despite a modest pick up in growth in 2018, a slight majority still forecasts a recession starting before the end of 2019 versus 48% seeing the expansion running through at least 2020.

UK – PM Theresa May is meeting Jean-Claude Juncker, the EC president, to iron out last disagreements ahead of the EU summit on Dec 14-15 in an effort to progress Brexit discussions further to trade terms.
• Two of the most important discussion points would be Norther Ireland border and the future of European courts in Britain, FT reports.

Turkey – Inflation hit the highest level in 14 years putting more pressure on the central bank to raise from current 12.25%.
• Consumer prices climbed 13.0%yoy in November compared with a 11.9%yoy increase recorded in the previous month.
• Turkish lira continued to weaken against the US$ currently trading close to the lowest level on record.

Currencies
US$1.1861/eur vs 1.1927/eur yesterday.   Yen 112.96/$ vs 112.59/$.  SAr 13.775/$ vs 13.668/$.  $1.344/gbp vs $1.352/gbp
0.759/aud vs 0.758/aud.   CNY 6.619/$ vs 6.607/$.

Commodity News
Precious metals:         
Gold US$1,273/oz vs US$1,276/oz last week
• Spot gold price fell under pressure from an improving dollar as the US Senate passed its tax reform bill over the weekend. The House-Senate conference committee will now be responsible for resolving the difference between the proposed House and Senate tax bills, with expectations for the bill to assist with sustaining corporate capital investment and [merger and acquisition] activities as both bill call for a reduction in the corporate tax rate to 20%.
• The dollar rebounded to a two-week high after falling on the news that Michael Flynn, former national security adviser to Trump, pleaded guilty to lying to the US Federal Bureau of Investigations about alleged contact with Russia.
• A potentially higher yield trajectory on US Federal Reserve’s interest rates across 2018 have renewed market interest in the dollar, harming precious metal prices.
• Geopolitical tensions could be on the rise as a week-long joint US and South Korea air exercise, called Vigilant Ace, has received condemnation from the North who state the US are “begging for nuclear war”. The drill is expected to involve some 230 aircraft, including two dozen stealth jets and tens of thousands of military personnel which could be at threat from North Korea as it would “seriously consider” counter-measures.
   Gold ETFs 71.9moz vs US$71.5moz last week
Platinum US$934/oz vs US$943/oz last week
Palladium US$1,023/oz vs US$1,015/oz last week
Silver US$16.33/oz vs US$16.44/oz last week
           
Base metals:   
Copper US$ 6,834/t vs US$6,789/t last week
• Base metal prices have been broadly supported by Chinese Purchasing Managers’ Index (PMI) readings, which continued to show expanding activity to rise to 51.8. Higher than expected data maintains a positive short-term outlook, while strike concerns at Southern Peru Copper Corp and Teck’s Quebrada Blanca copper mine give underlying supply doubt as unions attempt to renegotiate higher wages on elevated metal prices. Copper stocks dropped 4.1% in November to 460,000 tonnes across Shanghai-bonded warehouses.
Aluminium US$ 2,072/t vs US$2,056/t last week
Nickel US$ 11,400/t vs US$11,135/t last week
Zinc US$ 3,224/t vs US$3,170/t last week
Lead US$ 2,541/t vs US$2,488/t last week
Tin US$ 19,510/t vs US$19,520/t last week
           
Energy:           
Oil US$63.4/bbl vs US$63.1/bbl last week
• Despite hedge funds hiking bullish bets on US production, US shale oil producers appear to have followed suit with OPEC’s decision to extend the global output cuts until the end of 2018. Money managers boosted bullish wagers on US crude last week to the highest on record since 2009, raising its combined futures and options position by 51,853 contracts to 451,877.
Natural Gas US$3.110/mmbtu vs US$3.092/mmbtu last week
Uranium US$23.00/lb vs US$23.25/lb last week

Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$70.5/t vs US$68.2/t
• Spot iron ore surged up almost 20% from late October lows to climb beyond the $70/t level, as China’s crackdown on steel output over the winter emission period runs down inventories and builds demand for high-grade ore supply. The initiative to reduce harmful levels of pollutants across key producing provinces has effectively diminished inventories, with “the rally expected to be driven by a further tightening of the Chinese steel market, Chinese steel mills’ active restocking of high-grade iron ore, seasonally weak seaborne supply, and a recognition that iron ore supply growth passes its peak during the first quarter of 2018”, according to Citi analysis.
• The push toward improved environmental conditions has also prompted an increased demand for higher-grade ore which causes less pollution and more efficient energy, boosting the premium on higher-quality ore.
Chinese steel rebar 25mm US$755.4/t vs US$742.4/t
• Despite extensive mill closures, China’s steel output is expected to continue rising, increasing a further 3% to 832 million tonnes this year. The impact of closures of outdated plants and winter capacity cuts are being offset by major mills ramping up operations, with output growth extending 0.7% into 2018.
Thermal coal (1st year forward cif ARA) US$85.6/t vs US$85.2/t
Premium hard coking coal Aus fob US$215.7/t vs US$211.3/t
           
Other:  
Tungsten APT European US$291-300/mtu vs US$275-285/mtu last week
Cobalt LME 3m US$66250/t vs US$66750/t last week

Company News
Atalaya Mining (LON:ATYM) 174 pence, Mkt Cap £203m – Expansion to 15mtpa approved - £39m placing proposed
• Atalaya Mining has announced that it intends to proceed with a previously announced proposal to increase throughput at its Proyecto Riotinto from the current 9.5mtpa to 15mtpa increasing average copper output by around 40% or 15,000 tpa to 55-55,000 tpa of copper in concentrate.
• Subject to financing and permitting issues, the company plans to start construction work during Q1 2018 with commissioning of the expansion expected to take place during the second half of 2019 and a ramp up to full production during H1 2020.
• The project, which is forecast to cost €80.4m, is expected to reduce “cash costs and all-in sustaining costs by approximately 7% … based on maintenance and processing efficiencies”.
• “Management expects that the expansion project will result in an incremental post-tax net present value (NPV) of approximately US$113 million (assuming an 8% discount rate) and a post-tax internal rate of return (IRR) of approximately 43%, when assuming a US$3.00/lb copper price, US$18.00/oz silver price, and USD:EUR of 1.15.”
• Major elements of the expansion programme are a new primary crushing system and SAG mill, and additional flotation cells and concentrate handling capacity.
• In order to finance the expansion, Atalaya Mining proposes to raise £39m by the issue of approximately 23.3m new shares at £1.67/share. Based on the current issued share capital  disclosed on the company’s website we estimate that, if issued in full, the new shares represent around 17% of the enlarged company.
• We note that “The four largest existing shareholders ("Key Shareholders") have already committed to participate in the Placing, in accordance with their pre-existing contractual entitlement rights”. Trafigura, (22%), Yanggu Xiangguang Copper (21.9%) and Liberty Metals & Mining Holdings (13.98%) have all agreed to maintain their current stakes and Orion Mine Finance (14.56%) has agreed to take a further 1.8m shares or 8% of the proposed placing.
• Atalaya Mining’s team achieved commercial production at Proyecto Riotinto on 1st February 2016 at an initial 5mtpa capacity and leapfrogged the planned incremental expansion to 7.5mtpa moving straight to the current 9.5mtpa rate by July 2016. We interpret this as a demonstration of the technical and operational proficiency of the management which bodes well for the efficient delivery of the new expansion to 15mtpa.
Conclusion: Atalaya Mining’s plan to increase the capacity of its Riotinto operation is a relatively low-risk incremental expansion of an existing operating mine where management has already delivered previous expansion projects smoothly. The company’s economic case focuses on reduction of unit costs and sustaining capital requirements to deliver an attractive incremental post-tax IRR of 43% for the expansion. The proposed £39m financing has received the backing of the main shareholders representing over 70% of the current share capital.

Bacanora Minerals (LON:BCN) 95.5p, Mkt Cap £127m – President and director resigns
• Bacanora Minerals report the resignation of the Martin Vidal, President and director of the company as of 30 November.
• No explanation has been given as to the resignation though we note that Mr Vidal is to remain with the company in an advisory / consultancy capacity.
• We wonder if Mr Vidal has disagreed with the board’s filing of a statement of claim with the Court of Queen's Bench in Alberta striking out the 3% over-riding royalty held by the Estate of Colin Orr-Ewing.
• We also wonder why Bacanora did not announce the news of Mr Vidal’s departure on Friday?
• Last week Bacanora reported its first quarter financial results:
• Expenses were C$1.26m for the quarter but this rises to C$2.2m when including stock-based compensation.  Adding in other adjustments takes the total loss to C$2.7m which adds up to an annualized C$10.8m for a full year though much will change if the company moves into the construction phase.
• Bacanora reports it is fully financed with approximately US$24m in the bank and is fully funded through to the initial development of Sonora and the start of the construction stages.
• The company expects to report on its new Feasibility Study this year and appears to be updating its lithium carbonate pricing assumptions in the feasibility study based on prices published on https://seekingalpha.com/article/4117788-lithium-miner-news-month-october-2017
Conclusion: we conclude that all is not well with the board of Bacanora Minerals. We expect Bacanora will look to finance the construction of the Sonora project shortly after publication of the Feasibility Study.
*SP Angel is completely independent of Bacanora Minerals and the Orr-Ewing Family estate. The above text represents the author’s independent and personal views as a mining analyst and an observer of the company over many years. Note, we are not advising investors to buy or sell this stock.

Galileo Resources (LON:GLR) 1.375 pence, Mkt Cap £3.5m – Drilling at Star Zinc Project
• The company reports plans to start drilling an initial 1750m this week at the recently acquired Star Zinc Project in Zambia where Galileo Resources holds a 51% interest and may earn up to 85% via the completion of a preliminary economic assessment.
• Galileo Resources has engaged the consultants, CSA Global to prepare a JORC (2012) compliant mineral resource estimate along with the Zambian based GeoQuest who will manage the drilling programme and provide geological support.
• Commenting on the fast-tracking of the drilling, and the soil sampling programme which is expected to be reported shortly, CEO, Colin Bird, said “This imminent drilling programme is designed to confirm a regulatory JORC code resource and to test the potential of other nearby areas considered to be prospective.  On completion of this drilling programme, we intend to commence a preliminary economic assessment.”
Conclusion: Previous reports and non-JORC compliant mineral resource estimates have indicated that the Star deposit is a small but high grade deposit with zinc grades of around 20% zinc at a cut-off grade, higher than the resource grade of many deposits,  of 14% zinc. With its long history in mining, we consider Zambia to be a relatively attractive area for mining and exploration and look forward to the results of the drilling and the subsequent resource estimate and preliminary economics and to any indications of expansion potential for the Star deposit.

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Mon, 04 Dec 2017 10:24:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29063/today-s-market-view-atalaya-mining-bacanora-minerals-and-galileo-resources-29063.html
Today's Oil and Gas Update - Curzon Energy and Green Dragon Gas http://www.proactiveinvestors.co.uk/columns/sp-angel/29073/today-s-oil-and-gas-update-curzon-energy-and-green-dragon-gas-29073.html Curzon Energy* (LON:CZN– 8p) – $32.5mm (37p) – Getting on With It: Today’s news underlines the appetite with which the Company is tackling its appraisal programme, with the rig secured and turning so quickly after securing funds. While some commentators will point towards the fact that the wells being tackled are pre-existing wells, we believe that by focusing on the wells that will generate cash flow first, the Company is ensuring that shareholders achieve maximum value as quickly as possible. While the wells are pre-existing and will flow gas immediately, it must be remembered that due to the flow characteristics of CBM wells, the testing programme, albeit simpler, has a longer duration due to the need to dewater before the full productivity of the well is understood. Still, the gas produced will generate revenue which if sufficient, wil l be reinvested into new wells at ready identified drill locations, further increasing cash generation. If successful, the programme will see the ~270bcf of Contingent Resources quickly reclassified into Reserves, which will carry a higher than usual NPV (for the United States) due to the differentiated gas pricing in Oregon.


Green Dragon Gas (LON:GBG– 62p) – Listing Plans Ignore Underlying Reason for Weakness: Today’s news that the Company will be listing its producing businesses on the Hong Kong Exchange to raise enough funds to pay down the debt on its balance sheet, citing the fact that the London market doesn’t value the assets sufficiently, ignores the one single largest flaw in the plan. London doesn’t value the assets because Green Dragon Gas is laden with debt that has had no way of paying it off for a long time, that was run up by a management team that overlooked the fact that the majority of its assets have been developed by a third party without its knowledge. That’s why its poorly rated. So, what is going to remain in the London listing? Not much of anything. This management team have failed to deliver value on any basis for the shareholders, and are now seeking to take the value enhancing business away from those shareholders that have supported the Company thus far. Instead of fixing the problem and addressing the issues that the market is telling them are there, management are taking their brand of failure to a new location. Given this, it is unlikely they have learned their lessons and will fail again. We believe that this is a wasteful exercise based on the management team’s vanity, but given the fact that the majority of shares are owned by a concert party to management, this resolution will likely be passed. Best thing to do is to stay with the shares, get the new shares on dividend and then work with the new investors that come in through the HK listing to change the management team for one that can deliver. After the split, what’s left in London will not be worth anything.

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Wed, 06 Dec 2017 09:06:00 +0000 http://www.proactiveinvestors.co.uk/columns/sp-angel/29073/today-s-oil-and-gas-update-curzon-energy-and-green-dragon-gas-29073.html