Anglo American (LON:AAL) – De Beers reports continuing positive sentiment from diamond customers.
Aureus Mining (LON:AUE) – Moving to owner operation at the New Liberty mine
IronRidge Resources* (LON:IRR) – IronRidge acquires Lithium project in Ghana
Kodal Minerals* (LON:KOD) – Adding to its Lithium exploration portfolio in Mali
Metminco* (LON:MNC) – $45m of funds secured for Los Calatos copper mine in Peru
Noricum Gold* (LON:NMG) – Strengthening and restructuring of the Board
FTSE100 is relatively flat with miners range-bound this morning
• US$ index is off for a second day; although, a two-day decline is relatively modest with 0.2% lost during the period.
• Brent settled 1.7% higher on Monday after a volatile session as a “significant” joint statement between Saudis and Russians came short of market expectations with markets hoping for a potential production freeze deal.
• Instead Saudi Arabia said there was no need for production rationing at this point with an agreement to be discussed during the OPEC meeting in Algiers later this month.
• The RBA kept rates unchanged at a record low of 1.5% today with the A$ coming off slightly on the announcement but quickly regaining lost ground. The currency is up 0.8% against the US$.
• The central banks of Canada and Sweden are scheduled for a policy announcement tomorrow with no changes in rates expected (0.5% and -0.5%, respectively).
• The ECB will be releasing its statement on Thursday.
• Gold, copper and iron ore futures are little changed this morning.
German Antitrust Authority – Phase II proceedings
Sierra Rutile – Illuka merger may be suffer a 3-month delay depending on Authority proceedings
• Not content with flooding Europe with Migrants causing the rise of far right wing parties across Europe, the German authorities are sticking their ore in again with regard to the market for titanium mineral sands.
• In what may be a possible attempt to manage the market for ilmenite and rutile supply the German Antitrust Authority is initiating Phase II proceedings in respect of the proposed merger between Illuka and Sierra Rutile.
• The German Antitrust Authority has up to three months to conclude these Phase II Proceedings as the Authority reckons it needs more time to consider the implications of the merger given the industrial importance of the market for mineral sands.
• So why are the German Antitrust Authority getting involved? Is it because Germany hosts a number of traders and consumers of titanium mineral sands? Might they be flexing muscles afforded by the European Union? The chances are that the Authority will allow the deal through though it is possible that there may be some conditions applied to Illuka’s dominance in the market for zircon supply.
• It is our view that the revenues and profits of mineral sands consumers have been long and unjustly held back by a relatively small group of specialist consumers, though we note that no anti-competition review has been launched into the actions of consumers in this respect by any German Authority.
• Titanium mineral sands are an important market for industry and low ilmenite and rutile prices feed the profits of their respective processing and manufacturing industries.
• The industry is currently being squeezed by the fall in iron ore prices causing titano-magnetite ore production to collapse as Chinese steel producers switch to higher quality and better value iron ore, which does not contain titanium.
• Richards Bay Minerals, the large South African mineral sands producer is also suffering from labour disputes and stoppages not to mention the assignation of the ‘RBM’ HR General Manager, Ronny Nzimande, last week where attackers fired more than 20 shots.
• We reckon Illuka can see the importance of titanium rich mineral sands and is smartly manoeuvring for the consequential upswing in prices, which we regard in a free world as a fair move.
• It is worth noting that if this deal falls through then it would be the second failed deal by Illuka to acquire mineral sands resources this year and would not look good from an Illuka perspective.
Lithium – new generation of lithium batteries likely to spur replacement battery demand
• The mining sector is going mad for lithium in response to growing demand for the metal in batteries for Electric Vehicles and other machinery.
• Demand is likely to rise exponentially as new factories open up and particularly as better battery chemistries and manufacturing processes lead to better battery performance and robust characteristics.
• News that new Samsung batteries are catching fire will do little to dent demand as the quest to limit thermal runaway leads to new cathode and anode compositions. The stabilisation of the cathode with a coating of salts may be one solution while the orientation of graphite flakes in the anode may be another.
• Many consumers will be happy to upgrade their lithium battery packs for better performance leading to greater demand than is probably factored into many demand models and this won’t just apply to Electric Vehicles.
• Better battery performance will open up new markets for lithium batteries to rival markets currently served by cabled power and small gasoline engines.
• This is a market that is set to take off as soon as the next generation of higher-capacity, longer lasting batteries evolves onto the production line.
As if to support our view Tianqi Lithium, the world’s largest lithium chemicals producer using hard rock lithium concentrates, approved a A$400m investment in lithium plant in Kwinana, Western Australia.
• The plant to be commissioned in late 2008 for production of 24ktpa of lithium hydroxide processing spodumene concentrate from the Greenbushes mine, owned by Talison.
• Talison is a 49/51 JV between Albermarle and Tianqi.
• Lithium hydroxide to be exported primarily for use in the production of lithium batteries.
Germany – Factory orders, a leading indicator of industrial production, had a weak month in Jul as extending lacklustre performance to four months now.
• Factory orders: -0.7%yoy v -3.0%yoy in Jun and -0.2%yoy forecast.
• Contrary to previous months domestic orders posted a decline while foreign orders climbed.
UK – Retail sales contracted 0.9%yoy on a like-for-like basis in Aug following a strong rebound in the previous month, according to the British Retail Consortium and KPMG.
• “The fact is that so far little has directly changed for the UK’s consumers as a result of the referendum, so it’s the pre-existing market dynamics that are still driving sales,” BRC said.
• “The slowdown in real wage growth in the first half of 2016 and strong competition will continue to weigh on trend growth in total sales.”
• Retail sales: -0.9%yoy in Aug and 1.1%yoy in Jul and 1.4%yoy forecast.
Philippines – The government will close more mines including large-scale operations following a nationwide review , the Environment Secretary Gina Lopez said.
• Results of the review were previously reported to be made available on Thursday this week.
Anglo American (LON:AAL) 826 pence, Mkt Cap £10.6bn – De Beers reports continuing positive sentiment from diamond customers.
• Anglo American reports that the seventh diamond sale of 2016 by its De Beers group realised US$630m.
• This represents an almost 20% improvement on the US$528m raised in the sixth sale and we estimate brings sales to date in 2016 to over US$4.1bn.
• De Beers’ CEO, Bruce Cleaver, said “We saw a healthy demand for our rough diamonds in cycle 7, as manufacturers brought forward some of their demand in order to cut and polish rough diamonds in time for the important retail selling season.”
Aureus Mining (LON:AUE) 2.4 pence, Mkt Cap £28.6m – Moving to owner operation at the New Liberty mine
• Aureus Mining reports it is to move to owner operated mining at its New Liberty gold mine in Liberia in an initiative which it considers “will significantly reduce the ongoing costs of mining operations and improve the operational and financial flexibility of the Company.”
• Management under the newly installed team from MNG Gold is continuing to review the cost base at New Liberty but “it is expected that the cost of adopting an owner operator model will be the most substantial cost arising from management’s review.”
• As part of the transition agreement with the current contractor, MonuRent, Aureus “will pay to MonuRent cash of US$15.4 million to take ownership of the mining equipment, US$7.1m cash for the inventory currently on site at New Liberty, US$7.9 million cash for invoiced receivables, approximately US$2.5 million cash for future uninvoiced receivables incurred by BMMC during July and August 2016 … and US$4.5million cash as a contract novation fee.”
• The company has also provided an update on progress at the mine, following the plant restart in June. The plant continues to experience periods of unscheduled downtime and has achieved only 66% availability over the last 65 days, “however better availability has been achieved in recent weeks.”
• The continuing work is focussing on optimising the ball mill grinding circuit and reagent consumption in the CIL circuit. “Since the restart of p[processing operations to date the Company has poured and shipped approximately 8,100 ounces of gold.” The detoxification circuit, where problems led to the original suspension of operations at the plant in May this year “has been operating at a stable level and performing to its design specifications following recent modifications. All discharges from the Tailings Storage Facility (“TSF”) have been within permitted levels … However, the Company is working in conjunction with its consultants to modify the layout and operation of the TSF … to allow for an increased retention time for process effluent and also to enable more control over future discharges.”
Conclusion: The decision to move to owner operation at New Liberty is aimed at providing management with greater control as well as reducing costs. With production since the restart of operations running at just over 90 oz per day of gold and continuing plant availability issues there is some way to go to stabilise operations but there are signs of progress
IronRidge Resources* (LON:IRR) 13.1p, Mkt Cap £31.1m – IronRidge acquires Lithium project in Ghana
• IronRidge Resources is acquiring a lithium project in Ghana.
• The project comes with a non-JORC compliant resources of 1.48mt grading 1.66% Li2O as defined by the Ghana geological survey in 1962. We would hope further exploration would expand this initial resource.
• The worlds hard rock lithium deposits generally grade between 0.4% and 1.96% with Greenbushes, the world’s largest hard rock lithium mine in Australia as an outlier at 2.6% lithium content.
• The project grade would rank next to the Authier lithium project which was recently sold by Glen Eagle Resources for C$4m representing $47/t of lithium resource.
• Lithium resource within Pilbara Minerals and Altura Mining are value at around $600/t
• Galaxy Resources, a lithium producer (A$700m, EV US564m) is valued at around US$1,250/t of contained lithium resource.
• 34/t of resource at Mt Cattlin and US$352/t of annual production capacity.
• The project is a hard-rock pegmatite with dominant lithium-rich spodumene mineralogy in a 10km long x 1-3km wide pegmatite vein swarm.
• Location: the Egyasimanku project is well located on the coast and usefully within 70km of the capital Accra.
• Ghana is looking to encourage new mines within the country to help restore economic growth and recreate lost jobs in the sector.
• The project is located in a Forest Reserve but has access rights for exploration and development.
• IronRidge can earn into 100% of the project within four years by taking the project through to a feasibility study though the owners retain a 2.5% NSR of which 50% can be bought for $3m at any stage.
*SP Angel act as Nomad and Broker to IronRidge Resources
Kodal Minerals* (LON:KOD) 0.19p, mkt cap $7.1m – Adding to its Lithium exploration portfolio in Mali
• Following the recent announcement of the acquisition of the Madina exploration licence in the Bougouni-Sikasso region of southern Mali, Kodal Minerals reports that it has agreed with another local Malian company, EMAS Mining, to acquire the 250 sq km Kolassokoro concession which “is immediately adjacent to the recently acquired Madina project giving Kodal a total of 500 sq km land holding with defined high grade lithium targets.”
• Kodal has an option to acquire a 90% interest in the Kolassokoro concession by paying a total of US$160,000 in four annual stages. An initial payment of US$20,000 has already been made. A further US$30,000 is payable on the first anniversary of the agreement to acquire a 51% interest in the project. Subsequent payments of US$50,000 on the second anniversary and US$60,000 on the third anniversary increase Kodal’s ownership to 70% and 90% respectively.
• The agreement provides for additional cash payments to EMAS on the commencement of mining. EMAS will be paid an additional US$300,000 on the commencement of a gold mining operation and/or US$50,000 on the commencement of mining for any other minerals. In addition, EMAS will receive “a 2% net smelter return royalty on … gold production from the concession.”
• The licence, which lies approximately 180km south of the Malian capital, Bamako, “contains five identified lithium bearing pegmatite veins, with the Ngouanala and Sogala vein of high interest to Kodal.” The company stresses that it has secured a low cost of entry to identified targets thereby enhancing the ability to spend exploration funds and potentially to delivering a maiden JORC mineral resource estimate in a timely fashion.
Conclusion: The doubling of the size of the exploration areas in southern Mali should provide for more efficient exploration of the larger concession area, while Kodal Minerals has secured low-initial entry costs helping to facilitate exploration spending which may lead to a maiden resource estimate.
*SP Angel acts as Financial Advisor and Broker to the company.
*The author of this report does not hold shares in Kodal Minerals.
Three Partners of SP Angel and SP Angel LLP hold stock in Kodal Minerals due to their long running financial support for the company.
Metminco* (LON:MNC) 0.20 pence, Mkt Cap £6.6m – $45m of funds secured for Los Calatos copper mine in Peru
• Metminco has announced the resignation of Executive Director Stephen Tainton from its Board.
• Mr Tainton has been responsible for the Los Calatos project where he has “been instrumental in the completion of the work and studies undertaken since that time which have culminated in the CD Capital Natural Resources Fund III transaction announced previously.”
• With the successful completion of an agreement with CD Capital to pay up to US$45m payable in three tranches in order to acquire up to 70% of the project Mr Tainton “has elected to resign from the Board to assist with technical and operational issues relating to the planned Pre-Feasibility and Feasibility Studies on Los Calatos.”
Conclusion: The decision of a key manager to stay with the Los Calatos project should help to keep the momentum of the project going under the new managem,nt team and help to protect Metminco’s remaining share.
*SP Angel act as broker to Metminco
Noricum Gold* (LON:NMG) 0.2p, Mkt Cap £6.6m – Strengthening and restructuring of the Board
• Noricum Gold has announced the appointment of two new non-executive directors, replacing two directors who are stepping down.
• Dr. Neil O’Brien, a geologist and Vice-President of Exploration for Toronto based Lundin Mining has joined the Board as also has Mr. Peter Damouni who is a UK based investment banker with experience in equity and debt financing of natural resources companies.
• The new appointees replace Jeremy Whybrow and Marcus Edwards-Jones who are standing down today.
• Dr O’Brien holds a doctorate in Economic Geology from Queen’s University, Canada where his thesis “focussed on the unique VMS style of mineralisation similar to that found at Bolnisi” and is therefore particularly well-suited to assist in the guidance of Noricum Gold’s continuing exploration and development in Georgia.
• Conclusion: The strengthening of the technical and commercial expertise of the Noricum Board should help to provide a solid platform for the company’s continuing efforts in Georgia.
*SP Angel acts as Nomad and Broker to Noricum.