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Today's Market View - BlueRock Diamonds, Caledonia Mining, Georgian Mining Corporation, IronRidge Resources

Today's Market View - BlueRock Diamonds, Caledonia Mining, Georgian Mining Corporation, IronRidge Resources

BlueRock Diamonds* (LON:BRD) – Board changes mark restructuring of K1 diamond mine
Caledonia Mining (LON:CMCL) –Blanket mine site visit
Georgian Mining Corporation* (LON:NMG) (formerly Noricum Gold) – High-grade copper zone seen in drilling at Kvemo Bolnisi
IronRidge Resources* (LON:IRR) – Lithium pegmatite license acquired in Ghana

Polo Resources (LON:POL) – Arbitration update on fraudulent transfer of Celamin’s 51% stake in Chaketma Phosphates

EDF – ordered to shut down five nuclear reactors in France
• French regulators have ordered emergency tests on reactor pressure vessels on five nuclear reactors in France.
• 12 nuclear reactors are now under inspection.
• This is bad news for uranium prices but nowhere near as bad as a reactor meltdown.
• Fortunately the wind is blowing from the UK toward France today.

Equities are steady today as US Presidential elections are looking increasingly likely to be won by the Democrat candidate while investors are looking forward to the ECB press conference due later today.
• Gold is consolidating around $1,270/oz level after climbing 0.6% yesterday.
• The US$ is up slightly this morning with the euro trading lower and the pound flat.
• Brent is little changed after having climbed 1.9% yesterday on the back of official US reports showing an unexpected drop in crude inventories.

Dow Jones Industrials  +0.22% at 18,203
Nikkei 225    +1.39% at 17,236
HK Hang Seng    +0.30% at 23,374
Shanghai Composite    -0.01%  at 3,084
FTSE 350 Mining   -0.30% at 13,241 FTSE 350 +80% since 1st January
AIM Basic Resources   +0.68% at 2,533 AIM Basic Resources +55% since 1st January

Economic News

Date Index Period   Actual Est Previous
Monday New York Manufacturing Oct   -6.8 1.0 -2.0
  Industrial Production Sep %mom 0.1 0.1 -0.5
  Capacity Utilization Sep % 75.4 75.6 75.3
Tuesday CPI Sep %mom 0.3 0.3 0.2
  CPI Sep %yoy 1.5 1.5 1.1
  Core CPI Sep %mom 0.1 0.2 0.3
  Core CPI Sep %yoy 2.2 2.3 2.3
Wednesday Housing Starts Sep %mom -9.00 2.9 -5.6
  Building Permits Sep %mom 6.3 1.1 0.7
Thursday Weekly Jobless Claims    
  Existing Home Sales Sep %mom   0.4 -0.9
Friday Markit Manufacturing PMI Oct       51.5
Source: Bloomberg     

ECB – Expectations are for the Bank to leave rates at record low and keep bond purchases rates level at the €80bn per month.
• Markets will be looking for cues on a potential extension of the bond buying programme past the current deadline of Mar/17.
• Additionally, investors might want to hear the council’s outlook regarding a future monetary policy tapering after the news that the ECB council members reached a consensus over the eventual need to slow the pace of bond purchases led to a sharp sell off in market earlier this month.

UK – Retail sales posted zero mom growth in Sep underperforming expectations on reduced clothing purchases due to higher prices and warmer than average weather.
• The UK is reported to have recorded one of the warmest Sep months on record.
• Core Retail Sales (%mom): 0.0 v -0.1 in Aug and 0.2 forecast.
• Core Retail Sales (%yoy): 4.0 v 6.2 in Aug and 4.4 forecast.

Australia – Employment unexpectedly posted a decline in Sep as a fall in the number of full time jobs outpaced an increase in part time employment.
• An increase in the number of part-time filled positions highlights a relative strength of the services sector which employs more part timers.
• Employment Change: -9.8k v -8.6k in Aug and 15.0k forecast.
• Full Time Employment: -53.0k v 10.1k in Aug.
• Part Time Employment: 43.2k v -18.6k in Aug.
• Unemployment rate continued to decline and hit the lowest level since 2013; although, the decline has been accompanied by a fall in participation rate which is approaching the weakest level in two years and moving towards its 20-year average of 64.3% (64.5% in Sep v 64.7% in Aug).
• Unemployment Rate: 5.6% v 5.7% in Aug and 5.7% forecast.

UK retails sales – steady at 4.1% up on 2015
• Textile, clothing and footwear sales fall fall 5.4% due to warm September
• .Online sales accounted for 15% of all retail spending in September

Tesla – to build fully autonomous driving capacity into new cars from now on
• Tesla completed a fully autonomous drive demo this morning showing a Tesla navigating a complex urban environment
• The rapid development and roll-out of this feature demonstrates how Tesla is keen to develop features ahead of other automotive manufacturers
• Sadly the software to enable fully autonomous driving may not enabled for some years, but at least the hardware will be installed
• Retrofitting of autonomous driving is said to cost more than the original car – bad luck if you already have one and want this feature.

BHP sets target of 50% female staff by 2025
• Around 17% of BHPs current workforce is female, though this figure may include some transgender employees.
• The target goes to show how advanced and progressive nature of today’s mining industry. 
• The Mining industry leads the world in many areas in terms of development of practical health and safety practices and the adoption of technology. 
• Many larger mines already use remotely controlled trucks, trains and remote sensing of machinery for servicing and repair. 

US$1.0971/eur vs 1.0995/eur yesterday.   Yen 103.68/$ vs 103.47/$.   SAr 13.928/$ vs 13.925/$.   $1.226/gbp vs $1.231/gbp.
0.766/aud vs 0.768/aud.   CNY 6.738/$ vs 6.737/$.

Commodity News

Precious metals:
Gold US$1,270/oz vs US$1,265/oz yesterday –
     Gold ETFs 66.0moz vs 66.0moz yesterday –
Platinum US$942/oz vs US$944/oz yesterday
Palladium US$637/oz vs US$641/oz yesterday
Silver US$17.64/oz vs US$17.64/oz yesterday

Base metals:   
Copper US$ 4,649/t vs US$4,666/t yesterday – Peru Energy & Mines Minister told MMG executives to build the road to Las Bambas mine as local communities are complaining over the number of trucks running through local villages transporting copper concentrate to the port.
• The government is currently investigating the clash between police officers and local protesters earlier this week that left one demonstrator dead.
• The violence started when the police tried to unblock a road that was obstructed by protestors.
• The mine has a c.400ktpa Cu capacity and is in a ramping up stage at the moment after having shipped first concentrate in Jan/16.

We are bearish in the short term for copper prices due to increased supply coming in from new mines and BHP comment that the deficit might in 2019
• Copper was in deficit through the first half of the year but this is being overturned by new mine supply causing LME stocks to rise since March
• It is this year’s worst performing major metal as increasing metal supply overturns deficit forecasts for the year end
• High Tc/Rc in China indicate surplus supply of copper concentrates with new supply coming from Grasberg, Las Bambas and the expansion of Cerro Verde (capacity 360,000tpa from 120,000tpa last September)
• Codelco has well documented problems and is likely to miss production targets
• Grassberg is going underground and is likely to see some grade variance through this process again causing some production uncertainty
• Grasberg is targeting 660,00t for 2016, 353,000 2015, 306,000t 2014 – export tariff problem and 436,000t in 2013.

Aluminium US$ 1,614/t vs US$1,623/t yesterday –
Nickel US$ 10,210/t vs US$10,280/t yesterday – BHP forecasts nickel market to begin rebalancing on supply threats in the Philippines leading to a potential recovery in prices.
• “There are signs that this year could be finally the turning point for nickel with many expecting the market to be in deficit and so starting the much needed re-balancing process,” the Company said.
• “The welcome return to balance over the next few years should see further recovery in nickel prices.”

Zinc US$ 2,295/t vs US$2,276/t yesterday –
Lead US$ 2,003/t vs US$1,970/t yesterday
Tin US$ 19,850/t vs US$19,705/t yesterday –

Oil US$52.1/bbl vs US$52.4/bbl yesterday -
Natural Gas US$3.196/mmbtu vs US$3.218/mmbtu yesterday
Uranium US$20.50/lb vs US$20.90/lb yesterday

Iron ore 62% Fe spot (cfr Tianjin) US$56.9/t vs US$56.4/t – Fortescue Metals forecasts prices to hold on to current levels amid steady steel production in China.
• “There’s no real reason that I can see that would cause any change in demand,” Fortescue CEo New Power said.
• “We don’t see major changes in the price trend, although we do expect to see the volatility continue.”
• The view contrasts with the BHP view on the market which said that iron ore had the worst outlook among the key materials in produces on increasing market surpluses.

Chinese steel rebar 25mm US$409.1/t vs US$408.2/t –
Thermal coal (1st year forward cif ARA) US$67.9/t vs US$69.5/t yesterday –
Premium hard coking coal Aus fob US$240.9/t vs US$232.6/t

Tungsten - APT European prices $191-197/mtu vs $183-197/mtu unch last week

Company News

BlueRock Diamonds* (LON:BRD) 6.8p, Mkt Cap £2.6m – Board changes mark restructuring of K1 diamond mine
• BlueRock has announced the resignation, with immediate effect, of John Kilham as a director of BlueRock Diamonds plc and as an employee of Kareevlei Mining (Pty) Limited, the Company’s operating subsidiary in South Africa in order to pursue other interests.
• Mr Kilham’s resignations completes this stage of our management reorganisation.  
• The board is supported now by Johan Milho, as mine manager, and by Dr Kurt Petersen, a highly respected consultant metallurgist, who has advised on the proposed changes to the Company’s plant. The Company expects to appoint a geologist shortly.
• The company is bringing all mining and diamond recovery at the in-house at the K1 diamond pipe and is upgrading and improving the process plant with the aim of better diamond recovery under expert supervision. 
o Sales of diamonds came to £206k vs operating expenses of £516k to realise a loss of £575k for the first six months of the year.
o The company had £527k of current assets at the period end including £458k of cash and cash equivalents.
Conclusion:  The company hopes it should now have better functioning management and processes in place and for diamond recovery to improve significantly from here.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds

Caledonia Mining (LON:CMCL) 142 pence, Mkt Cap £74m –Blanket mine site visit
• Caledonia Mining has hosted a site visit for UK analysts to its Blanket mine in Zimbabwe where the company is well advanced on its major redevelopment project aimed at increasing production from the company’s guidance of 50,000 ounces of gold for 2016 (2015 – 42,806 ounces) to 80,000oz pa by 2012.
• The programme is already delivering increased throughput as a result of the improved ore handling and transport arrangements underground which increases underground ore handling from around 400tpd to 1000tpd and from the  newly installed ball mill which should lift processing capacity to the 1800tpd of ore feed expected on completion of the new Central Shaft.
• The Central shaft is currently at a depth of approximately 330metres below surface and, when completed in mid-¬2018, is intended to provide access to ore below the 750m level of the mine.
• The new shaft, which is located closer to the centre of the known orebodies than the existing shafts towards the southern end of the mine should allow more efficient access to both the northern and southern orebodies and should also improve operating costs by reducing the travel times for men, materials and ore as well as increasing the overall hoisting capacity at Blanket.
• This deeper ore is already becoming available through a newly developed decline system which provides additional flexibility to the underground ore transport infrastructure and provides the opportunity to develop and explore the deeper levels of mineralisation.
• Peak capital expenditure is now passed for the project and the impact of the improved efficiencies achieved so far is already coming through in recent quarterly production reports with June quarter cash costs of US$629/oz and all in costs of US$936/oz - reductions of 13% and 9% respectively compared with Q2 2015.
• Access to deeper levels of the mine is also providing access for drilling of the deeper extent of mineralisation which delivered a resource upgrade in July. With increasing access and a continuing on mine exploration programme backed up by digitisation of historical geological and mining information further resource upgrades seem likely over the coming months
Conclusion: Caledonia Mining’s development programme at the Blanket mine is a complex project which rejuvenates a mine already over 100 years old. In our opinion, the development is being well controlled by an experienced and capable management team and seems on track to deliver the planned production increase to 80,000 oz pa of gold by 2021.

Georgian Mining Corporation* (LON:GEO) 11.9p, Mkt Cap £5.7m – High-grade copper zone seen in drilling at Kvemo Bolnisi
(formerly Noricum Gold.  Ticker also changed from NMG LN to GEO LN.  Shares also rolled up by 100:1 hence the price change)
• Georgian Mining Corporation, the new name for Noricum Gold report assay results from five out of 10 recent drill holes.
• Recent drilling shows copper, gold mineralisation in nine out of the 10 holes drilled with relatively high grade copper assays showing in four of the holes.
• Significant new drill intercepts are reported as follows:
o 27.0m at 2.57% Cu and 0.23g/t Au from 107m depth;
o 19.5m at 0.85% Cu and 0.18g/t Au from 46.5m; and
o 18.8m at 1.5% Cu from 47.0m
o Importantly the copper mineralisation is seen over relatively good intersections
 A schematic cross-section within the press release shows the potential for a near vertical plunging shoot of high grade copper of around 20m in width.
 The copper mineralisation is seen at surface and continuing below 300m depth with grades which are higher than that reported in previous drill programs.
 “The Project is located 7km from GMC’s local partner’s Madneuli copper/gold mine and processing operation which has capacity available to facilitate a short lead time to initial production.”
 The team are targeting the definition of 50-70mt grading 0.30-1.00% copper and 0.101g/t gold within copper sulphide mineralisation and 0.5-5g/t for oxide gold at the Kvemo Bolnisi project. 
Conclusion:  The Kvemo Bolnisi project is shaping up to be a mineable proposition.  The development of a JORC resource on the property will indicate its economic potential.  With the Madneuli processing plant so close there should hopefully be a relatively short time line to production.
*SP Angel acts as Nomad and Broker to Noricum. 

IronRidge Resources* (LON:IRR) 11.4p, Mkt Cap £26.9m – Lithium pegmatite license acquired in Ghana
• IronRidge Resources report the acquisition of a substantial license area covering lithium pegmatite occurrences in Ghana.
• The license includes a number of lithium bearing pegmatite vein swarms with reports of eight lithium-rich pegmatites.
• Grades run at 0.5-2.2% in historic samples with pegmatite veins varying between 350-560ft and 30-80ft wide according to the Ghana Geological Survey.
• The pegmatites include lithium, tin, tantalum, niobium and beryllium and are located close to the coast and within easy reach of the capital Accra.
• IronRidge can earn up to a 100% interest in the property through a series of staged earn-in arrangements and expenditure to get to a Feasibility Study within four years.  Barari Developments retains a 2% royalty of which 50% can be acquired for US$2m at any stage.
• Lithium:  recent news on the next generation of lithium suggests to us that while battery capacities may rise 5-10x that these batteries will use more lithium metal in their composition.  The use of more lithium metal bears increasing risk of thermal runaway and scientists are working on a number of solutions to prevent the formation and growth of lithium metal dendrites which cause overheating to occur.  Now that scientists can see what is going on within lithium batteries, working out the process of optimisation and stabilisation of batteries should move much faster.  We expect significant improvement in existing batteries to lead demand higher with potential for next generation batteries to create a multiple increase in demand for lithium.
• Demand for batteries for sub-second grid storage applications and electric vehicles continues to grow.  The UK recently awarded contracts for 201MW of sub-second battery storage to help balance the impact of solar and wind energy on the grid.  The UK already has a 6MW, 10MWh system in place to support a local substation.  The UK Department of Energy and Climate Change ‘DECC’ states that the energy storage market should to reach $17bn in 2020, and nearly $30bn in 2030.  PJM in the US is now served by hundreds of megawatts of lithium-ion systems, capable of responding within 4 seconds to grid-balancing demands.  Qiantu Auto (China) plans to build a 50,000 vehicle pa hybrid electric vehicle plant for Rmb2.02bn ($300m)
Conclusion:  With demand for lithium looking likely to continue to increase, with very limited numbers of operating lithium mines and process plants and the strategic concentration of processing capacity in China, many countries should be keen to see the development of lithium production on their turf.
*SP Angel act as Nomad and Broker to IronRidge Resources

Polo Resources (LON:POL) 6.2 pence, Mkt Cap £19.3m – Arbitration update on fraudulent transfer of Celamin’s 51% stake in Chaketma Phosphates
• Last time we wrote about Polo Resources the company had just acquired a stake in Celamin Holdings for its phosphate project in Tunisia.
• Today we learn that the sole arbitrator appointed by the International Court of Arbitration of the ICC has issued an award confirming Celamin’s position and allowing arbitration proceedings to recover Celamin’s interest in the Chaketma phosphate project in Tunisia.
• Polo claim the project is a world class asset and Celamin believes it is best placed to manage the project to ensure it proceeds to development.


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