Ariana Resources (LON:AAU) – First gold-pour at Kiziltepe
Golden Star Resources (TSE:GSC) – Stepping up the 2017 exploration programme
Lucapa Diamonds (ASX:LOM) –Mothae resource estimate
Medusa Mining (ASX:MML) – Fatality at Co-O gold mine
Gold is set to post a second weekly increase amid uncertainty over the ability of the Trump administration to deliver promised pro-growth reforms and a gradual US monetary policy tightening.
• US Congress gets ready to vote on the new administration regulation to repeal Obamacare later today.
• Concerns on the ability of the government to pass its promised changes to business tax rates through Congress contributed to a 1.4% drop in the S&P 500 Index this week.
• Euro climbs against the US$ on the back of better than expected manufacturing and services sectors’ growth numbers in France and Germany.
• Copper is flat while miners at Escondida agreed to stop the strike following a 43-day stand off.
• Although the dispute remains ongoing since no resolution to miners’ demands have been reached with workers agreeing to resume operations under the old contract for 18 months before a new round of talks planned for next year.
• “The working environment will be affected. We are talking about 18 quite bad months and that would affect everything, including production,” Escondida Corporate Affairs VP said.
• Brent is on course for a third weekly decline this month on the back of reports showing record US crude supplies and ahead of results of meeting between OPEC and other oil producers this weekend.
• Iron ore futures prices are in the correction mode with most traded contracts on the Dalian Commodity Exchange down 19% this week and steel rebar prices in Shanghai falling 12%.
Lithium ETF – Global X Lithium RTF up 10.5% YTD 32% yoy
• Global X’s lithium ETF which is based on a basket of Lithium equities has risen 10% YTD.
• The ETF is said to track a diversified group of companies involved in the ‘full lithium cycle’.
• The ETF is made up of 22% FMC, 15% SQM, 6% Samsung SDI co., 5% Tesla, 5% Albemarle, 5% LG Chem, 5% Enersys, 5% GS Yuasa, 4% Simelo Technology, 4% Panasonic, 4% Glaaxy resources.
• We wonder if anyone is working on a Lithium metal ETF where we would expect to greater gains?
• Key lithium explorers and potential mine developers have posted stronger gains over the period supported by interest from lithium traders and other producers.
Argentina Government announces $880m investment in 50,000tpa of new lithium carbonate production
• A government statement indicates that Enirgi is to invest $730m and Orocobre $160m in two projects in Argentina.
• Enirgi which owns the Salar de Rincon 2017 reported results from a positive feasibility study last year
• Orocobre is planning to increase lithium carbonate production to 35,000tpa by CY18 from a run rate of around 12,000-12,500tpa currently, though the company seems more focussed on reporting its VAT recovery from the Argentine government than announcing new investment.
• Orocobre produced 6,542t of lithium carbonate ‘LCE’ in H1 FY17 up 309% yoy.
• Argentina currently produces 29,000tpa of lithium carbonate representing around 16% of global supply (USGS, 186,000LCE equivalent).
• Argentina might want to put out positive news to offset an unconfirmed rumour relating to potential disappointment relating on a POSCO funded project. We believe the POSCO supported project is using a new technology for extracting lithium from brines without using evaporation ponds. The technology might not be working as well as was first envisaged.
• The news suggests to us that Argentina is increasingly open for business from a Mining perspective and is looking to encourage very significant development within its lithium industry.
Ukraine bans Russian singer from entering Ukraine for Eurovision Song Contest
• Having watched the partisan voting at Eurovision for many years we suspect Julia Samoilova will still have a good chance of winning even if she doesn’t get to sing.
Dow Jones Industrials -0.02% at 20,657
Nikkei 225 +0.93% at 19,263
HK Hang Seng +0.10% at 24,351
Shanghai Composite +0.64% at 3,269
FTSE 350 Mining +0.48% at 15,959
AIM Basic Resources -0.49% at 2,584
US – Unemployment claims picked up last week; although, a smoothed 4-week average continues to hover around the lowest in decades.
Germany – A good set of manufacturing and services PMIs are out showing a broad based growth in production in Mar.
• The Composite PMI hit the strongest level in nearly six years with services and manufacturing indices at their highest in 15 and 71 months, respectively.
• “The Mar PMI survey data also signalled a near-record rate of employment growth and the strongest cost pressures for nearly six years.”
• New orders grew at the strongest pace since Apr/11 with manufacturing export orders posting strong increases on solid demand from the US, the UK, Asia and the Middle East.
• Strong increases in input prices were partially passed on to consumers with final goods prices recording the strongest increase since Jun/11.
• Business outlook remains strong.
• Markit Manufacturing PMI: 56.2 v 55.4 in Feb and 55.3 forecast.
• Markit Services PMI: 56.5 v 55.5 in Feb and 55.3 forecast.
• Markit Composite PMI: 56.7 v 56.0 in Feb and 55.8 forecast.
France – Both manufacturing and services industries picked up in Mar with the composite PMI at the highest in 70 months.
• Production growth was accompanied by a ninth consecutive increase in new orders this month.
• Business outstanding has also climbed for the thirteenth time with the growth pace accelerating to the highest in six years.
• Strong business activity lead firms to step up hiring while rising input price saw an increase in average selling prices for the first time since Apr/12.
• Input prices growth pace eased marginally from Feb’s 68-month high “but remained sharp nonetheless”.
• Upcoming presidential elections did little to challenge business optimism with the outlook reported to have improved to the strongest in five years.
• “There is also further evidence that the weakened euro is continuing to boost external demand.”
• Markit Manufacturing PMI: 53.4 v 52.2 in Feb and 52.4 forecast.
• Markit Services PMI: 58.5 v 56.4 in Feb and 56.1 forecast.
• Markit Composite PMI: 57.6 v 55.9 in Feb and 55.8 forecast.
US$1.0786/eur vs 1.0785/eur yesterday. Yen 111.26/$ vs 111.17/$. SAr 12.499/$ vs 12.551/$. $1.249/gbp vs $1.249/gbp.
0.761/aud vs 0.764/aud. CNY 6.891/$ vs 6.888/$.
Gold US$1,242/oz vs US$1,248/oz yesterday
Gold ETFs 58.7moz vs US$58.6moz yesterday
Platinum US$957/oz vs US$972/oz yesterday
Palladium US$803/oz vs US$786/oz yesterday
Silver US$17.56/oz vs US$17.57/oz yesterday
Copper US$ 5,818/t vs US$5,745/t yesterday
Aluminium US$ 1,931/t vs US$1,926/t yesterday
Nickel US$ 9,955/t vs US$9,990/t yesterday
Zinc US$ 2,830/t vs US$2,825/t yesterday
Lead US$ 2,358/t vs US$2,280/t yesterday
Tin US$ 20,205/t vs US$20,315/t yesterday
Oil US$50.6/bbl vs US$50.7/bbl yesterday
Natural Gas US$3.037/mmbtu vs US$3.072/mmbtu yesterday
Uranium US$25.15/lb vs US$25.40/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$83.2/t vs US$83.8/t
Chinese steel rebar 25mm US$567.5/t vs US$573.3/t
Thermal coal (1st year forward cif ARA) US$63.0/t vs US$61.8/t yesterday
Premium hard coking coal Aus fob US$150.4/t vs US$153.3/t
Tunsgten APT European US$208-216/mtu (from the 17Mar week) v US$212-217/mtu (from the 10Mar week)
Acacia Mining (LON:ACA) 458 pence, Mkt Cap £1.9bn –Update on Tanzania’s concentrate export ban
• Acacia Mining reports that despite talks with Government and others in an effort to lift the ban on the export of gold/copper concentrates from Tanzania, “To date there has not yet been a change in the situation.”
• The ban was first announced by Tanzania’s Ministry of Energy and Minerals on 3rd March and we note that on 21st March, Acacia announced that the preliminary discussions on a combination with Endeavour Mining first disclosed on 13th January, had been terminated. We wonder whether the export ban had any influence on the breakdown of these negotiations.
• The company points out that its Bulyanhulu and Buzwagi mines are continuing to operate as normal and currently the company is able to store gold/copper concentrates in containers on site. However, although capacity is available through April, “prior to reaching this point, during April we will reassess how long we can continue to produce as normal if the ban remains in place and what other measures may be necessary.”
• Underlining its stance as a long term investor in Tanzania, the company points out that “we have offered to support and partner with the Government in a new study by third party experts to assess the economic potential of building a smelter in Tanzania capable of processing our concentrate.”
• The company also stresses that the effect of the ban on Bulyanhulu and Buzwagi is a daily revenue loss exceeding US$1m.
• Conclusion: The impasse over the export of concentrates is affecting two of Acacia’s three mines in Tanzania. The mounting daily revenue losses and the filling up of on-site concentrate storage capacity add to the pressure for a speedy resolution as, we assume that at some point the company will be forced to consider suspending operations.
Ariana Resources (LON:AAU) 2p, Mkt Cap £18m – First gold-pour at Kiziltepe
• Ariana Resources has announced that it has made its first gold pour at its new, 50% owned, Kiziltepe mine in Turkey.
• The first gold-silver dore bar weighed 5.25kg and is estimated to contain gold:silver in a ratio of approximately 1:10.
• The mine is planned to produce at a rate of approximately 20,000 oz pa over a period of 8 years with production “expected ramp up over the coming weeks and through Q2 2017.”
• Initially, cash flow from the operation will be used to repay project loans “on a pre-determined schedule” – “Major loan repayments will have been completed by April 2020 and, during this time, excess cash-flow from the operation will be used to make repayments of loans provided by Ariana and Proccea jointly to the JV for exploration and development respectively.”
• “After the repayment of all loans, profits from the operation will be shared on a 51:49 basis between Ariana and Proccea respectively.”
• Ariana Resources also reports that following “Final statutory inspections and technical approvals received … the mine site has been issued with an Operations Permit.”
• Conclusion: Ariana’s first gold pour represents the culmination of an exploration and development programme which has, at times seemed protracted and has, no doubt required considerable determination from the project team. We endorse Managing Director, Kerim Sener’s comments commending “the significant contribution of the joint venture team on site and the support given by the local community and the Turkish Government [as well as] our long term shareholders who have remained committed to our vision and who have steadfastly supported our progress.”
China Africa Resources) (LON:CAF) 2.5p, mkt cap £2m – name change to Pembridge Resources delayed due to technical legal issues
• We are not sure what technical legal issues are? Are they technical issues relating legal stuff or legal issues relating to technical stuff?
• The company is now classed as a Rule 15 Cash Shell seeking a reverse takeover transaction primarily focussed on the energy metals and minerals sector.
• Lithium assets to cashier no3. please!
Golden Star Resources (TSE:GSC) C$1.1, Mkt Cap C$403m – Stepping up the 2017 exploration programme
• Golden Star Resources has announced a substantial increase in its 2017 exploration budget raising the planned expenditure to US$6.5m from the earlier guidance of US$2.4m. The increased funds are available following the C$30m fund raising completed in February.
• The new 47,580m drilling programme includes 21,480m at a cost of US$2.5m at the Prestea underground operation, 9,100m (US$0.4m) to follow up on the Prestea open pits and the Mampon and nearby Aboronye deposits and 17,000m (US$3.6m) for additional work at the Wassa underground mine.
• Drilling at the two operating mines at Prestea and Wassa is directed to fulfilling three objectives; firstly to increase the ore available as short term feed to the plants; secondly to expand the medium term resource potential; and thirdly to investigate longer term expansion potential.
• At the Prestea underground mine drilling to extend and more closely define the West Reef mineralisation has “the objective of assessing the opportunity to increase the supply of high grade, underground ore to the processing plant in the near term” is already underway while “initial testing of the Main Reef between 17 and 21 Levels; an area whch has not been drilled before by the Company” aims to “evaluate the potential to include ore from the Main Reef into the mine plan in the medium term”.
• Longer term targets at Prestea include surface drilling of the 2km long part “of the Ashanti Gold Belt located on the extreme southern end of the nine kilometre area of historical Prestea Underground workings, between the Bondaye and Tuapim shafts.” with the aim of extending life of the Prestea underground mine.
• The company is also planning 9100m of drilling to assess the possible expansion of the mineralisation at Mampon which is due to be mined during the first 3 quarters of 2017 as feed for the Prestea Plant.
• At the Wassa underground mine, testing extensions to the “B Shoot” mineralisation is expected to start during Q2 in order to assess the “potential to increase near term production from the mine.” “Secondly, step out fences will be drilled with the objective of ascertaining if the B Shoot is continuous to the South, down plunge of the current Inferred Mineral Resources”
• Also at Wassa, 4000m of drilling is to be allocated to test the potential to mine ore underground from the “242 Trend” and extending the inferred resource of this block of mineralisation previously mined from the Wassa Main Pit.
• Although it is clear that Golden Star has recognised that expansion of resources close to its existing processing plants and underground mine infrastructure at its existing mines offers it the most cost effective use of its exploration funds, it also “plans to compile existing geophysical, geochemical and geological information on these land packages and engage in a process of target generation and prioritization” over its wider 1156 square kilometres exploration land holding in Ghana.
• The Company notes that it “expects to release the results received from the various drilling programs during the second, third and fourth quarters of 2017. The Company anticipates that funds will be allocated for additional drilling, subject to positive drilling results.”
Conclusion: Golden Star is significantly increasing its 2017 exploration budget and applying a disciplined approach to its exploration programme in order to enhance its short to medium term feedstock, identify additional inferred resources and look for longer term opportunities to extend the life of its mines. We look forward to news on the results as the programme is implemented
Lucapa Diamonds (ASX:LOM) A$0.4, Mkt Cap A$124m –Mothae resource estimate
• Lucapa Diamonds has released a JORC compliant resource estimate for the Mothae kimberlite pipe in Lesotho. Mothae is located approximately 5km from Gem Diamonds’ Leseng mine.
• The resource estimate, prepared by the Johannesburg based consulting company, MSA Group, reports an indicated and inferred resource of 38.96m tonnes at an average grade of 2.7 carats per hundred tonnes (cpht) containing a total of 1.04m carats to a depth of 300m. “MSA has modelled the Mothae kimberlite to a total depth of 500,m below surface, corresponding to a total estimated 77.4million tonnes.”
• Indicated resources amount to 2.39m tonnes at an average grade of 3.0cpht with the balance of 36.57mt at a grade of 2.7cpht classified as inferred.
• The resource estimate assigns an average value of US$1,063 per carat which the company ascribes to the presence of high value Type IIa diamonds.
Conclusion: The bulk of the Mothae resource is currently classified as inferred and there will no doubt be further exploration required to upgrade the resource. The high estimated diamond value per carat and its proximity to the established Letseng operation leads us to look forward to further news as the exploration progresses.
Medusa Mining (ASX:MML) A$0.37, Mkt Cap A$76m – Fatality at Co-O gold mine
• Medusa Mining report a fatality at the Co-O gold mine I Mindanou, Philippines.
• The Co-O gold mine has been undergoing a very substantial increase in its scale and underground development.
• “The incident occurred at the start of dayshift on Level 8, where two contract miners were assigned to extend the timber support in a raise that was approximately 6 metres above the main track level. The prelimnary investigation indicates that one miner accessed the work area above the level while the second miner was assembling the work tools on the main track drift a few meters away. The second miner heard a loud noise and immediately returned to the work area to find his work partner on the track level unconscious.”
• The statement indicates to us that the worker fell down the raise suggesting that the worker was either not attached to a safety line or the mine’s processes need upgrading.
• The mine is using a traditional shrinkage stopping method which is well tried and considered appropriate for this type of mineralisation.
• This is the fourth fatality since 2013 by our reckoning.