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Today's Market View - Beowulf Mining, Premier African Minerals and Bluebird Merchant Ventures

Today's Market View - Beowulf Mining, Premier African Minerals and Bluebird Merchant Ventures

Beowulf Mining (LON:BEM)– Graphite project in Finland completes first round drilling
Bluebird Merchant Ventures (LON:BMV) 2.1 pence, Mkt Cap £3.8m – Bluebird jv to reopen two high-grade gold mines in South Korea. 
Premier African Minerals (LON:PREM) – The problem with Premier African Minerals

 

Safe haven assets rally while equities and the US$ index slide after US Congress fails to repeal Obamacare highlighting concerns over Trump’s ability to deliver promised deregulation initiatives.
• Dollar index is off 0.5% this morning trading at the lowest level in nearly eight weeks.
• US equity futures suggest the index is to fall when trading starts later today taking the Wall Street benchmark at a six week low.
• Gold prices are up more than $10/oz trading at the highest level over the last month.
• Base metals are all off today.
• Miners at Escondida ended a 44-day strike and returned to work on Saturday.
• Iron ore futures on the DCE were down 3.9% while benchmark 62% Fe material delivered in Qingdao was bid at $85/t (-1.5%) on Friday.
• Chinese iron ore stockpiles held in ports increased to 132.5mtg (+1.1%) as of Mar 24; on course, to deliver a 16% increase this quarter and market a seventh quarterly gain.
• Steel futures on the SHFE dropped for the seventh time in eight days losing as much as 5.9% and hitting the lowest level since Nov.

Dow Jones Industrials  -0.29% at 20,597
Nikkei 225  -1.44% at 18,986
HK Hang Seng  -0.73% at 24,181
Shanghai Composite  -0.08% at 3,267
FTSE 350 Mining  -2.13% at 15,489
AIM Basic Resources  +0.34% at 2,593

Economics
US – Both services and manufacturing activity growth slowed in Mar on the back of softer increase in new business orders, according to the Markit PMI data released on Friday.
• “The US economy shifted down a gear in Mar.”
• “The economy is struggling to sustain momentum… readings are consistent with annualised GDP growth of 1.7% in Q1, down from 1.9% in Q4 last year.”
• On a more positive side, business outlook is reported to have improved slightly which may tail down should new administration struggle to pass proposed tax cuts through US Congress.
• A separate report showed capital goods orders fell in Feb taking the three month rolling average growth lower to 0.3%mom, down from 0.9%mom in Jan and 1.0%mom in Dec (the highest level in two years).

 

China – Industrial profits surge 31.5%yoy in the first two months of the year marking the strongest increase since 2011.
• Increases in industrial output, increasing prices and lower costs are reported to have contributed to strong numbers, according to the National Bureau of Statistics.

Germany – Business sentiment is recovering following a weak reading in Jan with manufacturing and services output expanding at the fastest pace in almost six years.
• IFO Business Climate: 112.3 in Mar v 111.1 in Feb and 111.1 forecast.
• IFO Expectations: 105.7 in Mar v 104.2 in Feb and 104.3 forecast.

UK – The BoE is planning to carry out a new set of “exploratory” stress tests targeting the seven largest lenders on top of its regular annual risk assessment amid the start of the process of the UK leaving the EU.

Zambia – Zesco, a state-owned power supplier, said it will cut tariffs for miners at the expense of higher charges for other customers.
• Mining companies will pay 9.3c/kWh this year compared to 10.4c/kWh charged in 2016.
• Zesco asked the energy regulator to increase tariffs on other users by 50% from May 1 with a further 25% hike from Sep 1.

Currencies
US$1.0872/eur vs 1.0786/eur last week.   Yen 110.17/$ vs 111.26/$.   SAr 12.319/$ vs 12.499/$.   $1.258/gbp vs $1.249/gbp.
0.763/aud vs 0.761/aud.   CNY 6.874/$ vs 6.891/$.

 

Commodity News
Precious metals:         
Gold US$1,258/oz vs US$1,242/oz last week
   Gold ETFs 53.5moz vs US$58.7moz last week
Platinum US$974/oz vs US$957/oz last week
Palladium US$809/oz vs US$803/oz last week
Silver US$17.91/oz vs US$17.56/oz last week
           
Base metals:   
Copper US$ 5,730/t vs US$5,818/t last week
Aluminium US$ 1,929/t vs US$1,931/t last week
Nickel US$ 9,735/t vs US$9,955/t last week – The government is reported to have received applications to export 12mt of low grade nickel ore after the administration decided to temporarily relax its ban introduced in 2014.
• “So far, we’ve received two application and we haven’t issued any export recommendations,” the Energy and Mineral Resources Ministry said.
• Chinese statistics show that shipments started in Jan and Feb with 174.8kt exported last month marking a 42%%mom increase.
• Indonesia’s nickel ore exports peaked at over 6mt in Jan/14 ahead of the blanket ban on raw materials exports.

Zinc US$ 2,787/t vs US$2,830/t last week – Capital Economics expect prices to come down in H2/17 on the back of a weaker demand and the restart of idled mining operations.
• Estimates are for prices to close at $2,450/t.
• Mine output is forecast to grow 2% this year (excluding potential restarts at Glencore mines) compared with a 0.3% increase in 2016.
• Additionally, refined metal demand is expected to decline as growth in China is set to slow down markedly to 1.5% in 2017.

Lead US$ 2,315/t vs US$2,358/t last week
Tin US$ 19,595/t vs US$20,205/t last week
           
Energy:           
Oil US$50.4/bbl vs US$50.6/bbl last week
Natural Gas US$3.120/mmbtu vs US$3.037/mmbtu last week
Uranium US$24.65/lb vs US$25.15/lb last week
           
Bulk:   
Iron ore 62% Fe spot (cfr Tianjin) US$82.3/t vs US$83.2/t
Chinese steel rebar 25mm US$560.0/t vs US$567.5/t
Thermal coal (1st year forward cif ARA) US$64.2/t vs US$63.0/t last week
Premium hard coking coal Aus fob US$150.1/t vs US$150.4/t

Other:  
Tunsgten APT European US$206-216/mtu (from the 24Mar week) v US$208-216/mtu (from the 17Mar week)

Company News
Beowulf Mining (LON:BEM) 9.6 pence, Mkt Cap £48m – Graphite project in Finland completes first round drilling
• Beowulf Mining have completed eight drill holes into the Aitolampi graphite prospect in Finland.
• The company have drilled some 1,197m of in total with ‘substantial’ graphite mineralisation seen in each drill hole.
• A massive 113.5m intersection of graphitic material corresponds with an electromagnetic conductor.
• It is interesting to see Beowulf moving on to this project in Finland, something it might have done some time ago.
• The authorities in Sweden appear to have given the company a bit or a run around which may eventually make Sweden look as appealing as a ‘hole in a lifeboat’ to mining companies.
• Ironically, iron ore prices are such that projects like Kallak North in Sweden could have a chance of working with iron ore prices at generally high levels.
Conclusion:  The thing about graphite is that it’s easy to see but that we need to wait for assay and other metallurgical results to know what sort of value might be contained.  Demand for graphite is set to continue to rise alongside other battery materials with a fair number of new graphite mines likely to come on stream over the next few years to meet this demand.  Moves to set up new battery manufacturing facilities in Scandinavia should help with local ‘bulk’ graphite production potentially having an advantage over material from elsewhere in the world.

Bluebird Merchant Ventures* (LON:BMV) 2.1 pence, Mkt Cap £3.8m – Bluebird jv to reopen two high-grade gold mines in South Korea. 
• Bluebird Merchant Ventures report they are to reopen two high-grade gold mines in South Korea.
• The company will enter into a 50:50 joint venture upon completion of a feasibility study on each of the two mines with Bluebird as the operator of the projects.
• Bluebird has to spend £0.5m in the first 12 months to produce a feasibility study as well as investing A$0.25m into a placing in Southern Gold for each mine.
• Gubong was once the second largest gold mine in South Korea running from 1908 till its closure in the 1970’s due to low gold prices.
• The mine has “two vertical shafts, an incline and a few hundred kilometres of underground development.”
• “The mine area, which is 4 square kilometres in size, is recognised as being in one of the 10 major metallogenic provinces in Korea. Mineralisation is recognised over 14 square kilometres.”
• “Whilst Taechang has not been developed to anything like the extent of Gubong, it was a high-grade producer. Accesses to the underground workings were not previously sealed off and are mostly open thus making it an ideal target for early production..”
• Colin Patterson who will become ceo and Aidan Bishop, a founder and director have both offered to the Board that they would like to take 100% of their respective salaries over at least the next 12 month period in stock and for that stock to be subject to lock-in arrangements to be agreed with the Board.
*SP Angel acts as broker to Bluebird Merchant Ventures

Premier African Minerals (LON:PREM) 0.6 pence, Mkt Cap £22.9m – The problem with Premier African Minerals
• Premier African Minerals has raised £2m in equity.
• The company went out to raise £1.5m but elected to take up additional demand raising £2m.
• It is normal good practice to leave some demand on the table but in this case management decided to take the cash being offered.
• The company will now have 4.4bn shares following this issue.
• There is no statement on what the funds are to be spent on though we note the company continues to diversify its portfolio with the recent addition of a forestry and limestone business in Mozambique.
• The statement also notes the company has a 2m share holding in the Danakil Potash Project.  This is not the big potash project in the Danakil depression in Eritrea being developed by Danakali Ltd but is a lesser known deposit in Ethiopia being progressed by Stephen Dattels, Brad Mills and others.
• Premier also has a 4.5% interest in Casa Mining which continues to explore the Akyanga gold resource in the DRC to see if part of this might be worth further evaluation.
• Premier has also jumped onto the lithium bandwagon through the drilling of a lithium pegmatite project near Bulawayo in Zimbabwe where the company has reported some early stage drill results at depths (>100m) which make them look allot less interesting than if they were near surface.
• The problem with Premier African Minerals is that much of this new funding is likely to be drained by problems at the company’s RHA tungsten mine in Zimbabwe.
• The mine has missed successive and unrealistic targets and has required extensive modification to the plant and recovery process including the expense of a new X-Ray sorter in an attempt to raise recovery rates.  Note extra sorting means greater operating expenses, capital costs and increased loss of resource.
• The Chairman and CEO, and it’s rarely good to combine the two roles, commented that the mine should become cash generative in the near future, though we wonder when the near future might be reached?  
Conclusion:  Given the history of missed targets and poor performance we suspect shareholders can wave goodbye to these funds and await the next appeal for fresh capital.

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