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Today's Market View - Birimian, Bluerock Diamonds Plc, Diamondcorp Plc, BlueJay Mining PLC, Kodal Minerals, Metminco, Ortac Resources Ltd, SolGold plc

Published: 10:50 02 May 2017 BST

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Birimian Limited (ASX:BGS) Suspended – Stock suspended pending an announcement relating to internal reorganisation

Bluejay Mining* (LON:JAY) BUY Target Price 22p – Renewal of Disko Exploration licenses in Greenland

BlueRock Diamonds* (LON:BRD) – Plans to evaluate the Jubilee kimberlite pipe

DiamondCorp (LON:DCP) Suspended – Bond holders and AMCU union blamed for DiamondCorp administration

Kodal Minerals* (LON:KOD) – Kodal extends negotiating period by further 15 days following satisfactory due diligence with Suay Chin

Metminco* (LON:MNC) – On course to deliver Miraflores Feasibility Study in Q3

Ortac Resources* (LON:OTC) – Further investment in Casa Mining and £2m placement

Solgold* (LON:SOLG) – Hole 24 extends known strike length to approximately 1300m

 

121 Mining Investment conference – sponsored by SP Angel - 10–11 May 2017

• The 121 team are running the London 121 Mining Investment conference at No 8 Fenchurch Street in The City on 10-11 May.

• The event is for registered investment professionals, mining and exploration companies and mining analysts and brings the industry together alongside a series of investor briefings.

• 65 quality producers, developers and explorers attending / presenting

• I’m talking at 3:00 on the Thursday on:  ‘UK mining outlook - A new era of UK funded exploration and production’.

• Follow link for investor passes - https://www.weare121.com/121mininginvestment-london/registration/register-investor/

 

Dow Jones Industrials  -0.13% at 20,913

Nikkei 225   +0.70% at 19,446 

HK Hang Seng   +0.12% at 24,645 

Shanghai Composite    -0.35% at 3,144 

FTSE 350 Mining   -0.07% at 14,879

AIM Basic Resources   -0.89% at 2,664 

 

US – Q1 GDP numbers came in below expectations driven by a significant reduction in private consumption growth.

• Consumer spending recorded the weakest quarter since the end of 2009 climbing only 0.3%qoq v a 3.5%qoq increase in Q4/16.

• A slowdown in spending is reported despite increased consumer sentiment and confidence post elections as well as a strengthening labour market.

• Government spending fell 1.7%qoq v a 0.2%qoq growth in Q4/6 driven by a 4.0% drop in defence spending.

• On a positive note, business investments recorded the strongest quarter since Q4/13 climbing 9.4%qoq on the back of improving energy sector performance.

• A drop in inflation growth, slowing consumer demand in Q1/17 and weakening services and business activity PMI measures are expected to see the Fed holding off from raising rates with markets attributing as low as 14% chance to a rate hike this week.

 

China – Private report on the Chinese manufacturing showed the activity slowed to the weakest reading this year, in line with previously released official data.

• A weaker sentiment has been recorded across the board.

• Both local and export new orders growth slowed in Apr.

• Employment fell across the sector contracting at the fastest pace since the start of the year.

• Input prices growth continued to slowdown from the peaks seen at the end of the previous year and saw only a modest increase in prices charged.

• “The downward pressure on manufacturing gradually emerged in Apr, with all indicators weakening. The Chinese economy may be starting to embrace a downward trend in the near term as prices of industrial products decline and active restocking comes to an end, Caixin Markit reported.

• Manufacturing Caixin Markit PMI: 50.3 v 51.2 in Mar and 51.3 forecast.

• Manufacturing PMI (official, released on 30Apr): 51.2 v 51.8 in Mar and 51.7 forecast.

• Services PMI (official, released on 30Apr): 54.0 v 55.1 in Mar.

 

Eurozone PMI – Manufacturing activity in the single currency region strengthened in Apr led by solid performance from major economies in the Euro area.

• Production, new orders and employment climbed at the fastest pace in six year.

• “Companies are benefitting from the historically weak euro, improved growth in key export markets, rising domestic demand and ongoing central bank stimulus including record-low interest rates,” Markit said.

• “Optimism about the year ahead meanwhile appears unaffected by political worries, with the first four months of 2017 seeing confidence remaining elevated at the highest level since the future output series started in 2012.”

 

Australia – The RBA left rates unchanged at 1.5%, while a more upbeat tone over the labour market helped to lift the Australian dollar up against the US$.

 

Greece – Bond yields on Greek debt are coming down this morning on the back of the news the government agreed conditions with its creditors on which further bailout funds to be received.

• The deal involves a number of fiscal and structural reforms including an 18% cut in pension payments and the sale of publicly-owned coal-fired power plants and mines.

• Measures should be passed through Parliament before the meeting of the Eurogroup, one of the main creditors, on May 22.

• 10 year bonds yield 6.086%, the lowest level since late 2014.

 

Economic News

Currencies

US$1.0913/eur vs 1.0889/eur last week.   Yen 112.10/$ vs 111.27/$.   SAr 13.285/$ vs 13.283/$.   $1.287/gbp vs $1.293/gbp.

0.753/aud vs 0.748/aud.   CNY 6.897/$ vs 6.898/$.

 

Commodity News

Precious metals:

Gold US$1,255/oz vs US$1,265/oz last week

   Gold ETFs 59.6moz vs US$59.9moz last week

Platinum US$932/oz vs US$949/oz last week

Palladium US$814/oz vs US$807/oz last week

Silver US$16.93/oz vs US$17.44/oz last week

           

Base metals:   

Copper US$ 5,778/t vs US$5,718/t last week

Aluminium US$ 1,905/t vs US$1,967/t last week

Nickel US$ 9,530/t vs US$9,270/t last week

Zinc US$ 2,634/t vs US$2,628/t last week

Lead US$ 2,244/t vs US$2,188/t last week

Tin US$ 19,925/t vs US$19,840/t last week

           

Energy:           

Oil US$51.6/bbl vs US$51.5/bbl last week

Natural Gas US$3.229/mmbtu vs US$3.258/mmbtu last week

Uranium US$22.65/lb vs US$22.75/lb last week

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$68.0/t vs US$66.2/t

Chinese steel rebar 25mm US$545.1/t vs US$517.6/t

Thermal coal (1st year forward cif ARA) US$66.8/t vs US$66.1/t last week

Premium hard coking coal Aus fob US$246.2/t vs US$257.4/t

 

Other:

Tungsten - APT European prices $212-219/mtu vs $208-216/mtu

 

Company News

Birimian Limited (ASX:BGS) Suspended – Stock suspended pending an announcement relating to internal reorganisation

• Birimian has suspended its ASX listing pending an announcement relating to the company’s internal reorganisation.

• Michael Langford, a director at Birimian has already stepped down and other directors are expected to go.

• We believe the reorganisation relates to moves by an alliance of 10 shareholders who petitioned to remove the chairman following the failed takeover offer by a Chinese lithium processor for A$107.5m. 

• The takeover failed when the Chinese company, Shandong Mingrui was not able to deliver a A$10.7m deposit to a solicitor within Australia within a relatively short period given Chinese exchange controls.

• In the meantime Birimian has updated its lithium resource to 27.8mt of indicated and inferred resources grading 1.42% lithium oxide.

• Around 22% of the resource tonnage (6.2mt at an average grade of 1.40% is classified as indicated with the balance as inferred.

Conclusion:  We have met with a representative of the Chinese company. We believe Chinese lithium processors remain interested in acquiring the rights to lithium supply to enable their further expansion.

 

Bluejay Mining* (LON:JAY) 14p, Mkt Cap £103m – Renewal of Disko Exploration licenses in Greenland

BUY Target Price 22p

• BlueJay Mining report the company has renewed its exploration licenses for the ‘Disko’ DiskoNuussuaq magmatic massive suphide nickel-copper-platinum project in Greenland for a further five years.

• Some $50m has been spent on exploration of the Disko project area over more than 30 years started by Cominco and then passed onto Falconbridge, then Vismand and latterly Cairn Energy.

• Disko is classed as a flood basalt magmatic massive sulphide.  We understand this may have some similarity with the Norilsk mineral complex in Russia

• A massive 28t boulder which has assayed 7% nickel, 3% copper and 2ppm PGEs was collected from the Disco project and can be seen in the foyer of the Danish Geological museum.

• The challenge is to find out exactly where this massive high-grade boulder came from and how much more there might be.

Conclusion:  Greenland remains a land of opportunity.  Global warming is making it much easier to explore the terrain and to advance previous hard won exploration.  While BlueJay is busy developing the Pituffik ilmenite project there will be time to press ahead with some further investigation of the Disko project.

We reported a further significant increase in ilmenite prices on Friday in relation to the Pituffik project.

*SP Angel act as nomad and broker to Bluejay Mining

 

BlueRock Diamonds* (LON:BRD) 4.5p, Mkt Cap £2.5m – Plans to evaluate the Jubilee kimberlite pipe

• BlueRock Diamonds reports that it has reached agreement to take a bulk sample of some 2500 tonnes of kimberlite material from the 1.5 hectare Jubilee kimberlite pipe. Provided that the expected mining permit is granted, the material is to be processed at BlueRock’s Kareevlei plant “to ascertain the likely grade and quality of any diamonds coming from Jubilee.”

• In the event that this testing proves positive, BlueRock “has an option to extend the terms of the agreement for the duration of the Mining Permit which could be up to 5 years, and any extension thereof.”

• the company notes that, although there “has been no drilling or detailed evaluation done on Jubilee (with no identified resource)” a 24 carat diamond was, however, recovered from the area by alluvial miners approximately 2 years ago.

• BlueRock Diamonds also discloses that it has sold, by tender in Johannesburg, a parcel of 206 carats of diamonds in April for an average of $438/carat. The tender included a 9.5 carat stone which achieved a lower than expected price of $3750/carat. Excluding this large stone, it appears that the April tender achieved an average price of around $280/carat, broadly in line with the “previous average for all diamonds mined at Kareevlei Mine” of $293/carat.

Conclusion: The decision to evaluate the Jubilee kimberlite pipe should help BlueRock Diamonds to reach a decision on whether to exercise its option. The previously recovered alluvial diamond could possibly have been derived from elsewhere and formal testing of the deposit should provide the company with insight into the grade, distribution and value of in-situ  diamonds

*SP Angel acts as Nomad & Broker to BlueRock Diamonds

 

DiamondCorp (LON:DCP) Suspended – Bond holders and AMCU union blamed for DiamondCorp administration

• DiamondCorp reported its ‘notice of intention to appoint administrators’ at midday on Friday.

• The company’s debt restructuring appears to have been frustrated by the lack of agreement with South African bond holders.

• Protracted discussions with the AMCU union are also blamed.

• The company is not able to settle a £1m equity fund raise as announced in early April and we suspect the group is now days away from formal administration.

• The failure to reach agreement has caused all employees to be retrenched and that funding agreed with the International Development Corporation ‘IDC’ of South Africa is now no longer available.

Conclusion:  It will be interesting to see if the bond holders settle at the 11th hour.  The moral of the situation is that it is better for companies to raise straight equity and not to seek more exotic forms of finance which make restructuring all the more challenging in stressed situations.

 

Kodal Minerals* (LON:KOD) 0.32p, Mkt Cap £17.4m – Kodal extends negotiating period by further 15 days following satisfactory due diligence with Suay Chin

• Kodal Minerals announced on Friday that it has extended the negotiating period with Suay Chin for their anticipated £4.3m investment into the company and their Bougouni lithium project.

• Management report that negotiations are at an advanced stage.

• Suay China have already committed £0.5m to Kodal Minerals and are keen to negotiate an offtake agreement with the company.

• It is expected that Suay Chin may assist Kodal further in the delineation and potential future development of their Bougouni project following the funding.

• Kodal Minerals has previously verified that the due-diligence for the previously announced potential £4.3m investment into the company by Suay Chin International has now been completed and “the parties are now negotiating the final terms of the investment agreements.”

*SP Angel acts as Financial Advisor and Broker to the company.  Robert Wooldridge, a partner at SP Angel is also Chairman of Kodal Minerals.

 

Metminco* (LON:MNC) 4.4p, mkt cap £5.6m – On course to deliver Miraflores Feasibility Study in Q3

• Metminco’s quarterly report for the three months to 31st March confirms that the Feasibility Study remain on track for completion during Q3 2017.

• The updated resource estimate, based on a cut-off grade of 1.2g/t gold shows a measured and indicated resource of 9.3mt at an average grade of 2.82g/t gold and 2.77 g/t silver (840,000oz of contained gold and 826,000 oz of contained silver). A further 487,000 tonnes at an average grade of 2.36g/t gold and 3.64 g/t silver is classed as inferred.

• Work on detailed mine design, metallurgy and surveying to lay out the mine and processing plant infrastructure is continuing, however, “the critical path for the development of Miraflores remains the completion of the baseline monitoring for the Environmental Licence(EIA). It is expected that the submission of the EIA application to the relevant authorities will be by the end of 2017.”

• The technical studies are firming up the development of a 50,000 oz pa underground gold mining operation with a 9 years mine life. The company comments that the Study is now around 50% complete and detailed work to finalise the mining and processing schedules, the capital and operating costs and the tailings disposal is proceeding.

• The company is also working “with the local communities, municipality and government agencies and other stakeholders to gain its social licence for the project.”

Conclusion: Metminco is progressing the feasibility study for the development of an underground gold mine at Miraflores and has identified the baseline environmental work as the critical path element. Formal submission of the Environmental Licence is expected to occur by the end of 2017.

*SP Angel act as broker to Metminco.  SP Angel analysts have previously visited Los Calatos in Peru and Miraflores project in Colombia

 

Ortac Resources* (LON:OTC) 3.1p, mkt cap £2.6m – Further investment in Casa Mining and £2m placement

(Ortac recently consolidated their shares by 100:1)

• Ortac Resources has raised £2m through the placing of 66.666m new shares at 3p/s.

• The placing is to fund the acquisition of a greater position in Casa Mining which holds the Misisi Gold project in Southern Kivu in East DRC.

• Ortac are subscribing for a $2m convertible loan note in Casa Mining which will give Ortac an effective 45% stake in Casa.

• We assume the difference between the £2m raised and the $2m subscription will be used for general corporate purposes

• Casa has mining licenses covering a series of gold projects in the Misisi gold corridor which are valid for 30 years

• These licenses include Casa’s flagship ‘Akyanga’ gold project which is expected to host >2moz of gold.

• Funding of around $30m spent on the project was previously supported by Casaa’s former private equity partner which withdrew to consolidate its attention on the high-grade Alphamin tin mine also in the DRC.

• Resoruces:  The Akyanga project has an inferred gold oxide resource defined by ‘SRK’ at Akyanga of 5.5mt grading 1.5g/t for 272koz of gold.  SRK has also defined an inferred transition gold mineral resource of 16.2mt grading 1.8g/t for 927oz of contained gold.

• These are not JORC or NI 43101 classified resources but we suspect they might be reasonably close to official standards given SRK’s careful reputation.

• Scoping Feasibility Study:  which sounds like a hybrid scoping and feasibility study, has been done by MDM, who are also well respected and has estimated a value of:

o Capex $87.4m

o Operating cost $628/oz

o NPV $171m assuming an 8% discount at a $1,300/oz gold price

o IRR 35%

o While the headline figures look good the 8% discount rate is a bit low for the DRC and the $1,300/oz gold price assumption is some $45/oz higher than where we are today.

o Ortac also gets certain pre-emption rights and the right to nominate two directors to the Casa Mining board.

Conclusion:  Ortac’s funding should add to the value of Casa’s Akyanga gold project which Casa believe could expand to >2moz of contained gold.  We hope the team will, in the future, look to define a higher-grade portion of the orebody to potentially fast-track to mining as well as expanding the scale and definition of the orebody.  The presence of easy to process, bulk tonnage ore at surface makes this an interesting for investors looking for leveraged to higher gold prices.

*SP Angel acts as broker to Ortac Resources

 

Solgold* (LON:SOLG) 44.8p, Mkt Cap £640m – Hole 24 extends known strike length to approximately 1300m

(SolGold holds an 85% interest in ENSA which holds 100% of Cascabel)

• SolGold has provided an update on its drilling at the Cascabel project in Ecuador. Drilling is underway on three holes (23R, 24 and 25) each of which is planned to reach a depth of 2000m.) At this stage, the company is not reporting assay results but has provided visual estimates and drill-core photographs of the mineralisation encountered in each of the holes so far.

• Hole 23R at Alpala Central is currently at a depth of 1136.9m having entered mineralisation, largely comprising the copper sulphide mineral chalcopyrite, at a depth of 563.7m. The company comments that richer mineralisation was entered at a depth of 979.2m and that the drilling “continues to intersect increasingly intense copper sulphide mineralisation from 563.7m to its current depth of 1136.9m.”

• Hole 23R “is being drilled sub-vertical to intersect deep untested pockets of mineralisation up to 1800m below surface” implying that the company’s exploration team expects mineralisation to continue for up to a further 800+ metres.

• Hole 24, on the Alpala Southeast part of the project area has reached a depth of 1377.7m “having successfully intersected strong copper sulphide mineralisation at 738.9m depth.” Visual logging, confirmed by the photographs, shows the presence of both chalcopyrite (34.6% copper) and bornite (63.3% copper) copper minerals within the drill core.

• Hole 24 is located “approximately 100m north of Malte Creek, where visible chalcopyrite and bornite mineralisation were noted in surface geological mapping.” Solgold also observes that “Hole 24 confirms the extension of the known mineralised corridor at Alpala to approximately 1300 [metres] from hole 13 in the northwest. Hole 24 nearly doubles the strike length of the mineralisation confirmed by drilling along the Alpala trend.”

• At the Hematite Hill prospect, to the south of Alpala Central and Alpala Southeast, Hole 25 has reached a depth of 1481m “having successfully intersected visible copper mineralisation from 772.22m depth.” The company notes that visual estimates show bornite averaging over 1% of the volume of the core over the interval between 772.2m to 1226.4m with sections within this interval ranging from  zero to 4% bornite.

• To date, Solgold has identified 15 individual targets within the Cascabel project area, of which it has drilled a total of over 36,000m on 3 of the targets. “an increased understanding of the deposit is now leading to much larger step-outs in drilling”.

• Following the investments by Newcrest and Guyana Goldfields Solgold is also stepping up its drilling activity with a target of drilling 90,000m per year from early 2018. A fourth drilling rig is currently being mobilised and with a further 3 rigs expected to become operational over the next 2 quarters  drill testing is expected to be underway at the Alpala East, Alpala West, Trivinio and Aguinaga by mid year and with eight rigs expected to be working by the end of the year, Solgold will also be drilling on the large Tandayama-America prospect, located further to the north.

Conclusion: Solgold’s expanding drilling programme at Cascabel is extending the known mineralisation along strike as well as at depth. As additional rigs arrive on site, the company is looking to test more of the as yet undrilled targets. We look forward to assay results from the three holes currently underway and to news of the start of work by the recently arrived fourth rig.

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