SolGold* (LON:SOLG) – Maiden resource exceeds >1bn tonnes of copper equivalent mineralisation at Alpala
Dow Jones Industrials +0.42% at 24,824
Nikkei 225 -0.08% at 22,765
HK Hang Seng +0.15% at 30,561
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Asian – Global growth optimism peaks in Asia shares as ex-Japan approaches historic highs.
• MSCI’s index of Asia-Pacific shares outside of Japan rose a further 0.4%, having jumped 1.4% on Tuesday to record the best performance since March 2017. The index closed in on its all-time peak of 591.50, recording 579.46.
Eurozone – Eurozone factories recorded their fastest pace of growth in more than two decades as the December final manufacturing Purchasing Managers’ Index (PMI) rose to 60.6, the highest since the survey began in June 1997.
• Germany and France, the euro zone’s two largest economies expanded in tandem, boosting manufacturing to the highest levels for 17 years. British manufacturers are failing to make the most of a rebound in global trade as growth tailed off from a four-year high in November.
• Strong activity in Europe boosted bond yields and drove the euro shy of its highest in three years against a contracting US dollar.
US$1.2036/eur vs 1.1962/eur yesterday Yen 112.34/$ vs 112.62/$ SAr 12.387/$ vs 12.293/$ $1.360/gbp vs $1.349/gbp 0.784/aud vs 0.780/aud CNY 6.501/$ vs 6.512/$.
Gold US$1,314/oz vs US$1,296/oz last week
• Gold prices weaken in early Asian trading as the dollar rebounds on the release of strong US economic data. The US dollar index rose 0.06 to 91.89 following the strongest manufacturing growth since March 2015 on the release of December’s manufacturing PMI. The latest growth follows the fall to three-month lows on Tuesday, with the greenback posting its biggest annual drop last year since 2003.
• Expectations of a slower pace of interest rate hikes by the US Federal Reserve helped to boost gold prices to 3.5 month highs to start 2018. Key factors for the bullion market into the year will focus on the rate of normalisation of interest rates by the central banks, the length of the current equity rally, the longer-term impact of US tax reforms, and the timing for a pick-up in inflation.
• Growth in physical gold demand from the world’s second largest consumer, India, is expected to support global prices into the new year. Jewellers replenished inventories amid a rebound in retail demand as imports surged 67% in 2017 to 855 tonnes. The significant rise in demand followed last quarter demonetization in 2016 as Prime Minister Narendra Modi scrapped 500- and 1,000-rupee banknotes as part of a crackdown on corruption, tax evasion and the financing of militant groups, dampening purchasing. A combination of revived farmers income from strong monsoon rains in 2017 and mid-December deflated gold prices helped boost rural demand as overseas gold purchases in December rose 40% to 70 tonnes.
• Reuters technical analysis is pointing towards continued support for the precious metal, as wave pattern and Fibonacci ratio prediction suggest spot gold may break a resistance at $1,326/oz and rise to $1,380/oz by the end of the first quarter of 2018.
• President Donald Trump escalated his words of war with North Korean leader Kim Jong Un, giving further support for the safe haven investment. In a response to Kim’s annual New Year’s Day speech, the US president asserts that his “nuclear button” is “much bigger and more powerful”.
Gold ETFs 71.5moz vs US$71.5moz last week
Platinum US$946/oz vs US$929/oz last week
Palladium US$1,090/oz vs US$1,068/oz last week
Silver US$17.12/oz vs US$16.86/oz last week
Copper US$ 7,183/t vs US$7,257/t last week
• Extended discussions surrounding Freeport McMoRan’s Indonesian mining licence have resolved in an extension of their temporary special mining permit, which allows output from the Grasberg copper-gold mine until June 30, 2018. The extension of the temporary licence will allow negotiations with President Joko Widodo, which focus on contract extension, divestment, smelter construction and fiscal and legal obligation, to resolve.
• In exchange for appropriate licencing to operate through to 2041, Freeport agreed to divest 51% of PT Freeport Indonesia to the country’s government and to build at least one smelter. The Indonesian government has current plans to acquire Rio Tinto’s 40% stake in Grasberg.
Aluminium US$ 2,258/t vs US$2,274/t last week
Nickel US$ 12,610/t vs US$12,250/t last week
Zinc US$ 3,335/t vs US$3,298/t last week
• Benchmark zinc rose 0.9% to 10-year highs as the market participants foresee falling supplies generating further global deficits. Despite demand growth rising 43% over the first 11 months of 2017, accounting for 573,000 tonnes zinc imports, years of under-investment combined with China’s growing war on smog has restricted global production. Consequently shortages have increased the reliance on global inventories as a drawdown across LME-approved warehouses removes 70% material since Sept. 2015 to 180,975 tonnes. Further, stocks across Shanghai Futures Exchange warehouses dropped 65% since March last year to 68,630 tonnes.
• Optimism surrounding Chinese demand was boosted by an unexpected December rise in manufacturing and new orders, drawing base metals to higher prices by the close of 2017.
• However, gains in the metal are expected to be capped as prices sit at levels which are likely to encourage investment in new output.
Lead US$ 2,568/t vs US$2,533/t last week
Tin US$ 19,840/t vs US$19,800/t last week
Oil US$66.5/bbl vs US$66.5/bbl last week
• Hedge funds remain the most bullish about oil prices, with expectations that OPEC will tighten the global oil market too much. A record net long position has been accumulated by funds and money managers, amounting to 1,183 million barrels in the five biggest futures and options contracts covering crude, gasoline and heating oil.
Natural Gas US$3.012/mmbtu vs US$2.967/mmbtu last week
Uranium US$23.90/lb vs US$24.00/lb last week
Iron ore 62% Fe spot (cfr Tianjin) US$73.3/t vs US$72.8/t
Chinese steel rebar 25mm US$678.1/t vs US$692.7/t
Thermal coal (1st year forward cif ARA) US$86.3/t vs US$89.5/t
Premium hard coking coal Aus fob US$261.4/t vs US$260.1/t
Tungsten APT European US$294-301/mtu vs US$293-300/mtu last week
Cobalt LME 3m US$75,250.0/t vs US$75,250.0/t last week
SolGold* (LON:SOLG) 29.4p, Mkt Cap £497.8m – Maiden resource exceeds >1bn tonnes of copper equivalent mineralisation at Alpala
(SolGold own 85% of Cascabel in Ecuador)
• SolGold report a maiden resource of 1.08bn tonnes grading 0.68% copper equivalent.
• The deposit is estimated to contain some 5.2mt of copper and 12.3moz of gold amounting to 7.4mt of copper equivalent at a 0.3% CuEq cut off grade with some 45% in the indicated category (by contained metal).
• The estimates are based on 53,616m of drilling out of the 63,500m drilled to date with assay results for the balance of some 9,840m currently pending.
• Higher grade core contains 120mt grading 1.8% copper equivalent (1.1% copper and 1.3g/t gold) at a much higher 1.1% CuEq cut-off grade with some 60% contained in the Indicated category (by contained metal).
• The resource has been calculated by Mr. Martin Pittuck, MSc, CEng, MIMMM, who is responsible for the Mineral Resource estimate and is an "independent qualified person" as such term is defined in NI 43-101.
• The 0.3% copper equivalent calculation uses [copper grade (%)] + [gold grade (g/t) x 0.6]
• The Mineral Resource is considered by the company and Mr. Pittuck to have reasonable potential for eventual economic extraction by underground mass mining such as block caving.
• The Mineral Resources are not Mineral Reserves and do not have demonstrated economic viability
• The statement uses the terminology, definitions and guidelines given in the CIM Standards on Mineral Resources and Mineral Reserves (May 2014).
• The MRE is reported on 100 percent basis
• The effective date for the Mineral Resource statement is 18th December 2017.
• Grade has been classified as follows:
- low grade - where CuEq exceeds 0.15%;
- medium grade - where B vein intensity exceeds 4% or CuEq grade exceeds 0.7% CuEq; and;
- high grade - where CuEq grade exceeds 1.5%.
• ‘A cut-off grade of 0.3% CuEq has been used for the Mineral Resource statement. This compares well with other large-scale underground copper-gold miners and developers who have published Mineral Resource statements in recent years. This value also agrees with a calculation based on first principals including long term market forecast metal prices, operating costs based on peer group review, smelter terms based on assuming clean concentrate and 90% metal recovery based on reviewing typical industry values and preliminary mineralogy work for Alpala’.
• The Company is planning to immediately launch PEA at Alpala ahead of the PFS scheduled for commencement in late 2018.
• Additionally, the team is expecting to provide further updates to the maiden MRE as exploration programme progresses with 11 diamond drill rigs currently in operation at Cascabel and another one planned to be added by next month.
*SP Angel act as UK broker to SolGold and have acted as placing agent in relation to the recent £45m new share issue