African Battery Metals* (LON:ABM) – Consultant paid in shares
Arc Minerals (LON:ARCM) – Consolidation of interest in Zamsort and £2.5m placing
Bluebird Merchant Ventures* (LON:BMV) BUY – Target Price 12.8p – Sampling broken rock shows potential to extract higher grade gold at Kochang gold mine
Condor Gold (LON:CNR) – Q1 Results and La India update
KEFI Minerals* (LON:KEFI) – Kefi infrastructure bond to carry c. 7% coupon
Legendary Investments (LON:LEG) – share placing yesterday
Serabi Gold (LON:SRB) – Q1 results on track to meet 2018 production guidance
Glencore, Barrick expect prospecting license for Tanzania nickel project
• Global miners Glencore and Barrick Gold expect to receive a prospecting license for a nickel joint venture in Tanzania after the government cancelled its retention license, Barrick said
• The retention license of the undeveloped Kabanga nickel project was one of 11 licenses cancelled as part of enforcement of a new mining regulations which were approved in January
• “In order to transition to the new license structure implemented in January, the project partners have applied for a Prospecting License covering the same area as the Retention License,” Barrick said in a statement
• The cancelled retention license was due to expire in 2019, Barrick said, adding that a prospecting license would be valid for four years
Congo mining regulations committee completes work, miners say
• Major miners operating in the Democratic Republic of Congo, Africa’s top copper producer, said on Monday that a commission set up to draft detailed regulations to implement a new mining code had completed its work
• But the mining companies, which include Glencore, Randgold , AngloGold Ashanti, Ivanhoe and China Molybdenum said they had not been given an opportunity to tackle what they regard as major flaws in the law as they said they had not been able to negotiate over key issues in the new mining code as the talks were restricted to drafting the regulations within the parameters set by the new code
• The new mining code strips away a stability clause protecting existing investments from changes to the fiscal and customs regime for 10 years, introduces a 50 percent windfall profits tax and gives powers to the mines minister to raise royalties on minerals considered “strategic”
Dow Jones Industrials +0.27% at 24,899
Nikkei 225 -0.21% at 22,818
HK Hang Seng -0.95% at 31,241
Shanghai Composite +0.57% at 3,192
FTSE 350 Mining -1.17% at 19,434
AIM Basic Resources +0.05% at 2,582
China – Economic data released this morning showed a mixed picture with industrial production rebounding from a slowdown recorded through winter months and beginning of the year, while retail sales investments came in weaker than forecast.
• A pick up in industrial production growth market commentators attributed to firms rebuilding inventories following a rundown during the winter amid heightened air pollution controls.
• On a less positive side of things, private consumption as indicated by retail sales data continued to trend lower both in nominal and real terms.
• Investment growth has also come down on the back of a weaker increase in property investment.
• Retail Sales (%yoy YTD): 9.7 v 9.8 in Mar and 9.9 forecast.
• FAI (%yoy YTD): 7.0 v 7.5 in March and 7.4 forecast.
• Industrial Production (%yoy YTD): 7.0 v 6.0 in March and 6.4 forecast.
Germany – Economic output growth slowed in the Q1 coming in below market estimates and half of the rate recorded in the final three months of 2017.
• Growth has been driven by a pickup in business investment, construction and a slight increase in private consumption.
• A drop in government spending and weaker exports and imports weighed down on GDP growth.
• The question is whether the slowdown is a temporary development or a cyclical one which is likely to see changed to the ECB monetary policy stance.
• So far the ECB remained confident the single currency zone growth momentum remained robust and broad-based indicating that the asset purchases programme is expected to be withdrawn this year.
UK – Employment climbed strongly in the first three months of the year (+197k) with labour earning in line with market estimates.
• Core wage earnings (ex bonus) increased 2.9%yoy in March which would suggest wages are up in real terms as well with the latest inflation numbers showing consumer prices growth fell to 2.5% in March.
• The pound climbed slightly against the US$ on the news this morning and is currently trading at the 1.3540 level.
• Unemployment Rate (3m): 4.2 v 4.2 in February and 4.2 forecast.
• Av Weekly Earnings (%yoy): 2.6 v 2.8 in February and 2.6 forecast.
• Av Weekly Earnings ex Bonus (%yoy): 2.9 v 2.8 in February and 2.9 forecast.
Turkey – The national currency continues to post new lows with the lira off 14% YTD against the US$.
• President Erdogan has continuously criticised the central bank for its policy that raised the benchmark rate to 13.9% amid high inflation and flight of capital and suggested monetary authorities should be more accountable to the head of state.
• “Of course our central bank is independent,” Erdogan told Bloomberg TV on Monday. “But the central bank can’t take this independence and set aside the signals given by the president, who’s the head of the executive. It will make its evaluations according to this, take its steps according to this. And I believe this will result in very beneficial steps in the future.”
• The nation is set to hold snap presidential and parliamentary elections on June 24 that is hoped to take the nation to a single-party state and the president broadening powers that were approved after a constitutional referendum last year.
• Elections are set to be carried under the state of emergency that has been extended for the seventh time for another three months in April and which has been in place since a coup attempt in July 2016.
US$1.1932/eur vs 1.1968/eur yesterday Yen 109.88/$ vs 109.45/$ SAr 12.380/$ vs 12.208/$ $1.355/gbp vs 1.358/gbp 0.752/aud vs 0.756/aud CNY 6.351/$ vs 6.340/$
Gold US$1,312/oz vs US$1,321/oz yesterday
Gold ETFs 75.1moz vs US$75.0moz yesterday
Platinum US$909/oz vs US$927/oz yesterday
Palladium US$983/oz vs US$995/oz yesterday
Silver US$16.47/oz vs US$16.72/oz yesterday
Copper US$ 6,874/t vs US$6,951/t yesterday
• LME copper continues shedding, dropping 0.9% to close $6,885 as headline stocks in LME warehouses climbed 8,900 tonnes to 289,975 tonnes. The injection of material records the first gain since April 18, rising the most across Asian warehouses. It reverses the trend of falling inventories of more than 100,000 tonnes since March to just over 280,000 tonnes, driving prices up to $7,300/t.
• The positive move comes ahead of introduced Chinese curbs on scrap metal imports introduced this year, with total scrap supply to the Asian nation falling by around 100,000 tonnes in 2018. However, any tightening of scrap supply is being matched by a strong rise in domestic scrap production.
Aluminium US$ 2,300/t vs US$2,281/t yesterday
Nickel US$ 14,410/t vs US$14,380/t yesterday
• Surging supply potential from Indonesia and China are poised to weigh on the best performing base metal in 2018. Nickel, which has climbed more than 12% this year and nearing highs of 2015, is drawing elevated profits for nickel pig iron production, an alternative input for the stainless steel industry. However, sustained prices drawing higher production levels could trigger a 20% market drop according to new research from Shanghai Metals Market.
• Premature optimism surrounding early nickel demand from new energy vehicles has drawn prices above $15,000/t, toughing highs on April 18. Research notes “for eight years, it was NPI that set nickel prices, but since November it’s been batteries, batteries, batteries. Now NPI margins are huge in China, everyone is ramping up as much as they can, and this is happening even before Indonesia ore is ramped up. There’s going to be a flood of nickel units”.
• China’s daily production of nickel pig iron has climbed to the highest level in five months in April, soaring more than 40% yoy, according to trade house Grand Flow Resources.
• Despite battery sentiment leading the market charge, the market isn’t big enough to drive prices. This has led to excess nickel production, with 150,000 tonnes more NPI supply arriving this year. “China is going to be importing less refined nickel, which frees it up to go back into the LME, eventually stopping the drawdown in refined nickel, which is the key thing the bulls have been pointing to”.
Zinc US$ 3,075/t vs US$3,090/t yesterday
Lead US$ 2,385/t vs US$2,378/t yesterday
• Benchmark lead climbed 1.7% yesterday, having risen 7% on the London Metal Exchange since May 2, touching $2,241, the lowest since August. The price outlook remains positive with BMO Capital Markets forecasting $2,640 by the first quarter on extended market tightness.
• During 2014-2016, global mine lead supply contracted roughly 10%, equivalent to 500,000 tonnes. China, which supplies around 60% of primary lead supply, marched on with it environmental crackdown on industries that are heavy polluters, further squeezing output. “Lead from a raw materials side is probably the tightest commodity market out there. There has been a big clamp down on Chinese private sector mining.”. Headline stocks across LME-registered warehouses have fallen by a third since the start of last year to 131,225 tonnes.
• Last year’s shortfall of 119,000 tonnes is expected to continue with some market participants forecasting a sustained deficit of 115,000 tonnes in 2018 and 56,000 tonnes into 2019.
• Rising discounts of cash lead compared to three-month metal to $13/t, the highest since November, suggests there is no immediate shortage of the metal.
Tin US$ 20,945/t vs US$20,960/t yesterday
Oil US$76.7/bbl vs US$76.7/bbl yesterday
Natural Gas US$2.815/mmbtu vs US$2.815/mmbtu yesterday
Uranium US$21.60/lb vs US$21.50/lb yesterday
Iron ore 62% Fe spot (cfr Tianjin) US$68.6/t vs US$68.0/t
Chinese steel rebar 25mm US$671.0/t vs US$669.4/t
• China’s crude steel production, supplying approx. half of the world’s product, surged to record levels last month as mills ramped up operations to capitalise on rising profit margins after the end of winter curbs. The Asian nation boosted production 4.8% yoy to supply 76.7 million tonnes of steel to beat previous high of 74.6 million tonnes in August, according to National Bureau of Statistics data on Tuesday.
• Mysteel research note “electric arc furnaces have been running at about 75% of capacity as margins stay elevated, compared with rates of 50-60% a year ago”. Output across operations expanded a further 5% to 288.97 million tonnes in the first four months of 2018, the higher capacity ever.
• Despite winter production restrictions, shuttering older, more polluting capacity and limiting output during heating season, production in 2018 is expected to rise slightly from last year.
• Shanghai futures for reinforcement bar have been trading near the highest level in more than four years on capacity cuts and sustained domestic demand, providing elevated profit margins for Chinese steel mills.
Thermal coal (1st year forward cif ARA) US$89.8/t vs US$87.8/t
Premium hard coking coal Aus fob US$184.0/t vs US$185.7/t
Tungsten APT European US$327-336/mtu vs US$325-328/mtu
Cobalt LME 3m US$91,000/t vs US$90,500/t
Lithium - Yale chemists find new way to create lithium metal electrodes for batteries
• Researchers at Yale and Donghua University in China have developed a new process for creating lithium metal that may boost the energy and capacity of rechargeable batteries
• Lithium metal is considered the best option as a material for anodes in high-energy batteries, the researchers said, because of the metal’s high potential for providing large amounts of energy and capacity in a given mass, yet existing lithium metal electrodes, limited by low capacity and utilization efficiency, have not come close to reaching that potential
• New approach to creating more efficient lithium metal electrodes yields a protective layer that enables lithium metal anodes to be efficiently discharged and charged at high capacities, enabling it to outperform other laboratory-scale battery cells, as well as state-of-the-art lithium-ion batteries on the market
African Battery Metals* (LON:ABM) 0.04p, Mkt Cap £2.4m – Consultant paid in shares
• African Battery Metals reports that it has issued 5m shares to a consultant as settlement for an invoice for £2,500.
• The additional; shares represent less than 0.1% of the enlarged capital of the company.
*SP Angel act as broker to African Battery Metals
Arc Minerals (LON:ARCM) 2.8p, Mkt Cap £9.3m – Consolidation of interest in Zamsort and £2.5m placing
• Arc Minerals increased its stake in Zamsort Limited, developer of the Zamsort copper/cobalt project in Zambia, from 14% to 49%.
• The Company acquired shares held by Terra Minerals in exchange for 102.1m new shares in Arc Minerals.
• The team has also commenced discussions with the Zambian Competition and Consumer Protection Commission with regards to further increasing its stake in Zamsort to over 50%.
• The Company also holds convertible loan note in respect of 5.34% in Zamsort.
• Terra Metals is subject to a 12 month lock in period.
• Additionally, the Company raised £2.5m before expenses through a placing of 104.2m shares at 2.4p.
• Equity issue proceeds will be directed towards an exploration programme at Zamsort and to complete the Resource upgrade at Casa.
• The Zamsort commercial scale demonstration plant (CSD) is 75% complete and is expected to produce copper and cobalt hydroxide cake within the next six month from the available 10kt of screened ore grade 2.08% copper and 0.29% cobalt.
Conclusion: The Company continues to consolidate its interest in the polymetallic asset in the Zambian Copperbelt. The Company is bringing in new management team at Zamsort to lead the exploration programme and commissioning of the demonstration plant. Raised funds will help the Company advance exploration and development works at its portfolio of assets.
Critically, Arc Minerals are now able to drive the project forward with the support of a number of smaller minority shareholders.
*SP Angel acts as nomad and broker to Arc Minerals
Bluebird Merchant Ventures* (LON:BMV) 3.3p, Mkt cap £7.1m – Sampling broken rock shows potential to extract higher grade gold at Kochang gold mine
(Bluebird is earning into a 50:50 jv with Southern Gold Ltd at Gubong and Kochang)
BUY – Target Price 12.8p
• Bluebird Merchant Ventures have identified broken rock of economic value at the Kochang Mine in South Korea.
• The team took >1,300 samples over two main levels in the mine reporting grades of 1.69g/t to 5.12g/t.
• Each sample was taken in the form of a 3-5kg bag of the rock sampled.
• Randomly taken rock samples gave an average grade of 2.86g/t of gold and 19.34g/t silver in samples >1g/t.
• More selectively taken samples give a grade of 5.12g/t indicating that simple selectivity in processing might upgrade the rock to a higher average grade.
• Management also estimate a potential operating profit of US$750/oz from the processing of this broken rock material which has been left in the mine.
• This is a preliminary estimate and is based on the past experience of the team at Bluebird in mining this sort of material in other similar jurisdictions.
• Recent metallurgical test work also shows >90% gold recoveries on material from the Gubong gold mine in South Korea. We would hope the Kochang gold mine might show similar results.
• Leaching shows >90% and up to 97% recovery with low reagent consumption. The material is leached into soluble salts in an aqueous media with gold recovered from the solution.
• We recently published a note on the company where we value the two mines at a potential 12.8p. CLICK FOR PDF
Conclusion: This is a good metallurgical result for Gubong as it appears to verify statements that gold was simple to extract historically from the mined ore.
*SP Angel act as broker to Bluebird Merchant Ventures
Condor Gold (LON:CNR) 39.75p, Mkt Cap £26.7m – Q1 Results and La India update
• Condor Gold reports a loss of £1.4m for the three months ending 31st March 2018 (Q1 2017 – loss of £1.5m). Closing cash balances for the quarter amount to £2.5m (31st December 2017 cash balance of £0.9m).
• During the quarter, the company raised an additional £2.5m via a private placement and acquired a secondary listing on the Toronto Stock Exchange.
• In Nicaragua, meetings with government authorities at the Ministry of Energy and Natural Resources earlier this month are reported to have discussed the additional information required following “a final site visit inspection of the re-designed mine site infrastructure, which avoids resettlement” of the occupants of approximately 330 houses in March. “The Company intends to submit the technical information by May 31st, 2018.”
• Commenting on the quarter and on the amended site design layout, Chairman and CEO, Mark Child said “I am confident that the re-designed mine site infrastructure to avoid resettlement will facilitate the grant of the main permit. We are on track and have had encouraging meetings with key Ministries.”
• Continuing geological review of the stratigraphy is aimed at supporting “the strategy of proving a major Gold District” and “On a new prospect, the El Derrumbado prospect, an area of multiple east-west striking veins, immediately north of the Tatascame vein, six samples returning gold greater than 5 g/t, including a 24.3 g/t gold rock chip”.
Conclusion: The modifications to the proposed site layout in order to avoid displacing local inhabitants may facilitate approval of the required development permits for La India; we await further news.
KEFI Minerals* (LON:KEFI) 2.7p, Mkt Cap £8.9m – Kefi infrastructure bond to carry c. 7% coupon
• Kefi Minerals report that the planned senior secured sinking fund bond to be issued and listed in Luxembourg will have a coupon of c. 7%.
• The specialist bond arranger was formally mandated on 8th May and the coupon will be set according to market conditons.
• In Ethiopia, the new Prime Minister, Dr Abiy Ahmed, has been busy appointing new Ministers.
• The government have committed to fund $20m of the development in the project company and Kefi management are working with the relevant government offices to maintain progress on various administrative tasks as pre-cursers to development.
*SP Angel act as Nomad to KEFI Minerals
Legendary Investments (LON:LEG) 0.1p Mkt. Cap. £3.8m – share placing yesterday
• Legendary is an AIM listed investment company that orginally listed in 2000 and was taken over by current management in late 2010
• The company invests in start-up and small companies, holds shares for 2 – 7 years.
• Sectors are technology, energy and natural resources.
• Portfolio consists of two quoted mineral resource vehicles (Amedeo Resources PLC & Medgold) and 5 private equity investments
(Virtualstock Holdings, IBS, Circle Oil Tunisia, Crowd for Angels UK, Amedeo, Medglod, Bosques Energeticos.
• Core value is in private UK logistics software business Virtualstock – initial investment at a £2m valuation, and latest investment at £66m valuation. Total investment of £804k (Legendary follows on its investments in successful companies) that is now valued at £4.7m.
• In August 2017 a stake of 12.0% was acquired at nominal value in IBS, a New Zealand based banking services platform.
• Subsequently, third party investments were made in IBS at a valuation of US$10m. This not currently reflected on balance sheet as they occurred after the Interim results.
• Interim period net profit £0.25m – company admin costs are circa £250,000 per annum and the Company keeps running costs low.
• The company yesterday raised £0.55m by issuing 550k shares at 0.1p – the Chairman purchased £0.1m in shares in this placing.
• At a discount to fund NAV and offering upside – Mkt. Cap. £3.8m vs. NAV of £5.2m (at December end 2017) and this figure excludes the value of IBS circa £850,000
Serabi Gold (LON:SRB) 3.75p Mkt value £44m – Q1 results on track to meet 2018 production guidance
• Serabi Gold reports that it produced 9,188oz of gold during the quarter ending 31st March 2018 (Q1 2017 – 9,861oz) at a cash cost of US$907/oz and an all-in-sustaining cost of US$1,166//oz (Q1 2017 – US$800 and US$1,043/oz respectively).
• The production keeps the company on track to achieve its guidance for 2018 and “Management expects that gold production for 2018 will exceed that of 2017 [37,004 oz] and be up to 40,000 ounces.”
• The production comes from the processing of 43,145 tonnes of ore at an average grade of 7.04g/t gold and a recovery rate, we estimate, of approximately 94%. Production at the Palito underground mine is now coming from 3 levels with a further 3 levels developed or under preparation for future production which should provide a comfortable degree of production flexibility.
• The company received an average of US$1,319/oz of gold sold and generated after tax profits of US$10,786 reversing the US$114,043 loss of Q1 2017.
• After investment of US$2.7m, operating cash flow of US$3.1m (Q1 2017 – US$0.6m) generated free cash before financing of US$0.4m (Q1 2017 – cash outflow of approximately US$0.8m)
• The company reports a 31st March cash balance of US$6.7m giving an overall net debt position of approximately US$1.4m following net financings of US$2.2m, largely as a result of drawing down US$3m of secured debt from Sprott Resources.
• In April, agreement was reached with Greenstone Resources for the injection of US$15m investment for a 29.8% interest in the company, as a result, Serabi Gold is now well funded to pursue the exploration, evaluation and permitting of the recently acquired Coringa gold project as well as continuing work at the existing Palito and Sao Chico mines.
• Commenting on what he described as an “extremely exciting quarter”, CEO, Mike Hodgson said “The rest of the year promises to be very interesting and we expect to generate steady positive news flow from a successful exploration campaign from Palito and Sao Chico as well as progress at Coringa.”
Conclusion: Serabi Gold is on course to meet its 2018 production guidance of 40,000oz of gold and is targeting growth to 100,000oz pa within 2 years. The company now has solid financial backing from Greenstone Resources and the opportunity to further the development of its recently acquired Coringa gold project. We look forward to continuing news.
African Battery Metals* (LON:ABM) – Consultant paid in shares