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Proactive Mining weekly highlights: Ariana Resources, Horizonte, Premier African Minerals, Landore, Armadale, Petra Diamonds, Sirius Minerals

There was plenty to keep mining investors attention this past week.
mining
It was a week of project updates and financial results

Ariana Resources PLC (LON:AAU) managing director, Kerim Sener, hailed the “excellent” performance of the company’s Kiziltepe gold mine in Turkey after it delivered another strong quarter of low-cost production.

The operation, which it jointly owns with construction firm Proccea, churned out 7,517 ounces of the precious metal, generating US$10.62mln during the three months to December 31. For the year the gross income was US$37.80mln from 27,110 ounces.

The average revenue per gold ounce was a healthy US$1,413 (the figure included a silver credit too). Operating cash costs were some of the best in class at US$349 per ounce.

From inception to December 31, Kiziltepe milled 49,717 tonnes of ore at a grade 5.23 grams per tonne of gold. Quarter on quarter, production was steady, gross income up slightly as was average realised revenue and cost.

Horizonte Minerals PLC (LON:HZM)

The company started work on the pre-feasibility study for Vermelho, its second major nickel project in Brazil.

Consultant Snowden has been contracted to produce the mining schedules and act as overall study manager for the nickel/cobalt deposit, while Aussie group Simulus will provide detailed costings.

Araguaia is Horizonte’s flagship project in Brazil and talks are ongoing about a finance package to build the mine, said Jeremy Martin, chief executive. A feasibility study in December indicated a free cash flow of US$1.6bn over a 28-year life of mine based on a nickel price of US$14,000 per tonne.

Spot prices currently are US$12,500 per tonne, but Martin says stocks of the metal have fallen to their lowest in five years even before the mass adoption of electric cars. Nickel is a key component of the batteries used to power EVs and market predictions are for the nickel price to rise to at least US$16,500 per tonne by 2021.

Premier African Minerals Limited (LON:PREM)

The shares surged in late-morning Wednesday after it said it had reached “a general agreement” with the Zimbabwe Ministry of Industry regarding the financing and restarting of production at the RHA Tungsten mine.

The firm said agreements were in the process of being drafted and that it expects to announce details and a return to production schedule “as soon as possible”.

The company’s hopes had been lifted back in December when it received a letter from the Ministry of Industry, Commerce and Enterprise Development that indicated it was willing to inject the funds required to resuscitate the mine.

Landore Resources Ltd (LON:LND)

Landore revealed the findings of a preliminary economic assessment of the BAM gold project, at Junior Lake in Ontario, Canada. The project is deemed to have 951,000 of contained ounces of gold, including 701,000 ounces in the indicated resources category.

Cube Consulting’s base case view of the project is focused on some 515,000 ounces of gold, while the upside case is based on 800,000 ounces.

In the base case, the project is valued at US$69.2mln net present value and it gives an internal rate of return of 22.4% - and the upside is seen at US$123.7mln with an IRR of 26.9%. Cube estimates an ‘all-in-sustaining cost’ (AISC) of US$806 per ounce for the base case and US$816 per ounce.

The initial capital expenditure bill is estimated at US$73.53mln for plant and infrastructure, plus an additional US$20.28mln for pre-production work including mining costs.

Armadale Capital PLC (LON:ACP)

The company signed outline agreement with a Chinese company called Matrass Group, which wants to buy up 30,000 tonnes of graphite concentrate a year from its planned mine in Tanzania.

The memorandum of understanding envisages a five-year deal for output from the Mahenge Liandu operation, where environmental work has recently been completed. The company said it is in discussions to find buyers for the remaining 19,000 tonnes of production a year.

It pointed out there is significant interest in high-quality graphite products, such as the concentrate expected to be generated from Mahenge Liandu. By way of example, ASX-listed Black Rock Mining has agreed to a 205,000-tonne-year offtake deal for graphite unearthed from an operation close to the Armadale asset.

Petra Diamonds LTD (LON:PDL)

Half-year diamond production from Petra rose by 10% to just over two million carats, when set against the corresponding period a year ago.

Carats sold during the six months to 31 December was also up, by 15% to 1.73mln. That led to an increase in revenue to US$207mln, up from US$192mln in 2018. However, it wasn’t enough to turn profitable, as adjusted net losses rang in at US$4.5mln against the US$7.2mln adjusted net profit returned in the second half of 2018.

Overall net losses did drop, from US$117mln in the first half of the 2018 fiscal year, to US$54mln this time round. But it wasn’t enough to save the job of chief executive John Dippenaar, whose departure had been widely flagged, after a US$178mln rescue capital raising was required in March 2018.

Current net debt stands at US$559.3mln, which puts it on a par with another continually ailing company, Petropavlovsk PLC (LON:POG), which has spent years unable to escape the drag of its overly onerous debt burden.

As it stands, existing cash flow is expected to cover interest payments, but uncertainties abound, in particular around Petra’s Williamson mine in Tanzania, a country which has lately developed an unwholesome reputation as a place to go mining.

Sirius Minerals PLC (LON:SXX)

Investors in Sirius will be pleased with the news that the first of three tunnel boring machines is now on site in Yorkshire.

The mine developer will use the new gear to drill out the 23 mile tunnel that will connect the group’s polyhalite fertiliser mine to export facilities on Teeside. Two more boring units will be added to the project next year to complete the tunnels.

“Sirius is intending that mined polyhalite never comes to surface at the Woodsmith minesite,” said Yuen Low, mining analyst at Shore Capital.

“Instead, it would be hoisted to the 360m level and transported to the MHF via a Mineral Transport System (MTS), which is essentially a high-capacity conveyor in a 37km-long tunnel.”

Low added: “All things considered, while Sirius is currently at development stage and still some years from becoming a cash flow-generating company, we believe that an investment in Sirius should become progressively de-risked and enjoy significant value uplift as it advances towards production.”


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