Daily Mining Monitor
African Barrick Gold PLC (LON:ABG) announced an update on its operational review. The Review has been broken into three concurrent workstreams with an immediate focus (Workstream 1) on the Corporate Overheads, Exploration, Capital spend and the overall Organisational Structure. The Company has already implemented a series of measures which will substantially reduce the year on year expenditure in these areas, including:
• A $50M reduction in our sustaining capital
• A reduction of $25M in our exploration spend
• $8M of savings in our corporate overheads.
As part of the Review process, the Company are reassessing our staffing requirements both at its mine sites and offices in order to ensure it has the optimal structure, as well as the appropriate mix of employees and contractors. This incorporates the ongoing progress it has made in increasing the proportion of Tanzanian employees in its workforce to the extent that over the last 12 months it has reduced the level of international employees by 16%. This substantially lowers the turnover in the workforce and improves the cost profile, and this is an area where it will continue to work to make further improvements.
The second workstream is focused on the other operating costs which represent the largest area of expenditure within the organisation and it has identified a range of opportunities where it believes there is significant cost reduction potential. Project teams have been formed for each of these areas and are working to identify and quantify specific cost reduction opportunities within each of the following areas:
• Aviation, Camp Services, Travel, Vehicles and Administration
• Contractor and External Services
The third workstream is the complete review of its life of mine plans at each of its operations and the options available to ABG to enhance cash flow generation in the near term. The review is aimed at optimising production levels with the amounts of operating and sustaining capital required in order to maximise returns. Given the recent movements in the gold price, scenarios are also being run at different gold prices in order to ensure maximum flexibility at various potential price levels.
The Company is also reviewing all future expansion capital as part of the overall Review process. The CIL Expansion project at Bulyanhulu is well underway and scheduled to deliver first production and positive cash flows in Q1 next year, with an annualised run rate of 40,000oz. The project, which is substantially financed through a $142M export credit facility at 250 basis points over LIBOR, remains on budget and schedule, with $48M spent to date. With respect to other projects, its intention is to review them in light of the current cash generation of the business and other capital commitments.
In this news:
• Substantial gold production and mine life maintained over a range of gold prices
• Sound cash margins indicted under all scenarios evaluated
• Indicative cash costs some 20% below PFS estimates
• Additional high grade resources to contribute to lower cash costs in early years.
The report was done on various gold price scenarios. For the $1,350/oz scenario which most closely represents the PFS, the optimisation produced 1.9Moz over a 10 year mine life as indicative C1 cash costs of $850-950/oz. The average life of mine grade is 0.86g/t, but as we discussed yesterday with the Edwards/Gryphon resource update we expect initial grades to be higher and correspondingly costs to be lower. The results of the study are very positive as the PFS had life of mine C1 cash costs of A$1,145/oz (A$891/oz over the first 3 years of production due to high grading), which when you include depreciation, debt repayments, tax etc would be marginal in our view. However we still view the initial A$326M capex a major hurdle and it may be the only way the project would get into production in the current market is for it to be taken over. There is no indication whether the figures today are US$ or A$ but as they are currently trading at a parity, so this will make no difference to our analysis.
Conroy Gold & Natural Resources (LON:CGNR) has identified further targets across the thirty mile gold trend running across Counties Armagh, Monaghan and Cavan in Ireland.
In this news:
• A series of new targets identified by independent review of airborne geophysics
• Geophysics over targets shows similar characteristics to known gold occurrences
• Two target areas also coincide with known regional soil geochemical anomalies.
There were no details of what follow up work is proposed on these targets, and given the current market conditions we suspect that these will be left as targets for the time being.
Gemfields PLC (LON:GEM) announced an operational update for the three month period ending 31 March 2013. Gemstone production at the Kagem emerald mine increased by 33% to 6.5M carats in the quarter ending 31 March 2013 (from 4.9M carats in the quarter ending 31 March 2012). Grade for the quarter increased to 265 carats per tonne (from 236 carats per tonne in the quarter to 31 March 2012). Unit production costs for the quarter reduced by 34% to US$0.56 per carat (from US$0.85 per carat in the quarter to 31 March 2012); and cash rock handling unit costs reduced by 18% to US$3.06/t (from US$ 3.73/t in the quarter to 31 March 2012).
Revenues from the recent auction in Lusaka totalled US$15.2M, a record for lower quality auctions. The next auction (of higher quality emerald and beryl) is scheduled for 10-14 June 2013 in Singapore. Bulk sampling activities continue at the Montepuez ruby deposit in Mozambique, with the first auction of rough rubies likely to take place in the first calendar quarter of 2014. The acquisition of 100% of the globally recognised Fabergé jewellery brand was completed in January 2013.
Hochschilds Mining PLC (LON:HOC) announced that at the Bank of America Merrill Lynch Global Metals, Mining & Steel Conference in Barcelona today, Ignacio Bustamante, CEO, will give an update on Hochschild Mining's progress in 2013 and, in particular, detail on several of the measures taken as part of the Company's previously announced cashflow optimisation action plan, implemented as a prudent response to recent volatility in precious metal prices. The 2013 exploration budget has been cut by 29% to $55M with greenfield exploration initiatives focused on the most promising prospects. A positive impact has already been achieved from cash flow optimisation initiatives. The 2013 production target maintained at 20.0 million attributable silver equivalent ounces. Unit cost increases in Peru now expected at 10-15% for 2013, previously 15-20% increase and increases in Argentina maintained at 10-15% for 2013. Sustaining capital expenditure at main operations now expected to be approximately $160M.
In this news:
• Group incurred a loss of £4,330,518
• Finished year with £1,166,919, has since raised an additional £835,000 and is confident of raising additional funds as required
• Post period Company reported an updated indicated resource estimate for the B4-7 deposit of 2.695Mt at 1.24% Nickel equivalent (NiEq) for 33,248t of contained metal
• Company currently working on Pre-feasibility studies, including ancillary metallurgical, geotechnical, environmental and socio economic studies, on the combined B4-7 and the VW deposits.
Kirkland Lake Gold (LON:KGI) announced its operational results for the fourth quarter (February, March, April 2013) and fiscal year 2013. During the fourth quarter, 89,384 tonnes were produced at a head grade of 0.3673 ounces per tonne ("opt") and a recovery rate of 95.94% to produce 31,503oz of gold. Produced ounces for the month of April were 15,464oz. Following the completion of the hoisting capacity increase, April saw the Macassa mine record daily ore tonnage of 1,192t and head grades of 0.4501 opt. Average daily ore tonnage rates for the quarter were 1,004t per day, slightly surpassing the upper end of the Company's 900 - 1,000t per day target for the quarter.
For fiscal year 2013 (ended April 30, 2013) 91,756oz were sold, meeting revised production guidance. Ounces produced were 91,518 from 304,062t of ore at a head grade of 0.3145 opt and a recovery rate of 95.72%.
Minera IRL (BUY, 53p) (LON:MIRL) announced its unaudited first quarter results for the three month period ended 31 March 2013. Revenue of US$9.2M, was down 17% (Q1 2012: $11.1M) which was based on gold sales of 5,660 ounces, down 13% (Q1 2012: 6,515 ounces) with an average realised gold price of US$1,631/ounce, down 4% (Q1 2012: US$1,699/ounce). Profit before tax of US$0.2M, was down 94% (Q1 2012: $3.1M). The cash balance as at 31 March 2013 was $6.5M.
The lower profit has been caused by lower gold prices and falling production as the grade drops at Corihuarmi. The focus of attention is on getting all the permitting for Ollachea completed.
Richland Resources (LON:RLD) announced its Q1 2013 operational and sales update. All figures are unaudited. Total tanzanite production amounted to 788,198cts compared with 533,400cts in Q1 2012. The grade averaged 97 carats per tonne average grade (51 carats per tonne in Q1 2012). Total sales were US$4M during the quarter, excluding the insurance pay out of US$1.4M. This was for the sort house theft in December 2012. Positive results were obtained from initial bulk sampling at Tsavorite. Graphite exclusivity agreement signed with major international trading company. There is continuing illegal underground mining activities from neighbouring mines and this will severely impact the 2012 results.
In this news:
Operational Update - Palito
• Development mining now underway
• Ore production from remnant ore blocks underway
• Development ore stockpile now being generated
• Two main ventilation raises to surface have been started
• Reassembly of the primary crushing circuit due for completion by end of 2Q’13
• Remediation of flotation circuit due to be completed by end of the 2Q’13
• Detailed engineering of the milling circuit complete and disassembly and reassembly of the old plant well underway
• Initial mining fleet on site in February 2013 with further items expected to be commissioned at start of third quarter 2013
• Plant commissioning remains on schedule
Update on the Kenai Transaction
• Kenai will hold shareholder meeting on 5th July to discuss transaction
• Mr. Nicolas Bañados has become a Non-executive Director of the Company with immediate effect.
• Mr Bañados, aged 36, is an attorney-in-fact of Fratelli Investments and becomes its second representative to join the board of Directors of the Company following the subscription by Fratelli Investments Limited in January 2013.
In this news:
• Cash and equivalents of £792,337
• Reported loss for period of£253,718 of which £236,278 was administration costs
• Company engaged in a Preliminary Feasibility Study (PFS) targeting production of at least 100,000 tonnes per year of acid grade fluorspar.
• Environmental base-line sampling is continuing on schedule and will provide data for the planned mining lease and environmental permit applications.
• Technical studies are also ongoing with the emphasis on completion of metallurgical testwork, currently being undertaken in South Africa.
• Remains lower priority whilst financial market conditions remain challenging.
MB Fluorspar, USA
• Planning a phased programme of follow-up drilling with the objective of defining a JORC compliant Mineral Resource
• To be sufficient to support planning of a mine-starter pit for up to the first ten years of production and to target higher grade areas in the centre of the known deposit.
This is a frustrating time for the Company as it has lots to do, but lacks the cash to do it all, so continues to focus on the biggest value adding activities – the Storuman PSF and the MB Fluorspar maiden resource.
Daily Oil & Gas Monitor
Amerisur Resources (LON:AMER) – Platanillo Continues to Deliver – What’s Next?: The management update provides further support to the management’s assertions for Platanillo. What is not clear, at this stage, is the extent of progress elsewhere in the portfolio. This is somewhat of a Catch-22 for management, as they have now conditioned us what to expect, and while we are positive that in due course it will be forthcoming, currently it is obvious by omission. Still, this management team is generating a real track record of delivering against its promises, and we believe that investors should be heartened by that.
In this news:
• Platanillo-11 encountered a 49.5ft total net pay in the U sand and 17ft net pay in the T sand
• Alea-1R sidetrack encountered a 40ft total net pay in the U sand and 8.5ft in the T sand
• Platanillo Field production currently at approximately 5,400bopd, constrained by pipeline and export facility upgrade works
• Total field production capacity estimated at 7,500bopd before the contribution of Platanillo-11 and Alea-1R ST1.
Lansdowne Oil & Gas (LON:LOGP) – Barryroe Dominates: Today’s annual results are less about the numbers, with the exception of the cash, and more about the future. The future in two respects: (i) the extent to which the Company will need to raise further funding to support its interests in Barryroe; and (ii) the next stages in its exploration programme. We believe that the Company is well positioned to take advantage of the growing interest in the offshore Ireland basins, and the strong technical work that has been conducted to date coupled with the high equity positions, means that it will be able to leverage maximum value for its shareholders whilst minimising the risks.
In this news:
• Barryroe appraisal well 48/24-10z successfully tested at a stabilised rate of 3,514bopd and 2.93 mmscfd
• Barryroe updated operator estimate of P50 oil in place estimates currently total 1,043MMBO for the Middle and Basal Wealden reservoirs
• Barryroe additional potential identified in Lower Wealden and Purbeckian reservoir intervals with operator estimate of P50 oil in place of 778MMBO
• Barryroe technical reservoir resource audit by Netherland Sewell & Associates Inc. of the Basal Wealden Sand
• Total gross audited on-block 2C recoverable resources of 346MMBOE (69 MMBOE net to Lansdowne)
• Barryroe North Licensing Option secured over 521km2
• Amergin, Midleton & Rosscarbery prospects de-risked substantially by 3D seismic mapping and subsequent inversion. Industry farmout discussions on-going with Macquarie Capital as advisor to the Company.
Madagascar Oil (LON:MOIL) – 2013 the Start of the Recovery?: Today’s results appear to have drawn a line underneath the problems that has beset the Company, and the arrival of Paul Ellis will certainly bring greater technical rigour than has hitherto been brought to bear on the project to date. Consequently, we believe that 2013 will be the start of the reduction of risks, to being more about the technical execution of the geology.
In this news:
• Construction phase of the Tsimiroro Steam Flood Pilot is reaching completion and steam injection into the first wells has commenced
• Company drilled 28 wells in the Tsimiroro field in 2012, including:
o 16 production wells
o 9 steam injection wells
o 3 observation wells
• The Steam Flood Pilot designed to evaluate the potential production rates and recovery factor
• A 24,000 line km Airborne Gravity Gradiometry survey conducted across three exploration blocks
o Initiative is underway to consolidate all available data to assess the potential for light hydrocarbons
• Major overhaul of the Board, management and control environment was initiated in Q4 2012
o New Chairman
o Chief Executive Officer
o Chief Operating Officer
o Restructuring of risk and project cost controls to provide greater visibility and oversight by the Board of Directors
o Houston office to close In July 2013 and responsibilities moved to offices in Madagascar and the UK.
Matra Petroleum (LON:MTA) – Solid Update: Today’s upgrade to internal estimates is a welcome step forwards for Sokolovskoye, but it somewhat vindicates the previous management’s focus on getting the geology right. While this is in no doubt a great step forwards for the Company, investors have mostly backed the Barsky name, hence will be keen to see transformational transactions as soon as possible. While this is good news, we are reiterating our 2p Target Price and BUY Recommendation.