China – commentators point to new funding for Chinese municipalities for infrastructure funding
• But we understand that construction machinery sales in China are still very slow indicating that funding for new project has yet to have an impact.
• The implication is that Chinese growth looks set to remain significantly below official forecasts for at least another quarter.
• While China may be showing new green shoots it might take some time before they restore GDP growth.
• Copper prices, which are partially linked to Chinese GDP growth, have turned better as traders anticipate new demand for the metal as Chinese growth recovers.
Economic News
US – Headline durable goods orders fell at nearly twice the rate forecast in May with Apr numbers revised downwards.
• Durable goods orders: -1.8% v -1.5% (revised from -0.5%) in Apr and -1.0% forecast.
• Durable goods orders ex transport: +0.5% v -0.3% (revised from +0.5%) in Apr and +0.5% forecast.
• Capital goods orders ex military and aviation: +0.4% v -0.3% (revised from +1.0%) and +0.5% forecast.
• Economic news due today:
o 3rd Q1/15 GDP reading (-0.2%qoq v -0.7%qoq, 2nd reading)
Japan – Smal business sentiment remains weak with the confidence index remaining sub-50 from Mar/14 through Jun/15.
• The study based on 1,000 respondents (45%/55% from manufacturing/services industries) carried by Shoko Chukin Bank showed the index slipped to 46.9 in Jun, down from 48.1 in May and 48.3 forecast.
Germany – Business expectations come weaker than forecast in Jun.
• Business climate index Ifo: 107.4 in Jun from 108.5 in May and 108.1 forecast.
• Forward looking expectations index: 102.0 v 103.0 in May and 102.4 forecast.
Greece – Tsiparis is meeting troika today as negotiations over proposed list of reforms continue.
• In Athens, the government is working on preparations for parliamentary hearing over proposed reforms over the weekend as Eurozone leaders urge Greece to agree the plan by Monday.
• The IMF €1.5bn loan repayment is due nex Tuesday.
Uganda - Gates Foundation grants US$100k to Ugandan start-up
• The Ugandan financial services business MMINDZS has been awarded US$100,000 by the Bill and Melinda Gates Foundation Grand Challenges Explorations Grant program
• The grant will be used to develop the company’s MYAccounts platform, a mobile money accounting system that allows merchants to track all customer and supplier payments made through their mobile phones
US$1.1221/eur vs 1.1242/eur yesterday. Yen 123.87/$ vs 123.58/$. SAr 12.155/$ vs 12.146/$. $1.580/gbp vs 1.580/gbp
US$0.776/aud vs0.773/aud
Commodity News
Precious metals:
Gold US$1,177/oz unch vs US$1,185/oz yesterday
Platinum US$1,071/oz vs US$1,073/oz yesterday – Amplats cuts >400 jobs
Palladium US$703/oz vs US$702/oz yesterday – Forbes comment that China is driving palladium.
• The article effectively argues that China is driving palladium prices lower due to falling passenger car sales which grew at just 1.2% yoy in May and at 3.9% yoy in Q1 ’15.
• The conclusion is bullish with a deficit in the market last year and a $2bn fund being set up by Norilsk ceo, Vladamir Potanin to buy in physical pallasium. Lucky insider trading is not illegal in the metals markets!
Silver US$15.86/oz vs US$16.03/oz yesterday
Base metals:
Copper US$ 5,767/t vs US$5,723/t yesterday – Naperville, Illinois moves to copper only plumbing for new build houses due to the antimicrobial properties of copper.
Aluminium US$ 1,726/t vs US$1,721/t yesterday
Nickel US$ 12,885/t unch vs US$12,640/t yesterday
Zinc US$ 2,058/t vs US$2,030/t yesterday –
Lead US$ 1,806/t vs US$1,777/t yesterday
Tin US$ 15,270/t vs US$15,295/t yesterday
Energy:
Oil US$64.8/bbl vs US$63.4/bbl yesterday
Natural Gas US$2.743/mmbtu vs US$2.722/mmbtu yesterday
Uranium US$36.75/lb unch vs US$36.75/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$62.80/t vs US$62.60t – iron ore prices look to fall further as China exports steel at below cost indicating
Steel – Robots to 3D print steel bridge over canal in Amsterdam. The process may enable the quick and safe construction of many more bridges
Thermal Coal $59.8 unch vs $59.8 cif ARA Europe
Tungsten - APT European prices price $225-230/mtu on Friday vs $225.3/mtu
Lithium – 24M, a lithium technology spin off from MIT in the US reckons it has come up with a new lower cost method of producing lithium batteries
• The group, ‘24M’ is led by Yet-Ming Chiang who has previously run a number of battery related technology startups
• Chaing is a leading authority on Lithium-ion technology and has re-engineered the construction design and production process for lithium-ion batteries
• The new ‘semisolid flow’ lithium-ion cell holds about 5x more material between each layer within the battery cell.
• The current process was developed by Sony in 1991 to develop more powerful batteries for its camcorders. Sony started construction of its Lithium-ion cells using ‘redundant’ magnetic tape manufacturing machinery, a process which has not changed since the 90s. Chaing has reworked the manufacturing process adding a much thicker ‘active layers’ into the cell. Chaing also claims the new process is much quicker taking just hours rather than days to produce each cell. Chaing’s process is also said to be simpler and the absence of slovents should make the cells more easily recycled.
• ‘24M’ reckon they can build lithium-ion battery plants for just $11m a unit enabling the rapid development of the industry within the US
• The cost of the batteries could also fall to less than $100/kWh once the process is developed by 2020
• Interestingly, there is talk of the US government looking to reengineer US industry to gain commercial advantage from the new technology over its Chinese rivals
• The development comes at a time when SQM, in Chile is being challenged over its leases in the Atacama desert and when Tesla is securing supply for its Giga factory in Nevada
Company News
Amur Minerals* (LON:AMC) 28p, Mkt Cap £122m – Permission for 6,000m drilling programme granted
• Drilling works to be conducted until Nov/15 before freezing temperatures set in.
• The 6,000m programme will be focused on infill drilling of the Flangovy deposit to upgrade the Inferred Mineral Resource to Indicated category.
• Post conversion into Indicated category, the resource may be upgraded into Reserves.
• The Flangovy resource which is predominantly in the Inferred category is estimated to host c.20mt of ore.
• In addition, the Company is preparing metallurgical samples for Flangovy and Kubuk deposits to test recoverability of base metals and mineralogical analyses.
• Recommendation: we are moving our recommendation to Hold from Buy. The company’s shares are now ahead of our target price of 21 pence per share which is based on forecasts from the company’s last published economic study for the Kun Manie project. We will update our valuation and target price on release of updated project economic numbers.
Conclusion: The Company is moving forwards with the CY15 field season initiating the drilling programme at one of the Flangovy deposit. Flangovy together with Kubuk have the potential to turn into underground mining operation according to preliminary management estimates. The drilling programme is expected to cost US$3.5m with more than a half of that having been spent already including spares and fuel. We expect the Company to be well funded through the drilling programme and metallurgical test work with outstanding settlements under the Lanstead facility offering available funding backup.
* SP Angel act as Nomad and broker to Amur Minerals
** An SP Angel analyst has visited the Kun Maine licenses in Russia
Central Asia Metals (LON:CAML) 185 pence, Mkt Cap £207m – Update on Copper Bay Investment
• The company have invested a further US$3m to increase its shareholding in Copper Bay to 75%.
• Copper Bay has recently completed a PFS on its Chanaral Bay copper tailings project.
• Chanaral Beach has a JORC indicated resource of 42,714 Kt at 0.244% copper giving contained copper of 104,345t.
• There is a further inferred resource of 8,469 kt at 0.234% copper with contained copper of 19,838 t.
• Met test work indicated that the best extraction of copper is through initial acid leach to produce a copper cathode.
• Indicative recoveries at the PFS stage is 72.8%.
• The PFS looked at copper production of 8,600 tonnes with a capex of US$88m with an estimated C1 cash cost of US$1.34/lb.
• An NPV of US$50m was generated with a discount rate of 8% with an IRR of 21% using a copper price of US$3/lb (US$6,612/t).
Conclusion: The company look as if they are trying to replicate their success with Kounrad at Copper Bay. We wonder what the environmental implications will be even though Copper Bay itself claim that by processing the tailings they will be clearing up the dumps left behind by previous operators.
Kefi Minerals* (LON:KEFI) 0.9p, Mkt Cap £15.7m – BFS numbers and financing progress
• Kefi Minerals today report the results of their updated Bankable Feasibility Study and update on their financing progress.
• The new BFS study gives greater detail and confirms the financial model for the construction of the Tulu Kapi gold mine in Ethopia.
• NPV rises to US$125m from $112m previously at an 8% discount rate assuming an unleveraged financial model.
• AISC costs, which are critical, fall slightly to US$774/oz from US$783/oz confirming the economics of the project.
• When capital costs are added in the AISC costs rise to US$911/oz.
• IRR: an impressive 52% IRR is gained through the ‘Leveraged’ model but this reduces to just 28% when the model is unleveraged.
• We assume the company will finance the mine through substantial bank debt at close to the US$100m assumed in the leveraged model.
• The leveraged model appears best for shareholders from an IRR perspective assuming the use of a portion of lower cost development bank debt and some offtake finance.
• The BFS is being considered by interested lenders at present.
• Both models assume a gold prices of US$1,250/oz. Spot gold is currently at US$1,178/oz
• The mine’s sensitivity to the gold price is disclosed at lower and higher gold prices and shows a post-tax NPV of $178m at +10% gold and $71m at -10% gold on the leveraged model.
• Payback is just 2.5 years on an unleveraged basis but this rises to 4.5 years for a leveraged model.
• The company’s press release contains details of the legal and fiscal framework for the project including a 7% royalty and 25% income tax as well as a 5% government free carry.
• Grid power is mainly hydropower in Ethiopia with grid power costs at US$0.03/kWh.
• Capex remains at US$120m estimated using higher cost contract-mining and a brand new process plant. There is lots of second hand kit available.
Conclusion: Kefi Minerals is stepping closer towards the financing and construction of the Tulu Kapi gold project in Ethiopia and we expect to see the project financed and breaking ground within the next few months.
*SP Angel act as Nomad to Kefi Minerals. An SP Angel analyst has visited the Tulu Kapi mine site with Kefi Minerals.
Kenmare Resources (LON:KMR) 3.75 pence, Mkt Cap £104.3m – Unofficial Industrial Action at Moma Mine
• Production has been temporarily suspended at the mine as result of unofficial strike action.
• Kenmare is currently implementing an agreed reduction in the work force, shift allowances and a change to work patterns.
• The company is currently subject to a non-binding bid from Iluka.
Conclusion: This is unfortunate timing for the company as they are trying to implement an agreed retrenchment plan. The company need to cut costs to remain profitable against the current backdrop for prices. The company need to cut back on the workforce by 15-20% to achieve cost savings. With a overleveraged balance sheet and ongoing operational issues, shareholders need the Iluka bid to become firm and go through.
Kibo Mining (LON:KIBO) 3.75 pence, Mkt Cap £12.2m – Haneti Nickel Project – airborne geophysics
• The company reports that preliminary results from airborne geophysical surveying over the nickel/copper/pgm prospect over the Naneti-Itiso Ultramafic Complex (HIUC) in Tanzania have confirmed that the structure extends over a strike length of 80 km.
• These early stage exploration results have shown that the structure comprises “a number of attenuated and folded ribbons of ultramafic rocks” and has “identified a new zone of ultramafic rocks over a strike length of approximately 30 km similar to the HIUC, which will be new target for follow up exploration.”
• Kibo’s exploration work to date has concentrated on the central 25 km of the HIUC belt, where it has established targets for drilling during 2015 at Mihanza Hill and Mwaka Hill.
• The identification of a more extensive zone for future exploration is positive and the results of the survey also provide the company with information on areas of lower exploration potential which can be discarded to reduce holding costs on future licence renewals.
Premier African Minerals (LON:PREM) 2.65p, Mkt Cap £14.8m – 2014 Results and RHA Project update
• The company reports a loss of $537,000 for 2014, compared to a loss of $4.77m in 2013.
• Cash balances at 31st December amounted to $174,000. Since then, the company raised a further £2.65m through the issue of secured and unsecured loan notes to Darwin Strategic and an additional $500,000 in related party loans in order to advance the RHA tungsten open pit towards production.
• Premier African has, today, announced that Darwin has exercised 35m warrants at 1.25p raising an additional £437,500 for the company and resulting in the issue of 35m new shares to Darwin.
• The RHA open pit development is now well advanced with the plant delivering initial concentrates on 5th June and plant optimisation is now underway. The plant was delivered to site earlier this year and was still under fabrication in early May so the company has moved remarkably rapidly to produce concentrates so quickly.
• There is an off-take agreement in place with Noble Resources which has the right of first refusal on all future concentrate production on terms equivalent to those offered by an alternative purchaser.
• The historic underground workings have been de-watered down to the 859 level, which is reported to be the lowest historical level developed. This should allow access for geologists to map and sample the deeper mineralisation and for the refurbishment of underground infrastructure
Conclusion: The initial open-pit has a short life of less than two years, but a relatively low capital cost of around $4.18m and will provide useful operating experience and market contacts with purchasers of tungsten concentrates. The fast track approach to production may extend the period required to optimise the process plant but during this period the company will be in a position to generate revenues. This is a somewhat unconventional approach but could well prove an effective alternative development model for junior mining companies.