Economic News
China – the Peoples Bank of China ‘PBOC’ cut it’s one-year benchmark lending rate by 0.25% to 4.85% in an effort to increase confidence in the Chinese economy
• The PBOC also cut its one-year deposit rate by 0.25% to 2%.
• The rate cuts help traders and consumers to cut financing cost as consumption growth of iron ore and other raw materials is falling.
• In addition, the bank lowered the required reserve ratio by 50bp.
Greece – Banks will remain closed through the week while local equity and bond markets will not oen until Jul 06, the Capital Market Commission ruled.
• The decision to impose capital controls comes on the back of failed attempts to negotiate a bailout deal over the weekend.
• As PM Tsiparis called for a nationwide referendum on proposed bailout terms, Eurozone finance ministers refused to extend existing bailout programme beyond Tuesday.
• On Saturday, Greek parliament supported the referendum proposal for Jul 5.
• The ECB said it will not be raising the ELA allowance which in the light of increasing rate of deposit withdrawals led to the decision to announce bank closure and impose restrictions on cash withdrawals.
• Markets are in the red on the announcement with particularly heavy losses recorded in European equities (DAX -3.1%, CAC40 -3.2%).
• EURUSD opened 1.8% down but has regained some losses since early morning trading and is currently down 0.4%.
• Yields on eurozone peripheral debt are up but not as aggressively as they were earlier, FT reports. Italian bond yields climbed 17bp, while Spanish debt yields increased 20bp.
UK – Commercial car production up strongly in May
• UK commercial car production was up 32.8% in May with 6,808 units built in a month according to Society of Motor Manufacturers.
• The sector for vans, trucks and buses was up as exports rose 69.4% last month with increasing demand from European markets.
• The number of vehicles in the domestic market was up by a more modest 5.5%.
Burkina Faso – New Mining Code adopted
• Under pressure from the World Bank, the county has adopted new policies towards contribution of mining profits to a local development fund.
• Under the new code a 10% tax break for mining companies is to be paid into a local development fund.
• Under the new code mining companies with exploitation permits will pay the normal tax rate on profits of 27.5%.
• Companies with industrial mining licences will now pay 1% of monthly sales to a local development fund.
• The state will also pay 20% of its mining revenues into the fund.
• The World Bank appears to be using its muscle as funder to influence policy including cleaning up corruption.
• Hopefully the local development fund will function and be able to properly directed to local communities.
• There has been local unrest resulting in strikes and clean up issues related to artisanal miners.
US$1.1106/eur vs 1.1213/eur yesterday. Yen 122.93/$ vs 123.38/$. SAr 12.263/$ vs 12.114/$. $1.570/gbp vs 1.576/gbp
US$0.766/aud vs0.770/aud
Commodity News
Precious metals:
Gold US$1,179/oz unch vs US$1,177/oz yesterday – China to introduce Rmb-denominated gold fix by year-end
Platinum US$1,074/oz vs US$1,079/oz yesterday –
Palladium US$674/oz vs US$677/oz yesterday –
Silver US$15.86/oz vs US$15.88/oz yesterday
Base metals:
Copper US$ 5,789/t vs US$5,757/t yesterday –
Aluminium US$ 1,684/t vs US$1,712/t yesterday
Nickel US$ 12,020/t unch vs US$12,545/t yesterday
Zinc US$ 2,013/t vs US$2,026/t yesterday –
Lead US$ 1,766/t vs US$1,786/t yesterday
Tin US$ 14,625/t vs US$14,850/t yesterday
Energy:
Oil US$61.9/bbl vs US$63.1/bbl yesterday
Natural Gas US$2.752/mmbtu vs US$2.835/mmbtu yesterday
Uranium US$36.75/lb unch vs US$36.75/lb yesterday –
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$62.50/t vs US$62.60t –
Thermal Coal $59.35 unch vs $59.9 cif ARA Europe –
Tungsten - APT European prices price $217.5/mtu vs $225/mtu last week
Lithium
BioSolar claims advance in lithium battery technology - University of California Santa Barbara
• The new battery uses a new polymer ‘super cathode’ which is low cost and high capacity and allows fast redox-reactions for rapid charge and discharge.
• The stability of the polymer cathode and redox reaction enables better long term performance with >50,000 charge/discharge cycles recorded without any degradation in the super-capacitor.
• BioSolar aim to beat the $100/kwh cost barrier and predict a cost of $54/kwh
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 new ‘semisolid flow’ lithium-ion cell holds about 5x more material between each layer within the battery cell.
• ‘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
A new conspiracy theory reckons that flight M-470 crashed due to a fire caused by a cargo of lithium batteries in its hold
• We have to wonder why there was no mayday given in this event
Potash – PotashCorp offered US$8.7bn (in cash) to buy German rival K+S AG valuing the Company just over €40 per share.
• The offer suggests 42% premium to the K+S closing price on Wednesday.
• K+S is Board is currently considering the offer and is expected to reject the offer as too low, according to the person familiar with the matter.
• A merger would yield the combined company nearly 27% of global potash capacity by 2017, when both companies are expected to complete new mines.
Company News
Amur Minerals* (LON:AMC) 30.25, mkt cap £131.3m – Economic study demonstrate attractive economics of captive smelter option + FY14 annual results
• The study is based on the in-house economic update of the 2007 SRK PFS and parameters included in the recently awarded mining permit.
• Operations schedule involves production of flotation concentrate on site and then trucking the concentrate 320km to the Baikal Amur line.
• The plan is for the concentrate to be further processing at a captive smelter for production of refined final products including nickel and copper cathodes, cobalt precipitate and refined platinum, palladium, gold and silver.
• External consultants have examined the composition of the proposed concentrate and concluded it to be suitable for smelter processing.
• Operating and capital costs have been prepared by the management and updated as of Q1/15 using information available from public sources.
• Results of the study completed to the PEA level will be reviewed by to-be-selected well-respected mining consultants with three houses reported to have been shortlisted for the audit.
• Major assumptions and findings of the Kun Manie project study are provided below (with SRK PFS 2007 numbers provided for comparison):
Production parameters Jun/15 Update PFS 2007
• Preliminary estimates suggest an NPV of US$0.7-1.4bn using 10% discount rate and US$16,500-20,950/t nickel price.
• The Kun Manie project with 15 years mine life and processing capacity of 6mtpa is expected to 21-31% IRR (post-tax) at respective nickel prices.
• New project design for production of refined metal products from flotation concentrate containing 27.4kt Ni, 8.3kt Cu, 0.4kt Co, 260koz Pt and 300koz Pd annually involves construction of the smelting/refining complex at a cost of US$680m in development capex and another US$11m in maintenance expenses over the LoM.
• Total development capex is estimated at US$1.38bn including US$312m for a 320km access road and US$118m for on-site diesel gen sets. Maintenance capex is expected to come in at US$0.47bn.
• 90mt reserve potential that the study is based on will require further confirmation and verification works to be completed on outstanding mineral inventory at Kun Manie which is currently estimated to stand at 120.8mt with 67.3mt in Inferred category.
• The Company will start 6,000m infill drilling programme at the Flangovy deposit any day now with a plan to convert some of Inferred Mineral Resource into Indicated category.
• Additionally, the team will be conducting metallurgical test work on samples from Flangovy and Kubuk this year to test the susceptibility of minerals to proposed processing and determine metal recoveries.
• The medium term target remains generating data and moving the project forwards towards a DFS required to negotiate financing with banks.
• 2014 annual report (Dec YE) released this morning show the team has managed well to run the Company on minimum budget as the project has been going on through permitting.
• Net earnings totalled –US$9.4m v –US$5.2m in FY13.
• Stripping off non-recurring FX loss (FY14: -US$8.0m, FY13: -US$1.4m) and gain/loss on derivatives (FY14: +US$1.2m, FY13: -US$0.2m), yields net loss of US$2.5m (FY13: -US$3.7m).
• This reflects US$2.4m in admin costs (FY13: -US$2.5m).
• Capital expenditures have been significantly reduced during the year (FY14: US$0.7m: FY13: US$2.3m).
• Operations have been financed using outstanding equity swap facilities with Lanstead.
• The Company remained debt free with US$1.4m in cash as of Dec/14.
• Share price has more than tripled since then, with cash balances reported at US$6.0 as of 17 Jun/15 reflecting share price-linked settlements with Lanstead.
Conclusion: Economics study demonstrates advantages to developing an integrated refined metal producer as opposed to the floatation concentrate only option.
Superior returns are driven by significantly better payability for metals contained in the smelted concentrate, lower transportation costs and reduced deleterious elements (such as MgO content) penalties. Although, improved economics come at an increased capex with nearly 50% of the development US$1.38bn capex accounted by the smelter and refinery construction spend.
The focus is currently on increasing confidence in outstanding inferred resource with a high probability of hitting 90mt of reserve potential mentioned in the report given good success rate in-fill drilling demonstrated by the exploration team in the past.
In addition, the Company suggested in the past that mineralization in a number of deposits remains open in multiple directions suggesting step-out drilling has a potential to expand current mineral inventory.
We are updating our earnings numbers for the project and will release a reviewed valuation shortly.
* SP Angel act as Nomad and broker to Amur Minerals
** An SP Angel analyst has visited the Kun Maine licenses in Russia
Bacanora Minerals (LON:BCN) 77.5pence, Mkt Cap £65.5m – NI 43-101 report on Sonora Lithium project filed
• Bacanora Minerals, run by Colin Orr-Ewing and newly appointed Peter Secker as CEO have filed a new technical report on its Sonora Lithium project.
• The NI 43-101 resource report covers the company’s wholly owned La Ventana lithium concession as well as the El Sauz, El Sauz1 and Fleur concessions which are 70% held by Bacanora Minerals.
• The new Indicated resource contains 95mt grading 2,200ppm lithium or 1.14mt contained lithium carbonate ‘LCE’. This is upgraded from 1.12mt of LCE as reported on 14th May
• A further 500mt of 2,300ppm (6.30mt LCE) lithium is also contained in the inferred portion of the resource.
• Another 300-350mt of material is contained within a conceptual target grading 1,500-2,500ppm giving 2.4-4.6mt LCE though further work will need to be done to see if this might be included into the resource at a later date.
• The new NI 43-101 gives Bacanora the data on which to prepare its full feasibility and to then finance the larger scale mining operation, estimated cost $200m
• Cash: Cash holdings were C$11,649,436 at end March
Central Asia Metals (LON:CAML) 178.8 pence, Mkt Cap £199.7m – Update on Kounrad
• The company has had a problem with the solvent extraction section.
• This has resulted in a loss of a large amount of organic inventory to the dumps.
• This was a result of one of the weir plates in the SX mixer settler falling out of position.
• The problem has since been rectified but the plant is operating at a lower rate.
• This will impact the targeted level of production of 13,000 tonnes for 2015.
Conclusion: This is unfortunate for Kounrad where production and commissioning have gone well so far. The weir plates are used to regulate flows and it looks as if the flow rates will be tested and moved up once the SX mixer starts functioning as normal. This is said to be a temporary problem and has been addressed and we look forward to the plant moving back to its normal rate of production.
Rio Tinto (LON:RIO) - may have been the victim of am £800m cyber theft according to a new book by the BBC’s Security correspondent
• The book “Intercept: The Secret History of Computers and Spies” reports the then head of MI5 issued a warning about the scale of cyber espionage relating to iron ore price negotiations between Rio Tinto and China in 2009. The implication is that this was a ”hostile state cyber attack”.
• So perhaps investors can thank the Chinese state intelligence agency for lower iron ore prices.
SolGold* (LON:SOLG) 2.3 pence, Mkt Cap £17.5m – Drilling update from the Alpala prospect
• SolGold reports that its most recent hole, CSD-15-011 at the Alpala prospect within its Cascabel project area in Ecuador has been completed at a depth of 1,668m.
• No further assay results have been released at this stage.
• The company has moved the drilling rig to the site of the next drillhole (CSD-15-12) at Alpala Central. Hole 12 is to be drilled to a depth of 1,600m towards WSW at an angle of 87 degrees. The hole is intended to test the extension of the high grade intersections encountered in hole 5 towards the south east.
• SolGold has previously announced its intention to deploy a second drill rig to the Cascabel project. This second machine is currently undergoing modifications and is expected to be on site in July as planned.
*SP Angel act as Nomad and broker to SolGold. An SP Angel analyst has visited the Cascabel project
Savannah Resources (LON:SAV) 2.45 pence, mkt Cap £5.6m – Identification of new targets in Oman and £550,000 placing
• Savannah Resources has announced the results of an airborne geophysical survey over an area of 336 square kilometres within its Block 4 exploration licence in Oman.
• The VTEM (Versatile Time Domain Electromagnetic) survey over 3727 line kilometres has identified a total of 189 anomalies of which the company classes 10 as high priority targets and a further 33 as second order priorities.
• A number of the high priority targets are located around old mines at Lasail, Aarja and Bayda and extend further to the south into the greenfields area around Zuha. The geophysical response of these anomalies is reported to exhibit similar characteristics to those seen at “known VMS deposits of the Semail Ophiolite Belt, such as Maqail South, Mahab 4 and Ghayth.”
• Savannah is putting together a programme of reverse circulation (RC) drilling to start in Q3 2015 to follow up these geophysical results.
• Savannah is earning a 65% interest in the Block 4 licence area from the local company, Al Thuraya LLC.
• The company has also announced that it has raised approximately £550,000 by placing 21.9m new shares at a price of 2.5p/share. The funds are to be used to help meet commitments to the recently announced Mutamba /Jangamo mineral sands joint-venture with Rio Tinto in Mozambique. Which include “the definition of a JORC compliant resource and completion of a scoping study.”
Conclusion: Savannah Resources has had considerable success with geophysical exploration in its Omani projects in an area of former mining where conventional exploration can be arduous and rock exposures difficult to interpret. We will be interested to see results from the forthcoming drilling programme to test the most promising targets.
Xtract Resources (LON:XTR) 0.3 pence, Mkt Cap £19.9m – Fund raise and asset purchase
• The company has raised £4.4m to by the Manica Gold licence in Mozambique for Auroch Minerals.
• The total purchase was for US$12.5m to be paid with US$4.5m of cash and the balance in shares.
• The Fair Bride project which is part of the purchase is said to be 6 months from the completion of a BFS.
• A PEA was completed targeting 50 koz of gold production a year at a cash cost of US$650/oz.
• The project has a JORC resource of 9.5 Mt at 3.10 g/t gold and has a LOM plan of 8 years.
• The mine plan is for 5 years open pit and 3 years underground.
• Start-up capital is estimated at US$28.3m with underground development costs of US$14.8m.
• The project has been granted a mining licence.