Economic News
China – Local industrial sector faces major downward pressure and “arduous efforts” are required to stabilize the economy, according to the Ministry of Industry and Information Technology.
• The ministry noted companies in a number of industries are facing difficulties in making profits.
Australia – RBA Governor Glenn Stevens said more rate cuts remain a possibility.
• Rates have been cut twice this year and currently stand at an all-time low of 2.0%.
• The RBA noted easing policy has seen the national currency lower which helped offset some of a downturn in mining investment and commodity prices.
• The AUDUSD rate hit a six-year low this week and is down 21%yoy from Jul/14.
Greece – Parliament prepared to vote on a second set of reforms required to progress negotiations over an €86bn bailout.
• The latest set of reforms passed the vote with a small margin of just 123 MPs among the ruling coalition supporting the package compared with the minimum of 120 required to sustain a minority government.
• The vote to be held today and would gauge MPs sentiment towards the proposed set of tax hikes, market reforms and spending cuts included in the proposal.
US$1.0942/eur vs 1.0855/eur yesterday. Yen 123.75/$ vs 124.31/$. SAr 12.358/$ vs 12.398/$. $1.563/gbp vs 1.558/gbp
US$0.741/aud vs0.737/aud
Commodity News
Precious metals:
Gold US$1,095/oz vs US$1,108/oz yesterday –
Platinum US$969/oz vs US$987/oz –
Palladium US$620/oz vs US$618/oz –
Silver US$14.78/oz vs US$14.85/oz –
Base metals:
Copper US$ 5,593/t vs US$5,423/t –
Aluminium US$ 1,669/t vs US$1,682/t - Indian producers are lobbying the government to double the import duty on metal shipments to slow down Chinese aluminium imports. Currently the tax stands at 5%.
• Local producers have been caught out by a mix of increasing aluminium imports and falling metal prices as domestic producers are increasing smelting capacities.
Nickel US$ 11,595/t unch vs US$11,875/t –
Zinc US$ 2,012/t vs US$2,054/t –
Lead US$ 1,770/t vs US$1,822/t –
Tin US$ 14,755/t vs US$15,580/t –
Energy:
Oil US$56.52/bbl vs US$56.5/bbl
Natural Gas US$2.834/mmbtu vs US$2.834/mmbtu
Uranium US$36.40/lb unch vs US$36.40/lb – India looking to build a strategic uranium reserve to counteract potential shortage of nuclear fuel
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$54.00/t unch vs US$51.30t – Production at one of the world’s largest miners ramps up as the year progresses.
• BHP Billiton reported a 1.5%qoq and a 4.7%yoy increase in iron ore production through Q2/CY15 (65.3mt) at its WAIO operations.
Thermal Coal $57.5 vs $57.5 cif ARA Europe –
Tungsten - APT European prices price $225.0/mtu unch vs $217.5/mtu two weeks ago - China to build new tungsten reserve
• China Molybdenum plans to build a new CNY3bn tungsten reserve.
• The reserve buying price equates to $105/mtu even though this is significantly lower than current European price of $225/mtu.
• We suspect only very desperate producers will sell very very poor quality material into the fund.
• The European tungsten price has already been pulled back by the sale of some lesser quality material suggesting to us that premiums for better quality APT metal
Lithium - Li-ion battery production capacity forecast to hit 87GWh by 2020 from 8.3 GWh in 2014 according to Researchandmarkets.com.
• Li-ion battery sales forecast to grow at a CAGR of 43.1% to hit US$36.5bn by 2020.
Lithium-ion cell chemistry
• Lithium Manganese Oxide (LiMn2O4/LMO),
• Lithium Iron Phosphate (LiFePO4/LFP),
• Lithium Nickel Manganese Cobalt Oxide (LiNiMnCoO2/NMC),
• Lithium Nickel Cobalt Aluminum Oxide (LiNiCoAlO2/NCA)
• Lithium Titanate Oxide (Li4Ti5O12/LTO)
Lithium-ion cell construction/type
• Cylindrical,
• Prismatic
• Laminate/Pouch Cells.
• Worldwide shipments of lithium-ion powered hybrid and electric vehicles stood at 793,000 units in 2014
• Shipments are expected to see a robust CAGR of 36.9% between 2014 and 2020 with global hybrid and electric vehicle shipments projected to hit 5.2m units by 2020.
• Consumption of Li-ion cells at 299m in 2014 expected to rise by CAGR of 33.1% over 2014-2020 to a forecast 1.7bn by 2020.
China’s ‘Jiangxi Ganfeng Lithium‘ offtake agreement with Reed Industrial Materials
• Reed Industrial Materials is part owned by Neometals (NMT AU) and by a subsidiary of Mineral Resources (MIN AU)
• Spodumene will be sold to Ganfeng at a previously agreed price with Reed retaining the option to keep and sell up to 51% of the product if the see better prices elsewhere.
• Neometals hold 70% of Reed, with Mineral Resources holding the remaining 30%.
• Ganfeng can acquire 25% of Reed's shares, leaving Neometals with 45%.
• Neometals receive $19.5m in this transaction but could gain more if Ganfeng and Mineral Resources move to buy up to 31.2% more of Reed's shares.
Company News
FinnAust Mining* (LON:FAM) 1.4p, mkt Cap £4.1m – Rod McIllree appointed as interim ceo
• FinnAust Mining have appointed Rod McIllree to the board of FinnAust following the sudden departure of Alistair Clayton.
• McIllree is known for his work at Medusa Mining, Anvil Mining and Greenland Minerals. He is also a director at Noricum Gold.
• Rod is a graduate of Curtain University’s Kalgoorlie School of Mines in Australia.
• FinnAust’s best results from each project to date include:
o Hammaslahti Copper Project: 5.6m @ 3.2% copper ('Cu'), 2.7% zinc ('Zn'), 0.7% lead ('Pb'), 71gpt silver ('Ag') and 0.76 gpt gold ('Au') from 196.80m and 20.45m @ 1.12 % Cu and 5.5gpt Ag from 166.55m
o Kelkka Nickel-Copper Project: 1.5m @ 0.68% Ni, 0.31% Cu from 61.50m
Conclusion: It is great to see Rod McIllree on board. We believe this should cause a step up in activity as the company evaluates the results of the ongoing exploration programs.
* SP Angel acts as nomad and broker to the company
Gemfields (LON:GEM) 61 pence, Mkt Cap £330m – JORC Resource & Reserve for Montepuez Ruby Mine
• Following completion of a CPR by SRK, Gemfields have published a maiden mineral resource & reserve for the Montepuez Mine.
• A total JORC resource of 467m carats of ruby and corundum at an in-situ grade of 62.3 carats has been established combining the primary and secondary resource.
• The indicated primary resource is for 2.1 Mt at 115.4 carats/t giving 245m carats.
• The inferred primary mineral resource is for 0.4 Mt at 115.4 carats/t giving 44m carats.
• The indicated secondary mineral resource is for 5 mt at 35.7 carats/t giving 178m carats.
• The probable reserve is for 432m carats of ruby and corundum at 15.7 carats/t.
• The primary probable ore reserve is for 2.2 Mt at 114.9 carats/t giving 253m carats.
• The secondary probable ore reserve is for 25.3 Mt at 7.07 carats/t giving 179m carats.
• SRK have published an independent technical economic model for Montepuez.
• This is based on a 21 year Life of Mine producing 432m carats over the LOM.
• This projects mining capacity increasing from 3.3 Mtpa to 5.6 Mtpa by July 2017.
• Processing capacity goes up by 0.4 Mtpa to 1.3 Mtpa by July 2016.
• Revenues are based on 2 high quality auctions and 1 low quality auction.
• The average sales price for rubies is assumed at US$389/carat with US$1.3/carat for lower quality rubies and corundrum.
• This gives an NPV of US$996m using a 10% discount rate and IRR of 311.7%.
• Capex of US$64m is assumed for the first 2 years with a total of US$305m spent over the LOM.
Conclusion: This is significant news for the Montepuez ruby mine as it underscores the opportunity at the mine for Gemfields. The secondary resource is the more likely source for the valuable rubies and it is good to see that the company has established not only a resource but a reserve for this part of the overall resource. The detail on the resource and the information provided on the technical report provides the market with the information to more formally evaluate the value for Montepuez and the potential upside.
*Two SP Angel Analysts have visited the Montepuez Ruby Mine
Kalimantan (LON:KLG) 1.175 pence, Mkt Cap £5.9m – Copper resource estimation drilling at Beruang Kanan
• Kalimantan Gold has reported the latest tranche of results from its 80 hole, 6500m resource evaluation drilling programme at the company’s flagship Beruang Kanan copper project in Central Kalimantan, Indonesia.
• The programme is now just over 40% complete with 36 holes (2680m) now completed and three rigs currently deployed on site.
• The new results, for an additional 8 holes totalling 655m include shallow intersections of 32m at an average grade of 1.34% copper from a depth of 34m in hole BKM31650-03; 12m at an average grade of 1.22% copper from a depth of 21m in BKM31650-05 and 3m at 1.24% copper from 35m depth in BKM31650-02.
• The results released today come from drilling along section line BKM31650 and extends the mineralisation 100 metres to the south of the previously reported results which should have a positive impact on the overall size of the resource. The mineralisation remains open towards the east
• The current phase of drilling provides the information for an independent update of the resource at Beruang Kanan which is expected to be completed in Q3 2015 and which will underpin a Preliminary Economic Assessment of the project planned for completion in early 2016.
• A preliminary resource estimate in September 2014, identified an inferred resource of 24m tonnes at an average grade of 0.8% copper in the Main Zone at Beruang Kanan using a cut-off grade of 0.5% copper. The current drilling should upgrade and extend the resource and enable preliminary design work for a heap-leach, SX-EW copper project to assess the viability of project development.
Conclusion: Resource estimation drilling is now well underway at Beruang Kanan and encountering good grade copper mineralisation at relatively shallow depths. This mineralisation should be amenable to low strip ratio open-pit mining and heap-leach SX-EW processing to produce copper cathode on site. There is still some way to go but the initial results look promising and we look forward to the resource update in Q3 this year and the initial economic and engineering results early in 2016.
Noricum Gold* (LON:NMG) 0.175p, Mkt Cap £4.7m – Channel sample shows meaningful grades of copper, gold and silver in 12m section
• Noricum Gold report progress at their 100% owned Walchem project in Austria. Walchem has a historic non-JORC resource of 423,470t calculated in 1945
• Walchem was a polymetallic mine historically with ore mined from ‘limonitic’ ore zones within the mine.
• The mine is formed from a VMS style deposit indicating potential for the discovery of further high grade VMS style ore zones within the region.
• Volcanic Massive Sulphides are generally formed on the sea floor as seen by their black smokers. The metals and other minerals formed within this process are mixed through time but often still retain high concentration of metals when found on land after millions of years of tectonic movement. Walchem is a case in point.
• Channel sampling of a section of hanging wall within the project shows high grade polymetallic mineralisation. This is tantamount to drilling the relevant section of mineralisation and gives significantly more useful information than rock chip sampling.
• The 12m channel sample shows:
o 0.6% copper
o 0.33 g/t gold
o 7.25g/t silver
The channel sample includes a 2m section of:
• 1.14% copper,
• 1.08g/t gold,
• 30.8g/t sliver
• “Further local rock and chip sampling returned results up to 1.03% Cu, 5.63% lead (‘Pb’), 12.65% zinc (‘Zn’)” though the use of rock chips can give anomalous and erroneous results
• The Noricum team continue to focus their exploration efforts on the underground workings and other outcrops. This is low-cost work but is important as the channel sampling can give good results for very little expense.
• Walchem was last mined in 1942 producing average grades of:
o 1.71% copper
o 3.23% zinc
o 2.48% lead
o 83g/t silver
o 0.5g/t gold
• Total Walchem production between 1680 and 1858 is estimated in 1903 to be
o Copper (metal) 3,585t
o Sulphur 1,149t
o Gold 0.055t
o Silver 1.978t
o Lead 4.200t
o The company are also working in Georgia on their recently acquired Bolnisi exploration licenses in which Noricum hold a 50% stake
o The Bolnisi project contains non-JORC , C1, C2 & P1 Soviet Reserves & Resources of 980,000t copper, 6.6moz gold and 22moz silver.
o Noricum’s press release gives more detail on the history of the Walchem mine and the work being done on the property showing the location of sampling and further results on samples taken
Conclusion: The Noricum team are pressing ahead with their evaluation and exploration of the Walchem mine in Austria. The work is low cost but channel sampling within the mine should give good indication towards the potential of the mine going forward. Combining this information with drill sections in time should enable the calculation of a greater ore resource to indicate the value of the project and its potential for mining going forward. This early work looks encouraging and feels like a good start to the work program.
*SP Angel acts as Nomad and Broker to Noricum. An SP Angel analyst has visited the Schonberg site in Austria.
North River Resources (LON:NRRP) 0.25 pence, Mkt Cap £4.8m – Metallurgical testing resolving process route for the Namib Lead Zinc Project
• North River Resources has completed a programme of metallurgical test-work which has firmed up the flow sheet parameters for its planned new 250,000 tpa processing plant at the Namib Lead Zinc Project in Namibia.
• The work, which was undertaken by ALS Laboratories, has resolved the inconsistent performance of previous testing work included in the Definitive Feasibility Study and delivered lead concentrates at an average 62.2% Pb at a 91% recovery rate and zinc concentrates at an average 52.4% grade and 89% recovery.
• The earlier issues had been identified as resulting from the presence of the iron mineral, pyrrhotite, in the ore which had contaminated the saleable metal concentrates and resulted in poor recovery rates.
• The recent testing has demonstrated that a combination of more effective grinding and the use of more advanced reagents capable of separating pyrrhotite provides an effective, robust and consistent process flowsheet “with a wide range of mineral composition and particularly with the variable pyrite and pyrrhotite content.”
Conclusion: The latest metallurgical test work resolves an important mineral processing issue for the development of the Namib mine and should allow North River Resources to move forward in bringing the project to production.
South 32 (LON:S32) 83.7 pence, Mkt Cap £4.46bn – Fourth Quarterly Report
• For the quarter the company reported alumina production up marginally at 1% 1,325 kt and full year down 1% at 5,147 kt.
• Aluminium production was down 1% for the quarter and down 14% for the full year at 242 and 1,004 kt respectively.
• Energy coal production was down 5% for the quarter and up 12% for the full year at 8,916 and 35,748 kt.
• Met coal production was up 23% for the quarter and 25% for the full year at 1,983 and 7,455 kt.
• Nickel production was down 19% for the quarter and 9% for the full year at 8.6 and 40.4 kt.
• Manganese ore production was up 3% for the quarter and 4% for the full year and manganese alloy production was down 26% and 7% respectively.
• Zinc production was up 19% and 24% respectively at 44 kt and 183 kt.
Weatherly International (LON:WTI) 1.2p, Mkt cap £11.4m – Quarterly production results
• The company’s production results for the quarter to end of June 2015 show that the initial problems with the start-up of the Tschudi heap leach copper operation in Namibia are being resolved and 2,257 tonnes of LME Grade A copper cathode was produced representing over 50% of design capacity of 1400tpm.
• Production at Tschudi is expected to reach 70% of capacity (1000tpm) during the September quarter and reach full capacity during the December quarter.
• Tschudi’s initial difficulties came from the presence of a leached cap of mineralisation containing a significant clay content which overlay the western part of the orebody and resulted in lower and slower copper recovery rates than expected. The company has determined that this material represents only around 3% of the resource and that “More than 80% of that material will have been mined by the end of CY 2015.”
• Mining rates are running ahead of schedule and the process plant is “performing at or above expectations.”
• At the Central Operations, (Matchless and Otjihase operations) copper in concentrate output increased by 22% from the March quarter to 1,282 tonnes but has yet to recover to the rates of 1400-1500 tonnes rates achieved in the June 2014 and September 2014 quarters. C1 costs of $6,417/tonne in Central Operations are some 17% below the costs achieved in the March quarter but still well ahead of the current $5,500/t copper price.