INTRODUCTION
In the news: North River Resources (LON:NRRP) & Peninsula Energy (ASX:PEN)
Some our readers are currently off guzzling their way through bottles of rosé on terraces in the south of France. I’m not jealous though. Oh, no. They’ve missed the chance to meet with James Beams of North River Resources. While not as good as a first-hand meeting, the marvels of modern technology will allow these slackers to hear what James had to say about yesterday’s update on the company’s met test-work and its forward funding plans by clicking here.
I was reading an interesting article on the bus to work this morning about the zinc price. This could be pretty good news for North River. It quotes a research report from some obscure Australian brokerage — I think it was something like Macquarie? — saying that zinc prices will reach over US$3,000/t by 2017 due to the closure of MMG’s Century mine in Queensland this month, as well as the upcoming closure of Vedanta’s Lisheen mine. It comments that this will remove 600,000tpa of contained zinc capacity from the market and that global output growth will fall from 3.5% this year to 1.7% in 2016 and 1.5% in 2017. This will lag smelter output growth, sending the zinc concentrate market into deficit by the end of this year.
The article also quotes the Boston Consulting Group reporting a “crisis” in greenfield exploration. This is across all commodities, but particularly for zinc. The BCG report states: “The global market for zinc, the fourth most used metal (after iron ore, copper, and aluminium), is an unfolding case study in the macroeconomic effects of exploration failure.” Ouch.
The article concludes that the last major zinc deposit discovery is now a decade ago. With the closure of such major mines as Century, zinc stocks will fall to “critical lows” in the face of 4.5% annual rises in global consumption until 2020.
In other good news, the Carlyle Group and Riverstone have raised billions of dollars to buy un-fancied North Sea oil production assets. This is also being done by Jersey Oil and Gas’ Andrew Benitz, who is pursuing a strategy of building production through the acquisition of sub-sea type satellite fields. He aims to have 10,000bpd within 18 months, plus 15-20Mbbl of reserves. The fall in the oil price and the cap that might be put on current prices by the removal of sanctions against Iran has led to North Sea industry players slashing spending, striving for efficiency gains or simply selling and shutting down their least profitable assets. There has been a large rise in the number of assets for sale recently, but few deals have completed. The urgency to sell is thus increasing, and to sweeten these deals the current operators are having to look at retaining some or all of the decommissioning liabilities. Making these assets more attractive should get the significant funds lined up to invest moving.
METALS & MINING EQUITIES
Peninsula Energy†† — Major Development Milestone at Lance Project — The ASX-listed company advancing uranium projects in Wyoming and South Africa has announced the achievement of a major project development milestone at the near-production Lance Project, Wyoming. The wellfield data package has now been submitted for Mine Unit 1 to the Nuclear Regulatory Commission (NRC) and Wyoming Department of Environmental Quality (WDEQ), representing a stepping stone towards meeting the project’s pre-operational licence requirements.
As part of Lance’s pre-operational licence requirements, Peninsula, through its US operating subsidiary Strata, had been required to submit the wellfield data package for review and approval prior to production start-up. The submission of the data follows the installation of all Mine Unit 1 monitor wells, pump tests and four rounds of baseline water sampling. Included within the package is evidence that the ore zone aquifers are effectively isolated from those overlying and underlying for the purpose of ISL extraction. Water quality data from baseline sampling will additionally be utilised to set standards for future groundwater restoration and depleted wellfield rehabilitation.
Description of the Wellfield Data Package
The wellfield data package represents a thorough hydrological evaluation of Mine Unit 1, characterising wellfield conditions prior to sub-surface disturbance. Key elements of the wellfield package are as follows:
- Geological demonstration of the uranium mineralised ore zone’s hydraulic isolation from vertically adjacent aquifers.
- Results of aquifer testing, which demonstrated that the perimeter production zone monitor wells are in communication with the Mine Unit 1 mineralised ore zone wells.
- Data from the overlying and underlying aquifers demonstrated effectively no hydraulic communication with the ore zone aquifer.
- Baseline water quality data and proposed groundwater restoration standards and monitor well upper control limits.
- Verification that the ore zone aquifer meets exemption requirements within the perimeter monitor well ring.
- Individual well mechanical integrity test records.
- Abandonment records of historic exploration drill holes located within and adjacent to the perimeter monitor well ring.
- Numeric groundwater model simulating operational conditions that verified wellfield performance using wellfield-specific conditions.
Plant and Wellfield Construction Progress Update
The company has announced that construction at the wellfields and central processing plant continues to progress on schedule. All tanks have been placed within the processing plant building structure, and cladding of the structure is largely complete. Trade contractors for such functions as electrical, control, instrumentation and piping have been mobilised to site. Now that the wellfield data package has been submitted, development drilling for the first header house within Mine Unit 1 can be completed, with trenching and pipe laying underway.
RFC Ambrian Comment: With final NRC approvals one of the key steps towards achievement of first production, we are encouraged to see the timely submission of the wellfield package as a milestone to receiving full permitting. We anticipate first production should be the principal catalyst for a re-rating of the shares, which is expected in October according to the current timeline. We reiterate our Buy rating and target price of A$0.040.