Economic News
China – Trade data expected on Tuesday
• Trade data is expected to show a further slowdown in import and export growth.
• Exports for August are expected to be down 6.5% from -8.3% previously.
• Imports are expected to be -8% against -8.1% previously.
Europe – German Industrial Production increased in July
• Industrial production for July was up 0.7% for July after dropping a revised 0.9% in June.
• IP is up 0.5% from a year earlier.
• Construction led the gain up 3.2% from the previous month.
Japan – Second quarter GDP expected on Tuesday
• GDP is expected to shrink on a quarter on quarter basis at -1.8% and revised down from first estimate of -1.6%.
• Weak consumption and a fall in net exports are said to be the main reasons for the negative growth outlook.
Zambia – Zambia looking at options to defend the 25% fall in the kwacha this quarter
• Zambia’s currency remains under pressure against a background of low copper price.
• Copper accounts 70% of the country’s exports.
• The company has limited options to defend its currency.
• This backdrop should change the government towards mining companies.
Currencies
US$1.1160/eur vs 1.1147/eur yesterday. Yen 119.31/$ vs 119.04/$. SAr 13.9266/$ vs 13.6558/$. UK $1.5259/gbp vs 1.5238/gbp
AUD 0.6935/aud vs 0.6980/aud
Commodity News
Precious metals:
Gold US$1,122/oz vs US$1,125/oz yesterday
Platinum US$991/oz vs US$1,006/oz yesterday
Palladium US$580/oz vs US$575/oz yesterday
Silver US$14.58/oz vs US$14.79/oz yesterday
Base metals:
Copper US$ 5,185/t vs US$5,193/t yesterday
Aluminium US$ 1,615/t vs US$1,628/t yesterday
Nickel US$ 9,890/t vs US$9,915/t yesterday
Zinc US$ 1,795/t vs US$1,795/t yesterday
Lead US$ 1,673/t vs US$1,700/t yesterday
Tin US$ 15,050/t vs US$15,000/t yesterday
Energy:
Oil US$49.04/bbl vs US$49.88/bbl yesterday
Natural Gas US$2.671/mmbtu vs US$2.705/mmbtu yesterday
Uranium US$37.20/lb vs US$36.95/lb yesterday
Bulk commodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.10/t vs US$54.93/t
Thermal coal (1st year forward cif ARA) US$51.65/t vs US$52.93/t yesterday
Other:
Tungsten - APT European prices $190/mtu (range $185-195/mtu) down $5/mtu on Wednesday
Company News
Aureus Mining (LON:AUE) 19.5 pence, Mkt Cap £71.5m – on track for commercial production at New Liberty in Q4
• Aureus Mining announces that it has shipped four consignments of gold dore totalling 4,881 oz from its New Liberty mine in Liberia and that it “is on track to declare Commercial Production at New Liberty in Q4 2015 and this weill be announced following the plant achieving an average of 60% plant capacity over a 60 day period.”
• The company reports that commissioning is going well and that it has processed 52,310 tonnes of ore and achieved an average gold recovery of 89%. Recovery rates as high as 92% have been achieved and “Optimisation work is ongoing towards the delivery of the steady state target of 93%”.
• Mining operations have been hampered by irregular and consistent delivery of explosives from China, partly as a result of shipping disruption during the course of the Ebola epidemic. Alternative shipping via road through Ghana and Cote d’Ivoire has helped build up three months explosives supply on site and this is being maintained through regular deliveries.
• Grade control drilling has continued to demonstrate the robustness of the resource model and as at the end of August, ore stockpiles amounting to 211,000 tonnes have been established which should help to iron out continuity of plant feed.
• The contractors’ staff is being demobilised from site as the Aureus team assumes full control of the process plant operations.
Conclusion: Aureus Mining and its EPCM contractor DRA Mineral Projects have delivered the New Liberty mine under challenging conditions and the operation remains on track for full scale commercial production and a build up to achieving the full 120,000 oz pa design output rate early next year.
EMED Mining (LON:EMED) 3.875 pence, Mkt Cap £135.6m – Director Appointments
• The company announced the appointment of 4 NEDs.
• Hussein Barma and Stephen Scott are to join as independent NEDs.
• Damon Barber is joining as a NED representing Liberty Metals & Mining.
• Jonathan Lamb joins as NED appointed by Orion.
Conclusion: It is good to see EMED strengthening its board and particularly to see the appointment of Hussein Barma who should bring good experience in copper and mining from his time at Antofagasta.
Gemfields (LON:GEM) 62.3 pence, Mkt Cap £339m ~Results of rough emerald and amethyst auction
• The high quality auction held in Singapore between 31 August and 4th September netted US$34.7m for 0.59m carats offered.
• The average per value carat is US$58.42/carat with a total of 98% sold by weight and 88% by value.
• This compares with the Nov 2014 auction held in Lusaka which realised US$34.9m for 0.53m carats old at US$65.89/carat.
• 37 companies placed bids at the auction.
• The company also held a rough amethyst auction from the Kariba Minerals with the first to be held in Singapore.
• 11m high quality amethyst were offered with 11 of the 16 lots being sold generating revenues of US$0.44m from 10.1m carats old.
• The average realised price of amethysts was 4.32 US cents this compares with 1.77 cents realised in the auction in February.
• The next auction of lower quality emeralds and beryl are to be held in November 2015.
Conclusion: This is a good result for the company particularly against the recent volatility in global markets reflecting concerns about the health of the Chinese economy and the Chinese consumer. The diamond sector has pulled back against this environment. This could vindicate the company’s strategy of being more of a price maker than price taker.
Glencore (LON:GLEN) 136 pence, Mkt Cap £17.8 bn – Capital raise to reduce debt
• The company is to raise US$2.5bn from a proposed equity issue.
• 78% of the issue has been underwritten by Citi and Morgan Stanley.
• 22% or US$550m is to be taken up by Senior management including the CEO, CFO and several Board members.
• A further US$7.7bn is to be raised by initiatives to be implemented by the end of 2016.
• US$1.6bn is to come from the 2015 final dividend and US$800m from the suspension of the 2016 interim dividend.
• Working capital reduction is to generate around US$1.5bn.
• US$2bn is to be raised from asset disposals including proposed precious metals streaming.
• US$500-US$800m is to be generated from a reduction of long term loans and advances made by Glencore (this totalled US$4bn in 2015).
• Cut in capex is to result in a saving of US$500 to US$1bn by the end of 2016.
• African copper operations at Katanga and Mopani are to be suspended till cost reduction projects are implemented.
• The expansionary and upgrade programme is to reduce C1 cash costs materially to US$1.65 to US$1.70/lb from US$2.50/lb today.
• This is expected to take 400,000 tonnes of copper cathode from the market.
• Meanwhile Mutanda is said to be performing well producing above name plate capacity at a C1 cost of US$1.36/lb.
Conclusion: It is good to see the company taking decisive action to stem concerns about the group’s balance sheet. Management are taking up 22% of the proposed equity issue which will be seen as a sign of confidence in prospects for the business as well as sharing the “pain” with shareholders. Shareholders are to give up a total of US$2.4bn in dividends. Interestingly the terms of the rights issue have not been announced yet – short sellers would have been caught out this morning.
Closing down Katanga and Mopani while upgrades are implemented to improve costs makes sense rather than operating these businesses at a loss. This takes around 2.2% out of copper supply and should also help in terms of sentiment towards concerns of oversupply in the market.
Kefi Minerals* (LON:KEFI) 0.75 pence, Mkt Cap £13.1m – Tulu Kapi gold mine production plan rises to 100,000ozpa
• Kefi Minerals report a significant 33% increase in the planned gold production rate to average 100,000ozpa over the project’s 13 year planned mine life.
• Negotiations and discussions with contractors appear to have let the company to increase the planned plant capacity to 1.5mtpa from 1.2mtpa with the greater throughput leading to the gold production increase to 100,000ozpa.
• Capex – the great part is that the increase in throughput and production does not lead to an increase in capital cost and funding, indicating that contractors are prepared to commit to do more for their money.
• Costs – even better is the impact on the All-in Sustaining Costs ‘AISC’ which fall to $760/oz from $779/oz though we might normally expect a greater fall in unit costs from such a significant increase in the throughput production rate. We expect costs to fall further from here depending on contractor negotiations.
• NPV – the value of the mine rises to $147m from $125m assuming gold at $1,250/oz and a post-tax discount rate of 8%. The NPV falls to $90m with gold at $1,122/oz.
• Construction: Kefi Minerals are working through their tendering process to select contractors for the Tulu Kapi gold mine. The selection process has cut 10 contractors down to five with the final contractors being asked to tender on the expanded production plan.
Conclusion: This is great news for Kefi Minerals in that the project should now have significant new value giving greater confidence to lending banks. The increase in production rate should more than offset the impact of lower gold prices.
*SP Angel act as Nomad to Kefi Minerals. An SP Angel analyst has visited the Tulu Kapi mine site with Kefi Minerals.
Leed Resources* (LON:LDP) 0.04p, mkt cap £1.2m – Strong market for blocks in Perth but modifications to moulds delays panel production
• Leed Resources the investment company with a loan note convertible into a stake in a ‘Cultural Limestone’ building block business in Perth, Australia report strong continuing volumes for the company’s limestone blocks.
• Management also report ‘there are substantial projects in hand which could immediately utilise wall panels.
• Unfortunately and rather predictably, new moulds from China for the creation of limestone walls require modification to meet acceptable tolerances for prefabricated limestone wall construction.
• The first mould has been modified and with another nine to be worked on.
• The key is to get prefabricated wall production up to speed as quickly as possible so as to be able to deliver significant numbers of walls to customer specifications.
Conclusion: It is heartening to hear that demand remains strong for limestone blocks within the Perth construction market though the modification of wall moulds will delay the ramp up to full production by some weeks.
* SP Angel acts as nomad and broker to Leed Resources
Minera IRL (LON:MIRL) 3.25 pence, Mkt Cap £7.5m – Temporary suspension of Corihuarmi operations
• The company reports that following the incursion of “approximately 100 individuals from the Community of Atcas”, onto the site, it has suspended operations at its Corihuarmi mine located 160 km south east of Lima.
• The company has had limited discussions with the President of the Community with a view to resolving the concerns of the community but at this stage, the duration of the temporary closure of the mine remains uncertain.
• The stoppage at Corihuarmi comes on top of problems the company has been experiencing with local communities at the site of its proposed new 100,000 oz pa Olachea gold mine, also in Peru, and a number of high profile movements at Board level following the untimely demise of the founder, Courteney Chamberlain, earlier this year.
Conclusion: Further community relations problems are an unwelcome diversion from management’s key task of finalising the development plan and finance for Olachea. We hope that there can be a speedy resolution.
Noricum Gold* (LON:NMG) 0.135p, Mkt Cap £3.6m – Appointment of Advisor to accelerate Bolnisi resources conversion.
• Noricum Gold has announced the appointment of Mark Owen, The Technical Director of the consulting company, Wardell Armstrong International, as a Senior Advisor to the Company.
• Mark Owen will assist Noricum Gold as it works towards the conversion of Russian standard resource estimates at its recently acquired 861 sq km Bolnisi copper and gold project in Georgia into JORC compliant estimates.
• Bolnisi currently consists of three prime sites at Tsitel Sopeli and East and West Kvemo Bolnisi where Russian standard work conducted during the 1980s generated C1/C2 reserves (broadly corresponding to Indicated/ Inferred) of 450,000 tonnes of copper at an average grade of 1.31%, 835 koz of gold at a grade of 1.16 g/t plus 20m oz of silver at 23.71g/t and subordinate volumes of zinc and barite.
Conclusion: Mark Owen’s expertise in resources consulting and in managing projects in Russia and the CIS should provide particularly helpful in ensuring that the work to convert resources estimates should be in good hands.
*SP Angel acts as Nomad and Broker to Noricum. An SP Angel analyst has visited the Schonberg site in Austria.
Savannah Resources (LON:SAV) 2.125 pence, mkt Cap £5.3m – Identification of additional VMS targets
• The company reports that its Versatile Time Domain Electromagnetic (VTEM) geophysical survey over the Block 4 exploration licence in Oman has identified a number of high priority drilling targets in the vicinity of former copper producing areas at Laisal, Aarja and Bayda and may have also located a new area of potential new VMS (volcanigenic massive sulphides) targets at Zuha.
• The geophysical interpretation “has identified a series of strong, near surface conductors up to 350m in strike length and extending at least 200m down dip, with strong potential to be the result of VMS mineralisation.”
• The geophysics concentrated on 7 high priority areas over a north south trending belt approximately 35 km long and follow up drilling is expected to start towards the end of September.
• Savannah is earning a 65% interest in the Block 4 licence area from the local company, Al Thuraya LLC.
Conclusion: Savannah Resources has been exploring in an area of historic copper production in Oman and has been successful in using geophysics to identify targets. We will be interested to see whether the follow up drilling validates the economic potential of the geophysical targets.