121 Group Mining Investing Conference – Cape Town 8-9 February 2016
• Investors are signing up for the 121 Mining investment conference in Cape Town
• Last year this was the perfect place for investors and companies to get together with ‘well managed’ schedules full.
• The garden of the historic Welgemeend farm house provide the perfect setting for 1-2-1 investor meetings.
• Buy-side investors and analysts are able to attend the summit for free. See registration form in link below
Economic News
China - total retail sales of consumer goods in November rose 11.2% yoy RMB 2.79tn - National Bureau of Statistics
• Investment in fixed assets (excluding rural households) rose 10.2% yoy to RMB 49.72tn for first eleven months of the year
• Value-added output of industrial enterprises with designated size rose 6.2% yoy in November.
China – auto sales rose 20% yoy to 2.51m units. The figures are 12.9% up on October - China Association of Automobile Manufacturers (CAAM).
• Passenger car sales rose 23.7% yoy 2.2 m in November.
• Chinese auto production rose 17.7% yoy to 2.54m in November.
• Sales rose 3.3% yoy to 21.79m vehicles from January to November
• Chinese auto production rose 1.8% yoy to 21.82m vehicles from January to November
• Chinese built cars accounted for 41.9% of total passenger car sales in Novemebr.
China – PBoC may allow yuan to fall to four year low as investment flows from yuan to US dollar
• The yuan (renminbi) fell to 6.4550 / USD on Friday as currency advances towards a more market-driven rate
• Nomura reckons the PBoC see a fair rate as around 6.80
• Q3 GDP fell to 6.9% - seen as a potential sign of a hard landing in China
• Net capital outflows hit a record $113bn in November.
US – Core retail sales climbed more than forecast in Nov as holiday season got underway.
• A separate report on Friday showed, the UoM consumer confidence climbed to a four-month high in Dec.
• The FOMC is meeting this week with market expectations for the Board to announce first rate hike in years.
France – The Socialist party withdrew its candidates from northern and southeastern regions advising its supporters to vote for the conservative party led by Nicolas Sarkozy.
• The decision allowed conservatives to win elections in the respective regions with far-right National Front led by Marine le Pen failing to secure a single region in the second round of municipal polls.
UK – Property prices fell 1.1%mom in Dec v a 1.3%mom decline in Nov on Rightmove numbers.
• YoY prices continue to grow with a 7.4% increase recorded.
India – Wholesale prices remained in the deflation territory for 13 consecutive months with the nov reading coming in at -1.99%.
• Although the trend seems to be turning with the index falling pace slowing for a third month.
• Prices contracted 3.81% in Oct, 4.59% in Sep and -5.06% in Aug.
South Africa – president Zuma hires Pravin Gordhan to be new Finance Minister
• Pravin Gordhan is reported to be more experienced but will have his work cut out to halt the rot in the rand - There is nothing like a crisis to help a man into a new role
• Marches calling for the removal of President Zuma are planned in five cities on Wednesday
Currencies
US$1.0967/eur vs 1.0939/eur yesterday. Yen 121.04/$ vs 121.97/$. SAr 15.115/$ vs 15.659/$. $1.518/gbp vs 1.515/gbp
0.721/aud vs 0.723/aud
Commodity News
Precious metals:
Gold US$1,068/oz vs US$1,068/oz yesterday – China has imported 1,152t year to date from HK, UK and Switzerland. Withdrawals form the Shanghai Gold Exchange hit 2,405t YTD.
• The figures suggest China has imported a record tonnage of gold this year.
Platinum US$843/oz vs US$855/oz yesterday
Palladium US$549/oz vs US$544/oz yesterday
Silver US$13.82/oz vs US$14.05/oz yesterday
Base metals:
Copper US$ 4,674/t vs US$4,687/t yesterday
Aluminium US$ 1,479/t vs US$1,505/t yesterday –
Nickel US$ 8,665/t vs US$8,725/t yesterday -
Zinc US$ 1,548/t vs US$1,565/t yesterday
Lead US$ 1,720/t vs US$1,724/t yesterday
Tin US$ 14,600/t vs US$14,515/t yesterday
Energy:
Oil US$37.5/bbl vs US$39.5/bbl yesterday
Natural Gas US$1.900/mmbtu vs US$1.990/mmbtu yesterday
Uranium US$36.15/lb vs US$36.15/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$38.7/t vs US$38.6/t
Thermal coal (1st year forward cif ARA) US$44.0/t vs US$44.7/t yesterday
Other:
Tungsten - APT European prices $170–180/mtu vs $170–177/mtu – second price rise for over a month
Ferrochrome – Benchmark prices collapse to 92c/lb for Q1/16 marking a 11.5% decline.
Company News
Amur Minerals (LON:AMC) 10p, Mkt cap £45.9m – Subscription agreement for up to £12.5m equity investment signed
• The Company entered into a subscription agreement with Crede III Ltd, a subsidiary of a US-based family office Crede Capital, last week regarding a £12.5m with attached warrants.
• The amount to be spread over five subscription events of up to £2.5m each at 90 day interval.
• Issue price per tranche will the closing price for existing shares on the previous business day.
• Crede will be receiving three warrants for each 4 new shares with an exercise price of 130% of the subscription price for new shares with a matuiry of five years.
• Warrants may be exercised by paying the exercise price or exchanging existing warrants for new shares with the value of outstanding warrants calculated using black-Scholes model.
• The interest of the new investor in the Company will be capped at max 25%.
• First £2.5m tranche involving the issue of 22.7m shares at 11p and 17.0m warrant with an exercise price of 14.3p has been issued today.
• This represents 4.9% of enlarged share capital (460.3m) excluding warrants.
• Combined with a US$6.0m cash balance (as of Dec/15), the investment shall take the Kun Manie nickel copper project through the DFS stage.
• The funding package cost the Company 7% of gross proceeds in cash with another 3% in two-year warrants with an exercise price of 120% to the price new shares to be issued at.
Conclusion: The funding package allows the Company to continue with Kun Manie project development works ultimately seeing it through the DFS stage, significantly de-risking and potentially taking it to the level where other parties would be interested to step in. As highlighted previously, we see securing financing for the Kun Manie DFS amid current challenging conditions in the commodities space as positive news for the Company.
*SP Angel act as Nomad and Broker to Amur Minerals
Avalon Minerals (ASX:AVI) A$0.02, Mkt Cap A$7.0m - Completion of Scoping Study at Viscaria Project
• The company has completed a scoping study for an open pit and underground copper mine at the Viscaria Project in Sweden.
• The study looks at an open pit life of a minimum of 8 years mining three open pit deposits at the A, B and D zones.
• Average production a year is projected at 12,000 tonnes with a strip ratio of 5.8 with grades of 1.3% in the A zone, 0.7% in the B Zone and 0.9% in the D Zone.
• Throughput of 1.2 mpta is projected with recovery rates of 90.2% with simple chalcopyrite mineralogy.
• This gives a LOM All in Sustaining cost of A$2.10/lb of US$4,630/t.
• Development capital is estimated at US$87m for the site infrastructure and US$15m for the underground.
• A pre-tax IRR has been estimated of 22% on a copper price of US$3.25/lb or US$7166/t.
• Environmental permitting has started with a DFS targeted for H2 2017.
• Further step out drilling is to be done on the D zone to expand the underground resource.
Conclusion: The study shows potential for development with breakeven at current spot copper prices. Copper prices have scope to recover from here making the project worth pursuing to DFS with relatively low development costs and a low risk jurisdiction.
Minera IRL (LON:MIRL) SUSPENDED – EGM to proceed on 16 December
• The Chairman of the Minera IRL Limited EGM on 26 November postponed the vote due to potential irregularities in a small number of proxy votes
• These votes have now been revoked and the Chairman of the Minera IRL Limited EGM now knows of no reason why existing votes submitted for the Minera IRL Limited AGM can not be validated.
• More simply the EGM can now proceed on 16 December according to the votes cast by shareholders.
• Shareholders do not need to recast their votes.
* SP Angel analysts are expressing their own views and opinions in this analysis. SP Angel has no corporate connection with Minera IRL or its subsidiaries. SP Angel holds no shares in Minera IRL and does not have any current financial arrangements with the company.
Rambler Metals (LON:RMM) 3.1p, Mkt Cap £4.3m – First Quarter Results in line
• The company generated a small profit of C$554,000 against losses in the previous quarter (Q4 2015) of C$12.985m.
• Losses in the previous quarter included an impairment charge with losses of C$1.44m before impairments.
• Revenues were up 26% from the previous quarter at C$11.2m reflecting the higher volume of copper sales over the quarter.
• A total of 4,879 dmt was sold at an average price of $3.10/lb against $3.30/lb in Q4 2015.
• EBITDA was C$2.9m for the quarter against a loss of $0.9m in the previous quarter and C$3.7m the same time last year.
• Since the end of the quarter, the company has amended its terms with Transamine to extend the availability of Advanced Purchase Payments and delayed the start of repayment terms till January 1st 2016.
• At the end of the quarter the company had cash and cash equivalents of C$2.508m excluding restricted cash of C$3.26m.
Conclusion: The first quarter saw an improvement in operational performance which saw a move back into profitability from losses in the previous quarter. The optimisation strategy for the Lower Footwall Zone has resulted in better grades being achieved and they need to keep this up to counter lower copper prices.
Savannah Resources (LON:SAV) 1.525p, Mkt Cap £4.4m – Analysis of historical drilling data defines exploration targets
• Savannah Resources has announced that it has now completed its analysis of approximately 100,000 metres of historical drilling information in 783 boreholes from the Block 4 and Block 5 licences in Oman.
• The analysis has led to an exploration target of between 10.7m to 29.25m tonnes at grades between 1.4-2.4% copper and 0.2 to 0.4 g/t gold. These are distributed over 6 main targets, the largest of which is the Bayda open pit and underground target of between 3.5-11m tonnes at average copper grades between 0.7-3.0% copper and 0.2-0.5 g/t gold.
• The company comments that “Given the intensity of drilling into most of these deposits Savannah has a good degree of confidence that with appropriate drilling programmes, Mineral Resources within the stated Exploration Target ranges can be potentially defined with work underway to begin delivering the first of these during Q1 2016.”
• Savannah is earning a 65% interest in the local company Al Thuraya which owns the Block 4 licence area and already has a 65% interest in Al Fairuz Mining which holds the Block 5 area.
• Commenting on the nature of the Exploration Targets (which are a classification below the inferred resource category) the company states that “the potential quatity and gradeis conceptual in nature, there has been insufficient exploration to estimate a Mineral Resource and it is uncertain if further exploration will result in the estimation of a Mineral Resource”.
Conclusion: Savannah Resource has a range of exploration targets in a promising part of Oman with a history of historic mining. Work is progressing towards resource definition, however as with other junior explorers with limited financial resources, Savannah’s exploration will need to be highly disciplined to ensure the most effective deployment of limited financial resources.
Tertiary Minerals* (LON:TYM) 5.75p, Mkt £2.8m – Results for year to 30th September
• Tertiary Minerals reports a loss of £675,000 for the year ending 30th September 2015 (2014 loss of £359,000). The increased loss reflects a year of considerable activity which has seen significant progress on the resource definition at the MB Fluorspar Project in Nevada, where drilling was recently resumed, and the submission of an application to mine the Storuman Fluorspar project in Sweden.
• During the year, the company was able to report a 132% increase in the resource base at its MB project where the overall JORC compliant resource now stands at 6.1m tonnes of indicated resource at an average grade of 10.8% CaF2 and an additional 80.3m tonnes of inferred resource at an average grade of 10.7%. Drilling has recently restarted with an 1800 metres programme to test the lateral and depth extent of the newly discovered western area which contributed to much of the resource increase achieved last year.
• The new drilling at MB is expected to lead to an updated resource estimate during H1 2016 and metallurgical test-work, scoping studies and economic modelling leading to mine-permit planning during the second half of the year.
• Tertiary Minerals has also indicated that it expects shortly to receive a positive decision on its application to mine at Storuman. It reports that it has received support from 6 of the 7 key stakeholder groups and that a decision is expected from the Swedish Mining Inspectorate where “Tertiary Minerals anticipates that a positive decision will be made shortly.” Detailed test-work and consultation with potential customers has refined the mineral processing plans and the company “has contracted the services of a specialist mineral processing consultancy to complete the final phase of Preliminary Feasibility Study (PFS) level metallurgical testwork”.
• The company reported cash balances at 30th September of £310,000 and raised £650,000 in early October in order to advance the MB project.
• Conclusion: Tertiary Minerals has maintained progress on its two main fluorspar development projects and in the event that it is successful with the permit applications in Sweden the company may need to move ahead rapidly from a pre-feasibility study to a full scale Feasibility Study.
*SP Angel act as Nomad and broker to Tertiary Minerals