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
https://www.weare121.com/121mininginvestment-cape-town/registration/register-investor
• We are sponsoring because we think the 121 service is brilliant!
Economic New
Eurozone – Industrial production came in better than forecast in Oct rebounding from a two-month decline.
• Industrial production: 0.6%mom/1.9%yoy v -0.3%mom/1.3%yoy in Sep and 0.3%mom/1.4%yoy forecast.
UK – BoE Deputy Governor does not rule out faster pace in monetary tightening than currently expected by markets.
• “Once wage growth has returned at a level consistent with inflation returning to target I would expect the economy to warrant a path for Bank Rate that increases more quickly than implied by the market yield curve used to condition the November inflation Report,” Minouche Shafik said in her latest speech.
• “Having said that, I think all agents, and all members of the MPC, expect the future path to be gradual and limited.”
Australia – The government revised its budget deficit forecasts amid falling commodity prices.
• The 2015/16 fiscal year deficit to come in A$2.3bn higher than initially estimated taking the total to A$37.4bn.
• Over the next four year the cumulative deficit to be A$108.3bn, A$26.1bn more than previously forecast.
• The budget to return in surplus in 2020/21, one year later than projected in the May statement.
• “While the depreciation of the Australian dollar provides some buffer, the fall in prices is expected to detract US$7bn from forecast tax receipts over the forward estimates,” the statement read.
• Treasury cut its iron ore forecast to US$39/t, down from US$48/t used in May numbers.
• The economy to grow 2.5% in 2015/16, down from 2.75% forecast previously, and accelerate to 3.0%pa over the medium term (down from 3.5%).
Argentina – The government scraps taxes on agricultural exports in an anticipation for an increase in overseas shipments and an inflow of FX into the economy.
• Taxes on grain and beef to be eliminated immediately.
• A 35% tac on soya exports will be cut by 5pp per annum.
• New administration led by Mauricio Macri expects a US$8bn inflow from farming exports over the coming months helping to increase its FX reserves which fell below US$25bn last week.
Currencies
US$1.1014/eur vs 1.0967/eur yesterday. Yen 120.98/$ vs 121.04/$. SAr 15.034/$ vs 15.115/$. $1.516/gbp vs 1.518/gbp
0.725/aud vs 0.721/aud
Commodity News
Precious metals:
Gold US$1,063/oz vs US$1,068/oz yesterday
Platinum US$849/oz vs US$843/oz yesterday
Palladium US$554/oz vs US$549/oz yesterday
Silver US$13.72/oz vs US$13.82/oz yesterday
Base metals:
Copper US$ 4,640/t vs US$4,674/t yesterday
• Jiangxi Copper, one of the largest Chinese smelters, agreed lower TC/RC for Chilean copper concentrate shipped by Antofagasta.
• Companies agreed US$97.35/9.735 charges.
• This compares to benchmark rates for 2015 agreed for 2015 of US$107/10.7 between Jiangxi and Freeport.
Aluminium US$ 1,486/t vs US$1,479/t yesterday
Nickel US$ 8,725/t vs US$8,665/t yesterday – Production outpaced demand in Oct leaving the market in a 6.8kt Ni surplus on INSG numbers.
• Primary nickel supply totalled 164.7kt with demand coming in at 157.9kt.
• This comes on the back of surpluses recorded in previous months (Sep 8.3kt, Aug 8.4kt).
• Previously, the agency forecast a 49kt annual surplus for CY15 before the market moves into a deficit of 23kt in 2016 driven by Chinese demand and falling global production.
Zinc US$ 1,533/t vs US$1,548/t yesterday
Lead US$ 1,726/t vs US$1,720/t yesterday
Tin US$ 14,725/t vs US$14,600/t yesterday
Energy:
Oil US$38.3/bbl vs US$37.5/bbl yesterday
Natural Gas US$1.882/mmbtu vs US$1.900/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$38.7/t
Thermal coal (1st year forward cif ARA) US$44.5/t vs US$44.0/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
Base Resources (LON:BSE) 2.5 pence, Mkt Cap £16.9m – Rescheduling of debt
• Base has paid down some of its debt and has rescheduled the balance.
• Outstanding debt stands at US$190m with US$14m paid down together with US$11m paid in June 2015.
• The repayment of the debt has been extended over 4.5 years with both amortisation and interest payments for the first two years to be reduced.
• For FY 2016 capital payments are reduced from US$25.1m to US$14m with interest payment reduced to US$9.5m from US$28.2m.
• For FY 2017 capital payments are reduced from US$25m to US$15.2m with interest payment reduced to US$11.4m from US$27.1m.
• Payments are loaded to the FY 2019 and FY 2020 repayments for both capital and interest.
Conclusion: Shifting out the interest payments to FY 2019 and FY 2020 should be helpful given current cash flows and prices with better scope to repay against improving prices.
Hummingbird Resources (LON:HUM) 14.25 pence, Mkt Cap £15.2m – Yanfolila maiden reserve and project update
• Hummingbird Resources has announced a maiden ore reserve estimate for its 85% owned Yanfolila project in Mali.
• The probable reserve at Yanfolila amounts to 6.8m tonnes at an average grade of 3.03g/t gold (666,000 contained oz of gold) and represents a 20% increase on the indicated resource base used in the Pit Optimisation study.
• The reserve announced today is contained within the Komana East and Komana West pits “as these will be mined first”. The company points out that there are additional “significant Resources at other nearby deposits including Guiren West, Gonka, Sanioumale East and Saniioumale West which will be mined at a later stage.”, implying that there is scope for additional reserve definition as the project progresses.
• The reported reserve is contained with an overall resource of 22.2mt at an average grade of 2.54 g/t (indicated and inferred) and was based on optimisation at a gold price of $1100/oz.
• In addition to the reserve estimate, Hummingbird Resources reports that increased the planned plant capacity to 1.24mtpa from 1mtpa to enhance the “Ability to process all ore types including 1Mtpa of fresh ore” and increase gold production to “c120,000 ozs in first full year of production.” The updated plant design includes “the ability to further increase capacity to 1.5Mtpa.” It appears that the major modification to enhance the plant throughput has been the inclusion of a conventional two-stage crushing circuit.
• The company estimates that average gold recoveries are 94% in oxide ore, 92% in transitional ore and 91% in fresh material.
Conclusion: The initial reserve estimate and the flow-sheet modifications for Yanfolila are concrete evidence of progress in the project and we look forward to “further announcements on an updated mine schedule and Project economics once finalised.”
IronRidge Resources* (LON:IRR) 2.25 pence, Mkt Cap £5.92m - Exploration activity on Australian Bauxite asset
• IronRidge has found potential for DSO bauxite mineralisation at their Monogorilby project in Queensland.
• Mapping, rock chip sampling and channel sampling down exposed bauxite scarps has found DSO bauxite at an average of 42%.
• X-ray diffraction studies of representative samples have found Gibbsite as the main mineral in the bauxite layer.
• Laboratory analysis of samples found so far show could minerology with high alumina to reactive silica ratios indicating potential for low consumption of reagents.
• A low cost RC drilling programme has started.
• The project is in central Queensland a short distance from trucking to the dormant rail system leading north to the Port of Bundaberg.
• The company continue to have sufficient cash to continue their exploration work of both their iron ore projects in Gabon and other exploration assets in Australia.
Conclusion: Initial exploration work has found potential for a DSO bauxite deposit at the Monogorilby project in Queensland. We look forward to results from the drill programme to support the positive results so far.:
*SP Angel act as Nomad and Broker to IronRidge Resources
Kodal Minerals* (LON:KOD) 0.045p, mkt cap $0.47m – Interim Results
• Kodal Minerals reports an interim loss of £270,000 for the six months ending 30th September, broadly in line with the equivalent loss of £262,000 for the six months to 30th September 2014.
• The group is continuing to analyse the results of its drilling programme from the Grimeli copper – zinc deposit in western Norway and is focussed on controlling expenditure during the current period of commodity price and market weakness for junior mining and exploration companies.
*SP Angel acts as Financial Advisor and Broker to the company.
*The author of this report does not hold shares in Kodal Minerals.
Three Partners of SP Angel and SP Angel LLP hold stock in Kodal Minerals due to their long running financial support for the company.
Rio Tinto (LON:RIO) £18.70 pence, Mkt Cap £34.5bn – Project Finance for Oyu Tolgoi
• Project Finance has been secured for underground development at Oyu Tolgoi.
• US$4.4bn will be provided in Senior Loan form from the Export Development Bank Canada, EBRD, EXIM Bank of the US, Export Finance and Insurance of Australia as well as commercial lenders BNP Paribas, ANZ, Societe Generale, Sumitomo,Standard Chartered, Canadian Imperial Bank, Credit Agricole, Intesa Sanpaolo, National Australia Bank, Natixis, HSBCI, the Bank of Tokyo Mitsubishi, Kfw IPEX and Nederlands Financerings-Maatschappi voor Onwikkenlingslanden.
• EDC, EBRD, IFC and BNP Paribas acted as lead arrangers with Standard Chartered as initial lead arranger.
• There is to be a debt cap of US$6bn resulting in a further tranche of US$1.6bn.
Conclusion: The number of banks in the syndicate suggest that there is still interest in project finance in the sector but with the risk being better spread.
Weatherly International (LON:WTI) 0.325p, Mkt cap £3.1m – Reserve update on Tschudi
• Weatherly International has incorporated the results of 142 new infill drill holes (8963m) to generate an updated the Reserve estimate for its Tschudi copper mine in Namibia.
• The new estimate amounts to 25.3mt at an average grade of 0.85% copper (24.4mt attributable to Weatherly International). Twenty-nine percent of the ore tonnage and 32% of the contained copper is classified as proved.
• The reserve, which is dated 30th June 2015, represents a 6,350 tonnes (approximately 6.5%) increase in contained copper metal after depletion (8,000 tonnes) compared to the previous estimate.
• The updated reserve estimation is based on a copper price of US$5,950/t (US$2.70/lb) compared to an earlier estimate based on a higher copper price of $7500/t ($2.70/lb).
• The reserve is contained within an overall resource of 52.1m tonnes at an average grade of 0.81% copper.
• The mine incorporated some initial problems with clay rich material which resulted in lower and slower copper recovery rates than originally expected. Mining has now progressed beyond this material, however “0.6mt of material previously classified as ore has now been classified as waste”.
• Among the consequences of the resource/reserve update is a reduction in the life of mine waste:ore stripping ratio by around 10% “from 7.5:1 to 6.5:1 due to improved definition of the orebody profile, enhanced pit designs and the changed dilution assumptions. In the period to the end of June 2015, the ST actually achieved was 6.9:1.”
Conclusion: The reserve increase at Tschudi is positive news and it appears that the early issues surrounding the processing of clay rich material have now been resolved, however, the current copper prices maintain pressure on the operation.