Economic News
The Shanghai Stock market halted after 7% fall on manufacturing PMI with most industrial metals also down
• The first economic reading from China for Dec PMI showed weak manufacturing PMI against stronger non-manufacturing data.
• After all the focus on the Fed in the US and the start of rate rises, this year maybe a year of ongoing and increasing focus on China.
• IMF data shows that China accounted for 35% of global growth over the past 5 years.
• The forecast is that it will form 30% of global growth going forward to 2020.
• Consensus forecasts are for GDP growth of 6.5% against official expectations of 6.9%.
• Trying to second guess Chinese growth may be a hiding to nothing as official data holds little credibility.
• Any turning point in demand in the metals markets could hold the key to Chinese manufacturing PMI.
• Meanwhile over supply in the shipping sector shows short term charter rates for capsize ships collapsing to $4,897 a day against $20,000 in August.
China’s Manufacturing Purchasing Manager’s Index for December 2015 shows improvement on November reading but slightly short of expectations
• The Dec Manufacturing PMI index came in at 49.7 in December 2015 up from 49.6 in November but short of expectations of 49.8.
• This is the 5th straight month of contraction although the index appears to be stabilising.
• New orders expanded for the month with a reading of 50.2 against 49.8 in November.
• New export orders continued to contract at 47.5 but up from 46.4 in November.
• Non-manufacturing PMI expanded in December at 54.4 against a reading of 53.6 in November.
UK – government to stimulate housebuilding through the development of up to 13,000 new affordable homes on public land
• The government has earmarked five state owned sites for the developments. Three of the projects are on former MOD land
Currencies
US$1.0924/eur vs 1.0862/eur on 31/12/15. Yen 119.00/$ vs 120.22/$. SAr 15.5957/$ vs 15.4685/$. $1.4754/gbp vs 1.4736/gbp
0.7217/aud vs 0.7286/aud
Commodity News
Precious metals:
Gold US$1,072/oz vs US$1,061/oz on 31/12/15 – China demand to account for around 80% of total world gold production
Platinum US$874/oz vs US$891/oz on 31/12/15
Palladium US$546/oz vs US$563/oz on 31/12/15
Silver US$13.95/oz vs US$13.85/oz on 31/12/15
Base metals:
Copper US$4,618/t vs US$4,705/t on 31/12/15
Aluminium US$1,486/t vsUS$1,528/t on 31/12/15
Nickel US$8,585/t vs US$8,820/t on 31/12/15
Zinc US$1,563/t vs US$1,609/t on 31/12/15
Lead US$1,752/t vs US$1,793/t on 31/12/15
Tin US$14,500/t vs US$14,555/t on 31/12/15
Energy:
Oil US$37.8/bbl vs US$37.3/bbl on 31/12/15 – UK Diesel prices fall below £1/ltr
Natural Gas US$2.250/mmbtu vs US$2.237/mmbtu on 31/12/15
Uranium US$34.40/lb vs unch on 31/12/15
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$41.45/t vs US$42.44/t on 31/12/15
Thermal coal (1st year forward cif ARA) US$44.3/t unch on 31/12/15
Other:
Tungsten - APT European prices $170–190/mtu unch on last year
Ferrochrome – Benchmark prices collapsed to 92c/lb in December for Q1/16 marking a 11.5% decline.
Company News
Kefi Minerals* (LON:KEFI) 0.32 pence, Mkt Cap £8.4m – Q4 Operational Update
• Kefi Minerals reports that project financing for its flagship Tulu Kapi Gold Project in Ethiopia remains on track and that “Production remains scheduled for 2017.” A project management team is in place and “(front end engineering and design) due to complete in February 2016, followed by detailed engineering and procurement and then major construction.”
• The company also notes that, as previously announced, during November, the “Government of Ethiopia confirmed its intention to invest equity capital of US$15-20 million.” The Government already holds a 5% free carried interest in the project and the announced intention to invest directly seems to be a further solid confirmation of its continuing support.
• The Ethiopian Government is continuing preparations for the resettlement of households which will be affected by the mine development and is working on the plans for schooling and health facilities as well as the provision of access roads and water supply to these communities.
• In Saudi Arabia, Kefi Minerals has completed the preparation for its Mining Licence Application and the associated technical studies for its Jabal Qutman project and the documents are currently being translated into Arabic for formal submission. Following the completion of an infill drilling programme, and further metallurgical testing, the company indicates that an “Update of Mineral Resources will be issued after review processes completed for compliance with JORC Code (2012).”
• Elsewhere in Saudi Arabia, Kefi Minerals plans consultations with the local communities at Hawiah as a prelude to commencing drilling.
*SP Angel act as Nomad to Kefi Minerals
Ortac Resources* (LON:OTC) 0.045p, mkt cap £1.9m – Interim Results and Operational Update
• Ortac Resources reports a sharp fall in the level of losses for the 6 months period ending 30th September 2015. The company reports a total loss for the period of £251,000 compared to £1,177,000 for the six months ending 30th September 2014.
• The result reflects a 44% decline in administrative expenses to £432,000 from £774,000 as a result of cost rationalisation in Slovakia and in London plus a reversal of currency translation differences from a loss of £386,000 in 2014 to a gain of £91,000 in 2015.
• The company has raised £1m gross during the period as a result of two private placings in July and October respectively. In July, Ortac raised £600,000 at 0.085p/share to finance its initial investment in the private Zambian company, Zamsort. The £400,000 funding in October “to maintain liquidity and further develop our existing portfolio of mineral projects” was completed at 0.05p/share. At 30th September 2014, Ortac reports a cash balance of £182,000.
• Operations in Slovakia have now been temporarily suspended as a result of “recent judicial challenges made against the Slovak Mining Bureau in connection with earlier decisions made in Ortac’s favour” although the company stresses that the “reserve remains viable at current metal prices using standard and EU compliant extraction technology.” The company continues, however, “to operate the mining museum where visitors are taken underground to appreciate the rich mining heritage of Kremnica.”
• The company is now focussing its efforts on its investments in Zambia and Eritrea where there is the prospect of near term production.
• In Eritrea, the company holds a 25.37% interest in Andiamo Exploration which is drilling a volcanigenic massive sulphide target (VMS) at Hoba in the northern part of the Haykota licence area. The company also expects “that Andiamo will release a Maiden JORC Code compliant resource estimate and results from other technical studies at the Yacob Dewar gold deposit shortly.”
• In Zambia, Zamsort has renewed its Small Mining Licence for a further 10 years and has commenced construction of “a commercial scale demonstration plant” at it Kalaba copper/cobalt property which covers a prospective copper/cobalt mining and exploration licence in north-west Zambia located some 40 km from First Quantum Minerals’ Trident project. Zamsort expects to commission the plant in Q2 2016 and “Zamsort expects that this plant will generate sufficient revenue to fund exploration at its Large Prospecting Licence” .
Conclusion: Ortac is working to contain its costs while refocussing its efforts on near term production opportunities in Africa. The possibility of sufficient production to fund a continuing exploration programme of a highly prospective licence in Zambia by mid-2016 and the release of an initial resource estimate from Eritrea suggests that the market may receive positive news flow from Ortac Resources during the first half of 2016.
*SP Angel acts as Nomad and broker to Ortac Resources
SolGold* (LON:SOLG) 2.05p, Mkt Cap £16.9m – More copper/gold results to come from Cascabel
• SolGold continue to drill the developing copper/gold prospect at Cascabel in Ecuador.
• The project has so far shown massive intersections of mineralisation with >1km of copper/gold grades seen in deep drilling down to 1,800m in the Alpala zone.
• More recently trenching and surface assays are showing tantalising grades above new satellite anomalies
• The apparent potential scale of the Cascabel prospects bears some similarity with the cluster of copper orebodies at Chuquicamata with the Aguinaga prospect at Cascabel showing some similarities to Alumbrera from a geophysical perspective. Aguinaga’s bornite outcrop is a further positive sign.
• Geophysical work highlights further potentially large scale mineralisation below surface in porphyry style structures. Drilling at Alpala shows scope for larger scale mineralisation than is already shown in drilling indication a potential 2.5km x 2km x 500metre anomalous mass in a deep geophysical survey.
• The new discovery at Trevinio Hill and the northern lobe of the Alpala system both show outcropping mineralisation and form new targets for drilling where we are hopeful for promising results.
• So far assays show an increasing trend for higher grade mineralisation with depth down to 1,800m and the potential discovery of meaningful copper/gold grades at surface could lead to the potential development of a realistic mining plan involving a low capital cost surface mining followed by the development of a staged underground mining plan.
• We are told that SolGold has expressions of interest from geological teams within larger mining companies
• Ecuador is increasingly being seen as a potentially favourable country for mining following their agreement for another development at the $1.4bn El Mirador copper project (218mt grading 0.73% copper) and the collapse of oil revenues is likely to encourage the government to seek alternative sources of finance.
• Cascabel is at a low elevation of 1500m and lies just 80km from a port on the Pacific coast and is just one hour from the coast on a sealed highway. The site is also close to power and there is plenty of water to access.
Conclusion: Cascabel is shaping up as a very promising copper project with potential to add significant value if drill assays at the new targets show continuing grades of gold and copper in mineralisation.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.
Vast Resources (LON:VAST) 0.925 pence, mkt Cap £15.3m – Raising £5m
• Vast Resources has announced that it is to raise a total of £5m from the US based Crede Capital.
• The funds are being raised in 4 tranches, each of £1.25m at 0.8p per share. Tranches 2,3 and 4 are conditional upon “Certain managers [and] … directors” of Vast Resources investing a total of £0.5m “on the same terms as agreed with Crede … within two trading days of the Issue Date”.
• Following the issue of the first tranche shares to Crede Capital, Crede will hold approximately 8.6% of Vast Resources. The subsequent tranches of shares are to be issued at 90 day intervals and are subject to the approval of shareholders at a General Meeting to be held in February.
• Under the terms of the subscription agreement, Crede Capital will receive a Warrant, valid for five years, to purchase a single additional share for each share it acquires at “an exercise price equal to 130 per cent of the closing bid price on the day prior to each Investment Date” and will also pay an administration fee of 10% of the aggregate purchase price.
• Vast Resources’ Manaila polymetallic mine in Romania is currently mining and processing ore at a rate of 10,000 tonnes per month to produce separate copper and zinc concentrates. In the longer term, “re-commissioning of the third mill and full utilisation of the installed flotation circuits, the monthly production is expected to increase to twenty thousand tonnes per month.”
121 Group Mining Investing Conference – Cape Town 8-9 February 2016
• 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