Anglo Asian Mining* (AAZ LN) 5p, Mkt Cap £5.6m – FY15 gold production at record 72.0koz, in line with management guidance
Coal of Africa (CZA LN) – Water Use Licence for Makhado
Dominion Diamonds (DDC CN) – New Chairman appointed from De Beers
Keras Ressources (KRS LN) – Update on Australian Gold Projects
Orosur Mining (OMI LN) – Q2 FY 2016 – progress with cost cutting aided by suspension of Government royalty
Rio Tinto (RIO LN) – Institutes a pay freeze for 2016
Lithium Air batteries - crystallized lithium superoxide ((LiO2) may allow 5x energy density in lithium batteries
US and Korean scientists have developed a battery where a Lithium Air battery is able to produce stable crystallized lithium superoxide ((LiO2) instead of lithium peroxide during discharge.
Lithium peroxide forms a solid precipitate which blocks pores in electrodes, a major barrier to the lifespan of a battery.
The ability to form crystallized lithium superoxide ((LiO2) is seen as a possible major breakthrough in the development of more efficient lithium batteries.
In a further development scientists at Stanford Uni have developed a polyethylene film with tiny nickel spikes coated with graphene. The nickel spikes touch each other at normal temperatures but come apart on overheating. When the battery cools the spikes reform the circuit. Clever eh!
China coal imports collapsed last year down 30% on 2014
The figures quoted later in this note highlight the displacement of some thermal coal by nuclear but also a slowdown in energy consumption in China indicating slower activity in factories and heavy industry.
Russian prison governor steals concrete road for personal profit
We have heard of stealing rails of disused rail lines
We have heard of stealing copper cables off in-use rail lines.
But we never heard of a prison governor dismantling a 31 mile stretch of road so he could sell the concrete.
We look forward to hearing about how he gets on in prison.
Attend Cape Town in style and comfort with the 121 Group Mining Investing Conference – Cape Town 8-9 February 2016
Join us in the beautiful and historic gardens of the Welgemeend farm house in Cape Town, close to the Mount Nelson Hotel
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
Dow Jones Industrials -2.21% at 16,151
Nikkei 225 -2.58% at 17,241
HK Hang Seng -0.59% at 19,817
Shanghai Composite +1.97% at 3,008
FTSE 350 Mining -0.43% at 6,166
AIM Basic Resources -1.16% at 1,612
Economic News
Currencies
US$1.0915/eur vs 1.0817/eur yesterday. Yen 117.70/$ vs 118.30/$. SAr 16.622/$ vs 16.491/$. $1.441/gbp vs 1.446/gbp
0.694/aud vs 0.703/aud -
Commodity News
Precious metals:
Gold US$1,092/oz vs US$1,081/oz yesterday –
Platinum US$850/oz vs US$843/oz yesterday –
Palladium US$488/oz vs US$486/oz yesterday –
Silver US$14.16/oz vs US$13.83/oz yesterday
Base metals:
Copper US$4,375/t vs US$4,395/t yesterday –
Aluminium US$1,470/t vsUS$1,457/t yesterday –
Nickel US$8,410/t vs US$8,240/t yesterday –
Zinc US$1,490/t vs US$1,474/t yesterday
Lead US$1,623/t vs US$1,618/t yesterday
Tin US$13,085/t vs US$13,590/t yesterday
Energy:
Oil US$30.30/bbl vs US$31.60/bbl yesterday – China crude oil imports rise 21.4% to 33.19mt in Dec 2015 keeping the China ‘teapots’ busy.
China imports rose by 8.8% to 335.5mt for the year as the cost of imports fell by40.54% to RMB 833bn.
China imported slightly less refined oil down 0.33% at 29.90mt reflecting an increase in domestic refinery capacity and the purchase of crude for storage
Natural Gas US$2.269/mmbtu vs US$2.286/mmbtu yesterday
Uranium US$34.75/lb vs US$34.50/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$40.40/t vs US$40.30/t yesterday – Imports to China hit another annual record climbing 2.2%yoy for a total of 952.7mt in 2015, accounting for more than 2/3s of seaborne market.
Steel – Steel exports growth in China compensate for weak domestic demand.
Thermal coal (1st year forward cif ARA) US$38.30/t vs US$39.00/t on 30 December – European thermal coal futures fall to 12-month low, this is said to be on the back of lower oil prices
Thermal coal prices are more driven by the slump in Chinese coal imports which fell 35% yoy in December although December imports rose 8.9% on November.
Unseasonally warm weather combined with price pressure from US coal exports driven by US shale gas.
Currency depreciation in the major coal exporting nations of South Africa, Australia and Indonesia has served to reduce production costs enabling many miners to maintain production levels despite lower prices.
China imported 204.1mt of thermal coal in total last year down 29.9% from 291.2mt imported in 2014.
China’s electrical power consumption rose slightly in November 2015 to 465.8TWh with a small 0.7% increase in the first 11 months of the year to 5,049.3TWh.
Primary industry used 3.0% at 95.3TWh more power while much larger secondary industry consumption was 1.1% lower at 3,633TWh.
Residential consumption rose by 4.7% through the first 11 months of the year
We expect December’s Chinese power consumption numbers soon but for these to reflect ongoing trends.
Other:
Tungsten - APT European prices $165–180/mtu vs $165–185/mtu last week and $170–190/mtu the week before – prices continue to slip with this unconventional bid/offer spread.
The price also reflects the quality of shipments being transacted.
Ferrochrome – Benchmark prices collapsed to 92c/lb in December for Q1/16 marking.
Company News
Anglo Asian Mining* (AAZ LN) 5p, Mkt Cap £5.6m – FY15 gold production at record 72.0koz, in line with management guidance
Hold
Q4/15 production totalled 17.9koz gold (Q3/15: 18.2koz; Q4/14: 17.1koz) as follows:
Agitation leach plant 13.0koz (vs Q3/15: 11.8koz; Q4/14: 10.2koz).
Heap leaching ops – 4.6koz (vs Q3/15: 6.4koz; Q4/14: 6.8koz)
Flotation plant balance (0.3koz)
SART operation (minimal amounts of gold).
FY15 gold production amounted to 72.0koz, in line with 72-74koz management guidance and up on 60.3koz produced in FY14.
Agitation leach production rose 24%yoy to 48.2koz on better processed grades (FY15: 3.4g/t; FY14: 2.9g/t) and improved gold recoveries (FY15: 76%; FY14: 69%).
Heap leach output climbed 9%yoy at 23.4koz on an increased throughput (FY15: 941kt; FY14: 851kt) and slightly better grades (FY15: 1.2g/t; FY14: 1.1g/t).
Gadir underground mine feed 28.8kt at 7.7g/t for 7.1koz gold contained during the quarter taking the total to 37.9kt at 8.0g/t in FY15.
Gadir ore is blended with Gedabek material for processing at the agitation leaching plant.
SART plant copper production 205t copper and 6.6koz silver and minimal amounts of gold in Q4/15. FY15 SART production came in at 839t copper and 15.1koz silver (FY14: 784t Cu and 23.5koz Ag).
Flotation plant: commissioned in Q3/15 and declared commercial production in Q4/15; reported to have reached 75-80% of capacity and is currently running at 1,000wmt (c.800dmt) of concentrate per month.
The flotation plant produced 578dmt of concentrate in Q4/15 containing 130t Cu, 9.3koz silver and 0.3koz gold.
The new flotation circuit has now reached 75-80% of 1,250-1,300wmt of concentrate per month capacity, post an initial recalibration.
The plant is designed to process agitation leaching tailings improving general metal recoveries at little incremental cost at the Gedabek processing facilities as well as to treat hard to leach sulphide ores.
Assuming 20% moisture content and 20% Cu content in flotation concentrate, current 1,000wmt per month run rate is equivalent to 1.9kt Cu per annum production. This is below our copper production estimates for 2016 of 4.7kt and will require revision to take account of concentrate production rates.
FY15 gold sales^ totalled 63.9koz at an average price of US$1,161/oz (FY14: 50.6koz at US$1,267/oz).
FY15 SART^ copper sales (1,310dmt c.60% Cu) and flotation^ (392dmt c.20% Cu) copper concentrate sales generated US$3.3m and US$0.6m, respectively.
Debt: Net debt closed at US$49.2m as of Dec/14, down from US$52.4m at Dec/14.
A US$4m from the ceo has been extended by six months to 8Jul/16.
Conclusion: Gedabek reported good production results for FY15 with a 19%yoy increase in annual gold output benefiting from better processed grades and improved recoveries at the agitation leaching circuit. The AL plant accounted for 80% of gold production increase.
Fourth quarter gold production outperformed at 17.9koz versus our estimate of 16.4koz.
Gadir is proving to be a valuable addition to operations supplying high grade material to the Gedabek processing plant.
Currency depreciation: the latest 32% depreciation in the USD/AZN exchange rate and stronger gold production in FY15. We will release updated numbers in due course.
^Reported sales are post deduction of 12.75% government interest under the PSA agreement.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Coal of Africa (CZA LN) 2.5 pence, Mkt Cap £48.2m – Water Use Licence for Makhado
The company announced that it has received an Integrated Water Use Licence for the Makhado coal project. The licence was issued by the Department of Water and Sanitation valid for a period of 20 years.
The 2013 Definitive Feasibility Study for Makhado envisages mining approximately 12.6mtpa of run-of-mine coal to produce 2.3mtpa of hard-coking coal plus a further 3.2mtpa of thermal coal from the proposed operation in the northern part of the Limpopo Province of S Africa. Mining during the first 16 year of operation is expected to be by open pit with the potential to move into underground mining later in the mine’s life.
At the time of the feasibility study in 2013, capital expenditure to develop the 345mt coal project was estimated at R3.96bn and the project was expected to generate an NPV of R6.79bn at an 8% discount rate and to deliver an IRR of 30.1% on an ungeared basis. In today’s announcement, the company comments that “We continue to focus on our funding requirements in order to commence construction activities in H2 2016.”
Dominion Diamonds (DDC CN) C$13.95, C$1,189m – New Chairman appointed from De Beers
The company has appointed Jim Gowans as the new non-executive Chairman to be effective no later than April 30 2016.
The current Chairman Robert Gannicott has stepped down citing medical reasons.
A further director Mr Josef Vejvoda has also been appointed to the board.
He was proposed to the Dominion board by a group of activist shareholders and was previously a portfolio manager at K2 & Associates Investment Management,
From 2011 to 2014 Mr Gowans was MD of the Debswana Diamond Company in Botswana and he was CEO of De Beers Canada from 2006 to 2010.
He is currently CEO of Arizona Mining, a Canadian exploration company.
On Dec 24 two of its independent directors Fiona Perrott-Humphrey and Ollie Oliveira had resigned from the board.
Conclusion: Activist shareholders appear to be having an impact with the recent board changes being put into place. We wonder what strategic direction they can bring which will add value to the share price.
Keras Resources (KRS LN) 0.475 pence, Mkt Cap £5.2m – Update on Australian Gold Projects
The company expect to start production from two pits from Q2 2016.
The pits are said to be shallow with no pre-strip required.
At the two pits targeted, new estimates have been established with mine designs and environmental studies finished.
Internal modelling indicates a potential exploitable resource of 94,350t at 1.39 g/t gold and 69,496t at 1.32 g/t gold.
A small RC drilling programme is to be done to finalise mine plans.
The two pits are to provide around 4-5 months of mining for Keras.
The company has started assessing the prospects for underground mining at the underground mine at Prince of Wales.
They are looking at the scope for accessing high grade ore below the current stoping level at Level 10.
The plan would be to mine these stopes whilst developing Level 11 below.
The orebody is said to contain thin narrow veins (1.2m) and hence hand held machines are expected to be used as previously.
Before any mining can take place at the underground mine, the original shaft needs to be rehabilitated and a new headframe and winder installed.
Conclusion: Keras which is the new name for Ferrex is moving forward to bring on small production from the gold assets acquired in Australia. We look forward to news on further progress on mining at the two open pits.
Orosur Mining (OMI LN) 6.5 pence, Mkt Cap £6.3m – Q2 FY 2016 – progress with cost cutting aided by suspension of Government royalty
The company reports that it produced 8172 oz of gold during the 3 months ending 30th November 2015 at a cash cost of US$858/oz and all-in-sustaining cost of US$1095/oz.
Gold production in the first six months of financial year to date of 20,643 oz is, however, ahead of the guidance figure for the year of 30-35,000oz.
Production on a quarterly basis represents a 36% decline in gold output compared to the equivalent quarter of the previous year but the 13% decline in cash costs and 6% fall in AISC also reflects the company’s continuing programme “to reduce costs in line with the gold price.”
We note that the average gold price received during the quarter is reported as $1100/oz and that the company generated operating cash flow of $924/oz (before working capital). The AISC figures suggest that after taking account of sustaining and working capital the company is generating around $5/oz for its gold production.
Part of the cost reduction programme has included a 40% reduction of staff numbers and “Reduction in cash remuneration of the Board of Directors and senior executives as well as reorganisation and streamlining of the Management team.”
As an indication of the additional measures in force to contain costs “On December 4 2015, the President of Uruguay granted Orosur a one year exemption on the royalty payment to the Government (3% of sales).”
At 30th November 2015, the company reports net cash of $1.86m (gross $2.63m).
Rio Tinto (RIO LN) 1666 pence, Mkt Cap £30.8bn – Institutes a pay freeze for 2016
Rio plans to freeze all pay in 2016 according to reports of a memo to internal staff.
Sam Walsh expects 2016 to be a tougher year than 2016 with commodities hitting 10 year lows.
Conclusion: This memo for internal consumption appears to have leaked to the press. We are surprised that the company had any pay rises at all last year given the state of the sector and the significant drop in iron ore prices – a drop instigated by the big producers such as Rio and BHP Billiton with their determination to push ahead with supply against falling demand. Not an obvious strategy to grow earnings for investors in the short and medium term. This battle for market share has been painful all round.