Amur Minerals* (LON:AMC) – Ice road to the site construction completed
Beowulf Mining (LON:BEM) – Following up its Kallak North Application.
Centamin (LON:CEY) – Production and cash flow building up at Sukari
Condor Gold (LON:CNR) –Resolution of the disputed Espinito-Mendoza concession
Medusa Mining (ASX:MML) – New CEO appointed
Minera IRL (LON:MIRL) Suspended – Cancellation of AIM listing
Economic News
US – Inflation will climb back to the Fed target 2% once energy prices stabilise and the US dollar stops appreciating, Jeff Lacker said in his speec today.
• Lacker, a President of Richmond Fed and a former voting member of the FOMC, is expecting inflation to reach 2% in the medium term.
• “Inflation has been held down recently by two factors, the fallig price of oil and the rising value of the dollar. But neither factor is likely to depress inflation indefeinitely. After the price of oil bottoms out, I would expect to see headline inflation move significantly higher.”
• On Friday, UoM inflation expectations over Mar rose 2.7%, beating the previous reading of 2.5%.
• Economic news due this week:
Date Index Period Actual Expected (Bloomberg) Previous
Friday UoM Consumer Sentiment Mar 90 92.2 91.7
Monday Existing Home Sales Feb -2.9%mom 0.4%mom
Tuesday Markit Manufacturing PMI Mar 51.9 51.3
Wednesday New Home Sales Feb 3.2%mom -9.2%mom
Thursday Weekly Jobless Claims 268k 265k
Durable Goods Orders Feb -3.0%mom 4.7%mom
Core Durable Goods Feb -0.3%mom 1.7%mom
Capital Nondefence Goods Orders Feb -0.5%mom 3.4%mom
Friday Q4 GDP (Final Reading) 1.0%qoq 1.0%qoq (previous estimate)
Q4 Core PCE 1.3%qoq 1.3%qoq (previous estimate)
China – Governor of the PBoC and Vice Premier voiced their concerns regarding leverage in the system.
• “Lending as a share of GDP, especially lending as a share of GDP, is too high,” the PBoC said.
• China’s corporate debt had climbed to 160% of GDP lately, while total debt is 230%, according to FT estimates.
• Vice Premier advocated for a pro-active approach by authorities to address the problem of local-government debt and ensure that a plan for them to swap high-cost debt for cheaper municipal bonds goes ahead.
• On a separate note, the government pledged to boost lending to brokerages for their margin-trading businesses leading to gains in stock prices as measured by two benchmark equity indices.
UK – UK GDP may be 5% lower than it would have been otherwise by 2020 should the nation leave the EU; a shortfall might be limited to 3% should the UK negotiate a free-trade deal despite exiting the block, according to CBI (Confederation of British Industry) estimates.
• “Leaving the EU would be a real blow for living standards, jobs and growth,” CBI said.
• “The savings from reduced EU budget contributions and regulation are greatly outweighed by the negative impact on trade and investment.”
• Estimates suggest costs may come to 950k lost jobs by 2020.
• By 2030, GDP may be 3.5% lower than compared to the case if the UK had remained in the UK which is equivalent to only 1-2 years years of trend growth.
• “The UK would remain a relatively large, affluent and growing economy in both our exit scenarios, just not quite as large or affluent as in the counterfactual.”
• On a separate note, UK house prices climbed 1.3%mom/7.6%yoy in Mar, pushing the average above £300,000 for the first time, according to Rightmove.
• In London, inner city prices fell 1.7%mom to £833k with outer districts recording a 2.1%mom increase to hit £517k.
• YoY prices were 11%yoy up in London this month.
Currencies
US$1.1259/eur vs 1.272/eur yesterday. Yen 111.52/$ vs 111.30/$. SAr 15.349/$ vs 15.376/$. $1.442/gbp vs 1.433/gbp
0.762/aud vs 0.762/aud. CNY 6.480/$ vs 6.479/$ unch.
Commodity News
Precious metals:
Gold US$1,246/oz vs US$1,255/oz yesterday –
Gold ETFs 56.7 moz yesterday vs 55.9moz yesterday – big jump in gold ETF buying
Platinum US$968/oz vs US$978/oz yesterday
Palladium US$586/oz vs US$593/oz yesterday
Silver US$15.78/oz vs US$15.03/oz yesterday
Base metals:
Copper US$ 5,058/t vs US$5,065/t yesterday – Lundin Minign CEO is expecting copper and zinc prices to go higher form here saying commodities have bottomed following five years of declines.
Aluminium US$ 1,526/t vs US$1,524/t yesterday –
Nickel US$ 8,655/t vs US$8,865/t yesterday –
Zinc US$ 1,845/t vs US$1,835/t yesterday
Lead US$ 1,813/t vs US$1,809/t yesterday
Tin US$ 16,910/t vs US$16,960/t yesterday
Energy:
Oil US$41.1/bbl vs US$41.4/bbl yesterday
Natural Gas US$1.898/mmbtu vs US$1.931/mmbtu yesterday
Uranium US$29.75/lb vs US$29.75/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.5/t vs US$55.2/t – LKAB, a Sweden based iron ore miner, expects prices to remain low through 2016-17 with the Company’s strategy based on “tremendous focus” on production growth.
Thermal coal (1st year forward cif ARA) US$42.50/t vs US$41.70/t yesterday –
Other:
Tungsten - APT European prices stood at $168-185/mtu vs $165-180/mtu last week
Ferrochrome – ASA Metals, a South African ferrochrome producer, entered business rescue in late Feb.
Company News
Amur Minerals* (LON:AMC) 6.7p, Mkt Cap £32.3m – Ice road to the site construction completed
• The Company completed the 2016 winter road linking the Baikal Amur rail with the Kun Manie project.
• The 350km long road will be used to ship supplies including fuel and spares to the site ahead of the 2016 field season.
• The focus of the 2016 programme will be infill drilling on areas of the Maly Kurumkon/Flangovy deposit that are currently classified as Inferred resources, step out drilling on other targets as well as a collection of a bulk metallurgical sample.
• A total of 15,000m of drilling has been budgeted for this year with operations scheduled to start around 01 Jun/16.
• Recently acquired mobile equipment including dozers, an excavator and a diamond drill rig are on their way to the site.
• The Company will be releasing an updated resource at the Maly Kurumkon/Flangovy deposit based on last year’s exploration programme shortly.
*SP Angel act as Nomad and Broker to Amur Minerals
Beowulf Mining (LON:BEM) 4.0 pence, Mkt Cap £19.2m – Following up its Kallak North Application.
• Beowulf Mining reports that it has followed up its letter of 18th November 2015 to the Swedish Minister for Enterprise and Innovation with a new letter “given that it is now over six months since the Mining Inspectorate of Sweden recommended to the Swedish Government that the Concession for Kallak North be awarded and that no response has been received to the Company’s first letter sent on 18 November 2015.”
• The Company asserts that its “application satisfies the requirements of the Swedish regulations and that the Environmental Impact Assessment (“EIA”) for Kallak North has comprehensively studied all the aspects of a future mining operation, including mining, waste rock handling, processing, tailings management, water management and transport and their associated environmental impacts.”
• There have been concerns as to the impact on the Sami reindeer herding communities but the company maintains that it has established extensive studies describing precautionary protective and compensatory arrangements and that these have been established in “consultation with concerned Sami villages.”
• The CEO of Beowulf Mining, Kurt Budge, commented “We are aware that the Swedish Government is reviewing several applications and that ours may not be the priority but we have decided to write again to the Government, as it is difficult for a company, such as Beowulf, to have a business critical decision looming and have limited insight into either the decision making process or when a decision can be expected.”
Conclusion: Beowulf’s frustration at the delays to its Kallak North Application demonstrate that the political risk to permitting a mining venture can extend to European projects as well as the more widely publicised jurisdictions in more “frontier” areas. The present iron ore price has started to pick up but the market is understandably nervous od iron ore projects and Beowulf recently announced diversification into a graphite project in Finland.
Centamin (LON:CEY) 91.5 pence, Mkt Cap £1,054.2m – Production and cash flow building up at Sukari
• Reflecting lower gold prices and write offs for exploration in Ethiopia (US$6.3m) and a US$6.8m tax charge in Australia relating to foreign exchange gains, Centamin reports a 37% decline in annual earnings for 2015 at 4.51US cents per share. The company is, however, recommending a final dividend of 1.97 US cents per share bringing the total for 2015 to 2.94 US cents/share.
• Despite the earnings reduction, the company is financially robust and “remains debt free and unhedged with cash, bullion on hand , gold sales receivable and available-for-sale financial assets of US$230.7m at 31 December 2015; a material increase on prior year US$162.8 million.”
• Production at Sukari increased by over 16% to 439,072 oz (2014 – 377,261 oz) and both cash operating costs and all-in sustaining costs declined mainly as a result of reduced fuel costs to US$713/oz (2014 – US$729/oz) and US$885/oz (2014 - US$912/oz).
• The rising gold production and lower costs offset the lower received gold price (US$1159/oz vs 2014 – US$1257/oz) resulted in a sharp increase in free cash flow before financing of US$114.9m compared to the US$37.7m in 2014.
• Capital expenditure for the year of US$70.7m mainly consisted of US$31.4m of underground mine development at Sukari and US$34.4m of capitalised exploration.
• Operations have been building up with “record mining rates from the open pit (up 28% on 2014) and underground (up 20% on 2014)” and the “Process plant reached minimum expected long term rate of 11 million tonnes per annum in Q4 2015.”
• On this basis, the company is expecting a continuing increase in gold production with guidance for 2016 production of “470,000 oz gold at US$680/per ounce cash cost of production and US$900 AISC.”
• The Sukari Mineral Reserve was estimated at 8.8m oz “up 7% from 8.2Moz at 30 September 2013. Continued positive results from underground drilling support our expectation for further reserve growth.”
Conclusion: Centamin’s Sukari mine is building up towards steady state operations and the company is now looking ahead to an increased ore reserve base as its investment in additional exploration last year and the continued drilling programme in 2016 assesses lateral and depth extensions to Sukari while exploration builds up in west Africa.
Condor Gold (LON:CNR) 43.5p, Mkt Cap £19.9m –Resolution of the disputed Espinito-Mendoza concession
• Condor Gold announces that it has successfully agreed terms for the acquisition of the 200 hectare Espinito-Mendoza concession which lies within its La India Project area in Nicaragua.
• Access to the ground, which the Company had originally agreed in August 2011, had been in dispute over a proposed 5000m drilling programme and the transfer of clean surface rights to the ground.
• The area covers the Mestiza Vein set which contains an NI-43-101 standard inferred resource of 333,000oz of gold within 1.49m tons at an average grade of 7.47g/t. Up to now, this resource has been excluded from the PFS and PEA work Condor Gold has completed at La India, though in 1998, the consultants, Micon International, reported that though significant work remained to be done, the property could potentially support a8500-800tpd mill to produce 40-60,000 oz of gold annually.
• Under the revised terms, in addition to the US$1.155m previously paid, Condor has paid US$30,000 and will pay a further US$470,000 by June 2016 and will pay US$10,000 per month for 20 months following the payment in June 2016..
Conclusion: Now that Condor Gold has secured the Mestiza ground, we would imagine that they will work towards integrating it within the development plan for the larger La India project. We look forward to updates in due course.
Medusa Mining (ASX:MML) A$0.69, A$143.4m – New CEO appointed
• Medusa Mining have appointed a new CEO to run the company.
• Mr Boyd Timler get the CEO job.
• Timler most recently worked as COO at Beadell Resources based in Perth, Australia which produced 122,292oz of gold from its Tucano gold mine in Brazil last year.
• Boyd spent 15 years working for Kinross Gold’s Hoyle Pond Mine in Canada and was also MD at the large Lumwana copper mine in Zambia which was bought by Barrick Gold.
• Recently Medusa reported a 27% increase in gold production to 61,169 oz last year mainly due to improved grades of ore processed.
• Cash costs rose 14% to US$436/oz on largely unchanged mill throughput of 326,000 tonnes.
• The company reiterated its guidance for the full financial year to June 2016 of 120,000-130,000 oz of gold production at a cash cost of between US$400-450/oz and all in sustaining costs in the range US$900-1000/oz.
• Mr Timler will have his time cut out to manage the expanded Co-O gold mine in the Philippines. The recent upgrading of the mine should give Mr Timler the opportunity to further expand gold production and apply his many years of experience to this newly expanded mine.
Minera IRL (LON:MIRL) Suspended – Cancellation of AIM listing
• Minera IRL is very sadly cancelling its AIM listing.
• The company’s Nomad, Cannacord, suddenly resigned on 3rd February making it difficult for any other Nomad to take up the Nomad role within the time available before cancellation of the AIM listing.
• The shares were delisted from the TSX late last year
• The shares continue to trade on the Lima stock exchange.
• The battle to regain control of the board of Minera IRL after the death of Courtney Chamberlain led to the removal of Jamie Pinto the company Chairman by shareholders
• Diego Benavides continues to work for the subsidiary company in Peru and we believe continues to work in the best interests of shareholders and the Peruvian community.
• Benavides continues to maintain gold production at the Corihuarmi gold mine in Peru and to work towards the development of the larger Ollachea gold project also in Peru.
• The Corihuarmi gold mine produced a total of 23,917oz of gold last year and is expected by local management to continue operation on the basis of some promising exploration data.
• Corihuarmi, which first produced gold in early 2008 and has subsequently delivered over 200,000 oz, has last reported reserves of 2m tonnes grading 0.3g/t gold for just 192oz of gold and another 2.4mt of measured and indicated ore grading 0.4g/t for another 304oz of gold. We understand the project has significant exploration upside following promising drill results which are reported to have extended the mine life into H2 2017.
• The Ollachea project is relatively robust with a probable reserve of 1m oz at an average grade of 3.4 g/t. Sensitivity analysis on the company’s website shows that even at a gold price of $1100/oz, the real NPV discounted at 7% is $107m with an IRR of 20.3% and a payback of 4 years.
Conclusion: We are very sorry to see Mineral IRL shares delist from AIM. We do not see this as in the interests of supportive shareholders and we hope the company will return with a reconstituted board which is better able to manage its business.