African Potash (LON:AFPO) – Interim results
Minera IRL (LON:MIRL) Suspended – Interims released and key board changes
SolGold* (LON:SOLG) – Rio Tinto playing the long game in copper
Resource stocks and commodities slide waiting for Fed Chair speech today
• Janet Yelland is expected to talk today on the prospects for the US economy and more importantly may signal the potential timing of the next US rate hike.
• Liquidity is typically low in the week after Easter with relatively small scale selling and risk-off trading disproportionately moving markets.
• We see the current market environment as offering further opportunity for investors to buy the resources sector
Copper vs plastics -
• News last week from EW Berger & Bros in the US indicate that plastic continues to replace copper in plumbing applications.
• Feedback from readers with houses fitted with plastic pipes is don’t fit plastic.
• Plastic pipes appear to suffer leaks/breaks within their first 10 years resulting in far greater cost in repair work than the marginal cost of fitting copper pipes in the first place.
• Copper has the added benefit of its anti-viral properties and is now being considered for handrails and worktops in hospitals and other public places.
Extel survey – voting for the Extel survey is open
• Please feel free to express your appreciation for our work by voting using the link below
• https://www.extelsurveys.com/QuickVote
PlOD along to the 121 Mining Investment Conference in London on 14th -15th April at 8 Fenchurch Place, Fenchurch Street Station
• See the inflatable PODs at the 121 Mining Investment Conference - Investors and analysts go free:
https://www.weare121.com/121mininginvestment-london/registration/register-investor/
Dow Jones Industrials -0.11% at 17,535
Nikkei 225 -0.18% at 17,103
HK Hang Seng +0.10% at 20,366
Shanghai Composite -1.28% at 2,920
FTSE 350 Mining -2.76% at 8,553
Economic News
Currencies
US$1.1183/eur vs 1.1169/eur yesterday. Yen 113.65/$ vs 112.86/$. SAr 15.512/$ vs 15.466/$. $1.426/gbp vs 1.408/gbp
0.752/aud vs 0.749/aud. CNY 6.509/$ vs 6.505/$.
Commodity News
Precious metals:
Gold US$1,217/oz vs US$1,216/oz yesterday –
Platinum US$950/oz vs US$954/oz yesterday
Palladium US$570/oz vs US$578/oz yesterday
Silver US$15.10/oz vs US$15.25/oz yesterday
Base metals:
Copper US$ 4,913/t vs US$4,943/t yesterday –
Aluminium US$ 1,483/t vs US$1,488/t yesterday –
Nickel US$ 8,628/t vs US$8,677/t yesterday – BCL, the Botswana nickel company plans to retrench up to 2,000 workers, cut its corporate jet and even dispose of some non-core assets.
Zinc US$ 1,763/t vs US$1,807/t yesterday
Lead US$ 1,750/t vs US$1,763/t yesterday
Tin US$ 16,960/t vs US$17,222/t yesterday
Energy:
Oil US$39.40/bbl vs US$39.91/bbl yesterday –
Natural Gas US$1.850/mmbtu vs US$1.850/mmbtu yesterday
Uranium US$29.70/lb vs US$29.70/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$55.8/t vs US$55.8/t –
Thermal coal (1st year forward cif ARA) US$41.20/t vs US$41.20/t yesterday – Weak demand in Europe seen depressing prices
• European demand for thermal coal has fallen from around 50mt at its peak to around 10mt driven lower by higher carbon taxes in the UK.
• South Korea appears to be driving demand in Asia driving up the price of Australian seaborne thermal coal
Other:
Tungsten - APT European prices stood at $168-185/mtu vs $165-180/mtu last week –
Ferrochrome – “The rand is destroying us: we are punished because our import costs rise and we are punished again because our customers in China ask for a lower price for ferro-chrome on the basis that the rand has devalued,” CEO of Afarak, an integrated chrome producer, said.
Company News
SolGold* (LON:SOLG) 3.1p, Mkt Cap 25.3m – Rio Tinto playing the long game in copper
• News last week indicates Rio Tinto’s love of copper following the announcement of Jean-Sebastien Jacques as the new CEO head of Rio Tinto.
• Mr Jacques has spent the last three years running Rio Tinto Copper, a near certain route to the top job at Rios.
• Rios see the copper market going into structural deficit as the world’s largest mines are expected to see declining production from falling grades.
• It is reported that Rios see a potential copper shortfall of >1mt within the next ten years.
• Rios has been milking its existing portfolio of copper mines for many years adding the giant Oyo Tologu mine in Mongolia to its portfolio in recent years
• The value of deals being done in the copper space also looks robust with Sumitomo buying a 13% stake in the Morenci Mine off indebted Freeport-McMoRan in a bit of a fire sale.
• Sumitomo paid $1bn for the stake equating to around $27,068/t of annual copper production and on our numbers around 55c per pound of copper resource (900mlbs).
• Cascabel: SolGold is drilling to prove up the scale of its Cascabel copper porphyry discovery.
• The grade and massive intersections of the copper and gold mineralisation at Alpala within the Cascabel license indicates potential for the development of a large scale block caving project.
• While this would require very substantial capital investment there is potential to drive into the orebody through the development of a long adit for development and eventual mining of the project.
• The major mining companies are interested in development of this type of giant orebody and for the use of greater automation to reduce costs for block caving. See video link below:
• https://www.youtube.com/watch?v=5JcdqqhZxp4
Conclusion: It is looking increasingly likely that SolGold has an elephant by the tail at Cascabel and each drill hole of >1km of mineralisation brings the company closer to marking its place in the history books of copper discovery.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project.
African Potash (LON:AFPO) 1.525p, Mkt Cap £11.8m – Interim results
• African Potash, the African fertilizer trading company, report interim figures for the six months to end December.
• Revenue of $59,000 in December from fertilizer sales led to a gross margin of $13,000 following costs of $46,000.
• Operating expenses of $622,000 and $107,000 of finance costs caused a loss of $716,000 for the period.
• The company now has a trading agreement with the ‘Common Market for Eastern and Southern Africa’ COMESA to supply and deliver fertilizers
• Cash: balance at end December $509,000.
• Lac Dinga potash project: The company retains its Lac Dinga potash project in the Republic of Congo.
• Fertilizer sales: The company signed an agreement for the supply of $10m worth of fertilizer sales providing a good opportunity to develop its trading strategy and business.
• African Potash received payment for the first 200t of fertilizer delivered to ‘Windmill’ out of a 3,000t order for urea fertiliser stock.
• Delayed payments: Unfortunately a delay in payments has led to the suspension of supply, the Chairman’s letter states “the delivery and payment schedule originally envisaged under the Zambian COMESA agreement, announced on 6 January 2016, has been protracted and I am aware of the frustration and, for some, concern, which this has brought. I would like to comfort investors and state that I have confidence that African Potash will deliver and that we will receive the full amount originally reported”.
• Meanwhile “The Company is continuing to build a pipeline of opportunities on the auspices of the COMESA agreement; further news will be provided to shareholders in due course via the normal regulatory channels when appropriate”.
Minera IRL (LON:MIRL) Suspended – Interims released and key board changes
• Minera IRL is finally getting back on track with the release of its long overdue interim results which were held up by the previous board.
• The COO, Eric Olson, under whose name many interesting and, in our view, potentially misleading press releases were issued has resigned with immediate effect.
• The interims were delayed on the issue of the eventual closure costs of the Corihuarmi gold mine in Peru. It is our view that this was a technical issue which was used to delay the publication of the results and to cause the delisting of the company in Toronto and the suspension of the shares in London.
• Mr Francis O’Kelly is appointed as a new non-executive director – he is one of the good guys!
• Mr. O’Kelly has an extensive background in Mining and Mining Finance. In his early career he worked in mines in Central and South America initially as a shift boss and ultimately as manager of a large gold mine. He then transferred to the banking sector and was appointed VP Mining at J P Morgan. He subsequently co-managed a mining investment house and ultimately worked on M&A mining projects for Standard Bank. He currently runs his own company dedicated to consulting to the mining sector. Mr. O’Kelly holds an honors degree in Mining Engineering awarded by the Royal School of Mines, Imperial College. He is a fellow of the Institute of Mining & Metallurgy, Chartered Engineer and Associate of the RSM..
• The interims will be available on the company’s website at https://www.minera-irl.com/en
o 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.
o 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 believe the project has significant exploration upside following promising drill results which are reported to have extended the mine life into H2 2017.
o 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: It is good to see Francis O’kelly join the board. We expect to see further positive progress in the near future.