Aureus Mining (LON:AUE) – Year end and operational review
Tertiary Minerals* (LON:TYM) – Storuman Mining Permit objections
Yellen gives dovish speech weakening the US dollar and raising oil and other commodity prices
• Janet Yellen, the Fed Chairman’s comments are in contrast to comments made by other Fed committee members though her dovish stance was not unexpected.
• Federal Reserve Bank of Chicago President speech tonight may well be more hawkish in comparison.
• The comments are likely to create further volatility in the US dollar, commodities and resources shares
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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 +0.56% at 17,633
Nikkei 225 -1.31% at 16,878
HK Hang Seng +2.15% at 20,803
Shanghai Composite -1.28% at 2,920
FTSE 350 Mining +5.48% at 8,921
Economic News
• Eurozone Business climate for March
• Germany Consumer prices for March
• US ADP national employment for March
• Federal Reserve Bank of Chicago President speech tonight – expected to be more hawkish than Yellen last night
Currencies
US$1.1319/eur vs 1.1183/eur yesterday. Yen 112.22/$ vs 113.65/$. SAr 14.998/$ vs 15.512/$. $1.439/gbp vs 1.426/gbp
0.766/aud vs 0.752/aud. CNY 6.467/$ vs 6.509/$.
Commodity News
Precious metals:
Gold US$1,239/oz vs US$1,217/oz yesterday –
Platinum US$972/oz vs US$950/oz yesterday
Palladium US$576/oz vs US$570/oz yesterday
Silver US$15.37/oz vs US$15.10/oz yesterday
Base metals:
Copper US$ 4,888/t vs US$4,913/t yesterday –
Aluminium US$ 1,495/t vs US$1,483/t yesterday –
Nickel US$ 8,517/t vs US$8,628/t yesterday – BCL, the Botswana nickel company plans to retrench up to 2,000 workers, cut its corporate jet and even dispose of some non-core assets.
Zinc US$ 1,792/t vs US$1,763/t yesterday
Lead US$ 1,745/t vs US$1,750/t yesterday
Tin US$ 16,810/t vs US$16,960/t yesterday
Energy:
Oil US$39.65/bbl vs US$39.40/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 – strengthening steel prices in China seen supporting iron ore futures prices
• Iron ore prices in China appear to have been anticipating a pick up in demand by local steel producers.
• Many steel mills are reported to be restarting production following an extended shutdown over the Chinese new year and National Peoples Congress.
• Some producers are reported to be struggling to meet debt repayments as a fall in domestic steel demand has hit higher cost and lesser quality producers hard.
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
Aureus Mining (LON:AUE) 6.55 pence, Mkt Cap £24m – Year end and operational review
• Aureus Mining which is operating the New Liberty gold mine in Liberia reports results today marking a transitional year from construction to gold production.
• The company earned $19.2m from 17,172oz of gold sales last year with gold production now significantly higher following commissioning and ramp up.
• Equipment failures and commissioning issues held back gold production. The failures created an opportunity for management to optimise and improve the gold production circuit and improve performance.
• Recovery rates have thus risen to >90% from 73% seen in early January and should give improved performance from here on with commercial production declared on 1st march this year.
• Aureus spent another $77m on the New Liberty gold mine though the capital addition is offset on the balance sheet by a $50.4m impairment based on lower gold prices.
• The extra money spent on the mine should give .
• The New Liberty mine in Liberia produced approximately 4,500 ounces of gold during the first 14 days of operations in March indicating a potential annualised production rate of around 117,000ozpa.
• Debt: The company deferred its initial debt repayment on 1st March and is in wider debt rescheduling discussions which may impact the value of the company.
• Total liabilities are $134m including borrowings of $102m vs Total assets of $281m
• Cash $7.1m.
• Aureus report a relatively modest loss of $11m excluding the $50m impairment on property, plant and equipment which tool the overall loss for the year to $62m
• Liberia remains Ebola free following the nation’s effective response to contain the disease.
Conclusion: Aureus is now in a good position to benefit from a rising gold price. The company is not out of the woods yet with respect to the rescheduling of its debt but rising cash flow generation should enable the restructuring to go through.
Tertiary Minerals* (LON:TYM) 1.6p, Mkt £3.5m – Storuman Mining Permit objections
• Tertiary Minerals which is looking to develop the Storuman fluorspar mine in Sweden report that two appeals have been received by the mining inspectorate in Sweden to the company’s exploitation (mining) license granted earlier this year.
• The objections are from the Sami Reindeer Husbandry Community and Urbergsgruppen, a Swedish environmental action group who oppose all mining activities throughout Sweden.
• The Sami regularly object to anything which might get in the way of their free roaming reindeer. Settlement is normally reached through the demarcation of clear paths for reindeer migration and in some cases reindeer bridges are built to ensure they are able to cross rail lines and other obstacles.
o The Urbergsgruppen also object to anything mining related in Sweden though mines are built despite their objection.
o The Sami have previously opposed the license application but The Swedish Mining Inspectorate appears to give precedence to the national interest of minerals over the national interest of reindeer herding. “The view of the Mining Inspectorate is that continued sustainable reindeer husbandry can co-exist alongside the mining operations providing that the Company implements appropriate protective measures/precautions”
o A Study of the Saami Resistance Movement Against the Swedish Mining Industry in 2015 argues for changes in the nation’s environmental and mineral laws connecting the issue with climate change. The paper states that the mining industry is considered to be one of the most important industries for the Swedish economy and employment.
o The paper goes on to state “The industry also neglects and stands in conflict with Sweden’s indigenous people, the Saami’s, right to land, cultural existence and the Saami’s unique way and knowledge of how to sustainably live off, and with, nature (Sametingets Gruvpolicy 2014).
o The Storuman project has 28mt fluorspar resource grading 10.2% fluorspar, with approximately 90% indicated.
o A scoping study by Scott Wilson consulting shows throughput of 1mtpa for 18 years to produce 103,000tpa of acid grade fluorspar at an overall capital cost of US$46m to generate a pre-tax NPV of US$33m (discounted at 8%) and an IRR of 24%.
o Flourspar is classed as a critical raw material by the European Union and as a strategic mineral by the USGS. The mineral is principally used as a flux for smelting and chemical production.
Conclusion: It will take a while for Tertiary management to work their way through the permitting process but we think they will get there in the end for their relatively inert fluorspar mining project.