Amur Minerals* (LON:AMC) – IKEN mineral resource update – a 30% in MI category
Aureus Mining (LON:AUE) – Further deferral of first debt repayment
European Metals (LON:EMH) – L-Max technology
Metminco * (LON:MNC) – Quarterly Report – Quinchia Gold Project
Petropavlovsk* (LON:POG) – Sale of non-core gold resource brings in $20m
Solgold* (LON:SOLG) – Hole 15R2 at Cascabel intersects “intense visible copper sulphide mineralisation” in Hole 15R2
Dow Jones Industrials +0.66% at 17,891
Nikkei 225 (Markets closed all week)
HK Hang Seng -1.85% at 26,077
Shanghai Composite +1.85% at 2,993
FTSE 350 Mining -3.97% at 9,965
AIM Basic Resources +0.62% at 1,937
Economic News
US – Consumer loans posted a strong increase in Q1/16, while businesses’ demand for credit was softer, the Federal Reserve data showed.
• “Over the first quarter, banks reported stronger demand across all consumer loan categories.”
• For business customers, “among the banks that reported weaker loan demand, customers; decreased investment in plant or equipment was the most commonly cited reason.”
• Weaker M&A activity and working capital funding requirements were also quoted as reasons for weaker commercial and industrial loan demand.
China – Private survey point to an accelerating contraction in the manufacturing sector in Apr compared to a stagnation suggested by official numbers.
• “Total new orders stagnated and new export work fell for the fifth month in a row,” the Caixin report said.
• “Further solid reduction in staff numbers.”
• On a more positive side, “inflationary pressures intensified across the sector in Apr, with input costs rising at the quickest pace since Jan/13, which in turn underpinned the quickest rise in output charges since Oct/11.”
• Caixin Manufacturing PMI: 49.4 v 49.7 in Mar and 49.8 forecast.
• Official Manufacturing PMI: 50.1 v 50.2 in Mar and 50.3 forecast.
• As in the previous month, services industry favoured better than manufacturing posting significantly stronger growth rate.
• Official Services PMI: 53.5 v 53.8 in Mar.
Japan – BoJ Governor voiced concerns over rapidly appreciating currency as the yen posted a 12% gain against the dollar this year.
• “There is a risk that the yen’s current appreciation brings an unwelcome impact on the economy,” Kuroda said.
• The currency continued to strengthen this morning breaking through the 106 level and currently trading around 105.7.
South Korea – Inflation held steady at 1.0%yoy and was marginally stronger at 1.8%yoy after adjusting for volatile components.
• The Bank of Korea left rates unchanged at 1.5% earlier in Apr while trimming its growth and inflation forecasts for a second time this year.
• The Bank expects the economy to grow 2.8% this year, down from 3.2% forecast in Jan.
• Inflation estimates have been brought down to 1.2% versus 1.7% estimated in Jan.
Brazil – Economists downgraded 2016 growth forecasts for a 15th week in a row a weekly survey released by Brazilian central bank showed.
• The economy is forecast to contract by 3.89% this year, following last year’s 3.8% decline which mare the worst performance in 25 years.
• Analysts project a 0.4% growth in 2017 as chances of Ms Rousseff leaving the government rise.
Australia – The Australian currency is off more than 1% trading at 0.761 after the RBA has unexpectedly cut rates by 25bp to a new low of 1.75%.
• The decision has been driven by weak inflation numbers released last week showing consumer prices contracted from the previous quarter in Q1/16 (-0.2%qoq).
• A trimmed mean CPI, one of the RBA preferred gauges of inflation, climbed 1.7%yoy last quarter, down from 2.1%yoy in Q4/15 and 2.0%yoy forecast.
• It was the weakest level of inflation since 1999 and fell short of the 2-3% target.
• “While the quarterly data contain some temporary factors, these results (inflation numbers), together with ongoing very subdued growth in labour costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast,” RBA statement read.
Currencies
US$1.1589/eur vs 1.1376/eur yesterday. Yen 105.83/$ vs 107.07/$. SAr 14.342/$ vs 14.230/$. $1.470/gbp vs 1.460/gbp
0.758/aud vs 0.763/aud. CNY 6.479/$ vs 6.485/$.
Commodity News
Precious metals:
Gold US$1,297/oz vs US$1,275/oz yesterday
• Gold ETFs 57.3moz unch vs 56.5moz yesterday – good rise in ETF holdings
Platinum US$1,083/oz vs US$1,059/oz yesterday
Palladium US$620/oz vs US$629/oz yesterday
Silver US$17.62/oz vs US$17.72/oz yesterday
Base metals:
Copper US$ 4,948/t vs US$5,000/t yesterday
Aluminium US$ 1,656/t vs US$1,673/t yesterday
Nickel US$ 9,580/t vs US$9,445/t yesterday
Zinc US$ 1,916/t vs US$1,933/t yesterday
Lead US$ 1,777/t vs US$1,782/t yesterday
Tin US$ 17,305/t vs US$17,210/t yesterday
Energy:
Oil US$45.4/bbl vs US$48.3/bbl yesterday –
• Of the oil price that “2016 will be a transitional year” and if the year to date has proved anything, it is that it is certainly that. In January, we said that “this leg will be seen as a relatively short lived down leg in the context of an upward saw tooth growth pattern,” both of which have come to pass.
• What is curious, however, is that in the context of the underlying supply/demand balance, nothing much happens in the space of 5 months. Consequently, just as the market psychology has driven down the market, so too has it driven the rebound. This will inevitably result in greater volatility, at least in the short term, as we continue to make progress towards our estimated year end oil price of $60/bbl.
• While the only thing you can guarantee about oil price estimates is that they will be wrong, at one thing that is certain is that due to the limited availability of financial resources to invest in world-scale projects, within two years the market is going to be worried about a shortfall. In this the fundamental supply/demand balance shifts away from supply the further out you look, which is better for the oil price.
Natural Gas US$2.056/mmbtu vs US$2.145/mmbtu yesterday
Uranium US$27.65/lb vs US$27.65/lb yesterday
Bulk comodities:
Iron ore 62% Fe spot (cfr Tianjin) US$62.2/t vs US$62.0/t –
• Gains in iron ore prices driven by an increase in steel production and mills’ restarts through Q1/16 in China are likely to see undone as port inventories climb to the highest in more than a year and as producers’ slow purchases of the ore.
• Chinese port stockpiles are reported to have climbed 1.2% to 98.5mt last week.
• Looking back at the Jan-Apr period, economic data being released sheds some light on reasons behind a spectacular growth in iron ore prices.
• Over 60 blast furnaces nationwide are said to have been brought back into production during Q1/16, according to China Metallurgical news.
• At the same time, the steel PMI jumped to 57.3 last month crossing the 50.0 level for the first time in two years.
• Iron ore futures traded in Asia have come down 6.9% this week below the US$60/t mark.
Thermal coal (1st year forward cif ARA) US$46.2/t vs US$46.8/t yesterday –
Other:
Tungsten - APT European prices stood at $205-215/mtu vs $188-210/mtu last week
Company News
Amur Minerals* (LON:AMC) 4.8p, Mkt Cap £24.5m – IKEN mineral resource update – a 30% in MI category
• An updated JORC-compliant mineral resource statement on the Ikenskoye/Sobolevsky deposit (IKEN), the second largest mineral target in the Kun Manie project, has been released today.
• The MI mineral resource increased to 29.4mt at 0.46% Ni and 0.12% Cu for 134.8kt nickel and 35.6kt copper contained.
• That indicates a 30.1% increase in tonnage terms, a 26.1% growth in nickel contained and a 29.5% rise in copper contained compared to the previous statement from Jul/13.
• Total mineral resource was little changed at 35.2mt at 0.51% Ni and 0.13% Cu for 180.8kt nickel and 47.1kt copper.
• An expanded MI resource provides a good base to grow the mineral reserves inventory to be included in the DFS.
• In addition to enhanced confidence level in the mineral inventory, updated resources delineate high grade portion of the IKEN deposit.
• In particular, MI resource category includes 12.5mt of continuous high grade material averaging 0.79% Ni for 98.5kt nickel, accounting for 73% of the MI total.
• Total high grade portion of the deposit is estimated to host 16.9mt at 0.82% Ni for 139.1kt nickel, accounting for 77% of the total mineral resource.
• The geological model assumes both open pit and underground mining methods to be used in the operations’ development.
• The Company is currently working with SRK on updating the third and final resource at Kubuk before focusing on re-estimation of available mineral reserves.
Conclusion: Resource update results are encouraging given an expansion of the MI category at both MKF and IKEN that would be used for Mineral Reserves estimates with a subsequent inclusion in the DFS. More importantly, an increase in MI category is supported by the definition of the portions of high grade continuous mineralization accounting for most of the contained metal at deposits (75% of the MI resource at MKF and 73% at IKEN). These resource adjustments may prove to be economically enhancing to the Kun Manie project allowing to reduce the operations’ nickel breakeven price.
*SP Angel act as Nomad and Broker to Amur Minerals
Aureus Mining (LON:AUE) 6.5 pence, Mkt Cap £35.2m – Further deferral of first debt repayment
• Aureus Mining reports that it has received the approval of its lenders for a further deferral of the first debt repayment until 31st May 2016.
• The first repayment was originally scheduled for 31st January and subsequently deferred until 29th April. Discussions with the lenders relating to a the longer term mine plan and the debt repayments are continuing with a number of mine planning options prepared by the company and the international consultants, SRK, under discussion.
• The New Liberty gold mine in Liberia first declared commercial production in early March, following a number of commissioning issues which disrupted the ramp up of production. Subsequent reports have shown a build-up of production and improvement of recovery rates to over 90%. Gold production during the first 14 days of March were on course for annual output of around 117,000 oz pa.
Conclusion: Aureus Mining expects to make a further announcement regarding the life-of-mine plan for New Liberty shortly – we look forward to news of the revised plan and the debt rescheduling.
European Metals (LON:EMH) 15.9 pence, Mkt Cap £13.8m – L-Max technology
• European Metals announced yesterday in London and Australia that it has signed a licensing agreement to use L-Max process technology.
• The L-Max process has been shown in test work to recover 98% of the contained lithium to concentrate with 99.5% of this lithium then recovered from the concentrate by leaching.
• The company estimates an operating cost of around $1,500/t after inclusion of a sulphate of potash credit, making the process costs comparable with estimated lithium recovery costs from lithium rich clays.
• Tin and tungsten credits should reduce estimated costs further
• Investors should note that these costs are likely to be from the scoping study work and are subject to change and potential increase on further evaluation.
• EMH is to pay a $20,000 license fee to Lepidico, the owners of the L-Max process technology.
• There is an additional option fee of $25,000 if the option is extended by a further 12 months.
• Upon exercise of option, the Company must make an additional payment of $30,000 plus the issuance of 890,215 CDI's in EMH
o Royalty: Lepidico also get a 2% gross product royalty on the lithium and all other by products recovered using the L-Max technology. This is where Lepidico will gain most value if the process works and the mine is put into production.
Metminco * (LON:MNC) 0.2 pence, Mkt Cap £6.6m – Quarterly Report – Quinchia Gold Project
• Metminco reports on an eventful quarter which saw the acquisition of a near-term gold development project at Quinchia in Colombia and the completion of a promising exploration drill-hole at the Los Calatos property in Peru which shows possible opportunities to expand the known mineral resources.
• The acquisition of the 2.8m oz Quinchia property in Cauca gold belt of Colombia remains on track for completion by 31st May and the company is planning to complete a Feasibility Study on the 1.88moz Miraflores property by the end of this year “followed by the submission of a mining plan and application for all the operating permits to the relevant mining authorities.”
• Although Miraflores is the most advanced of the acquired projects, Metminco has already identified possible expansion opportunities both within the existing project and at other projects within the licence areas, including at Dosquebradas where 1.04m oz of inferred resources have already been identified by the previous owners and on the Tesorito property.
• In addition to the exploration potential, Metminco has also identified improvements to the Preliminary Economic Assessments prepared by the previous owners, Seafield Resources. These enhancements include the use of mining contractors and higher mining and production rates to improve unit costs and taking advantage of the suppressed state of the construction industry and the devaluation of the Chilean Peso to improve capital costs are to be incorporated in the feasibility study.
• Discussions with potential equity funding partners for the Los Calatos property in Peru are continuing while a recently completed exploration drill-hole at the TD2 target area has supported the company’s “expectations of the presence of a probable deeper seated porphyry system adjacent to the Los Calatos deposit. Reported gold and silver levels significantly higher than those reported to date is an interesting development that requires further investigation.”
• The drilling results at TD2 include an intersection of 35m of mineralisation grading 0.24g/t gold and 2.64 g/t from an in-hole depth of 311m. Although the tenor of the assays are sub-economic at today’s metal prices, the company comments that this intersection “is some 13 times higher than the mean gold value associated with the underlying porphyry, as intersected in the main Los Calatos deposit.”
Conclusion: Metminco’s acquisition of a near development gold opportunity in the prolific Cauca gold region of Colombia provides the company with a route to relatively near term cashflow while the continuing work at Los Calatos indicates that there may be additional mineralised bodies beyond the deposits so-far identified. We look forward, in due course, to news of the continuing discussions with potential joint-venture partners at Los Calatos.
*SP Angel act as joint-broker to Metminco
Petropavlovsk* (LON:POG) 8.7p, Mkt Cap 286m – Sale of non-core gold resource brings in $20m
Target price and valuation under review
• Petropavlovsk (POG) has brought in $20m from the sale of non-core gold resources in regions away from the company’s existing mines.
• The disposal of the Visokoe deposit in Krasnoyarsk and als a 49% stake in the Verkhnetisskaya Ore Mining Company brings in $7.5m by end May.
• The Visokoe deposit contains some 1.2moz of non-refractory JORC Probable gold Reserves and 1.3moz of Mineral Resources.
• POGs recorded a $32.5m impairment charge against the assets at end December.
Conclusion: The sale of the assets for $20m values the asset at $16.7 per ounce in the ground. The low value of the JORC resource appears to reflect the remote location and distressed value of Russian mineral assets where few buyers are available with sufficient cash to make such an acquisition.
*SPAngel analysts have visited the Pioneer, Malomir and Albyn gold mines in Russia
Solgold* (LON:SOLG) 3.55p, Mkt Cap £33.9m –Hole 15R2 at Cascabel intersects “intense visible copper sulphide mineralisation” in Hole 15R2
• Solgold reports that its exploration drill-hole 15R2, which is targeting “extensions of the Alpala deposit to the north, and at depth, some 100m north of the deeper high-grade zone intersected in Hole 9, which returned 1050.8m @ 0.68% Cu and 0.92 g/t Au, including 420m @1.00% Cu and 1.34 g/t gold.” has now “intersected well over 1000m of intrusion hosted, porphyry style copper sulphide mineralisation.”
• Hole 15R2 is currently at a depth of 1595.7m and is planned to extend to a depth of 1800m. the company describes the mineralisation encountered in this hole as “intense visible copper sulphide mineralisation which is increasing with depth.” No assay results have yet been reported, however, photographs of drill core which have been released to the company’s website and are referenced in today’s announcement show mineralised veining containing the copper sulphide minerals chalcopyrite and bornite.
• The sequence of photographs show a general increase in the intensity of mineralisation at deeper levels of the borehole, with a particularly intense zone of chalcopyrite mineralisation shown at a depth of 1412.3m.
• In addition to the information on Hole 15R2, Solgold also reports that Hole 17 is currently at a depth of 729.2m and is drilling through visible mineralisation. Hole 17 is aimed at investigating the shallower extensions of the mineralisation encountered in holes 5 and 12 which returned intersections of 1306m at an average grade of 0.62% copper and 0.54 g/t gold (from 24m) and 1312m averaging 0.67% copper and 0.63 g/t gold (from 128m) respectively.
• Hole 17 is planned to continue to a depth of 1300m and the company expects to encounter “the main target zone from around 600m to 1150m depth.”
Conclusion: Solgold’s drilling programme at Cascabel is continuing to encounter wide intersections of copper gold mineralisation. The photographs of drill core show strong mineralisation at depth and we look forward to the assay results.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project