Edenville Energy (LON:EDL) - Start of initial access works at Mkomolo
European Metals (LON:EMH) – Lithium resource estimate for Cinovec
FinnAust Mining* (LON:FAM) – End-sale markets for Pituffik titanium concentrates
Solgold* (LON:SOLG) – Hole 17 at Alpala intersecting visible copper sulphide mineralisation
Gold prices hold steady despite stronger US dollar as Dallas Fed President says will push for interest rate hike in June or July
• The hawks are out in the US looking for rate rises as US consumer price rises hit three year high in April indicating potential for higher domestic inflation (partially driven higher by oil).
• The Doves will try to hold back any Fed rises as contagion from destabilising debt-laden Emerging Markets is still seen as a significant risk to the US economy.
• US housing starts also posted good gains in April as the US economy benefits from ongoing low interest rates
• The data raises the potential for a US rate hike sooner rather than later though we would not expect all indicators to be so positive as businesses struggle to maintain earnings growth.
US imposing 500% duty on Chinese steel
• Policymakers have at last seen sense and have slapped a whopping 500% duty on Chinese steel.
• China continues to give tax rebates to steel exporters as it claims to restructure domestic steel production.
• The move could serve to collapse steel prices in China which might lead to some negative impact for Chinese traders
• China’s ministry of commerce has expressed its ‘strong dissatisfaction’ with the ruling
• The US takes just 2% of Chinese steel exports
o It is said that it takes the US Senate around 9 months to pass legislation versus around 22 months for the EU indicating that the EU might get round to imposing anti dumping duties on Chinese steel sometime in H2 next year. Though the EU might move rather faster now the US has set its duties.
o Perhaps if the EU moved its parliament to Port Talbot for a week they might get a move on with better protecting Europe’s steel industry
Dow Jones Industrials +1.02% at 17,530
Nikkei 225 -0.05% at 16,645
HK Hang Seng -1.45% at 19,826
Shanghai Composite -1.27% at 2,808
FTSE 350 Mining -3.23% at 8,948
AIM Basic Resources +0.18% at 1,919
Economic News
US – The US dollar index is back on an appreciating trajectory following the release of better than expected economic data and as Dennis Lockhart, president of the Atlanta Fed, saying markets are underestimating chances of a rate rise in Jun.
• Chances of a rate hike during the Jun meeting climbed to 28% today, up from 26% yesterday, according to Fed funds futures.
• Inflation accelerated to a three-year high driven by rising fuel and food costs in Apr.
• CPI: 0.4%mom/1.1%yoy v 0.1%/0.9%yoy in Mar and 0.3%mom/1.1%yoy forecast.
• Core CPI remained above the 2.0% mark coming in at 2.1%yoy v 2.2%yoy in Mar.
• Additionally, industrial production numbers beat estimates with the property market also growing stronger.
• Industrial output: 0.7%mom, the strongest growth pace in 17 months, in Apr and 0.3%mom forecast.
• Housing starts: 1.2m units in Apr v 1.0m in Mar and 1.1m forecast.
Japan – Stronger than forecast Q1 GDP numbers contributed to a volatile trading in Japanese equities.
• Q1 GDP: 0.4%qoq/1.7%yoy v -0.4%qoq/-1.7%yoy in Q4/15 and 0.1%qoq/0.3%yoy growth forecast.
• Lower oil prices cut the import bill and benefited consumption; although, business investment remained weak.
• Topix stock index and the yen both traded higher following the release of the GDP data but have given up most of their gains as traders assessed whether strong economic numbers would translate into a weaker pace in monetary easing and if the government would go with a 2017 sales tax rise.
• In addition, Q2/16 may prove to be a challenging quarter given a 2.5% yen appreciation through Q2 so far and disruptive effects of an earthquake recorded in the southern part of the country in Apr
China – Local equity markets closed lower today following Wall Street despite the release of positive property data.
• Property prices posted a monthly increase in 65 of 70 large cities in Apr, up from 62 in Mar.
• At an annualized pace prices climbed in 46 of 70 cities.
• On a downside, the distribution of gains seems skewed towards top-tier cities, which (once again) led growth.
• Prices in Shenzhen soared 62.4%yoy, accelerating from a 61.1%yoy gain in Mar. Shanghai prices were 25%yoy up while those in Beijing, Nanjing, Xiamen and Hefei climbed c. 20%yoy.
UK – Producer prices’ deflation continued to slow down in Apr with energy prices continuing to be the main drag on the headline number.
• Factory gate prices were down 0.7%yoy last month v -0.9%yoy in Mar, according to the ONS.
• PPI run in the negative since Jun/14.
• Property prices 9%yoy in Mar as buy-to-let investors and second homebuyers rushed to beat a rise in stamp duty in Apr.
Italy – The economy settles in the stagnation territory with the national statistics office forecasting 1.1% growth through 2016.
• This marks a downwards revision from a 1.4% increase estimated in Nov last year and a marginally weaker growth forecast the Matteo Renzi’s government of 1.2%.
• The economy expanded at 0.8%yoy in 2015, emerging from a three-year recession.
South Africa - finance minister reported arrested
• The South African rand hit a new low today as the nation’s finance minister Neither Gordhan was arrested.
• Gordhan was reported to be aware of his imminent arrest and is quoted as saying he would not be intimidated
• The minister has been campaigning to root out corruption and recently asked for all government contracts to go out for tender.
Myanmar (Burma) – US eases economic sanctions as Obama signals support for ongoing political reform
• The BBC report the lifting of economic sanctions by the US against Myanmar today.
• The US has been keen to lift sanctions but the process appears to have been slowed at the request of Ms Suu Kyi.
• Military contracts are still sanctioned and measures against some individuals have been expanded.
Ecuador – another earthquake has hit Ecuador
• This time the earthquake is 6.7 in the Richter Scale and is centered at 32km depth
• The quake hit near Esmeraldas, Ecuador at 07:57:05.00 UTC on May 18, 2016
• Ecuador gets allot of lesser Earthquakes though at 6.7 this is relatively large
• The nation was hit by a massive 7.8 Richter earthquake about a month ago
Currencies
US$1.1270/eur vs 1.1324/eur yesterday. Yen 109.46/$ vs 109.63/$. SAr 15.840/$ vs 15.626/$. $1.445/gbp vs 1.447/gbp
0.727/aud vs 0.732/aud. CNY 6.536/$ vs 6.525/$. –
Commodity News
Precious metals:
Gold US$1,271/oz vs US$1,271/oz yesterday –
Gold ETFs 58.7moz v 58.6moz yesterday –
Platinum US$1,042/oz vs US$1,048/oz yesterday –
Palladium US$581/oz vs US$589/oz yesterday –
Silver US$17.03/oz vs US$17.14/oz yesterday –
Base metals:
Copper US$ 4,576/t vs US$4,651/t yesterday
Aluminium US$ 1,536/t vs US$1,555/t yesterday
Nickel US$ 8,595/t vs US$8,725/t yesterday –
Zinc US$ 1,875/t vs US$1,891/t yesterday
Lead US$ 1,701/t vs US$1,738/t yesterday
Tin US$ 16,770/t vs US$16,905/t yesterday
Energy:
Oil US$49.0/bbl vs US$48.9/bbl yesterday
Natural Gas US$2.051/mmbtu vs US$2.049/mmbtu yesterday
Uranium US$28.65/lb vs US$28.35/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$52.0/t vs US$50.3/t –
Thermal coal (1st year forward cif ARA) US$47.0/t vs US$47.1/t yesterday –
Other:
Tungsten - APT European prices stood at $215-225/mtu vs $205-215/mtu two weeks ago – prices unchanged on last week
Company News
Edenville Energy (LON:EDL) 0.0325 pence, Mkt Cap £3.0m - Start of initial access works at Mkomolo
• Edenville Energy reports that it has started initial road building and work to improve river crossings in the vicinity of its Rukwa coal-to-power project in Tanzania.
• The initial works are in and around the 173m tonnes Mkomolo coal deposit in order to improve access to the deposit and surrounding villages.
• In March this year the company announced that it had received permits to mine coal from the Mkomolo deposit. One of the requirements of the licence was that development work should start within three months and this work would seem to help meet that condition.
• The company also announced in March that “As a next step, the Company expects to announce the signing of a Framework Agreement setting out the milestones for a Power Purchase Agreement (“PPA”) with Tanzania Electric Supply Company Ltd”.
Conclusion: The start of work to improve access to the mining area keeps the Rukwa coal-to-power project moving forwards. We look forward to further news on progress on the discussions for the Power Purchase Agreement.
European Metals (LON:EMH) 15.9 pence, Mkt Cap £13.8m – Lithium resource estimate for Cinovec
• European Metals has released an initial resource estimate for the lithium content of its Cinovec deposit in the Czech Republic.
• The company reports an indicated resource of 49.1m tonnes at an average grade of 0.2% lithium (0.43% lithium oxide) and an inferred resource of 482.9m tonnes at the same grade. The estimates use a 0.1% lithium cut-off grade.
• The estimate was prepared by an independent consultant, Mr Lynn Widenbar of Widenbar and Associates and is “based on a modest drill program completed in the southern part of the project. A much larger drill program will commence next month to test higher grade, shallower lithium mineralisation in the northern half of the project”.
• The Cinovec deposit has historically been mined for tin and today’s announcement also reports a revised estimate for the tin resource. Using a 1% tin cut-off, the company reports a indicated resource of 15.7m tonnes at an average grade of 0.26% tin and an inferred resource of 59.7m tonnes at an average grade of 0.23% tin.
• We note that the tin resource estimate also shows lithium grades of 0.23% for the indicated tonnage and 0.21% for the inferred portion. It is not clear the extent to which the separately reported, larger, lithium resource overlaps this estimate.
• The estimates, which are reported “in accordance with the guidelines of the JORC Code (2012” are based on 68,932 assays “derived from almost 800 historic underground and surface diamond drillholes, [totalling over 83,000 metres]historic underground channel sampling [from 21.5 km of underground development completed by the Czech Government from the 1960s to the 1980s] as well as the 8 surface diamond holes drilled to date by European Metals.”
Conclusion: The initial lithium resource at Cinovec is based on work in the southern part of the deposit. It is likely to be enlarged when drilling on the northern part of the deposit, which is due to start next month, has been completed.
FinnAust Mining* (LON:FAM) 5.7p, mkt Cap £27.6m – End-sale markets for Pituffik titanium concentrates
• FinnAust Mining report the identification of two prospective end-sale markets for product from the Pituffik titanium mineral sands.
• The non-optimised concentrate is reported to be well suited for direct use in the sulphate production process for titanium dioxide pigment.
• The low impurity levels of the concentrate are seen as good for quality pigment production and the material is seen as easily soluble in low strength sulphuric acid.
• A little extra purification could also enable its sale for chloride slag manufacture for TiO2 pigment or titanium metal.
• TZMI, experts in titanium mineral concentrates, reckon the market for ilmenite should show increasing deficit in the medium to longer term with the potential to deliver Pituffik into this forecast market shortfall.
• The TZMI report on Pituffik’s mineral sand concentrates should help to secure off-take contracts for FinnAust as it looks to develop initial production from the project
• Pigment sales are estimated to have risen by 6-12% in Q1 yoy.
Conclusion: This is one of those transformational announcements where a prospect goes from being somewhat possible to rather more probable.
The great news in this announcement is that FinnAust should have a relatively easy process for the mining and simple concentration of titanium mineral sands for shipment and sale.
The news on low impurity levels is critical for offtakers and consumers and should, in theory, help the company raise offtake finance and move more quickly into production.
* SP Angel acts as nomad and broker to the company
Solgold* (LON:SOLG) 3.65p, Mkt Cap £34.8m – Hole 17 at Alpala intersecting visible copper sulphide mineralisation
• Solgold reports that hole 17 is currently at a depth of 999m and has been encountering “strong visible mineralisation from 641.3 metres”.
• Hole 17, which is “targeting shallow extensions of the Alpala deposit to the west, along the interpreted continuation of strong copper and gold mineralisation intersected in Holes 1,5 and 12” has a planned depth of 1400 metres and extends “the surface footprint of the high grade mineralisation approximately 100 metres south west and approximately 300 metres higher at this position.”
• Although assay results from hole 17 are not yet available, previous results included a 100m intersection at an average grade of 0.65% copper and 1 g/t gold from a depth of 222m in Hole 1; a 552m long intersection at an average grade of 1.03% copper and 1.05 g/t gold from a depth of 778m in Hole 5 and a 576m long intersection grading 1.03% copper and 1.19 g/t gold from a depth of 844m in Hole 12.
• The company notes that Hole 17 entered a zone of “very intense visible bornite-chalcopyrite copper sulphide mineralisation from [a depth of] 816.2m”. Photographs of drill core available on the company’s website illustrate a general increase in the intensity and width of veining at greater depths.
• The second rig at Alpala is currently drilling hole 15R2 to a revised target depth of 2000 metres “having intersected over 950m of significant over 950m of significant intrusion hosted, porphyry style copper sulphide mineralisation from 803.2m to the current depth of 1749.4m.”
Conclusion: Solgold’s drilling continues to expand the known extent of the mineralisation at Alpala with long mineralised intersections. We look forward to the assay results from both Hole 15 and Hole 15R2 as they become available.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst has visited the Cascabel project