Amur Minerals* (LON:AMC) – Ongoing development funding discussions with sovereign and private funds; Warrants conversion
Kibo Mining (LON:KIBO) – Completion of Phase 1 Environmental & Social Impact Study
Sirius Minerals (LON:SXX) – Salt Resource may provide additional product line
Strategic Minerals (LON:SML) – Q1 update
Shady dealings in tin industry in Indonesia
• What a surprise! An official audit of the tin industry on the Bangka Belitung Islands has found indications of massive foul play in the management and operations of firms in Indonesia’s largest tin-producing region.
• There are some 29 active tin smelters and 47 registered facilities in the province.
• 2015 Trade Ministry regulations on tin exports require producers to secure a production operation license and also ‘clean-and-clear’ certification before production.
• Of 775 license holders only 498 currently hold clean-and-clear certificates.
• The ministry is to further audit tin producers and private tin smelters following reports of alleged illegal tin exports.
• A report by Indonesia Corruption Watch illegal tin exports from 2004 to 2013 reached some 300,000t. Anything which hits global tin prices appears to be a sensitive issue for Indonesia.
• Indonesian tin exports hit 6,911t in April based on pre-shipment checks down slightly on 7,190t a month earlier
Palladium – good news and bad news
• The good news is that researchers in China have discovered a way in which to disperse palladium atoms in catalysts to maximize the availability of individual noble metal atoms in the catalyst.
• The bad news is that this may enable further thrifting of catalysts.
• But panic not, if the improved performance works well then the more efficient use of palladium might find greater use and regulators might be able to toughen emissions standards yet further.
• It is possible that the technique might also work with other industrially important catalysts.
• We suspect it will take some years for the process to potentially become more widely available.
Sterling jumps on poll of 55% backing staying in EU
• It may be a bit premature for sterling to move given the rather slim majority backing staying in the EU.
• It looks all too easy for one or two critical facts to swing the vote given the closeness of the poll.
Dow Jones Industrials -0.02% at 17,527
Nikkei 225 +0.01% at 16,647
HK Hang Seng -0.67% at 19,694
Shanghai Composite -0.02% at 2,807
FTSE 350 Mining -4.77% at 8,606
AIM Basic Resources -0.54% at 1,919
Economic News
Moody’s cut growth rates for the US, Canada, Italy, Japan and the UK with a sharper than expected deceleration in Chinese growth being “one of the biggest risks to the global economy”.
• Chinese economy is forecast to slow down to 6.3% this year, down from 6.9% recorded in 2015.
• This compares to an official range targeted of 6.5%-7.0% for 2016.
• The US economy is estimated to grow 2.0% this year, down from 2.3% expected previously, before posting a 2.3% increase in 2017.
• The Fed is to raise rates twice this year, according to the agency.
• Strengthening consumption led by improving labour market as well as robust services industry is expected to lead US growth.
US – The minutes of the Fed Apr meeting showed a number of policymakers said it would be “appropriate” to hike rates on Jun 15 given an improving trajectory in labour market and inflation remain.
• Yields on government debt climbed together with the US dollar weighing on oil and metal prices.
• A separate report highlighted the effect of lower energy prices on the gasoline usage.
• US motorists are estimated to have used 9.8mmbbl of gasoline per day last week, the US EIA data showed.
• This is the second strongest weekly reading on record.
• The record of 9.8mmbbl per day was set on Aug/07.
Japan – A rebound in machinery orders led gains in the Japanese yen.
• Machinery orders: 3.2%yoy in Mar v -0.7%yoy in Feb.
• Core machinery orders: 5.5%mom in Mar v -9.2%mom in Feb, which was the first decline since Nov/15.
UK – Unemployment held unchanged at 5.1% while the number of people in work hit a fresh record high of 74.2% in the three months to Mar/16.
• An increase in the employed percentage was driven by a decline in the number of people who were not actively looking for a job during the period.
• Average earnings climbed 2.0%yoy/2.1%yoy (inc/excl bonuses) during the period, compared to 1.8%yoy/2.2%yoy in the three months to Feb/16.
• UK retail sales rise in April
Australia – The Aussie is trading lower today as the economy is reported to have added less jobs than forecast in Mar with Feb data revised downwards.
• 10.8k jobs were created in Mar v 12k expected.
• Feb numbers have been revised down to 25.7k compared to 26.1k estimated previously.
• Additionally, the report showed that all gains are coming from part-time positions with full time jobs posting a 9.3k fall in Mar (-10.0k in Feb).
Currencies
US$1.1224/eur vs 1.1270/eur yesterday. Yen 110.08/$ vs 109.46/$. SAr 15.805/$ vs 15.840/$. $1.465/gbp vs 1.445/gbp
0.721/aud vs 0.727/aud. CNY 6.544/$ vs 6.536/$. –
Commodity News
Precious metals:
Gold US$1,255/oz vs US$1,271/oz yesterday –
Gold ETFs 58.7moz unch v 58.7moz yesterday –
Platinum US$1,021/oz vs US$1,042/oz yesterday –
Palladium US$573/oz vs US$581/oz yesterday –
Silver US$16.66/oz vs US$17.03/oz yesterday –
Base metals:
Copper US$ 4,578/t vs US$4,576/t yesterday
Aluminium US$ 1,551/t vs US$1,536/t yesterday
Nickel US$ 8,545/t vs US$8,595/t yesterday –
Zinc US$ 1,858/t vs US$1,875/t yesterday
Lead US$ 1,695/t vs US$1,701/t yesterday
Tin US$ 16,670/t vs US$16,770/t yesterday
Energy:
Oil US$49.5/bbl vs US$49.0/bbl yesterday
Natural Gas US$2.025/mmbtu vs US$2.051/mmbtu yesterday
Uranium US$28.65/lb vs US$28.65/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$51.1/t vs US$52.0/t –
Thermal coal (1st year forward cif ARA) US$46.7/t vs US$47.0/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
Amur Minerals* (LON:AMC) 4.90p, Mkt Cap £25.2m – Ongoing development funding discussions with sovereign and private funds; Warrants conversion
• The Far East and Baikal Region Development Fund, the sovereign investment vehicle, expressed interest in providing assistance in financing of pre-development stages of the Kun Manie project including the DFS.
• Additionally, the Company held talks with a number of Korean investment funds during meetings hosted by the Russian sovereign fund and discussed opportunities for participating in the Kun Manie project.
• The management examined options to attract Korean counterparties for “design-and-build contracts” as well as “metal off-take and streaming schemes”.
• In a separate release, the Company announced that 10.0m warrants of a total of 24.5m issued to and held by Crede CG III will be converted in stock.
• The conversion ratio is 1.5 shares per each exercised converted warrant.
• Under the terms of the agreement Crede CG II may not hold any interest in the Company before opting for a conversion of warrants and hence it will hold 2.9% of total issued share capital once new 15.4m shares are admitted to trading.
• This will bring the total number of outstanding shares to 530.3m.
Kibo Mining (LON:KIBO) 4.75 pence, Mkt Cap £16.7m – Completion of Phase 1 Environmental & Social Impact Study
• Kibo Mining reports that it has successfully completed the Phase 1 Environmental and Social Impact Assessment (ESIA) for the Mbeya Coal-to- Power Project (MCPP) in Tanzania. The Tanzanian Government authorities have formally accepted the study and it has been officially registered.
• Phase 2 ESIA work is already underway “with most of the specialist studies that are required for Phase 2 nearing completion.”
• Kibo Mining is planning a 250-350MW mine mouth power plant based on mining around 1.5mtpa of coal from a resource of some 121m tonnes of coal within seven seams over a period of 27 years.
• Kibo Mining’s website indicates that Tanzania has less than half of the 2,000MW of power generation capacity required and is “facing increasing power generation under capacity to meet its economic development needs”.
Conclusion: Development of the MCPP has the potential to contribute to filling Tanzania’s power supply deficit and the formal approval of the ESIA Phase 1 study is a milestone in achieving this objective.
Sirius Minerals (LON:SXX) 18.5 pence, Mkt Cap £424.5m – Salt Resource may provide additional product line
• Sirius Minerals has announced that, in addition to the polyhalite resource which forms the basis of the North Yorkshire Potash Project, it has identified an inferred resource of halite (rock salt) of 550 million tonnes at an average grade of over 93% sodium chloride within the mining area.
• A higher grade portion of this resource includes 210m tonnes at a “mean grade of greater than 95% NaCl.”
• Sirius Minerals indicates that it could access the halite seam “from the polyhalite workings via the driving of twin ramps into the halite seam that could be constructed within a 12 month period. The salt would be mined using conventional methods utilising the same mining equipment planned for use in polyhalite mining with over 2Mtpa achievable from a single production unit.” Preliminary estimates suggest that the diversification into salt production would require incremental capital expenditure of US$29m.
• The company indicates that “It would take an opportunistic approach, [to the production of salt] bringing on supply when market demand for salt was strong, although not at the expense of its polyhalite production.”
• Sirius Minerals recognises that salt production would require additional approvals but “is confident that given the minimal above surface infrastructure required, that it would be granted as required.”
• The polyhalite mine is being constructed with capacity for 20mtpa of production though we understand that existing planning consents impose a cap of 13mtpa. We presume that any additional consents for salt production would be additional to the current 13mtpa production limit for polyhalite. In the past, the company has said that it “is confident that, given the expansion to 20Mtpa will largely be achieved through utilising the infrastructure for the initial capacity, there will be limited environmental impact arising from the tonnage increase and therefore an application to vary the planning condition to allow for the increased tonnage would be granted as required.”
• The Roskill Consulting Group considers that the overall consumption of de-icing salt in the European and N American markets amounts to between 30-45mtpa and that potential future production by Sirius Minerals is likely to be at a competitive FOB cost.
Conclusion: The possibility of salt production in addition to polyhalite provides a possible additional product line for Sirius Minerals, however we note that at this stage the salt resource is only classified as inferred and will need additional assessment to upgrade the resource to the point where it could be developed to reserve status. Although in the context of the £1.7bn project the additional capital required for salt production is relatively trivial, we are, however, cautious on the planning consents though Sirius Minerals has been successful in acquiring consent within a National Park which at one time many would have though unachievable.
Strategic Minerals (LON:SML) 0.335 pence, Mkt Cap £3.1m – Q1 update
• Strategic Minerals have published an update to the end of the first quarter ended 31 March this year.
• The company’s Cobre magnetite mining operations in new Mexico continue to reflect annual sales of around 17,000tpa.
• Sales from Cobre recorded $0.227m in Q1 down on Q1 2015 but said to be consistent with the variability of demand.
• The company also acquired up to 50% of Central Australian Rare Earth Pty for A$380,000
• The team have terminated the Tatu Coal project in New Zealand in February returning the project to its original owners for a nominal sum.
• Management also withdrew from the Wanbao Coal Mine project.
• Central costs are reported to be tightly controlled with the MD cutting his remuneration by 15% and the CFO now on an hourly consulting contract.
• Planned overheads continue to remain under US$1m excluding variable costs
• The team are now focussed on exploration and investment on projects tied to offtake arrangements and on exploration for minerals where there is expected strong demand and price upside over a three to five year period.
• Costs associated with the restructuring will be reflected in the 2015 annual report to be released shortly.
• Cash of US$640,525 compares with US$1,048,058 at end December
Conclusion: the company has battened down the hatches and appears to be working towards greater sustainability with regards to its costs while looking to develop future value in new projects.