Amur Minerals* (LON:AMC) – 2016 MKF drilling programme yields good grades and thickness intersections
Aston Bay Holdings (CVE:BAY) – Definitive option agreement signed with BHP to advance the Storm copper project
Aureus Mining (LON:AUE) – Further deferral of initial debt repayment
Petropavlovsk* (LON:POG) – K&S processing plant produced first trial concentrate 3.2mtpa run rate on target for Q3/16
Karelian Diamonds (LON:KDR) – Lahtojoki mining permit
World’s longest tunnel opens in Switzerland connecting Italy through the Gotthard passes
• The new Gotthard rail link is 35 miles long and has taken 20 years to build at a cost of >$12bn.
• The twin tunnels have used 4mt of concrete and 3,200km of copper cable and employed >2,000 workers through its 17 year construction.
• The new tunnel is flat and straight enabling freight and passengers to travel at up to 155mph slashing travel times and increasing transport capacity through the region.
• The Gotthard road tunnel carries >1m lorries per year. The first rail tunnel through the Gothard opened in 1882.
Dow Jones Industrials -0.48% at 17,787
Nikkei 225 -1.62% at 16,956
HK Hang Seng -0.26% at 20,761
Shanghai Composite -0.11% at 2,914
FTSE 350 Mining -2.34% at 8,577
AIM Basic Resources +0.08% at 1,914
Economic News
Equity markets are range bound ahead of major economic news and events due later this week.
• OPEC members are meeting in Vienna while the ECB is holding a policy a decision tomorrow.
• Expectations are for the OPEC to avoid any production cuts given the latest rally in the oil price from US$27/bbl levels seen in Jan.
• The ECB is unlikely to announce changes to its monetary policy following a fresh stimulus announced in Mar including rate cuts and an expansion in the bond-buying programme.
• Inflation struggles to pick up with latest reports showing prices fell for a fourth consecutive month in May (-0.1%yoy v -0.2%yoy in Apr). Core CPI came in at 0.8%yoy
• The BLS will release May NFPs on Friday.
• Estimates are for a 160k reading matching the Apr level and marking the slowest increase in the number of jobs in the first five months of the year since 2012.
• The US$ is slightly off this morning (-0.3%) taking a break following a 3.0% increase through May.
US – Consumer spending rebounded in Apr with inflation holding up well as demonstrated by the PCE data.
• Households increased consumption by the most since Apr/09 following a sluggish start to the year.
• The data suggests the slowdown in GDP growth in Q1 may prove to be temporary.
• Bloomberg forecasts the economy to post a 2.2%qoq growth in Q2/16., up from 0.8%qoq in the previous quarter.
• Economic data this week:
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Personal Income Apr 0.4%mom 0.4%mom 0.4%mom
Personal Consumption Apr 1.0%mom 0.7%mom 0.1%mom
PCE Apr 0.3%mom/1.1%yoy 0.3%mom/1.1%yoy 0.1%mom/0.8%yoy
PCE (Core) Apr 0.2%mom/1.6%yoy 0.2%mom/1.6%yoy 0.1%mom/1.6%yoy
S&P/CS House Prices Mar 0.9%mom 0.7%mom 0.7%mom
Wednesday ISM Manufacturing May 50.3 50.8
Wards Vehicles Sales May 17.3m 17.3m
Thursday Weekly Jobless Claims 270k 268k
ADP Employment Change May 175k 156k
Friday NFP May 160k 160k
Unemployment Rate May 5.0% 5.0%
Av Hourly Earnings May 0.2%mom/2.5%yoy 0.3%mom/2.5%yoy
Source: Bloomberg
China – Manufacturing PMIs suggest the sector remained in stagnation/contraction through May based on the official/private numbers.
• Official PMI data which has historically been more positive in the assessment of the sector and is based on the survey among state owned enterprises showed the index held steady at 50.1 last month.
• Services PMI has also come down last month (53.1 v 53.5 in Apr).
• Private survey showed the manufacturing PMI fell 0.2 points to 49.2 in May.
• The CSI 300 Index, a gauge of major companies trading on the Shanghai and Shenzhen exchanges, posted a slight decline on the day (-0.28%).
OECD warns UK of negative shock if it leaves the EU
• The OECD has warned the UK could suffer a large negative shock if it leaves the EU and that GDP could be around 1% weaker.
• They suggest lower trade openness would hit UK economic dynamism and productivity in the long term as well.
• They warn that by 2030 UK GDP could be 5% lower than otherwise if exit had not occurred.
• We question why leaving a rather slow-moving economic bloc and aligning more with faster moving economies should create this scenario and wonder if the OECD has looked at this from a more positive angle?
• See Roger Bootle, founder, Capital Economics in link on BREXIT economic analysis
• https://www.bloomberg.com/news/videos/2016-05-23/the-argument-against-anti-brexit-analysis
UK – The pound is witnessing a sharp increase in volatility as results of polls showing a closer tie between the Remain/Exit vote than seen previously.
• Implied sterling volatility has surged past the 20% hitting the highest level since Feb/09.
• The Guardian/ICM poll released yesterday showing a 52/48 split with the Remain camp leading by a narrow margin led to a 1% depreciation in the GBPUSD exchange rate.
• The currency is range bound this morning around the 1.448-1.450 level.
Australia – Better than forecast Q1/16 GDP data lifts the currency against the US$.
• Q1 GDP: 1.1%qoq/3.1%yoy v 0.7%qoq/2.9%yoy in Q4/15 and 0.8%qoq/2.8%yoy forecast.
• Household consumption led growth with business investment remaining weak.
• The currency surged 0.9% on the news but has given up some of its gains trading 0.3% higher at the moment.
Russia – A contraction in the manufacturing sector slowed in May according to the latest PMI data.
• Markit manufacturing PMI: 49.6 v 48.0 in Apr and 48.5 forecast.
• The industry remained in a contractionary territory since Dec/15 and in the 16 of the last 18 months.
• A fall in new business orders led the decline.
• “Faced with fewer new projects, Russian manufacturing companies continued to work through their outstanding business in May.”
Currencies
US$1.1155/eur vs 1.1129/eur yesterday. Yen 109.83/$ vs 111.01/$. SAr 15.693/$ vs 15.851/$. $1.447/gbp vs 1.461/gbp
0.725/aud vs 0.723/aud. CNY 6.582/$ vs 6.585/$
Commodity News
Precious metals:
Gold US$1,216/oz vs US$1,211/oz yesterday
Gold ETFs 59.3moz unch v 59.3moz yesterday –
Platinum US$976/oz vs US$977/oz yesterday
Palladium US$544/oz vs US$544/oz yesterday
Silver US$15.99/oz vs US$16.08/oz yesterday
Base metals:
Copper US$ 4,589/t vs US$4,661/t yesterday – Chile copper production hit by heavy rain. Chile produced 8% less copper in April due to heavy El Nino rains forcing the closure of some larger copper mines. Chile produced just 432,277t of copper in April making up just 1.83mt (4.7% lower) for the first four months of the year.
• Molybdenum production rose by 21% in April to 4,103t taking the molybdenum production to 19,121t for the first four months up 38% yoy. It is interesting to see molybdenum production rise at a time when Chinese steel production has also climbed due to a rise in domestic prices in China partly driven by local speculative futures market activity
• The report blames the El Nino rains but we reckon recent wild-cat strike related action might also have had some impact
Aluminium US$ 1,557/t vs US$1,559/t yesterday
Nickel US$ 8,395/t vs US$8,530/t yesterday
Zinc US$ 1,906/t vs US$1,925/t yesterday
Lead US$ 1,678/t vs US$1,700/t yesterday
Tin US$ 15,950/t vs US$16,155/t yesterday
Energy:
Oil US$49.1/bbl vs US$49.3/bbl yesterday
Natural Gas US$2.282/mmbtu vs US$2.173/mmbtu yesterday
Uranium US$27.25/lb vs US$27.25/lb yesterday
Renewable energy – new energy capacity was added faster in renewables than for new coal and gas plants in 2015
• Emerging economies added more than more developed nations on renewable power than on fossil fuels generation last year.
• The trend for distributed renewable energy is gathering pace with >8m people now working in renewable energy
• Some 147GW of capacity was added in 2015 in mainly wind and solar with total investment in renewables at around $286bn
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$44.8/t vs US$48.8/t – yesterday – China steel mills reported to be operating at around break-even and are cutting back on stock levels
Thermal coal (1st year forward cif ARA) US$49.3/t vs US$49.3/t yesterday
Other:
Tungsten - APT European prices stood at $213-225/mtu unch vs $215-225/mtu
Lithium – Airbus to install lithium batteries on A350-900
• The European Aviation Safety Agency ‘EASA’ has approved the use of lithium-ion batteries on A350-900 aircraft
• Airbus is still waiting on the FAA to certificate lithium-ion batteries for the A350-900.
• The batteries were originally designed to provide light weight back up power for the avionics system and to start the auxiliary power unit
• Airbus has been using heavier nickel-cadmium batteries in the meantime.
Company News
Amur Minerals* (LON:AMC) 4.7p, Mkt Cap £23.9m – 2016 MKF drilling programme yields good grades and thickness intersections
• Nearly a month in the 2016 field programme at Kun Manie sulphide nickel/copper project, the Company completed 2,500m at western borders of Maly Kurumkon/Flangovy deposit (MKF).
• Preliminary results indicate an extension of the MKF deposit high grade mineralisation zone by another 300m to 2,200m.
• In addition, in-house assays obtained from the RFA guns’ results show higher average thicknesses and better grades compared to previously available drill data (43.9m v 16.3m in thickness; 0.83% Ni v 0.70% Ni; 0.24% Cu v 0.17% Cu).
• Given positive results and a tighter spacing of the current drilling programme (100x100m), new data may lead to an expansion of available Indicated Resources in both tonnage and grade terms.
• Current 2016 15,000m drilling programme focuses on the MKF deposit (May-Oct/16) with a view to convert the available Inferred Mineral Resources to higher confidence categories as well as to collect bulk samples for metallurgical test works.
• Final assays from AS Labs in Moscow are normally due in 6-10 weeks after the collection of the sample. Historically, the difference between the RFA nad ASL results were insignificant.
Conclusion: The management provided a detailed description of the 2016 field season including 15,000m of drilling at the MKF deposit of the Kun Manie project. The primary objective of the programme being the bulk sample collection is progressing well while the infill drilling brings positive surprises in the form of thicker and higher grade intersections when compared to the pre-2016 data.
*SP Angel act as Nomad and Broker to Amur Minerals
Aston Bay Holdings (CVE:BAY) C$0.40c/s, Mkt cap $22m – Definitive option agreement signed with BHP to advance the Storm copper project
(75% BHP Billiton, 25% Aston Bay after option exercise)
• Aston Bay Holdings has agreed a Definitive option agreement with BHP on the Storm Copper project in Nanavut, Canada.
• The agreement includes a pre-negotiated Joint Venture agreement with a Canadian subsidiary of BHP
• BHP can earn a 75% interest in Storm by spending a minimum of C$40m on qualifying exploration expenditures over a period of up to nine years.
• BHP have a minimum expenditure of C$2.5m in the first two years
• Some funding has already been advanced for the purchase and shipping of supplies to Nanavut for the Summer 2016 drill program with targets and plans still being finalised.
• The region has a weather restricted field season for exploration
• Aston Bay has no required exploration expenses for four years from the closing of the Option Agreement but an an early exercise of BHP’s option could result in Aston Bay contributing pro-rata funds after this period.
• Commander Resources Ltd. retains a 0.875% Gross Overriding Royalty on its area of mutual interest with Aston Bay; BHP Billiton has the option to buy this down to 0.4% with a one-time payment of C$4m. Aston Bay holds a 0.3% Gross Overriding Royalty on ground outside the area of mutual interest with Commander.
• BHP is to make a cash payment of C$325,000 to Aston Bay upon closing of this Option Agreement.
• Aston Bay is the operator for this upcoming field season but BHP can assume operatorship at any time.
• The project is of interest due to the long copper intersections previously drilled in >9,000m of drilling
• Including:
o 110m @ 2.45% Cu
o 56.3m @ 3.07% Cu
o 53.2m @ 1.34% Cu
o 51.3m @ 1.16% Cu
• Location: Aston Bay’s properties are just off a junction of two major sea lanes leading to the infamous Northwest Passage described as one of the World’s last true frontiers by Adventure Canada which runs cruises through the region. The project is on the tidewater to these active shipping lanes. A commercial airport at Resolute Bay and annual sealift provide logistical support to nearby Aston Bay.
• Other mines: A number of mines highlight the prospectivity of the region with the Polaris zinc-lead mine up at Polaris Bay, the Nanisivis zinc-lead mine at Artic Bay and the Mary River iron ore mine to the east.
• Other targets: Aston Bay holds a number of licenses and targets with Seal Zinc and Typhoon zinc in existing tenures and the Hurricane target within a new prospecting permit
See https://astonbayholdings.com/storm-copper for more information on the Storm project.
Conclusion: Aston Bay has concluded a rare joint venture agreement with BHP Billiton. The deal funds a good look at the property to confirm the Teck drilling and to see if the prospects host a large scale and high grade copper deposit.
Aureus Mining (LON:AUE) 3.125 pence, Mkt Cap £16.9m – Further deferral of initial debt repayment
• Aureus Mining reports that its lenders, NedBank, Rand Merchant Bank and the Export Credit Insurance Corporation of S Africa, have granted a further extension on the first debt repayment until 30th June.
• The first repayment was originally scheduled to occur on 31st January and was subsequently deferred until 29th April and then until 31st May as initially teething troubles with the plant surfaced and the operation was slower to build up production than originally planned.
• We expect that the latest deferral is probably related to the current, temporary, suspension of plant operations which was imposed following a “small overflow of effluent” from the tailings storage facility following a period of heavy rainfall, and issues with the detoxification circuit in the process plant.
• The company reports today that it “fully expects to receive approval to recommence processing operations in the coming days.”
Conclusion: Having brought the New Liberty mine into production against the challenging backdrop of the economic downturn and the West African ebola epidemic, Aureus has suffered a number of setbacks through the commissioning and ramp-up phases of its plant, although we understand that mining operations have been unaffected. We look forward to news of the resumption of processing operations in the near future.
IRC LTD (HK1029) HKD0.12, Mkt Cap HKD757.2m / Petropavlovsk* (POG LN) 7.7p, Mkt Cap £253.3m – K&S processing plant produced first trial concentrate 3.2mtpa run rate on target for Q3/16
• The K&S plant produced first iron ore concentrate taking the project closer to commercial production.
• The operation located in the Jewish Autonomous Region in the Russian Far East and 35.8% owned by Petropavlovsk yielded 65.5% Fe wet concentrate.
• The processing plant remains on target for commissioning by 30 Jun/16 with the drying unit due by 31 Aug/16.
• The management reiterated the forecast for the plant to ramp up to budgeted 3.2mtpa 65.8% Fe concentrate run rate in Q3/16.
*SPAngel analysts have visited the Pioneer, Malomir and Albyn gold mines in Russia
Karelian Diamonds (LON:KDR) 1.025 pence, Mkt Cap £3.3m – Lahtojoki mining permit
• Karelian Diamonds reports that “the Diamond Mining Permit over the Lahtojoki diamond project, the acquisition of which was announced on 19 April 2016, has been forlally transferred from A&G Mining Oy to Karelian, along with all claim reports and additional; technical material.”
• The transfer of the Permit to the company has also received the approval of the Finnish Safety and Chemical Agency.
• The company announced the acquisition of the 55 hectare claim in central Finland in April for a consideration of €150,000 comprising an initial purchase price of €50,000 with a further €100,000 due after 24 months unless Karelian decides not to develop the project.
• Although the general area is known in the scientific literature to host diamond-bearing kimberlite pipes, particularly the Lahtojoki No.7 pipe which has been explored in the past by a number of organisations including Ashton Mining, Rio Tinto, Dia-Met and the Finnish Geological Survey, Karelian Diamonds has yet to disclose technical information on the specific project which is located in the Kuopio-Kaavi region of Finland other than it being described as a diamondiferous kimberlite.
• The company, however, expresses the belief that, with favourable infrastructure “the Lahtojoki kimberlite pipe has the potential to become a profitable low strip open pit diamond mine.”
Conclusion: The relatively low-cost acquisition of the Lahtojoki Permit represents a broadening of Karelian’s diamond exploration exposure in Finland, however, the company will need to evaluate adequate diamond resource grades and tonnages which eluded previous explorers and the value per carat of any contained diamonds before it will be able to demonstrate the path to the profitable diamond mine it hopes for.