Aureus Mining (LON:AUE) – US$30m equity injection and new majority owner
Mkango Resources* (LON:MKA) – AIM debut and £1m funding
Ormonde Mining* (LON:ORM) – Barruecopardo – project timetable
Scotgold Resources (LON:SGZ) – Initial results of Cononish Bulk Processing Trial
Markets seem to be bouncing back this morning with the European Stoxx 300 Index (+1.3%() climbing for the first time in six days while Asian equities are also gaining back their losses (CSI 300 +1.3%).
• British pound is rebounding after touching the lowest level in nearly two weeks and ahead of the FOMC statement due today.
• Japanese yen fell 0.2% to 106.3, after appreciating nearly 1% over the past three sessions.
• Weaker US$ index sees precious and base metals prices.
• Brent fell below US$49/bbl briefly this morning on the back the report showing US stockpiles climbed 1.2mmbbl last week.
Dow Jones Industrials -0.33% at 17,675
Nikkei 225 +0.38% at 15,920
HK Hang Seng +0.39% at 20,468
Shanghai Composite +1.58% at 2,887
FTSE 350 Mining +2.48% at 8,940
AIM Basic Resources -3.08% at 1,894
Economic News
US – The Fed to release its monetary policy statement later today with investors looking for clues on the next rate hike amid a mixed bag of economic news.
• Markets forecast a zero chance of changes to the benchmark rate with the Jul move probability at 16%, down from 53% expected at the end of May.
• Weak May payroll numbers have been followed by strong retail sales, solid job openings and low jobless claims reports.
• Retail sales beat estimates in May (0.5%momv 1.3%mom in Apr and 0.3%mom forecast) on the back of an increase in gasoline sales led by price gains (+7.4%mom) during the month.
• Excluding gasoline component, sales were more with consensus estimates.
• Auto sales came in close to expectations climbing 0.5%mom v 3.1% in Apr.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Retail Sales May 0.5%mom 0.3%mom 1.3%mom
Core Retail Sales May 0.4%mom 0.4%mom 0.8%mom
Wednesday PPI May 0.3%mom/-0.1%yoy 0.2%mom/0.0%yoy
Core PPI May 0.1%mom/1.0%yoy 0.1%mom/0.9%yoy
Industrial Production May -0.2%mom 0.7%mom
Capacity Utilisation May 75.2% 75.4%
FOMC Rate 0.25%-0.50% 0.25%-0.50%
Thursday Weekly Jobless Claims 270k 264k
Current Account Balance Q1 -$124.3bn -$125.3bn
CPI May 0.3%mom/1.1%yoy 0.4%mom/1.1%yoy
Core CPI May 0.2%mom/2.2%yoy 0.2%mom/1.1%yoy
Friday Housing Starts May -1.9%mom 6.6%mom
Building Permits May 1.3%mom 4.9%mom
Source: Bloomberg
China – The yuan fell 0.1% to 6.6 per US$, the weakest level since Jan/11, following the MSCI decision not to include Chinese equities in its benchmark indices.
• MSCI said policy makers must address improvements to the accessibility to the A share market, according to the statement.
• MSCI emerging indices are tracked by institutions with c. US$1.5tn in AUM, according to Bloomberg.
• A separate report showed aggregate financing came down in May against forecast for an increase, although, the YTD borrowings remain on a rising trend (+16%yoy) with monthly average up 27%yoy.
• Aggregate Financing: CNY 659.9bn v CNY 751bn in Apr and CNY 1,000bn forecast.
UK – The pound climbs higher this morning on the back of a better than expected employment report showing jobless rate fell 0.1pp to 5.0% in Apr while earnings’ growth accelerated in the three months through Apr.
• Unemployment rate: 5.0% v 5.1% in the previous three months and 5.1%v forecast.
• Employment change: +55k v +44k in the previous three months and 60k forecast.
• Av Weekly Earnings/ex Bonus: 2.0%yoy/2.3%yoy v 2.0%yoy/2.2%yoy in the previous three months and 1.7%yoy/2.0%yoy forecast.
France – Final inflation estimates showed the economy escaped deflation in May following three months of negative price growth led by gains in food and oil prices.
• CPI (Harmonised): 0.5%mom/0.1%yoy v 0.1%mom/-0.1%yoy in Apr.
Greece – The central bank article in the Financial Times calling for a change in the terms of the Athens’ third bailout package including a relaxation of fiscal targets drove sovereign debt yields to the highest in over a month.
• Nation’s creditors are meeting tomorrow in an effort to finally sign off on a €7.5bn loan tranche which is due to help the government to avoid a summer default.
Currencies
US$1.1224/eur vs 1.1223/eur yesterday. Yen 106.29/$ vs 105.81/$. SAr 15.273/$ vs 15.345/$. $1.419/gbp vs 1.416/gbp
0.739/aud vs 0.734/aud. CNY 6.584/$ vs 6.592/$
Commodity News
Precious metals:
Gold US$1,282/oz vs US$1,281/oz yesterday –
Gold ETFs 60.5moz v 60.3moz yesterday –
Platinum US$980/oz vs US$983/oz yesterday –
Palladium US$543/oz vs US$541/oz yesterday –
Silver US$17.41/oz vs US$17.30/oz yesterday
Base metals:
Copper US$ 4,580/t vs US$4,528/t yesterday –
Aluminium US$ 1,615/t vs US$1,607/t yesterday –
Nickel US$ 9,020/t vs US$8,865/t yesterday –
Zinc US$ 2,040/t vs US$2,037/t yesterday –
Lead US$ 1,700/t vs US$1,700/t yesterday
Tin US$ 16,890/t vs US$17,045/t yesterday -
Energy:
Oil US$49.12/bbl unch vs US$49.73/bbl yesterday
Natural Gas US$2.597/mmbtu vs US$2.574/mmbtu yesterday
Uranium US$28.00/lb vs US$28.00/lb yesterday
Bulk
Iron ore 62% Fe spot (cfr Tianjin) US$47.1/t vs US$49.1/t – yesterday –
Thermal coal (1st year forward cif ARA) US$53.0/t vs US$51.2/t yesterday –
Other:
Tungsten - APT European prices stood at $205-222/mtu unch vs $208-222/mtu –
Company News
Aureus Mining (LON:AUE) 3 pence, Mkt Cap £16.3m – US$30m equity injection and new majority owner
• Aureus Mining has announced that it has reached agreement with MNG Gold, a “privately-owned Turkish gold exploration and development company focused on West Africa and Turkey.” for a US$30m equity financing.
• MNG Gold is owned by a Turkish entrepreneur, Mr. Mehmet Nazif Gunal who also holds interests in the construction, contracting, tourism, air cargo, finance and energy industries. In the mining industry, “MNG Gold owns the Youga gold mine in Burkina Faso, the Kokoya gold mine in Liberia and various exploration assets.”
• The funds are to be raised in two tranches at a price of 3.21p/share, “representing a premium of 22.3% to the closing price on AIM on 14 June 2016;” and result in MNG Gold becoming a 55% shareholder in Aureus Mining.
• The initial tranche of funding (US$15m), comprising the issue of approximately 59.5m new shares at a price of 3.21p/share and a promissory note for some US$12.3m will occur on closing. Following the clearance of the Toronto Stock Exchange of personal information forms relating to Mr Mehmet Nazif Gunal, Mr Murathan Gunal and “any other personal information forms required by the TSX”, the second tranche of US$15m (331m shares at the same price) will be released.
• MNG Gold will appoint three directors to the Aureus Mining Board, and bring in a new CEO (Serhan Umurhan) and Finance Director (Geoff Eyre). The current CEO, David Reading and CFO, Paul Thompson are to stand down.
Conclusion: Having brought the New Liberty mine to production against a background of the challenges posed by the West African Ebola epidemic and the world’s economic downturn, problems in the commissioning phase have led to a number of deferrals in debt repayments. The arrival of a new majority owner and a substantial injection of funds should stabilise the future for the New Liberty mine. We consider it appropriate, however, to recognise the considerable contribution of the outgoing management team of David Reading and Paul Thompson without whose energy, vision and professional dedication the New Liberty mine would not have been a reality.
Mkango Resources* (LON:MKA) 3.625p, Mkt Cap £4.4m – AIM debut and £1m funding
• Mkango Resource, which is focussed on developing the Songwe Hill rare-earths deposit in Malawi commenced trading on the AIM market.
• In conjunction with the AIM Admission, Mkango has raised £1m via the issue of 30.3m units at 3.3p/unit. Each unit comprises one share and a warrant to acquire a further share at a price of 6.6p/share for a period of three years.
• Over the last five years, Mkango Resources has moved the Songwe Hill deposit to a pre-feasibility stage by November 2015. The pre feasibility study describes a project generating an after tax NPV of US$345m using a 10% discount rate and a 37% IRR from an initial capital expenditure of $216m.
• The suite of rare-earth elements at Songwe Hill is suited for use in emerging new clean energy technologies and, quoting the company’s Chief Executive, William Dawes, is “the only focused rare earth company listed on the London Stock Exchange”.
Conclusion: Mkango Resources offers an advanced rare earths project and provides the AIM Market with a pure rare-earth minerals opportunity
*SP Angel acts as Nomad and Broker to Mkango Resources
Ormonde Mining* (LON:ORM) 1.375 pence, Mkt Cap £ 6.5m – Barruecopardo – project timetable
• Ormonde Mining has announced that, in agreement with Oaktree Capital it has a revised and optimised construction schedule for the Barruecopardo tungsten project “which will see commissioning in late 2017.”
• The revisions to the timetable were, in part, a result of the previously announced delays caused by “the recent administrative appeal by a third party in relation to an element of the compulsory land acquisition process at Barruecopardo.”
• The company’s actions have been upheld by the relevant authority and Ormonde Mining’s local operating subsidiary, Saloro, has received independent legal advice on the expected timing required to now complete the compulsory acquisition process.
• Construction of the water dams and site services are now the initial tasks on development at Barruecopardo
• The company points out the recent improvement in the benchmark ammonium paratungstate price to US$210/metric tonne unit and expresses the view that “The optimised construction schedule also aligns first production with a more positive forecasted tungsten price environment, reducing risk and optimising project valuations.”
Conclusion: After resolving the administrative and regulatory issues, Ormonde Mining is now able to commence the construction of Barruecopardo with a view to initial production in late 2017. We look forward to further news as the project advances.
*SP Angel acts as Broker to Ormonde Mining
Scotgold Resources (LON:SGZ) 0.835p, Mkt Cap £12.0m – Initial results of Cononish Bulk Processing Trial
• Scotgold Resources reports the initial results of its Bulk Processing trials at the Cononish deposit in Scotgold. Although the company acknowledges that “there is currently insufficient data available to draw definitive conclusions”.
• Tests show that “feed grade is in line with the expected 7.6g/t Au and 39 g/t Ag estimated average for the stockpile.”
• Crushing tests show that the impact crusher “is proving very effective at liberating the contained sulphides (which in turn are associated with the majority of the gold content)”
• Approximately 90% of the sulphides, which contain around 75% of the gold at Cononish, are recoverable by gravity methods using spirals and shaking tables.
• The trials have also shown that a potentially saleable lead sulphide concentrate is achievable from the shaking tables.
• The continuing bulk test is expected to produce “sufficient free gold … to demonstrate the marketability and profitability of hall marked Scottish gold production from Cononish.” The company has engaged consultants to advise on marketing.
Conclusion: Initial test results suggest that much of the gold at Cononish is likely to be recoverable using relatively low cost gravity recovery methods. The continuing test work should generate the detailed information required to help in detailed design of the flowsheet and process plant. We look forward to further information as the test work progresses.