BlueRock Diamonds* (LON:BRD) – Strategic review update
Edenville Energy (LON:EDL) - Progress report on Rukwa Coal-to-Power Project.
FinnAust Mining* (LON:FAM) – Offshore Exploration Licence Granted and Placing
Kefi Minerals* (LON:KEFI) – John Leach and Wellesley-Wood to join Kefi Minerals
Metals Exploration* (LON:MTL) – Milling operations restart at Runruno gold project in Philippines
Metal Tiger (LON:MTR) – Drilling at T3 expands Phase 1 area of interest and identifies new targets
Following a positive trading session in Asia, European equities are flat as gains in mining stocks are outweighed by losses in oil and gas names and financials.
• Sovereign bond yields are down this morning following a two-day rebound driven by an increased appetite for risk on speculation for stimulus in the UK and Japan.
• Gold prices are up $11/oz/0.8% with the US$ index broadly range-bound.
• Sterling has given up all this morning’s gains following as traders positioned themselves ahead of the expected BoE rate cut.
• Japanese yen is slightly up this morning after having fallen c. 4% over the last two days driven by a general risk on sentiment and local Parliamentary elections securing PM’s party a majority to press on with a fiscal stimulus.
• Copper prices have earlier crossed the $5,000/t level on increased buy orders in China as investors bought the metal as a hedge against geopolitical risk. An international tribunal ruled Chinese efforts to assert control over the South China Sea as groundless.
• Crude trades lower today after the API report showed nation’s stockpiles climbed 2.2mmbbl last week adding to concerns on oversupply in the market.
Chinese rail freight contracted 7.6%yoy for the first half of the year highlighting a weakening growth in the manufacturing sector.
• Slowing shipments are reported to have been affected the most by lower transportation of coal as industrial producers cut electricity demand amid weakening economic outlook.
• On a bright side of things, the number of passengers using rail network climbed 12.4%yoy in H1/16, up from a 9.2% growth recorded in H1/15.
• Increased mobility of the population is supportive of the government’s goal to steer the nation towards consumption and services economic growth.
China – sabre rattling in the South China Seas as United Nations Arbitration goes against claims over territorial waters
Copper prices rise on strong Chinese copper imports
• Some Chinese investors are also thought to be buying copper as insurance against potential issues over the South China Seas
Gold - The tense situation is also likely to help gold prices higher once the recent turn in ETF sales is done
• A storm has been brewing in the South China Seas for some time as China builds up Atols into new islands to assert its claims over a very large portion of the South China Seas.
• The Philippines has a legitimate claim to increased territorial waters according to the United Nations Arbitration panel.
• Chinese media responded with pictures of force with ships firing missiles and landing craft unloading troops in exercises to show military / government displeasure.
• China’s next step might be to restrict trade with nations which go against Chinese government policies as seen with the dispute with Japanese territorial islands and the subsequent restrictions on rare earth supply to Japanese industry.
Appointment of Teresa May as next UK Prime Minister soothes financial markets
• Expectations for new QE and rate cuts also help dividend paying stocks higher.
• Scare stories on the impact of Brexit and potential for UK recession continue to dampen sentiment.
• Problems with Italy’s banking sector also present further risk for the Eurozone as do looming votes in Hungary on migration and Austria on the rerun of its recent presidential election where the far right candidate was narrowly defeated.
Dow Jones Industrials +0.66% at 18,348
Nikkei 225 +0.84% at 16,231
HK Hang Seng +0.46% at 21,322
Shanghai Composite +0.37% at 3,061
FTSE 350 Mining +1.67% at 12,021
AIM Basic Resources -0.61% at 2,104
Economic News
US – Job openings slowed in May reflecting matching weak payrolls numbers released earlier in Jun than led to a revision in the Fed policy tightening pace and a rally in sovereign bond prices.
• Job openings fell to 5,500k, a decline of 5.9%mom, from a record high of 5.845k in Apr.
• Jun numbers are expected to come in stronger following a rebound in NFPs.
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday JOLTS Openings May 5,500k 5,650k 5,845k (revised from 5,788k)
Wednesday Fed Beige Book
Thursday PPI Jun 0.3%mom/-0.1%yoy 0.4%mom/-0.1%yoy
Core PPI Jun 0.1%mom/1.0%yoy 0.3%mom/1.2%yoy
Weekly Jobless Claims 2,140k 2,124k
Friday Retail Sales/Core Jun 0.1%mom/0.4%mom 0.5%mom/0.4%mom
CPI Jun 0.3%mom/1.1%yoy 0.2%mom/1.0%yoy
Core CPI Jun 0.2%mom/2.2%yoy 0.2%mom/2.2%yoy
New York Manufacturing Jul 5.0 6.0
Industrial Production Jun 0.2%mom -0.4%mom
Capacity Utilization Jun 75.1% 74.9%
UoM Consumer Sentiment Jul 93.0 93.5
Source: Bloomberg
China – Both exports and imports contracted through Jun (in US$ terms) as slowing economic growth and falling renminbi weighed on domestic demand.
• Exports (US$ terms): -4.8%yoy v -4.1%yoy in May and -5.0%yoy forecast.
• Exports (CNY terms): 1.3%yoy v1.2%yoy in May and 0.3%yoy forecast.
• Imports (US$ terms): -8.4%yoy v -0.4%yoy in May and -6.2%yoy forecast.
• Imports (CNY terms): -2.3%yoy v 5.1%yoy in May and -1.2%yoy forecast.
Japan – Industrial production came in weak through May posting a -2.6%mom/-0.4%yoy reading and setting a scene for monetary and fiscal stimulus the government and BoJ are expected to announce in due course.
• Industrial production: -0.4%yoy in May and -3.3%yoy in Apr.
• Output fell in all but three months in the last year and a half.
EU – Two of the top four economies in the EU are reported to have remained in a deflation through Jun according to the latest CPI data.
• Germany CPI (EU harmonised): 0.2%yoy v 0.0%yoy in May.
• France CPI: 0.3%yoy v 0.1%yoy in May.
• Italy: -0.2%yoy v -0.3%yoy in May.
• Spain: -0.9%yoy v -1.1%yoy in May.
Malaysia – central bank cuts rates by 0.25%
World first – drone delivers ice cream to customers on beach
• Commercial applications for cutting edge technologies are not always easy to predict.
• Drone ice cream deliveries could take the traditional ice cream van into a new age.
Daft comment of the day
• A mining executive comments that a company has four vertical shafts with a combined depth of 2,940m.
• We wonder if the company is planning on lining up the shafts in some way.
Currencies
US$1.1052/eur vs 1.1116/eur yesterday. Yen 104.36/$ vs 103.31/$. SAr 14.394/$ vs 14.325/$. $1.325/gbp vs $1.315/gbp.
0.760/aud vs 0.763/aud. CNY 6.691/$ vs 6.684/$ -
Commodity News
Precious metals:
Gold US$1,341/oz vs US$1,356/oz yesterday –
Gold ETFs 64.4moz v 64.7moz yesterday – ETF holdings fall for first time in a while
Platinum US$1,088/oz vs US$1,101/oz yesterday –
Palladium US$638/oz vs US$626/oz yesterday
Silver US$20.35/oz vs US$20.47/oz yesterday
Base metals:
Copper US$ 4,940/t vs US$4,805/t yesterday – Metal inventories in Chinese bonded warehouses climbed to 620kt in May, the highest since Jul, according to Bloomberg.
• An increase in domestic stockpiles was driven by a surge in metal imports which hit a record in the first six months of the year on eased credit availability and a rebound in property markets.
Copper imports rise 22% yoy for the first six months of the year
• Crude oil imports rose 14.2% yoy for the first half. Some of the increase may be down to increased storage
• Copper, aluminium and zinc LME stocks are down today
Aluminium US$ 1,679/t vs US$1,659/t yesterday –
Nickel US$ 10,300/t vs US$10,340/t yesterday –
Zinc US$ 2,187/t vs US$2,177/t yesterday –
Lead US$ 1,862/t vs US$1,850/t yesterday
Tin US$ 17,850/t vs US$17,900/t yesterday
Energy:
Oil US$47.6/bbl vs US$46.8/bbl yesterday -
Natural Gas US$2.756/mmbtu vs US$2.721/mmbtu yesterday
Uranium US$26.45/lb vs US$26.45/lb yesterday –
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$54.8/t vs US$52.7/t –
Thermal coal (1st year forward cif ARA) US$59.2/t vs US$58.3/t yesterday
Other:
Tungsten - APT European prices dropped to $185-200/mtu vs $185-210/mtu from the previous week
Company News
BlueRock Diamonds* (LON:BRD) 12 pence, Mkt Cap £4.7m – Strategic review update
• BlueRock Diamonds has elaborated on the progress of its strategic review of the Kareevlei diamond operation. The modifications to the plant are now nearing completion and are expected to lead to an improvement in grade “and also increased capacity of the plant.”
• During the review process the company has also “identified some bottlenecks in our process. The most significant of these is our DMS (Dense Material Separator). We have identified a nearly new DMS which is twice the size of our installed machine and which is available in the Northern Cape”.
• Inspections by the South African Department of Mineral Resources (DMR) has revealed shortcomings “in two areas; processing plant procedures and guarding rails on the plant, and Trackless Mobile Machinery (TMM).” The first is expected to be resolved “within the next four to five weeks” and will be re-inspected by the DMR and “we anticipate restarting operations at that time.”
• The TMM issues “all relate to machinery owned by our contractor Diacar. Diacar, having reviewed the DMR requirement to bring its fleet up to the required standard, has decided to withdraw from its agreement with BlueRock to provide earth moving services.” BlueRock Diamonds expects to either appoint another contractor to meet the DMR standards or to lease and operate the equipment itself.
• “Diacar has also stated its wish to sell its processing plant … and we are considering the economics of such a purchase. Should we decide to acquire the Diacar Plant we will be able to retain 100% of all diamond revenues coming from the mine which we believe will outweigh the increased operating cost that we would need to assume.” The December 2015 balance sheet shows the company with cash of approximately £175,000 and net debt amounting to £420,000..
• The company has also disclosed that following the DMR inspection they will be required to “increase our rehabilitation guarantee from ZAR 280,000 (c£15,000) to approximately ZAR2,150,000 (c£115,000), reflecting our increased scale of operations.”
• CEO, Adam Waugh, pointed out that pit development work completed over the last 3 months “will provide us with a sustainable supply of high grade kimberlite and I am confident the ongoing work on plant efficiency will result in higher grades and improved processing capacity.”
Conclusion: BlueRock Diamonds is undergoing a major change with the need to provide additional rehabilitation guarantees, augment the plant with a new and larger DMS and either find a new contractor or assume operational management itself. We look forward to news of the resumption of processing operations.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Edenville Energy (LON:EDL) 0.02 pence, Mkt Cap £2.8m - Progress report on Rukwa Coal-to-Power Project.
• Edenville Energy has provided an update on progress with key aspects of its Rukwa Coal-to-Power Project in Tanzania.
• Work has started on the next phase of the Power Plant Environmental and Social Impact Assessment (ESIA). This will entail consultation with local interests including Government, commercial and communities as well as reviews of the project development impact on flora, fauna and the socio-economic effects.
• Subject to “other parts of the application process can be advanced in a timely manner, management expects the ESIA application process can be completed in H1 2017.”
• Upgrading of existing access routes and some work on improving local roads as part of the company’s social engagement is now largely complete. Improvements to access should facilitate development work as the project advances.
• Bulk sampling of the Mkomolo deposit is planned to occur in August to obtain material to assist in “design work for both the power plant combustion process and any associated coal treatment or washing facilities to service the proposed power plant.”
• Discussions with potential contractors for both the construction and operation of the power plant are reaching a more advanced stage and will require Tanzania Electric Supply Company’s input to define the key project parameters in order to “move to a formal arrangement with one of these groups”. In the meantime, “The Company is also continuing to review engineering options with Runh Power of China with whom we have a non-exclusive collaboration agreement.”
Conclusion: Continuing progress with the Rukwa project is currently on course for completion of the ESIA process in H1 2017. The engineering work is progressing and the excavation of a bulk sample will provide material to assist the design work while discussions with EPC contractors are progressing.
FinnAust Mining* (LON:FAM) 5.5p, mkt Cap £26m – Offshore Exploration Licence Granted and Placing
• FinnAust Mining have been awarded an extension to its existing license to include all minerals within the shallow marine environment at the Pituffik project in Greenland.
• The license allows FinnAust to claim ownership of any mineral group found within a license area of around 150 sq km.
• The award also reported to set out a clear permitting pathway for the project as a whole.
• Submerged terraces in the shallow marine environment appear to host an average thickness of some 5m of enriched mineral sands.
• The license is the first offshore license awarded by the Self Rule government of Greenland.
• Royal IHC, one of the world’s larger dredging companies has been appointed to provide wet mining solutions for the project.
• FinnAust also raised £500,000 by way of a placement to new and existing investors for exploration and general corporate purposes.
Conclusion: The granting of the license, the first by the new Self Rule government of Greenland, indicates that Greenland is very much open for business for mining exploration.
* SP Angel acts as nomad and broker to the company
Kefi Minerals* (LON:KEFI) 0.6 pence, Mkt Cap £18.1m – John Leach and Wellesley-Wood to join Kefi Minerals
• Mark Wellesley-Wood is joining the board of Kefi Minerals as a non-executive director.
• Wellesley-Wood is to serve as Chair of the new Technical Review Committee.
• Professor Ian Plimer will serve as Chair of the new Exploration Review Committee.
• Wellesley-Wood will assume the roles of Deputy Chairman and Senior Independent Director from January 2017.
• Jeff Rayner is stepping down from the board as planned to take up a more ‘free-ranging’ role looking for new opportunities.
• John Leach also joins the senior executive team as Finance Director. Leach formerly worked with Harry Adams at EMED now known as Atalya Mining.
• The new hires are designed to better take the company forward toward gold production.
*SP Angel act as Nomad and broker to Kefi Minerals
Metals Exploration* (LON:MTL) 8.9p, Mkt Cap £153.7m – Milling operations restart at Runruno gold project in Philippines
• Metals Exploration report that ore milling has restarted at its Runruno gold project in the Philippines.
• The company report “Test running and debugging” operations as part of the commissioning and ramp-up program will now continue with immediate focus on the carbon in leach circuit, BIOX® and ASTOR (cyanide destruction) circuits..
o The mine had to temporarily suspend milling operations to assess and rectify problems with the bearings on its mill.
o The restart was subject to the arrival of replacement parts
o The Company also previously reported on continuing discussions with lenders over restructuring of the project debt facility. This follow delays and repairs required after Typhoon Lando passed through the area. Permits were also required to restart operations
o Metals Exploration made the interest payments scheduled for 30 June 2016 but has not made the capital repayment.
Conclusion: Its good to see the mill up and running so quickly. We wait to see what comes from the debt restructuring.
*SP Angel act as Broker to Metals Exploration
Metal Tiger (LON:MTR) 3.6 pence, Mkt Cap £20.2m – Drilling at T3 expands Phase 1 area of interest and identifies new targets
• Metal Tiger’s partner on its 30% owned T3 copper silver project in Botswana, MOD Resources, has announced further drilling results from the Phase 1 programme.
• The latest results extend the resource area at T3, shown on a map released by MOD Resources, to a block approximately 1 km long and up to 400m wide and open towards the north.
• Among the new drilling results reported are an 18.4m intersection at an average grade of 1.4% copper and 9 g/t silver from a depth of 68m in hole MO-G-12D which is in addition to a previously reported 17.2m intersection grading 1.4% copper and 14 g/t silver from a depth of 103.9m in the same hole.
• Further results include 16.8m averaging 1.4% copper and 5g/t silver from 176.8m in MO-G-13D; 18.4m at 1.4% copper and 9 g/t silver from 68m depth in hole MO-G-14D and two intersections in hole MO-G-16D – 34.3m at 1.2% copper and 11 g/t silver from 87.7m and a second interval of 27.5m at 3.2% copper and 13 g/t silver from 134m.
• We highlight a number of aspects to the T3 results reported so far. The grades, particularly of copper seem particularly consistent; in some of the holes reported there appear to be multiple mineralised zones and the results of hole “MO-G-13D, which extended the resource area another 200 metres east to a total 1 km strike length.”
• There are currently three diamond-drilling rigs deployed at the T3 target area and a fourth rig “testing deeper targets outside the resource area. Shallow RC drilling is also in progress testing an extensive copper/zinc anomaly approximately 3 km east of Phase 1.”
• In addition, MOD Resources has announced that regional soil sampling has identified “several new copper anomalies”. The new targets, T2, T9 and T10 are located north of the T3 area. Two strong copper soil anomalies have been identified at the T2 area some 20km north of T3, while “Two additional extensive copper soil anomalies were identified at T9 and T10, approximately 60 km north of T3.” The T9 and T10 targets are located on major regional geological structures which have previously been undrilled.
Conclusion: Exploration work in Botswana is delivering consistent copper results from the T3 target while earlier stage exploration work is identifying new targets within the wider area.