Asiamet Resources (LON:ARS) – Additional drilling confirms and extends shallow mineralisation
Hochschild Mining (LON:HOC) – H2 Production Report and higher 2016 guidance
Metminco* (LON:MNC) – Updated resource for Miraflores gold project in Colombia
South32 Limited (LON:S32) – Record production performances
Sirius Minerals (LON:SXX) – Final part of North Yorks Moors potash development plan approved
Dow Jones Industrials +0.19% At 18,555
Nikkei 225 +0.77% At 16,810
HK Hang Seng +0.54% At 22,000
Shanghai Composite +0.37% At 3,039
FTSE 350 Mining +1.27% At 11,268
AIM Basic Resources -0.60% At 2,129
European equities are range-bound this morning ahead of the first ECB monetary policy meeting post the Brexit vote.
• Estimates are for benchmark rates and assets purchases pace to remain unchanged.
• US equity indices closed higher yesterday with the S&P500 up 0.4% marking a new record high gaining on sold corporate earnings.
• Malaysian stocks and currency were worst performers in the Asia region on the back of US DoJ allegations over state investment fund related fraud.
• Brent is up today following the report that US crude inventories dropped for a record ninth week.
• Base metals are trading higher with gold relatively flat.
US
Date Index Period Actual Expected (Bloomberg) Previous
Tuesday Housing Starts May 4.8%mom 0.2%mom -0.3%mom
Building Permits May 1.5%mom 1.2%mom 0.5%mom
Thursday Existing Home Sales Jun -0.9%mom 1.8%mom
Philly Fed Index Jul 4.5 4.7
Weekly Jobless Claims 265k 254k
Friday Markit Manufacturing PMI (P) Jul 51.5 51.3
Source: Bloomberg
UK – The pound came off on weaker than forecast retail sales after posting gains earlier driven by good jobs data and the BoE MPC member comments that there is no rush to cut rates as policymakers are awaiting more hard data and evidence on the Brexit economic effects.
• “There may be a case to adjust monetary policy soon. But until more hard data is available, I believe this is good time to ‘keep calm and carry on’,” Kristin Forbes wrote in the Daily Telegraph.
• Retail sales: -0.9%mom/4.3%yoy v 0.9%mom/5.7%yoy in May and -0.6%mom/5.0%yoy forecast.
• Core retail sales: -0.9%mom/3.9%yoy v 0.9%mom/5.2%yoy in May and -0.6%mom/4.8%yoy forecast.
Brazil – Contrary to mainstream, the central bank voted to leave the rate at the ten-year high of 14.25% during the monetary policy meeting yesterday.
• The bank highlighted the risk of higher inflation in the short term and uncertainty over planned economic reforms.
• CPI came in at 8.8%yoy in Jun v the target of 4.5%.
Turkey – Recep Erdogan declared three months of emergency rule with almost 60,000 people reported to have been arrested and suspended on charges of being involved in Frida’s failed coup.
• The local currency hit fresh lows against the US$ yesterday as S&P cut the sovereign rating further into junk territory.
Scotland – The economy stagnated in Q1/16 showing 0 growth v 0.4%qoq for the UK.
• Services posted a 0.4%qoq while both production and construction recorded 1.2% and 1.5% declines, respectively.
• Over 12 months, the economy grew only 0.6%yoy.
Iran – Chinese press reports comments on Iran threat to reactivate its uranium enrichment facilities
• China.org.cn reports that “Iran's Majlis (parliament) speaker on Wednesday threatened that the Islamic republic will reactivate its uranium enrichment plants if the West puts further demands on Iran under the pretext of the nuclear deal, or JCPOA.
• In a reaction to the recent UN report on the implementation of the JCPOA by Iran, Ali Larijani urged the Atomic Energy Organization of Iran (AEOI) to prepare a plan for the reopening of shuttered uranium enrichment facilities, Tehran Times daily reported.
• A half-yearly report by the UN Secretary-General Ban Ki-moon on the JCPOA said Monday that Iran's developing missile program is "not consistent" with the spirit of the nuclear deal.
• Iran objected to the report, calling it "biased" and "unrealistic."
• Iran has reiterated that its ballistic missiles are not designed to carry nuclear warheads and the issue is not related to the nuclear deal.
• "It is necessary for AEOI to act in compliance with the law passed (earlier) on the reopening of the nuclear plant to enrich uranium proportionate to the country's needs," Larijani was quoted as saying.
• Following a nuclear deal between Iran and the world powers in July 2015, Iran stopped major parts of its uranium enrichment activities in the Natanz and Fordow facilities in central Iran.
• On Wednesday, Larijani stressed that hostile actions by the U.S. House of Representatives and the Senate against the nuclear deal have reached a point where Iran has "no other option but to retaliate."
• While Iran has announced it is more than ever ready for investments, international companies drag their feet to invest in the country since they fear that they may face obstacles due to the sour relations between Iran and the United States as well as complications involved in the money transfer to and out of the country.
• The United Sates has still its sanction on Iran over the alleged violations of human rights and supports of terrorism, which Iran denies.
• Also, Washington has recently blacklisted some Iranian and foreign entities for being involved in Iran's missile program.”
Currencies
US$1.108/eur vs 1.099/eur last week. Yen 105.96/$ vs 106.45/$. SAr 14.281/$ vs 14.277/$.
$1.319/gbp vs $1.316/gbp. 0.750/aud vs 0.749/aud. CNY 6.677/$ vs 6.679/$.
Commodity Newstop
Precious metals:
Gold US$1,321/oz vs US$1,327/oz last week
Gold ETFs 64.5moz v 64.5moz last week
Platinum US$1,087/oz vs US$1,085/oz last week
Palladium US$672/oz vs US$654/oz last week
Silver US$19.45/oz vs US$19.78/oz last week
Base metals:
Copper US$ 4,969/t vs US$4,961/t last week – The market is estimated to have posted a 119kt deficit in the first four months of 2016, compared with a production surplus of around 13kt for the same period in 2015, the ICSG reports.
• Global demand climbed 6%yoy on the back of a 14%yoy increase in China with world consumption ex China down 1%yoy.
• Mine production was up 4% with concentrate output up 5% and SX-EW supply unchanged.
• Peru, Canada, US, Mexico and Malaysia all reported an increase while output was down in Chile (-4%yoy) and the DRC (-13%).
• Refined production increased 4.5%yoy with both primary and secondary output up 4%yoy and 6%yoy, respectively.
Aluminium US$ 1,618/t vs US$1,642/t last week – China production fell 2.4%yoy in June although a rebound from May raises concerns over a potential step in supply in H2/16.
• Refined aluminium output totalled 2.7mt or 32.7mt on annualised basis in Jun, down 2.4%yoy and up 3.8%mom.
Nickel US$ 10,660/t vs US$10,505/t last week –
Zinc US$ 2,261/t vs US$2,246/t last week –
Lead US$ 1,862/t vs US$1,851/t last week
Tin US$ 17,850/t vs US$17,700/t last week – Indonesia June refined tin exports rise 42% mom
• Indonesia exported 7,651.84t of refined tin in June up 42% on May but 8% lower yoy
Energy:
Oil US$47.2/bbl vs US$46.9/bbl last week
Natural Gas US$2.638/mmbtu vs US$2.725/mmbtu last week
Uranium US$25.40/lb vs US$25.40/lb last week – uranium price hits an 11-year low at $24.9/lb on Monday according to Ux Consultants (FT).
• We believe that much uranium supply is produced for long-term contracts which are thought to be set at significantly higher levels (>$40/lb) than the spot price would suggest.
• A significant deficit between mine supply and demand has been filled through the reprocessing of weapons grade uranium and government stocks.
• Nuclear power plants in the US have closed in the face of cheaper power generation from shale gas production.
• This has added to the pull back in demand from the closure of Japan’s nuclear reactors following the Fukushima event
• China is thought to have accumulated some 280mlbs (Ux est) in recent years importing 65mlbs last year
• China plans on adding some 420Gw of new generations capacity by 2020 with 95% of this coming from new nuclear plants and also renewable resources
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$52.8/t vs US$52.8/t –
• China steel sentiment index rebounded in July
Thermal coal (1st year forward cif ARA) US$58.9/t vs US$59.0/t last week
Other:
Lithium – Lithium x Energy initiate pump tests on brines at their Sal de los Angeles project in Argentina
• SRK consultants are running the pump tests
• Construction permits for the pilot ponding facility are anticipated within 60 days
• A new resource is expected by end August
Tungsten - APT European prices dropped to $175-185/mtu vs $185-200/mtu from the previous week
Company News
Asiamet Resources (LON:ARS) 2.3 pence, Mkt Cap £14.2m – Additional drilling confirms and extends shallow mineralisation
• Asiamet reports that infill and extension drilling being undertaken as part of the feasibility study work for its Beruang Kanan Main (BKM) copper deposit in Central Kalimantan continues to encounter shallow, high grade copper mineralisation within the resource area. The drilling has also confirmed the continuity of mineralisation and has extended the known mineralisation in the southern part of the property further to the east than was previously thought.
• Among the results reported today are a 12m intersection in hole BKM–31700-02 at an average grade of 0.93% copper from a depth of 1m; three separate intersections in hole BKM-31700-03 of 5m at 1.8% copper from a depth of 10.5m; 22m at 1.07% from 21m and 6.2m at 1.06% from 102m with the hole terminating in mineralisation and a 43m wide intersection at ana average grade of 1.16% copper from a depth of 15m in hole BKM-31700-04.
• There are currently four drill rigs in operation with 25 holes, totaling 2558m of drilling completed to date. As well as the resource drilling, five- large diameter drill holes have been completed to obtain material for additional metallurgical test work. A further 12 holes are planned to obtain more material for the testing programme.
• Referring to the implications of the new drilling results, Chief Executive Tony Manini, commented that they “present Asiamet with an opportunity to assess selective mining and scheduling of this higher grade mineralisation early in the mine life, potentially enhancing project economics and shortening the capital payback period for the project.”
Conclusion: The company has previously indicated that it expects to complete its resource estimation update by the end of Q3 2016. The recent results suggest that there may be scope to further reduce the already low 1.23:1 waste:ore ratio as well as achieve the primary purpose of upgrading the current, largely inferred, resource of 49.7m tonnes at an average grade of 0.6% copper to measured and indicated.
Hochschild Mining (LON:HOC) 209 pence, Mkt Cap £1.1bn – H2 Production Report and higher 2016 guidance
• Hochschild Mining reports “strong production results, continued cost reduction, further debt repayments” during H2 2016. The company also announces that its “Inmaculada operation has performed above expectations and is on track to exceed its production and cost targets for the year”.
• As a result, the company has increased its 2016 production guidance by 6% to 34 million silver equivalent ounces and lowered its all –in-sustaining cost guidance to US$11-11.50 per silver equivalent ounce.
• Attributable production for H1 rose by more than 30% to 8.21m ounces of silver (H1 2005 – 6.27moz) while gold production almost trebled to 118.12 koz (H1 2015 – 40.6 koz) resulting an overall increase of 82% in silver equivalent ounces to 16.95m oz.
• The company comments that “Inmaculada delivered its strongest quarter [Q2] since commissioning with gold production at 45,000 ounces and silver production of 1.4 million ounces … Throughout the first half grades and silver recoveries have been better than expected in the original mine plan”. The Inmaculada mine reached commercial production in September 2015.
• In the company’s other operations, increases of 15% in silver equivalent production at the Arcata mine (to 3.7m oz) and of 5% at the San Jose mine (6.35moz) were partially offset by a 13% decline in output at the Pallancata mine to 1.75m oz.
• The strong production profile has enabled Hochschild Mining to repay $70m of debt during the first half of 2016 leaving the company with net debt of approximately $280m at 30th June 2016.
Conclusion: The new Inmaculada mine is delivering better than expected performance and enabling the company to increase its production guidance and reduce debt.
Metminco* (LON:MNC) 0.155 pence, Mkt Cap £6.8m – Updated resource for Miraflores gold project in Colombia
• Metminco has updated its mineral resource statement for the Miraflores gold project in Colombia.
• The new statement is to the JORC 2012 standard using a 1.2g/t cut offand replaces the former NI 43-101 statement
o M & I Mineral Resources 832,000oz gold and 817,000 silver in (9.19Mt grading 2.81g/t Au and 2.76g/t Ag)
o Measured Mineral Resources 282,000oz gold and 237,000 silver (2.95Mt grading 2.98g/t Au and 2.5g/t Ag
o Indicated Mineral Resources 549,000gold and 580,000 (6.24Mt grading 2.74g/t Au and 2.89g/t Ag)
o Inferred Mineral Resources 8,000oz gold and 32,000 silver (0.18Mt grading 1.44g/t Au and 5.49g/t Ag)
o The previous statement and initiation of feasibility study was done by Mineral Seafield SAS using SRK.
o Minera Seafield SAS went into administration in late 2014 having spent substantial sums drilling and evaluating the project for a large-scale open pit.
o Metminco are reworking the project as an underground mine with a much lower capital cost and more focussed mining plan.
o The new strategy is very much more workable than the previous plan and is more likely to gain approval for mining and processing as it should not disturb much more than previous mining camps at the site.
o New modelling of the Miraflores veins and ore types has been done on the 25,884m of core from 73 drill holes as well as assay data from channelling and other samples taken from the existing underground workings. The new JORC statement gives significant detail on the work done to complete the JORC resource.
o The Miraflores project has a former NI 43-101 compliant resources, defined by the previous operator, of 1.88moz based on a cuttoff grade of 0.27g/t.
o The statement shows a LiDAR survey image depicting the position of the Breccia against the local topography.
o A small open pit may also be excavated with no overburden removal required.
o Metminco also holds a further 0.92m oz at the nearby Dosquebrados project. The company also has a recently announced funding agreement for the company’s Los Calatos project in Chile.
o Metminco is targeting 50-60,000oz of gold production a year with sufficient measured resources for 5-6 years of production and enough indicated resources to be sure the mine will carry on for more than 10 years in our view.
o There appears significant potential to extend the operation of the mine and or the plant well beyond this given other prospects in the region.
o Metminco is currently preparing estimates for a reworked mine plan:
o Costs: We expect to see significant reductions in capital and operating costs through the development of a more focussed and better targeted operation.
o Recovery rates: a significant proportion of the gold is recoverable by simple gravity separation particularly from the underground ore.
o Permitting: the Miraflores mine is effectively a brown-field site and is located near a number of other smallish mining operations. We do not envisage any specific permitting problems with the revised mine plan as this minimises surface impact.
o Colombia: Colombia is open for business and appears keen for professional mining companies to replace hazardous artisanal operations where mortality rates are unacceptably high. There were no artisanal miners evident in the mine tunnels at Miraflores.
o Higher parts of Colombia are restricted to mining for environmental reasons. The Miraflores project is at lower elevation with its highest point at around 2,000m and is in an existing mining area.
o Infrastructure: local properties appear to be connected with power and gravel roads. A 15MW grid power line runs within 4 km of the site.
o Exploration: there is significant potential to extend Metminco’s gold resources in the area with further drilling at the Tesorito and Desquebradas prospects offering significant potential. Tesorito has a drill hole showing around 1g/t gold over a 200m width with gold disseminated all the way through
Conclusion: The team at Metminco are reworking the mine plan to create a workable, compelling and better focussed mine plan. We expect this, more simple, plan to show significant reductions on previous capital and operating costs and for this to raise the value of the project significantly.
*SP Angel act as joint-broker to Metminco. An SP Angel analyst has visited the Miraflores mine site in Colombia
South32 Limited (LON:S32) 103 pence, Mkt Cap £5.5bn – Record production performances
• South32 has reported “Record annual production at its Australia Manganese, Worsley Alumina, Brazil Alumina, Mozal Aluminium and Cannington (payable zinc)” operations.
• Production did, however, decline at a number of operations, including manganese alloy output down 46% y-o-y where operations in both Australia, which were adversely impacted by power shortages in Tasmania, and in S Africa where operations at 3 of four furnaces were suspended pending an improvement in market conditions.
• Production also declined by 9% at the Cerro Matoso nickel operation in Colombia to 36,800 tonnes as a result of planned lower grades.
• At the Cannington mine, temporary reductions in mill throughput led to a decline in production of payable silver and lead (to 20.85m oz of silver and 173.2lt of lead) but these effects were more than compensated for by higher zinc grades and recoveries which led to a 9% increase to a record 79kt of zinc.
• In the alumina business, production at Worsley rose 4% to 4mt “as an uplift in calciner availability underpinned record performance.”
• South African aluminium output was largely unchanged and the company comments that “the impact of load-shedding was lower than expected”. In Mozambique, however, “Mozal Aluminium achieved record annual production of 266kt … as a reduction in load-shedding complemented an increase in potline current efficiency.”
Sirius Minerals (LON:SXX) – Final part of North Yorks Moors potash development plan approved
• The BBC report today that the final part of the North Yorkshire potash mine development plan has been approved.
• The proposed capital cost is £2.4bn.
• While we believe it may be possible to raise the huge sum to pay for development of the project we do not feel there will be sufficient margin to sufficiently reward long term equity investment.