Amur Minerals (LON:AMC) – A plan of works ahead of the DFS completion in Dec/17
Atalaya Mining (LON:ATYM) – 9.5mtpa expansion completed
Petra Diamonds (LON:PDL) – Exceeding production guidance
Scotgold Resources (LON:SGZ) – Initial field programme for Pomar licences in Portugal
Randgold Resources (LON:RRS) – Mill failure and power issues revise Tongon gold target to 260,000oz
Copper – looking increasingly interesting as Zambia and Chile both look like they will move to increase government revenues from copper
• Copper miners are looking increasingly interesting as the two major copper producers look like they are moving towards increasing their take from copper mining.
• Raising royalties or corporate taxes could serve to restrict copper production in both regions at a time when we expect demand for copper to increase.
• Copper miners are already struggling to meet production forecasts and any move by governments to raise taxes may serve to cut investment and move focus elsewhere.
Gold prices pause as investors wait for signals from G-20 leaders on further stimulus
• The US dollar continues to gain as the impact of Brexit continues to unsettle investors.
• Gold has held it ground against the strength of the US dollar indicating good ongoing support for the metal though we note there have been some recent mid-summer ETF sales.
BHP Mitsubishi Alliance may win Anglo Queensland coal asset tender for around US$1.5bn
• BHP and Mitsubishi may acquire Anglo American’s metallurgical coal mines in Queensland, Australia.
• The result of the tender offer will be known next week.
• The mines are said to include two major world-class longwall mining operations
Dow Jones Industrials +0.29% At 18,571
Nikkei 225 -0.04% At 16,620
HK Hang Seng +0.13% At 21,993
Shanghai Composite +0.10% At 3,016
FTSE 350 Mining +0.84% At 11,400
AIM Basic Resources +1.72% At 2,166 – AIM resources continue to perform
Gold prices slide while Brent trading close to the lowest since May as investors are looking towards results of central bank meetings planned in the US and Japan this week.
• The BoJ is forecast to step up purchases of ETFs providing more stimulus to the economy while the Fed is expected to stay put.
• Sovereign bond yields are trading higher this morning with major European equity indices all in black.
• Iron ore futures rebounded from the worst week since May on stimulus outlook. Futures on Dalian Exchange were up 4.1% today after posting a 7.2% loss last week.
US
Date Index Period Actual Expected (Bloomberg) Previous
Friday Markit Manufacturing PMI (P) Jul 52.9 51.5 51.3
Tuesday S&P/CS Property Prices May 0.2%mom/5.6%yoy 0.5%mom/5.4%yoy
Consumer Confidence Jul 95.5 98
New Home Sales Jun 1.6%mom -6.0%mom
Wednesday Durable Goods/Core Jun -1.1%mom/0.3%mom -2.3%mom/-0.3%mom
Capital Goods Orders Jun 0.2%mom -0.4%mom
FOMC Rate 0.25%-0.50% 0.25%-0.50%
Thursday Weeklyt Jobless Claims 263k 253k
Friday GDP (1st reading) Q2 2.6%qoq 1.1%qoq
Core PCE 1.7%qoq 2.0%qoq
Source: Bloomberg
Japan – Yen weakened on poor trading data that showed both exports and imports posted an annual decline in Jun.
• Exports: -7.4%yoy v -11.3%yoy in May and -11.3%yoy forecast.
• Imports: -18.8%yoy and -13.8%yoy in May and -20.0%yoy forecast.
Turkey – Prime Minister ruled out early elections and said the government will be launching a multi-billion dollar infrastructure fund to stimulate economic growth.
• The stock index recovered 2.4% while Turkish lira is trading up 1.1% against the US$ this morning.
• Both equity index and the currency remain 11.3% and 5.0% down following a failed coup attempt on the 16-17Jul weekend.
Zambia – elections on 11 August as Zambians prepare to elect new president and ruling party. The wo main parties are President Edgar Lungu's Patriotic Front (PF) and the opposition United Party for National Development (UPND) led by Hakainde Hichilema.
• Neither party has stated policies on hot to recreate economic growth and better help the Zambian people
• The nation is facing energy shortages and reduced revenues from significantly lower copper prices
Philippine - parliamentary speaker says mines should only operate with congressional oversight and government must ensure miners do not export ore but must process locally to create jobs for locals. The speaker goes on to state that mines should not just enrich stockholders.
• Curiously – the province of Capiz has lifted a 50-yr mining ban though much opposition from local environmental groups and other interests might make the restart of mining difficult in the area
Currencies
US$1.0985/eur vs 1.103/eur last week. Yen 106.29/$ vs 106.25/$. SAr 14.312/$ vs 14.216/$ $1.315/gbp vs $1.318/gbp.
0.749/aud vs 0.748/aud. CNY 6.679/$ vs 6.672/$.
Commodity News
Precious metals:
Gold US$1,315/oz vs US$1,324/oz last week
Gold ETFs 64.5moz v 64.4moz last week – ETF sales rise again
Platinum US$1,074/oz vs US$1,096/oz last week
Palladium US$676/oz vs US$681/oz last week
Silver US$19.46/oz vs US$19.62/oz last week
Base metals:
Copper US$ 4,929/t vs US$4,968/t last week –
Aluminium US$ 1,608/t vs US$1,612t last week –
Nickel US$ 10,445/t vs US$10,660/t last week – Sumitomo cut deficit forecast for 2016 to 46,000t as more nickel comes out of Indonesia than expected
Zinc US$ 2,262/t vs US$2,264/t last week – zinc prices reported to be leading base metals higher as G-20 pledge more support for economic growth
Lead US$ 1,848/t vs US$1,856/t last week
Tin US$ 17,785/t vs US$17,835/t last week –
Energy:
Oil US$45.4/bbl vs US$46.2/bbl last week
Natural Gas US$2.801/mmbtu vs US$2.681/mmbtu last week
Uranium US$25.40/lb vs US$25.40/lb last week –
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$54.7/t vs US$54.9/t –
Thermal coal (1st year forward cif ARA) US$58.5/t vs US$58.4/t last week
Other:
Tungsten - APT European prices dropped to $180-190/mtu vs $175-185/mtu on last week
Company News
Amur Minerals* (LON:AMC) 4.0p, Mkt Cap £20.6m – A plan of works ahead of the DFS completion in Dec/17
• The Company has issued a roadmap for the medium term Kun Manie project development reiterating the DFS completion date at 31 Dec/17.
• A revision to the available MKF resource is planned at the of the end of the season while negotiations with an internationally recognised consultant are in final stages regarding the preparation of the mining reserve.
• An updated mineral reserve statement will include both open pit and underground production scenarios.
• Previously, the Company looked at a 6.0mtpa mining rate for a 15-year mine life at Kun Manie for an onsite production of the flotation concentrate to be processed by a captive smelter or a third party.
• A bulk scale metallurgical sample will be collected during this field season to define plant and process design and the composition of the flotation concentrate for evaluation of smelter design specifications.
• Three companies have been identified to complete the process design work with requests for proposal currently being compiled for submission.
• In the meantime, bench scale metallurgical assay results prepared by SGS Minerals are currently under review by management and to be released in the near term.
• A group of independent contractors and engineering groups are reported to have been shortlisted for design of onsite infrastructure, a 320km access road and power supply for the optional owner operated smelter.
• Two independent and qualified project management companies have been identified for the DFS completion and preparation of all required supportive Russian documentation and materials. The management is currently preparing requests for proposals.
• Two qualified environmental and regulatory specialists have also been considered to develop environmental controls for mining and processing operations to control for respective regulations.
Conclusion: The Company is set for a busy year and a half period as Kun Manie project development goes into the DFS preparation stage. A number of consultants and qualified specialists has been shortlisted to complete different parts of the study. In the meantime, the exploration team continues with infill drilling at the MKF with a view to expand the Measured and Indicated category of the resource as well as focuses on a collection of a representative metallurgical bulk sample for inclusion in the DFS.
*SP Angel act as Nomad and Broker to Amur Minerals
Atalaya Mining (LON:ATYM) 93 pence, Mkt Cap £108.5m – 9.5mtpa expansion completed
• Atalaya Mining has reported the completion of its expansion project at the Proyecto Rio Tinto to the 9.5mtpa rate ahead of schedule and under budget. The company expects to ramp up production to this rate by the end of this year.
• The company is also reporting its production numbers for the quarter to 30th June. Ore tonnes produced increased by 5.5% compared to Q1 2016 to reach 1.25mt, while processing rose by 15% to 1.31mt.
• As a result, despite the short-lived shutdown of the plant over an administrative issue with tailings disposal and the dislocation to operations caused by the integration of the new, larger, plant, copper production rose by 10% to 4,442 tonnes within a copper concentrate grading 21.54%.
• There was a slight dip in recovery rates to 79.8% reflecting the commissioning of the plant, however the company reports that “Recoveries have now reverted to normal and averaged over 84% in July.”
• The company has previously reported an updated reserve estimate which underpins a mine life of up to 16.5 years.
Conclusion: Atalaya has established a long life operation at the rejuvenated Proyecto Rio Tinto and successfully and, apparently relatively seamlessly, lifted processing rates from the initial 5mtpa to 9.5mtpa ahead of schedule and under budget. We look forward to further news as the ramp-up proceeds.
Petra Diamonds (LON:PDL) 122p, Mkt Cap £637m – Exceeding production guidance
• Petra Diamonds reports FY2016 production for the year ending 30th June 2016 of 3.7m carats, exceeding both 2015 production of 3.2m carats and the previously issued company guidance of 3.6-3.65m carats.
• The company now expects production for the 2017 year to increase by a further 25-30% to 4.6-4.8m carats and to reach their long-term target rate of 5m carats per year in 2018 “a year earlier than originally anticipated, with production rising to ca 5.3Mcts by FY 2019.”
• The Finsch mine increased production by 7% during the year to 2.21m carats, more than offsetting a 7% decline in output from Cullinan to 0.68m carats where management has taken a decision “to reduce ROM throughput during FY 2016 to focus on grade control”.
• The combined operations of the Kimberley Ekapa operations, which were recently restructured to combine Petra Diamonds’ underground operations with their tailings retreatment operations and those of Ekapa Mining, produced 0.53m carats while the smaller, Koffiefontein mine produced a 37% year-on year production increase to over 62,000 carats.
• The Williamson mine in Tanzania showed a 5% increase to 213,000 carats as a result of improved grades from both the run-of-mine ore and the alluvial operations.
• The company reports that its operational capex of US$294m (2015 US$252m) has now peaked and is expected to fall substantially to US$218m and fall further to around US$130m in FY2018 and US$85m in FY 2019.
• The company sold 3.45m carats of diamond during the financial year (up 9% on 2015), however “Rough diamond prices fell ca 9% in H1 FY 2016 before recovering ca 3% in H2 due to the stabilisation of the diamond market … leading to rough prices being overall down 6% for the Year”. As a result, group revenue increased by 1% 40 $430.9m.
• Net debt at 30th June 2016 amounted to US$387.4m (2015- US$172.1m) and “Petra expects to become cash flow positive during FY 2017”.
• Commenting on the diamond market, Petra Diamonds notes the continuing impact of an excess inventory of polished diamonds, liquidity issues in the manufacturing and supply chain and a slowdown in retail demand from China. However the market is reported to have “stabilised in early calendar 2016, with good sales demand from the midstream of the diamond pipeline (the cutting and polishing / manufacturing segment) leading to improved sales volumes of rough diamonds.”
• “Petra remains cautious with regard to the market outlook for the remainder of the calendar year. Market conditions are likely to depend on continued supply control from the major producers to the midstream and stable retail demand, particularly in the US”.
Conclusion: Petra Diamonds is exceeding its production targets and its capital spending has now peaked. As production ramps up more rapidly than originally expected and cash flow becomes positive during the coming year, net debt levels should start to decline.
Scotgold Resources (LON:SGZ) 0.9p, Mkt Cap £12.9m – Initial field programme for Pomar licences in Portugal
• Scotgold Resources reports that its team have recently conducted an initial field inspection of the newly acquired licences in east central Portugal.
• The licence area covers the historic antimony mines at das Gatas, Pomar and Caalinho and mineralisation in the district is now interpreted to represent two separate events with an earlier phase of antimony mineral;isation followed by a later episode of gold emplacement.
• The company is now planning an initial, £30,000, phase of work consisting of re-evaluation and compilation of historic data, and a mapping and soil sampling programme and the analysis of soil samples collected, but not analysed, by the previous owner of the property.
Conclusion: We look forward to results from Portugal as well as further updates from the company’s flagship Cononish project in Scotland.
Randgold Resources (LON:RRS) 8670 pence, Mkt Cap £8.1bn – Mill failure and power issues revise Tongon gold target to 260,000oz
• Randgold report today news of problems at their latest gold mine, Tongon in the Ivory Coast revising the mine’s gold production target to 260,000oz for the year.
• One of the mills at the mine lost 46 days worth of production as a result of poor repairs to the journal and slipper pads following on from last quarter.
• The mill should perform better in the second half.
• To make matters worse the mine has had to contend with erratic power supply from the national grid. We feel certain that management have made their thoughts on grid supply issues known through ‘constructive engagement’ with the power utility. Randgold states it is “committed to continue working with the utility and the energy ministry to permanently secure power supply stability”.
o Tongon is an impressive mine having repaid its capital cost last year and remains profitable having just declared a maiden dividend of $22m.
o Kibali is the DRC also remains on course to exceed 600,000oz
o Exploration: Randgold report new opportunities at the Boundiali and Mankono permits and indicate potential to extend the life of the Tongon gold mine through near-mine exploration at Seydou and Sekala as well as potential for additional resources below the Tongon pit.
o Production: Randgold delivered record production last year of 1.2moz but may risk meeting its 2016 forecast of >1.2moz through 2016 given recent challenges at Kibali and issues at Tongon
Conclusion: Randgold remains a major gold producer despite the challenges of operating in the DRC, Mali, Senegal and the Ivory Coast.