Avalon Minerals ltd (ASX:AVA) – drilling starts at high-grade lithium project in Sweden
Horizonte Minerals (LON:HZM) – Additional licences awarded at the Araguaia nickel project
Kefi Minerals* (LON:KEFI) – Raising £3.8m
Kodal Minerals* (LON:KOD) – Exploration work in West African
Mkango Resources* (LON:MKA) – Option to acquire hydrochloric acid regeneration technology
European markets are trading level while Asian stocks climb toward their highest level since October driven by gains in telecom and gaming companies.
US equities closed lower on losses in energy stocks driven by a fall in oil prices.
• Copper hit the lowest level in nearly two weeks in Shanghai as local smelters raised output driven by increasing margins driven a surplus of concentrate.
• Nickel prices fell despite a Philippino MP calling for an outright ban on shipments of raw metal ores mimicking the Indonesian decision in 2014. The metal rallied more than 10% this month as new administration launched a review of mining permits in the country.
• The yen is up 1.5% this morning on the back of Finance Minister comments that the government is yet to decide on the size of a fiscal stimulus. Investors expect the BoJ to ease the policy further this Friday.
• Sterling fell a further 0.4% as an independent MPC member brought expectations of a monetary easing forward on weak economic data released on Friday (FT).
• Brent crude fell 0.7% after falling 4% over the past three sessions on concerns over US inventory levels.
• Major sovereign bond yields are lower ahead of the Fed and BoJ meetings today.
Lithium – Lithium Oxygen batteries could lead to lighter, longer range cars
• The boffins at the MIT, Argonne National Lab and Peking University have created a lithium oxygen battery which has the power and light weight of a lithium air battery but does not suffer from the short life or wasted heat issues.
• The lithium oxygen battery uses nanoscale particles which hold both oxygen and lithium and keeps the oxygen within the battery as it changes states. This cuts energy losses and prevents changes in volume which shorten battery life spans. It also does not suffer contamination from carbon dioxide or H2O and has some inherent protection against overcharging.
• The battery is still at the proof of concept stage but a prototype will soon follow. The battery is thought to store 2x existing energy density..
• If this new battery is able to also benefit from other recent breakthroughs in electrode coatings and graphite flake alignment which may be applicable across a range of battery technologies then the performance of the battery may exceed the 2x energy density forecast making a big difference to consumers.
• New battery technology ‘will’ herald a new era for electric vehicles, consumer and industrial products.
• The electricity needed to power increased demand for plug-in electric vehicles will largely come from coal and nuclear and will be delivered through upgraded grid networks of copper and aluminium requiring more metal all round. Increased distributed power from solar and wind will also become a part of the distribution network
• While the age of oil is not yet over, the hydrocarbon age may have seen its best years.
Cobalt – Chinese investors / speculators buy cobalt for battery demand growth
• Chinese investors and speculators are reported to be buying up physical cobalt as they bank on new demand for cobalt batteries.
• Consumers are reported to be paying higher prices for forward deliveries with cobalt prices rising to $28-31,000/t for metal.
Chinese miners buy $4.5bn of foreign mining assets in H1
• Chinese companies have been taking full advantage of the rout in commodity markets to acquire mineral assets.
• Chinese backed funds and companies have bought over $4.5bn worth of non-China mining assets according to Baker & McKenzie.
• The figure is 18% higher yoy.
• China Molybdenum (CMOC) was the major buyer acquiring Freeport’s stake in Tenke Fungurume in the DRC for $2.65bn. The mine is a major copper, cobalt producer.
• The company also agreed to buy Anglo’s niobium and phosphate assets in Brazil for US$1.5bn.
• Acquisitions are increasingly being made by private and provincial parastatal companies
• Jiangxi Ganfeng Lithium, China’s second largest lithium producer bought 43% of the Mount Marion lithium project in Western Australia in late 2015.
• Sichuan Railway Investment Group (SRIG) agreed a A$330m deal for 60% for Alton Mining’s Cloncurry’s copper-gold mine in Queensland, Australia. SRIG were already in jv with Alton Mining on the asset and are contributing US$213.5m to the project giving SRIG a 66% stake in the project.
Dow Jones Industrials -0.42% At 18,493
Nikkei 225 -1.43% At 16,383
HK Hang Seng +0.62% At 22,130
Shanghai Composite +1.14% At 3,050
FTSE 350 Mining +0.69% At 11,310
AIM Basic Resources +1.59% At 2,201 – AIM resource stocks rise 45% since January
US
Date Index Period Actual Expected (Bloomberg) Previous
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
China – Monetary Conditions Indicator reached a five-year high in Jun helped by improved bank lending and a weaker currency, HSBC reported.
Japan – The administration is working on the fiscal stimulus package with no details on the size of the programme available at this moment.
• Meanwhile, Finance Minister said he hoped the BoJ would continue with its monetary stimulus efforts.
• The supplementary budget meeting is scheduled for this Friday, same day as the BoJ policy meeting, with the final decision on the size on Aug 2.
Germany – Business confidence came in better than forecast in Jul, while a little off from the Jun reading, the survey continued to point to a relative resilience of the local economy to the decision by the UK to leave the EU, Ifo Institute said.
• Ifo Business Climate: 108.3 v 108.7 in Jun (the highest since the start of the year) and 107.5 forecast.
• The report follows good manufacturing PMI numbers released last year as the index hit the highest level since early 2014.
UK – Business confidence fell to the lowest reading since early-2009 reflecting the effect of the Brexit vote in Jun.
• CBI Business Optimism: -47 v -5 in Jun and -15 forecast.
• Surveyed noted weak expectations for new orders and scaling back of investment plans post Brexit.
• “Concerns over economic and political conditions abroad as a constraint on export orders are at their highest since 1983,” CBI said.
South Korea – The economy, the fourth largest in the region, reported an accelerated increase in GDP in Q2/16 beating market estimates.
• Q2 GDP change: 0.7%qoq/3.2%%yoy v 0.5%qoq/2.8%yoy in Q1 and 0.6%qoq/3.0%yoy forecast.
• The government together with the central bank hs been adding to stimulus to try support local economy amid weak dometic consumption and falling exports.
• In Jun, the government announced a $17.5bn stimulus package while the Bank of Korea cut its benchmark rates.
Venezuela – Gold reserves have come off in May for a fourth consecutive month as the administration feels the pressure of diminished FX revenues on weaker oil prices.
• Holdings dropped to 6.24moz, down from 6.63moz in Apr, according the IMF data.
• Gold reserves fell 36% over the last 12 months and almost halved since Feb/15.
Currencies
US$1.1007/eur vs 1.0985/eur last week. Yen 104.35/$ vs 106.29/$. SAr 14.400/$ vs 14.312/$ $1.310/gbp vs $1.315/gbp.
0.752/aud vs 0.749/aud. CNY 6.675/$ vs 6.679/$.
Commodity News
Precious metals:
Gold US$1,321/oz vs US$1,315/oz last week
Gold ETFs 64.3moz v 64.5moz last week – ETF holdings pull back in summer trading
Platinum US$1,087/oz vs US$1,074/oz last week
Palladium US$684/oz vs US$676/oz last week
Silver US$19.68/oz vs US$19.46/oz last week
Base metals:
Copper US$ 4,869/t vs US$4,929/t last week –
Aluminium US$ 1,607/t vs US$1,608t last week –
Nickel US$ 10,280/t vs US$10,445/t last week –
Zinc US$ 2,223/t vs US$2,262/t last week –
Lead US$ 1,839/t vs US$1,848/t last week
Tin US$ 17,725/t vs US$17,785/t last week –
Energy:
Oil US$44.4/bbl vs US$45.4/bbl last week
Natural Gas US$2.713/mmbtu vs US$2.801/mmbtu last week
Uranium US$25.20/lb vs US$25.40/lb last week –
•
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$54.6/t vs US$54.7/t – China imposes anti-dumping duties on EU, Japan, S Korea for steel shipments
• In a move which would make Niccolò Machiavelli proud, China is imposing anti-dumping duties on certain steel imports into China
• The new duties will range from around 37-46.3% according to the Chinese Ministry of Commerce as reported in the Taipei Times.
• We suspect the move is a pre-emptive strike against proposals in the EU for dumping steel into Europe
• The US has already imposed anti-dumping duties but the EU has been typically slow to impose similar dities.
• In 2012 the WTO ruled that Chinese duties on high-tech steel from the US violated trade rules.
• The WTO censured China last year for ongoing duties despite the judgement against it.
Thermal coal (1st year forward cif ARA) US$59.3/t vs US$58.5/t last week
Other:
Tungsten - APT European prices dropped to $180-190/mtu vs $175-185/mtu on last week
Company News
Avalon Minerals ltd (ASX:AVA) A$0.4, mkt cap A$20.1m - drilling starts at high-grade lithium project in Sweden
• Avalon Minerals which has been investigating a copper project at Kiruna in Sweden has turned its attention to lithium.
• The team led by Malcolm Norris, is following up on some high-grade intersections at the Kietyonmaki lithium project in Finland drilled by the Geological Survey of Finland.
o 12.9m @ 1.83% Li2O within a broader zone of 23M @ 1.53% Li2O
o 9m at 2.2% Li2O within a broader zone of 24m at 1.3% Li2O
o 1m @ 3.9% Li2O within a broader zone of 13m at 1.66% Li2O
o Peak value of 3m @ 4.35% Li2O (drill hole R310).
o The plan is to drill 3,000m of diamond drilling in around 17 drill holes to test around 400m strike length and depth of 250m depth.
o Drilling starts around mid August and will allow for preliminary metallurgical test work with a maiden lithium resource expected by the year end.
o Avalon is earning into the project in joint venture with Nortec Minerals Corp
Conclusion: This feels like a positive development for Avalon
Horizonte Minerals (LON:HZM) 2.1 pence, Mkt Cap £14.3m – Additional licences awarded at the Araguaia nickel project
• Horizonte Minerals reports that it has been awarded 3 further licences totalling 3,142 hectares to the south of its recently acquired Glencore Araguaia Project (GAP) in Brazil.
• The company has been progressively expanding its footprint in the region covered by ultramafic rocks which host laterite nickel deposits and now holds a total of 113,314 hectares within 19 licences.
• The company plans to “undertake a reconnaissance exploration programme to evaluate the potential of these new areas for additional nickel mineralisation. In addition, based on generative work recently completed, we have applied for three further licence areas, which is in line with our strategy to consolidate our land position in the district.”
• The company has previously disclosed that it is working on an updated pre-feasibility study, due for release during H2 2016, for the development of the Araguaia saprolite / laterite nickel deposit.
Conclusion: Horizonte Minerals is consolidating its holdings in the Araguaia district and continuing to apply for additional licences. We look forward to the updated pre-feasibility study later this year.
Kefi Minerals* (KEFI LN) 0.5 pence, Mkt Cap £17.0m – Raising £3.8m
• Kefi Minerals has announced that it has, conditionally, raised £3.8m through the issue of 761.9m shares at 0.5p/share.
• The proceeds are to be used to assist in the resettlement of the Tulu Kapi community as well as the costs of closing the project finance syndication. In addition, the company will recommence exploration on satellite deposits within trucking distance of the Tulu Kapi plant and further the exploration of its project at Jabal Qutman in Saudi Arabia.
• Odey Asset Management “has subscribed in the Placing above its pro rata shareholding and, upon completion of the Placing, will have a beneficial interest in circa 29.5% of the issued capital of the Company.” “Ausdrill International Pty Ltd, an existing 7.31% shareholder has also subscribed in the Placing for approximately £266,160 (approximately US$350,000) to maintain its pro rata shareholding in KEFI.”
Conclusion: The funding has been well-supported by two of Kefi Minerals’ major shareholders and should help maintain the momentum of work by facilitating the start of the resettlement programme at Tulu Kapi and allow the exploration of outlying satellite deposits.
Kodal Minerals* (LON:KOD) 0.05p, mkt cap $1.8m – Exploration work in West African
• Kodal Minerals reports on its exploration activities in west Africa where a trenching programme has commenced on the Nangalosso Gold project in Mali is following up previous work including a 3m wide intersection at an average grade of 7.12g/t within a wider mineralised zone of 21m averaging 7.12g/t gold in drill hole NNAC114; a 1m wide section averaging 7.8 g/t in drill hole NNAC021.
• To date, assay data has yet to be received from the first of the six trench programme at Nangalosso but the company reports that “initial geological inspection of the first trench (located 100m south of drill hole NNTR002) highlights abundant zones of quartz veining, strong alteration, haematite staining and strong geological structures.” The company expects exploration results in August 2016.
• Elsewhere, Kodal Minerals expects to start a programme of geochemical soil sampling at its wholly owned Korhogo project in Cote d’Ivoire shortly.
• Also in Cote d’Ivoire, activity in the joint venture exploration with Newcrest Mining at Dabakala is resuming with the establishment of a field camp in preparation for auger drilling of strong gold anomalies. The programme is expected to take 2 months with results expected in Q4.
• Resolute Mining is continuing with geochemical soli sampling on the joint venture exploration at Nielle and Tiebissou and is in discussion with the Cote d’Ivoire Government for exploration access to the M’Bahaikro licence area.
Conclusion: Since concluding the acquisition of the West African properties in June, Kodal is building up its exploration programme; we look forward to results as exploration progresses and assay results become available.
*SP Angel acts as Financial Advisor and Broker to the company.
*The author of this report does not hold shares in Kodal Minerals.
Three Partners of SP Angel and SP Angel LLP hold stock in Kodal Minerals due to their long running financial support for the company.
Mkango Resources* (LON:MKA) 4.4p, Mkt Cap £3.1m – Option to acquire hydrochloric acid regeneration technology
• Mkango Resources has announced that it has secured a two year option to acquire hydrochloric acid regeneration technology developed by McGill University in Canada.
• The process allows the production of high-strength hydrochloric acid from calcium chloride using sulphuric acid and is “applicable in rare earths processing and other potential industrial applications”.
• The planned processing route for Mkango’s Songwe Hill rare earth project in Malawi uses hydrochloric acid to leach waste minerals (“gangue”) which produces calcium chloride. The McGill technology provides Mkango the scope to regenerate hydrochloric acid on-site “using the calcium chloride feed stream, supplemented with additional calcium chloride, together with sulphuric acid produced from Sulphur at a plant on site.”
• Harnessing this technology provides the opportunity to eliminate the need to transport large quantities of liquid hydrochloric acid to Songwe Hill by importing solid sulphur and calcium chloride feedstock to generate these key reagents on-site. This approach should simplify logistics and offer “significant potential cost” savings.
• In its November 2015 pre-feasibility study, Mkango Resources outline a project generating an after tax NPV of US$345m using a 10% discount rate and delivering a 37% IRR from an initial capital investment of US$216m. The potential operating cost savings will have to be balanced against any additional capital cost requirements to incorporate a hydrochloric acid regeneration module in the plant, however, in acquiring the rights to this technology Mkango has created additional options for its own plant development and may be able to roll out this expertise in due course.
Conclusion: Mkango Resources has the right to acquire technology which could simplify the provision of important reagents to its Songwe Hill rare earths project and deliver cost benefits in the processing plant.