Centamin (LON:CEY) – Q2 Results and increased company guidance for 2016
Conroy Gold & Natural Resources (LON:CGNR) – Continuity of mineralisation at Clontibret
Dalradian Resources (LON:DALR) – Sprott reports sale of 4.4m shares in Dalradian Resources
Gem Diamonds (LON:GEMD) – Adverse weather may trigger revision to guidance
Glencore (LON:GLEN) – Expect mixed buy positive Interim figures tomorrow
Kibo Mining (LON:KIBO) – Agreement for consolidation of Imweru and Imwelo gold projects
IronRidge Resources* (LON:IRR) – IronRidge buys into Tekton for gold properties in Chad
Petra Diamonds (LON:PDL) – Cullinan mine yields a 138 carat diamond
Solgold* (LON:SOLG) – SolGold shares soar on expectation for US$36.5m funding
Lithium – Tesla statement highlights risks to Gigafactory timeline
• Tesla has highlighted in a recent statement risks to bringing its Gigafactory online and operating within expectations.
• The statement highlights the risk to the supply of the new Tesla Model 3 if the Gigafactory is not able to produce high volumes of quality lithium-ion cells at reasonable prices. The Model 3 is due for release in late 2017.
• So far 373,000 people have placed $1,000 deposits and reports suggest that 200,000 orders may be fulfilled in 2017.
• Model 3 production is forecast for 500,000 cars pa from 2018.
• Tesla reckons the Model 3 will offer a minimum range of 215 miles on a full charge. Acceleration is likely to me significantly faster than the stated 0-62 in <6 seconds, though you might have to buy extra batteries for the ‘Ludicrous Mode’ to get more squeals in your wheels.
• At $35,000-42,000 its going to change the nature of motoring industry so long as it can solve ‘range anxiety’ and so long as the batteries perform to expectations. So far Tesla battery packs are said to have performed ahead of expectations due probably to their management controls.
• The number of developments and breakthroughs in lithium battery construction and chemistry should enable Tesla to produce significantly better batteries with improved range and charging times in the years to come. Question is, will these better batteries be tested and ready for production by the time the Model 3 is released?
• If consumers are persuaded by the much lower operating cost of EV motoring then just imagine how much new metal is going to be consumed by the move to buy new cars and to develop the electrical infrastructure to recharge all these new electric vehicles. As Apple says ‘ This changes everything’.
Dow Jones Industrials +0.02% at 18,533
Nikkei 225 -0.18% at 16,735
HK Hang Seng +0.12% at 22,492
Shanghai Composite -0.23% at 3,019
FTSE 350 Mining +0.22% at 12,236
AIM Basic Resources +2.14% at 2,382 AIM resource stocks up 51% since the January low and up 41% from 1st January
The 350 Mining index is up 63% since 1st January
European equities take a break following a five day long winning streak as metal prices gain on a weaker US$ while Brent is slightly lower this morning.
• The API data showed US stockpiles climbed by 2.1mmbbl last week while the EIA increased its US crude production estimate for 2017in its monthly short term energy outlook released yesterday (8.31mmbbl v 8.2mmbbl forecast in Jul).
• Iron ore futures for Sep delivery on Dalian Commodity Exchange dropped 1.5% to close at CNY 494/t ($74.4/t) after having hit the highest in more than 18 months on Monday.
US – Labour productivity contracted in Q2/16 marking the longest run of negative readings since at least 1980, according to Bloomberg.
• The latest data showed productivity fell 0.5%qoq last quarter v estimates for a 0.4%qoq growth.
• On annual basis, productivity slid to 0.4%yoy, down from 0.7%yoy recorded in 12 months through Mar.
• Average gains in productivity since 2011 of 0.4%yoy compare to 3% recorded in the second half of 1990s pointing to a period of weak future growth while convincing the Fed to potentially leave accommodative monetary policy in place for longer.
Date Index Period Actual Expected (Bloomberg) Previous
Wednesday Job Openings Jun 5,588k 5,500k
Thursday Weekly Jobless Claims 265k 269k
Friday Retail Sales/Core Jul 0.4%mom/0.2%mom 0.6%mom/0.7%mom
UoM Consumer Sentiment Aug 91.5 90.00
Source: Bloomberg
China – Earnings of Chinese securities firms collapsed 59%yoy in H1/16 as the stock market recorded a 41.6% from Jun/15 multi-year peak and funds saw a 30.5%yoy (annualised) drop in total assets under management.
• Net profits of 126 forms totalled CNY 62.5bn ($9.4bn) during the first half of the year while revenue dropped 52.5%yoy to CNY 157.1bn.
UK – The BoE bond purchasing programme has undershoot the planned size as holders of long dated notes refused to sell gilts to the central bank.
• Despite being offered a premium to market price, investors sold £1.12bn of notes compared with a £1.17bn BoE plan.
• This was the first auction following the decision by the central bank to expand its stimulus by £70bn announced last week.
• 10 year bond yields continued to slide further for a third consecutive day hitting new record low briefely slipping below the 0.55% level.
France – Industrial production contracted for a second month in a row in Jun against expectation for a rebound summing up what turned out to be a particularly weak quarter.
• Industrial production: -0.8%mom/-1.3%yoy v -0.5%mom/0.5%yoy in May and 0.1%mom/-0.4%yoy forecast.
Australia – The new leader of the Nationals party proposed to hike iron ore royalties from A$0.25/t to A$5.0/t on Western Australian operations in an effort to support the government budget.
• The proposed increase is estimated to add A$7.2bn to state coffers, but is likely to put pressure on local miners and cost jobs in the sector.
• The proposal is not “supported by business and was unlikely to proceed given it would need the support of the Nationals’ alliance partners,” Chamber of Commerce and Industry of Western Australia said.
• Royalties are reported to be the third’s biggest source of revenue after taxes and federal government grants in the region.
• “An ill-conceived tax grab will place these local jobs and the growth of Rio Tinto’s iron ore business at risk,” Rio Tinto said commenting on the news.
Currencies
US$1.1165/eur vs 1.1094/eur yesterday. Yen 101.48/$ vs 102.31/$. SAr 13.364/$ vs 13.550/$. $1.306/gbp vs $1.300/gbp.
0.772/aud vs 0.766/aud. CNY 6.638/$ vs 6.662/$ unch.
Commodity News
Precious metals:
Gold US$1,352/oz vs US$1,334/oz yesterday –
Gold ETFs 65.4moz unch vs 65.4moz yesterday –
Platinum US$1,181/oz vs US$1,145/oz yesterday
Palladium US$734/oz vs US$689/oz yesterday
Silver US$20.29/oz vs US$19.71/oz yesterday
Base metals:
Copper US$ 4,809/t vs US$4,786/t yesterday –
Aluminium US$ 1,653/t vs US$1,642/t yesterday
Nickel US$ 10,785/t vs US$10,765/t yesterday
Zinc US$ 2,291/t vs US$2,270/t yesterday
Lead US$ 1,825/t vs US$1,795/t yesterday
Tin US$ 18,550/t vs US$18,180/t yesterday
Energy:
Oil US$44.5/bbl vs US$45.3/bbl yesterday
Natural Gas US$2.621/mmbtu vs US$2.735/mmbtu yesterday
Uranium US$25.80/lb vs US$26.20/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$59.8/t vs US$60.1/t –
Steel rebar 25mm US$392.1/t vs US$393.5/t – rebar futures
Thermal coal (1st year forward cif ARA) US$59.3/t vs US$59.5/t yesterday –
Other:
Tungsten - APT European prices vs $190-200/mtu vs $180-190/mtu on last week – prices rise again
Company News
Centamin (LON:CEY) 176 pence, Mkt Cap £2.0bn – Q2 Results and increased company guidance for 2016
Centamin has increased its performance guidance for its Sukari gold mine in Egypt for 2016.
The company has lifted its expectations of gold output for the year to the range 520-540,000 oz of gold from its earlier indicated 470,000 ounces while also reducing its expected production costs to US$530-550 per ounce (previously US$680/oz) on a cash cost basis. All in sustaining costs are now forecast in the range US$720-750/oz from a previous indication of US$900/oz.
During Q2, the mine increased gold production by 12% to 140,306 oz and by 30% compared to Q2 2015, bringing production for H1 to 265,574 oz. The grade profile over recent quarters has been rising to 1.66 g/t during the most recent quarter and with recovery rates hovering around 90% (89.5% in Q2 2016) it appears that the Sukari mine is operating relatively smoothly.
Cash costs declined by 24% during the quarter to US$461/oz and by 35% compared to Q2 2015. All-in-sustaining costs fell by 12% during the quarter to $669/oz (Q2 2015 $853/oz – down 22%).
Earnings per share for the quarter amounted to 6.3 US cents bringing the total for H1 to 9.8 cents and the company has announced an interim dividend of 2 US cents per share.
Operating cash generation for H1 amounted to US$156.5m (2015 US$105.2m) leaving the company with a cash balance of US$281.7m at 30th June.
Conclusion: As indicated at the time of the Q2 production report in early July, the company has increased its production targets for 2016 by around 10-15% and reduced its cost guidance by around 15-30%.
Conroy Gold & Natural Resources (LON:CGNR) 33p, mkt cap £3.6m – Continuity of mineralisation at Clontibret
The company reports that an independent review of the structural geology of its Clontibret prospect has confirmed the continuity of gold mineralisation identified in drilling.
Eight gold bearing structures identified in drilling have been confirmed by an independent structural geologist, Dr Francis Murphy, in a stream bed.
The company has previously reported an indicated resource of 4.9m tonnes at an average grade of 1.64g/t gold (260,000 oz of contained gold) and an additional inferred resource of 6.8mt at a grade of 1.6g/t gold (341,000 oz) at Clontibtret.
Conclusion: The indications of structural continuity of gold bearing veins at Clontibret may point to additional exploration potential, however, the upgrading of the current inferred portion of the exiting JORC resource and a clear route towards production at Clontibret might attract more attention when other explorers in the region are proceeding with concrete plans for mine development.
Dalradian Resources (LON:DALR) 78 pence, Mkt Cap £169.2m – Sprott reports sale of 4.4m shares in Dalradian Resources
Dalradian Resources reports that its feasibility study work for the Curraghinalt gold project in Northern Ireland is on track for release in Q4 2014.
Metallurgical testwork, which shows 94% recovery rates to be achievable, and flowsheet planning are now complete as are the geotechnical investigation and the environmental baseline work.
Test mining and paste backfill studies are continuing and engineering design work is nearing completion.
Local consultations, including discussions with more than 500 individuals, with site visits from 400 people are reported to be complete ahead of the planned submission of a planning application during Q4 2016.
Conclusion: Dalradian Resource has a number of parallel work-streams either complete or nearing conclusions and is building towards the submission of a Planning Application for Curraghinalt later this year.
Gem Diamonds (LON:GEMD) 122 pence, Mkt Cap £169m – Adverse weather may trigger revision to guidance
• Gem Diamonds reports that extreme weather conditions including excessive snow and high winds in the Maluti Mountains of Lesotho have damaged power lines and despite the use of standby generating capacity has reduced treatment rates at the 70% owned Letseng mine.
• As a result “Full Year guidance for ore tonnes treated and operating costs may need to be reassessed but due to the strong operational performance in H1, carats recovered are not expected to be affected materially.”
• The mine has been providing assistance in the form of accommodation and food to local communities also affected by the exceptional weather.
Conclusion: Partially as a result of the strong production earlier in the year, the company is indicating that its production guidance (105-108,000 carats) is unlikely to be missed but that the additional costs of maintaining the mine at a reduced rate of production during the bad weather may have an adverse impact on costs and throughputs previously indicated.
Glencore (LON:GLEN) 196 pence, Mkt Cap £28.2bn – Expect mixed buy positive Interim figures tomorrow
Glencore are due to report interims tomorrow.
Very simply we expect the marketing division to perform well again as we reckon it’s been a relatively good environment for metals and for oil trading.
The oil business, which is highly leveraged to oil prices should also show significant improvement as average prices have moved higher.
Industrials:
Zinc should do well due to better prices and
Copper should continue to struggle from lower production rates and constrained metal prices
Restructuring: we expect Glencore to report progress in cutting costs and further streamlining the business. While the Mick Davis had previously cut much fat out of the Xstrata mining business its combination with Glencore’s mining group should lead to benefits.
Costs: many of Glencore’s mines are located in emerging markets like Australia, Kazakhstan, South Africa and the DRC. While most costs in the DRC will be effectively denominated in US dollars and South African rand, weakness in the Australian peso (A$) and Kazak Tenge for example will provide significant benefit to the cost base of mines in these locations.
Relatively low oil prices will also provide further benefit from a cost perspective to Glencore mines.
Disposals: Asset disposals this year are running at $3.2bn - target US$4-5bn in 2016.
Glencore have made a number of disposals which will help with the recent sale of a 9.99% interest in Glencore Agri to the British Columbia Investment Management Corporation for US$624.9m in cash. This followed the sale of a 40% interest in Glencore Agri to the Canada Pension Plan Investment Board for US$2.5bn and the US$100m sale of the Komarovskoe mine.
Debt: Glencore stabilised concerns over its highish debt levels and should continue to show progress in this area. It seems fair for the trading business to carry debt to support its marketing activities while better debt cover should return to the Industrial division.
Conclusion: We expect a mixed but slightly positive set of results for Glencore. We expect to see ongoing strength from the marketing / trading business and for mixed but recovering numbers from the Industrials / mining businesses led by a recover in zinc and thermal coal.
Kibo Mining (LON:KIBO) 5.1 pence, Mkt Cap £18.1m – Agreement for consolidation of Imweru and Imwelo gold projects
Kibo Mining has now concluded the previously announced agreement with Lake Victoria Gold (LVG) for the consolidation of Kibo’s Imweru gold project with LVG’s contiguous Imwelo gold project in the Lake Victoria goldfield of northern Tanzania.
The joint assets will be in a company, Sloane Investments owned 52% by Kibo Mining and 48% by LVG. Sloane “will make an application for its shares to be admitted to trading on AIM and the JSE”.
The amalgamation of the two projects, which are located approximately 35 km west of Anglogold Ashanti’s Geita gold mine, combines a resource of 550,000 oz of gold at a grade of 1.14g/t in Imweru with 205,000 oz at a grade of 2.3 g/t from Imwelo.
The companies are indicating their intention to develop a mine within a period of 24-30 months at a target production rate of 100,000 oz pa of gold production.
Conclusion: The combination of two existing, adjacent and contiguous gold resources in an established gold mining district of northern Tanzania to provide an adequate resource base for a 100,000 oz pa gold mine makes sense. The proposal to list the company in London and Johannesburg reduces the need for both Kibo Mining and LVG to raise the development capital. We look forward to further details of the proposed mine in due course.
IronRidge Resources* (LON:IRR) 12.5p, Mkt Cap £29.6m – IronRidge buys into Tekton for gold properties in Chad
IronRidge Resources which is looking to better define resources in Gabon and Queensland Australia is investing US$3.5m in Tekton Minerals Pte Ltd
Tekton Minerals has an interesting portfolio of gold projects in Chad, North Africa.
IronRidge can earn 58% of Tekton through the expenditure of $3.5m to be spent on drilling and evaluation of a number of targets worked up by Tekton over three years of through exploration in the region.
The Tekton board and management team is particularly impressive – see https://www.tektonminerals.com
The team gives credibility to their work identifying gold prospects in this largely unexplored sub-Saharan area.
Tekton have followed artisanal miners highlighting >3km strike trends with relatively high gold values obtained from trenching:
Dorothe: Numerous gold nuggets up to 1cm across have been found within the Dorothe target area
Trench results at Dorothe include:
o 14.12g/t Au over 4m, 34.1g/t over 2m and 63.2g/t.
At Am Ouchar UNDP trenching results included intersections of:
o 20m at 6.8g/t Au, 16m at 4.7g/t Au and 12m at 5.7g/t Au with individual 2m composite grades up to 33g/t Au.
More recent Tekton channel sampling showed intersections include:
o 2m at 18.2g/t Au, 2m at 14.2g/t Au and 2.3m at 9.9g/t Au.
Len Kloff, IronRidge’s country manager for Gabon will join the board of Tekton.
Chad has two athletes competing in the Olympics this week in the Men’s 400m and Women’s 5,000m run.
*SP Angel act as Nomad and Broker to IronRidge Resources
Petra Diamonds (LON:PDL) 119p, Mkt Cap £625m – Cullinan mine yields a 138 carat diamond
Petra Diamonds reports the recovery of a 138.57 carat Type IIa diamond from its Cullinan mine in South Africa.
The stone is to offered for sale in Johannesburg in late August. The Cullinan mine has a history of producing large diamonds. In July, the company announced the sale of a 121 carat white diamond from the mine for US$6m and in the past the mine has produced the eponymous 3,106 carat Cullinan Diamond, the largest diamond ever discovered, as well as the 599 carat De Beers Centenary diamond and the 755 carat Golden Jubilee stone.
The sale of large “exceptional” stones is a regular component of revenues for the Cullinan mine and for Petra Diamonds which is building up to production of 5.3 million carats by 2019 as it expands the scale of operations at the Cullinan and Finsch mines.
Conclusion: We look forward to the results of the August diamond sale.
Solgold* (LON:SOLG) 6.9p, Mkt Cap £65.6m – SolGold shares soar on expectation for US$36.5m funding
SolGold shares have moved significantly higher on expectations for a very substantial injection of funds from Canada.
Maxit Capital agreed to subscribe for 268.8m new shares at US$0.08/share to raise US$21.5m with an option for up to a further US$15m taking the total to a maximum of US$36.5m.
The new funds should enable the company to launch a comprehensive drilling and exploration program to develop and extend the copper / gold resource at Cascabel in Ecuador.
So far drilling has largely focussed on the Alpala portion of the license area with steeply dipping holes used to show the huge vertical extent of mineralisation in the orebody.
Trenching shows promise on other parts of the Cascabel license and there is good indication of further porphyry orebodies within the license area. High priority targets are at Tandayama America and Aguinaga which show larger surface expressions.
Newer targets are at Moran, Carmen and Parambas. Chinambicito is a lower priority target.
Conclusion: The injection of new funding should accelerate the development of a maiden JORC resource at Cascabel and broaden the exploration program to drill a number of higher priority targets. We envisage the identification of a cluster of mineralised porphyrys with good potential for the discovery of more surface and near surface ore.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst visited the Cascabel project.