Amur Minerals* (LON:AMC) – 2016 drilling programme now approximately 80% complete with improved thickness and grade intersections at MKF
BHP talk on putting the giant Jansen Potash project in Sasketchewan on hold
Hybrid Air Vehicles (Private) - Airship test flight
Jubilee Platinum (LON:JLP) – Update on Dilokong chrome and Hernic projects
Lonmin PLC (LON:LMI) – Funding for tailings project
Dow Jones Industrials at 18,574
Nikkei 225 at 16,486 Market closed for Mountain Day in Japan a new day off which became law in 2014
HK Hang Seng at 23,028
Shanghai Composite at 3,801
FTSE 350 Mining at 12,011 The 350 Mining index is up 64% since 1st January
AIM Basic Resources at 2,403 AIM resource stocks up 57% since the January low and up 46% from 1st January
US Federal Reserve – reported to be split on next rate hike
• The US Federal Reserve is playing a game of cat and mouse with investors as it comments on the division between policy-makers over the timing of the next rate rise.
• So far the Fed has held rates at between 0.25-0.5% since December 2015 preferring to wait for greater evidence of inflation.
• The Fed are targeting 2% inflation as well as job creation but may also have an eye on maintaining historically low borrowing costs for the US Treasury.
• High government debt levels give the Fed every incentive to maintain low rates so long as investors are still willing to lend their cash to the government at these price levels. Presumably the Fed might be forced to print new money if investors decide there are better / safer places to store their cash.
• Either way, the prospect looks like low rates for longer as is seen across yield curves with domestic mortgages now offering historically low 10-year rates.
UK – July retail sales rise in warm, dry weather
• July retail sales rose by 5.9% yoy and 1.4% on June driven by sales of watches and jewellery which rose by 16.6%
• The fall in sterling following the Brexit vote is likely to raise August’s retail sales numbers yet further
Ford is targeting 2021 for mass production of driverless cars / taxis
• Fords news cars will be fully automatous and you will be able to hail the car like a taxi according to the report.
• Ford has invested $75m in using Lidar ‘Light Detection and Ranging’ technology, which is quite often used for planning mines and geology.
• While Ford may offer the utility in its existing cars we suspect they will look to roll the technology out within a new range of Electric Vehicles.
• The race to pack new technology into cars led Ford to comment that it sees Apple as its new rival.
• We reckon this will lead to more rapid sales of new cars as the argument for going electric is compelling both from a running cost and new technology perspective.
• Many youngsters have been put off driving by the inability of using smart phones and tablets while driving and autonomous systems will help to recapture these lost customers.
Tesla – French authorities to investigate Tesla car fire
• A Tesla Model S 90D has caught fire in the area of Biarritz and Bayonne.
• In the US two Tesla cars have caught fire. In both incidents the cars are said to have hit debris on the road which pierced the chassis causing the battery fire. This makes me wonder what they are making the chassis out of, as I’ve have ever had debris pierce the chassis of a car before, though I did put my foot through the floor pan of an old triumph many years ago.
Currencies
US$1.1329/eur vs 1.1255/eur yesterday. Yen 100.07/$ vs 100.992/$. SAr 13.269/$ vs 13.648/$. $1.307/gbp vs $1.301/gbp.
0.770/aud vs 0.763/aud. CNY 6.633/$ vs 6.641/$ unch.
Commodity News
Precious metals:
Gold US$1,351/oz vs US$1,342/oz yesterday –
Gold ETFs 65.2moz vs 65.4moz yesterday –
Platinum US$1,126/oz vs US$1,112/oz yesterday
Palladium US$699/oz vs US$696/oz yesterday
Silver US$19.73/oz vs US$19.55/oz yesterday
Base metals:
Copper US$ 4,825/t vs US$4,766/t yesterday –
Aluminium US$ 1,698/t vs US$1,690/t yesterday
Nickel US$ 10,300/t vs US$10,195/t yesterday –
Zinc US$ 2,297/t vs US$2,245/t yesterday
Lead US$ 1,898/t vs US$1,865/t yesterday
Tin US$ 18,305/t vs US$18,290/t yesterday –
Energy:
Oil US$49.8/bbl vs US$48.7/bbl yesterday
Natural Gas US$2.629/mmbtu vs US$2.639/mmbtu yesterday
Uranium US$26.05/lb vs US$26.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$58.1/t vs US$59.5/t –
Steel rebar 25mm US$392.5/t vs US$401.7/t –
Thermal coal (1st year forward cif ARA) US$58.7/t vs US$58.8/t yesterday –
Other:
Tungsten - APT European prices vs $185-200/mtu vs $190-200/mtu –
Company News
Amur Minerals* (LON:AMC) 4.0p, Mkt Cap £20.6m – 2016 drilling programme now approximately 80% complete with improved thickness and grade intersections at MKF
• Amur Minerals reports that as a result of an earlier than expected start to the field season and better performance than expected, as of 1st August it has completed 54 holes (11,978m) of its 2016 summer drilling programme at its Maly Kurumkon Flangovy prospect. This represents around 80% of the planned 15,000 metres.
• A total of 34 resource definition holes have been completed along the 2100m long western part of the deposit at a drilling density which, in the opinion of the company’s consultants, SRK , is adequate to define indicated resources. Prior to this season’s work only 1300m of the deposit was drilled at sufficiently close intervals to support an indicated resource classification.
• Amur Minerals reports that it has now received assay results for all but three of the resource definition holes from the Alex Stewart laboratory. Among the results reported today are an intersection grading an average 1.09% nickel and 0.2% copper of 4.6 metres from a depth of 214.4m in borehole C401 and 65.3 metres at an average grade of 0.83% nickel and 0.24% copper from a depth of 135.8m in borehole C409.
• The resource definition work has also discovered a 400m long extension to the western 2100 metres of mineralisation defined by a 16 holes “step-out” drilling programme, “and infill drilling of an Inferred block of resource where intersected grades and thicknesses are greater than previously indicated”. The company comments that “drill results previously used to define the resource understated the mineralised thickness by as much as 78%. The average infill drill results indicate a thickness of 34.8 metres per hole at 0.74% nickel and 0.21% copper based on a 0.2% nickel cutoff grade.”
• The remaining 20 drill holes completed to date have recovered 6.9 tonnes of bulk material (from 3959m of drilling) for metallurgical testing to help assess mineral recovery rates and to aid process plant design and flowsheet development.
• The remaining drilling work, comprising around 3000 metres of the budgeted 15,000 metres, is aimed at targeting additional inferred resources at the eastern end of the MKF deposit where the company is aiming to upgrade some of the existing 9.2m tonnes at an average grade of 0.58% nickel and 0.17% copper currently classed as inferred to indicated. Currently this phase of work is scheduled to finish by 31st October but with better than expected progress so far and an earlier start than anticipated, there may, in our opinion, be scope for earlier completion.
Conclusion: The definition of additional strike length at the western end of the MKF zone, the wider than expected mineral intercepts and indications of down-dip extensions to the mineralisation all indicate that an updated resource estimate incorporating the 2016 drilling may well contain an increase in the overall resource volume as well as an upgrade to the resource classifications. We look forward to the results of drilling the eatern part of the deposit and to updated resources estimates in due course.
*SP Angel act as Nomad and Broker to Amur Minerals. An SP Angel analyst has been to site.
BHP talk on putting the giant Jansen Potash project in Sasketchewan on hold
• BHP may postpone further development of its giant Jansen potash project after what is said to be $3.4bn if investment out of a potential $14bn total capital cost.
• Development of two shafts is more than half way with shaft completion in 2018 and 2019
• BHP will then, reportedly, decide on whether to spend a further funds to complete the mine, its plant and infrastructure
• The Jansen mine could produce some 8mtpa of potash or 15% of global supply which would be larger than Mosaic’s Estarhazy mine at 6.3mt.
• Jansen is said to require potash prices of around $400/t to make an acceptable rate of return and >$500/t to compete for capital within BHP’s new project portfolio.
• Potash prices are relatively low at around $190/t in the spot market with China signing a benchmark supply contract with the Belarusian Potash Co. at $219/t, significantly lower than many forecasts and a long way off $900/t seen at the peak of the market.
• There may still be room for smaller, cheaper, lower capex players to come in
• The interesting part for BHP is that with the shafts completed they should be able to bring this online quicker than most other potential rivals and this should give them first mover advantage when there is a sustained improvement in potash prices.
Hybrid Air Vehicles (Private) - Airship test flight
• HAV’s Airlander 10 airship has taken its first test flight since returning to the UK following trials in the US.
• The vehicle is most likely to be used for surveillance in its first roles as it can carry a greater payload of radar and other surveillance equipment
• The airship is currently envisaging 5-day flights but in reality should be able to stay aloft for much longer.
• HAV’s airship is scalable with a 50t payload envisaged which would be useful for the heavy lifting of equipment and materials to remote mine sites and to difficult to reach locations. The other great benefit is the ability to land payloads on very short landing sites.
• Amur Minerals has had discussions with the HAV team as have certain Canadian diamond miners – roll over ice road truckers!
Jubilee Platinum (LON:JLP) 3.375 pence, Mkt Cap £30.4m – Update on Dilokong chrome and Hernic projects
• Jubilee Platinum has announced that chromite revenues and earnings at its Dilokong Chrome mine tailings project (DCM Project) have increased by 33% and 46% respectively during July 2016 compared to the previous month. Earnings attributable to Jubilee Platinum increased by 30% during July to £0.29m (R5.11m).
• The company notes that since the start of the project in April 2016, the project has generated revenues from chromite concentrate sales of £1.69m (R31.2m) and earnings of £1.26m (R23.3m) implying an average margin of almost 75%.
• The announcement indicates that “Upgraded platinum values in surface material after chromite removal continue to exceed design expectations … “
• Construction work at the Hernic project, which plans to treat some 1.7m tonnes of surface chrome tailings resources generated by the Hernic ferrochrome plant (of which around 90% is classed as “measured”) to recover PGMs and chromite is reported to be around 55% complete with total capital expenditure to date of £6.2m (R108m).
• When complete, the Hernic project is expected to treat 660,000 tpa and will be “the largest PGM beneficiation plant of surface chrome tailings in South Africa” and aims to produce in excess of 31,000oz pa of PGM annually. Commissioning of the plant is expected to start in December 2016.
Lonmin PLC (LON:LMI) 236 pence, Mkt Cap £665.7m – Funding for tailings project
• Lonmin reports that it has secured US$50m of funding to develop its Bulk Tailings Treatment Project. The company has already received the initial $9m tranche of the funds and work is underway to move the project ahead.
• The funds are being sourced through a project finance metal streaming agreement with an undisclosed party.
• The project, which involves reprocessing 26 million tonnes of tailings from Lonmin’s Eastern Tailings Dam at a rate of around 300,000 tpm is expected to produce around 29,000 oz of platinum (55,000 oz of PGMs) per year from the 2018 financial year. Lonmin expects the project to deliver the lowest unit cost production of platinum and PGM within its portfolio.
Conclusion: When it comes into production the tailings treatment project will deliver low cost production which, although relatively small compared to the current 700,000oz pa guidance for 2016, is a welcome reaffirmation of Lonmin’s intention to deliver profitable platinum ounces as it restructures the business.