Amur Minerals* (LON:AMC) – Metallurgical assay results on Kun Manie ores
Anglo American (LON:AAL) – Completion of the sale of Foxleigh mine
Firestone Diamonds (LON:FDI) – Extension of timetable for disposal of Botswana assets
Kodal Minerals* (LON:KOD) – Lithium exploration property in Mali
Medusa Mining (ASX:MML) – 2015/16 Results – return to profit
SolGold* (LON:SOLG) – Newcrest takes 10% of SolGold for $10.8m
Vast Resources (LON:VAST) – Process plant improvements at Manaila
Dow Jones Industrials +0.58% at 18,503
Nikkei 225 -0.07% at 16,725
HK Hang Seng +0.85% at 23,016
Shanghai Composite +0.15% at 3,075
FTSE 350 Mining -3.56% at 11,467
AIM Basic Resources +0.81% at 2,475
Economic News
European and Asia equity benchmarks climbed tracking Wall Street which closed some 13 points off record levels.
• Stanley Fischer, a voting member of the FOMC, is due to give an interview later today following last weeks’ remarks that a Sep rate move is possible.
• US$ is holding onto its gains with US sovereign bond yields climbing on the back of reviewed outlook US monetary policy tightening pace.
• US$-denominated gold is slightly off and is on track to post the first monthly decline in three.
• Copper is flat trading near a two-month low.
• Iron ore futures are hovering around eight-week low on stronger supply with prices reported to have lost 7.8% in the previous four sessions.
US - Chances for a rate hike before year end continue to climb following hawkish Yellen comments made last week and currently stand at 61%, up 4pp from before the speech.
• A report on personal income and spending for the first month of Q3/16 showed robust growth in consumption driven by an increase in demand for durable goods.
• Inflation data showed prices’ growth remained below the Fed target 2% rate with core PCE index coming at 1.6% in Jul, unchanged from the Jun growth rate.
Date Index Period Actual Expected (Bloomberg) Previous
Monday Personal Income Jul (%mom) 0.4 0.4 0.3
Personal Spending Jul (%mom) 0.3 0.3 0.5
PCE Jul (%mom) 0.0 0.0 0.1
PCE Jul (%yoy) 0.8 0.8 0.9
PCE Core Jul (%mom) 0.1 0.1 0.1
PCE Core Jul (%yoy) 1.6 1.5 1.6
Wednesday ADP Employment Change Aug 175 178.6
Pending Home Sales Jul (%mom) 2.15 0.29
Thursday Weekly Jobless Claims 265 261
Firday NFP Aug 180 255
Unemployment Rate Aug 4.8 4.9
Av Hourly Earnigns Aug (%yoy) 2.5 2.6
Labour Participation Rate Aug 62.8
Factory Orders Jul (%mom) 0.4
Source: Bloomberg
Japan – Household spending fell for a fifth month in Jul with consumers reluctant to accelerate purchases amid weak growth in labour wages.
• A separate report showed the labour market remained tight with the unemployment rate standing at 3.0% in Jul.
• Household spending: -0.5%yoy v -2.3%yoy in Jun and -1.5%yoy forecast.
• Retail trade: 1.4%mom/-0.2%yoy v 0.3%mom/-1.3%yoy in Jun and 0.8%mom/-0.9%yoy forecast.
• Unemployment rate: 3.0% v 3.1% in Jun and 3.1% forecast.
Germany – Regional inflation data released this morning came in lower than forecast pointing to a likely slowdown in a nationwide measure in August.
• Inflation hit a six month high in Jul (0.4%mom/0.4%yoy) with estimates for an acceleration in the rate to 0.5%%yoy in Aug.
UK Grid infrastructure modernisation to better balance network using battery storage
• Eight companies have been awarded sub-second frequency response contracts to help balance the national grid.
• The tender round is for 201MW of storage capacity and is expected to save some £200m over the next four years.
• The present system responds in around 10 seconds under conventional solutions.
• The new capacity will come on line between April 2017 and February 2018
• While 201MW of contracts were awarded some 1.4GW of capacity was pre-accredited indicating potential for further storage capacity additions.
• The addition of so much variable renewable power in recent years has created a need for more fast-response energy storage to smooth out the variability of renewable supply.
• The grid needs to maintain a tight frequency range for power supply but is struggling to maintain this range as more renewable power is built which makes the system less stable. The service is needed to maintain the frequency within statutory (49.5Hz - 50.5Hz) and operational limits (49.8Hz - 50.2Hz).
• Vanadium flow batteries is a solution as is lithium battery storage which also has the ability to respond quickly and in scale.
• A number of trials with vanadium and lithium storage are ongoing
Currencies
US$1.1167/eur vs 1.1288/eur yesterday. Yen 102.29/$ vs 100.47/$. SAr 14.129/$ vs 14.436/$. $1.308/gbp vs $1.321/gbp.
0.755/aud vs 0.763/aud. CNY 6.679/$ vs 6.670/$. US dollar strengthens as Yen, AUD and CNY fall
Commodity News
Precious metals:
Gold US$1,321/oz vs US$1,325/oz yesterday
Gold ETFs 65.4moz unch vs 65.4moz yesterday
Platinum US$1,078/oz vs US$1,082/oz yesterday
Palladium US$697/oz vs US$694/oz yesterday
Silver US$18.75/oz vs US$18.66/oz yesterday
Base metals:
Copper US$ 4,616/t vs US$4,649/t yesterday
Aluminium US$ 1,641/t vs US$1,645/t yesterday
Nickel US$ 9,825/t vs US$9,860/t yesterday
Zinc US$ 2,303/t vs US$2,316/t yesterday
Lead US$ 1,875/t vs US$1,878/t yesterday
Tin US$ 18,865/t vs US$18,800/t yesterday
Energy:
Oil US$49.6/bbl vs US$49.2/bbl yesterday
Natural Gas US$2.912/mmbtu vs US$2.828/mmbtu yesterday
Uranium US$25.40/lb vs US$25.95/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$57.9/t vs US$59.5/t
• Steel production in China is facing two more years of declines after having recorded a 1.8% contraction in 2015, according to Li Xinchuang, a vice chairman at the China Iron & Steel Association. “Our original estimate was for a 3% decline this year.”
Steel rebar, China 25mm US$399.9/t vs US$403.5/t
Thermal coal (1st year forward cif ARA) US$57.1/t vs US$57.0/t yesterday
Other:
Tungsten - APT European prices vs $180-200/mtu vs $185-200/mtu last week – prices pull back slightly
Lithium – Tianqi Lithium looking at $400m hydroxide plant in Kwinana, Australia
• Tianqi Lithium, a Chinese company, is pressing ahead with plans to build a $400m lithium hydroxide plant to process lithium concentrates from the Greenbushes mine in Western Australia Australia.
• Greenbushes produces some 161,000tpa of lithium concentrate supplying more than one third of the global market for lithium concentrate. Note that much of the market for lithium is directly supplied by lithium brine producers in Chile who produce lithium carbonate and hydroxide directly.
• The plant should be ready within two years assuming the Tianqi board approve the $400m financing in China next week.
• If the plant is built it will cause other Chinese lithium processors to look elsewhere for new concentrate supply.
Company News
Amur Minerals* (LON:AMC) 3.4p, Mkt Cap £19.4m – Metallurgical assay results on Kun Manie ores
• SGS Mineral Services completed bench scale flotation test work on the ores from Maly Kurumkon/Flangovy (MKF) and Kubuk deposits coming up with a set of respective metallurgical recoveries.
• In addition, SGS revised previous results from Ikenskoye/Sobolevskiy (IKEN) and Vodorazdelniy (VOD) deposits to provide deposit-by-deposit metallurgical recoveries contributing to the DFS preparation process which is targeted for completion at the end of Q4/17.
• At a 0.6-0.8% Ni mining grade range, nickel and copper content combined in the concentrate is forecast to come in at 8.8-12.0%.
• Flotation recoveries are estimated to be 61-83% for nickel and 77-91% for copper.
• 90% of the concentrate value will be derived from nickel and copper.
• The metal content of the concentrate increases with increasing mined grades across all four deposits.
• These compare to previous test results (SGS, 2012) for 0.6% Ni and 0.2% Cu processed grades for 78% nickel and 90% copper recoveries and 12.7% nickel and copper combined concentrate grades.
• By-product recoveries for cobalt, platinum and palladium are reported to range between 50% and 65%.
• The metallurgical work will now be focused on bulk ore samples to establish processing parameters closely related to production results.
*SP Angel act as Nomad and broker to Amur Minerals
Anglo American (LON:AAL) 833.6 pence, Mkt Cap £10.75bn – Completion of the sale of Foxleigh mine
• Anglo American reports that it has completed the previously announced sale of its 70% interest in the Foxleigh metallurgical coal mine in Queensland to a consortium headed by Taurus Fund Management for an undisclosed sum.
• The Foxleigh operation is an open-cast coal mine which produced around 2.6mt (Anglo American share 1.86mt) of pulverised coal injection (PCI) coal from the Bowen Basin.
• In its 2015 Annual Report, Anglo American reported that Foxleigh had a proven and probable reserve of 18.5m tonnes of coal.
Firestone Diamonds (LON:FDI) 42.5 pence, Mkt Cap £133.4m – Extension of timetable for disposal of Botswana assets
• Firestone Diamonds has announced that, at the request of the purchaser, Tango Mining, it has agreed to extend the closing date for the proposed US$8m sale of its Botswana assets to “no later than 9 September 2016”.
• The extension is “to enable Tango Mining to finalise its funding.” The timetable for Tango Mining to acquire the BK11 assets has been extended before, most recently to 29th August and it appears that this may be the last extension Firestone is prepared to grant as “if the conditions of the CSA are not satisfied or waived by the Revised Drop Dead Date, the disposal will not complete.”
• The original announcement of the disposal to Tango Mining was issued by Firestone Diamonds in July 2015. However, in October 2015, it was reported that Tango Mining had been unable to meet the 30th September deadline for payment of a US$0.3m deposit and that the deadline had been extended to “no later than 8th April 2016”.
• The BK11 mine is on care and maintenance pending completion of the sale though we understand that at one time Firestone Diamonds had plans to modify the crushing circuit in order to recover larger, higher value diamonds. Firestone Diamonds has however been concentrating its efforts at the Liqhobong mine where announcements in early July indicated that construction was around 85% complete and that initial production was planned for early Q4 2016.
Kodal Minerals* (LON:KOD) 0.05p, mkt cap $1.9m – Lithium exploration property in Mali
• Kodal Minerals reports that it has agreed with a local Malian company, Gorutumu Mining, to acquire a 90% interest in the 250 square kilometre Madina exploration licence in the Bougouni-Sikasso region of southern Mali for a total of US$140,000 staged over three years. The licence area has benefitted from previous exploration work indicating the presence of high grade anomalous levels of lithium and also its prospectivity for gold.
• The initial US$25,000 payment has already been made and a further US$40,000 is due on the first anniversary followed by a final US75,000 on the second anniversary. Kodal will need to complete all three payments to exercise its option over the 90% interest. In addition, Kodal Minerals’ wholly owned subsidiary Future Minerals, is responsible for “all exploration costs up to and including the cost of producing a feasibility study, progression to which will be dependent on the success of early stage exploration work.”
• In the event that exploration successfully identifies an economic resource, the announcement also provides for Kodal and Gorutumu Mining to form a jointly owned Malian mining company to complete the necessary environmental studies and apply for a mining licence.
• Application for a mining licence triggers a further, resource based payment to Gorumutu; if a gold resource of less than 5m oz is defined, Kodal will pay a further US$1m; if the resource exceeds 5m oz, the payment tariff is US$2m plus US$2 for each ounce above 5m oz. Interestingly, there do not appear to be similar provisions linked to the scale of any lithium resource identified.
• Previous exploration in 2008, funded by the World Bank “identified high-grade lithium-bearing pegmatites … [while] Regional geochemical sampling completed by the government of Mali has also identified lithium anomalies within the Bougoni-Sikasso region, anomalies have been identified within Madina.” Randgold Resources has also previously explored the area, presumably largely as a prospective gold target
Conclusion: The option to acquire the Madina project in Mali adds to the company’s existing Mali exploration effort and diversifies into a high profile mineral. The staging of payments towards the later years of the option should enable the company to focus its resources on exploration with the bulk of any future payments linked to the successful definition of a large-scale gold resource.
*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.
Medusa Mining (ASX:MML) A$0.64, A$133.0m – 2015/16 Results – return to profit
• Medusa Mining reports a reversal of its US1.05 per share loss in the year to 30th June 2015 with a profit of US$0.21 per share.
• The company generated a 4% improvement in revenue to US$128.1m (2014/15 US$123.1m) based on sale of 108,529 oz of gold (2014/15 97,200 oz).
• Cash costs increased 21% higher at US$466/oz despite a 14% improvement in the grade of ore treated to 6.4 g/t gold. All-in-sustaining costs of US$999/oz include “discretionary exploration expenditure of US$9.3 million.”
• During the year the company spent US$17.2m on capital projects including new mill construction, infrastructure development and mine expansion.
• The company has released its production guidance for the year to June 2017. Gold production is expected in the range of 105-110,000 ounces at an AISC in the range US$1000-1100 per ounce.
• Commenting on the guidance the company highlights its expectation that the early part of the year will produce less gold “driven by the higher level of development ore and infrastructure project waste rock required in the first 2 quarters.”
• The company also points out that its’ Co-O mine “remains hoist capacity constrained until the E15 Service Shaft is completed by June 2017. “ After outlining the benefits of the service shaft in freeing up hoisting capacity on the L8 shaft, the company comments that “Once completed we will see a reduction in the sustaining capital project cost component of the AISC’s mostly driven by the Service Shaft completion in June 2017.”
• The company held cash and cash equivalent gold inventory of US$22m at 30th June.
SolGold* (LON:SOLG) 7.5p, Mkt Cap £102m – Newcrest takes 10% of SolGold for $10.8m
• Newcrest Mining, the International copper / gold mining company is subscribing for $10.8m worth of SolGold stock at US$0.08/s (6.07p).
• Newcrest get anti-dilution rights and top-up rights to a maximum further 10%. If Newcrest’s holding falls below 5% of SolGold stock then these anti-dilution rights fall away.
• Newcrest also get to appoint a director to the SolGold board.
• If there is a change of control transaction within the next three years then Newcrest will support the recommendations of any independent expert appointed to the SolGold board in circumstances where holders of 60% of SolGold shares support a particular proposal.
• The SolGold board have unanimously approved the transaction along with DGR Global, a substantial shareholder.
• Newcrest Mining are an Australian copper gold miner running the Cadia East copper gold porphyry mine in Australia, the Golpu mine in Papua New Guinea and the Gosowong mine in Indonesia.
• Newcrest has a market capitalization of A$17bn and is expert in block caving.
• The company produced some 2.4moz of gold and 83,000t of copper for FY 2016 at an All In Sustaining Cost of $762/oz.
• Today’s news follows on from the raising of £16m last week by way of a placing with Maxit Capital in Canada.
• Newcrest believe they have an advantage when exploring for new deposits driven by their expertise in mining Cadia, Golpu and Gosowing. Management reckon they have a competitive advantage with the search space expanded to >1km depth. Their bulk mining, block caving expertise gives an ability to commercialise deep deposits.
• Newcrest’s experience in block caving at Cadia gives it confidence in mining deeper deposits such as the Alpala prospect at Cascabel in Ecuador.
• In recent years, Newcrest has placed significant focus on investing in strategic research and development of underground bulk-mining technologies from early concept studies to full-scale trials. Through this investment, Newcrest has advanced the technical development of caving mining methods with current application at Cadia East, Ridgeway and Telfer, and planned application at Wafi-Golpu.
• Newcrest has a strong track record of discovering major deposits over the past 15 years, including the deposits at Cadia Hill, Cadia East, Ridgeway, Gosowong, and the O’Callaghans tungsten and base metals deposit. It also mines at Lihir and Hidden Valley in PNG and Bonikro in the Ivory Coast.
• In addition to the development projects located within provinces where Newcrest already has mining operations, Newcrest is currently evaluating two major prospects with significant metal endowments, namely Wafi-Golpu in Papua New Guinea (PNG) and Namosi in Fiji. Greenfield exploration activities at other sites are also ongoing in Australia, Indonesia, PNG, Fiji and Côte d’Ivoire.
• Major mining companies are increasingly looking at the development of ever deeper mines using block caving and automated block caving techniques. We recommend viewing of the following link for a good description of this.
• Newcrest are also actively looking for projects in Nicaragua, The Ivory Coast, Fiji, New Zealand, PNG, Indonesia and Australia.
• Shares: Adding in Tranche 1 shares issued last week plus the new shares to Newcrest gives Solgold 1,358bn shares when all approved. There are also a further 820,000 options exercisable at 50p, 5,030,000 options exercisable at 28p and 8,030,000 options exercisable at 14p to give a total potential fully diluted number of shares of 1,372,304,605 adding another £1m to the market capitalization if exercised
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst visited the Cascabel project.
Vast Resources (LON;VAST) 0.3 pence, mkt Cap £9.6m – Process plant improvements at Manaila
• Vast Resources reports progress with the Iacobeni process plant at its Manaila polymetallic mine in Romania.
• The company now estimates that it will be able to produce a 20% copper concentrate at in excess of 80% recovery rates and that work is continuing to produce a second stream of zinc concentrate at grade of up to 50% zinc.
• The recent quarterly report showed that the company had managed to increase the throughput at the plant and it now appears that progress is being achieved in improved recovery rates and in producing commercial copper and zinc concentrate streams. “The average concentrate grade in the quarter to 30 June 2016 was 17.3% Cu and 14% Zn; concentrate grades over the past six weeks have seen an increase in copper to 19% but importantly a reduction in zinc grade to around 4%. … Commissioning has now commenced on a second float line to produce a saleable zinc concentrate with first sales in September.”
Conclusion: Progress on splitting concentrates into separate copper and zinc rich products should help enhance the saleability and value of both.