Acacia Mining (LON:ACA) 464.7 pence, Mkt Cap £1905.7m –Bulyanhulu production guidance unchanged despite “trouble at mill”
• Acacia Mining reports that, following a two week long period in August of planned maintenance on both the shaft and the process plant at the Bulyanhulu mine in Tanzania, “we have not been able to run the plant consistently since the shutdown due to repeated overheating of the ball mill trunnion bearing.”
• “ A team of specialists is working with personnel on site in order to establish the root cause of the problem and a timetable for resuming normal operations.”
• The company adds that “Due to strong performance to date at North Mara, we continue to expect Q3 production to be broadly in line with Q1 2016, as guided at the interim results. At this stage, full year guidance for both Bulyanhulu and Acacia remain unchanged and we will update the market as appropriate.”
o For reference, we note that Q1 production for Bulyanhulu was 78,426 oz at an all in sustaining cost of US$983/oz. Bulyanhulu produced a further 78,643 oz in Q2 at a cost of US$958/oz. At the interim stage, the company’s guidance for the full year was expressed as we “are now expecting to deliver at or above the upper end of the full year production guidance of 750-780,000 ounces, and at the lower end of AISC guidance of US$950-980 per ounce.”
o While the plant has been shut down, the company has built stockpiles containing some 11,300 oz of gold on surface and an additional 7,400 oz underground, however “we have now put stoping operations on hold until the plant is running and providing consistent paste fill. The treatment of reclaimed tailings will continue, as will underground development and drilling activities.”
Conclusion: The problems with the mill do not yet appear to have been resolved. At this stage, following a strong first-half, the company expects to be in a position to meet its production guidance for the year, though we suspect that there could be a cost implication. However a protracted shutdown could jeopardise plans to meet the target. We hope that the problems can be resolved quickly.
Anglo Asian Mining* (LON:AAZ) BUY - Target price – 21p (from 24p) – Earnings update post interim results
Horizonte Minerals (LON:HZM) – New CFO appointed
Kibo Mining (LON:KIBO) – MoU Agreement with General Electric for Mbeya coal to power project
Kodal Minerals* (LON:KOD) – Broad zones of anomalous gold in Nangalasso trenches
Kennedy Ventures – plant upgrade program on track for completion in Q2 next year
European shares are trading lower led by losses in energy and bank stocks.
• Brent is off 1.4% this morning extending its weekly losses to 4%.
• Gold is on course to post the first weekly decline in the last four with prices down 1% since last Friday.
• Copper is little changed today with prices up 0.3% on the week so far.
• The US$ index is slightly up today after coming off in the previous day on reports showing a drop in US retail sales and industrial production in Aug.
Dow Jones Industrials +0.99% at 18,212
Nikkei 225 +0.70% at 16,519
HK Hang Seng 0.00% at 23,336 - Unchanged due to holiday
Shanghai Composite 0.00% at 3,003 – Mid Autumn festival holiday in China
FTSE 350 Mining -0.35% at 11,179 FTSE 350 +52% since 1st January
AIM Basic Resources -0.14% At 2,411 AIM Basic Resources +48% since 1st January
US – Weak Aug retail sales and industrial production numbers cut chances of the Fed raising rates before year end.
• A number of economists are reported to have their Q3 GDP growth estimates after core retail sales, an indicator of consumer demand, contracted for a second month in a row, according to Bloomberg.
• Consumer spending was one of the main drivers behind GDP growth lately.
• In industrial production category, both manufacturing and utility output were down through Aug (-0.4%mom and -1.4%mom, respectively), with mining climbing 1.0%mom marking the strongest increase through the year oil drilling increased with prices.
Date Index Period Actual Est Previous
Thursday Core Retail Sales (ex Auto) Aug %mom -0.1 0.2 -0.3
Core PPI (ex Food, Energy) Aug %mom 0.1 0.1 -0.3
Core PPI (ex Food, Energy) Aug %yoy 1.0 1.0 0.7
Industrial Production Aug %mom -0.4 -0.2 0.7
Capacity Utilization Aug % 75.5 75.7 75.9
Manufacturing Production Aug %mom -0.4 -0.3 0.5
Friday Core CPI (ex Food, Energy) Aug %mom 0.2 0.1
Core CPI (ex Food, Energy) Aug %yoy 2.2 2.2
UoM Consumer Sentiment Sep 90.6 89.8
UoM Current Conditions Sep 107.6 107.0
Source: Bloomberg
UK – The BoE indicated another rate cut remains on the table as the committee left the current policy unchanged this month.
• Despite a pickup in economic activity in Aug which followed an initial shock post the Brexit vote, Mark Carney highlighted that long term consequences of the vote remain unclear.
• Although the BoE has internally revised their Q3 growth forecasts to +0.2%qoq compared to 0.0%qoq estimated in its Aug inflation report.
• Bond yields and British pound fell following the announcement but since recovered some of its losses and were largely range bound.
Philippines – Mining industry audit results have been postponed to next week with the preliminary release date set for Sep 21.
• Results are going through final processing, Environment Undersecretary said.
• 10 mines, mostly nickel producers, have been suspended so far after not meeting environmental standards.
Currencies
US$1.1233/eur vs 1.1236/eur yesterday. Yen 102.01/$ vs 102.36/$. SAr 14.118/$ vs 14.316/$. $1.321/gbp vs $1.323/gbp.
0.751/aud vs 0.749/aud. CNY 6.675/$ vs 6.675/$.
Commodity News
Precious metals:
Gold US$1,315/oz vs US$1,321/oz yesterday –
Gold ETFs 64.8moz unch vs 64.9moz yesterday
Platinum US$1,029/oz vs US$1,034/oz yesterday
Palladium US$653/oz vs US$655/oz yesterday
Silver US$18.96/oz vs US$18.97/oz yesterday
Base metals:
Copper US$ 4,764/t vs US$4,767/t yesterday –
Aluminium US$ 1,578/t vs US$1,583/t yesterday –
Nickel US$ 9,695/t vs US$9,825/t yesterday –
Zinc US$ 2,220/t vs US$2,263/t yesterday –
Lead US$ 1,935/t vs US$1,948/t yesterday –
Tin US$ 19,075/t vs US$19,300/t yesterday –
Energy:
Oil US$46.1/bbl vs US$46.0/bbl yesterday
Natural Gas US$2.901/mmbtu vs US$2.902/mmbtu yesterday
Uranium US$25.25/lb vs US$25.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$53.5/t vs US$53.6/t –
Steel rebar, China 25mm US$387.3/t vs US$387.3/t – unchanged due to Chinese futures market holiday
Thermal coal (1st year forward cif ARA) US$58.4/t vs US$57.4/t yesterday -
Coking coal prices $197.7/t vs $196.0/t FOB Australia for Premium Hard Coking Coal (The Steel Index) –
Other:
Tungsten - APT European prices vs $180-200/mtu unch vs $185-200/mtu two weeks ago
Company News
Acacia Mining (LON:ACA) 464.7 pence, Mkt Cap £1905.7m –Bulyanhulu production guidance unchanged despite “trouble at mill”
• Acacia Mining reports that, following a two week long period in August of planned maintenance on both the shaft and the process plant at the Bulyanhulu mine in Tanzania, “we have not been able to run the plant consistently since the shutdown due to repeated overheating of the ball mill trunnion bearing.”
• “ A team of specialists is working with personnel on site in order to establish the root cause of the problem and a timetable for resuming normal operations.”
• The company adds that “Due to strong performance to date at North Mara, we continue to expect Q3 production to be broadly in line with Q1 2016, as guided at the interim results. At this stage, full year guidance for both Bulyanhulu and Acacia remain unchanged and we will update the market as appropriate.”
o For reference, we note that Q1 production for Bulyanhulu was 78,426 oz at an all in sustaining cost of US$983/oz. Bulyanhulu produced a further 78,643 oz in Q2 at a cost of US$958/oz. At the interim stage, the company’s guidance for the full year was expressed as we “are now expecting to deliver at or above the upper end of the full year production guidance of 750-780,000 ounces, and at the lower end of AISC guidance of US$950-980 per ounce.”
o While the plant has been shut down, the company has built stockpiles containing some 11,300 oz of gold on surface and an additional 7,400 oz underground, however “we have now put stoping operations on hold until the plant is running and providing consistent paste fill. The treatment of reclaimed tailings will continue, as will underground development and drilling activities.”
Conclusion: The problems with the mill do not yet appear to have been resolved. At this stage, following a strong first-half, the company expects to be in a position to meet its production guidance for the year, though we suspect that there could be a cost implication. However a protracted shutdown could jeopardise plans to meet the target. We hope that the problems can be resolved quickly.
Anglo Asian Mining* (LON:AAZ) 15.5p, mkt cap £17.5m – Earnings update post interim results
BUY - Target price – 21p (from 24p)
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• We have adjusted our forecasts based on Anglo Asian’s adjusted production numbers in line with Company guidance of 69.0-71.0koz gold and 1.7-2.1kt copper;
• An improvement in operating costs through H1/16 driven by a depreciation in the USDAZN exchange rate, stronger by-product revenues and operational improvements is expected to follow through H2/16 with annual C1 (reported by the Company) and AISC at $550/oz and $799/oz (v previous estimates for $573/oz and $821/oz);
• Despite lower unit costs, a downwards revision to production guidance decreases our forecast levered cash flow from operations and free cash to $28.4m and $16.5m (v previous estimates for $29.7m and $19.8m, respectively);
• As highlighted in the earlier comment on earnings results release, given the forecast capex for the rest of the year on water treatment plant, power substation, maintenance and exploration (H2/16: $5.3m; FY16: $12.0m), generated cash flows will be more than enough to cover ATB loan repayments (H2/16: $5m) helping the Company to continue with deleveraging of the business. YE16 net debt is expected to come in at $32.6m (v previous estimates $29.3m and $49.0 as of YE15).
• The recommendation remains a BUY with a revised target price of 21p, down from 24p, reflecting lower annual production and updated copper price assumptions (see below).
Changes to copper price assumptions 2014 2015 2016E 2017E 2018E
New 6,828 5,505 4,788 5,000 5,500
Old 5,101 5,750 6,500
Estimates (Bloomberg) 4,770 4,960 5,271
(Dec year end) 2014 2015 2016E 2017E 2018E
Gold price US$/oz 1,267 1,161 1,262 1,300 1,300
Gold production koz 60.3 72.0 70.0 78.8 60.7
Copper production kt 0.8 1.0 2.1 2.7 3.9
C1 (reported) US$/oz 971 724 550 508 433
TCC US$/oz 1,168 821 657 620 576
AISC US$/oz 1,370 952 799 745 754
Sales US$m 68.0 78.1 84.5 99.5 83.3
EBITDA US$m 10.1 18.7 32.4 37.5 23.2
PAT US$m -10.9 -7.4 3.2 8.5 0.9
EPS USc -9.79 -6.58 2.85 7.50 0.81
EV/EBITDA x 7.7 3.1 1.9 1.7 2.7
PER x - - 6.9 2.6 24.3
Source: SP Angel, Company
*SP Angel act as Nomad and Broker to Anglo Asian Mining
Horizonte Minerals (LON:HZM) 2.3 pence, Mkt Cap £16.8m – New CFO appointed
• Simon Retter has been appointed as the new CFO (non-board) at Horizonte Minerals.
• Simon replaces Jeffrey Karoly who has stepped down to pursue new opportunities.
• Mr Retter remains as finance director at Paragon Diamonds, a private company holding the Lemphane and Mothae diamond projects in Lesotho
• Horizonte is working to integrate the former Glencore ground into its feasibility study for the wider Araguaia nickel project in Brazil.
• The Araguaia project reckons it can feed 1.9% nickel saprolite ore for an initial 10 year operation
• Horizonte have 72mt grading 1.33% Ni in M&I resources
• Glencore have 16.1mt grading 1.44% Ni as a Measured resource and 89.0t grading 1.31% Ni as an Indicated resource
Kibo Mining (LON:KIBO) 9.625 pence, Mkt Cap £34.2m – MoU Agreement with General Electric for Mbeya coal to power project
• Kibo Mining has announced that it has signed an MoU with General Electric for GE to supply equipment, technology and services to the Mbeya Coal to Power Project (MCPP) in Tanzania.
• Kibo and GE are in discussions “to set out in detail the terms and conditions of their collaboration into a binding agreement.”
Conclusion: The involvement of GE should provide a major technical resource to the continuing development of the MCPP. The company is now assembling a team to move ahead with MCPP and has previously announced that it is also involving the Chinese EPC contractor, SEPCO III in the pre-bidding process. We look forward to further news on the outcome of talks to finalise the terms of the MoU with GE.
Kodal Minerals* (LON:KOD) 0.15p, mkt cap $5.7m – Broad zones of anomalous gold in Nangalasso trenches
• Kodal Minerals has reported results from five trenches (264m) at its Nangalasso gold exploration project in southern Mali.
• All of the trenches, which were located to follow up areas of artisanal mining and to help generate targets for a proposed aircore drilling programme, showed anomalous gold values.
• Four of the trenches were excavated over lengths of 60m with the fifth covering 24 metres and the trenches were sampled over 3metre long composite intervals.
• The company highlights the highest value, from trench NNTR009 which showed 0.37g/t of gold over a three metre wide section, as well as trench NNTR005, located along strike from previous drilling intersections and trenching, which showed two zones of higher grade mineralisation including 3m at an average of 0.27g/t gold and a 6m wide section averaging 0.12 g/t gold.
• As part of the work to identify future drilling targets, the company plans to undertake further field mapping to follow up previous “surface geochemical sampling, auger geochemical drilling, trenching and wide spaced reconnaissance aircore drilling.” and help to define the structural setting of potential targets.
• The company comments that “This programme has confirmed the widespread surface gold anomalism at Nangalasso “ and “The identification of the strong alteration, quartz veining and shearing “ together with the previous geological work, “indicates that the surface gold anomalism reflects the sub-surface gold mineralisation.”
Conclusion: Kodal Minerals is systematically validating work by previous exploration teams and following up on artisanal mining activity as it refines target definition for future drilling at Nangalasso. The tenor of gold assay results from the company’s recent trenching programme is encouraging and we look forward to continuing news as exploration proceeds.
*SP Angel acts as Financial Advisor and Broker to the company. *The author of this report does not hold shares in Kodal Minerals.
*Robert Woodridge, a partner at SP Angel is also Chairman of Kodal Minerals. *Two Partners of SP Angel and SP Angel LLP hold stock in Kodal Minerals
Kennedy Ventures (LON:KENV) 3.9p, mkt cap £6.8m – plant upgrade program on track for completion in Q2 next year
• Kennedy Ventures report the plant upgrade program at its Homestead Project at the Tantalite Valley Mine in Namibia is progressing with completion due in Q2 2017.
• Mining continues through the plant upgrade with a small 4,000t stockpile now ahead of the plant.
• The upgrade is expected to double plant capacity to 15,000t per month to 7,300tpm.
• The company also reports it is assessing the potential of a lepidolite lithium deposit as well as in other pegmatite ores.
• The company has also appointed Mr Renier Swiegers, an experienced engineer, project manager and citizen of Namibia as their new General Manager.
• Kennedy Ventures is an investing company focused principally, but not exclusively, in the resources and energy sectors. The Company has made a first investment in African Tantalum (Pty) Ltd, a Namibian based operation producing tantalite concentrate and is looking for additional quoted or unquoted assets to invest in. The company is likely to seek additional funds to complete a transaction.