Kibo Mining (LON:KIBO) – Advisory engagement letter signed for Mbeya coal to power project
IronRidge Resources* (LON:IRR) – Drilling to start at May Queen gold project
Metal Tiger (LON:MTR) – MOD Resources enters trading halt on ASX
SolGold* (LON:SOLG) – Superior Investment Proposal Received of US$20m at 16c/s
Miners rise as US dollar falls following fed decision to hold rates
• It was no surprise that the Fed held rates last night
• Many Americans reckoned the Fed would not raise rates ahead of the election but will raise rates in December.
• We reckon the first rate rise might come in Q2 next year eg when global growth is better assured and the world is better able to withstand the massive flow of funds into the US out of Emerging Markets as investors rebalance their portfolios.
• The Fed flagged the potential for a December rate rise but with a less certain outlook. This caused the US dollar to fall.
• It is possible/likely that the Fed is working to a new agenda and that a more aggressive approach to driving inflation while maintaining low rates till government borrowings fall.
• The Central Bank of New Zealand also held rates low indicating it may cut rates further from its current 2% rate.
The Fed decision to keep rate level yesterday is helping the sentiment with the Stoxx Europe 600 Index up at the highest in almost two weeks.
• Bulk commodities producers and energy stocks are leading gains.
• Brent climbed for a third consecutive day on reports of falling curve inventories in the US.
• The latest EIA report showed stockpiles dropped by 6.2mmbbl last week compared to forecasts for a 3.25mmbbl increase.
• Base metals climbed across the board led by a decline in the US$ index which fell 0.9% over the course of two days.
• Gold climbed c.$20/oz or 1.4% in the last two days.
• Iron ore futures jumped 3% on Dalian Commodity Exchange advancing for a third consecutive day supported by price surges in a different bulk commodity market. Coking coal futures climbed 8.7% this week with coke futures up 9.2%.
Dow Jones Industrials +0.90% at 18,294
Nikkei 225 at 16,808 Unch due to holiday
HK Hang Seng +0.38% at 23,760
Shanghai Composite +0.54% at 3,042
FTSE 350 Mining +3.46% at 12,274 FTSE 350 +67% since 1st January
AIM Basic Resources -0.42% At 2,435 AIM Basic Resources +49% since 1st January
US – The US$ index fell as the Fed left rates unchanged in a divided vote while cutting its forecasts for future rate increases.
• “The Committee judges that the case for an increase in the federal funds rate has strengthened, but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” FOMC said.
• The Bank ruled there remains scope for the labour market to continue strengthening without causing inflation rate to overshoot the Fed’s 2% target rate.
• Three of ten FOMC members including Esther George (Kansas City), Loretta Mester (Cleveland) and Eric Rosengren (Boston) voted in favour of a rate hike.
• Economic growth projections have been cut to 1.8%, down from 2.0% forecast in Jun, for this year while the longer-term pace has also been brought down to 1.8% (from 2.0%).
• Inflation projections (measured by the PCE index) have been adjusted only slightly (1.3% for this year v 1.4% estimated previously; 2017/18/19 numbers were left unchanged at 1.9%/2.0%/2.0%).
• The pace of tightening has been brought down with the median rate forecast to end 2016 at 0.6%, implying one 25bp hike before year end (down from 0.9% as of Jun). Additionally projected rates for 2017/18 were cut to 1.1%/1.9% versus 1.6%/2.4%.
Date Index Period Actual Est Previous
Tuesday Housing Starts Aug %mom -5.8 -1.7 1.4
Building Permits Aug %mom -0.4 1.8 -0.8
Wednesday FOMC Rate % 0.25-0.50 0.25-0.50 0.25-0.50
Fed Economic Projections
Thursday Weekly Jobless Claims 261k 260k
Existing Home Sales Aug %mom 1.1 -3.2
Friday Manufacturing PMI Sep 52.00 52.00
Source: Bloomberg
Currencies
US$1.1231/eur vs 1.1159/eur yesterday. Yen 100.80/$ vs 101.80/$. SAr 13.436/$ vs 13.771/$. $1.308/gbp vs $1.298/gbp.
0.766/aud vs 0.759/aud. CNY 6.670/$ vs 6.672/$.
Commodity News
Precious metals:
Gold US$1,333/oz vs US$1,320/oz yesterday –
Gold ETFs 65.1moz unch vs 64.9moz yesterday
Platinum US$1,045/oz vs US$1,040/oz yesterday
Palladium US$689/oz vs US$687/oz yesterday
Silver US$19.75/oz vs US$19.41/oz yesterday
Base metals:
Copper US$ 4,815/t vs US$4,766/t yesterday – Refined copper imports hit the lowest level in 18 months in Aug following a strong run in H1/16 and compensated by an increased domestic production.
• Refined metal shipments dropped to 232kt, down 8%mom and 12%yoy, marking the a fifth consecutive monthly decline.
• Nevertheless, refined copper imports YTD remained up showing a 16% gain on increased credit availability and property market rebound.
• At the same time, refined copper production inland jumped to the highest in at least six months on increased supply of concentrates and improved smelters’ margins.
• Arbitrage window improved slightly in the last week of Aug after remaining closed for the most part of time since May, but it proved to be insufficient to lead to improved refined copper imports in Aug.
Aluminium US$ 1,610/t vs US$1,576/t yesterday –
Nickel US$ 10,525/t vs US$10,250/t yesterday –
Zinc US$ 2,288/t vs US$2,283/t yesterday –
Lead US$ 1,948/t vs US$1,969/t yesterday –
Tin US$ 19,425/t vs US$19,430/t yesterday –
Energy:
Oil US$47.2/bbl vs US$46.7/bbl yesterday
Natural Gas US$3.082/mmbtu vs US$3.088/mmbtu yesterday
Uranium US$24.75/lb vs US$24.90/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$56.4/t vs US$54.2/t – Vale reiterated its target for first S11D iron ore shipment in Jan/17.
• The $17bn 90mtpa iron ore concentrate project was 80% complete as of Q2/16 with the project forecast to supply 30-40mt in 2017 and reach 80% of capacity by 2018.
• The project is estimated to produce iron ore concentrate at less than $10/t at full capacity.
Steel rebar, China 25mm US$382.9/t vs US$382.8/t –
Thermal coal (1st year forward cif ARA) US$60.0/t vs US$58.5/t yesterday -
Coking coal prices $206.4/t vs $205.9/t FOB Australia for Premium Hard Coking Coal (The Steel Index) – Prices holding new high level
Other:
Tungsten - APT European prices vs $180-200/mtu unch again vs $185-200/mtu two weeks ago
Company News
Kibo Mining (LON:KIBO) 9.1 pence, Mkt Cap £32.4m – Advisory engagement letter signed for Mbeya coal to power project
• Kibo Mining has signed an advisory engagement letter with Absa Bank / Barclays Bank under which the bank will act as new financial advisor to the company on the Mbeya coal to power project in Tanzania.
• There is a ‘minimal cash retainer fee’ and an ‘undilutable’ advisors equity call option over 3.5% of the total share capital of the Mbeya Development Company Ltd.
• The, unstated, cash retainer fee can be suspended in the event of project delays.
• Kibo recently reported an MoU with General Electric for supply equipment, technology and services to the Mbeya Coal to Power Project (MCPP) in Tanzania.
Conclusion: Kibo are still some way off the financing and construction of the Mbeya project and the engagement of a new financial advisor is a small step towards its eventual development if the market and banks are able to get comfortable with the risk and returns of providing power in Tanzania.
IronRidge Resources* (LON:IRR) 11.1p, Mkt Cap £26.3m – Drilling to start at May Queen gold project
• IronRidge have received landholder approval to start drilling on their May Queen gold project in central Queensland, Australia.
• The company is looking to follow up on previous drilling done by Black Swan Pacific NL.
• Black Swan’s drilling indicated two good holes of mineralisation with the first drill hole ending in mineralisation.
• Why the drillers did not continue drilling into this mineralisation is a mystery as any sane driller/geologist should continue to follow the mineralisation if it is visually identifiable?
• Historical intersections including:
o 4m @ 38.8g/t Au (at end of hole) and 3m @ 18.9g/t Au
o 2m @ 73.4 g/t Au, including 1m @ 145g/t Au
• Mineralisation at May Queen “appears to be hosted within numerous parallel quartz vein systems open to the north‐west and south‐east, projected to extend under cover and concealed below younger sediments.
• The Intersections appear to occur at or close to the contact between intrusive andesite porphyritic dykes and gabbros, and a mixed mudstone – limestone sedimentary package. The licence area is largely covered by a thin sandstone cover sequence, which is believed to mask additional areas of potentially extensive mineralisation. The Company has also identified potential exoskarns beside the intrusive contact with visible secondary copper mineralisation at surface, and endo skarns within the exposed intrusives. Likewise, elevated zinc anomalism is reported within stream sediments draining the broader project area. IronRidge considers this to be indicative of potentially mineralised basement.
• The May Queen Prospect is also characterised by a discrete magnetic anomaly, spatially associated with historical drill intersections. Additional magnetic anomalies occur along strike to the south‐east of the May Queen prospect under approximately 20m to 50m of younger cover sediments. Potential exists for the discovery of additional high‐grade gold mineralisation concealed below the younger cover sequence in settings similar to May Queen, 2km to 8km along strike to the south‐east and associated with these magnetic anomalies.”
• “The gold mineralisation along the intrusive contact (endoskarn) has similarities to the Red Dome copper‐gold deposit within the Mungana District, in Northern Queensland. There is potential skarn association with base metal mineralisation along the sedimentary contact (exoscarn).
• At Red Dome, the gold is restricted to the skarns and in the primary state occurs as very fine free gold, either as inclusions in sulphides (bornite, chalcocite, chalcopyrite and arsenopyrite), associated with silicates, tellurides and as minor electrum, with free gold in the oxide zone. Pre‐mining geological resources in 1986 were 15 Mt @ 2.6 g/t Au at a 1 g/t Au cut‐off*.“
Conclusion: The May Queen project appears to offer near certain potential to drill into high-grade gold mineralisation and to delineate more strike length and potential volume for the gold mineralisation.
IronRidge are starting off with a 10-hole, 500m drill program with a view to aggressively following up once the previous drill results have been confirmed. This should give a much better indication of the potential of the extent of gold mineralisation and high-grade potential of the project.
We are excited about the potential for discovery at the May Queen gold project and look forward to seeing confirmation of the high-grade gold results as previously drilled.
*SP Angel act as Nomad and Broker to IronRidge Resources
Metal Tiger (LON:MTR) 3.3 pence, Mkt Cap £20.1m – MOD Resources enters trading halt on ASX
• Metal Tiger plc report that their joint venture partner MOD Resources has entered into a trading halt on the ASX.
• Metal Tiger as an AIM market stock continues to trade.
• MOD Resoruces shares are halted pending the release of a new JORC resource on the company’s T3 copper project in Botswana.
• Recent drilling at the T3 project has expanded high grade mineralisation into the western part of the deposit.
• Metal Tiger holds 30% of the T3 copper silver project in joint venture with MOD Resources
• MOD Resources recently reported:
• “Wide intersections in MO-G-24D (32.6m @ 1.6% Cu and 22g/t Ag from 146m down hole) and MO-G-25D (45.3m @ 2.0% Cu and 36g/t Ag from 131m down hole) and previously an-nounced MO-G-20D (20m @ 3.2% Cu and 77g/t Ag from 130m down hole) now appear to extend the central footprint of higher grade mineralisation into the western part of the depos-it.”
• Among the drilling results reported were 6.3m averaging 1.9% copper and 16 g/t silver from a depth of 159m in hole MO-G-23D; 32.6m averaging 1.6% copper and 22 g/t silver from 146m and 4.5m averaging 3.3% copper and 53 g/t silver from 184.5m in hole MO-G-24D and 45.3m averaging 2.0% copper and 36 g/t silver and 237 ppm molybdenum from a depth of 131m in hole MO-G-25D.
• Six drill rigs, including 4 diamond core rigs, have been working on the T3 prospect area to evaluate the “Phase One” resource area and testing extensions to the mineralisation.
• We last reported that there were 12 drill holes currently awaiting assay results and, according to MOD Resources’ Managing Director, Julian Hanna, these, coupled with the remaining planned holes, “may provide further support for this interpretation of a wide, high core extending at least 700m along the deposit which remains open along strike.”
• Drilling at T3 has been hitting wide, high grade intersections of copper and silver and more recently molybdenum across an extensive area. The extent of the mineralisation, which in some holes appears to occur in multiple horizons has yet to be closed off and we look forward to further results as they become available..
Conclusion: The new, maiden, JORC resource will give good indication as to the economic potential of the T3 project. JORC resources now have to incorporate a range of economic parameters to determine if mineralisation should be considered to be part of a potentially economic resource.
SolGold* (LON:SOLG) 13.75p, Mkt Cap £168.1m – Superior Investment Proposal Received of US$20m at 16c/s
• SolGold report that Maxit Capital have offered to arrange a cash investment of US$20m at a price of US$16c/s.
• It is possible that Newcrest, the mining company, may also participate in the capital raising if it raises its offer for stock to match the price being offered by Maxit Capital.
• Newcrest is currently offering 8c/s to buy 10% of SolGold capital.
• If Newcrest raises its offer to 16c/s and commits to putting in US$22.863m then Maxit Capital would input US$10.137m, though this is less than the $20m offered today, also at 16c/s to create a total raising of US$33m.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst visited the Cascabel project.