ASA Resource Group* (LON:ASA) – Project update and progress report
BlueRock Diamonds* (LON:BRD) – Interims highlight plans to improve performance at K2 diamond mine.
Edenville Energy (LON:EDL) - Raising £500,00
Noricum Gold* (LON:NMG) – Name change and consolidation
Strategic Minerals (LON:SML) – Interim results and progress update
Tri-Star Resources* (LON:TSTR) – Interims indicate lower operating costs going forward
Equity markets are up this morning led by gains in energy stocks on the news OPEC agreed a planned reduction in oil production.
• Brent jumped 7.4% following the announcement yesterday as OPEC said daily output to come down to 32.5-33.0mmbbl compared to 33.24mmbbl pumped in Aug.
• A detailed plan to cuts and a breakdown of production rationing measures is said to be prepared over the next few months.
• Nigeria said OPEC will set up a committee to prepare a proposed split in cuts among members.
• Yen is off on an increased risk appetite in the market and a weaker than forecast economic data (retail sales -1.1%mom/-2.1%yoy in Aug).
• Gold is flat with the US$ index trading higher and base metals largely range bound.
• Iron ore futures continued to rise following steel prices higher (Jan contract +2.5%).
Samsung – washing machines explode
• Samsung are not having a good run of luck. First we learn of its phones catching fire and now we learn that its washing machines explode. Our advice is, if you have a Samsung washing machine, don’t take it on an airline.
Dow Jones Industrials +0.61% at 18,339
Nikkei 225 +1.39% at 16,694
HK Hang Seng +0.51% at 23,739 China National Day, week long holiday next week
Shanghai Composite +0.36% At 2,998
FTSE 350 Mining +3.19% at 12,752 FTSE 350 +74% since 1st January
AIM Basic Resources +1.90% At 2,510 AIM Basic Resources +54% since 1st January
US – While headline durable goods orders posted a contraction through Aug following a strong rebound in the previous month, core capital goods orders, an indicator of business investment and industrial production, climbed 0.6%mom marking the third consecutive rise.
• This brings quarterly annualised change to 4.9%qoq in Q3 compared to a decline of 6.5%qoq in Q2 which may see industrial sector contributing to GDP growth this quarter as opposed to being a drag as witnessed lately.
Date Index Period Actual Est Previous
Monday New Home Sales Aug %mom -7.6 -8.3 13.8
Tuesday SPCS 20 City Index (SA) Jul %mom 0.0 0.00 -0.1
SPCS 20 City Index (NSA) Jul %yoy 5.0 5.1 5.1
Markit Services PMI Sep 51.9 51.2 51.00
Markit Composite PMI Sep 52.0 51.5
Consumer Confidence Sep 104.1 99.0 101.1
Wednesday Durable Goods Orders (ex Transport) Aug (Prelim) %mom -0.4 -0.5 1.3
Capital Goods Orders Aug (Prelim) %mom 0.6 -0.1 1.5
Thursday Weekly Jobless Claims 260k 252k
GDP Q2 (Final) %qoq 1.3 1.1*
Consumer Spending Q2 (Final) %qoq 4.4 4.4
Core PCE Q2 (Final) %qoq 1.8 1.8
Friday Personal Income Aug %mom 0.2 0.4
Personal Spending Aug %mom 0.1 0.3
PCE Aug %mom 0.2 0.00
PCE Aug %yoy 0.9 0.8
Core PCE Aug %mom 0.2 0.1
Core PCE Aug %yoy 1.7 1.6
* Previous Q2 GDP estimate; Q1 GDP change was +0.8%qoq
Japan – Retail sales contracted more than expected through Aug marking the first decline in the last three months.
• Poor weather and less weekends in Aug have been partially responsible for a decline market commentators noted.
• On a more positive front purchases of big ticket items like durable goods remained solid.
• Japan to release more data tomorrow including employment, household spending, industrial production and inflation reports.
• Retail sales (%mom): -1.1 in Aug v 1.5 in Jul and -0.6 forecast.
• Retail sales (%yoy): -2.1 in Aug v -0.2 in Jul and -1.7 forecast.
Germany - Unemployment climbed only slightly through Sep while inflation numbers released by separate states show an acceleration in price growth.
• While an increase in inflation rates is likely to be mark a relatively modest improvement in absolute terms, the trend would be a welcome news for monetary policy authorities.
• Country-wide inflation will be released later this afternoon with estimates for 0.0%mom/0.5%yoy in Sep v -0.1%mom/0.3%yoy in Aug.
• Despite a marginal increase in unemployment labour agencies said demand for workers remains high.
• Change in unemployment: +1k v -6k in Aug and -5k forecast.
• Unemployment rate: 6.1% v 6.1% in Aug and 6.1% forecast.
Spain – The nation reported a series of positive economic data including a continuing growth in retail sales and a pick-up in inflation rate.
• Inflation is reported to have been primarily driven by higher fuel prices.
• Retail sales (%yoy SA): 3.4 in Aug v 5.1 in Jul and 4.5 forecast.
• Inflation (%mom EU harmonised): 0.8 in Sep and 0.0 in Aug and 0.9 forecast.
• Inflation (%yoy EU harmonised): 0.1 in Sep and -0.3 in Aug and 0.2 forecast.
Currencies
US$1.1219/eur vs 1.1205/eur yesterday. Yen 101.48/$ vs 100.81/$. SAr 13.713/$ vs 13.468/$. $1.299/gbp vs $1.299/gbp.
0.767/aud vs 0.767/aud. CNY 6.669/$ vs 6.672/$.
Commodity News
Precious metals:
Gold US$1,322/oz vs US$1,324/oz yesterday –
Gold ETFs 65.3moz unch vs 65.3moz yesterday
Platinum US$1,029/oz vs US$1,024/oz yesterday – Impala platinum refinery strike
Palladium US$711/oz vs US$703/oz yesterday
Silver US$19.14/oz vs US$19.10/oz yesterday
Base metals:
Copper US$ 4,826/t vs US$4,823/t yesterday –
Aluminium US$ 1,660/t vs US$1,661/t yesterday –
Nickel US$ 10,600/t vs US$10,725/t yesterday –
Zinc US$ 2,337/t vs US$2,2330/t yesterday –
Lead US$ 2,006/t vs US$1,979/t yesterday –
Tin US$ 19,945/t vs US$19,900/t yesterday –
Energy:
Oil US$48.2/bbl vs US$46.3/bbl yesterday – At the OPEC meeting late yesterday Saudi Arabia and Iran moved to agree a cut in production.
• Those familiar with OPEC will remember the days when the committee having met to discuss the market, would subsequently make announce the quota that each individual OPEC member would produce no more than. During that period, the only one to routinely comply with OPEC’s directive was Saudi Arabia.
o It was often said that while supply to the market was well regulated through the quota system, the individual countries failed to maintain them such that production was always between 110% of the mandated quota limit and 135%. OPEC’s policing of its limits was always poor, at best, or non-existent. It was more that OPEC was watching that had the desired effect.
o Whilst we have no doubt that both countries have a vested interest in raising the oil price, the suspicion and distrust with which each of them view the other may lead to a situation where there is a lot of talk about cuts, and the Iranians have already highlighted that they may remove up to 700m bpd, but that each will wait for the other to move before doing so, and ultimately no cut to production will result.
o Whatever the outcome of OPEC’s, Saudi Arabia’s and Iran’s join and individual statements on the matter of production, what it has done is signal very clearly that the governments and OPEC members believe that the oil price has been too low for too long, and that the old policy may soon be about to change.
o Paradoxically, what this period of low oil prices has resulted in is not just one swing producer emerging, but three, albeit with the third (the United States) being a market forces driven swing producer, with a long lifetime before the reduction in production, but similarly we would imagine that there would be a lag in an uptick too.
o Irrespective of what’s to come, the crude prices already moved 5%, and if both Iran and Saudi Arabia are seen to be working together, there could be a further 5% move in the crude price. History tells us that Saudi Arabian and Iranian cooperation is anything but, but then again these are strange days.
Natural Gas US$3.014/mmbtu vs US$2.960/mmbtu yesterday
Uranium US$23.50/lb vs US$23.50/lb yesterday –
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$55.3/t vs US$55.1/t –
Steel rebar, China 25mm US$389.3/t vs US$387.7/t –
Thermal coal (1st year forward cif ARA) US$64.9/t vs US$61.2/t yesterday –
Coking coal prices $206.4/t unch vs $206.4/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
ASA Resource Group* (LON:ASA) 2.1 pence, Mkt Cap £35.5m – Project update and progress report
• The company has provided a trading update outlining progress on moves to restructure operations along commodity lines with gold operations at the operating Freda Rebecca mine, the pre-feasibility stage Zani-Kodo project in the DRC and other gold projects being brought together as ASA Gold; the nickel operations at Bindura becoming ASA Nickel; the diamond interests at Klipspringer as ASA Diamonds and a joint venture copper exploration project in the Katanga province of the DRC to be known as ASA Copper.
• ASA Gold’s Freda Rebecca mine is reported to be “increasing its gold output consistent with the targets set out in our last update” which outlined plans to match mine and mill capacity by increasing the mill capacity by around 600,000tpa through the installation of two, internally sourced, mills which should bring the mine’s output to 90-100,000 oz of gold pa. For reference, in the year to 31st March 2016, Freda Rebecca produced 67,673 oz of gold.
• The group’s Zani-Kodo gold project in the north-east DRC, which contains a resource of 2.97m oz of gold at grades some 50% higher than at Freda Rebecca, is currently the subject of pre-feasibility study work aimed at starting “a mining operation as soon as possible.” The studies are evaluating the relative merits of a low cost gravity/flotation process route or the development of “a full scale CIL processing plant similar to that at Freda Rebecca.”
• ASA Resources has a senior engineering team on the ground in DRC to undertake the evaluation and liaise with Government and comments that “if the gold price remains at current levels, we see the potential to have a CIL plant operation producing 35,000 oz in the first phase within 12-24 months of securing the appropriate finance.”
• The company’s strategy is to use the initial cashflow from an operation at Zani-Kodo to continue exploration within the larger 1605 sq. km exploration licence area.
• At Bindura, ASA Nickel “continues its steady performance with AISC (C3) below $5,000/t for nickel in concentrate, ahead of earlier indications.” The restart of the nickel smelter is expected to be completed in the early part of 2017 (“in Q4 of our financial year ending 31st March 2017.”). The addition of the smelter is expected to improve “payability from the current 65% to circa 85% of the LME market spot price.”
• Plans to deepen the shaft at Bindura’s Trojan mine have been held in abeyance as the focus has been on restarting the smelter but are now expected to “come back on to BNC’s radar.” In the longer term, a feasibility study is underway to examine the nickel refinery “and it remains our medium term ambition to re-establish BNC as the only fully integrated nickel producer in Africa.”
• The Klipspringer diamond mine continues to reprocess slime tailings “and progress is being made towards retreating another dam of coarse tailings which are hoped to produce diamonds presently selling at $100 US per carat as opposed to the current $20 US per carat for the slime tailings diamond project.” The company also comments that it is continuing discussions with potential partners from the diamond industry to reopen the old mine.
• The company also mentions a copper exploration joint-venture in the DRC where “one of the largest copper tube manufacturers in the world, Zhejiang Hailiang” is funding “all the appropriate exploration licences.”
Conclusion: Under the new management team, ASA Resources is making progress on a number of fronts with the expansion of the Freda Rebecca gold mine, the restrt of the nickel smelter at Bindura and progressing the feasibility work towards initial gold production from the 3m oz Zani-Kodo gold project in the DRC.
*SP Angel act as Nomad and broker to ASA Resources
BlueRock Diamonds* (LON:BRD) 7p, Mkt Cap £2.7m – Interims highlight plans to improve performance at K2 diamond mine.
• BlueRock Diamonds is putting its house in order following poor performance from its hard-rock diamond mine in Kimberley, South Africa.
• Management changes: New mine manager Johan Mihlo was appointed in July to take over the running of the mine. This followed review by the relatively new ceo Adam Waugh. Johan has previously worked for Petra Diamonds, which is highly respected, BHP and DeBeers. Riaan Visser has resigned as a director of the company.
• Subcontractor issues: The new management have agreed to take over the plant of the subcontractor which was loading and hauling rock in the pit and was also processing oversized material which the BlueRock team were not able to process.
• BlueRock will subcontract loading and hauling to a new subcontractor due to its cost efficiency but will now manage all diamond processing.
• Unfortunately for Diacar, the subcontractor, much of its equipment failed inspection by the Department of Mineral Resources.
• BlueRock have agreed to terminate the subcontractor and to take over the running of the open pit and all of the diamond recovery.
• The team have agreed an ‘option’ to by the Diacar machinery and plant for a relatively modest ZAR1.6m with a down payment of ZAR100k + three monthly payments of ZAR50k. This gives BlueRock time to operate the Diacar plant and work out if buying the kit is the best way to go.
• Process plant: BlueRock has been working / struggling with its own diamond recovery plant and reckons its performance can be enhanced through simplification, adding to pan capacity and some further adjustments. Any improvement to the recovery process could result in significant benefits in terms of recovery rates, sales and per carat cost improvement.
• Cost savings: BlueRock is also buying crushing and screening equipment for its own operation and hopes this should reduce costs to around ZAR50/t from around ZAR80/t currently.
• K2 mine plan: There is also some adjustment to the mine plan to suit a longer term mine plan rather than simply dive into higher grades in the lower levels. The move will inevitably require some waste removal but should ensure a more constant supply of kimberlite ore from all parts of the mine.
• Second mine potential: the team are undertaking limited work on the K5 diamond pipe to evaluate potential for a second hard-rock diamond mine at site.
• Sales of diamonds came to £206k vs operating expenses of £516k to realise a loss of £575k for the first six months of the year.
• The company has £527k of current assets including £458k of cash and cash equivalents.
Conclusion: Bluerock hopes to improve recovery rates, mine performance and operating costs. If the plan works then K2 should become a profitable diamond mine in relatively short order.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Edenville Energy (LON:EDL) 0.51 pence, Mkt Cap £3.2m - Raising £500,00
• Edenville Energy has announced that it has raised £500,000 through the issue of 125m new shares at 0.02p per share.
• The funds will provide additional resources to the technical and regulatory work on the Rukwa coal-to power project in Tanzania where the company recently completed bulk sampling to provide additional data for mining and processing design works.
Noricum Gold* (LON:NMG) 0.103p, Mkt Cap £4.1m – Name change and consolidation
• Noricum Gold is changing its name to Georgian Mining Corporation reflecting its new focus on gold and copper mine development in Georgia.
• The company is also consolidating its shares by 100:1. Noricum currently has 4,792,485,350 shares. Fractional shares after the roll-up will be aggregated and retained by the company or sold for the benefit of the company.
o Today’s statement reminds us that Noricum have made significant progress with its 50% held Bolnisi copper, gold concessions in Georgia which could host a number of economic mineral deposits and materially enlarge the scale of a future mining operation.
o The agreement which Noricum has with its joint venture partner for processing of gold ore from these prospects could enable Noricum to fast track the development of one or more copper, gold mines to become a new and significant gold producer within relatively short order.
o The team are targeting the definition of 50-70mt grading 0.30-1.00% copper and 0.101g/t gold within copper sulphide mineralisation and 0.5-5g/t for oxide gold at the Kvemo Bolnisi project.
*SP Angel acts as Nomad and Broker to Noricum.
Strategic Minerals (LON:SML) 0.35 pence, Mkt Cap £3.7m – Interim results and progress update
• Strategic Minerals has reported a loss of $472,000 for the first six months of 2015. The result is in line with the equivalent loss of $473,000 in 2015.
• The company reports a 30th June cash balance of US$837,000.
• The company’s Cobre magnetite operation in the US reported a profit of US$62,000 (US$162,000). The decline compared to H1 2015 reflects additional costs associated with a legal claim over rail work compensation which has now been resolved with “the Company agreeing to receive US$675,000 to settle its claim.”
• The company also comments that “the fall in oil prices [makes] the mine gate sales effectively cheaper for local clients … has provided the Company the opportunity to market its magnetite product more widely and has now resulted in the addition of a substantial new client.”
• During H1, the company has acquired a stake in NAE Resources UK, which holds the Redmoor tin / tungsten project in UK. Strategic Minerals has an option to increase its stake in the 23 sq.km licence area to 50%.
• Continuing work at Redmoor is aimed at upgrading at least a part of existing “inferred” resources to “indicated”, and bringing additional exploration targets to “inferred”. Plans to optimise a planned 19 holes drilling programme and to ensure land access and the relevant permits are underway alongside the selection of an appropriate drilling contractor.
• Strategic Minerals has also acquired a 50% interest in CARE, which has nickel exploration projects at Hann’s Camp in W Australia. Initial drilling intersected nickel sulphides and, in conjunction with its joint venture partner, the company is reviewing the results of the drilling and down-hole electromagnetic surveys “to define the most appropriate strategy for the future.”
Conclusion: Strategic Minerals’ Cobre operation is benefitting from the recent lower oil prices and provides a cashflow to the company where mineral exploration for nickel in W Australia and tin/tungsten in the UK is seeking to establish and or expand existing mineral resources.
Tri-Star Resources* (LON:TSTR) 0.115p, Mkt Cap £9.7m – Interims indicate lower operating costs going forward
(Tri-Star holds 40% of SPMP)
• Tri-Star’s interim report highlights the impact of cost control and activity in the construction of their joint venture antimony roaster in Oman.
• The roaster is planned to produce some 20,000tpa of antimony and more significantly to also produce to an estimated 50,000 oz pa of by-product gold.
• The company cost shareholders £931k in losses for the year vs a loss of £1,924k a year earlier. The interim loss was driven by an administrative loss of £485k finance costs of £990k and £305k of losses in associated companies.
• The losses were partially offset by £848k of finance income.
• There are some non-recurring costs taken in the first half and the company’s cost run rate should be significantly lower through the remainder of the year.
• Tri-Star is due a final instalment of US$2m on the sale of its roasting Intellectual Property ‘IP’ to the joint venture company which it operates in conjunction with the Oman Sovereign Wealth Fund.
• The company’s joint venture partner its 40% owned Strategic and Precious Metals Processing LLC (SPMP) recently awarded contracts for the delivery of further key items of equipment for the Oman Antimony Roaster (OAR).
• The Antimony metal Type 2 price is $7,600-7,900/t and is up 46% having risen gradually from $5,100-5,400/t at the start of the year. The price progression looks good for TriStar and the addition of the gold circuit should add meaningfully to sales, profits and to the willingness of miners to send material to the new roaster in Oman.