DiamondCorp (LON:DCP) – Delays to production ramp-up at Lace triggers need for additional finance
Orosur Mining (LON:OMI) – Positive exploration drilling around San Gregorio
RedT (LON:RED) – large scale vanadium flow batteries land on Isle of Gigha, Scotland
Savannah Resources (LON:SAV) – Raising £0.83m
European equities followed US stocks lower which recorded losses on Tuesday driven by a disappointing start to Q3 earnings season from Alcoa and a continuing strengthening in the US$ index.
The pound is up 0.8% against the US$ this morning driven by short covering after the currency briefly slipped below the 1.21 level.
Brent is trading above $52/bbl level holding onto its recent gains driven by production rationing announcements from Russia and OPEC members.
Gold is flat ahead of Fed Sep meeting minutes to be released later today.
Iron ore futures posted a second consecutive daily gain climbing 1.7% today following stronger steel prices as mills are reported to have resumed restocking post a week long holiday.
Lithium – thermal runaway casts doubt over use of lithium batteries. Could lithium batteries create a Hindenburg type event?
Samsung say the fault with their new phone is down to faulty batteries, but what is really causing its phones to catch fire?
Is it the massive power consumption of this powerful phone overloading the battery, is it something to do with the battery itself or both.
Samsung replaced the manufacturing supplier but continued to suffer the same problem. Remember the exploding hoverboards?
All smart phones get hot particularly when working with heavy data traffic, the trick is to limit the power drain to keep battery temperatures below critical levels.
If areas within the battery, normally at the anode reach around 100C then the battery can suffer thermal runaway till it catches fire.
We have written previously on the stabilisation of lithium using ionic liquids. It is important to supress dendritic formation of lithium metal at the anode which scientists reckon can be done by immersing the electrodes in a special salt bath for a short period before assembly into the battery. A cocktail of salts in an ionic liquid has been shown to allow safe charging and discharging cycles over >1,000 cycles at better efficiency than previously known.
Problem for consumers is what happens after 1,000 cycles. As smartphones and tablets get older and the batteries become less efficient are they going to become more prone to catastrophic failure and potentially fire.
Samsung might be taking a hit now, but what happens if the longer term charging and discharging of older phones increases the risk of thermal runaway?
Sony withdrew 6m battery packs after a one in 200,000 breakdown. They say that microscopic metal particles may come into contact with other parts of the battery cell leading to a short circuit. So if rising temperature and heavy current draw is causing the creation of specks of lithium metal within the battery and if the risk of this increases over time then this may not be a good sign.
We wonder if smartphones could, in time, become more effective than Al-Qaeda when it comes to starting fires and bringing down airliners?
China – Auto sales surge by 28.9%yoy to 2.27m in Sep as people rushed to place orders in ahead of the end of a tax break for small engine cars in Dec.
Sales were up 25.9%mom.
Leaving fiscal related stimulus aside, Moody’s forecasts passenger auto sales to continue to slow down to 6.7% and 2.7% in 2016 and 2017, respectively.
This compares to a 7.2% increase recorded in 2015 with passenger autos normally accounting forc.85% of total car sales.
Japan – A voting member of the BoJ Policy Board does not expect more easing in the monetary policy in the next meeting.
“Job markets continue to improve as a trend so for now, additional easing may not be necessary,” Yutaka Harada said.
The next meeting is scheduled for Oct 31 / Nov 1 with market expectations for the BoJ to stay put on the current pace of the monetary policy.
UK – Theresa May pledged to negotiate the government’s Brexit strategy with lawmakers before the triggering Article 50.
Although, no promise on a potential formal vote on the strategy has been made.
The Parliamentary debate is scheduled for today.
Australia – Credit card spending hit the third-highest level on record in Aug supported by low borrowing costs.
Purchases came in at A$26.8bn in Aug.
The RBA cut the benchmark rate twice this year taking it to a record low of 1.5% in Aug.
Currencies
US$1.1019/eur vs 1.1114/eur yesterday. Yen 103.56/$ vs 103.87/$. SAr 14.420/$ vs 14.218/$. $1.226/gbp vs $1.229/gbp.
0.758/aud vs 0.755/aud. CNY 6.715/$ vs 6.717/$.
South Africa Finance Minister – Pravin Gordhan to appear in court in relation to Fraud charges on 2nd November
Charges relate to retirement of former colleague from finance ministry and then rehiring of the man on a contract basis
We wonder what all the fuss is about the NHS and other UK government agencies do this all the time. It’s called having your cake and eating it. Seems to happen allot in public services and not so much in the real world!
Commodity News
Precious metals:
Gold US$1,256/oz vs US$1,258/oz yesterday –
Gold ETFs 65.8moz vs 65.8moz yesterday –
Platinum US$950/oz vs US$962/oz yesterday
Palladium US$651/oz vs US$665/oz yesterday
Silver US$17.53/oz vs US$17.63/oz yesterday
Base metals:
Copper US$ 4,825/t vs US$4,821/t yesterday –
Aluminium US$ 1,678/t vs US$1,668/t yesterday – Alcoa cuts deficit forecast to 615,000t for the year end vs 1.2mt forecast previously.
Alcoa see demand continuing to increase at 5%pa to 115mt this year with supply rising by just 1% to 113mt
A contact tells us that China, despite pledging to hold back expansion plans, may still bring on double digit supply growth next year
Nickel US$ 10,495/t vs US$10,420/t yesterday
Zinc US$ 2,255/t vs US$2,274/t yesterday
Lead US$ 2,041/t vs US$2,069/t yesterday
Tin US$ 19,865/t vs US$20,000/t yesterday
Energy:
Oil US$52.8/bbl vs US$52.7/bbl yesterday
Natural Gas US$3.216/mmbtu vs US$3.290/mmbtu yesterday
Uranium US$22.75/lb vs US$22.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$55.8/t vs US$55.0/t –
Chinese steel rebar 25mm US$395.2/t vs US$391.5/t
Thermal coal (1st year forward cif ARA) US$62.1/t vs US$63.3/t yesterday
Premium hard coking coal Aus fob US$218.1/t vs US$214.7/t
Other:
Tungsten - APT European prices vs $183-197/mtu unch vs $$180-200/mtu two weeks ago
Company News
DiamondCorp (LON:DCP) 2.8 pence, Mkt Cap £13.2m – Delays to production ramp-up at Lace triggers need for additional finance
DiamondCorp reports that it is experiencing delays to the ramp-up of production at the Lace diamond mine as difficult mining conditions, exacerbated by the presence of old workings and the resulting mine-safety issues, are restricting production to around 14-15,000 tonnes per month and deferring the start of full commercial mine production of 30,000 tpm until February 2017.
Grades have also been adversely affected, as previously disclosed, and during September “Diamond recoveries averaged 25 cpht [carats per hundred tonnes] for the month against a budget of 29 cpht”.
On the positive side, mining has recovered a number of relatively large diamonds “up to 19.4 carats in size, with a pleasing number of gems larger than 8 cts, including a 10.6ct clear gem. Management is confident that achieved diamond values will continue to be in line with its estimated $164/ct base case.”
The production problems are putting financial pressure on Diamond Corp and “The Company is at an advanced stage of finalising a convertible debt facility of c £500,000for immediate financial commitments in order to continue trading as a going concern in the very near term.”
Looking slightly further ahead, “the Company is looking to raise additional equity and/or debt from one or more parties of c £2.5- £3.0 million in the near term to cover the anticipated cash required to fund operations through to commercial production and positive cashflow from operations.”
The company reports that it has had positive discussions with it main lender, South Africa’s IDC (Industrial Development Corporation), for restructuring of the project finance repayments “such that capital repayments are deferred from the first half of 2017 until such time as significant positive cashflow is achieved from the first 100,000 tonnes per month mined from the block cave on the 500m level, in the meantime, only interest would be payable.”
The company is looking to strengthen the management team “bringing on board additional diamond mining development and corporate finance expertise in key executive roles”.
Conclusion: The production difficulties at the Lace mine have delayed the start of sustainable cashflow, triggered the need for significant additional finance as well as the deferral of capital repayments on the project loans and the need to strengthen the management team. DiamondCorp’s difficulties highlight the practical challenges of mine development, particularly where old mine workings add to the complexity of mining. We wish the company well in resolving the technical and financial issues at Lace.
Orosur Mining (LON:OMI) 16 pence, Mkt Cap £15.9m – Positive exploration drilling around San Gregorio
The company reports that its exploration drilling in and around its San Gregorio mine in Uruguay has “yielded positive results, which are expected to significantly enhance mine economics and increase reserves and resources in the short and medium term.”
Drilling from underground in the eastern part of the San Gregorio orebody has confirmed the continuity of mineralisation in each of the seven holes drilled so far. Drilling is continuing and has “demonstrated consistent and attractive mineralised intercepts and are expected to validate and increase reserves.” Among the results reported today, are a 10.3m wide intersection at an average grade of 2.6 g/t gold and a 15.3m wide intersection averaging 1.22 g/t gold.
Similar drilling of the depth extension of mineralisation in the western part of the mine has also demonstrated continuity of mineralisation and a further six-hole programme is being planned. Assay results from the deeper extension include intersections of up to 17.9m width and grades as high as 4.6g/t gold.
At the San Gregorio West underground mine itself, construction is on track and within its budget to commence production towards the end of Q2 2017.
Conclusion: The recent drilling results offer scope for expansion of the current resource which is reported at 19.8mt of measured and indicated resources at an average grade of 1.18g/t gold (752koz) plus an additional inferred resource of 2.4mt at an average grade of 1.1 g/t (84koz).
RedT (LON:RED) 12.1p, mkt cap £56m – large scale vanadium flow batteries land on Isle of Gigha, Scotland
RedT have delivered four of its 15-240kWh energy storage machines to the Isle of Gigha, known to be one of the most beautiful of the Isles of the Western Hebrides.
The company is to install seven modules for a total storage capacity of 1.68MWh to support the local grid and an extra 330kW of community-owned wind turbines on the island. The machines will also eventually provide voltage and frequency support services and back-up for the remote Scottish island in case of grid outages.
The trial instillation of vanadium storage capacity on the island should help prove that vanadium redox flow batteries are a viable method of storing and smoothing out fluctuations caused by the variable nature of wind and solar power supplies.
Savannah Resources (LON:SAV) 4.3 pence, Mkt Cap £18.1m – Raising £0.83m
Savannah Resources reports that, following the recent £1.42m placing announced on 26th September it has raised a further £0.83m from “certain Directors of the Company and Al Marjan Ltd (“Al Marjan”)”, the Company’s major shareholder.
The additional funds are being raised at the same 3.5p/share price as the earlier fundraising and will maintain Al Marjan’s 29.99% holding with a subscription of £685,370.
Chief Executive, David Archer, is also maintaining his 5.77% interest with a subscription of £129,816.
Conclusion: Savannah Resources now has three different projects underway with an advanced copper project in Oman, early stage lithium exploration in Finland and a large mineral sands exploration joint venture with Rio Tinto in Mozambique. The commitment of management and the major shareholder to maintain their stakes is positive.