Beowulf Mining (LON:BEM) – Divestment of Grundtrask exploration licence
DiamondCorp (LON:DCP) – Section 54 cliff hanger as shutdown closes mine at point of urgent funding
SolGold* (LON:SOLG) – Additional funding provides a platform for acceleration of exploration at Cascabel
Sula Iron & Gold (LON:SULA) – Madani Minerals to take 26% stake in Sula
Weatherly International (LON:WTI) – Water problems at Tschudi hitting H1 production – company looks for H2 recovery
FTSE100 climbed for the first time in four days with a broad based rebound across sectors as better than expected inflation data from China supported demand for riskier assets.
• Brent is higher trading higher today despite SU state reports showing an increase in oil stockpiles through last week, although gasoline inventories were reported to have fallen during the same period.
• Gold is flat trading in the $1,252-1,262/oz range over the last four days.
• Iron ore futures climbed for a fourth consecutive day marking a 6.0% increase this week following gains in steel prices.
Dow Jones Industrials -0.25% at 18,099
Nikkei 225 +0.49% at 16,856
HK Hang Seng +0.88% at 23,233
Shanghai Composite +0.08% at 3,064
FTSE 350 Mining +1.53% at 13,089 FTSE 350 +78% since 1st January
AIM Basic Resources -1.23% at 2,500 AIM Basic Resources +53% since 1st January
Economic News
US – Another solid week regarding the change in initial jobless claims pointing to a good momentum in the labour market.
• Retail sales are due later today with investors to be looking for clues on the strength of consumer spending through Q3, the sector which has been driving US economic growth lately.
Date Index Period Actual Est Previous
Monday Columbus Day celebrations
Exchanges remain open
Wednesday JOLTS Job Openings Aug '000 5,443 5,800 5,871
FOMC Meeting Minutes Sep
Thursday Weekly Jobless Claims '000 246 253 246
Friday Retail Sales Sep %mom 0.6 -0.3
Core Retail Sales (ex Auto) Sep %mom 0.5 -0.1
Core PPI Sep %mom 0.1 0.1
Core PPI Sep %yoy 1.2 1.00
UoM Consumer Expectations Oct 91.8 91.2
Source: Bloomberg
China – Producer prices recorded the first positive yearly reading since the start of 2012 reflecting a falling away effect of lower oil prices, robust domestic demand and state efforts to close excess capacity.
• Inflation in producer prices is a welcome news for company’s profits and their outstanding debt liabilities.
• Industrial profits reached the highest level since 2013 in Aug, according to the latest data.
• Consumer prices have also accelerated past market expectations suggesting solid internal demand through Sep.
• PPI (%yoy): 0.1 v -0.8 in Aug and -0.3 forecast.
• CPI (%yoy): 1.9 v 1.3 in Aug and 1.6 forecast.
India – Inflation slowed down for the first time since Apr the latest data suggests driven by a good monsoon among other things.
• Wholesale prices: 3.57%yoy v 3.74%yoy in Aug and 3.90%yoy forecast.
• A deceleration in inflation supports the RBI monetary policy easing stance.
• The central bank cut the benchmark rate by 25bp to 6.25% last month.
Currencies
US$1.1021/eur vs 1.1094/eur yesterday. Yen 104.17/$ vs 104.04/$. SAr 14.256/$ vs 14.368/$. $1.221/gbp vs $1.217/gbp.
0.762/aud vs 0.752/aud. CNY 6.725/$ vs 6.731/$.
Commodity News
Precious metals:
Gold US$1,257/oz vs US$1,259/oz yesterday –
Gold ETFs 65.9moz vs 65.9moz yesterday –
Platinum US$939/oz vs US$943/oz yesterday
Palladium US$640/oz vs US$644/oz yesterday
Silver US$17.53/oz vs US$17.60/oz yesterday
Base metals:
Copper US$ 4,707/t vs US$4,777/t yesterday –
Aluminium US$ 1,692/t vs US$1,683/t yesterday –
Nickel US$ 10,430/t vs US$10,415/t yesterday
Zinc US$ 2,247/t vs US$2,234/t yesterday
Lead US$ 2,004/t vs US$2,010/t yesterday
Tin US$ 19,440/t vs US$19,595/t yesterday –
Energy:
Oil US$52.4/bbl vs US$51.7/bbl yesterday -
Natural Gas US$3.333/mmbtu vs US$3.208/mmbtu yesterday
Uranium US$22.00/lb vs US$22.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$56.6/t vs US$54.8/t –
Chinese steel rebar 25mm US$395.9/t vs US$395.2/t
Thermal coal (1st year forward cif ARA) US$65.5/t vs US$65.0/t yesterday –
Premium hard coking coal Aus fob US$220.6/t vs US$217.0/t
Other:
Tungsten - APT European prices vs $183-197/mtu unch vs $$180-200/mtu two weeks ago
Company News
Beowulf Mining (BEM LN) 5.9 pence, Mkt Cap £28.2m – Divestment of Grundtrask exploration licence
• Beowulf Mining reports that it has agreed to divest its Grundtrask exploration licence in Sweden to a private exploration company, Erris Resources.
• Erris will receive US$200,000 when an independently audited JORC resource on the property amounts to 100,000 ounces of gold. A second payment of US$2/oz is payable when the independently audited resource reaches 1m oz of gold and Beowulf will receive a 1% net smelter royalty should the project be brought into production.
Conclusion: the divestment of a non-core asset should enable the company to focus on its Atvidaberg lead/zinc/copper/silver exploration target in Sweden and the graphite portfolio in Finland. While it does not appear that Beowulf is receiving any immediate cash for Grundtrask, it is presumably relieved of the costs of holding the licence, associated administration and the management time involved.
DiamondCorp (DCP LN) 1.6 pence, Mkt Cap £7.8m – Section 54 cliff hanger as shutdown closes mine at point of urgent funding
• Just as I was getting ready for an invite to the next mine tour, DiamondCorp report a fire in an underground dump truck, though it’s hard to envisage much of a fire in this relatively wet mine.
• Rather unfairly, the DMR, Department of Mineral Resources, has kindly slapped a Section 54 shut down notice on the mine, closing the operations in this most critical of financial phases.
• It sounds as if the fire was put out quickly without much incident and it may be that the DMR were waiting for an excuse to get inspectors into the mine
• The DMR say they want an external ventilation and audit team to inspect the mine. Management expect the mine to be shut for at least a week.
• Personally, I’m hoping to get an invite for a future next site visit. I’ve ordered a snorkel and flippers and was idly wondering if it’s better to pack board short or speedos for the underground tour, though hopefully standard issue wellingtons with those steel toes caps will be as much as anyone will need.
• It’s a long way down the bottom of the mine these days so I’m hoping the pumps have been properly greased and are working well as well as the kit can.
• Warmer weather in the region should at least mean that water from passing rainstorms is at least bearably warm by the time it flows through the old workings and into the lower levels of the underground mine. You never know, if the water flow is strong enough you might get a few micro diamonds washed through in the process.
• More seriously, we hope the Industrial Development Corporation ‘IDC’ is minded to restructure the finance payments and that investors / offtakers will stump up the cash to cover the cost of reduced diamond production while the miners clear the overhanging rocks.
• The recovery of some larger and more valuable diamonds indicates the mine should be worth rescuing and it’s not much of a surprise that the mine is suffering commissioning issues as it ramps up to target ore production in the lower levels.
• Management are looking to strengthen the team through the addition of diamond mining development and corporate finance expertise. We recommend Eric the Eel, as we know he can swim.
• Funding: DCP are going to need to find another £500,000 in short order to cover costs and £2.5- £3.0m in the medium term as previously announced to help get the mine to positive cash flow. Unfortunately for the company the investors who were looking at the provision of short term funding have walked away meaning that the company needs to find another investor in very short order to continue trading.
• We believe Paul Louden and his team have worked tirelessly to get the Lace mine into production and, given, geological challenges, they appear to have done a relatively good job. We hope investors will have the fortitude to back the company through this critical phase to ensure the survival and longer term success of the company.
SolGold* (SOLG LN) 18.4p, Mkt Cap £225m – Additional funding provides a platform for acceleration of exploration at Cascabel
• SolGold reports that it has completed the previously announced US$10.1m funding via the issue of 63.35m new shares to Maxit and other parties. “The Company will now work towards settlement of the placement to Newcrest as approved by shareholders at Solgold’s General Meeting yesterday.”
• Completion of the Newcrest transaction should bring in a further US$33m leaving Solgold well-placed to accelerate the exploration of its flagship Cascabel project in Ecuador significantly.
• The company is working towards an initial resource statement for the Alpala deposit, which is the most advanced of fourteen targets identified to date at Cascabel, by the end of 2016.
• With the additional funding now available Solgold “intends to contract additional drilling rigs to expand exploration on the overall Cascabel concession … Intense diamond drilling is planned for the next 12 months with multiple drill rigs.”
• The company is now also in a position to “drill test other key targets within the Cascabel concession at Aguinaga, Trivino, Moran, Alpala Northwest, Hematite Hill, Alpala Southeast , Cristal, Parambas, Carmen, Tandayama-America, and Chinambicito.”
• To date, Solgold has completed around 23,700m of diamond drilling at Cascabel and associated exploration work at a cost of approximately US$33m and has reported major drill intersections of copper / gold mineralisation extending over down-hole thicknesses of, in some cases, over 1km at Alpala where mineralisation remains open at depth and laterally “to the north, north-east, south-west and south east”.
Conclusion: The increasing realisation of the scale of the Cascabel project is attracting the interest of major mining companies and significant new funding which allows the company to step up its exploration programme.
*SP Angel acts as Nomad and Broker to SolGold. An SP Angel analyst visited the Cascabel project.
Sula Iron & Gold (SULA LN) 0.1 pence, Mkt Cap £1.3m – Madani Minerals to take 26% stake in Sula
• Madani Occidental (Madini Minerals), a private investment group is buying a 26% stake in Sula Iron & Gold.
• Madani run by Iain Macpherson, Ilja Graulich, John Gould and Serge Ngandu plant to install Roger Murphy, ex equity sales at Cannacord and Dundee into Sula as its CEO.
• The founder of Sula, Nick Warrell, will remain as the COO.
• Sula’s key asset is the Ferensola gold project in Sierra Leone which has a ‘JORC Exploration Target’ of 5-7mt grading at 4-8g/t Au for 0.8moz to 1.5moz Au.
• This should not be considered to be the standard of the more commonly seen ‘JORC Resource’ and is a bit like more like wishful thinking on a back of a fag packet albeit with some sound geological evidence to support the concept.
• The target is derived from a 2 km strike length of a mineralised fold belt and is given some credibility by the fact that it has been done by SRK.
• The statement goes onto say that the “Exploration Target provides a platform that should allow Sula to deliver good results and a robust JORC compliant resource. Sula also notes extensive artisanal gold mining over the Ferensola property.”
• Madini must reckon they are onto something but with little happening on the property in the past two years its been slow going so far and could do with some fresh management.
• Ferensola lies along from the Tonkolili license in Sierra Leone which was previously with African Minerals, least said about that the better!
Conclusion: This is a great move if you are an investor in Sula. Roger Murphy knows his stuff and will hopefully take command and control of the company. We expect to see a more rapid path towards resource development and, dare we say it, eventual gold production.
Weatherly International (WTI LN) 0.3 pence, Mkt Cap £2.9m – Water problems at Tschudi hitting H1 production – company looks for H2 recovery
• Weatherly International reports that during the year ending 30th June 2016 the company made a pre ad post-tax loss of US$10.6m (2015 loss US$13.5m).
• The company’s Tschudi mine in Namibia produced 15,8884 tonnes of copper at a cash cost, from the date the mine achieved commercial production on 1st October 2015, of US$4,199/tonne.
• The mine achieved nameplate capacity of 17,000tpa of copper production during December 2015 and exceeded this rate by 4% during Q4 to March 2016. During Q4, however, groundwater inflow at rates significantly in excess of those anticipated in the DFS significantly reduced production to 10% below the nameplate level, “and the September 2016 quarter production is expected to be approximately 15% below nameplate before returning to nameplate production levels by the end of the December 2016 quarter.”
• Despite these setbacks, the company expresses confidence that it still expects to produce the full nameplate 17,000 tonnes of copper production for the fill year to June 2017, implying that it will significantly outperform during the second half of the financial year.
• As a result of its operating issues, and with the support of its major shareholder and lender, Orion Mine Finance (24.6%), Weatherly International has deferred all loan repayments and net debt at 30th June increased to US$99.5m (2015 – US$82.6m) increasing gearing (netdebt:net debt + equity) to 77% (2015 – 67%).
Conclusion: Operating problems encountered during the quarter to June are expected to be resolved during the December quarter and the company expects to recover the lost production during the second half of the financial year. Weatherly International unfortunately joins a number of other companies where debt repayments have had to deferred in response to operating setbacks.