Caledonia Mining (LON:CMCL) –Blanket mine site visit
We are repeating and correcting in red, yesterday’s report from the Blanket mine site visit
DiamondCorp (LON:DCP) – Debt notice and resignation of Euan Worthington
Scotgold Resources (LON:SGZ) – Scotgold completes delisting from ASX
FTSE100 is flat today with miners trading slightly higher with the FTSE 350 Mining Index coming close to this year’s highest level recorded last week.
• Funds inflows in commodities hit the highest level in six months of $11.6bn in Sep, Bloomberg reports citing Barclays.
• Largest inflows recorded in energy ($4.8bn), agriculture ($2.9bn) and precious metals ($2.7bn).
• This compares to a $3.2bn inflow in Aug.
• Gold is slightly off amid a stronger US$ Index.
• Brent prices are range bound consolidating at above the $51/bbl level.
• Iron ore futures finished flat (CNY 440/t) on the week holding up to previous gains and trading at close to highest levels recorded in Aug (CNY 456/t).
Dow Jones Industrials -0.22% at 18,162
Nikkei 225 -0.30% at 17,185
HK Hang Seng % at 23,374 Closed due to typhoon
Shanghai Composite +0.21% at 3,091
FTSE 350 Mining +0.70% at 13,341 FTSE 350 +82% since 1st January
AIM Basic Resources +1.34% at 2,567 AIM Basic Resources +57% since 1st January
Economic News
US – Weekly jobless claims posted the strongest weekly rise since late Jul which is partly related to Hurricane Matthew related disruptions.
• On a four-week average basis claims climbed only 2k to 252k which was the second-weakest reading in 2016 pointing to a continuing positive momentum in the labour market.
Date Index Period Actual Est Previous
Monday New York Manufacturing Oct -6.8 1.0 -2.0
Industrial Production Sep %mom 0.1 0.1 -0.5
Capacity Utilization Sep % 75.4 75.6 75.3
Tuesday CPI Sep %mom 0.3 0.3 0.2
CPI Sep %yoy 1.5 1.5 1.1
Core CPI Sep %mom 0.1 0.2 0.3
Core CPI Sep %yoy 2.2 2.3 2.3
Wednesday Housing Starts Sep %mom -9.00 2.9 -5.6
Building Permits Sep %mom 6.3 1.1 0.7
Thursday Weekly Jobless Claims '000 260 250 247
Existing Home Sales Sep %mom 3.2 0.4 -1.5
Source: Bloomberg
China – The National Bureau of Statistics national metals production numbers show:
• Copper production climbed 8.4%yoy to 6.2mt in the Jan-Sep period.
• Aluminium production hit a 15-month high in Sep (2.75mt) taking the total for the Jan-Sep to 23.4mt (-1.4%yoy).
• Zinc production fell 0.1%yoy to 4.6mt during the same period.
• Lead output increased 6.6% to 3.2mt during the same period.
• Iron ore output fell 3.2%%yoy to 941mt.
ECB – The Bank left rates and the pace of bond purchases unchanged saying the council has not discussed extending the QE.
• The focus now shifts to the Dec meeting with markets to increasingly expect a comment on a potential for delaying the tapering past Mar/17.
• The euro slid back post the press conference and continued to decline against the US$ this morning on different monetary policy outlook in two regions.
• The currency is off 0.8% against the US$ since pre-announcement.
Indonesia – The parliament is planning to revise the existing mining law next year with an update in oil and gas laws currently being the focus, according to one of parliamentarians.
• Although, the decision on the raw and semi-processed ores exports is separate to the process with the government expected to come up with changes within three weeks.
Currencies
US$1.0880/eur vs 1.0971/eur yesterday. Yen 103.73/$ vs 103.68/$. SAr 14.048/$ vs 13.928/$. $1.223/gbp vs $1.226/gbp.
0.763/aud vs 0.766/aud. CNY 6.764/$ vs 6.738/$.
Commodity News
Precious metals:
Gold US$1,265/oz vs US$1,270/oz yesterday –
Gold ETFs 66.2moz vs 66.0moz yesterday –
Platinum US$929/oz vs US$942/oz yesterday
Palladium US$622/oz vs US$637/oz yesterday
Silver US$17.49/oz vs US$17.64/oz yesterday
Base metals:
Copper US$ 4,638/t vs US$4,649/t yesterday –
Aluminium US$ 1,616/t vs US$1,614/t yesterday –
Nickel US$ 10,050/t vs US$10,210/t yesterday –
Zinc US$ 2,270/t vs US$2,295/t yesterday –
Lead US$ 2,021/t vs US$2,003/t yesterday
Tin US$ 19,915/t vs US$19,850/t yesterday –
Energy:Oil US$51.5/bbl vs US$52.1/bbl yesterday -
Natural Gas US$3.100/mmbtu vs US$3.196/mmbtu yesterday
Uranium US$20.50/lb vs US$20.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$57.2/t vs US$56.9/t –
Chinese steel rebar 25mm US$405.4/t vs US$409.1/t –
Thermal coal (1st year forward cif ARA) US$67.6/t vs US$67.9/t yesterday –
Premium hard coking coal Aus fob US$242.9/t vs US$240.9/t
Other:
Tungsten - APT European prices $191-197/mtu vs $183-197/mtu unch last week
Company News
Caledonia Mining (LON:CMCL) 142 pence, Mkt Cap £74m –Blanket mine site visit
We are repeating and correcting in red, yesterday’s report from the Blanket mine site visit
• Caledonia Mining has hosted a site visit for UK analysts to its Blanket mine in Zimbabwe where the company is well advanced on its major redevelopment project aimed at increasing production from the company’s guidance of 50,000 ounces of gold for 2016 (2015 – 42,806 ounces) to 80,000oz pa by 2021 and not 2012 as we said yesterday.
• The programme is already delivering increased throughput as a result of the improved ore handling and transport arrangements underground which increases underground ore handling from around 400tpd to 1000tpd and from the newly installed ball mill which should lift processing capacity to the 1800tpd of ore feed expected on completion of the new Central Shaft.
• The Central shaft is currently at a depth of approximately 330metres below surface and, when completed in mid-¬2018, is intended to provide access to ore below the 750m level of the mine.
• The new shaft, which is located closer to the centre of the known orebodies than the existing shafts towards the southern end of the mine should allow more efficient access to both the northern and southern orebodies and should also improve operating costs by reducing the travel times for men, materials and ore as well as increasing the overall hoisting capacity at Blanket.
• This deeper ore is already becoming available through a newly developed decline system which provides additional flexibility to the underground ore transport infrastructure and provides the opportunity to develop and explore the deeper levels of mineralisation.
• Peak capital expenditure is now passed for the project and the impact of the improved efficiencies achieved so far is already coming through in recent quarterly production reports with June quarter cash costs of US$629/oz and all in costs of US$936/oz - reductions of 13% and 9% respectively compared with Q2 2015.
• Access to deeper levels of the mine is also providing access for drilling of the deeper extent of mineralisation which delivered a resource upgrade in July. With increasing access and a continuing on mine exploration programme backed up by digitisation of historical geological and mining information further resource upgrades seem likely over the coming months
Conclusion: Caledonia Mining’s development programme at the Blanket mine is a complex project which rejuvenates a mine already over 100 years old. In our opinion, the development is being well controlled by an experienced and capable management team and seems on track to deliver the planned production increase to 80,000 oz pa of gold by 2021.
DiamondCorp (LON:DCP) 2.8p, Mkt Cap £13.4m – Debt notice and resignation of Euan Worthington
• DiamondCorp remind us, in accordance with Rule 2.9 of the Takeover Code, of the relevant securities in issue.
• The company has 478,739,580 (0.1p) shares in issue + another 276,839,478 deferred shares which hold no voting, dividend or winding up rights other than the nominal amount paid on the shares. “The deferred ordinary shares effectively have a zero value, are non-transferable and have no effect on the economic interest of the holders of ordinary shares.”
• DiamondCorp also has ZAR40m of senior secured South African bonds due 14 Dec 2018
• The real reason for the announcement is to report a new Shariah-compliant secured convertible for £700,000 with a maturity date of 15 December this year.
• £400,000 of the facility has so far been drawn. The instrument is convertible into stock at a 30% discount to the average daily trading price since the agreement. While this may look onerous it feels like good deal for the company considering the urgent need for cash and precarious financial position of the company.
• DiamondCorp also reported yesterday that its Chairman, the very charming, Euan Worthington, has at long last fallen on his sword. Part of a Chairman’s role is to foresee problems and to guide the board accordingly.
• Worthington has resigned at the very moment when the team should have been celebrating a successful ramp up in diamond production and sales.
• Worthington also bailed from his Chairman’s role at African Eagle on 24 April 2013 subsequently serving the company with a winding up petition on 12 June 2013 relating to unpaid salary and expenses.
• African Eagle subsequently announced a restatement of terms on the Jacana deal on 18 June 2013 relating to an agreement to sell the very valuable Balma graphite asset for a price of just A$925,000 (£470,000) to Jacana (now Syrah Resources). Balama graphite is reported to be the world’s largest graphite resource with Syrah Resources valued at >A$1bn almost entirely on this project.
• Worthington later withdrew his winding up petition on 01 July 2013.
Conclusion: Now that Worthington has left the Lace mine in the lurch it is now down to the very dedicated, long suffering and capable Paul Loudon and his team to rescue the business.
We feel confident that the technical mining issues encountered so far should be overcome and that the mine will produce significant quantities of valuable coloured diamonds going forward. We also feel there will be a number of parties interested in the acquisition of the mine who would be prepared to pay up sensible cash under more normal circumstances.
The problem is that with insufficient cash in the bank and the next best thing to a ‘Pay-Day’ loan in place, will there be anything much left for the company’s long suffering investors.
Scotgold Resources (LON:SGZ) 0.6p, Mkt Cap £8.8m – Scotgold completes delisting from ASX
• Scotgold Resources reports it has delisted from the Australian Securities Exchange ‘ASX’ today.
• The company are recently completed a preliminary bulk processing trial of 870t of material from its Cononish deposit in Scotland has produced 530 gms of dore gold (unrefined, impure gold) via the production of an intermediate pyrite concentrate.
• The trial has demonstrates the viability of producing a separate gold rich lead concentrate using gravity separation.
• Recovery rates of 62% are seem from a simple coarse grinde to 500microns
• Test work indicates at recovery rates should improve to around 93% on finer grinding to 150 microns.