IronRidge Resources* (LON:IRR) – Gold portfolio secured in Ivory Coast
SolGold* (LON:SOLG) – Cascabel exploration update
ZincOx (LON:ZOX) Suspended – MOU signed with Korea Zinc on joint design and development of new recycling plant in Vietnam
The US$ index is trading at the highest in more than a decade amid solid economic data strengthening the policy tightening case.
Gold prices are flat trading close to the lowest level since Feb this year.
Holdings in gold ETFs contracted for a 10th consecutive day, as investors are reducing positions in the non-yielding metal.
On a positive note, copper, zinc and lead are having a good day while iron ore prices have nearly made up all losses incurred last week.
Iron ore futures climbed 2.9% today closing a little way off a one-year high (for Jan futures) recorded last week.
Brent is little changed today despite comments by Iraq’s prime minster that the country will agree to cut production as part of the OPEC deal in contrast to previous calls for an exemption.
US government debt – who is going to buy new US government bonds
We are wondering who is going to buy new US government bond issues – to fund Trump’s new infrastructure plans.
Middle Eastern sovereign funds are depleted by low oil prices and certain Trump comments may not have endeared him to leaders in this region.
China is also not happy with Trump comments about trade barriers and may not wish to support his growth plans.
The US dollar has strengthened making US Treasuries look more expensive compared with local currencies.
Fund flows back into the US dollar may potentially spark a collapse in weaker emerging market currencies and starve local markets of capital.
While many other investors will buy the relative safety of US Treasuries we wonder how high US rates will need to go to attract sufficient funds.
The world changed with the election of Donald Trump. Trump’s selection of key personnel around him is further evidence of this change and of his likely hard line stance towards other nations.
Trump’s impact on the US dollar and on Fed interest rates is going to affect the rest of the world though it is still too early to know how this is going to play out.
If Trump gets the cash to rebuild American infrastructure then demand for metals will rise in the US but this may be tempered by slower growth elsewhere.
Skyscanner sold to Chinese group for £1.4bn
The sale serves to highlight the re-emergence of Chinese companies acquiring overseas businesses.
Lundin Mining is also selling its 30% share in the Tenke Fungurume copper, cobalt mine in the Congo for $1.14bn.
Health & safety going mad
The advertising watchdog has gone bonkers and banned an ad by Heinz which shows a teenager drumming out a tune on a tin of Heinz Baked beans. Apparently teenagers might cut themselves by drumming out tunes on the serrated edges of opened cans.
Given that we all face greater dangers on a daily basis we have to wonder what else they the authorities will ban and where the teenagers of today will learn the basic skills that help them better avoid stupid accidents in the future.
Dow Jones Industrials +0.31% at 19,083 Thanksgiving today. Market closed
Nikkei 225 +0.94% at 18,333
HK Hang Seng -0.30% at 22,608
Shanghai Composite +0.02% at 3,242
FTSE 350 Mining 0% at 14,986 FTSE 350 +104% since 1st January
AIM Basic Resources -1.08% at 2,406 AIM Basic Resources +48% since 1st January
Economic News
US – Durable goods orders surprised on the upside in Oct while FOMC Nov meeting minutes showed members are thought it was appropriate to raise rates “relatively soon”.
A pick up in core durable goods suggest business investment may be finally changing its trend following declines in spending by the energy sector amid lower oil prices.
With US elections results uncertainty behind us and the latest economic data demonstrating good growth momentum, the Dec hike has now been fully priced by the market given the implied probability of the move at 100%, according to Bloomberg.
Looking past 2016, the FOMC members appeared unconvinced to accelerate the pace of tightening next year beyond the previously guided two rate increases.
Germany – Business sentiment came in strong in Nov confirming that “the economic upturn in Germany remains intact”, according to Ifo Institute.
Despite a slight drop in the expectations index this month, the sentiment held up well with the gauge hovering around a two-year high.
Ifo Current Assessment: 115.6 v 115.1 in Oct and 115.0 forecast.
Ifo Expectations: 105.5 v 105.9 in Oct and 106.0 forecast.
UK – New budget guides for an extra £122bn in borrowing by 2020-21 versus previous forecasts prepared in Mar with the OBR estimating than a little less to be due to the decision to leave the EU.
The economy is expected to grow at a slightly higher rate in 2016, while medium term forecasts have been brought down on “lower investment and weaker consumer demand, driven respectively, by greater uncertainty and by higher inflation resulting from sterling depreciation”.
2016 growth to come in at 2.1% v Mar estimates for 2.0%.
2017 growth expected at 1.4%, down from 2.2%.
Overall 2016-2020 growth has been brought down to 7.4% from 8.8% assuming the UK leaves the EU by Apr/19.
CPI inflation driven by the weaker pound is expected to climb from 0.9% in Oct to above 2% in early 2017 and peak at 2.6% in mid-18.
China – platform collapse at a new power station in China kills 40
The collapse serves to highlight the need for rigorous health and safety procedures in major construction projects.
Some workers remain trapped in the tangled remains of the collapsed steel platform and concrete slabs.
While these incidents appear more common in China this may partially be due to the ongoing high level of construction activity in the region.
Currencies
US$1.0554/eur vs 1.0607/eur yesterday. Yen 113.03/$ vs 111.04/$. SAr 14.105/$ vs 14.085/$. $1.245/gbp vs $1.238/gbp.
0.740/aud vs 0.742/aud. CNY 6.917/$ vs 6.898/$ – Yuan weakens further
Commodity News
Precious metals:
Gold US$1,188/oz vs US$1,212/oz yesterday
Gold ETFs 61.2moz vs 61.6moz yesterday
Platinum US$917/oz vs US$940/oz yesterday
Palladium US$733/oz vs US$744/oz yesterday
Silver US$16.35/oz vs US$16.64/oz yesterday
Base metals:
Copper US$ 5,865/t vs US$5,589/t yesterday
Aluminium US$ 1,772/t vs US$1,764/t yesterday
Nickel US$ 11,630/t vs US$11,365/t yesterday
Zinc US$ 2,698/t vs US$2,592/t yesterday
Lead US$ 2,242/t vs US$2,198/t yesterday
Tin US$ 21,285/t vs US$21,200/t yesterday
Energy:
Oil US$49.1/bbl vs US$49.2/bbl yesterday
Natural Gas US$3.011/mmbtu vs US$2.957/mmbtu yesterday
Uranium US$18.50/lb vs US$18.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$73.0/t vs US$71.5/t
Chinese steel rebar 25mm US$452.5/t vs US$452.2/t
Thermal coal (1st year forward cif ARA) US$64.0/t vs US$68.5/t yesterday
Premium hard coking coal Aus fob US$308.8/t vs US$308.8/t – unch
Ordinary hard coking coal is $270.0/t vs $270.0/t (Dalrymple Bay Coal Terminal)
Other:
Tungsten - APT European prices $198-203/mtu vs $198-203/mtu unch last week – boringly unchanged. Price will have to start rising sometime soon if Trump goes for growth.
Company News
IronRidge Resources* (LON:IRR) 16.5p, Mkt Cap £39m – Gold portfolio secured in Ivory Coast
IronRidge which holds concessions for iron ore in Gabon, gold in Chad, lithium in Ghana and gold, copper and other minerals Australia is taking on a highly prospective gold portfolio in the Ivory Coast.
The tenement portfolio covers 2,310sqkm including artisanal workings over an 8km strike at Kineta North.
The region covers Birimian greenstones which are generally known to host multi-million ounce gold deposits.
The license includes four principal gold bearing structures with two of these as splay structures off the Sassandra Shear zone. Similar structures host the Syama at 7moz and Tongon 5moz gold mines in the north of the Ivory Coast.
Structures to the south also include Ahafo at 23moz, Bibiani 7moz and Chirano at 5moz.
Kineta North (100%): The Kineta North appears to be located on the same structural shear as the Wa 2.2moz and Konkera 3.3moz which is now held by Centamin.
Pictures in the IronRidge press release show a larger scale artisanal pit and underground workings. Atrisinal miners are good at finding gold mines but are often held back by the water table and ground conditions which often kill workers in lower levels.
Understanding the potential of these diggings to host much larger gold discoveries is a skill and an art with the potential to reveal multi-million gold discoveries particularly where the workings are show the presence of gold mineralisation at key intersections along structural shears.
Bianouan (100%): lies at the south-western extension of a structural setting which hosts the Ahafo 23moz, Bibiani, 7Moz and Chirano 5moz structures.
Bodite (100%): is a different sort of geology with gold seen in Birimian metasediments and a where a thicker package of turbidite sequence rocks are intruded by more fractionated granitic intrusives. Turbidite structures are formed from deep water sedimentary flows often in underwater avalanches.
This setting is similar that which hosts Siguiri 13.3moz and Lefa 8moz.
The team: The IronRidge team, led by Nick Mather are expert at identifying and locating interesting mineral prospects. They have a proven track record as project generators and use a combination of high-tech and traditional geological techniques to evaluate the potential of their projects. They know what makes a good project for sale to a major and equally they know how not to waste too much time on projects of lesser value.
The license agreement allows IronRidge to earn into 100% of each project through expenditure and feasibility study work and also gives an NSR of 2.5% to the vendors of which 40-50% may be acquired for US$2-3m at any time. The deal demonstrates an new found co-operation between license holders and explorers which should serve to advance the projects for both parties.
SolGold* (LON:SOLG) 22.4p, Mkt Cap £334m – Cascabel exploration update
SolGold report that Hole 18 has intersected visibly strong copper mineralisation at Hole 18 on the Alpala property at Cascabel in Ecuador.
The company states that visible copper mineralisation is seen from 903.9m depth to 1,321.5m with the intensity and veining of the mineralisation increasing with depth as drilling continues towards the target depth of 2,300m.
Intense veining of up to 48% of the total rock mass has been observed.
The team currently have three rigs at Alpala.
Hole 19 is currently at a depth of 153m
Hole 20R is at a depth of 321m and should serve to enable another seven directional drilling daughter holes testing up to 650m below the thickest and richest part of the Alpala deposit.
ZincOx (LON:ZOX) Suspended – MOU signed with Korea Zinc on joint design and development of new recycling plant in Vietnam
ZincOx is looking to remerge from the ‘ashes’ or should we say the ‘Electric Arc Furnace Dust’ to develop a new recycling plant in Vietnam.
The press release is short on technical details on the project but does tell us that it’s a 51:49 joint venture in favour of Korea Zinc and that the ‘Definitive Development Study’ is expected to cost about $2.5m. If this cost rises to >$3m then ZincOx’s interest will be diluted proportionately though ZincOx will be able to buy back its interest to 49% in the following six months.
The new Vietnam recycling plant will be based on ZincOx’s developed Rotary Hearth Furnace technology and with capacity to treat 100,000tpa of EAFD. We guess this could result in 30,000t of high quality zinc oxide (80% zn) production worth around twice as much as zinc concentrate plus some by-product iron.
This should lead to a significant increase in sales for a relatively modest increase in overall operating cost leading to a substantial uplift in margin, value and profit compared with the last plant built. We believe the ZincOx plant built in Korea is now working well and enjoying the benefits of the significant uplift in zinc prices since Korea Zinc took control of 91.3% of the plant as part of a financial restructuring during the prolonged commissioning process.
ZincOx shares were suspended on 28th October and must requote within six months to avert delisting.
Debt: ZincOx is carrying £3.78m of corporate loan notes with interest accruing at 10%pa from 1st August 2016 and are due for repayment in January 2018.
Assets: ZincOx retains an 8.7% interest in the Korea Recycling Plant which it designed and built. Very sadly extended plant commissioning combined with prevailing low zinc prices allowed Korea Zinc to take control and majority ownership of the plant just ahead of a recent and sustained rise in Zinc prices.
The value of Zincox’s stake in Korean Zinc Recycling Plant should now be substantially more than the last implied value of $6.3m.
ZincOx also owns what is described as a valuable plot of industrial land in Turkey.
Conclusion: It’s good to see ZincOx re-emerge from losing control of its Korea Zinc Plant. It is interesting to note that Korea Zinc are still working as cooperating partners with the ZincOx team. Korea Zinc must respect the skill and knowhow of the ZincOx team and must also need to utilise these skills to advance with their next EAFD project.