Ariana Resources (LON:AAU) – Kiziltepe construction expected to complete in mid-December
ASA Resource Group* (LON:ASA) – Bindura Nickel reports US$1.2m profit in half year to September
Bushveld Minerals (LON:BMN) – Interims show progress toward Vanadium production acquisition
DiamondCorp (LON:DCP) Suspended – 310m level now clear of flood water and longhole rig being moved for refurbishment
Metals Exploration* (LON:MTL) – First gold sale as Runruno mine ramps up amid debt rescheduling talks
Mariana Resources (LON:MARL) – Drilling underway at Ergama in Turkey
Mkango Resources* (LON:MKA) – Quarterly update
Sierra Rutile (LON:SRX) – Takeover offer hangs in the balance as due diligence is dammed
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Economic News
Currencies
US$1.0597/eur vs 1.0635/eur yesterday. Yen 112.63/$ vs 112.39/$. SAr 13.980/$ vs 13.875/$. $1.246/gbp vs $1.243/gbp.
0.746/aud vs 0.747/aud. CNY 6.898/$ vs 6.907/$
Commodity News
Precious metals:
Gold US$1,187/oz vs US$1,190/oz yesterday
Gold ETFs 60.7moz vs 60.9moz yesterday
Platinum US$923/oz vs US$916/oz yesterday
Palladium US$756/oz vs US$754/oz yesterday
Silver US$16.53/oz vs US$16.67/oz yesterday
Base metals:
Copper US$ 5,773/t vs US$5,954/t yesterday
Aluminium US$ 1,725/t vs US$1,764/t yesterday
Nickel US$ 11,380/t vs US$11,780/t yesterday
Zinc US$ 2,859/t vs US$2,890/t yesterday
Lead US$ 2,440/t vs US$2,433/t yesterday
Tin US$ 20,900/t vs US$21,1000/t yesterday – CRU sees tin among its top picks for next year.
Peter Kettle at ITRI reckons tin prices may rise to $30,000/t in 2018/19.
They see a supply demand deficit of 10,000-15,000t this year and a similar shortfall in 2017.
They see a very long-term trend of declining stockpiles and a medium term equilibrium of about $22,500/t.
Energy:
Oil US$47.6/bbl vs US$47.3/bbl yesterday
Natural Gas US$3.317/mmbtu vs US$3.190/mmbtu yesterday
Uranium US$17.50/lb vs US$18.50/lb yesterday – surprise fall in uranium prices
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.3/t vs US$76.1/t
Chinese steel rebar 25mm US$481.4/t vs US$474.2/t
Thermal coal (1st year forward cif ARA) US$68.0/t vs US$65.6/t yesterday
Premium hard coking coal Aus fob US$308.8/t vs US$308.8/t – unch
Other:
Tungsten - APT European prices $188-198/mtu vs $198-203/mtu last week – a surprise fall in tungsten prices
Company News
Ariana Resources (LON:AAU) 1.65p, Mkt Cap £13.9m – Kiziltepe construction expected to complete in mid-December
Ariana Resources has announced that it expects to complete construction at its Kiziltepe mine in Turkey “by mid-December 2016 with production commencing during the weeks thereafter”.
Wet and dry commissioning of the plant is underway and production will be able to start when the tailings storage facility has been completed and approved by the Turkish authorities and an Operations permit has been issued.
The company comments that “As Kiziltepe approaches its first gold pour, we remain focussed on further enhancing the project through the drilling of potential resource extensions and in developing several satellite prospects … This will require further drilling programmes and project development work, including additional feasibility studies, particularly at Kepez, Kizilcukur and ultimately at Tavsan.”
ASA Resource Group* (ASA LN) 2.125 pence, Mkt Cap £36.0m – Bindura Nickel reports US$1.2m profit in half year to September
ASA Resources’ 74.73% owned subsidiary, Bindura Nickel, has reported an after tax profit of US$1.18m for the six months to 30th September 2016, reversing a US$3.4m loss in the six months to September 2015.
Despite a 15% decline in the average price of nickel in concentrate to US$3198/t, turnover grew by 9% to US$22.46m (H1 2015 – US$20.56m) on the back of a 25% increase in nickel sales to 3,464 tonnes.
Bindura has also achieved a 22% reduction in cost of sales to US$ 14.32m or US$4,133/t and an EBITDA margin of 14% during the half year.
At the operational level, the head grade of ore treated rose to 1.81% nickel (2015 – 1.41%) and overall nickel output increased by 23% to 3,420 tonnes.
The upgrading and refurbishment of the nickel smelter is some 71% complete and remains on schedule. Capex for the half year amounted to US$4.2m and was largely deployed on the smelter project.
Conclusion: Bindura Nickel is growing profitability and sales and is well advanced towards completing the refurbishment of the smelter.
*SP Angel act as Nomad and broker to ASA Resources
Bushveld Minerals (LON:BMN) 1.275 pence, Mkt Cap £8.7m – Interims show progress toward Vanadium production acquisition
Bushveld Minerals is drawing closer to the consummation of its agreed US$16.5m acquisition of ‘SMC’ the Vametco vanadium mine and Vametco Alloy plant in South Africa.
The company has paid US$1.646m towards the consideration for SMC and is making good progress towards completing the full settlement.
The team now have an MoU in place to work with ‘UET’ ( UniEnergy Technologies https://www.uetechnologies.com/ ) a US manufacturer on the development of opportunities for vanadium redox batteries and for the manufacturing of vanadium electrolyte in South Africa. This
Bushveld Minerals has settled all outstanding financial obligations from thee £2.6m Darwin Strategic facility.
The company cut its losses for the first six months of the year to end August to £32,736 from £864,439 yoy.
Total assets are £60m vs Total current liabilities of £1.1m.
The effect of foreign exchange rates is a positive £345,361 through the period
The company generated some £1.9m through the period from financing activities and paid US$1.646 for the consideration of SMC and is making good progress towards completing the full settlement.
The company had cash and cash equivalents of £117,361 at the end of the period.
DiamondCorp (LON:DCP) Suspended – 310m level now clear of flood water and longhole rig being moved for refurbishment
DiamondCorp will one day write a book about the road to diamond production at the Lace mine.
Flood water is now clear from the 310m production level, with pumps now working normally.
Thankfully the mine is insured for storm damage and remediation which should pay for much of the cost of refurbishment and reopening the mine.
5,130 carats of diamonds are due to be sold from the ramp up of production just prior to the storm which closed the mine.
At $160/ct the parcel should fetch around $820,800, however there are a number of pinks and purples in the parcel indicating to us a potentially higher value for these stones and greater value for the sale. This could imply significantly better value for the mine going forward once it is out of ‘Business Rescue’ in South Africa.
The team are now looking at repairing the ramp and critically are working on moving the Longhole production drill rig for refurbishment.
Metals Exploration* (LON:MTL) 5.625p, Mkt Cap £116m – First gold sale as Runruno mine ramps up amid debt rescheduling talks
Metals Exploration report their first gold sale from the Runruno gold mine in the Philippines. The gold was sold in dore form as it was uplifted from the project site for refining.
The good news is that the sale of gold demonstrates the mine and process is working and should prove that all necessary government approvals are in place for the production, processing and sale of gold.
Today’s report says the Mining and processing operations are ramping up soundly and ‘each of the individual processes within the plant have been successfully commissioned and are being ramped up progressively to design throughputs’.
Debt rescheduling: the company has obtained a further waiver from its lenders to delay the repayment of $15m due on 30 June. This will either be repaid by the year end or on successful rescheduling.
Conclusion: The sale of gold and the cash flow from this sale are an important step in development of the mine and the settling of its debt restructuring.
*SP Angel act as Broker to Metals Exploration
Mariana Resources (LON:MARL) 76.5p, Mkt Cap £94.6m – Drilling underway at Ergama in Turkey
Mariana Resources reports that it has started an initial 7 hole drilling programme at its wholly owned Ergama copper gold project in western Turkey.
The targets include “near-surface, porphyry-style copper-gold mineralisation within the central portion of the Ergama claim block, in addition to peripheral high grade vein / fault hosted gold-silver mineralisation.” Results are expected in Q1 2017.
The licence area covers 21.6 square kilometres and geological mapping, geochemical sampling and ground geophysical surveying has identified 2 main targets “interpreted to represent sulphides associated with a “blind” porphyry copper-gold deposit”.
Mariana Resources has achieved significant exploration success at its Hot Maden project in north-eastern Turkey where there is currently an indicated resource of 2.79m oz of gold at a grade of 12.2g/t with 2.3% copper. Drilling is continuing and the lateral and depth limits of Hot Maden have still to be fully defined. A local Turkish company, Lidya, has earned a 70% interest in Hot Maden and we speculate whether a successful exploration programme at Ergama could prompt Mariana to try and replicate a similar model.
Conclusion: Following its exploration success at Hot Maden, Mariana is turning its expertise in Turkish exploration to Ergama and if successful may seek to replicate the model of a local company earning in to the project over the longer term. We look forward to results from the Ergama drilling when they become available.
Mkango Resources* (LON:MKA) 3p, Mkt Cap £2.1m – Quarterly update
Mkango Resources, the rare earths exploration and development company whose main projects are located in Malawi, has announced a net loss for the quarter ended 30th September of US$391,000 bringing the overall loss for the first 9 months of 2016 to US$1.39m. The equivalent YTD loss in 2015 amounted to approximately US$844,000.
The results are adversely impacted by “a non cash ($275,861) revaluation loss of the Company’s outstanding warrants and a non-cash ($199,117) foreign exchange loss due to Sterling depreciation in the wake of the UK’s referendum on EU membership and decision to leave the EU.”
At 30th September 2016, Mkango Resources reports a cash balance of US$491,000.
At the flagship Songwe Hill project, the company is working to optimise the November 2015 pre-feasibility study “with a view to maximising efficiency and reducing costs, thereby providing a strong platform both for entering into partnerships, marketing and off-take arrangements.”
To recap the highlights of the study, the pre-feasibility study envisages open pit mining of the Songwe Hill deposit over a period of 18 years producing 2840 tpa of rare earth oxide (REO) in concentrate at a cash operating cost of US$16.4/kg of REO over the life of mine. On this basis, the company expects an initial capital expenditure of US$216m to generate a post tax NPV of 345m at a 10% discount rate and an IRR after tax of 37%.
Among the developments which could help with the project optimisation is an agreement with McGill University in Canada to “acquire on commercially standard terms, the worldwide licence to produce high strength (up to 30%) hydrochloric acid (“HCl”) from calcium chloride feed streams”. This technology, if it can be deployed at Songwe Hill cound significantly reduce the cost of one of the key reagents required and substantially reduce the requirement to transport significant volumes of liquid chemicals to the site..
In August 2016, the company also announced that an airborne geophysical survey sponsored by the World Bank had highlighted a number of additional targets within the wider Phalombe licence area which contains Songwe Hill. These radiometric anomalies, which represent anomalous concentrations of thorium, “are known as a highly effective tool for rare earths exploration”
Conclusion: Mkango Resources is working to optimise its pre-feasibility work at Songwe Hill and has a number of additional exploration targets for later follow up work. We look forward to further news of the results of the project optimisation as work proceeds.
*SP Angel acts as Nomad and Broker to Mkango Resources
Sierra Rutile (LON:SRX) 29.0p, Mkt Cap £172.8m – Takeover offer hangs in the balance as due diligence is dammed
Iluka’s notice to the market today states that that “Iluka has given SRL notice under the Merger Implementation Agreement dated 31 July 2016 (MIA) of the non-fulfilment of the material adverse change condition precedent due to geotechnical risks of SRL’s tailings dams.
Iluka will consult with SRL regarding this matter within five business days. They might then terminate the MIA.
Tailings dams have always been a big issue and even more so since the Samarco disaster in Brazil. Sierra Leone is not a seismically active area and we are not aware of previous problems with Sierra Rutile’s tailings dams. There is no chemical treatment in the production of concentrate production so the tailings should just be fines from the company’s dredging operations with the heavy mineral sands removed.
It’s a curious situation as mineral sands dredging normally put the tailings back into the pond which they came from. The problem may be due to the dams holding back historic dredging ponds and the potential danger of a mud rush if heavy rainfall causes a dam to fail and tailings to liquefy. This is pure conjecture on our part as we don’t recall seeing any tailings other than former dredging ponds on previous site visits.
Conclusion: If Iluka wish to walk away then the tailings dams give an opportunity to do so. If not then we feel sure that some remedial work may suffice.
Mineral sands are an interesting space at present. Prices are seen rising with the fall off in titano-magnetite production and processing in China where cutbacks in steel production and lower iron ore prices are expected to have hit the titano-magnetite processors hardest.
With mineral sands prices rising Iluka may opt to activate other plans for expansion either in Australia or through alternative acquisitions abroad. FinnAust, for example, appears to have some of the highest grade mineral sands in the world in a prospect in Greenland and may be a future target for Illuka. We also suspect the Savannah/Rio Tinto prospects in Mozambique are also relatively easy to acquire albeit at lower grades.