Edenville Energy (LON:EDL) - Initial bulk test results confirm coal suitability for power generation
Horizonte Minerals (LON:HZM) – Completion of fundraising
Petropavlovsk* (LON:POG) – Amur Zoloto acquisition update
Sula Iron & Gold (LON:SULA) – Drilling to start at flagship Ferensola gold project in January
Tertiary Minerals* (LON:TYM) – Disposal of non-core gold exploration assets
Bulk commodities and base metals miners are trading higher this morning with most precious metals producers falling following weaker gold prices.
Gold prices are off 1% trading around the $1,165/oz level as all early gains were given up. Base metals are broadly up.
US$ index is flat this morning following a volatile early morning session jumping on the Italy’s referendum results only to give up its gains later.
Iron ore futures were up slightly on stronger steel prices.
Italian Prime Minister loses referendum as EU stands on brink of oblivion
The European Union has proudly announced a victory in Austria as a minority group left wing politician defeated the far right candidate.
How this was a victory for the EU we don’t know but it seems the EU PR people have woken up to the crisis of confidence in the Berger’s of Brussels.
Sadly for the EU, the Italian Prime Minister lost his referendum causing some uncertainty in the region.
Today Greece starts negotiations with Eurozone finance ministers and the IMF over its extraordinary debt burden. It’s difficult to see how Greece is ever going to repay this debt and to restore the nation to its rightful place.
If the EU is not able to forgive Greece on a significant portion of its debt and if the ECB can not a bit more forgiving on the pain inflicted on the equity holders of Italian banks then the ECB risks alienating and collapsing a substantial part of the Eurozone on a longer term basis.
An observation
Some stupid things are fun to watch. Like daring your kids to run up the stairs at a tube station while you travel the escalator alongside encouraging them along while their little legs tire as they realise how far it really is.
Another is to tell people holding tickets in a queue that they are eligible for a prize if their ticket is called out. They are always so disappointed when they discover there is no prize at the end of it.
Some geologists do something similar where they love getting analysts and investors to do a lot of running round but quite often there is no hope of anything tangible happening.
A couple of companies spring to mine such as Anglesey Mining, Conroy Gold, Chaarat Gold and Sirius Minerals where there’s an awful lot of running around going on but we suspect there may be little reward for long suffering equity investors at the end of it all.
Fortunately most of the projects we write about do have good merit and while most projects will take longer and cost more than first envisaged many should get there in the end.
Dow Jones Industrials -0.11% at 19,170
Nikkei 225 -0.82% at 18,275
HK Hang Seng -0.26% at 22,506
Shanghai Composite -1.21% at 3,205
FTSE 350 Mining +1.26% at 14,759 FTSE 350 +101% since 1st January
AIM Basic Resources +0.93% at 2,370 AIM Basic Resources +45% since 1st January
Economic News
US – Nov employment numbers showed the labour market remained strong with an unemployment rate posting a new post-recession low.
While hourly earnings growth slowed slightly in Nov a less volatile 3m average remained on an increasing trajectory posting a post-recession high.
China – Composite economic activity index remained at a three-year high in Nov as growth in services sector accelerated while manufacturing output gains slowed.
New projects and stronger new orders are reported to have contributed to solid services sector PMI numbers.
At the same time “optimism towards future growth prospects moderated to a13-motnh low at services companies”, the report said.
“While some panellists expect company expansion plans and further increases in new orders to support future activity, others commented on relatively subdued market conditions.”
Price pressures were relatively subdued in services sector, as opposed to manufacturing firms that reported stronger input costs driven inflation.
Manufacturing PMI (released on Thursday): 50.9 v 51.0 in Oct and 51.2 forecast.
Services PMI (released today): 53.1 v 52.4 in Oct.
Composite PMI: 52.9 v 52.9 in Oct.
Eurozone – Economic growth accelerated to the highest pace this year in Nov with relatively broad based gains as measured by Markit Output index.
“The improvement is enough to signal an acceleration of GDP growth to 0.4% in Q4,” the report said.
“With growth broadly stable in Germany, the PMI remains consistent with a 0.5% GDP increase in the fourth quarter, while growth in France is running to a more modest 0.2-0.3%.”
“Faster rates of expansion were especially welcome in Spain and Italy, where the surveys point to fourth quarter GDP growth of 0.7% and 0.2% respectively.”
Both employment and inflation increased last month.
“Price pressures continued to intensify… input costs rose to the greatest extent since May/15.”
Markit Eurozone Services PMI: 53.8 v 54.1 in Oct and 54.1 forecast.
Markit Eurozone Composite PMI: 53.9 v 54.1 in Oct and 54.1 forecast.
Italy – Matteo Renzi will be filing his resignation as the nation’s prime minister this afternoon following a “no” vote win in the referendum.
The proposed constitutional change was rejected by 59% of people voted with a high turnout of nearly 69%.
Sergio Mattarella, the nation’s president, will be appointing a temporary government until the next elections, due in 2018.
Euro dipped in last night on exit poll results but has recovered all its losses this morning.
Currencies
US$1.0636/eur vs 1.0665/eur yesterday. Yen 114.38/$ vs 113.97/$. SAr 13.863/$ vs 14.062/$. $1.272/gbp vs $1.262/gbp.
0.742/aud vs 0.742/aud. CNY 6.887/$ vs 6.882/$ –
Commodity News
Precious metals:
Gold US$1,165/oz vs US$1,175/oz yesterday
Gold ETFs 59.8moz vs 59.8moz yesterday
Platinum US$927/oz vs US$918/oz yesterday
Palladium US$729/oz vs US$748/oz yesterday
Silver US$16.57/oz vs US$16.55/oz yesterday
Base metals:
Copper US$ 5,851/t vs US$5,745/t yesterday
Aluminium US$ 1,719/t vs US$1,712/t yesterday
Nickel US$ 11,625/t vs US$11,160/t yesterday
Zinc US$ 2,718/t vs US$2,698/t yesterday
Lead US$ 2,293/t vs US$2,306/t yesterday
Tin US$ 21,045/t vs US$21,925/t yesterday
Energy:
Oil US$55.0/bbl vs US$53.9/bbl yesterday
Natural Gas US$3.522/mmbtu vs US$3.508/mmbtu yesterday
Uranium US$18.00/lb vs US$18.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$73.0/t vs US$70.3/t
Chinese steel rebar 25mm US$483.1/t vs US$471.6/t
Thermal coal (1st year forward cif ARA) US$65.3/t vs US$66.5/t yesterday
Premium hard coking coal Aus fob US$305.0/t vs US$308.0/t – unch
Company News
Edenville Energy (LON:EDL) 0.5 pence, Mkt Cap £3.6m - Initial bulk test results confirm coal suitability for power generation
Edenville Energy has reported the second tranche of test results from the recent bulk sampling programme at the Mkomolo and Namwele coal deposits in western Tanzania.
The results, which come from a sample taken in the MK1 seam in the southern part of the Mkomolo deposit have confirmed that the coal is suitable “to provide a sustained and reliable fuel supply to a power plant project.”
As with the earlier results from the MK2 seam, the results indicate that “only moderate washing would be needed to produce a coal suitable for use in the power generation process.”
The company indicates that “The sample from MK1 included a significant proportion of friable and weathered material, distinguishable from the main seam below.”
Testing of this friable material “demonstrated lower energy values and would probably not be used as power plant feedstock.”, though the company indicates that it believes that this poorer quality material could be mined selectively in the process of accessing the better quality coal underlying it and therefore not increasing the washing requirements for the plant.
Conclusion: The second positive set of bulk sample results supports the suitability of the coal for the proposed integrated coal-to-power project. The ability to selectively mine the poorer quality material close to the surface should help to contain the costs of washing, though we wonder how much of the overall resource within the MK1 seam may need to be discarded as a result.
Horizonte Minerals (LON:HZM) 2.5 pence, Mkt Cap £28.7m – Completion of fundraising
The company reports that it has completed the second and final tranche of a £9m fund-raising. The company has placed a further 76m shares to raise gross proceeds of approximately C$2.48m.
The funds are to be used to fund a feasibility study at the wholly owned Araguaia nickel project in Brazil.
In a separate announcement issued by JP Morgan Asset Management, it has been disclosed that they now hold an 8.98% interest (approximately 98.4m shares) in Horizonte Minerals.
Conclusion: The additional funding provides Horizonte with the means to advance its feasibility work at Araguaia while the support of a respected institutional investor should help to raise the profile of the company.
Petropavlovsk* (LON:POG) 7.3p, Mkt Cap £238m – Amur Zoloto acquisition update
Amur Zoloto shareholders indicated willingness to accept a reduction in the acquisition price and proposing to fund the 2017-18 production plan with its own cash.
“Following our several discussion, the shareholders of Amur Zoloto are prepared to financially support the AZ’s current production plan in order to avoid any recourse to the Petropavlovsk cash flow in 2017-18,” Petropavlovsk reports Amur Zoloto saying.
“Furthermore, we do propose to improve terms of the Contribution Agreement in favour of Petropavlovsk and reduce the number of shares of Petropavlovsk to be issued to AZ’s shareholders to 20%$ after completion of the transaction.”
Previous terms of the deal involved the issuance of 1,434m shares at 6.89p and 1.45USDGBP exchange rate amounting to $144m.
Adjusting for the lower number of shares, new exchange rate and using same reference price, the consideration is expected to come down to $100m (excluding $16m in net debt to be assumed by Petropavlovsk).
Discussions between parties are ongoing with further announcement expected to be released in due course.
*SP Angel analysts have visited the Pioneer, Malomir and Albyn gold mines in Russia
Sula Iron & Gold (LON:SULA) 0.2p, Mkt Cap £4.5m – Drilling to start at flagship Ferensola gold project in January
Sula have contracted Equity Drilling Ltd to start a new 2,400m drilling program on their key Ferensola gold project in Sierra Leone.
The company, now led by Roger Murphy, Iain Macpherson are building on the work done by Nick Warrell who is an honorary Paramount Chief in Sierra Leone.
The drill program is to go towards the definition of a new resource at Ferensola where eight out of 10 of the last holes drilled hit gold mineralisation. The aim is to extend the Ferensola JORC Exploration Target’ of 5-7mt grading at 4-8g/t Au for 0.8moz to 1.5moz Au and to upgrade this to a more certain JORC resource when sufficient drilling is done.
A 40 hole program done by trailblazers, Mano River many years earlier was done with drilling sub parallel to the main structural shear missing the main mineralisation of the deposit. While this drilling missed the best part of the deposit the data should still be of some value.
Interestingly the drilling contact is being partly paid for with new equity in Sula, which is not a bad way of funding a drilling program and is somewhat better than using one of those death spiral facilities being offered by various groups in the market.
Conclusion: The team are excited by the high-grade gold prospects offered at Ferensola and we look forward to seeing the results in the new year.
Tertiary Minerals* (LON:TYM) 1.2p, Mkt £3.1m – Disposal of non-core gold exploration assets
Tertiary Minerals reports that it has sold two non-core gold assets in Finland, Kaaresselka and Kiekeromaa, to Canadian listed exploration company, Aurion Resources.
The sale, which is conditional on the successful transfer of the exploration licences and the approval of the TSX-V, involves an initial consideration of £100,000, of which £15,000 will be in cash with the balance in Aurion shares, followed by a p[re-production royalty on the definition of a resource compliant with Canadian NI-43-101 standard or equivalent. The royalty is payable at the rate of US$1/oz of inferred resource, US$2/oz for indicated resources and US$3/oz for measured resources.
There is also a 2% net-smelter-returns (NSR) royalty on all future gold production from the properties. Aurion will, however, have the right to purchase 50% of the NSR for US$1m “at any time prior to commencement of commercial production on either project.
Conclusion: The disposal of non-core gold exploration projects should reduce Tertiary Minerals’ administrative overhead in maintaining the licences as the company progresses its fluorspar projects in the US and Scandinavia.
*SP Angel act as Nomad and broker to Tertiary Minerals