Asiamet Resources (LON:ARS) – Raising £2m to complete BKM feasibility study
Aureus Mining (LON:AUE) – Completion of US$76m fund-raising and name change.
Berkeley Energia (LON:BKY) – Land acquisitions to accelerate development of the Salamanca uranium project
Golden Star Resources (GSR CN) – Wassa underground – drilling results
Hummingbird Resources (LON:HUM) – US$55m debt facility for Yanfolila development
Ortac Resources* (LON:OTC) – Andiamo Exploration update highlights new joint venture value
Peak Resources (LON:PEK) – Peak selects site in Tees Valley, UK for Rare Earth Refinery
Miners are trading lower on weaker base metal prices
Iron ore futures (Jan delivery) just hit a new high for the year following rising steel prices
Gold prices are flat this morning trading around $1,170/oz after briefly touching $1,157/oz, the lowest level since the start of Feb, with a continuing declines in ETF holdings.
Oil prices gains paused following a four-day long rally that saw Brent surging 14% on the OPEC proposal to curb global production.
Dow Jones Industrials +0.24% at 19,216
Nikkei 225 +0.47% at 18,361
HK Hang Seng +0.75% at 22,675
Shanghai Composite -0.16% at 3,200
FTSE 350 Mining -1.68% at 14,676 FTSE 350 +100% since 1st January
AIM Basic Resources +0.46% at 2,381 AIM Basic Resources +46% since 1st January
Economic News
Germany – Strong factory orders in Oct are driven by domestic demand and come after a Sep decline.
Home orders climbed 6.3%mom while foreign demand accelerated to 3.9%mom.
In the overseas orders category, demand was driven by demand from outside (+6.3%mom) the Eurozone which recorded no change in Oct.
Numbers indicate good start to the quarter with economic growth expected to rebound from a one year low posted in Q3/16.
Factory Orders (%mom): 4.9 v -0.3 (revised from -0.6) in Sep and 0.6 forecast.
Factory Orders (%yoy): 6.3 v 2.9 (revised from 2.6) in Sep and 1.6 forecast.
Australia – Weak net exports numbers released this morning showed trade is on track to deduct 0.2pp off economic growth in Q3.
GDP data is out on Wednesday with economists forecasting a 0.1%qoq contraction in Q3 marking the first negative reading since 2011.
The RBA kept rates at record low of 1.5% highlighting weak growth and fragile employment outlook.
“There continues to be considerable variation in employment outcomes across the country. Part-time employment has been growing strongly, but employment growth overall has slowed,” the RBA Governor Philip Lowe said.
“The outlook for business investment remains subdued.”
South Africa – Q2 GDP came in weak in Q3 with mining sector growth led by solid iron ore production while sectors like agriculture, manufacturing and electricity generation posting declines.
GDP (%mom, annualised): 0.2%qoq in Q3 v 3.5%qoq in Q2 and 0.6%qoq forecast.
GPD (%yoy): 0.7%yoy v 0.7% in Q2 and 0.7% forecast.
Greece – 10 year bond yields are little changed following the EU finance ministers meeting regarding the latest review of the Greek bailout programme.
EU creditors agreed on a series of short-term debt relief measures.
On a down side, the IMF has not committed its participation in the latest programme with an expected date for the fund to join other creditors moved into new year.
As it stands, the projected 3.5% primary budget surplus targeted for 2018 would require further reforms from the government including changes to tax and pension system, the IMF said.
The fund suggest European creditors lower the target to 1.5% and provide more debt relief, otherwise, Eurozone officials would need to convince Athens of pension and tax reforms.
Currencies
US$1.0764/eur vs 1.0636/eur yesterday. Yen 114.14/$ vs 114.38/$. SAr 13.647/$ vs 13.863/$. $1.275/gbp vs $1.272/gbp.
0.744/aud vs 0.742/aud. CNY 6.880/$ vs 6.887/$
Commodity News
Precious metals:
Gold US$1,171/oz vs US$1,165/oz yesterday
Gold ETFs 59.6moz vs 59.8moz yesterday
Platinum US$943/oz vs US$927/oz yesterday
Palladium US$752/oz vs US$729/oz yesterday
Silver US$16.81/oz vs US$16.57/oz yesterday
Base metals:
Copper US$ 5,862/t vs US$5,851/t yesterday
Aluminium US$ 1,712/t vs US$1,719/t yesterday – Bearish comments by the China Nonferrous Metals Industry Association are dragging the metal lower.
“Manufacturers are slowing purchases as Lunar New Year nears and bullish investors are taking profits,” the Association said.
A run in aluminium prices was called “irrational” and is expected to result in a restart of mothballed capacities dragging prices lower.
New Chinese legislation barring truck overloading is said to have created logistics bottlenecks and contributed to a shortage of the metal.
Aluminium climbed 14% YTD and is off 1% since the start of Dec.
Nickel US$ 11,610/t vs US$11,625/t yesterday
Zinc US$ 2,748/t vs US$2,718/t yesterday
Lead US$ 2,304/t vs US$2,293/t yesterday
Tin US$ 21,130/t vs US$21,045/t yesterday
Energy:
Oil US$54.9/bbl vs US$55.0/bbl yesterday
Natural Gas US$3.671/mmbtu vs US$3.522/mmbtu yesterday
Uranium US$18.00/lb vs US$18.00/lb yesterday –
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$74.8/t vs US$73.0/t
Chinese steel rebar 25mm US$489.4/t vs US$483.1/t
Thermal coal (1st year forward cif ARA) US$62.0/t vs US$65.3/t yesterday
Premium hard coking coal Aus fob US$300.0/t vs US$305.0/t – unch
Other:
Tungsten - APT European prices $183-195/mtu vs $188-198/mtu last week and $198-203/mtu a week earlier – we know not why ???
Company News
Asiamet Resources (LON:ARS) 2.5 pence, Mkt Cap £15.4m – Raising £2m to complete BKM feasibility study
Asiamet reports that it has raised approximately £2m via a bought deal for approximately 87m shares at £0.023p/share.
The proceeds will allow the company to complete its feasibility study “in 2017” on the Beruang Kanan Main (BKM) copper deposit in Kalimantan where infill resource drilling and metallurgical test work is currently underway.
Results to date have been promising with shallow zones of relatively high grade contiguous mineralisation identified and recent test-work indicating that the material will be relatively simple to process with low levels of crushing required.
Conclusion: We look forward to further news of the continuing exploration and evaluation at BKM and to the feasibility study next year
Aureus Mining (LON:AUE) 1.5 pence, Mkt Cap £18.4m – Completion of US$76m fund-raising and name change.
Aureus Mining reports that it has completed fundraising of US$76m by the issue of 10.72m new shares.
The company’s Chief Executive, Serhan Umurhan, has subscribed for 5.3m shares.
The company has also announced that it is, today, assuming responsibility for the owner-operation of the New Liberty mine as previously announced.
Aureus Mining has also announced that it is changing its name to Avesoro Resources with effect from 7th December.
Conclusion: The name change, injection of funds and move to owner operation signify a new chapter for the company and we wish them success as Avesoro Resources.
Berkeley Energia (LON:BKY) 45.0 pence, Mkt Cap £106m – Land acquisitions to accelerate development of the Salamanca uranium project
Berkeley Energia has announced that it has new secured lease and purchase agreements over more than 500 hectares of land which “will allow for the completion of the initial infrastructure currently underway and the commencement of construction of the processing plant in the first quarter of 2017”.
The land acquisitions will also facilitate the construction of a medium voltage substation and reagent storage facilities at the site.
Plans are also progressing on the process equipment and the company expect that purchase orders for the crushing equipment will be complete “before the calendar year end.”
Conclusion: The news that construction of the processing plant is due to start during Q1 2017 is the latest in a series of positive announcements from the company which also announced in late November that it had secured a binding agreement for product offtake at double the level originally indicated. We look forward to continuing news as the project development accelerates.
Golden Star Resources (GSR CN) C$1.1, Mkt Cap C$355m – Wassa underground – drilling results
Golden Star reports results from the first nine holes of its 6800m drilling programme designed to investigate the high grade B Shoot at its Wassa underground mine.
The results, which come from an area expected to be mined during the third quarter of 2017, include a number of high grade intersections.
Hole BS16DD009 intersected 31.7m of mineralisation at an average grade of 23.8g/t gold from a depth of 296.8m while hole BS16DD002 encountered 8m of mineralisation averaging 13.9g/t from 57m and 18.7m at 4.25g/t from 322.6m in BS16DD004.
The company points out that “the deposit remains open down plunge so we believe there is also significant exploration upside potential.”
The drilling is part of a programme of work expected to lead to an updated mineral reserve and resource estimate during Q1 2017. Currently the proven and probable Wassa underground reserve is estimated at 20.4mt at an average grade of 2.25 g/t gold for approximately 1.5m oz of contained gold.
The high grade intersections reported today, depending on their position within the B” Shoot” may, in our opinion, lead to an increase in the overall reserve estimate and/or to an upgrading of the reserve classification where currently only around 2.5% of the reserve is classified as “proven”.
Conclusion: We look forward to the new reserve and resource estimate early next year and, in the meantime, to continuing news of the drilling programme at Wassa.
Hummingbird Resources (LON:HUM) 19.8 pence, Mkt Cap £67.8m – US$55m debt facility for Yanfolila development
Hummingbird Resources reports that it has agreed a US$55m debt facility (the Senior Secured Term Facility) for its Yanfolila mine development with Taurus Funds Management. The facility includes a US$10m cost overrun facility.
The main US$45m facility, which has a four-year term, will pay interest at 7.75% from project completion and 9% from drawdown until that point while the cost overrun facility attracts interest at 11% on the drawn funds.
Repayment of the facility is scheduled to occur in a series of five semi-annual tranches between 30th September 2018 and 30th September 2020. There is also a 0.75% Gross Revenue Royalty on production, capped at a maximum 2 million ounces of gold.
Taurus has also agreed to extend the existing bridge loan facility until 8th April 2017 and increase the bridge loan from US$15m to US$25m. The Bridge loan is “expected to be refinanced by the Senior Secured Term Facility”.
The company points out that the new debt facility, in conjunction with the equity raising of US$71m earlier this year, leaves the Yanfolila project fully funded. Hummingbird also confirms that the project is “On budget and schedule for the first gold pour from Yanfolila by the end of 2017, targeting production of 132,000oz in the first year.”
Conclusion: The completion of the financing leaves the Yanfolila project team a clear run to deliver the project. We look forward to news as the development work progresses.
Ortac Resources* (LON:OTC) 0.03p, mkt cap £2.3m – Andiamo Exploration update highlights new joint venture value
(Ortac holds a 26.99% equity interest in Andiamo) Ortac also holds 100% of Šturec, 21.25% in CASA and an option for 19.35% in Zamsort.
Ortac have updated the market on Andiamo Exploration following the release of an update to Andiamo shareholders.
The government of Eritrea have granted an extension of 91sqkm to the Haykota license covering various VMS targets. The ground has been released following the collapse of Libya-Eritrea joint venture which ceased trading following political change in Libya.
EEA jv: The new 50:50 joint venture between Andiamo and Environminerals East Africa ‘EEA’ will give EEA a 25% stake in Andiamo subject to certain conditions at an implied valuation of around US$0.17 per Andiamo share, potentially valuing Ortac’s interest at some US$1.8m representing a 70% uplift on Ortac’s investment to date. EEA has spent around US$2.3m on the ground so far giving some basis for the valuation.
If the transaction completes, EEA will have the right to nominate a director to the Andiamo board and EEA’s principal shareholder may also invest further in Andiamo.
Ortac’s principal asset is the Šturec gold mine in Slovakia where the company is petitioning for a license to work the deposit through open pit mining. A trial mining program produced 400t in 2014 and an SRK pre-feasibility study calculated gold production of 71,000ozpa.
A JORC pre-2012 ore report shows a very respectable ‘reserve’ of 873,000oz gold equivalent grading 1.90g/t.
Cash cost of around $555/oz indicate this to be a valuable project
IRR of around 30% at a $1,343/oz gold price.
Capex = $124m inc +15% contingency.
NPV post-tax = $145m and $195m pre-tax at a $1,343/oz gold price and at an 8% discount rate
Ortac Resources reports that it is maintaining its stake in Casa Mining at 21.25%. Recent investment in CASA implies a value to Ortac of US$1.1m its stake.
Ortac also holds a option to a 19.35% stake in Zamsort, which holds copper and cobalt licenses and resources and should be imminently commissioning a small copper and cobalt leach plant and mining operation in Zambia.
Conclusion: Ortac’s portfolio of assets continues to grow in value and look positioned to offer Ortac further expansion opportunity. While the value proposition at Šturec outweighs the value held in Andiamo, CASA and Zamsort it is good to see the value of Ortac’s joint venture partners offering potential for further uplift.
*SP Angel acts as Nomad and broker to Ortac Resources
Peak Resources (PEK AU) A$0.07, Mkt Cap A$32m – Peak selects site in Tees Valley, UK for Rare Earth Refinery
Peak Resources which holds one of the world’s highest grade rare earth deposits in Tanzania has selected a site for its proposed Rare Earth Refinery (solvent extraction plant) in the Tees Valley in the UK.
The plant is expected to cost US$124m including a 25% contingency and Opex of US$49.5m
Peak is taking a 24m option to purchase a 16.3ha site near the estuary on Teeside with all necessary key infrastructure already in place
Production is forecast at:
2,300* tpa Nd/Pr 3N,
250* tpa SEG + HRE
2,740* tpa La
1500 tpa Ce*
*REO equivalent
Cerium depletion flowsheet
Low cost chemicals
Siting in the Tees Valley allows enhanced capital allowance of up to €125m on qualifying plant and machinery.
Hydrochloric acid supply is reported to be 40% on Teeside than seen on the gulf coast of the US over the past five years
The UK also offers good access to logistics, infrastructure, markets and the expertise required for the separation and refining of high quality rare earth products.
Peak’s process flowsheet is specifically orientated towards the production of neodymium and praseodymium which account for around 85% of the value of rare earths used in the permanent magnets.
The choosing of the Tees Valley serves to demonstrate the attractive nature of the UK despite the hard-line attitude of the EU towards the recent Brexit vote. The recent pull back in the value of sterling only serves to boost the attractiveness of locating in the UK, though access to highly skilled labour as well as solvents and reagents is as much a factor as anything else.
Private Equity fund Appian and the IFC, the multilateral development organisation are investors supporting Peak Resources.
Conclusion: We would expect Peak’s Rare Earth Refinery to potentially become a larger processing centre for Rare Earth Minerals.
The location in the UK should serve to reduce the risk of China using rare earth mineral supply to exert political influence on overseas manufacturers.
We recently visited the region to view the construction of Nautilus’ Minerals sub-sea mining equipment at Machine Dynamicss Limited facility in Newcastle upon Tyne.