Condor Gold (LON:CNR) – Land purchase and resolution of disputed NSR
FinnAust Mining* (LON:FAM) BUY Target Price 15p – Placing raises £8.5m to support program to evaluate ilmenite production
Metal Tiger (LON:MTR) – MOD Resources secures a 2 year extension to its exploration licences in Botswana
PolyMet Mining* (NYSEMKT:PLM) – Q3 results highlight expenditure of $114m on evaluation and permit application to date
Copper prices likely to break $6,000/t as official warehouse stock fall at LME and in Shanghai
LME stocks are down 3.7% or 7,800t to 213,325t
Shanghai copper stocks fall 2.5% or 3,413t. >12,000t have left Shanghai exchange warehouses this month.
Tenke Fungurume administrator appointed by court in Lubumbashi at the request of Gecamines which is petitioning to block sale of a 56% stake in the mine from Freeport to China Molybdenum for $2.65bn. Lundin Mining have also agreed to sell a 30% stake in the mine to China Molybdenum.
Las Bambas has been asked to resubmit an environmental plan by the Peru government following protests by local groups which are unhappy at a lack of consultation on revisions to the mine plan and due to higher levels of road noise and dust from the hundreds of heavy vehicles using unpaved roads close to residential homes.
The Las Bambas copper mine was bought by MMG (China) from Glencore last year and is set to produce 400,000tpa of copper. The mine represents around 20% of Peru copper production
US equity indices including the S&P500, Dow Jones Industrial Average, Nasdaq Composite and Russell 2000 hit new record highs yesterday.
This was the first time those four indices covering most of the US stock market posted new highs simultaneously since Nov/99.
Gold is little changed at $1,171/oz today with base metal prices trading slightly higher.
Oil prices recovered yesterday and is trading above the $54/bbl level this morning before talks between OPEC and other oil producers in Vienna on Saturday.
Iron ore and steel futures in China posted the first decline in days.
'Hazardous' tsunami risk after 8.0 magnitude Pacific quake
"Widespread" and "hazardous" waves are possible after a magnitude 8.0 quake hit off the Solomon Islands , authorities have warned..
Dow Jones Industrials +0.33% at 19,615
Nikkei 225 +1.23% at 18,996
HK Hang Seng -0.44% at 22,761
Shanghai Composite +0.54% at 3,233
FTSE 350 Mining +0.85% at 15,715 FTSE 350 +114% since 1st January
AIM Basic Resources -1.42% at 2,376 AIM Basic Resources +46% since 1st January
Economic News
US – Four week average of jobless claims continue to hover around a multi-decade low suggesting robust labour market growth momentum.
China – Inflation accelerates in Nov with producer prices jumping on higher mining industry costs.
Producer prices in the mining industry increased 14.8%yoy, up from a 7.9%yoy in Oct and a 2.1%yoy increase in Sep.
Consumer prices were led by higher prices for food (+4%yoy), while non-food segment prices increased 1.8%yoy.
A turnaround in the PPI trend which recovered from a nearly five year long period of deflation in Sep this year is potentially helpful to overseas markets as stronger inflation gets exported to its major trading partners like the US, EU and Japan.
CPI (%yoy): 2.3 v 2.1 in Oct and 2.2 forecast.
PPI (%yoy): 3.3 v 1.2 in Oct and 2.3 forecast.
ECB – The Governing Council ruled to extend the bond buying programme until the end of 2017 from previously planned Mar/17 deadline.
Although the pace of purchases has been reduced to €60bn per month, down from €80bn, from Apr onwards.
“There are no signs yet of a convincing upward trend in underlying inflation,” Draghi said.
With inflation currently at 0.6%yoy and ECB forecasts for prices growth to hit 1.7% in 2019, Draghi noted that forecast inflation levels remain below and were “not really” close to the 2% target.
The Bank reiterating its view that economic outlook remains subject to downside risks.
The currency fell 1.8% against the US$ following the announcement driving the US$ index back above the 100.0 level.
Germany – Weak Oct trade data released this morning showed a surprising contraction both in exports and imports.
Exports (%yoy): -4.1 with shipments to the EU -4.5 and other countries -3.4.
Imports (%yoy): -2.2 with imports from the EU -1.9 and from other countries -2.7.
France – Oct industrial production data point to a poor start to the quarter.
Industrial production (%yoy): -1.8 v -1.1 in Sep and -0.6 forecast.
The trend remains weak with growth having been slowing through the year before finally slipping in the negative territory in Jul (based on a three months moving average).
Although the latest manufacturing PMI numbers suggest an improvement in the activity in the sector led by “marginal expansions in new orders and output” (Nov Markit Manufacturing PMI report).
Currencies
US$1.0627/eur vs 1.0797/eur yesterday. Yen 114.44/$ vs 113.54/$. SAr 13.676/$ vs 13.585/$. $1.261/gbp vs $1.268/gbp.
0.748/aud vs 0.795/aud. CNY 6.903/$ vs 6.878/$
Commodity News
Precious metals:
Gold US$1,171/oz vs US$1,176/oz yesterday
Gold ETFs 59.1moz vs 59.2moz yesterday
Platinum US$938/oz vs US$949/oz yesterday – Sibanye offered to acquire Stillwater Mining, the only PGM miner in the US, for $2.2bn marking a 20% premium to the VWAP over the past 20 days.
The acquisition will be funded through a $2.7bn loans with Citigroup and HSBC, which also includes an agreement to settle a $500m outstanding convertible notes.
The Stillwater board accepted the offer and is recommending it to shareholders.
Stillwater two mines in Montana are expected to produce 535-545koz of platinum and palladium this year at $430-455/oz cash costs.
Palladium US$743/oz vs US$728/oz yesterday
Silver US$17.08/oz vs US$17.13/oz yesterday
Base metals:
Copper US$ 5,825/t vs US$5,816/t yesterday – Shanghai copper stocks fall 2.5%
Aluminium US$ 1,733/t vs US$1,725/t yesterday
Nickel US$ 11,380/t vs US$11,400/t yesterday
Zinc US$ 2,720/t vs US$2,760/t yesterday
Lead US$ 2,305/t vs US$2,325/t yesterday
Tin US$ 21,050/t vs US$21,005/t yesterday
Energy:
Oil US$54.2/bbl vs US$53.3/bbl yesterday
Natural Gas US$3.720/mmbtu vs US$3.539/mmbtu yesterday
Uranium US$18.25/lb vs US$18.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$76.4/t vs US$77.0/t
Chinese steel rebar 25mm US$500.1/t vs US$495.0/t
Thermal coal (1st year forward cif ARA) US$64.0/t vs US$59.5/t yesterday
Premium hard coking coal Aus fob US$291.7/t vs US$299.2/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
Condor Gold (LON:CNR) 57.5p, Mkt Cap £30.4m – Land purchase and resolution of disputed NSR
Condor Gold has announced that it has reached an agreement with B2Gold and Royal Gold in relation to a long-standing dispute over a 3% Net Smelter Return Royalty (NSR) relating to a part of its La India concession in Nicaragua.
The dispute dates from 2010 when B2 Gold exchanged 65sq km of licences at La India for the 22sq km Cerro Quiroz concession, held by Condor, adjacent to B2Gold’s La Libertad mine. Under the terms of that agreement, the new ownership arrangements were reflected in the creation of Condor Gold’s 100% owned La India Gold SA and Cerro Quiroz SA which is owned 80% by B2Gold and 20% by Condor Gold.
Under the Agreement, which “ is expected … [to] take three months … to complete … Condor will assume the liability of a 3% NSR within an Area of Interest(“AOI”) on La India Project in favour of IRC”.
In addition to the resolution of the NSR, B2Gold’s Nicaraguan subsidiary, “Triton Mineral SA will execute and deliver to Condor a document transferring certain land surface rights covering the area that hosts an estimated resource of 18.08Mtonnes at 4.0g/t for 2.31Moz of gold. In 1996, a predecessor company to B2Gold paid approximately US$720,000 to acquire approximately 3,508 hectares of land surface rights (known locally as possession rights) from over 120 individuals. As part of the Settlement, Condor will acquire these land surface rights from B2Gold in exchange for its 20% shareholding in Cerro Quiroz SA”.
Condor Gold’s Mark Child commented that “The purchase of land surface rights will facilitate negotiations with local land owners and allows the project to progress forming part of Condor’s strategy of de-risking the Project and achieving a clear path to production.”
Conclusion: The resolution of the long-standing disagreement over the NSR and the rationalisation of the land holdings should simplify the proposed mine development at La India where Condor Gold is planning a 1mtpa processing plant capable of producing approximately 100,000oz pa of gold.
FinnAust Mining* (LON:FAM LN) 7.0p, Mkt Cap £55.5m – Placing raises £8.5m to support program to evaluate ilmenite production
BUY Target Price 15p
FinnAust report the completion of a placing raising £8.5m for the evaluation of ilmenite mining at Pituffik in Greenland through the placing of 76,428,572 new shares at 7p and the placing of 45,000,000 existing shares also at 7p.
Gross proceeds to the company are £5.35m with a further £3.15m raised to buy FinnAust stock from Western Areas the Australian nickel producer. Western Areas’ stock holding is now 22.85% and remains a supportive shareholder.
The placing was significantly oversubscribed demonstrating an increased level of interest in the market for FinnAust and it’s ilmenite project in Greenland.
The plan is to deliver a proof-of-concept bulk sample from the Pituffik ilmenite project in 2017 and to deliver a cash flow and dividend paying business with a long-term life span.
A new JORC resource is being prepared for publication in Q1 2017 to be followed by completion of feasibility study work in June next year
Bulk sampling and sample preparation should enable the testing of concentrate samples next year which may lead to offers to offtake Pituffik material from consumers and traders.
FinnAust also has a number of drill ready zinc targets for 2017 with further targets to drill in 2018.
The team are also keen to continue to acquire further low cost, high quality assets and to maximise value from their licenses in Finland.
Profound climate change has stripped away ice and snow from Greenland through the summer allowing easier access to many metalliferous targets.
Pituffik; is a unique mineral sands deposit in the Moriusaq Bay area and Interlak Delta in Greenland.
Moriusq Bay shows very high ilmenite grades of around 50% to-date on Active beaches and at up to 90% ilmenite. Drowned beaches at Moriusaq Bay are expected to carry very high grade ilmenite.
The Interlak Delta shows +/- 15% ilmenite which is still relatively high grade for an ilmenite resource.
FinnAust acquired the Pituffik project through the issue of shares to the vendors of Bluejay Mining. The company also completed the acquisition of Bluejay Mining yesterday through the issuance of the deferred consideration of 40,755,885 new shares.
Rod McIllree and Greg Kuenzel, directors of FinnAust were among the vendors of Bluejay. Rod McIllree now holds 9.34% and Greg Kuenzel holds 3.78%
Metal Tiger (LON:MTR) 1.55 pence, Mkt Cap £10.2m – MOD Resources secures a 2 year extension to its exploration licences in Botswana
Metal Tiger plc report that their joint venture partner MOD Resources has secured a two-year extension to 10 of its exploration licences over the T3 prospect in Botswana where Metal Tiger holds a 30% interest. The licences will now run until 31st December 2018.
The licences will now be held in a Botswana company, Tshukudu Metals, which has also entered an option agreement to acquire two additional licences immediately west of Ghanzi along the prospective Mahumo Structural Corridor. “As a result, Tschukudu Metals will hold approximately 200 km length of this structural zone” and will hold ground over this belt to the Namibian border.
MOD Resources will now commence a pre-feasibility study on the T3 project where in September this year the comp[any announced a maiden indicated and inferred resource estimate of 28.36mt at an avaerege grade of 1.2% copper and 15.7g/t silver.
Earlier this month, the company reported the results of a scoping study which outlined a 10 year mining plan at a rate of 2mtpa of ore to produce an average of 22,000tpa of copper and 665kozpa of silver at a net cost of US$1.29/lb of copper production. Using a copper price of US42.53/lb, the company expects the project to require capex of US$135m and to generate a pre tax NPV of US$180m (discounted at 10%) and an IRR of 31%.
Metal Tiger also comments that its rejection, in November, of a potential offer which “fundamentally undervalued the Company” has “led to recent instability in the market and in light of this a significant restructuring of the Board and management of the Company has occurred.”
Conclusion: Securing the licence extension in Botswana and controlling the prospective belt within Botswana will give the MOD/Metal Tiger JV a powerful role in any wider exploration play in the Kalahari Copper Belt of Botswana. Meanwhile we look forward to results from the recently initiated PFS as they become available.
PolyMet Mining* (NYSEMKT:PLM) US$0.87, Mkt Cap US$275m – Q3 results highlight expenditure of $114m on evaluation and permit application to date
Polymet Q3 results show cash of $25.5m at end October vs $10.3m six months earlier.
The company cut its cash and admin expenses for the quarter to $856k from just over $1m a year earlier though other expenses rose to $1.1m from $0.5m yoy.
The company’s loss widened to $2.1m from $1.6m yoy as it works towards the receipt of a mining license for the Northmet mine and Erie plant in Minnesota.
Management reported key highlights through the quarter:
On August 2, 2016, the Company renewed its request for Water Quality Certification under Section 401 of the Clean Water Act;
On August 24, 2016, the Company submitted the air quality permit application required to construct and operate NorthMet;
On September 14, 2016, the Company and Glencore agreed to extend the maturity date of outstanding secured convertible debentures and outstanding secured non-convertible debentures to the earlier of March 31, 2018, availability of $100 million of debt or equity financing, or when it is prudent for the Company to repay the debt;
On October 18, 2016, the Company closed the initial tranche of a private placement of 25,963,167 units for gross proceeds of $19.472 million;
On October 28, 2016, the Company closed the second tranche of a private placement of 14,111,251 units for gross proceeds of $10.583 million pursuant to Glencore's right to maintain its pro rata ownership;
On November 3, 2016, the Company submitted the Permit to Mine application required to construct and operate NorthMet.; and
As of October 31, 2016, PolyMet had spent $114 million on environmental review and permitting, of which $108 million has been spent since the NorthMet Project moved from exploration to development stage.
The company is working towards
USFS issuance of its final ROD on the proposed land exchange and transfer of title to the surface rights over and around the NorthMet mineral rights to PolyMet;
Decision on 401 Water Quality Certification and U.S. Army Corps of Engineers final ROD and 404 wetlands permit under the Clean Water Act;
Decisions on key state permit issuance - Permit to Mine, air and water permits;
Completion of Definitive Cost Estimate and Project Update following permits;
Completion of project implementation plan;
Repayment, restructuring, and/or conversion of Glencore loans; and
Completion of construction finance plan including commitment of debt prior to the issuance of permits, subject to typical conditions precedent such as receipt of key permits.
Conclusion: Polymet continue to work toward the authorisation of a mining license in Minessota.
The eye watering cost of the permit application would have crippled most mining companies by now but support by Glencore through a series of convertible notes has enabled the company to continue with the permitting process for far longer than any normal company would be able to sustain.
We suspect that the capital cost of the project may have changed significantly by the time a mining permit is ever issued and the economics of mining relatively low grade polymetallic deposit will also differ markedly from those seen when the project first started. We are in the process of upgrading our numbers and will report on the parameters under which the Northmet project might work in due course.