Avocet Mining (LON:AVM) – Tri-K deal update and
Bacanora Minerals (LON:BCN) – Sonora FS update and Offtake discussions
Berkeley Energia (LON:BKY) – Salamanca update
Kefi Minerals* (LON:KEFI) – Tulu Kapi project operational update
Metals Exploration* (LON:MTL) – $81m refinancing agreed
Metminco* (LON:MNC) – EGM results
Dow Jones Industrials +0.20% at 19,883
Nikkei 225 +0.53% at 19,495
HK Hang Seng -0.47% at 21,729
Shanghai Composite -0.49% at 3,103
FTSE 350 Mining -0.94% at 14,134 FTSE 350 +92% since 1st January
AIM Basic Resources -0.61% at 2,282 AIM Basic Resources +40% since 1st January
Economic News
US – Services sector continued to expand, though at a slower pace, in the last month of the year while jobs growth strengthened for a third consecutive month and input costs reported to have climbed the most since mid-15, the latest Markit PMI data showed.
New business orders growth came down slightly, although a one year business outlook improve.
“The surveys are consistent with GDP rising at an annualised rate of 2.0% in the fourth quarter, fuelled mainly by improving domestic demand,” Markit wrote.
“With the new year bringing a change of government and a shift emphasis towards fiscal stimulus, economic growth and the labour market look set to strengthen further in 2017.”
“We expect GDP growth to accelerate to a steady but unexciting 2.3% in 2017, accompanied by the three further quarter point rate hikes by the Fed.”
Japan – The BoJ kept its monetary policy unchanged with rates on hold at -0.1% and the pace of asset purchases flat at ¥80tn per annum.
Germany – Producer prices posted their first annual increase in more than three years reflecting a base effect of energy prices.
PPI (%mom): 0.3 in Nov v 0.7 in Oct and 0.1 forecast.
PPI (%yoy): 0.1 in Nov and -0.4 in Oct and -0.2 forecast.
Russia – Russia called the killing of its ambassador to Turkey on Monday “a provocation aimed at disrupting the normalisation” of foreign relations between two countries and the “peace process in Syria”.
Both countries condemned the assassination as an act of terrorism with a Russian delegation set to arrive in Turkey today to work on a joint investigation into Mr Karlov’s death.
Mr Karlov was shot on Monday by a former riot policeman disguised as one of his bodyguards during a photo exhibition at Ankara.
Turkey remains in a state of emergency following a failed coup in Jul that led to tens of thousands of arrests in the following months.
Currencies
US$1.0387/eur vs 1.0443/eur yesterday. Yen 118.04/$ vs 117.52/$. SAr 14.156/$ vs 14.048/$. $1.238/gbp vs $1.246/gbp.
0.724/aud vs 0.728/aud. CNY 6.950/$ vs 6.948/$.
Commodity News
Precious metals:
Gold US$1,134/oz vs US$1,138/oz yesterday
Gold ETFs 57.5moz vs 57.8moz yesterday
Platinum US$917/oz vs US$921/oz yesterday
Palladium US$674/oz vs US$686/oz yesterday
Silver US$15.88/oz vs US$16.06/oz yesterday
Base metals:
Copper US$ 5,528/t vs US$5,580/t yesterday
Aluminium US$ 1,715/t vs US$1,718/t yesterday
Nickel US$ 10,970/t vs US$11,035/t yesterday
Zinc US$ 2,610/t vs US$2,659/t yesterday
Lead US$ 2,170/t vs US$2,207/t yesterday
Tin US$ 21,070/t vs US$21,075/t yesterday
Energy:
Oil US$55.0/bbl vs US$55.5/bbl yesterday
Natural Gas US$3.365/mmbtu vs US$3.336/mmbtu yesterday
Uranium US$20.40/lb vs US$20.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$74.3/t vs US$77.0/t
Chinese steel rebar 25mm US$510.4/t vs US$517.3/t
Thermal coal (1st year forward cif ARA) US$67.8/t vs US$66.4/t yesterday
Premium hard coking coal Aus fob US$259.0/t vs US$259.0/t
Other:
Tungsten - APT European prices $187-198/mtu vs $182-200/mtu
Company News
Avocet Mining (LON:AVM ) 50p, Mkt Cap £11m – Tri-K deal update and
The Company signed a Tri-K Mining Convention with Guinean authorities and Managem representatives.
Shareholders are scheduled to vote on the deal on 22 Dec ahead of the submission of the Mining Convention to the Guinean National Assembly for ratification.
Given a shareholder approval, the Company expects the National Assembly ratification to be completed early in Jan/17.
Following successful ratification, Avocet will transfer 40% in the Tri-K project to Managem for $4m.
Managem will then launch a $10m programme to complete a FS on the Tri-K project.
The court hearing over the legality of a seizure of the 1.4koz shipment by bailiffs acting on behalf of disaffected former employees has been postponed for at least two weeks.
Bacanora Minerals (LON:BCN) 67p, Mkt Cap £74m – Sonora FS update and Offtake discussions
The management is in “advanced discussions with a significant Asian offtake partner” regarding the future production of battery grade lithium carbonate from the Sonora project.
The project is expected to launch operations in 2019 running at 17.5ktpa of battery grade Li2O3 for the first two years, before ramping up to 35ktpa.
Feasibility Study completion date has been moved forwards slightly as a result of continuing increase in reagent input costs affecting economics of the project.
Although, the Company highlighted that “rising costs are being experience in tandem with a rise in lithium carbonate pricing”.
The Study is now expected to be completed in the summer of 2017 compared to Q1/17 guided previously.
Berkeley Energia (LON:BKY) 53p, Mkt Cap £135m – Salamanca update
The Company is on target to commence construction at the Salamanca uranium project early next year.
The team completed first purchase orders for a primary jaw and secondary cone crushers from the Sandvik Group.
The equipment cost came in 20% below estimates contained in the DFS.
Kefi Minerals* (LON:KEFI) 0.38p, Mkt Cap £14.6m – Tulu Kapi project operational update
Kefi Minerals has provided an update on its activities on the Tulu Kapi project in Ethiopia and on its work in Saudi Arabia.
Kefi points out that, despite the previously declared declaration of a six month period of a state of emergency in October 2016, “Ethiopia remains a stable, high growth African country” which “has maintained 7-10% annual GDP growth for 15 years.”
The company comments, however, that the state of emergency has not impaired their activities and that “The Government has recently started lifting some of the restrictions of the State of Emergency and has publicly indicated its possible end ahead of schedule”.
The company comments that some of its project funding discussions have been stalled or impaired by concerns over the political situation in the country but the “project funding process continues in earnest by KEFI having switched focus to potential financiers unfazed by the geopolitical context, being well-established in the region themselves.”
The company expects the Tulu Kapi Gold Project development works to start in 2017.
Kefi expects to announce at least one lender “around the end of Q1-17, coinciding with the scheduled end of the Ethiopian State of Emergency”.
Commenting on the progress at Tulu Kapi, Kefi Minerals highlights the impact of its mine optimisation and contract mining plans in delivering a “Group funding requirement [of] … $150-160M, which has been approximately halved from that of the previous owner.”
• Even at an $1150/oz gold price (currently $1138/oz) the company expects the Tulu Kapi project to deliver an NPV (discounted at 8%) of $78m for a combined open pit and underground mining operation and $56m for an open-pit only development plan.
In Saudi Arabia, the company’s plans to develop a heap-leach gold mining operation at Jabal Qutman are awaiting the outcome of a restructuring of Government policy towards mining arising from the “newly created Energy, Industry and Mineral Resources Ministry”.
Meanwhile, “KEFI has upgraded its portfolio of licence applications in preparation for the anticipated deregulation of the sector to expedite its development” and is evaluating “large buried targets as a prelude to drilling” at Hawiah.
Conclusion: Despite the imposition of a State of Emergency in Ethiopia, Kefi Minerals continues to press ahead with Tulu Kapi and has successfully identified potential project lenders. At least one lender is expected to be in place by the end of Q1 2017.
*SP Angel act as Nomad and broker to Kefi Minerals
Metals Exploration* (LON:MTL) 5.0p, Mkt Cap £103.6m – $81m refinancing agreed
The Company agreed the refinancing plan with its major lenders, HSBC and BNP Paribas, regarding the outstanding $81.0m principal.
New repayment schedule is provided below:
Principal, $m Payment date
4.2 31-Mar-17
6.5 30-Jun-17
6.5 30-Sep-17
6.5 31-Dec-17
6.5 31-Mar-18
7.3 30-Jun-18
7.3 30-Sep-18
8.1 31-Dec-18
8.1 31-Mar-19
8.1 30-Jun-19
8.1 30-Sep-19
3.9 31-Dec-19
81.0 Total
Interest rate has been revised upwards to 5.75% over 6m US Libor before the Project Completion date and 4.75% over 6m US Libor thereafter.
The Project Completion is defined as the end of a 90-day test period demonstrating the project runs at full capacity and operating costs perform in line with budgeted levels which is expected to be declared post successful BIOX plant ramp up (SPA assumption H1/17).
New interest rates compare to 4.25% and 4.75% spreads charged previously on the Senior Facility ($75m) share of the total outstanding principal before and after completion of the Runruno construction, respectively. The balance represented by the Cost Overrun Facility previously cost 5.75% over 6m US Libor.
New facility includes an accelerated cash sweep repayment of 35% of the Runruno FCF.
A 1.25% or $1.0m arrangement fee is payable to lenders in four quarterly instalments.
Lenders have the right to demand hedging of 35% Runruno production during the term of the revised facility with the current Company’s hedging programme covering sales until Sep/18. No requests for additional hedging have been received from HSBC and BNP Paribas at this point.
Conclusion: A long awaited resolution of the Runruno refinancing deal has now been reached with the focus to shift from the Company’s liquidity position to the progress of the BIOX plant ramp up. Earlier the Company announced maiden gold revenues and given all permits now in place to reach full capacity, the management team is working hard to hit budget production levels as early as possible. Assuming a successful ramp up to full 1.75mtpa processing capacity in H1/17 and given the Company’s hedging programme in place for 45koz locked in at $1,287/oz, we estimate the project to cover current debt repayment schedule at $900/oz gold price. We are looking forward to the news on the BIOX ramp up progress.
Below we provide a table summarising changes to repayment schedules.
Changes to repayment schedule H1/16 H2/16 H1/17 H2/17 H1/18 H2/18 H1/19 H2/19
Former schedule $m -15.0 -15.0 -15.0 -13.0 -12.0 -11.0
Updated schedule $m -10.7 -13.0 -13.8 -15.4 -16.2 -12.0
*SP Angel act as Broker to Metals Exploration
Metminco* (LON:MNC) 0.12p, Mkt Cap £5.4m – EGM results
The EGM held today passed all resolutions put forward including the issue of 2,480.8m shares at A$0.00237 for A$5.9m in gross proceeds.
Secured funds will allow the Company to complete the Feasibility Study on the Miraflores Project located in the Cauca gold belt of Colombia.
In addition, shareholders approved a 50 to 1 consolidation of outstanding shares.
*SP Angel act as broker to Metminco. SP Angel analysts have previously visited Los Calatos in Peru and Miraflores project in Colombia.