Today's edition features:
• Alecto Minerals (LON:ALO)
• Ariana Resources (LON:AAU)
• Savannah Resources (LON:SAV)
Markets
Europe
The FTSE-100 finished yesterday's session 0.04% lower at 7,041.42, whilst the FTSE AIM All-Share index closed 0.24% worse-off at 824.56. In continental Europe, the CAC-40 finished 0.33% lower at 4,833.82 whilst the DAX was 0.03% higher at 11,468.64.
Wall Street
In New York overnight, the Dow Jones fell 0.16% to 19,941.96, the S&P-500 lost 0.25% to 2,265.18 and the Nasdaq dropped 0.23% to finish on 5,471.43.
Asia
In Asian markets this morning, the Nikkei 225 had fallen 0.26% to 19,394.90, while the Hang Seng eased 0.73% to 21,650.57.
Oil
In early trade today, WTI crude was down 0.204% to $52.47/bbl and Brent was flat at $54.56/bbl.
Headlines
Broadband boost for remotest parts of UK
The government has said £440m has been found so about 600,000 more premises can gain access to superfast broadband. The cash comes from "efficiency savings" and money returned by BT as part of the government's flagship broadband rollout scheme. Culture Secretary Karen Bradley said the funds would help to bring faster speeds to homes and businesses in some of the most remote parts of the UK. Experts said it was not all "new money" but would still be welcomed. The cash will be made up of £150m in cost savings and the rest in the form of returned subsidies from BT, the government said. Under a 2010 deal, the government paid BT to roll out superfast broadband in hard-to-reach areas where providers had said it was not cost-effective to install broadband infrastructure. As part of the agreement, if more than 20% of premises in those areas bought superfast broadband, BT had to repay some of the subsidy. On average, the take-up has been 30.6%, leading to a forecast repayment of £292m, the Department for Culture, Media and Sport said.
Source: BBC News
Company news
Alecto Minerals (LON:ALO, 0.06p) – Under Review
Alecto has announced a transformational Zambian copper mine acquisition. At this stage it is proposed and conditional on various things, including detailed technical due diligence and a modest amount of initial funding. As a reverse takeover, the shares are now suspended and expected to resume trading end March, on completion. The Mowana open pit mine had pre-production capex of $60m spent on it, and after Alecto’s upgrades it should produce 22kt of copper (in concentrate) per annum. The grade is c.1.34% copper and Alecto estimates an 11 year mine life with extension potential. The main elements of the acquisition are £1m cash and £5.72m in shares. There is also a $20m requirement to re-vamp the plant and a further $20m repayment of a legacy loan to the project. Alecto will end up with 60% of the mine and a 1.5% royalty, the lender will own 40% and $21m of outstanding debt. Importantly the $40m (mine re-vamp and loan repayment) are funded through pre-payments from two copper offtakers, meaning Alecto only requires £1m plus some working capital for the mine re-start (the working capital quantum is not disclosed).
Our view: This is an exciting event and although there a numerous moving parts and a slightly complex transaction, the end result should be Alecto owning 60% of this mine. Alecto’s internal studies show an NPV10 of $245m. So if it all works out, there will be very significant upside for existing Alecto shareholders despite the dilution. We put our recommendation under review pending more information about the funding (i.e. the working capital element/equity requirement), but first impressions are this is very good news for shareholders. Note the shares are suspended and not tradeable until end-March.
Beaufort Securities acts as corporate broker to Alecto Minerals PLC
Ariana Resources (LON:AAU, 1.66p) – Speculative Buy
Ariana Resources, the gold-silver exploration and development company operating in Turkey, announced yesterday that it has acquired 100% ownership of the Salindas gold project in north-east Turkey. Salindas (and the adjacent Ardala deposit) had been part of a 49:51 joint venture agreement between Ariana and European Goldfields prior to their acquisition by Eldorado Gold. Salindas has a combined JORC-complaint (Indicated and Inferred) resource of c 10Mt with an average grade of 2g/t Au and 10.2g/t Ag whereas Ardala has an inferred resource of 16Mt grading 0.6g/t Au with some minor copper (up to 0.2%) and molybdenum (up to 0.01%). A 2015 scoping study was completed on Salindas that demonstrated a potential production of 50,000oz Au and 100,000oz of Ag per annum over 10 years. Based on a gold price of US$1,250/oz and 8% discount rate, a pre-tax NPV of US$108m with an IRR of 28% was calculated. Under the terms of the agreement, Arianna will acquire the remaining 51% of Greater Pontides Exploration (a subsidiary of Eldorado Gold) for nominal cash consideration and a NSR royalty of up to 2%. Of note, Salindas is located in a region with significant exploration upside given its close proximity (only 16km) from the 4Moz Hot Maden gold project.
Our view: The above announcement coincides with Ariana’s 50% owned Kiziltepe gold project due for imminent production. As such, Ariana can now focus on further enhancements to its pipeline with the goal to ultimately increase its production capacity. Management is considering a work programme for Salindas in 2017 to identify potential resource extensions. We look forward to the first gold pour at Kiziltepe as well as further updates on Salindas as Ariana focuses on unlocking the value of c 1Moz in-situ gold ounces within a highly prospective area containing significant new gold discoveries. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Ariana Resources plc
Keras Resources (LON:KRS, 0.45p) – Speculative Buy
Keras Resources announced yesterday assay results from its first two holes of its Reverse Circulation (RC) drill programme on its 100% owned Klondyke gold project located in the Pilbara Region of Western Australia. Drill hole KKC001 returned 18m grading 6.3g/t Au from 33m, including 6m grading 9.3g/t Au from 34m and drill hole KKC002 returned 9m grading 6.9g/t Au from 49m, including 6m grading 9.5g/t Au from 49m. These holes were drilled at the satellite Copenhagen deposit and assay results for a further six holes drilled on the main Klondyke are pending. The holes were planned to confirm known mineralisation ahead of resource definition drilling to begin in early 2017 and add to the existing JORC-compliant mineral resource estimate of 5.6Mt grading 2.08g/t Au. The current resource is confined to less than 30% of the known strike length of the main shear zone. Rock chip samples from the recently completed mapping programme returned 56g/t Au peak value at Copenhagen. The Company also announced that its Tribute mining agreement with KalNorth over the Lindsay’s deposit in the Western Australian Goldfields has been mutually terminated. Under terms of the termination agreement Keras has been refunded all third-party costs totally A$120,000.
Our view: Although the initial results confirm historic intercepts, we are very encouraged with the wide, high-grade intercepts that occur near surface from the first two drill holes at Copenhagen. We look forward to the pending assay results from the further six holes drilled at the main Klondyke trend and are encouraged with the potential for additional resources. It’s not surprising that the Company has decided to cease its tribute operations given the current pressure on gold prices. That said, management can now focus all of its attention on advancing the Klondyke gold project. We look forward to further updates on Klondyke drilling and mapping programmes given that the current resource is confined to only 30% of the main strike length. In the meantime, we maintain our speculative buy on the stock.
Beaufort Securities acts as corporate broker to Keras Resources plc
Savannah Resources (LON:SAV, 5.70p) – Speculative Buy
Savannah Resources, the diversified mining group focused on exploration and development, announced today results from its rock chip sampling programme over its two new lithium projects in Finland (see RNS 2 Jun 2016). The Somero and Erajarvi projects cover an area of 60.5km2 and 98.5km2, respectively within a highly prospective lithium terrain. The sampling programme returned anomalous lithium mineralisation leading to the discovery of seven lithium-bearing pegmatites across both projects. A total of 524 samples (244 from Somero and 288 from Erajavi) were collected and submitted for analysis with key lithium-bearing minerals including spodumene, lepidolite and petalite identified in hand samples. Through its newly established Finnish subsidiary Finkallio Oy, Savannah holds a 100% interest in both projects.
Our view: Savannah’s reconnaissance rock chip sampling programme has now identified seven lithium-bearing pegmatites with assay results returning up to 4.47% Li2O. While still an early exploration play we are encouraged with the potential for lithium mineralisation in the area. Given that the global lithium demand is expected to double by 2025 on the back of the burgeoning battery market, Savannah is looking to capitalise on the lithium market and diversify its portfolio. We look forward to further updates regarding the exploration programme in Finland as well as continued developments on the copper-gold deposits in Oman and the heavy mineral sands in Mozambique. In the meantime, we maintain a Speculative Buy rating on the stock.
Beaufort Securities acts as corporate broker to Savannah Resources Plc