Anglo Asian Mining* (LON:AAZ) Hold – 22p, Q4 Operations Update
Alecto Minerals (LON:ALO) Suspended – Alecto agrees to pay 20% rate on convertible loan notes plus additional fees
Asiamet Resources (LON:ARS) – Drilling shows good high-grade copper intersections close to surface
Strategic Minerals* (LON:SML) – Sales rise by 24%
Safe haven assets gain ahead of the May speech due later today.
Gold and yen climbed for a seventh day with US Treasuries trading higher.
The pound is in a recovery mode this morning up 0.8% following the BoE comments yesterday that the MPC policy move may be in the direction of tightening as well as easing while there are limits to the BoE tolerance for the inflation accelerating past the 2% target.
The currency has been further supported by stronger than expected increase in the inflation rate.
The IMF assumes only a modest increase in the pace of US expansion led by the proposed Trump policies.
The uncertainty over the Trump policies present a “wider than usual range of upside and down risk factors”, the fund said.
US growth was increased by 0.1pp for this year and 0.4pp in 2018 to 2.3% and 2.5%, respectively.
Chinese growth was increased by 0.3pp to 6.5% in 2017 compared to the Oct forecast driven by expectations for more government stimulus.
Although IMF economists argued that “continued reliance on policy stimulus measures, with rapid expansion of credit and slow progress in addressing corporate debt, especially in hardening the budget constraints of state-owned enterprises, raises the risk of a sharper slowdown or a disruptive adjustment”.
Brent is little changed trading in the $55.5-56.0/bbl range.
Iron ore prices posted the first decline in seven days and are trading 0.6% lower today after having rallied 16% in the previous six sessions.
LME inventories show falls in copper and zinc
Copper fell 1,625t at 277,375t
Aluminium rose 45,825t at 2,296,775t – Japan saw a large increase in aluminium at major ports in December
Zinc fell 2,225t at 419,800t
Nickel rose 2,382t at 372,114t
Tin rose 50t at 3,985t
Lead rose 575t at 193,500t
121 / SP Angel Mining Investment conference Cape Town, 6th-7th February 2016
Located in the beautiful and historic gardens of the Welgemeend farm house in Cape Town, close to the Mount Nelson Hotel
Investors go for free. Please ask for conference brochure
Dow Jones Industrials 19,886 Markets were closed yesterday
Nikkei 225 -1.48% at 18,814
HK Hang Seng +0.54% at 22,841
Shanghai Composite +0.17% at 3,109
FTSE 350 Mining -1.25% at 16,521
AIM Basic Resources +1.60% at 2,548
Economic News
UK – Inflation continued to pick up through 2016 finishing the year at the highest reading in more than two years.
Dec data showed prices climbed more than forecast led by a jump in import costs amid a weaker pound.
The cost of imports is reported to have climbed 16.9%yoy in Dec, the strongest move since Jul/11.
CPI (%yoy): 1.6 v 1.2 in Nov and 1.4 forecast.
Core CPI (%yoy): 1.6 v 1.4 in Nov and 1.4 forecast.
Currencies
US$1.0660/eur vs 1.0597/eur yesterday. Yen 113.13/$ vs 114.12/$. SAr 13.479/$ vs 13.632/$. $1.213/gbp vs $1.204/gbp.
0.753/aud vs 0.746/aud. CNY 6.865/$ vs 6.898/$.
Commodity News
Precious metals:
Gold US$1,214/oz vs US$1,203/oz yesterday
Gold ETFs 57.0moz vs US$57.0moz yesterday
Platinum US$991/oz vs US$985/oz yesterday
Palladium US$751/oz vs US$749/oz yesterday
Silver US$16.99/oz vs US$16.83/oz yesterday
Base metals:
Copper US$ 5,770/t vs US$5,891/t yesterday
Aluminium US$ 1,785/t vs US$1,811/t yesterday - Aluminium – Aluminium inventories held at three major Japanese ports climbed 14.8% in Dec, according to the Marubeni data,
• Stocks climbed to 276kt accounting for c.12% of Total LME stockpiles.
Nickel US$ 10,140/t vs US$10,310/t yesterday
Zinc US$ 2,693/t vs US$2,787/t yesterday
Lead US$ 2,243/t vs US$2,287/t yesterday
Tin US$ 21,015/t vs US$21,080/t yesterday
Energy:
Oil US$55.8/bbl vs S$55.3/bbl yesterday
Natural Gas US$3.480/mmbtu vs US$3.464/mmbtu yesterday
Uranium US$23.00/lb vs US$23.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$79.8/t vs US$81.8/t
Chinese steel rebar 25mm US$500.1/t vs US$492.7/t
Thermal coal (1st year forward cif ARA) US$66.5/t vs US$66.9/t yesterday
Premium hard coking coal Aus fob US$180.0/t vs US$184.7/t
Other:
Tungsten - APT European prices $191-200/mtu vs $187-198/mtu
Company News
Anglo Asian Mining* (LON:AAZ) 23p, £25m – Q4 Operations Update
Hold – 22p
Total gold production totalled 15.5koz (Q3/16: 16.5koz; Q4/15: 17.9koz) with FY16 gold output at 65.4koz (FY15: 72.0koz).
Annual production came in below the management revised guidance of 67-69koz on the back of lower than expected processed grades at Gedabek.
Agitation Leaching (AL) operations contributed 10.2koz to quarterly production treating 193kt of ore at 2.3g/t (Q3/16: 164kt at 2.5g/t; Q4/15: 148kt at 3.5g/t).
Annual AL contribution stood at 41.7koz from 641kt at 2.8g/t (FY15: 48.2koz from 577kt at 3.4g/t)
Flotation and SART operations performed in line with estimates with 0.6kt Cu produced in Q4/16 (Q3/16: 0.5kt: Q4/15: 0.3kt). The Flotation circuit accounted for around 2/3s of production.
Annual copper output totalled 1.9kt Cu (FY15: 1.0kt) meeting the 1.7-2.1kt Cu guidance for the year.
Annual gold sales (excl 12.75% government interest under the PSA) totalled 53.4koz at an average price of $1,253/oz (FY15: 63.9koz at $1,161/oz).
Copper concentrate sales grossed (excl PSA) $12.6m implying an average price of $2,114/dmt of concentrate (FY15: $3.7m and $2,482/dmt) thanks to additional by-product revenue from retreating of AL tailings through the flotation plant.
The processing plant was connected to the state power grid in Q4/16 which should help lower operating costs compared to diesel gen sets used previously.
Mapping, trenching and drilling programmes continue at Gadir for confirmation of the orebody orientation and potential expansion as well as in areas adjacent to the Gedabek processing hub including the Ugur deposit.
Net Debt came down to $35.1m by the end of 2016 compared with $37.7m in Q3/16 and $49.0m in Q4/15 with the ATB outstanding debt reduced to $17.1m from $27.1m in 2015.
Conclusion: Production came in below our estimates for 68.8koz with the difference attributed solely to Gedabek lower processed grades.
While a decline in processed grades weighed on the H2/16 production (1.8g/t v 2.7g/t in H1/16 for the Gedabek AL ore), we expect Gedabek grades to normalise moving forwards supported by the reserve statement.
On the other note, a newly commissioned SAG mill helped to improve quarterly throughput rates to budgeted 90-100tph. Additionally, flotation plant is performing in line with estimates contributing some 4.5koz of gold from reprocessing of AL tailings.
The Company continues to repay the ATB loan; although, liquidity remains constrained with the management investing a share of the dore and concentrate proceeds into water treatment, connection to the grid, maintenance and exploration.
One of the tailwinds of note, is continuing depreciation of the manat which lost another 10% in 2016 and operating costs.
Updated earnings estimates below account for a weaker USDAZN exchange rate (1.8 v 1.5) and new more conservative gold price forecasts (2017/18/LT: $1,175/1,150/1,250; v 2017/18/LT: $1,200/1,300/1,300):
Alecto Minerals (LON:ALO) Suspended – Alecto agrees to pay 20% rate on convertible loan notes plus additional fees
Alecto Minerals has agreed to issue £1m in convertible loan notes with an interest rate of 20% plus an additional fee of £50,000.
The company plans to use the funds to restart operations at the Mowana Copper mine in Botswana.
The note holders have the right but not the obligation to convert into shares within the first ten trading days of the company’s readmission at the closing price on the day immediately after readmission and at “80% of the of the closing mid-price per Ordinary Share as quoted on AIM on the trading day immediately prior to the date of receipt by the Company of the conversion notice in question (the "Floating Price"). Following that ten trading day period the conversion price will be the Floating Price.”
Asiamet Resources (LON:ARS) 2.8 pence, Mkt Cap £20.1m – Drilling shows good high-grade copper intersections close to surface
Asiamet Resources continue to report intervals of copper near surface at its Beruang Kanan Main copper prospect in Central Kalimantan in Indonesia.
The company has drilled 67 holes for 6,750m.
The results below speak for themselves:
104.0m at 0.83% Cu (from 8.00m)
Including 4.0m at 1.93% Cu (from 8.0m)
Including 7.0m at 1.92% Cu (from 21.0m)
Including 18.0m at 1.31% Cu (from 33.0m)
Including 5.0m at 3.64% Cu (from 106.0m)
15.0m at 0.66% Cu (from 9.00m)
Including 2.0m at 2.41% Cu (from 9.0m)
74.5m at 0.64% Cu (from 29.0 m)
Including 17.0m at 1.41% Cu (from 69.0m)
Includes 2.0m at 7.23% Cu (from 73.0m)
60.0m at 0.51% Cu (from 69.0m)
9.0m at 1.35% Cu (from 5.00m)
Including 3.0m at 3.18% Cu (from 9.0m)
52.25m at 1.15% Cu (from 26.0m)
Including 4.0m at 3.04% Cu (from 30.0m)
Including 6.0m at 1.59% Cu (from 49.0m)
Including 15.25m at 1.53% Cu (from 63.0m)
105.5m at 0.65% Cu (from 0.5m)
The company raised £2m at 0.023p/share in mid December towards the completion of a feasibility study this year on the Beruang Kanan Main (BKM) project. Infill resource drilling and metallurgical test work is currently underway.
Work done to date indicate a number of shallow ore zones of contiguous mineralisation with relatively high grade. Recent test-work suggests the ore should be relatively simple to process with low levels of crushing required.
Conclusion: Asiamet Resources appear to have a very promising and undervalued copper project on its hands at Berung Kanan Main ‘BKM’. The presence of higher-grade copper mineralisation close to surface indicates potential for a relatively simple low cost and lower capex project.
Strategic Minerals* (LON:SML) 0.6 pence, Mkt Cap £7.1m – Sales rise by 24%
Strategic Minerals report a significant rise in magnetite sales from their Cobre magnetite mine in New Mexico in the US.
The company sold 25,385tons of magnetite last year for $1.55m representing a 24% increase over last year.
Higher tonnages combined with better prices for iron ore helped the Cobre mine to better performance. Persistent higher iron ore prices at $79.8/t this morning should continue to lift sales through 2017.
Production rose in Q4 to 9,431 tons vs 7,524 tons a year earlier indicating a potential significant increase in sales going forward
While the introduction of a new large customer is reported to have reduced sales prices it has cut transportation cost so that profits have risen by 70% despite the ‘bulk’ pricing discount being applied.
Management also confirm that their wholly-owned subsidiary ‘Southern Minerals Group’ has received $400,000 due under a settlement with the rail provider at the Cobre Mine.
The team will use these funds and existing funds to exercise its option to take 50% of the historic Redmoor tin mine in Cornwall.
We expect drilling at Redmoor to confirm and expand the existing mineral resource of 13.3mt grading 0.56% tin equivalent. The drill program should start H1 2017.
Strategic Minerals recently appointed Brett Grist, the former CEO of Casa Mining, as exploration manager to oversee the Redmoor project.
Brett led the team at CASA to the discovery and identification of >1.2m oz of gold at Misisi in the DRC. We hope the natives of Cornwall are as friendly as those in the DRC.
The company raised £600,000
See company presentation for further info: https://www.strategicminerals.net/investors/presentations.html
Conclusion: It’s good to see additional funds coming in from the Cobre magnegite mine in the US. The funds will help to advance the Redmoor project to delineate a new tin / tungsten resource and to work up a potential mine plan from thereon.
*SP Angel act as Nomad and joint broker to Strategic Minerals alongside Optiva Securities