Ariana Resources (LON:AAU) – Update on Salinbas targets
BlueRock Diamonds* (LON:BRD) – Plant upgrade and plans for new contractor to restart mining on track
Central Asia Metals (LON:CAML) – DFS on Copper Bay tailings project
Edenville Energy (LON:EDL) - Second stage ESIA completed
Golden Star Resources (TSX:GSC) – Raising C$30m
Hochschild Mining (LON:HOC) – Record production in 2016 and increased guidance for 2017
European equities are relatively mute today ahead of the ECB meeting due tomorrow.
The pound is off (-0.6%) after climbing nearly 3% yesterday despite May confirming expectations for the government readiness to exit the single market as part of Brexit.
The US$ index is up slightly this morning following a 1.3% decline on Tuesday and hitting the lowest level in a month.
Iron ore futures are lower following weaker Chinese steel futures prices.
Brent is weaker as the IEA highlighted that US shale production response to higher prices will be “significant”. At $56-57/bbl, “a lot of shale plays in the US would make perfect sense to produce”, the IEA head said at Davos.
Lithium – Chile invites bids to add value to the nation’s lithium resources
The Chile state organisation CORFO, ‘Corporation for the Promotion of Production’ is to hold a tender in April to encourage companies to better utilise Chile’s lithium resources.
The nation is looking for companies to add value through further processing towards battery quality material and potentially even to manufacture batteries within Chile.
Chinese battery maker Vision Group and Kanhoo which produces rare earth metals is reported to have put forward a proposal for a lithium hydroxide plant and a lithium battery plant in Chile.
We suspect many other lithium miners will be put off by the cost of meeting these sort of commitment and that if Chile presses for terms which are too tough then this may serve to hold back the industry.
Alternatively it may be that Chinese, state sponsored, lithium companies are the only companies which are financially able to meet the new commitments effectively barring new entrants into the Chilean lithium scene.
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 -0.30% at 19,827
Nikkei 225 +0.43% at 18,894
HK Hang Seng +1.13% at 23,098
Shanghai Composite +0.14% at 3,113
FTSE 350 Mining +0.15% at 16,384
AIM Basic Resources -0.52% at 2,534
Economic News
US – The dollar climbed as San Francisco Fed President John Williams said the labour market hit the central bank’s goals with continuing tightening to be appropriate.
China – Property prices cycle is starting to reverse with the growth pace in 70 major cities slowing for the first time in 2016.
The average selling price climbed 12.4%yoy in Dec, down 0.2pp from the Nov reading.
On a month-on-month basis, prices increased in 46 of 70 cities and fell in 20, with nine additional cities posted a decline versus the previous month.
Germany – Inflation was confirmed at 1.7%yoy in Dec marking the strongest reading in three years.
UK – Unemployment held at a more than decade low of 4.8% in three months to Nov.
Jobless rate kept unchanged as a decline in unemployment claims was compensated by the number of people leaving the workforce.
Low unemployment rate led an acceleration in earnings rate which beat market estimates.
Theresa May unveiled the Brexit plan in her speech yesterday saying Britain to leave the single market but highlighting the importance of negotiating a new trade agreement beneficial for both parties.
The government hopes to maintain partial membership of the EU customs union.
The Parliament will vote on the final version of the Brexit deal once it has been agreed.
The pound rallied nearly three percent yesterday with many attributing the move to a reduction in uncertainty over the Brexit plan, as well as stronger inflation data released previously suggesting the BoE might be looking at raising rates soon.
Employment Change (3m v previous 3m): -9k v -6k in 3m through Oct/16 and -35k forecast.
Unemployment Rate (%): 4.8 v 4.8 in 3m through Oct/16 and 4.8 forecast.
Av Weekly Earnings (3m %yoy): 2.8 v 2.6 (revised from 2.5) in 3m through Oct/16 and 2.6 forecast.
Italy – The European Commission is demanding the Italian government step up austerity measures bring the budget deficit below current estimates for a 2.3% shortfall (of GDP).
The Commission agreed Italy to post a 1.8% deficit this year; although, updated estimated point to an expanded shortfall.
The government argued worse data account for the proposed local lenders’ bailout, earthquake damages and the refugee crisis related costs.
Currencies
US$1.0696/eur vs 1.0660/eur yesterday. Yen 113.16/$ vs 113.13/$. SAr 13.538/$ vs 13.479/$. $1.234/gbp vs $1.213/gbp.
0.756/aud vs 0.753/aud. CNY 6.834/$ vs 6.865/$.
Commodity News
Precious metals:
Gold US$1,214/oz vs US$1,214/oz yesterday
Gold ETFs 57.0moz vs US$57.0moz yesterday
Platinum US$975/oz vs US$991/oz yesterday
Palladium US$746/oz vs US$751/oz yesterday
Silver US$17.15/oz vs US$16.99/oz yesterday
Base metals:
Copper US$ 5,782/t vs US$5,770/t yesterday - Pan Pacific sets first Tc/Rc of the new year at $92.5/t and 9.25c/lb indicating an ongoing shortage of copper concentrates.
Aluminium US$ 1,802/t vs US$1,785/t yesterday
Nickel US$ 10,195/t vs US$10,140/t yesterday
Zinc US$ 2,755/t vs US$2,693/t yesterday
Lead US$ 2,310/t vs US$2,243/t yesterday
Tin US$ 21,140/t vs US$21,015/t yesterday
Energy:
Oil US$55.7/bbl vs US$55.8/bbl yesterday
Natural Gas US$3.384/mmbtu vs US$3.480/mmbtu yesterday
Uranium US$22.90/lb vs US$23.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$79.1/t vs US$79.8/t – Iron ore prices weakening ahead of Chinese new year
Chinese steel rebar 25mm US$502.7/t vs US$500.1/t
Thermal coal (1st year forward cif ARA) US$69.0/t vs US$66.5/t yesterday
Premium hard coking coal Aus fob US$180.0/t vs US$180.0/t
Other:
Tungsten - APT European prices $191-200/mtu vs $187-198/mtu
Company News
Ariana Resources (LON:AAU) 1.7p, Mkt Cap £14.5m – Update on Salinbas targets
Ariana Resources reports that a review of the recently acquired Salinbas project in north-east Turkey has identified thirty-seven target areas for potential follow up exploration during 2017.
The targets include areas with previous drilling requiring additional exploration as well as “Numerous significant rock-chip and soil geochemical anomalies … which have not been drill tested [and] also require follow-up”
The licences, which were acquired from Eldorado Gold and already contain “an approximately 10Mt Indicated and Inferred JORC resource, with an average grade of 2.0 g/t Au and 10.2 g/t Ag (for 650,000 oz gold and 3.2Moz of silver)” are located north of Mariana Resources’ Hot Maden project and include the Salinbas gold/silver deposit, the Ardala copper/gold/molybdenum porphyry and the Hizarliyayla gold/silver system “among several other prospects.”
Conclusion: The company recently raised additional funds and is starting to assign exploration priorities to the Salinbas project. We await news of the exploration as it proceeds later in the year.
BlueRock Diamonds* (LON:BRD) 5.75p, Mkt Cap £3.2m – Plant upgrade and plans for new contractor to restart mining on track
BlueRock Diamonds report progress is in-line with their budget and expectations in preparation for a restart early next month.
Overhaul of the process plant is now complete and should increase capacity, efficiency and hopefully recoverability. Testing of the plant started in December and is now largely complete.
The new primary crusher is expected to reduce costs and a pre-screening circuit is expected to help expand capacity and improve efficiency.
The new contractor is on site and preparing for their first blast next week. They should provide consistent run of mine material
Heavy rainfall in recent weeks is welcome in the region as it breaks the drought and provides ample water for the process plant though it may restrict safe access to some areas of the open pit.
Conclusion: BlueRock should be up and running with the next few weeks with the refurbished plant hopefully showing better throughput diamond recovery rates.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Central Asia Metals (LON:CAML) 238 pence, Mkt Cap £266m – DFS on Copper Bay tailings project
Central Asia Metals reports that the definitive feasibility study (DFS) on its 75% owned Copper Bay tailings project in Chile shows a seven year life delivering an average annual copper production of 8,640 tonnes at a cash cost of $1.37/lb.
An initial capital investment of $88.5m is expected to deliver an after tax NPV of $34.1m at a discount rate of 8% and generate an after tax IRR of 19.1% based on a copper price of $3/lb.
The historic tailings, thought to be as much as 250m tonnes, originating from the Potrerillos and El Salvador copper mines are located on the beach at Chanaral Bay and the company has outlined a mineable resource of 34.8m tonnes at a grade of 0.24% copper within an overall measured/indicated/inferred resource of 53.4m tonnes grading 0.24% copper. Approximately 73% of the resource is classed as measured and indicated.
The DFS envisages dredging the tailings to supply an SXEW plant producing cathode copper as well as a flotation plant to recover a copper concentrate for sale to smelters.
We note the comment by Gavin Farrar, Business Development Director, who after highlighting the addition of value as a result of the DFS commented that “Given the current uncertainty with regard to the near and medium term expectations for copper, the CAML Board has recommended that the project remains in our development pipeline while we review our options.”
Conclusion: The DFS on the Copper Bay project outlines the financial and technical features of a possible development, however the Board is considering the options and has yet to give a go-ahead for project development.
Edenville Energy (LON:EDL) 0.8 pence, Mkt Cap £6.2m - Second stage ESIA completed
Edenville Energy reports that it has completed the second stage of its Environmental and Social Impact Assessment (ESIA) and the documents are currently being approved by the National Environment Management Council in Tanzania.
The final stage of the ESIA, comprising “extensive data and consultation with the local community and stakeholders, is to be completed in parallel with the Bankable Feasibility Study for the power plant.
The company is aiming to ensure that “all necessary technical, environmental and social considerations are taken into account when completing these specific areas.”
Conclusion: It appears that there has been significant progress on the environmental and permitting of Edenville’s coal to power project at Rukwa. Although the company has not detailed its expected permitting timetable at this stage, which is probably largely in the control of the Tanzanian authorities, we look forward to updates in due course.
Golden Star Resources (TSX:GSC) C$1.10, Mkt Cap C$362m – Raising C$30m
Golden Star reports that it is raising C$30m through the issue of 27.3m new shares at C$1.10/share.
The funds are to be used to progress the company’s exploration projects; to help fund capital expenditures at the Wassa and Prestea gold mines and to redeem part of the company’s 5% convertible debenture which stood at C$13.1m on 30th September 2016.
The company recently indicated that it expected to increase gold output by 31-44% in 2017 as it ramps up underground production at its Wassa gold mine and commences underground production at Prestea in the middle of 2017.
Conclusion: Golden Star is attracting investor support as it makes the transition towards higher grade underground mining at its operations in Ghana and increases gold output as a result.
Hochschild Mining (LON:HOC) 236 pence, Mkt Cap £1.2bn – Record production in 2016 and increased guidance for 2017
Hochschild Mining reports that it achieved record attributable production in 2016 with 17.3m oz of silver and 246 koz of gold representing 35.5m equivalent ounces of silver - a 31% increase on the 27.0m oz of attributable equivalent oz achieved in 2015.
The company is indicating that all in sustaining costs for 2016 are “expected to be between $11.0 and $11.5” per silver equivalent ounce.
Hochschild Mining is guiding the market to expect another record production year in 2017 with a target of 37m oz of silver equivalent, “exceeding previous guidance of 35.0 million ounces.” Cost guidance is for $12.2-12.7 per silver equivalent ounce. The company is also indicating that it expects to spend $120-130m on development and sustaining capital in 2017.
Production during the first full year of production at the Immaculada mine exceeded the company’s original forecast at 16.9m ounces of silver equivalent or around half of the group’s attributable output. The company expects Immaculada to produce around 17m oz of silver equivalent in 2017.
The company reports a strengthening of its financial position as a result of the increased production levels, with a halving of net debt to $183m during the year and increased cash of $56m leaving Hochshild Mining with a cash balance of $140m at the end of 2016.
Conclusion: The impact of Immaculada is delivering increased production, strengthening the company’s financial position and company forecasts show this continuing into 2017.