Condor Gold (LON:CNR) – Drilling results from exploration at the Cacao project
Hummingbird Resources (LON:HUM) – Yanfolila development ramping up with project delivery on target
Chinese new year starts tomorrow
Many Chinese nationals have started early in an attempt to beat the rush out to the country.
DHL – we spotted a DHL electric delivery van running round London today and want to say well done DHL
A quick Google of DHL’s electric vehicles reveals that DHL has around 1,000 EV vans in service and is looking to manufacture and sell its own EVs.
DHL’s Streetscooter vans are designed to last 16 years, to work 6 days a week, 10 hours a day, so that should be good enough for most people.
The first electric delivery vehicles were produced by the Brush Electrical Engineering Company between 1901 and 1905. Shows how long it can take for a really good idea to catch on.
121 / SP Angel Mining Investment conference Cape Town, 6th-7th February 2017
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 +0.16% at 20,101
Nikkei 225 +0.34% at 19,467
HK Hang Seng -0.06% at 23,361
Shanghai Composite +0.31% at 3,159
FTSE 350 Mining +0.76% at 16,777
AIM Basic Resources -0.45% at 2,540
Economic News
US – Following strong Jan manufacturing data released earlier this week, a gauge of services sector hit the strongest level in over a year.
Growth has been led by “stronger domestic demand and improving business confidence”.
New orders climbed at an accelerated pace marking the strongest gain since late-2015.
Business outlook over the next 12 months improved to the highest since May/15.
On inflation, respondents to the Markit survey highlighted increased fuel costs and wages led prices higher, although “the rate of inflation was only moderate”.
“The two PMI surveys collectively point to the economy growing at an annualised rate of just over 2.5% in Jan, and puts the US on a strong footing to achieve faster growth in 2017,” Markit said.
Strong start to the year supports the case for further monetary tightening with market forecasts for three rate hikes in 2017.
Mexico – expect auto sales into the US from Mexico to rise ahead of Trump trade barriers
We are feeling a bit sorry for the Mexican’s following certain comments, though we suspect Mexico will find ways to get their own back.
Mexican auto sales into the US rose strongly toward the year end with production increasing by 7.4% in November and sales into the US rising by 11%
The US accounts for around 75% of all Mexican car exports and a proposed 20% tariff might raise some $11bn for the US treasury assuming the average cost is around $20,000 per vehicle.
Auto duty could in theory pay for Trump’s wall in 1.3 years assuming the number of vehicles exported to the US remains at high levels
Currencies
US$1.0675/eur vs 1.0714/eur yesterday. Yen 115.12/$ vs 114.36/$. SAr 13.474/$ vs 13.294/$. $1.254/gbp vs $1.261/gbp.
0.753/aud vs 0.754/aud. CNY 6.884/$ vs 6.880/$.
Good stock falls on LME
Copper stocks fell 5,200t to 263,775t
Aluminum fell 4,150t to 227,8225t
Nickel fell 288t to 381,714t
Zinc fell 2,725t to 400,925t
Lead fell 1,600t to 192,775t
Tin stocks rose 295 to 5,450t
Commodity News
Precious metals:
Gold US$1,184/oz vs US$1,192/oz yesterday – Swiss gold exports to China rise >400% in run up to the Lunar New Year with lower gold prices serving to support new demand. The rise in demand into China through the end of December and early January is dramatic.
The Chinese and Indian gold markets are quite sensitive to gold prices as traders and consumers look to buy on any weakness and hold off as prices rise.
The Indian market for gold and diamonds is currently depressed by liquidity issues caused by the government withdrawal of larger rupee notes and their determination to force Indian’s to pay tax. Retrospective tax demands are likely to cause gold sales when payments are agreed.
Gold ETFs 56.8moz vs US$56.9moz yesterday – gold ETFs continue to fall as Trump drives equities and the US dollar higher
Platinum US$970/oz vs US$979/oz yesterday – Sibanye states it is looking at laying off 330 workers at its platinum mines in South Africa. The job losses will be at Kroondal and at Rustenburg Platinum
Palladium US$716/oz vs US$737/oz yesterday – Palladium prices pull back
Silver US$16.72/oz vs US$16.85/oz yesterday
Base metals:
Copper US$ 5,844/t vs US$5,949/t yesterday – Freeport’s Grasberg copper exports stranded in Indonesia due to concentrate export ban.
Freeport has warned it will start to cut production to around 40% capacity if it fails to get an export permit
In Chile, workers at Escondida copper mine in Chile rejected a latest wage offer this week and are preparing to vote to strike
Get ready for another round of strikes as miners look to control inflation as energy and reagent costs rise
A new round of strikes may have the unintended consequence of lifting copper prices to the benefit of all other copper producers
Aluminium US$ 1,824/t vs US$1,846/t yesterday
Nickel US$ 9,385/t vs US$9,805/t yesterday
Zinc US$ 2,737/t vs US$2,841/t yesterday
Lead US$ 2,276/t vs US$2,385/t yesterday
Tin US$ 19,850/t vs US$20,355/t yesterday
Energy:
Oil US$56.1/bbl vs US$55.3/bbl yesterday – OPEC continues with production cuts to reduce global inventories
Fires at possibly >13 refineries have cut product production which may serve to raise gasoline prices while reducing crude demand.
Natural Gas US$3.245/mmbtu vs US$3.403/mmbtu yesterday
Uranium US$23.25/lb vs US$23.25/lb yesterday – new extraction process could enable more efficient uranium extraction
Research at Oregon state university shows that surfactants can aid the extract uranium from an aqueous solution into kerosene
The research may lead to new processes for the extraction of uranium from ore as well as refined material
Potash – Potash Corp, ceo, reckons expected strengthening demand this year and a fall in global inventories should help prices higher. He says prices have already modestly recovered from 2016
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$82.4/t vs US$82.0/t – Category 2 Clyclone to hit West Australian coast
Harbours are being cleared at Port Harcourt and Dampier to avert damage to ships in port
While this is not particularly unusual the clearing of the harbours may disrupt loading for a day or two
Chinese steel rebar 25mm US$498.8/t vs US$499.2/t
Thermal coal (1st year forward cif ARA) US$65.0/t vs US$65.8/t yesterday
Premium hard coking coal Aus fob US$170.2/t vs US$170.2/t
Shipping
BHP – BHP launches new Freight Uber – online freight platform to cut shipping costs
BHP might be about to score a bit of an own goal with its new online freight platform
While we suspect that the platform might help to reduce the cost of managing its ship chartering we also wonder if use of the platform might cause some shippers to scrap some older vessels faster than they might have otherwise.
Almost every ship yard in the world is now struggling for survival with only a few in China likely to continue as they are.
Taking more ships out of the system should inevitably lead to higher freight rates in the longer term and given the precarious state of the shipping industry then the longer term may not be so long away.
BHP says the portal has so far cut rates to below $0.30/t below the spot price which is currently at $5.19/t according to the spot freight index rate.
BHP estimates it has spent $764m to ship 275mt of iron ore from Western Australia to its customers, mainly in China in the last financial year to end June 30.
Like Uber, BHP will automatically match vessels with cargos according to its algorythm, unlike Uber ride sharing might not be a preferred option.
Other:
Tungsten - APT European prices $191-200/mtu vs $187-198/mtu
Company News
Condor Gold (LON:CNR) 57.5p, Mkt Cap £30.4 m – Drilling results from exploration at the Cacao project
Condor Gold has announced results from 4 scout drilling holes (719.6m) recently completed at the Cacao prospect within its La India project area in Nicaragua.
The results include intersections of 7.85m at an average grade of 3.75g/t gold from a depth of 157.4m in hole CCDC023, 7.85m averaging 4.2g/t from 199.75m in CCDC024, 17.1m averaging 1.74g/t from 92.7m in CCDC025 and 2.6m averaging 1.19g/t from 142.3m in CCDC026.
The drilling was intended to test deeper mineralisation within the Cacao zone which was first drilled by Condor Gold in 2007/2008 and where there is already an NI-43-101 compliant inferred resource of 590,000 tonnes at an average grade of 3g/t gold (58,000 oz of contained gold).
The recent drilling has shown that mineralisation remains open at depth and laterally along strike both to the east and west. A longitudinal section available on the company’s website shows the recent drilling as a continuation of existing mineralised structures identified in the earlier phase of drilling which included an intersection of 14.05m at an average grade of 6.05g/t gold from a depth of 87m in hole CCRD002.
The recent holes, 25 and 26 lie between the intersections in hole 002 and another intersection from the earlier programme which encountered 5.55m at an average grade of 6.1g/t gold from a depth of 123.35m in hole CCRCD006.
The company has previously described the Cacao prospect as lying in a down-faulted block of ground associated with a linking structural feature between the main La India trend and the 4km long Andrea vein system which “has never been drill tested” and lies towards the north-east of the La India system.
One of the potentially most significant findings of the recent scout drilling at Cacao is that the mineralisation at “Cacao is at the top of an epithermal gold system, preserved because the regional Highway Fault drops down the entire system towards the southeast. The Cacao vein is open down dip and along strike with signs of being substantially bigger and is prioritised for further drilling to expand the mineral resource.”
The scout drilling has also included the completion of four holes at the Real de la Cruz prospect and a further 3 holes at the Tatescame prospect where assay results have yet to be released. The rig is now scheduled to start work on the as yet undrilled Andrea vein.
Conclusion: Condor Gold has already established a sizeable discovery of 1.3m oz of gold on the main La India vein set and is now working on other prospects within the district. The results from Cacao provide considerable encouragement that the majority of that specific epithermal system may be largely intact while the scout drilling on the other prospects may provide further evidence of wider scale gold mineralisation.
Hummingbird Resources (LON:HUM) 22p, Mkt Cap £77m – Yanfolila development ramping up with project delivery on target
The Hummingbird Resources team hosted a site visit at the Yanfolila project that was acquired from Gold Fields in 2014 and is currently in the development stage for the first gold pour targeted for the end of this year.
On the geological setting and exploration potential, the project is found in the Yanfolila Greenstone Belt stretching North/South along the eastern margin on the Siguiri Basin and bound to the east by the Sanakarani Shear Zone.
Mineralised zones are controlled by numerous sub vertical NS and NE faults with host rocks ranging from sedimentary siltstones and sandstones to igneous basalt, dolerite and porphyry.
Mineralisation is found in steeply dipping quartz-feldspar-pyrite veins with true widths ranging between deposits with an average of below 10m.
The Company benefits from more than $100m worth of exploration data completed by previous owners of the Project (mostly, Gold Fields) with the current mining plan including only two deposits (Komana East and Komana West) of six contained in the JORC compliant resource.
Applying historic resource conversion rates (50-55%) to available resource there is a potential to expand the reserve base by c.225koz; while, taking into account of historic Gold Fields estimates for ounces included in the old DFS (non-JORC) a potential of additional 507koz may be added to the mine life.
Additionally, existing deposits are expected to benefit from step out drilling along the strike as well as down dip with a potential for underground mining at certain targets.
Regarding mining operations, African Mining Services, a signed mining contractor, has a long history of operating in the West African province including works performed at Anglo-Gold Ashanti, Resolute Mining and Endeavour Mining projects.
AMS has access to the required fleet including excavators, trucks (18 100t CATs at peak of operations) and dual purpose drill rigs (for drill/blasting as well as grade control).
Fleet to start arriving onsite in Mar/Apr ahead of the start of mining operations in Aug.
Preparations for dewatering of pits to lower the level of the ground water table in progress.
As with all steeply dipping veins orebodies waste stripping ratio comes in high at 12-13 times.
Grade control will be crucial to minimise mining dilution (planned at 10-11% at the moment) and keep operating costs in check; although, the orebody seems well-structured and allows for an easy visual control of the ore/waste.
Processing plant completion remains on target for 28 Nov/17 with first gold pour scheduled for 19 Dec/17.
Ramp up to full capacity budgeted through Mar/18.
Crushers are in transit with the ball mill expecting shipment from South Africa (app. 8 weeks delivery time).
The variability in the ore type (weathered/transitionary/primary) is addressed with a single/two stage crushing.
The weathering profile varies across deposits from 60-90m at KW, 40-50m at KE to shallow 15-20m at Gonka, although all seem to be well defined with a relatively thin layer of transitional material (5-10m).
Potentially, as mining progresses deeper in the sulphide zone, a third crusher to be added (c. year 3 of operations) to account for a harder rock feed to the ball mill.
Accurate ores blending from the ROM pad will be critical to running the plant at a budgeted throughput and meet planned recoveries.
Also ROM pad to allow for a smooth feed to the mill with mining operations running at below/above the plant capacity during the wet (May-Oct)/dry season.
The site to run on a set of diesel generators (7MW total capacity) with a significant cost benefit drawn from fuel tax free agreement with authorities under the current permit.
Artisanal miners are established in the area which provide local communities with an income compensating for poor farming yields during the dry season (Feb-Apr).
The Company is planning to follow the “peaceful coexistence” approach allowing artisanal mining in areas not required for immediate development works.
Komana East and Komana West deposits, the two starting pits, will see miners moved this quarter with the remainder of sites remaining open for orpaillage (Company estimates c.2-3koz per annum depletion rate from those activities).
A share of affected miners are planned to be engaged in the construction/operations stage as well as in socio-economic projects launched by the Company (e.g. development of market gardens) compensating people for a lost source of income.
The project is likely to employ significantly more than the 80% minimum local labour requirement (currently running at 95%) maintaining good relations with local communities and making sure those participate in economic benefits of the project.
Conclusion: The project seems well set up to go into an active development stage with mining contractors arriving in the next few weeks and material processing equipment on its way to the site.
The management has done well to assemble a team with an extensive experience of taking the project through development and commissioning stage with development works progressing on time and schedule. The project benefits from an extensive historic drilling completed on the site which should help the mine plan and processing run rates to come in line with budgeted levels.
While the project clearly offers an upside to the current mine plan, the team is focused on delivering the project on time and on budget with any excessive funds to be carefully directed to further de-risking of the available resources.
Preparatory works are addressing issues that may influence the timing of the commissioning and ramp up of the mine including dewatering of pits, planning mining sequence adjusting accounting for the rainy season, engaging with local communities (including numerous artisanal miners) as well the timely delivery and installation of processing equipment.
The Company is currently trading on $118/oz on the EV/PP Reserves and $665/oz on the EV/Production multiples compared to same size producers averages of $182/oz and $1,625/oz, respectively, reflecting development and commissioning risks of the Company. We would expect the gap to close as the Company continues to deliver on its plans with commissioning and ramp up going as planned.