Avesoro Resources (formerly Aureus Mining) (LON:ASO) – Agreement of improved terms for finance facility
Berkeley Energia (LON:BKY) – Quarterly update
Birimian Limited (ASX:BGS) – ‘Super Ninja’ moves to take control of Birimian for ‘massive’ potential
DiamondCorp (LON:DCP) Suspended – placing amendment end date
FinnAust Mining* (LON:FAM) BUY Target Price 15p – New appointments strengthen Pituffik project development team
Neo Lithium Corp (TSX:NLC) – $20m bought deal to advance Tres Quebradas lithium project in Catamarca, Argentina
Wolf Minerals (LON:WLFE) – Quarterly Activity Report – moving forward with process plant improvements
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Economic News
Eurozone bond yields are climbing on strong inflation numbers reported by major single currency block economies.
Gold is up marginally for a third consecutive day with the US$ index little changed this morning.
Brent is flat with base metals up amid reduced volumes with Chinese out celebrating Lunar New Year.
In particular, copper is up 1.9% today as a strike at Escondida operations looms as the labour union is on course to reject the management pay offer.
US – Core inflation stabilised at 1.7%yoy in Dec last year taking a pause in a rapid acceleration recorded through the first three quarters of the year.
Japan – In line with expectations, the BoJ kept the monetary policy unchanged today.
The Bank has also upgraded its economic growth forecasts on improving outlook in overseas economies and a weaker currency.
In particular, 2017 and 2018 estimates were brought up to 1.5% and 1.1%, respectively, compared to 1.3% and 0.9% forecast in Oct.
Germany – Inflation dipped in Jan from the previous month but continued to accelerate on YoY basis.
A surge in prices was led by a 5.8%yoy increase in energy prices.
CPI (EU Harmonised, %mom): -0.8 v 1.0 in Dec and -0.7 forecast.
CPI (EU Harmonised, %yoy): 1.9 v 1.7 in Dec and 2.0 forecast.
France – Inflation rate doubles in Jan on YoY basis compared to Dec numbers.
CPI (EU Harmonised, %mom): -0.2 v 0.3 in Dec and -0.5 forecast.
CPI (EU Harmonised, %yoy): 1.6 v 1.2 in Dec and 0.8 forecast.
A separate report showed GDP growth accelerated in the final quarter of the year led by household consumption and business investments.
Two segments contributed 0.6pp to quarterly growth rate, while trade added another 0.1pp. Negative contribution came from a decline in inventories.
GDP (%qoq): 0.4 in Q4 v 0.2 in Q3 and 0.4 forecast.
2016 annual growth came in at 1.1%, down on 1.3% in 2015.
Spain – Headline inflation surged to a 3.0%yoy growth in Jan adding to concerns of accelerating price pressures in the single currency zone.
CPI (EU Harmonised, %mom): -0.9 v 0.5 in Dec and -1.6 forecast.
CPI (EU Harmonised, %yoy): 3.0 v 1.4 in Dec and 2.2 forecast.
Eurozone – General and core inflation numbers point to a continuing decoupling of growth rates driven by the effect of stronger energy prices.
CPI (%yoy): 1.8 in Jan v 1.1 in Dec and 1.5 forecast.
Core CPI (%yoy): 0.9 in Jan, unchanged from the previous month and in line with estimates.
Currencies
US$1.0697/eur vs 1.0699/eur yesterday. Yen 113.90/$ vs 114.83/$. SAr 13.591/$ vs 13.619/$. $1.245/gbp vs $1.254/gbp.
0.755/aud vs 0.754/aud. CNY 6.884/$ vs 6.884/$.
Commodity News
Precious metals:
Gold US$1,197/oz vs US$1,190/oz yesterday
Gold ETFs 56.8moz vs US$56.8moz yesterday
Platinum US$988/oz vs US$981/oz yesterday
Palladium US$751/oz vs US$731/oz yesterday
Silver US$17.18/oz vs US$17.12/oz yesterday
Base metals:
Copper US$ 5,908/t vs US$5,895/t yesterday
Aluminium US$ 1,812/t vs US$1,810/t yesterday
Nickel US$ 9,935/t vs US$9,535/t yesterday
Zinc US$ 2,827/t vs US$2,763/t yesterday
Lead US$ 2,378/t vs US$2,279/t yesterday
Tin US$ 19,850/t vs US$19,750/t yesterday
Energy:
Oil US$55.1/bbl vs US$55.3/bbl yesterday
Natural Gas US$3.179/mmbtu vs US$3.310/mmbtu yesterday
Uranium US$24.50/lb vs US$23.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$82.4/t vs US$82.4/t
Chinese steel rebar 25mm US$498.8/t vs US$498.8/t
Thermal coal (1st year forward cif ARA) US$65.9/t vs US$65.0/t yesterday
Premium hard coking coal Aus fob US$169.8/t vs US$169.8/t
Other:
Tungsten - APT European prices $194-200/mtu vs $$191-200/mtu
Company News
Avesoro Resources (formerly Aureus Mining) (LON:ASO) 1.95pence, Mkt Cap £104m – Agreement of improved terms for finance facility
Avesoro Resources has announced that its lenders, NedBank and FirstRand Bank have approved revised terms for the company’s finance facility.
“The revisions include improved conditions and rescheduled repayment terms of its existing project finance facilities with the Lenders in exchange for the provision of a personal guarantee from Mehmet Nazif Gűnal, Non-Executive Chairman of the Company, and a corporate guarantee from Avesoro Holdings Limited, the beneficial owner of 73.5% of the Company's issued equity.”
The company will make no further capital repayments until 31st March 2018 “allowing the Company to generate a prudent level of cash reserves before repayments commence” and helping to match the repayment schedule to the production profile at the New Liberty gold mine.
The Senior loan facility has been extended by 2 years until 31st January 2022 and the subordinated loans have been “extended to the earlier of 12 months following the repayment of the senior facility or 31st January 2023.”
Interest rates payable on the senior facility remain at the US$LIBOR rate plus 1.8% until 2020 following which it will increase to LIBOR plus 4.3%. The rate on the subordinated debt remains at LIBOR plus 7.5%.
Commenting on the outcome of the deliberations with the lenders, CEO, Serhan Umurhan, welcomed the resolution and pointed out that “The agreement provides stability for management to build on the material progress made since the initial investment by Avesoro Holdings in the Company during June 2016.” He also expressed “our gratitude to Mr Mehmet Nazif Gűnal, the Company's Non-Executive Chairman and to the wider Avesoro Holdings Group for their support of the Company by providing a guarantee over the obligations of this finance facility."
Conclusion: The support and loan guarantees provided by the Chairman and Avesoro Holdings may have proved pivotal in resolving the debt rescheduling and helping to match the loan repayments with the mine’s production profile.
Berkeley Energia (LON:BKY) 69p, Mkt Cap £176m – Quarterly update
The Company’s quarterly report for the three months ending 31st December 2016 highlights a number of advances achieved, including the successful conclusion of an offtake agreement for the supply of 2m pounds of uranium production from the Salamanca uranium project over a five year period to Interalloys Trading – double the original volume, and the successful raising of US$30m from the London market.
Operationally, major items of equipment have been ordered and major land acquisitions have been completed.
Commenting on the significance of the quarter in the company’s development, Managing Director Paul Atherley commented that “"We continue to work very closely with the local community and we are proud of the relationships we have created and the strong ongoing local support we have received as we prepare for construction."
Mr Atherley also pointed out that uranium prices are staring to rise “after multi-year lows” and that the company is attracting growing levels of interest “from US and Asian utilities who are looking to diversify their off-take with a low cost producer in the heart of the European Union."
Conclusion: We look forward to news of the accelerating development of the Salamanca uranium project during the coming months.
Birimian Limited (ASX:BGS) A$0.33, mkt cap A$62.5m – ‘Super Ninja’ moves to take control of Birimian for ‘massive’ potential
An alliance of 10 shareholders has put together a 6.6% stockholding in Birimian Limited to lodge a petition to remove chairman Winton Willesee.
The move follows the termination of an offer by Shandong Mingrui Group which has offered A$107.5m for the company but failed to meet a deadline to pay a A$10.7m deposit due on Friday 20th.
We are aware that Chinese companies are experiencing great difficulty in transmitting funds through official routes out of China as the authorities move to stem the flow of funds out of the country.
The rebel shareholders are reported in The West Australian, to be keen for Kevin Joyce, Birimian’s managing director to stay on.
The move may have been orchestrated by the Walcot Capital, venture capital fund run by James McKay who is nominated as a non-exec director and which is proposing a former CIO Michael Langford to also be a new non-exec director.
Michael Langford goes by the handle ‘Super Ninja’ on social media according to the paper which goes on to say that Langford believes “Birimian had “massive” potential, but needed a “clear and well articulated strategy that addresses key project risks and provides the market with confidence that BGS will achieve production”.
He said his strategy as a director would be to find a partner for Bougouni with a “group that has proven successful operations and experience in Africa and direct lithium mining and processing experience”, then partner with a world class logistics provider for infrastructure.
The third pillar of the new board’s strategy would be to find “large internationally known battery and electric vehicle companies” to provide underlying long-term off-take contracts, he said. Birimian shares closed even at 34¢ yesterday.”
Birimian’s Goulamina project has one of the world’s known highest grade lithium resources grading 1.48% Li2O for 15.5mt to contain 229,000t Li2O.
Three drill rigs are currently active on site which are due to complete the second phase of a 10,000m drill program.
Initial assay results are expected this month with next phase metallurgical test work due in February.
The company plans to update its resource estimate in Q1 with PFS and maiden reserve reporting due in Q2.
The Goulamina resource ranks as the fifth highest on our list of known hard rock lithium resources and is currently at no.15 in terms of resource size though it looks like it will become a larger project.
DiamondCorp (LON:DCP) Suspended – placing amendment end date
DiamondCorp has agreed to a drop-dead end date on its £1m placing in the London market of 28 February with an expected admission date of 14 February.
The publication of the date gives the Deloitte & Touche, the South African Administrators and the Industrial Development Corp ‘IDC’ of South Africa a clear date by which to agree a suitable creditor agreement to allow the business to move forward.
It may be that either side may see greater value in some alternative solution but we hope that the two sides will respect shareholder interests and the willingness of long-standing investors to continue to support the business.
While the raising of £1m is relatively small for the rescuing of the Lace diamond mine given recent events it should be noted that investors are likely to further support the company once a business rescue has been achieved.
Creditors should, in our view, see the commitment of £1m by investors as a first gesture in a much longer term commitment to this South African mine.
It will be a sad day if the administrators and the IDC is not able to find a suitable agreement whereby investors are able to support DiamondCorp to get the mine back into production.
We note other miners and entrepreneurs are likely to be hovering in the wings to take over the operation through we also note that it is likely to take more than just £1m to get the mine back onto a sustainable operational footing.
FinnAust Mining* (LON:FAM) 6.9p, Mkt Cap £42.4m – New appointments strengthen Pituffik project development team
BUY Target Price 15p
FinnAust has made two new appointments to strengthen its Pituffik project development team.
The company is bringing in significant expertise to advance and further develop their ilmenite (titanium) mineral sands project in Greenland.
“Hans Jensen ('Hans') has been appointed as Chief Operating Officer. Hans has more than 30 years of experience managing and operating Greenland wide logistical, transport and resupply chains, as well as international shipping. Hans has previously held senior roles in the largest Greenland transportation and logistics companies such as Royal Arctic Line AS and Leonhard Nilsen & Sønner AS where he was Vice-President in charge of Projects and Transportation. Hans is also familiar with permitting regulations required by the various Ministries of Greenland regarding these types of activities.
In addition, the Company has also engaged Eric Sondergaard ('Eric') as Manager of Geology. Eric is a graduate of the University of Calgary, has extensive experience in Greenland and has worked on similar sedimentary type projects in Canada. Eric also managed the exploration team that uncovered the super-giant Kvanefjeld Rare Earth project in Greenland.”
Conclusion: The appointments highlight FinnAust’s determination to advance the Pituffik project toward development and production of ilmenite concentrate suitable for shipping to consumers.
Initial findings of independent experts indicate that Pituffik ilmenite concentrates may have the potential for sale into pigment and possibly titanium slag production.
We understand that titanium mineral sands concentrate prices have a new upward trajectory following the withdrawal of much titano-magnetite from processing in China. We expect prices to continue to rise helped in part by strengthening demand for pigments as the global economy continues to grow.
Pigment demand is now expected to return back to the long term trend of 1990-2015 growth rates relatively quickly with 2017 expected to see growth of >5%-7%. A lack of investment in recent years within the industry is seen as creating a tightening supply / demand situation with significant supply disruption from the wholescale removal of titano-magnetite production.
Protectionism in the US may further affect certain supply chains causing US consumers to look for new sources of higher-grade ilmenite concentrate supply
*SP Angel act as nomad and broker to FinnAust and acted for FinnAust in this placing
Neo Lithium Corp (TSX:NLC) – C$1.2, mkt cap C$77m - $20m bought deal to advance Tres Quebradas lithium project in Catamarca, Argentina
Wolf Minerals (LON:WLFE) 4.1p, Mkt Cap £45m – Quarterly Activity Report – moving forward with process plant improvements
Wolf Minerals’ report that during the quarter ending 31st December 2016, it processed a total of 464,727 tonnes of ore to recover 24,390 metric tonne units (mtu) of tungsten concentrate.
The company has made progress on two important regulatory matters with the Planning Permission for the Drakelands mine extended from 2021 to 2036 and the agreement of the Devon County Council to permit the implementation of a permanent seven day per week operating regime following the temporary trials of full time working which began in 2016.
Work continues with plant improvements to enhance recovery rates as the mine works through the weathered upper levels of the orebody which has proved challenging due to the smaller than expected particle size distribution of the tungsten mineralisation. The company and its contarctor, GRES are implementing a programme of remedial work and plant improvements and “Completion of the programme in the first half of 2017 is on schedule with a number of pieces of new equipment to be installed in the processing plant in January and February 2017.”
“Production late in the Quarter was significantly affected by the poor availability of the refinery circuit in the processing plant due to difficulties with the kiln and its surrounding equipment.”
Concentrate sales generated A$5.4m in revenue resulting a net cash outflow from operations of A$24.6m after production costs of A$25m and interest and finance costs of A$5m.
The company’s principal shareholder, RCF has injected additional secured bridge finance of £20m, with “the potential for this to be increased to £30m … At the end of quarter a total of £14m of the Bridge Facility had been utilised.” The repayment schedule for the Senior Debt has been rescheduled with principal repayments deferred until January 2018.
The company comments that while demand for tungsten concentrate “was similar to the September 2016 quarter with firm interest in Japan and Europe as a result of steady output from the automotive sector and aerospace sectors. Demand from other regions remained low as a result of soft conditions in the mining, oil and fracking industries and the economic slowdown in China.”
Wolf Minerals also notes that the structure of pricing within the tungsten concentrate industry may be shifting following the announcement by a European producer that it had “entered into several one year fixed price off-take agreements with a net price to be received of US$210/mtu, equating to an effective APT price of US$269/mtu (assuming an industry average discount factor). At the time of the announcement the average spot market price APT was approximately US$200/mtu.”
Conclusion: Wolf Minerals is still working to resolve its operational issues at the Drakelands mine and we would expect evidence of the effects of its efforts to start coming though in the latter part of the year. In the meantime, with the support of its major shareholder and the regulatory authorities in Devon, the mine should be accessing more straightforward, less-weathered ore as it moves deeper into the orebody.