IRC Ltd (1029 HK) – Restructuring of ICBC loan facility repayments
Solgold* (LON:SOLG) – Hole 21 extends known mineralisation by a further 200m potentially doubling the scale of Alpala
Stratex International (LON:STI) – Stratex fighting to get paid by joint venture partner in Turkey
European stocks climb led by energy names following strong US growth momentum where both Dow and S&P 500 indices closed at new record highs on Friday.
• Brent is trading close to the strongest in 19 months on reports that the UAE is pressing for OPEC members to comply with agreed output levels, according to the nation’s OPEC governor.
• On a different note, US drilling rigs count climbed by five to 602 last week while US oil production climbed above 9mmbbl, the highest level since Apr, the government data showed last week.
• Gold is little changed today holding near a three month high ahead of the Trump’s Congress address.
• Iron ore and steel futures post new gains with rebar prices on the Shanghai Futures Exchange at the highest level since Dec/13 while iron ore on the Dalian Commodity Exchange close to its May/14 peak.
• The National Development & Reform Commission is reported to be looking into manipulations in the commodity futures markets as higher commodity prices contribute to accelerating nation’s inflation levels.
Dow Jones Industrials +0.05% at 20,822
Nikkei 225 -0.91% at 19,107
HK Hang Seng -0.17% at 23,925
Shanghai Composite -0.76% at 3,229
FTSE 350 Mining -0.32% at 16,183
AIM Basic Resources -0.23% at 2,705
Economic News
Eurozone sentiment edges higher in February despite weaker consumer, retail and construction
• The sentiment survey rose to 108.0 points from 108.9 in January.
US – Donald Trump will face a joint sessions of Congress tomorrow with markets to watch closely the President’s comments on the timing of previously announced major reforms.
France – French 10y sovereign bond yields fell to a one month low of 0.89% as the latest poll showed the centrist candidate Emmanuel Macron narrowed the gap with Marine Le Pen.
• Macron support was boosted after the nation’s centrist candidate Francois Bayrou supported the Macron candidacy.
• Francois Fillon, a former right wing PM, remains in the race trending third behind Le Pen and Macron.
• Over the weekend, Fillon secured a temporary reprieve in an investigation over public funds’ misuse.
Spain – Inflation picks up in Feb as measured by the EU Harmonised CPI with the annual rate climbing to 3.0%, the highest since Dec/12.
• CPI (EU Harmonised; %mom/yoy): -0.3/3.0 v -1.0/2.9 in Jan and -0.3/3.1 forecast.
London Stock Exchange merger with Deutsche Bourse looks like it’s off
• Sounds like the European Commission will not approve the €29bn deal
• It is also interesting to note that the boss of the German Stock Exchange is being investigated over buying stock in his own company two months before merger talks began.
Currencies
US$1.0577/eur vs 1.0597/eur last week. Yen 112.26/$ vs 112.72/$. SAr 12.975/$ vs 12.924/$. $1.240/gbp vs $1.255/gbp.
0.769/aud vs 0.772/aud. CNY 6.872/$ vs 6.872/$.
Commodity News
Precious metals:
Gold US$1,255/oz vs US$1,254/oz last week
Gold ETFs 58.8moz vs US$58.8moz last week
Platinum US$1,028/oz vs US$1,015/oz last week
Palladium US$773/oz vs US$777/oz last week
Silver US$18.39/oz vs US$18.28/oz last week
Base metals:
Copper US$ 5,930/t vs US$5,898/t last week
• Red Kit David Lilley forecasts the market to post the first deficit in six years in 2017 on the back of stronger demand and increased supply disruptions.
• Co-founder of RK Capital Management, one of the largest metals investment firms, forecasts a deficit of 327kt in 2017, 266kt in 2018, 270kt in 2019 and 600kt in 2020, compared with c.100kt surplus last year.
• Lilley forecast Chinese demand to climb 3.5% this year and 3.0% in 2018 versus 7.9% recorded in 2016, according to Bloomberg.
• “Personally, I think these numbers are conservative and China has the chance to grow faster,” Lilley said.
Aluminium US$ 1,893/t vs US$1,878/t last week
Nickel US$ 10,960/t vs US$10,725/t last week
Zinc US$ 2,821/t vs US$2,815/t last week - Lianyungang to Send Back $154,300 Worth of Zinc Concentrate on Excessive Cadmium Content (SMM News)
Lead US$ 2,258/t vs US$2,243/t last week
Tin US$ 19,510/t vs US$19,200/t last week
Energy:
Oil US$56.7/bbl vs US$56.3/bbl last week
Natural Gas US$2.695/mmbtu vs US$2.615/mmbtu last week
Uranium US$22.75/lb vs US$24.00/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$87.1/t vs US$86.7/t
Chinese steel rebar 25mm US$574.7/t vs US$558.6/t
Thermal coal (1st year forward cif ARA) US$68.8/t vs US$68.8/t last week
Premium hard coking coal Aus fob US$158.7/t vs US$157.7/t
Tungsten – APT European prices $195-205/mtu
Company News
IRC Ltd (1029 HK) HKD0.42, HKD 2,979m – Restructuring of ICBC loan facility repayments
• IRC Ltd, an iron ore developed commissioning the flagship K&S project in the Russian Far East, announced changes to the schedule of the ICBC project finance facility.
• Two semi-annual payments due this year for $21.25m each have been postponed and spread over five subsequent payments due in 2018-2020.
• Five subsequent payments have gone up by $8.5m to $29.75m until the balance of postponed $42.5m is cleared.
• The restructure “will be effective upon fulfilment of the conditions precedent and will continue to be effective until 20 Jun/20, subject to the ongoing satisfaction of certain conditions”.
• The agreement lifts liquidity pressures off the Company which is reported to have reached 50% capacity at the K&S 3.2mtpa project with full production scheduled for H1/17.
• K&S produced 100kt of iron ore concentrate in Jan/17 with commissioning reported to have been delayed by “a technical incident with the ball mill lubrication system”.
• The team adjusted the commissioning process running three out of four ball mills while waiting for spare parts to the plant.
• Debt repayments restructuring is also a positive news for Petropavlovsk, a 31.1% shareholder in the Company and the guarantor of the ICBC facility.
Solgold* (LON:SOLG) 39.8p, Mkt Cap £569m – Hole 21 extends known mineralisation by a further 200m potentially doubling the scale of Alpala
(SolGold holds an 85% interest in ENSA which which holds 100% of Cascabel)
• SolGold report further results from their massive copper, gold porphyry system at Cascabel in Ecuador.
• Ongoing drilling shows that the Alpala mineralised system which is open in most directions continues to grow in scale.
• Hole 21 at Hematite Hill shows visual copper mineralisation from 685m down hole including intense chalcopyrite and significant bornite mineralisation from 844m to the current downhole depth of 1,187m.
• The results appear to extend the copper mineralisation a further 200m to the southeast of the next nearest hole (Hole 16) which graded 0.80% copper and 1.04g/t gold.
• Drilling is targeting up to 2,300m depth the longest encountered vertical extent of copper mineralisation at Alpala.
• Hole 22 at Alpala is reported to intersect visible copper sulphide mineralisation from 253-1,128m with more to come as the drill extends. The hole extends the deposit above Hole 19 and shows very strong bornite (copper) mineralisation at 960m depth.
• The good news here is that the visible copper sulphide mineralisation is seen considerably closer to surface than in previous holes and 130m above the previous Hole 19 intersection (802m grading 0.63 % copper, and 0.43g/t gold).
• The team reckon the presence of many multi-directional and sub-horizontal veins should increase the width and therefore the tonnage of Alpala discovery.
• New rigs coming to site to increase drill rate: A third rig arrives at site this week with a fourth within 4 weeks. These rigs are man-portable but are capable of good depth drilling as seen so far. Access to the Cascabel deposit is much easier than it was with a new road into the area built by the government. Two more track mounted rigs to be mobilised to site over the coming eight weeks.
• Alpala is just one small part of the Cascabel license area where 14 targets have been defined through geophysics and sampling.
• The team have drilled > 29,600m to date, a remarkable feat given they have been using man-portable rigs. The arrival of four more rigs in the next eight weeks will more than double the rate of drilling with seven rigs planned to work this year.
• Detailed Orion-Spartan 3D IP, and Lidar topographic control surveys are giving better data on the other 13 targets.
• SolGold expects to drill test Aguinaga, and Tandayama-America prospects next as well as the exciting Moran and Trivinio targets on the northern edge of the Alpala system.
• Ecuador is holding a runoff vote on 2 April to decide their next leader. Former Banker Guillermo Lasso is tipped to beat the left wing candidate Lenin Moreno. Lasso is likely to be better for business and more supportive for mining than Moreno who has been supported by the outgoing president.
• References to other large copper porphyry orebodies such as the Hugo Dummet deposit at Oyu Tolgoi in Mongolia are useful for geologists and investors who wish to look at these other deposits and how they developed into new mines. This is common practice among exploration geogolists.
• The age of the mineralisation is also in interest as ‘Eocene Age’ mineralisation is seen in many of the Tier 1 deposits along the Andean Copper Belt.
• SolGold continue to report separate copper and gold grades but combine these into copper equivalent figures for simple economic reference against other similarity comparisons. This is again common practice within the mining industry though more detailed analysis of intersections and grades is used for more rigorous economic assessment.
Conclusion: SolGold continue to extend the scale of mineralisation at Alpala with a potential doubling of the resource. Hole 21 extends mineralisation 200m to the southeast and Hole 22 which cuts across the top of Hole 19 shows there is ‘visible’ mineralisation closer to surface at Alpala than previously seen.
These two drill holes are important for assessing the economics of a ‘block-cave’ mine at Alpala which is largely why Newcrest invested $23m in the company and BHP also made an offer of finance at the time.
Stratex International (LON:STI) 1.6p, Mkt cap £7.5m – Stratex fighting to get paid by joint venture partner in Turkey
• Stratex today reports that it is having to ‘undertake appropriate steps to enforce Stratex’s rights’ in relation to its joint venture agreement in Turkey.
• The silence has been deafening for some time on the cash distribution from Bahar, Stratex’s local joint venture partner, though we cannot say we are surprised.
• There are other details in the update, though nothing else seems of much relevance when compared with the revelation that they are not getting paid in Turkey and the company’s worsening cash position.
• We suspect Ariana Resources may also struggle to get paid by its local joint venture partner, though Kerim Senner’s Turkish local family connections may help and we are pleased to hear that Senner has at long last moved back to Turkey following some years running the company from Australia.
• The company had US$3.6m (£2.7m) as of June last year with no funds raised since. Given Stratex’s Admin which runs at around £2mpa, investments in joint ventures and their own exploration programs the company is likely to be stretching its finances if it is does not receive funds from Bahar in Turkey.
Conclusion: We are not overly surprised that Stratex are having trouble with getting paid by their joint venture partner. It will be interesting to see if a Turkish court will see fit to enforce the payments due under the joint venture agreement. European Nickel were thwarted by locals over the withholding of a forestry license in Turkey. It will be interesting to see if the local courts will apply the rule of law or favour local interests as we suspect they well might.