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Today's Market View - Birimian, Diamondcorp Plc, Medusa Mining Limited, Strategic Minerals, Tethyan Resources

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Birimian Limited (BGS AU) – new mineralised zone at Goulamina, Bougouni lithium project in Mali

DiamondCorp (DCP LN) Suspended – Update on restructuring discussions with the IDC and AMCU

Medusa Mining (MML AU) – Infrastructure development causes interim sales to fall at Co-O mine in Philippines

Tethyan Resources (TETH LN) – Tethyan makes first milestone payment to secure Suva Ruda copper discovery

Strategic Minerals* (SML LN) – Cobalt mineralisation discovered at Hanns Camp in Australia

 

European equities are little changed this morning ahead of Donald Trump address to a joint session of Congress later today.

• Both Dow and S&P 500 indices closed at record highs yesterday… again. The latest winning streak of Dow Jones extended to 12 straight sessions marking the longest winning run since 1987.

• Gold is down $9/oz despite some weakness in the US$ index and a fifth consecutive daily increase in gold ETF holdings.

 

Dow Jones Industrials  +0.08% At 20,837 

Nikkei 225   +0.06% At 19,119 

HK Hang Seng   -0.77% At 23,741 

Shanghai Composite    +0.40% at 3,242 

FTSE 350 Mining   -1.51% at 16,039

AIM Basic Resources   -0.50% at 2,691 

 

Economic News

US – Trump is planning to raise US military spending by 10% translating into a $54bn in additional spending and marking the largest increase in the defence budget since wars in Iraq and Afghanistan.

• The increase will be put in front of Congress for approval in due course.

• Funding for the initiative will be sourced from other non-defence sectors where spending would be reduced accordingly.

• Administration did not provide details on which non-defence articles are facing cuts.

• On a different note, durable goods orders started the year on a weak footing when volatile transportation sector is excluded.

• Capital goods orders (ex aircraft) also fell in Jan after posting a strong run post elections amid expectations for a pro-business stance of new administration.

Date Index Period   Actual Est Previous

Monday Durable Goods Orders Jan (Prelim) %mom 1.8 1.6 -0.5 (revised from -0.8)

  Core Durable Goods Orders Jan (Prelim) %mom -0.2 0.5 0.9 (revised from 0.5)

  Capital Goods Orders (ex Air) Jan (Prelim) %mom -0.4 0.5 1.1 (revised from 0.7)

Tuesday GDP Q4 (Second) %qoq  2.1 1.9

Personal Consumption Q4 (Second) %qoq  2.6 2.5

Core PCE Q4 (Second) %qoq  1.3 1.3

20-city Property Prices Dec %mom/yoy  0.7/5.4 0.9/5.3

  CB Consumer Confidence Feb     111.0 111.8

Wednesday Personal Consumption Jan %mom  0.3 0.5

Personal Income Jan %mom  0.3 0.3

PCE Jan %mom/yoy  0.5/2.0 0.2/1.6

Core PCE Jan %mom/yoy  0.3/1.7 0.1/1.7

  Wards Total Viehicle Sales Feb     17.7m 17.5m

Thursday Weekly Jobless Claims       245k 244k

Source: Bloomberg     

 

Japan – The BoJ published a schedule of its bond purchases through Mar in order to improve the transparency and cut volatility in bond yields following a case when the market though the Bank missed one auction last month which in turn led to an increase in sovereign bond yields.

• The central bank will buy a minimum of ¥1,375bn ($12.3bn) and a maximum of ¥2,175bn ($19.4bn); although, the Bank signalled that it “may increase the frequency (of purchases) as needed”.

• The BoJ continues to target ¥80tn ($711bn) of bond purchases per annum rate.

 

France – Consumer inflation continued at a nearly double rate seen at the end of 2016 fuelled by increased production costs.

CPI (EU Harmonised; %mom/yoy): 0.1/1.4 in Feb v -0.3/1.6 in Jan and 0.4/1.7 forecast.

• PPI (%mom/yoy): 0.7/3.8 in Jan v 0.9/1.7 in Dec.

 

UK – Consumer confidence drops lower on the back of “concern about… personal financial situation for 2017” in Feb, according to GfK.

• Outlook for personal finances over the next 12 months has also declined by four points to +3 in Feb, against +8 for the same period last year.

• “Consumer spending continues to drive economic growth in the UK so any further fall in confidence could support forecasts for a lowdown of the overall economy this year,” GfK said.

• GfK Consumer Confidence: -6 in Feb v -5 in Jan and -6 forecast.

 

UK – housing market

• Further to our comment on the London housing market last week.

• We understand that a number of buy-to-let landlords who have leveraged portfolios are selling property ahead of new rules which will prevent them from claiming relief on the interest they pay on related mortgages.

• Curiously this is helping to drive up rents in some areas of London as landlords retake possession of their properties ahead of the letting process.

 

Currencies

US$1.0588/eur vs 1.0577/eur yesterday.   Yen 112.44/$ vs 112.26/$.   SAr 13.014/$ vs 12.975/$.   $1.243/gbp vs $1.240/gbp.

0.768/aud vs 0.769/aud.   CNY 6.870/$ vs 6.872/$.

 

Commodity News

Precious metals:         

Gold US$1,252/oz vs US$1,255/oz yesterday

   Gold ETFs 58.8moz vs US$58.8moz yesterday

Platinum US$1,030/oz vs US$1,028/oz yesterday

Palladium US$786/oz vs US$773/oz yesterday

Silver US$18.31/oz vs US$18.39/oz yesterday

           

Base metals:   

Copper US$ 5,913/t vs US$5,930/t yesterday

Aluminium US$ 1,899/t vs US$1,893/t yesterday

Nickel US$ 10,945/t vs US$10,960/t yesterday

• Ore shipments from Indonesia remain constrained as miners and processors await for government rules on amounts allowed to be exported.

• The government lifted restrictions on unprocessed ores export on Jan 12 following three years of a blanket ban allowing miners to ship surplus ore with less than 1.7% Ni if at least 30% of supplies are used for their processing plants.

• Shipments are allowed to miners that have an operating smelted or are in the process of developing one with the permission valid for five years.

• The Energy and Mineral Resources Ministry is preparing a set of guidelines on methods to calculate the volume of ore to supply smelters and for export.

•  “People are waiting a clear regulation, not only for the volume of exports, but also on the surveyors. This policy, allowing only a certain grade of ore, has never been done before,” the Indonesian Processing and Refining Industry Association said.

Zinc US$ 2,820/t vs US$2,821/t yesterday

Lead US$ 2,260/t vs US$2,258/t yesterday

Tin US$ 19,240/t vs US$19,510/t yesterday

           

Energy:           

Oil US$55.8/bbl vs US$56.7/bbl yesterday

Natural Gas US$2.690/mmbtu vs US$2.695/mmbtu yesterday

Uranium US$22.50/lb vs US$22.75/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$88.6/t vs US$87.1/t

Chinese steel rebar 25mm US$580.7/t vs US$574.7/t

Thermal coal (1st year forward cif ARA) US$67.7/t vs US$68.8/t yesterday

Premium hard coking coal Aus fob US$160.1/t vs US$158.7/t

 

Tungsten – APT European prices $195-205/mtu (from the 17Feb/17 week)

 

 

Company News

Birimian Limited (ASX:BGS) A$0.30, mkt cap A$56.6m – new mineralised zone at Goulamina, Bougouni lithium project in Mali

• Birimian Limited have released results of further drilling from a third mineralised zone at Goulamina within the Bougouni lithium license in Mali.

• The newly identified ‘Sangar’ Zone appears consistent with other lithium pegmatite grades and intersections seen within the region.

• Reverse Circulation drilling shows:

o 25m @ 1.45%Li2O from 25m

o 29m @ 1.65 % Li2O from 13m, and

o 36m @ 1.87 % Li2O from 63m

o 34m @ 1.42 % Li2O from 28m

o 26m @ 1.89% Li2O from 25m

o 32m @ 1.85 % Li2O from 45m, and

o 26m @ 1.95 % Li2O from 80m.

o Goulamina has a mineral resource of 15.5mt grading 1.48% Li2O containing some 229,000t of Li2O making it possibly the world’s 4th highest grade and 11th largest hard rock lithium prospect.

o We suspect the next JORC resource will raise Goulamina up the rankings in terms of scale while maintaining approximately similar grade according to the drilling shown above.

o Birimian continues to advance its studies as it works towards completion of the PFS with Como Engineers undertaking next phase PFS process engineering and flow sheet design.

o Management reckon they can enhance the project economics by:

 Optimising open pit mine designs

 Improving flowsheet design through the various PFS test work studies

 Further detailed analysis of transport and logistics options

 Definition of additional high grade mineralisation.

 Next phase development drilling is being planned to:

 Further upgrade resource categories

 Confirm geotechnical parameters for open pit mine planning

 Confirm plant, associated infrastructure, waste dump and Tailings Storage Facility locations

 Birimian is seeking to fast-track commercialisation of Bougouni through metallurgical test work, upgrading resource estimates this quarter

 The PFS is expected to be completed in the June 2017 quarter enabling progression towards initial project financing and offtake agreements depending on the feasibility results.  Traditionally companies need to undertake a fuller Feasibility Study before a project is fully financed.

 

DiamondCorp (LON:DCP) Suspended – Update on restructuring discussions with the IDC and AMCU

• DiamondCorp report today on progress in respect to their corporate restructuring and negotiations with the IDC ‘Industrial Development Corp. ’and the AMCU union, which is known in South Africa for its militant stance.

• All parties appear to be willing to do their part with respect to rescuing the Lace Diamond Mine, though we note: “there can be no assurance that an appropriate agreement with the AMCU can be obtained in sufficient time,”.

 

Medusa Mining (ASX:MML) A$0.34, Mkt Cap A$71m – Infrastructure development causes interim sales to fall at Co-O mine in Philippines

• Medusa Mining report interim results today.  The figures are negatively affected by work being done to secure and expand mining operations underground.

• Sales fell by 28% to $50.1m causing profits after tax to collapse to -$40.8m.

• The profit figure includes asset impairment costs of US$55m

• AISC ‘All-In-Sustaining-Costs’ costs of $1,408/oz are significantly higher than the average gold price received of $1,271/oz highlighting the need to improve production at the mine and to lower costs to more sustainable levels.

• An average cash cost of $607/oz was significantly higher than the comparable cash cost of $436/oz yoy.

• The fall in sales and profits is down to a significant decrease in gold production to 39,061oz vs 62,011 previously.

• Guidance:  The Company’s production guidance for FY2016-17 is revised to between 85,000-95,000oz at AISC US$1,250-1,350/oz vs 105,000-115,000oz of at AISC US$1,000-1,100/oz previously

• The company has cash and cash equivalents of US$12.9m.

 

Tethyan Resources (LON:TETH) 5.6p, Mkt Cap £8.2m – Tethyan makes first milestone payment to secure Suva Ruda copper discovery

• Tethyan Resources reports it has made its first option payment on the Suva Ruda copper project in Serbia.

• Tethyan is required to pay €100,000 pa for four years to a Serbian group called ‘Deep Research d.o.o.’ to retain its 100% option on the Suva Ruda project.

• The team have drilled 2,000m with promising results and plan a larger 5,000m drill program starting in August.

• The project strike length is currently seen as around 1,500m north-south by 500m wide.

• Results include:

o RDD-001 567m grading 0.28% copper and 0.45 g/t gold

o RDD-002 86m grading 0.16% copper and 0.30g/t gold from a depth of 354m

o RDD-004  356 m @ 0.38% copper and 0.31 g/t gold from 48 m  

 (including 30 m @ 1.45% Cu and 0.39 g/t Au from 102 m)

• RDD-003  285 m @ 0.31% copper and 0.33 g/t gold from 42 m

o (including 16.7 m @ 1.55 % Cu and 0.20 g/t Au from 102 m).

o A higher grade intersection, between 122m and 160m, of 38m grading 1.18% copper and 0.38g/t gold may represent a zone of supergene enriched copper mineralisation.

o Suva Ruda was identified by Phelps Dodge in 2004 which drilled seven widely spaced drill holes over an area of 1.2km by 0.8km.

o An earlier Phelps Dodge drill hole reported 144m grading 0.4% copper and 0.4 g/t gold ending in mineralisation at 244m.  copper miners were not as interested in these sorts of grades as they are today.

Conclusion:  The results from Rudnitza are starting to make the Rudnitza project look like a meaningful discovery.

 

Strategic Minerals* (LON:SML) 0.95p, Mkt Cap £12m – Cobalt mineralisation discovered at Hanns Camp in Australia

• Strategic Minerals report that ‘significant’ cobalt mineralisation has been discovered at Hanns Camp in Western Australia.

• The discovery of high grade cobalt with and coincident Platinum Group Metals ‘PGM’ is an interesting and unexpected development for the company.

• Cobalt grades of 0.18% might not seem high when compared with the rock dug using child labour in the Congo but compared with other larger scale mines it’s seen as a relatively good grade.

o HC00  16m grading 0.10% cobalt (including 1m at 0.18% cobalt)

o HC01  4m grading 0.12% cobalt from 19m

o HC003 10m grading 0.4g/t total PGMs from 36m

o While these are preliminary results they are interesting in the potential that they offer.

o If we consider the cobalt alone we can see that 0.18% co is potentially economic on its own.

o Eg: the current cobalt price of $22/lb = $48,500/t which is >8 times the price of copper giving a copper equivalent grade of around 1.5% for 0.18% cobalt.

o Most cobalt comes out of the DRC and in particular from parts of the DRC which have been subject to conflict and supply disruption in the past.

o Chinese companies are moving to take control of significant cobalt production with their ongoing acquisition of Tenke Fungurume in the DRC which has cobalt grades of around 0.4% in addition to 4% copper.  CMOC ‘China Moly’ are paying $2.65bn in cash for 56% of Tenke Fungurume with Lundin Mining selling its 24% effective stake for $1.14bn to BHR Partners, a Chinese private equity firm.  The Mine cost $3bn to build, not counting the cost of the blood sweat and tears required to build a mine of this scale in the Congo.

o The danger with this acquisition is that with China Inc’s acquisition of Tenke Fungurume, western companies like Tesla might struggle to buy sufficient cobalt to feed growing demand at its Gigafactory in Nevada.  Tesla say their cobalt will come out of North America but we are struggling to see where this comes from and if China commands the world’s major cobalt mine and other consumers are forced to go elsewhere for their cobalt then Tesla may well struggle to get the supply it needs.

o The battery industry uses around 42% of global cobalt supply

o A number of hedge funds were recently reported to have stockpiled some 6,000t of cobalt equivalent to around 17% of last year’s global cobalt production.

o Global demand is expected by CRU to outstrip supply by 900t this year with demand to grow by 20% this year indicating to us that prices should rise dramatically.

o Cobalt prices have more than doubled to $22/lb from $10/lb a year ago but are still some way off their peak of $50/lb in 2007.

Conclusion:  Hanns Camp offers interesting and prospective grades in terms of PGM and cobalt.  Given the great interest among investors for lithium and other battery-related metals and the relative rarity of decent cobalt grades in mineral assays we would expect to see significant investor interest in the project.

*SP Angel act as Nomad and joint broker to Strategic Minerals

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