Antofagasta (LON:ANTO) – 2016 Preliminary Results
Birimian Limited (ASX:BGS) – Current phase of drilling at Goulamina lithium project in Mali completed
Kodal Minerals* (LON:KOD) – Exploration update from the Bougouni lithium project
Metminco* (LON:MNC) – Resource update at Miraflores
Strategic Minerals* (LON:SML) – Cobalt mineralisation discovered at Hanns Camp in Australia
European equities as measured by the Stoxx Europe 600 Index is off for the first time in the last five days with FTSE100 up slightly on a weaker pound.
• Gold prices are relatively mute today ahead of a number of central bank meetings scheduled for this week.
• Brent trades near a three-month low on expectations for US stockpiles to have climbed for a 10th week with the EIA report due tomorrow.
• Iron ore futures are also flat this morning despite good Chinese steel production numbers (129mt +5.8%yoy YTD Jan-Feb).
Dow Jones Industrials -0.10% at 20,881
Nikkei 225 -0.12% at 19,610
HK Hang Seng -0.01% at 23,828
Shanghai Composite +0.07% at 3,239
FTSE 350 Mining -0.18% at 15,674
AIM Basic Resources +1.77% at 2,584
China – Economic data released today point to a sustained growth momentum in the first two months of the year.
• Both industrial production and fixed asset investment (FAI) climbed through Jan-Feb and came in ahead of expectations.
• FAI changes split also demonstrates positive dynamics with the private sector growth accelerating while government led investments increase slowed/normalised during the period.
• Retail sales growth slowed underperforming market estimates on the back of a reduction in tax incentives which in turn affected automobile sales (-1.0%yoy, YTD).
• Property sector demonstrated good run YTD with both sales (+23.7%yoy, YTD) and housing under construction (+14.8%yoy, YTD) up strongly through Jan-Feb.
• Industrial Production (%yoy, YTD): 6.6 v 6.0 in Jan and 6.2 forecast.
• FAI (%yoy, YTD): 8.9 v 8.1 in Jan and 8.3 forecast.
• Private FAI (%yoy, YTD): 6.7 v 3.2 in Jan.
• Public FAI (%yoy, YTD): 14.4 v 18.7 in Jan.
• Retail Sales (%yoy, YTD): 9.5 v 10.4 in Jan and 10.6 forecast.
UK – The pound is off 0.7% this morning after having briefly hit the 1.211 level, the lowest in eight weeks.
• The House of Commons passed the Article 50 bill unchanged from the former version rejecting amendments proposed by the House of Lords.
• The upper chamber then completed the bill’s legislative process by voting through the unchanged version of it.
• Contrary to what many have recently suggested, the government dismissed speculation that the Article 50 will be triggered this afternoon and reiterated its target for the end of March.
Germany – Second reading on Feb inflation saw no changes in the preliminary reading of 2.2%, marking the highest level the economy recorded since 2012.
CPI (%mom/yoy, EU harmonised): 0.7/2.2 v -0.8/1.9 in Jan.
Spain – Inflation was confirmed at the strongest level since 2012 in Feb led by gains in transport (+8.2%yoy) and housing (+5.9%yoy).
• Numbers are in line with accelerating inflation levels in the single currency block where consumer prices growth also hit a four year high last month
• CPI (%mom/yoy, EU Harmonised): -0.3/3.0 v -1.0/2.9 in Jan.
Currencies
US$1.0645/eur vs 1.0674/eur yesterday. Yen 115.12/$ vs 114.59/$. SAr 13.200/$ vs 13.134/$. $1.214/gbp vs $1.222/gbp.
0.755/aud vs 0.758/aud. CNY 6.913/$ vs 6.909/$.
Commodity News
Precious metals:
Gold US$1,203/oz vs US$1,210/oz yesterday
Gold ETFs 58.3moz vs US$58.1moz yesterday
Platinum US$937/oz vs US$946/oz yesterday
Palladium US$751/oz vs US$752/oz yesterday
Silver US$16.96/oz vs US$17.13/oz yesterday
Base metals:
Copper US$ 5,785/t vs US$5,800/t yesterday – Miners at Escondida rejected the BHP proposal to restart wage talks which is currently in the second month.
Aluminium US$ 1,871/t vs US$1,886/t yesterday – Prices came off a one week high as the latest data showed China ramped up production to a record level (5.5mt +15.6%yoy in Jan-Feb).
Nickel US$ 10,125/t vs US$10,060/t yesterday
Zinc US$ 2,731/t vs US$2,760/t yesterday
Lead US$ 2,231/t vs US$2,282/t yesterday
Tin US$ 19,395/t vs US$19,360/t yesterday
Energy:
Oil US$51.5/bbl vs US$51.2/bbl yesterday
Natural Gas US$3.039/mmbtu vs US$3.056/mmbtu yesterday
Uranium US$24.50/lb vs US$24.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$84.2/t vs US$79.5/t
Chinese steel rebar 25mm US$575.3/t vs US$564.3/t
Thermal coal (1st year forward cif ARA) US$65.5/t vs US$65.2/t yesterday
Premium hard coking coal Aus fob US$158.6/t vs US$159.4/t
Other:
Tunsgten APT European US$212-217/mtu (from the 10Mar week) v US$210-217/mtu (from the 03Mar week)
Company News
Antofagasta (LON:ANTO) 785p, Mkt Cap £7.73bn – 2016 Preliminary Results
• After exceptional charges totalling US$386.4m, Antofagasta has reported a profit for 2016 of US$214.3m (2015 – 701.7m) giving basic earnings per share of 16cents per share (2015 – 61.7 cents).
• The company has declared a final dividend of 15.3 cents per share bringing the total for the year to 18.4 cents. The company comments that this “represents 53% of underlying earnings per share, significantly more than the company's commitment to pay-out a minimum of 35%.“
• Antofagasta highlights the improvement in EBITDA margin to 44.9% (2015 28.2%) and the lifting of the total EBITDA for the year by 78.7% to US$1626.1m (2015 – US$910.1m) as a result of an 8.1% reduction in operating costs and a 12.3% rise in revenues.
• “Operating cash flow generation of $1,457.3 million, up 69.8% compared to same period last year on the back of stronger margins and higher production”.
• Also focusing on financial discipline, Antofagasta’s capital expenditure fell by 24.2% to US$795.1m although both “the Antucoya project and Centinela expansion were completed during the year.”
• Commenting on the copper market the company notes that “The copper market in 2016 was roughly in balance and, although the LME price of copper averaged some 11.6% lower than in 2015, it finished the year at $2.51/lb, 17.8% higher than at the end of the previous year.”
• Looking to the future, Antofagasta sees “The next stage of growth will come from the Los Pelambres Incremental Expansion project, which is expected to start construction in 2018, and building a second concentrator at Centinela, which will together add up to 200,000 tonnes of annual copper production.”
• The Los Pelambres Incremental Expansion is to be undertaken in a US$1.05bn first phase of expanding annual production by around 55,000 tpa of copper production under the terms of the existing mine permits, followed by a second phase expansion to expand ore throughput to 205,000tpd at a cost of approximately US$500m which will require additional permits.
• At Centinella “a feasibility study is underway and will focus on the first phase of expansion to add some 140,000 tonnes of copper, 150,000 ounces of gold and 2,800 tonnes of molybdenum annually.” through the addition of a second concentrator at a pre-feasibility level estimated capex of US$2.7 bn.
Conclusion: Antofagasta’s focus on financial discipline has made a significant improvement to margins and the group is preparing for two major capital expansion projects.
Birimian Limited (ASX:BGS) A$0.29, mkt cap A$54.6m – Current phase of drilling at Goulamina lithium project in Mali completed
• Birimian reports that, following the completion of its latest drilling programme at the Goulamina lithium prospect in Mali as reported earlier this month, it has updated the estimate to a total of 27.8m tonnes of indicated and inferred resources at an average grade of 1.42% lithium oxide.
• Around 22% of the resource tonnage (6.2mt at an average grade of 1.40% is classified as indicated with the balance as inferred.
• A maiden resource estimate in October 2016 reported a resource of 15.5mt at an average grade of 1.48% of which 6.2mt was reported as indicated at an average grade of 1.40% - the same as in today’s estimate so we estimate that the current update represents an increase of approximately 70% in the contained lithium oxide - entirely as a result of an increase in the inferred part of the resource.
• The earlier estimate included results from 51 drill holes and today’s update brings in an additional 29 holes into the estimate. The company comments that “Approximately 65 holes were pending assay results at the time of the resource estimation and have not been included in the current estimate. These holes include some extensional drilling at Main and West Zone … Further resource expansion and resource category upgrades are likely when this drilling is included in a subsequent estimate which is expected in early May.”
• “Drilling at the Project has paused briefly while the company awaits assay results to undertake further detailed resource estimation work and other resource related technical studies. [and] The next phase of development drilling is currently being planned. This program will be designed to:
o Further upgrade resource categories
o Confirm geotechnical parameters for open pit mine planning
o Confirm plant, associated infrastructure, waste dump and Tailings Storage Facility locations”
Conclusion: Birimian’s updated resource estimate for Goulamina appears to be an interim report with a results from a further 65 as yet un-assayed drill holes to be incorporated in a more comprehensive estimate in May. The addition of these extra infill and extension holes is likely to both increase and firm up the resource classification. We look forward to the May estimate.
Kodal Minerals* (LON:KOD) 0.33p, Mkt Cap £17.4m – Exploration update from the Bougouni lithium project
• Kodal Minerals reports that it’s trenching programme on the Bougouni lithium project in southern Mali has encountered a number of high grade lithium intersections.
• The trenching programme comprised 14 trenches totalling 862m, however 5 of the trenches were not sampled “due to extreme weathering”
• Among the results highlighted by the company are:
o 27m at an average grade of 1.38% lithium oxide in trench MDTR005 at the Sogola-Baoule prospect;
o 10m at an average grade of 1.67% lithium oxide in trench MDTR002 at the Filon B prospect; and
o 6m at an average grade of 1.61% lithium oxide in trench KLTR007 at the Orchard prospect
o The work at the Sogola-Baoule prospect, reported above, “outlines an extensive outcropping spodumene rich pegmatite vein with a current strike length exceeding 200m”. Spodumene in a lithium bearing silicate mineral and one of the principal lithium ore minerals.
o The company has also announced that it has started a programme of reverse-circulation drilling at the Sogola-Baoule prospect “planned to target extensions to the excellent results returned from the Ngoualana prospect as well as complete reconnaissance testing of these new priority targets”.
o As well as the trenching results, Kodal Minerals also reports that it has obtained “High-grade rock chips up to 2.52% Li2O returned from pegmatite samples at the newly defined Boumou prospect and trenching confirms extensions of pegmatite”.
Conclusion: We welcome the start of the reconnaissance drilling programme at Sogola Baoule and look forward to results which may provide an initial indication of the scale, geometry and scope of the mineralisation.
*SP Angel acts as Financial Advisor and Broker to the company. Robert Wooldridge, a partner at SP Angel is also Chairman of Kodal Minerals.
Metminco* (LON:MNC) 5.9p, mkt cap £7.5m, – Resource update at Miraflores
• Metminco has announced an updated resource estimate for its Miraflores gold project in Colombia. The new estimate forms part of the company’s feasibility study, expected to be completed by the end of May 2017, for the possible development of the Miraflores deposit.
• The new estimate, which has been prepared by Metal Mining Consultants of Denver at a cut-off grade of 1.2g/t gold, and is compliant with JORC (2012) guidelines, outlines a measured and indicated resource of 9.27mt at an average grade of 2.82g/t gold and 2.77 g/t silver as well as an additional inferred resource of 0.49mt at an average grade of 2.36g/t gold and 3.64 g/t silver.
• The update shows a small increase in the total measured and indicated gold resource to 840,000 oz compared to 830,000oz reported in July 2016, largely as a result of an increase in estimated tonnage from 9.19mt to 9.27mt with average gold grades rising marginally to 2.82g/t from 2.81 g/t.
• The company outlines the geology of the deposit which consists of a mineralised, near-vertical, breccia pipe with a surface footprint measuring approximately 250x280m and extending to “500 to 600m but open at depth”. The breccia pipe consists of 4 different breccia types with the Red Breccia containing “the highest gold grades with grades of up to 429 g/t in the vicinity of fault / vein zones.”
• Vein mineralisation is hosted within three main vein sets and “The veins are defined by a narrow mineralised core (10cm to 60cm) … [consisting] … of increased amounts of sphalerite, galena, pyrite, chalcopyrite and fine clay… [within] …a wider mineralised halo (1m to 5m)”.
• The estimate is based on the results of three drilling campaigns conducted by various operators between 2006 to 2013. The overall drilling database consists of 73 holes (25,884m)
Conclusion: The new resource estimate validates the previous estimate and will form a key component of the feasibility study which is expected to be completed by the end of May this year. We look forward to the feasibility study and to further news of the project later this year.
*SP Angel act as broker to Metminco. SP Angel analysts have previously visited Los Calatos in Peru and Miraflores project in Colombia
Strategic Minerals* (LON:SML) 0.9p, Mkt Cap £11m – Cobalt mineralisation discovered at Hanns Camp in Australia
• Strategic Minerals reports that, subject to the new customer providing a US$100,000 letter of credit from an acceptable bank, it has secured a contract for the sale of up to 350,000 tons of magnetite from the Cobre stockpile in New Mexico. “with a private company, Galvin Investment Company”.
• “The contract, calls for a minimum purchase of 2,000 tons per month and logistics at the mine would result in a maximum supply, above existing client demand, of 6,000tons per month.”
• The company notes that this “would effectively double annual sales from Cobre” and that this “is likely to be achieved without affecting SMG’s effective net profit margin of between 40% to 45% of sales revenue.”
Conclusion: Strategic Minerals, which is shortly to start drilling at the Redmoor tin project in Cornwall, is unusual for a junior exploration company in having a profitable source of cashflow at Cobre. This sales agreement, if consummated, will strengthen this leg of the company’s business and help underpin the exploration efforts both in Cornwall and in Western Australia where Strategic Minerals recently announced the discovery of cobalt mineralisation associated with its nickel project at Hanns Camp.
*SP Angel act as Nomad and joint broker to Strategic Minerals