Alecto Minerals (LON:ALO) Suspended – Update on Mowana
Antofagasta (LON:ANTO) – Antofagasta wins latest round in compensation for Reko Diq project in Pakistan
BlueJay Mining* (formerly FinnAust Mining) (LON:JAY – formerly LON:FAM) BUY Target Price 15p – First production targeted for 2018
Asiamet Resources (LON:ARS) – BKM feasibility study update
Strategic Minerals* (LON:SML) – Drilling underway at Redmoor
Stratex International (LON:STI) – Drilling results from Thani-Stratex’s Anbat Project
Tertiary Minerals* (LON:TYM) – Disposal of non-core gold exploration assets
European equities are following US and Asian markets lower as investors cut “reflation” trades on the back of uncertainty of new US administration policies.
• S&P 500 fell more than 1% on Tuesday, bond yields traded lower while Japanese yen and gold gained pointing to increased demand for safe haven assets.
• Gold trades at the highest in three weeks.
• Copper prices are off for a third consecutive session. Major miners are off on the back of softer iron ore and coal prices as well as strength in the British pound following strong inflation numbers released yesterday.
• Iron ore futures in China slump extending losses to 8% over the last two consecutive days led by weaker steel prices and record port stockpiles. Prices for the 62% Fe Qingdao CFR material dropped to $87.6/t yesterday, according to Metal Bulletin.
Dow Jones Industrials -1.14% at 20,668
Nikkei 225 -2.13% at 19,041
HK Hang Seng -1.24% at 24,288
Shanghai Composite -0.50% at 3,245
FTSE 350 Mining -2.09% at 15,815
AIM Basic Resources -0.49% at 2,592
Economics
US – A build up in concerns over the new administration ability to pass its legislative changes through Congress weigh on the market sentiment.
• Top Republican Party members warned other congressmen that a failure to repeal Obamacare may stall the process of approving other initiatives including business tax cuts.
• Reports emerged that a health-care replacement bill backed by House Speaker Paul Ryan struggled to secure support from Congress.
China – Local media report that Beijing banks increased mortgage rates following the PBoC drive to rein in property lending rates.
Japan – Exports posted a third consecutive annual increase in Feb (+11.3%yoy) on the back of a steady currency against the US$.
• Overseas shipments growth improved towards the end of 2016 as the US$ currency rallied against the yen through the final quarter of the year.
Currencies
US$1.0805/eur vs 1.0794/eur yesterday. Yen 111.38/$ vs 112.80/$. SAr 12.645/$ vs 12.673/$. $1.249/gbp vs $1.238/gbp.
0.767/aud vs 0.771/aud. CNY 6.886/$ vs 6.897/$.
Commodity News
Precious metals:
Gold US$1,248/oz vs US$1,229/oz yesterday
Gold ETFs 58.6moz vs US$58.4moz yesterday
Platinum US$972/oz vs US$961/oz yesterday
Palladium US$786/oz vs US$780/oz yesterday
Silver US$17.57/oz vs US$17.35/oz yesterday
Base metals:
Copper US$ 5,745/t vs US$5,823/t yesterday – Miners at Cerro Verde, the largest copper mine in Peru which is the second world’s largest source of mined copper, are reported to be planning new strike from Friday which may continue into Apr.
• The previous strike was ruled illegal and forced unions to end strike this Thursday.
• The mine produced 0.5mt of copper last year.
• Additionally, Chinalco reported force majeure on some of its copper shipments after being hit by heavy rains and floods damaging transport routes.
• The mine produced 168kt copper last year and has a capacity for 184ktpa.
• Union representatives at Escondida are waiting for response from management on proposed terms following a rejection of the latest Company offer.
• The strike has entered its 41 day implying more than 10% of the annual production foregone at the 1.1mtpa operation.
Aluminium US$ 1,926/t vs US$1,916/t yesterday
Nickel US$ 9,990/t vs US$10,175/t yesterday
Zinc US$ 2,825/t vs US$2,864/t yesterday
Lead US$ 2,280/t vs US$2,268/t yesterday
Tin US$ 20,315/t vs US$20,380/t yesterday
Energy:
Oil US$50.7/bbl vs US$52.1/bbl yesterday
Natural Gas US$3.072/mmbtu vs US$3.076/mmbtu yesterday
Uranium US$25.40/lb vs US$25.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$83.8/t vs US$84.6/t
Chinese steel rebar 25mm US$573.3/t vs US$578.0/t
Thermal coal (1st year forward cif ARA) US$61.8/t vs US$63.8/t yesterday
Premium hard coking coal Aus fob US$153.3/t vs US$155.4/t
Other:
Tunsgten APT European US$208-216/mtu (from the 17Mar week) v US$212-217/mtu (from the 10Mar week)
Wright Electric – plans for short-haul electric-powered flights to Paris
• A new start-up company Wright Electric is proposing to develop a plane which could carry 150 people on journey’s of less than 300 miles.
• We love all things electric but when it comes to flying we are more interested in the power to weight ratio and safety record than many other issues.
• Electric vehicles are a great idea and small electric planes sound nice but when it comes to commercial airliners we like the power to weight ratio of jet fuel.
• One problem with lithium batteries is that when they fail, they fail without much warning and rather catastrophically. Not good if you are running an airline.
Company News
Alecto Minerals (LON:ALO) Suspended – Update on Mowana
• Alecto Minerals reports that its plans to restart the Mowana copper mine in Botswana are moving towards a “first production blast by the end of this month” and that “after initial commissioning of the process plant, test production has now commenced, producing saleable concentrate up to 28% copper”
• Alecto acquired 60% of the Mowana operation in late December 2016 via a reverse takeover of Cradle Arc Investments. The mine was originally commissioned in 2008 at a cost of around US$60m.
• In its announcement of the transaction on 21st December 2016, Alecto indicated that it expected Mowana to produce 22,000tpa of copper over an 11 year mine life from existing mineral resources at an average grade of 1.34% copper and 30g/t silver. Alecto’s modelling indicated that it expected the project to generate an NPV of US$245m at a discount rate of 10% leading to an IRR of 55%.
Conclusion: The restart of mining at Mowana later this month will be a milestone for Alecto as it rejuvenates the former African Copper operation in Botswana.
Antofagasta (LON:ANTO) 819p, Mkt Cap £8.1bn – Antofagasta wins latest round in compensation for Reko Diq project in Pakistan
• All we can say is good luck with that boys.
• Antofagasta might win a few legal cases but we reckon the only real winners here will be the lawyers and fixers in Lahore.
• We were invited to help finance advancement of the Reko Diq asset after it was lost by the Antofagasta, Barrick joint venture. We declined for a whole bunch of reasons though it was tempting to try to unravel the problems associated with the asset.
• Pakistan ranks at 124 out of 157 on the Economic Freedom of Worldmeasures. Slightly better than we had expected but still not good on many levels.
• While we appreciate the scale and potential value of the Reko Diq copper project in Balochistan, Pakistan we do have to wonder whatever possessed Antofagasta and Barrick to attempt to tackle a project in this politically challenged region.
BlueJay Mining* (LON:JAY – formerly LON:FAM) 8.9p, Mkt Cap £55.1m – First production targeted for 2018
(formerly FinnAust Mining)
BUY Target Price 15p
• BlueJay Mining are targeting first production in 2018 according to revelations in their interim statement.
• The news demonstrates the fast pace of development of the asset and presumably a desire by offtakers to get their hands on high-grade ilmenite material.
• We are told, Metallurgical testwork shows the Pituffik ilmenite to be relatively low in impurity levels and suitable for much of the world’s titanium pigment production.
• The team are gearing up to produce a proof of concept bulk sampling programme for H2 2017 and for their application for an Exploitation License again in the second half.
• BlueJay also acquired two polymetallic assets in Greenland which they will advance once Pituffik is cash flow positive.
• Pituffik is an interesting situation, not only is it possibly the world’s highest grade ilmenite mineral sand project being developed but its situation means that BlueJay may incur relatively little in the way of capital cost to get it going.
• Pituffik is located in a natural harbour encompassing >30km of heavy ilmenite rich minerals have settled and been naturally sorted by the action of the sea. The situation looks perfect for dredging and has attracted the attention of Royal IHC, a large Dutch dredging company which is keen to get working at the site.
• The interims remind us of the company’s £8.5m Equity funding back in December with >£5m of these funds attributable to the development of the Pituffik project.
• The company has since consummated its consolidation of 100% ownership of the Pituffik project through the completion of its acquisition of BlueJay Mining, hence the name change.
• Pituffik has active beaches, raised beaches and drowned beaches. BlueJay is to trial “dredging a small amount of material from the drowned beach environment” in the second half following the completion of Social and Environmental Impact Studies ahead of the exploitation license application.
• Pituffik is located in the north of Greenland and will be subjected to a restricted field season depending on the weather. Dredges operating on lakes and rivers in Siberia tend to stop for a few months each winter when everything freezes. Operating a dredge in a salt water, marine environment should be easier as only the surface of the sea freezes and could allow for a longer field season depending on the economics of operating in the environment.
• The interim financials seem almost irrelevant compared with the potential value of the Pituffik project.
• The company reports £402k of admin expenses and a loss of £1,036k to end December 2016.
• BlueJay has £4,916k in cash and cash equivalents which should see it through the field season, trial mining and into next year.
*SP Angel act as nomad and broker to Bluejay Mining
Asiamet Resources (LON:ARS) 4.2p, Mkt Cap £30m – BKM feasibility study update
• Asiamet Resources reports progress on a number of aspects of the current feasibility study for the development of its Beruang Kanan Main (BKM) copper deposit in Kalimantan.
• Studies have confirmed that a phased build up to the planned 25,000tpa of copper production provides benefits including the possibility of lower upfront capital costs and the potential for cashflow from an initial 10,000tpa operation to be deployed for the later expansion to the full 25,000tpa production rate. In our view, adopting this development approach gives Asiamet the opportunity to gain important understanding of the mineability and process characteristics of the deposit at the smaller scale of operations helping to de-risk the second phase expansion.
• As work progresses on the ore resource drilling, due for completion in early April, and the resource estimation, the company is looking to identify “improvements to the mine sequencing to maximise early copper production, while deferring waste mining costs.”
• Geotechnical work has already demonstrated that “Approximately 34% of material in the shallower 35-40 metres of the proposed pit is classified as “easy digging”, which will contribute to relatively lower mining costs.” In addition, “There is potential to steepen pit wall angles in the upper section of the open pit (<40 metres depth) compared with the previous pit design. This would lead to lower estimated operating costs through a lower strip ratio.”
• Studies have also confirmed that the area has low seismicity and that “No foundation treatment Is likely to be required below the proposed waste dump locations, saving on potential pre-production costs for development of the waste dump site.”
• Metallurgical testing has been stepped up in recent months as planned and we await results with interest.
Conclusion: As the BKM feasibility work progresses, Asiamet is identifying potential savings in both the capital and operating costs and scope to de-risk the project development. The forthcoming updated resource estimation is likely to be the first of a number of important documents leading to the feasibility study which should draw together the resource, metallurgical and mining work as well as economic analysis.
Strategic Minerals* (LON:SML) 1p, Mkt Cap £12.6m – Drilling underway at Redmoor
• Strategic Minerals reports that drilling is now underway at its 50% owned Redmoor project in Cornwall.
• The 23 hole drilling programme, which is to be conducted in two phases with the initial phase comprising 13 holes, is intended to “confirm and extend the high grade tin-tungsten resource at Redmoor”.
• The initial phase of work is expected to completed during Q3 2017 with the second phase of 10 further holes to be completed before the end of the year.
• A report on the phase 1 part of the drilling is expected to be released during Q4 once the assaying of samples has been completed.
Conclusion: We look forward to the drilling results from Redmoor later this year. The decision to conduct the drilling in two phases should allow the initial results to inform planning for the second phase so that appropriate modifications to the programme can be introduced as appropriate.
• *SP Angel act as Nomad and joint broker to Strategic Minerals
Stratex International (LON:STI) 1.7p, Mkt cap £7.9m – Drilling results from Thani-Stratex’s Anbat Project
• Stratex reports that its 30.4% owned associate, Thani Stratex has intersected additional gold mineralisation at its Anbat project in Egypt. The drilling confirms “the newly-interpreted geometry of a near-surface, flat-lying gold mineralised zone to the east side of an identified mineralised intrusion.” Among the wider intersections reported today are a 4.85m wide intersection in borehole TDAND-04 averaging 1.99g/t gold from a depth of 99.15m and a 32.35m wide intersection averaging 1.48g/t from a depth of 86.65m, including 18.2m grading 2.25g/t from a depth of 100.8m in hole TDAND-05.
• “The drilling has also identified additional deeper flat-lying zones of mineralisation” which include an 8.15m wide intersection grading 0.74g/t from a depth of 139.5m; 10.9m at 1.04g/t from 16.0.7m and 20.2m grading 0.57g/t from 201m all in borehole TDAND-06 which was drilled 100m due south of hole TDAND-05.
• Results from the final hole of the current programme at Anbat, hole TDAND-07, are still awaited.
Conclusion: The results from Anbat show what appears to us to be multiple flat lying mineralised horizons which could ultimately have a beneficial effect on the economics of a future mining operation. However, at this stage, with only limited drilling completed that eventuality is simply a tantalising prospect – the results do, however, appear to justify follow up work and we look forward to further news from Thani-Stratex on its plans to progress the exploration of Anbat.
Tertiary Minerals* (LON:TYM) 0.9p, Mkt £2.3m – Disposal of non-core gold exploration assets
• Tertiary Minerals reports that the previously announced disposal of its Finnish gold assets at Kaaresselka and Kiekeromaa to Canadian-listed Aurion Resources has now been completed.
• The licences have been transferred to Aurion and exchange approval of the TRX-V has been granted and as a result Tertiary Minerals has been able to complete the transaction which brings them £15,000 in cash, £85,000 in Aurion shares and a retained pre-production and production royalty interest in both properties.
• Tertiary Minerals’ royalty provides for a pre-production royalty of US$1/oz for NI-43-101 compliant inferred resources defined on the properties. Indicated resources will attract a pre-production royalty of $2/oz and measured resources $3/oz. Tertiary Minerals also retains a 2% net smelter royalty of 2% on all future gold production from the properties and Aurion has the right to buy 50% of the royalty for a lump sum of $1m at any time prior to start of production.
Conclusion: The disposal of the gold assets should reduce Tertiary Minerals’ administrative overhead in maintaining the licences as the company progresses its fluorspar projects in the US and Scandinavia.
*SP Angel act as Nomad and broker to Tertiary Minerals