Mariana Resources (LON:MARL) – Drilling results from Hot Maden extend known mineralisation over 700m
Shanta Gold (LON:SHG) BUY – New reserves extend NLGM mine life
Lead market shenanigans as market sees 43,000t of cancelled warrants
Lead US$ 2,380/t vs US$2,280/t yesterday
• The 43,000t of lead could in theory be taken out of warehouses tomorrow, though in practice it would take longer
• The immediate effect is to tighten the market
• One trader reckoned it was down to strong consumer demand but speculated it could be one of the bigger traders playing games
• Either way it’s a big tonnage to suddenly remove from the market and prices have risen commensurately on the move
Zinc prices rise on news that China’s imports of zinc fell in February and lifted by the sharp rise in lead prices
Zinc US$ 2,859/t vs US$2,825/t yesterday
• Zinc prices followed lead higher but also continue to gain on signs of a tightening market for zinc.
• Imports of zinc ore into China fell to 181,767t in February from 223,123t in January and 201,949 yoy.
• The news suggests that zinc smelters in China may be struggling to buy zinc at acceptable contract prices.
• Local mine closures and problems with importing suitable ores has led to the closure of some 640,000t of zinc smelting capacity representing around 4.5% of Total refined capacity.
Chinese power generators are appealing to suppliers to cut coal prices as they get caught between rising thermal coal and falling power prices
• The cost of producing coal-fired power in China is reported to be Rmb 0.27/kWh (US$0.039/kWh) – that’s cheap!
• If the Rmb 0.27/kWh cost of producing power is higher than the sales price then consumers are getting a great deal. I can’t get anything like that on USwitch?
• We remember the days when bulk consumer power prices in South Africa were similar at around 4c/kWh. SA power active energy charges are now around 5.6c/kWh
• Chinalco Ningxia has asked the Ningxia regional authorities to ask Shenhua Group, China’s largest coal miner, to cut thermal coal prices to Rmb260/t ($37.7/t) from Rmb320/t ($46.5/t) currently. These prices are still way lower than quoted thermal coal prices for import coal currently at US$62.6/t.
On this day in history the US Army sold the last of its carrier pigeons in 1957
• It is possible with so much hacking and cyber security issues that they may need to reinstate the US Army Pidgeon Service
Dow Jones Industrials -0.03% at 20,661
Nikkei 225 +0.23% at 19,085
HK Hang Seng +0.03% at 24,328
Shanghai Composite +0.10% at 3,249
FTSE 350 Mining +0.07% at 16,159
AIM Basic Resources +0.16% at 2,596
Currencies
US$1.0785/eur vs 1.0805/eur yesterday. Yen 111.17/$ vs 111.38/$. SAr 12.551/$ vs 12.645/$. $1.249/gbp vs $1.249/gbp.
0.764/aud vs 0.767/aud. CNY 6.888/$ vs 6.886/$.
Commodity News
Precious metals:
Gold US$1,248/oz vs US$1,248/oz yesterday
Gold ETFs 58.7moz vs US$58.6moz yesterday
Platinum US$963/oz vs US$972/oz yesterday
Palladium US$792/oz vs US$786/oz yesterday
Silver US$17.55/oz vs US$17.57/oz yesterday
Base metals:
Copper US$ 5,823/t vs US$5,745/t yesterday
Aluminium US$ 1,925/t vs US$1,926/t yesterday
Nickel US$ 10,045/t vs US$9,990/t yesterday
Zinc US$ 2,859/t vs US$2,825/t yesterday
Lead US$ 2,380/t vs US$2,280/t yesterday
Tin US$ 20,370/t vs US$20,315/t yesterday
Energy:
Oil US$50.8/bbl vs US$50.7/bbl yesterday
Natural Gas US$3.027/mmbtu vs US$3.072/mmbtu yesterday
Uranium US$25.40/lb vs US$25.40/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$83.1/t vs US$83.8/t
Chinese steel rebar 25mm US$568.3/t vs US$573.3/t -
Thermal coal (1st year forward cif ARA) US$62.6/t vs US$61.8/t yesterday –
Premium hard coking coal Aus fob US$150.4/t vs US$153.3/t
Other:
Tunsgten APT European US$208-216/mtu (from the 17Mar week) v US$212-217/mtu (from the 10Mar week)
Vanadium – news on AsianMetal.com indicates that ferro-vanadium and vanadium nitride quotations are moving higher in China while other ferrovanadium prices remain stable in North America
Lithium - Portola Resources Inc completes acquisition of lithium ground in Argentina
• The company is paying 21m new shares and US$2.678m in staged cash payments for 18 concessions covering 69,112 hectares in the lithium-prolific northwestern quadrant of the Catamarca Province.
• The tenements are less than 10km northeast of the Laguna Caro Project, where FMC Corp operates its Fenix mine at Salar de hombre Muerto.
Company News
Mariana Resources (LON:MARL) 57p, Mkt Cap £71.9m – Drilling results from Hot Maden extend known mineralisation over 700m
• Mariana Resources reports the results of a further 19 drill-holes at its 30% owned Hot Maden deposit in north eastern Turkey where Mariana is in a 30:70 joint venture with a local company, Lidya Madencilik. Approximately 34,000m of drilling has now been completed since November 2014.
• The recent results are a combination of infill drilling within the Main Zone, where an update on the existing resource estimate of 7.1m tonnes at an average grade of 12.2g/t gold and 2.3% copper is being prepared as part of a Preliminary Feasibility Study (PFS) and a series of “step-out” holes “designed to extend known high grade gold-copper mineralisation.”
• The infill drilling continues to intersect broad widths of copper gold mineralisation with Hole HTD-90 intersecting 79m (estimated 55m true width) averaging 8.1 g/t gold and 1.9% copper from a down-hole depth of 248m and Hole HTD-106 intersecting 116.5m averaging 6.7 g/t gold and 1.7% copper from a depth of 244.5m down hole.
• Step-back holes HTD-88 and HTD-101 encountered 74m at an average grade 3.0g/t gold and 1.57% copper from a down-hole depth of 326m and 33m averaging 4.1g/t gold and 1.24% copper from 393m depth respectively.
• Commenting on the results of the drilling in the Main Zone, the company notes that “Au-Cu grades decrease significantly at a vertical depth of 350 m from surface … as late-stage anhydrite [a calcium sulphate mineral] floods the mineralised multiphase breccia. The source of this late-stage anhydrite is currently not clear; deeper drilling will be required to establish what happens to the mineralised breccia below the 500m RL level.”
• The extension drilling has focussed on the “Ridge” area a “transitional zone between the Main Zone resource area and the new Southern Deposit” where hole HTD-92 intersected 29m averaging 6.8g/t gold and 0.49% copper from a depth of 151m and hole HTD-100 drilled through 32.8m averaging 15.5g/t gold and 1.07% copper from a depth of 311.8m.
• The company comments that “Including the Ridge Area discovery, multi-phase gold-copper mineralisation has now been drilled over a strike length of 700m at Hot Maden”. Mariana Resources adds that “No drilling has yet been undertaken in the southernmost “Russian Mine Zone”, which is located about 1.5km south of the Main Zone Resource and where high grade copper –gold mineralisation was extracted prior to 1923 by Russian mining interests.”
• Unlike the Main Zone, where mineralisation is hosted in andesite, the Ridge Zone mineralisation is within a dacite host rock and “further structural interpretation will be required to connect the main mineralised trends.”
• The company notes that a third drilling has recently arrived on site and that it will now be able to deploy one rig to complete the PFS related work on the Main Zone, one rig to focus on “the New Southern Zone extension drilling and the third rig to work on “various targets, including the undrilled Russian Mine Zone.”
Conclusion: Drilling at Hot Maden is firming up the existing mineralisation within the Main Zone where we look forward to an updated resource estimate as part of the PFS. Extension drilling into the southern and Ridge areas looks likely to identify further resource extensions as the know mineralised strike length has now been identified over 700m and the arrival of a third rig will enable sub-surface exploration of the Russian Mine Zone. Further geological and structural interpretation is required to better understand the geological controls and we look forward to further updates as drilling proceeds.
Shanta Gold (LON:SHG) 9.4p, Mkt Cap £55m – New reserves extend NLGM mine life
BUY
• The Company have today released an updated mineral reserves statement together with a new mine plan at the New Luika Gold Mine ‘NLGM’.
• Changes to the previous mine plan (Sep/15) include the maiden underground reserve at Ilunga, expansion at the Elizabeth Hill and revised economics at other pits accounting for lower mining costs.
• The new mine plan increases total NLGM’s gold production by 39% to 500,000oz, up from a previously estimated 359,000oz, through the 2017-2023 life of mine.
• C1 and AISC cash costs are estimated by Shanta to average $577/oz and $736/oz respectively vs our SP Angel estimates of $584/oz and $790/oz.
• The expanded reserves allow for a four-year extension to the maximum utilisation of the 600,000tpa capacity of the NLGM processing plant.
• Similarly to the previous mine plan, projected output represents a combination of open pit mining, underground operations and tailings recovery.
• New mineral reserves statement (as of Dec/16) is provided below:
Ore Au Au (in situ) Au (recoverable)
Proved and Probable JORC Reserves kt g/t Koz koz
Open Pit 1,255 1.77 71 65
Underground 2,389 5.79 445 405
Total 3,644 4.40 516 470
- including Ilunga (UG) 660 5.56 118 107
• The difference between total reserves and the production number makes up the processing of lower grade material and tailings project production.
• Shanta’s new mine plan NPV at 8% discount rate and $1,200/oz gold price is estimated at $123m.
• Included in the number above the the Ilunga underground project NPV is estimated at $42m and IRR (pre-tax) of 129% under same assumptions.
• Ilunga underground is expected to start ramping up from 2019 with Bauhnia Creek and Luika running through 2021.
• NLGM resources outside the mine plan are estimates at 9.5mt at 2.24g/t for 683koz provide a good opportunity to further expand the NGLM life of mine.
• The resources “have the advantage that all sit within the current mining license with close proximity to processing plant” and can benefit from further drilling with high grade underground deposits open at depth and the Company managing to find new exploration targets in prospecting licenses surrounding the New Luika mining license.
• Underground development works at Bauhinia Creek ‘BC’ are progressing well with surface infrastructure to support the underground now complete.
• Cross drive from the BC decline to Luika is finished with Luika decline development in progress.
• First ore from stopes at the BC remains on target for Q2/17.
• The Company reports the NLGM remains on track to hit previously set targets for 80-85koz at AISC $800-850/oz in 2017.
• Eric Zurrin has been confirmed as permanent CFO.
Conclusion: An update mine plan delivers an extension to the life of mine at NLGM and adds 141,000oz of total additional gold production gold production at an average AISC of $736/oz. The increase is predominantly driven by the Ilunga underground reserve which is set to add 107,000oz in gold production with high grades and little need in additional infrastructure given its close proximity to the NLGM core operations contributing to excellent economics on the project (21,500ozpa at cash costs $508/oz and IRR (pre-tax) 129%).
The management is keeping development works at BC and Luika on track. The 683,000oz, 2.24g/t resource currently sitting outside the mine plan provides a good opportunity to further extend the life of the New Luika Gold mine.
We will revise our earnings and production in the view of an updated mine plan and issue new estimates shortly. We remain buyers of Shanta.