FTSE350 Mining climbs driven by precious metals producers’ gains.
• Gold is up on increased ETFs demand amid broadly flat US$ index.
• Copper is rangebound on the news of a restart in exports from Grasberg and a potential labour action at Southern Copper’s operations in Peru.
• Brent is off slightly this morning after dropping 0.7% yesterday on the news that Libya resumed operations at its biggest field following a week long disruption.
• Tesla market capitalisation overtook the one of Ford Motor yesterday as the electric vehicles producer beat quarterly sales estimates.
• While Ford sales came in around nine times that of Tesla in just the US last month, its deliveries missed projections leading to a drop in shares.
• Overall US Mar auto sales came in significantly below estimates weighing on the equity markets’ sentiment on Monday.
• Iron ore prices continued to slide on Monday with the 62% Fe material delivered to Qingdao bid at $79.4/t, according to MetalBulletin.
• This marks the lowest level since Jan 9 and down more than 16% on the Feb 21 high of $94.9/t.
• China’s futures markets remain closed for holidays.
Tesla market capitalisation overtakes Ford despite Ford’s greater vehicle sales
In 2016 Ford sold 6.7m vehicles and Tesla sold 0.08m vehicles.
• Tesla is today valued at £39bn with Ford at £36bn.
• So far Tesla has secured 0.4m pre orders for its Model 3. The future is electric – so says Tesla’s highly charged valuation.
China – new gold discovery claims discovery of its largest gold mine with $22 billion potential
• The biggest ever gold deposit of an estimated 380 tons has been discovered in China, announced Shandong Gold Group during a news conference in Beijing on Tuesday.
• The Xiling gold project in eastern China is >2km x 67m and could produce for the next 40 years.
• The mine is estimated to have the equivalent of 20 percent of the country’s 1,843 tons of gold reserves.
Dow Jones Industrials -0.06% at 20,650
Nikkei 225 -0.91% at 18,810
HK Hang Seng +0.62% at 24,261
Shanghai Composite 3,223 Markets are closed Monday/Tuesday
FTSE 350 Mining +0.29% at 15,557
AIM Basic Resources -0.40% at 2,643
Economic News
US – A separate manufacturing PMI came off slightly in Mar ending a strong post elections increase but settling at levels reflecting good growth momentum in the sector.
• The ISM manufacturing PMI came in at 57.2 last month, down from 57.7 in Feb, following six months of consecutive increases.
• New orders held up well while overseas demand picked up during the month coming just shy of the previous peak reached in late 2013.
• Employment gains were strong while input costs inflation continued to build up.
• The rate of ISM PMI is consistent with GDP growth closer to 3% compared to 2% seen over the last year, according to Bloomberg Intelligence estimates.
Spain – Unemployment shrank came down further in Mar taking the unemployment rate to 18% in Mar.
• The economy is estimated to have taken over half a million people out of unemployment over the last 12 months and accounting for around a half of the 1.2m decline across the Eurozone during the period.
• Unemployment (mom change): -48.6k v -9.4k in Feb and -40.9k forecast.
Australia – The nation records the second-largest nominal trade surplus on record beating estimates in Feb on the back of a recovery in the commodities prices and weak Australian dollar.
• The RBA left rates unchanged at 1.5% today in line with expectations although inflation continued to run below the central bank’s 2-3% target.
• The RBA highlighted a weakening state of the labour market and concerns over rapid appreciation in house prices in certain regions.
• The Australian dollar was little changed on the release of the trade data but came off 0.5% on the back of a more downbeat tone of the RBA announcement.
South Africa – S&P cut the nation’s sovereign credit rating below the investment grade level for the first time in 17 years.
• The agency brought the rating down to BBB- from BB+ while leaving the outlook unchanged as “negative”.
• “The executive changes initiated by President Zuma have put at risk fiscal and growth outcomes,” the agency said.
• The rand is down 1.5% this morning and is off more than 10% since speculation over the shake up in the government emerged early last week.
Currencies
US$1.0654/eur vs 1.0666/eur yesterday. Yen 110.53/$ vs 111.45/$. SAr 13.846/$ vs 13.492/$. $1.243/gbp vs $1.253/gbp.
0.757/aud vs 0.760/aud. CNY 6.887/$ vs 6.887/$.
Commodity News
Precious metals:
Gold US$1,258/oz vs US$1,246/oz yesterday
Gold ETFs 59.0moz vs US$58.9moz yesterday
Platinum US$958/oz vs US$952/oz yesterday
Palladium US$807/oz vs US$798/oz yesterday
Silver US$18.34/oz vs US$18.18/oz yesterday
Base metals:
Copper US$ 5,739/t vs US$5,870/t yesterday
• The Indonesia’s government issued a temporary permit to Freeport allowing the Company to export Grasberg concentrates following almost three months of negotiatios.
• Discussions over the terms of the mining permit including the revision in the local unit’s ownership will continue while the export license will allow the Company to ramp up mining operations.
• Grasberg is reported to have operated at around 40% of full capacity only feeding a smelter in Gresik on Java island.
• Workers at Southern Copper’s Toquepala and Cuajone mines and Ilo smelter processing mines’ concentrates for production of copper anodes are going on an indefinite strike on Apr 10.
• Union members are demanding bigger share of 2016 profits with leaders are reported to have informed the labour ministry of their intentions to down tools from midnight local time on Apr 10.
• Toquepala SX-EW and concentrator operations together with the Cuajone concentrator produced 312.8kt of copper in 2016.
Aluminium US$ 1,950/t vs US$1,969/t yesterday
Nickel US$ 9,775/t vs US$10,000/t yesterday
Zinc US$ 2,705/t vs US$2,785/t yesterday
Lead US$ 2,278/t vs US$2,339/t yesterday
Tin US$ 20,050/t vs US$19,910/t yesterday
Energy:
Oil US$53.0/bbl vs US$53.5/bbl yesterday
Natural Gas US$3.138/mmbtu vs US$3.229/mmbtu yesterday
Uranium US$23.50/lb vs US$23.25/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$75.9/t vs US$76.4/t
Chinese steel rebar 25mm US$557.3/t vs US$557.3/t
Thermal coal (1st year forward cif ARA) US$67.7/t vs US$67.0/t yesterday
Premium hard coking coal Aus fob US$175.7/t vs US$152.3/t – Damage and disruption caused by Clyclone Debbie has lifted coking coal prices by 15% to 175.70/t marking coking coal’s largest daily move since May 2013 as Chinese traders scrabble to secure supplies from US exporters.
• Damage in Queensland has knocked out the Goonyella rail road which carries around half the states seaborne coking coal. Queensland is currently supplying more than half the world’s seaborne coking coal with a particular emphasis on shipping into China.
Other:
Tungsten - APT European prices $208-216/mtu vs $187-198/mtu
Company News
ASA Resource Group* (LON:ASA) 2p, Mkt Cap £34m – Unfounded, anonymous allegations on Freda Rebecca gold mine operations
• ASA Resources Group reports the receipt of unfounded and anonymous allegations relating to the Freda Rebecca Gold Mine in Zimbabwe.
• The allegations relate to certain aspects of the financial management of the Freda Rebecca Gold Mine in which ASA holds an 85% stake.
• The board feels the allegations are unsubstantiated and designed to distract from the ongoing restructuring and may relate to certain disgruntled former employees.
• ASA Resources was seen by many in the market as suffering from excessive local and other management costs under previous management.
*SP Angel acts as Nomad and broker to ASA Resources and its analysts have visited ASA’s Bindura Nickel, Freda Rebecca and Zani Kodo assets.
BlueJay Mining* (LON:JAY – formerly LON:FAM) 13p, Mkt Cap £81m – Ilmenite price rise on supply shortage suggests better days for titanium mineral sands producers
(formerly FinnAust Mining)
BUY Target Price to be revised on higher ilmenite prices
• Titanium concentrate prices have risen by some 69% to around $180/t according to independent and other sources, eg Bloomberg (Metal Bulletin) prices.
• Spot prices are said to have been moving higher for some time for inland Chinese spot sales with contract prices catching up for international producers.
• Stockpiles of titanium concentrates, eg titanium slags and ilmenite concentrates which had served to depress prices through the last couple of years are said to have been used up.
• Supply: high iron ore prices had attracted titanium and vanadium rich magnetite into the market on the back of higher iron ore credits.
• The pullback in iron ore prices last year ended much of this production causing many titano-magnetite producers to shutdown. Chinese moves to limit polluting and loss making production of steel and in some casts mining has also served to reduce supply and demand for these types of ores.
• Some new supply may come on from India and Vietnam in the next 12-18 months with the reopening of idled mines which may curb excessive spot prices in China next year.
• Demand: there are a number of drivers for demand. Pigment producers are said to be working at full capacity to meet demand and make up for lost production from two fire damaged plants. Pigment prices are said to be at a level where they can afford higher ilmenite prices in order to keep pace with demand.
• Demand is also growing among titanium powders and wire producers for 3-D printing processes. Companies like Renishaw, GKN, EOS, ATI,
• already sell titanium powder for additive manufacturing
• Future demand: we expect a new avenue for future demand to grow in the supply of titanium metal powders for 3-D printing. We understand aerospace and other high-tech engineers are increasingly using 3-D printing to make complex and lighter metal components. You can buy a full metal dual extruder 3-D printer on Amazon for £550 “direct metal laser sintering” so it’s not just the preserve of high-tech engineers either.
• lmenite prices have risen dramatically to over US$177.5/t a 69% price increase according to Metal Bulletin prices reported on Bloomberg.
• Industry sources tell us that sulphate ilmenite prices have risen steadily in China since mid last year and dramatically since the beginning of this year due to major shutdowns in Sichuan Province early in the new year. This took around 2.4mtpa out of the Chinese domestic market though some 1.4mtpa has since returned.
• The shutdowns happened as pigment plants were increasing production with relatively low stock in the market hence the rise in prices. Chloride ilmenite which is less commonly used and requires a purer ore has seen a lesser price increase probably due to its disconnect with Chinese spot ilmenite sulphate prices.
• The price has moved beyond the expectation of many in the market with pigment producers said to be working flat out to meet demand and to make up for a number of plants which have suffered fire damage.
• Prices are negotiated individually for contracts with spot prices seen as more normal in China and longer term 3-month and 6-month price revisions said to be common more internationally with 90-day price protection on some contracts.
• A supply shortage looks likely to help to keep prices higher for longer with pigment producers seen as able to absorb concentrate price increases.
• Maiden resource estimate: BlueJay are due to put out a maiden, preliminary JORC resource sometime soon. BlueJay drilled some 500 auger and vibracore holes into the Moriusaq Bay and Interlak area with some areas grading >85% ilmenite at Moriusaq and >70% ilmenite at Interlak.
• Some 260 auger holes were drilled and sampled on raised beaches with 500kg collected for metallurgical testing. Moriusaq Bay samples appear to average >35%.
• Interlaq delta showed some very high >90% ilmenite grade areas prompting the digging of some 26 trenches >1m deep and 240 offshore vibracore holes in the marine environment.
• Not all of these holes will be included in the resource and the company reported reduced penetration of drilling in the Moriusaq due to almost pure layers of ilmenite bearing sediments. Eg further drilling will almost certainly increase this part of the resource significantly if more deeper holes are achieved.
• We refer investors to the map of the drilling, trenching and sampling program: https://www.titanium.gl/
• https://www.titanium.gl/announcements/completion-2016-work-programme-pituffik-titanium-project/
Conclusion: Higher than expected ilmenite prices appear to have caught many in the industry by surprise. While there is no surprise that prices have risen off what was seen as a particularly low base the scale and speed of the price rise has surprised many. International prices which are generally on longer-term 3-6 month contracts are now catching up on spot prices in China with pigment producer prices now seen as able to support higher ilmenite prices internationally. The result should be for a marked increase in valuations across the board for ilmenite mines and producers.
*SP Angel act as nomad and broker to Bluejay Mining
Goldplat* (LON:GDP) 7p, Mkt Cap £11.9m – Proposed payment from Goldplat to the Rand Refinery rejected
• Goldplat report today on its dispute with the Rand Refinery of South Africa.
• The dispute relates to an MoU with the Refinery to process a batch of silver sulphide material.
• The Rand Refinery have proposed a settlement whereby Goldplat would make a net payment to the Rand Refinery to settle the dispute.
• An Independent Expert has completed a report which Goldplat feels has strengthened its case.
• Goldplat is of the strong opinion that it should ultimately recover the ~£780,000 which it claims is owed to it by the Rand Refinery.
*SP Angel analysts have visited the Goldplat’s recycling plant at Benoni in Johannesburg
Sirius Minerals (LON:SXX) 20.5 pence, Mkt Cap £854m – FT urges caution
• The FT summed up Sirius Minerals in its Small Talk column on Sunday.
• The paper highlighted Sirius’ need expand the market for ‘Polyhalite’ in its comment that the company “must persuade farmers in Asia and the Americas that Sirius’ crop food is as good if not better than potash rival found close by. There is a potash glut at the moment”.
• The company reckon they can sell Polyhalite for as much as other more concentrated forms of potash sulphate that sell at $600/t. The problem is that Polyhalite sells for around $145/t and even this is likely to come under pressure if Sirius’ Woodsmith project increases supply into the market.
• The FT also questions the company’s $30/t production cost. We share their concern and remember a recent company in Sierra Leone where margins were squeezed between rising costs, falling prices and ill-conceived royalty and streaming agreements. We recall that London Mining was unable to restructure its debt and financing package leaving the directors little option but to scupper the company. An act which the directors performed admirably while hiding behind the very convenient excuse of the Ebola outbreak.
Conclusion: While we share the view for an increase in demand for fertilizer products on a longer term basis we also share the FT’s concerns over Polyhalite prices and its caution over Sirius Minerals.
Solgold* (LON:SOLG) 45p, Mkt Cap £641m – Holes 19-25 show ongoing massive intersections of copper and gold mineralisation
(SolGold holds an 85% interest in ENSA which which holds 100% of Cascabel)
• SolGold is reporting an update on holes 19 – 25 at the Cascabel project in Ecuador.
• The results show more of the very long intersections of copper, gold mineralisation which we have come to expect from Cascabel
• The first two holes, 19 and 20R show final assay results with hole 19 showing a particularly impressive intersection of 552m grading 0.68% copper and 0.45g/t gold.
• This equates to 1% copper equivalent or 1.41g/t of gold at today’s metal prices which are good numbers when considered over such long intersections.
• Hole 19 final results return:
o 1,344m @ 0.44 % copper and 0.28 g/t gold from 268m (at 0.10% CuEq cut-off), including:
o 980m @ 0.55 % copper and 0.36 g/t gold from 514m (at 0.30% CuEq cut-off), and
o 552m @ 0.68 % copper and 0.45 g/t gold from 822m (at 0.5% CuEq cut-off).
• Hole 20R intersects strongly mineralised porphyry clasts within hydrothermal breccia returning open-ended intersection of:
o 498.4m @ 0.20% copper and 0.15 g/t gold from 844m (at 0.10% CuEq cut-off), including:
o 126.0m @ 0.27 % copper and 0.32 g/t gold from 1136m (at 0.30% CuEq cut-off), and
o 44.0m @ 0.27 % copper and 0.58 g/t gold from 1202m (at 0.50% CuEq cut-off).
• Visual estimates:
• SolGold also reports estimates based on visual inspection of Hole 21. It is unusual to describe and estimate grade in this way but we consider it to have value based on previous drill results from the Cascabel project.
• Hole 21 shows another massive intersection of 925m from 685m depth. Visual inspection shows an estimated “average of >1.5 volume-percent chalcopyrite, which includes a zone that averages >2.0 volume-percent chalcopyrite over a down-hole length of approximately 490m. The abundance of bornite in the 925m interval is visually estimated to range from zero to 0.5 volume-percent. Chalcopyrite and bornite are copper sulphide minerals that contain 34.6% and 63.3% copper, respectively. Assay results for Hole 21 are expected in late April 2017.”
• Hole 22 also intersects visible copper sulphide mineralisation from a much shallower 253m depth to around 1,150m depth. The drill core also shows “very strong bornite mineralisation around 960m depth”. The drill core also shows multi-directional quartz -chalcopyrite ±bornite veining occupies up to a maximum of 23 volume-percent in parts of Hole 22. Assay results for Hole 22 are expected in early April 2017.”
• “Hole 23R intersects hydrothermal breccia and strong phyllic alteration, with the presence of mineralised porphyry clasts in parts of the breccia. Hole 23R, at a current depth of 356.6m, is planned to intersect deep untested mineralisation up to 1800m below surface and has a planned hole depth of at least 2000m.”
• “Hole 24 continues drilling at Alpala Southeast, at a current depth of 649.5m testing approximately 570m to the southeast of Hole 23R. To date Hole 24 has intersected strong pyrite and trace chalcopyrite and trace bornite and molybdenite mineralisation. Hole 24 is planned to extend the known mineralised corridor at Alpala to some 1150m from Hole 13 in the northwest.”
• “Hole 25 continues drilling at Hematite Hill, at a current depth of 560.5m testing some 250m to the southeast of Hole 23R. To date Hole 25 has intersected hydrothermal breccia with strong phyllic alteration and trace chalcopyrite mineralisation, and has a planned hole depth of 2000m.“
• A fourth man-portable drill rig is expected on site shortly.
• See maps etc at: https://www.rns-pdf.londonstockexchange.com/rns/4981B_-2017-4-4.pdf
Conclusion: Hole 19 presents a particularly good intersection. We are grateful for the estimate given on Hole 21 where management have taken the time and trouble to work out a probably estimate grade range by visual inspection. This sounds like a particularly good hole and we should see the assay results for this in the next few weeks.
We note, many joint ventures with major mining companies are reluctant to publically report results till absolutely necessary and often then in large batches after the management of the major have formed their view of what they want to do.
We are therefore pleased to see SolGold continuing to publish drill results as they are released and to take the trouble to give an early estimation of the potential grade from what sounds like a particularly interesting drill hole. While we would not want to see many mining companies report results in this way we do feel this is appropriate in this particular situation and we look forward to the final assay reconciliation. If Cascabel does turn out to be one of the world’s next major copper mines then we may be grateful for SolGold’s early reporting of its results.
Strongbow Exploration (CVE:SBW) CAD0.1, Mkt Cap CAD8.4m – Strongbow files NI 43-101 and PEA on SEDAR for South Crofty Tin mine in Cornwall
• Strongbow Exploration report the filing of their Preliminary Economic Assesment and the NI 43-101.
• The company previously reported headline figures from these reports on 17 February. Further details are now publically available on SEDAR
• https://www.sedar.com/homepage_en.htm
• Key figures from the PEA are:
o NPV US$130.5m after-tax NPV – assuming 5% discount, tin at $10/lb, copper $2.65/lb, zinc $0.90/lb
o IRR 23.4%
o CAPEX US$118.7m inc contingency
o Sustaining capital $83.8m
o Cash cost $3.36/lb of tin equivalent for life of mine
o Throughput 2.575mt on 1,000tpd plant throughput
o Grade average 1.55% tin equivalent
o Recovery rates 88-90% for tin
o Construction over 24-36 months