IronRidge Resources* (LON:IRR) – Exploration agreement signed in Ivory Coast following due diligence exercise
Mkango Resources* (LON:MKA) – Financial statements
W Resources (LON:WRES) – vendor financing contract
Gold $1,275/oz – Gold price rises on rising geopolitical tensions.
• Trump has sent a clear signal to China and to the world.
• Trump tweeted that the US is prepared to “solve the problem” of North Korea accelerating its missile development and nuclear programme unilaterally.
• If N Korea launches any missiles in the direction of the US fleet in the South China Seas or even S Korea this may be sufficient provocation for the US to take action.
• We believe Trump has given China an ultimatum. It has suited China to leave N Korea well alone as China will inevitably have to deal with any refugee crisis or fallout from its troublesome neighbour.
• China in response has announced that it will switch away from North Korean coal and will buy coal from the US. Which suggests that either China has completely missed the point of Trump’s message or that China is simply not taking the threat seriously.
• Trump may well take that as a bit of an insult and act with the support of other threatened nations. If the US removes N Korea’s leadership then China may feel obliged to feed the population of N Korea or become hugely preoccupied with a potentially destabilising refugee crisis. Neither outcome is good for China.
Safe haven assets gain on escalated rhetoric from major players in the geopolitical arena
• The US criticised the Kremlin for “shielding” Assad that is said to have used chemical weapons at Khan Sheikhoun.
• President Putin called chemical attacks in Syria as “provocations” hours before Secretary of State Rex Tillerson arrived to Moscow for an official visit.
• The US sent the USS Carl Vinson with an escort of guided-missile cruiser and two destroyers after the latest missile test by North Korea last week.
• The Vix index measuring the expected S&P 500 Index volatility climbed to the highest since Nov last year when concerns built up ahead of result of US presidential elections.
• Additionally, in France a far-left candidate Jean-Luc Melenchon have been gaining support in the presidential race according to the latest polls.
• 2 year French bond yields hit the highest level in Arp on Tuesday (-0.275%) reflecting investors’ nervousness ahead of elections scheduled for 23 Apr.
• Gold hit a high of $1,280/oz in early hours today but came off slightly since then settling around $1,275/oz, up nearly $20/oz on Monday.
• German 2 year bond yields hit the lowest level in a month (-0.848%).
• A sell off in the iron ore market resumed with port inventories remaining close to record high and domestic mines ramping output up.
• 62% Fe Qingdao delivered iron ore price fell to $74.4/t (-0.4%) on Tuesday while DCE futures were down 2.5% today at CNY 510.5/t.
Giant, high-grade Tellurium discovery made at ‘Tropic Seamount’ just 1,000m deep in Atlantic Ocean
Nautilus Minerals (NUS CN) – C$0.23/s, mkt cap C$152m – Nautilus have the capability
Lucrative nodules
• The discovery by the UK Geological Survey is being investigated using submersible robots in the Atlantic 300 miles off the Canary Islands
• The tellurium discovered is >50,000 times the grade seen on land.
• Tellurium is used in a type of advanced solar panel as well as wind turbines and electronics and this discovery may prove to be a significant advance for the industry.
• Marine geologists had expected to find minerals on the seamount which rises 3,000m from the seabed but the concentration of grade has taken many by surprise
• The 2,670t of tellurium on the seamount is around 1/12th of global supply and is worth around US$93m at current prices of around US$35,000/t.
• Nautilus Minerals (NUS CN) is the only serious listed sub-sea mining company and are using British Engineering contractors to build their deep-sea mining machinery.
• Two SP Angel analysts have travelled to see Nautilus’ new subsea machinery being built and tested in Newcastle on Tyne and one of our mining analysts has even travelled to see Nautilus’ drilling a volcanic massive sulphide ‘VMS’ deposit off the black sea.
• Nautilus’ sub-sea machinery is impressive and is essentially an upgraded and heavy duty version of kit which is currently in use in the oil and gas industry for digging trenches for cables and pipelines.
• The company are preparing to mine at depths of 2,000m so this new tellurium discovery at a mere 1,000m should be a piece of cake, though the mid-Atlantic presents its own challenges.
• Chatham Rock, a New Zealand company were refused permission by the NZ authorities to mine phosphate nodules through simple suction dredging on the Chatham Sound off the coast of NZ last year setting sub-sea mining back in the region.
• What we don’t get is if sub-sea mining is banned for disturbing the sea bed then why is trawling still allowed where fish trawlers destroy huge areas of seabed stirring up plumes of silt which then cover even larger areas.
• Sub-sea mining and suction dredging removes most of the silt plume as it sucks up the silt. Silt can then be placed back into trenches on the seabed reducing disturbance.
Dow Jones Industrials -0.03% at 20,651
Nikkei 225 -1.04% at 18,553
HK Hang Seng -0.12% at 24,060
Shanghai Composite -0.79% at 3,263
FTSE 350 Mining +0.51% at 16,080
AIM Basic Resources +1.85% at 2,725
Economic News
China – Inflation pressures remained low as consumer prices growth continued at a moderate pace in Mar.
• At the other end of the spectrum, producer prices climbed strongly helping manufacturers’ margins.
• CPI (%yoy): 0.9 v 0.8 in Feb and 1.0 forecast.
• PPI (%yoy): 7.6 v 7.8 in Feb and 7.5 forecast.
Japan – Producer prices which emerged from the negative territory in Jan posted a third consecutive increase in Mar.
• Although the index is wroking off the low base as prices declined for 21 months in a row through 2015-16.
• PPI (%mom/yoy): 0.2/1.4 v 0.3/1.1 in Feb and 0.3/1.4 forecast.
UK – Employment numbers came in weaker than forecast while wages growth slowed to the weakest in seven months in the three months through Feb/17.
• After adjusting for accelerating inflation, real wages climbed only 0.1%yoy, the weakest since Q3/14.
• Inflation held at 2.3% in Mar, while the BoE expects consumer prices growth to accelerate to 3% towards the end of the year highlighting risks to consumer demand growth.
• Employment Change (3m average): 39k in Dec-Feb v in 92k Sep-Nov and 70k forecast.
• Unemployment Rate (3m average): 4.7% v 4.7% in Nov-Jan and 4.7% forecast.
• Av Weekly Earnings (3m yoy%): 2.3 v 2.3 in 3m to Jan and 2.2 forecast.
• Av Weekly Earnings ex Bonus (3m yoy%): 2.2 v 2.4 in 3m to Jan and 2.1 forecast.
Currencies
US$1.0616/eur vs 1.0584/eur yesterday. Yen 109.69/$ vs 110.53/$. SAr 13.754/$ vs 13.939/$. $1.249/gbp vs $1.241/gbp.
0.749/aud vs 0.750/aud. CNY 6.896/$ vs 6.902/$.
Commodity News
Precious metals:
Gold US$1,275/oz vs US$1,254/oz yesterday
Gold ETFs 59.3moz vs US$59.1moz yesterday
Platinum US$966/oz vs US$953/oz yesterday
Palladium US$802/oz vs US$800/oz yesterday
Silver US$18.29/oz vs US$17.94/oz yesterday
Base metals:
Copper US$ 5,708/t vs US$5,792/t yesterday – Tongling Nonferrous Metals, the largest refined copper producer in China, is “actively seeking” to improve copper self-sufficiency as local smelters increase investments in overseas mines, the Company said.
• The Company is planning to cut production to 1.21mt this year, down from 1.30mt in 2016.
Aluminium US$ 1,922/t vs US$1,945/t yesterday
Nickel US$ 9,760/t vs US$10,135/t yesterday
Zinc US$ 2,578/t vs US$2,663/t yesterday
Lead US$ 2,234/t vs US$2,246/t yesterday
Tin US$ 19,875/t vs US$20,200/t yesterday
Energy:
Oil US$56.4/bbl vs US$55.5/bbl yesterday
Natural Gas US$3.170/mmbtu vs US$3.238/mmbtu yesterday
Uranium US$23.50/lb vs US$23.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$68.3/t vs US$72.0/t
Chinese steel rebar 25mm US$538.2/t vs US$543.5/t
Thermal coal (1st year forward cif ARA) US$65.7/t vs US$66.6/t yesterday
Premium hard coking coal Aus fob US$300.3/t vs US$283.1/t
Other:
Tungsten - APT European prices $205-215/mtu vs $208-216/mtu
Company News
IronRidge Resources* (LON:IRR) price 44.8p, Mkt Cap £117m – Exploration agreement signed in Ivory Coast following due diligence exercise
• IronRidge Resources is forging ahead with its exploration portfolio in the Ivory Coast.
• The company now has access rights to eight applications and licenses covering some 3,110km2 including Gboguhue.
• Due diligence which involved a fairly extensive exploration program over the prospect area covering 178 soil samples and some rock chips has been done.
• Gboguhue: gold in soil anomalies up to 0.45g/t show two target areas along strike from a third party 700Koz and growing gold discovery. Gold in soil is a useful indicator for a potential gold deposit lying below and is often reported in parts per billion (ppb). Soil anomalies in tropical weathering terranes with levels greater than 100ppb (0.1g/t) gold are typically considered highly anomalous.
• Structural trend: IronRidge are interested in a land position along a particular structural trend which runs down from Burkina Faso and through the Ivory Coast and is proven to host significant gold deposits. IronRidge’ strategic and prospective land position is now growing along strike in both directions around a third party 700Koz and growing gold discovery.
• The idea is that anomalies along the shear zone will have caused gold to precipitate out of gold-bearing hydrothermal fluids at various points along the shear. Sometimes this precipitation may be caused by changes in pressure, PH or some other environmental factor.
• The Birimian sequence of rocks hosts some of the world’s largest gold orebodies in splays off the main shear zone and the team is keen to use their expertise to follow indicators to find new deposits in this relatively large and prospective tenement area.
*SP Angel act as Nomad and Broker to IronRidge Resources
Mkango Resources* (LON:MKA) 0.06p, Mkt Cap £5m – Financial statements
• Mkango Resources, the rare earths project company, have published their results for the year ending December 31 2016.
• The results are, perhaps, less meaningful than the progress made last year in bringing Noble Metals on board as an offtake partner and shareholder.
• The company is also collaborating with Metalysis on a project to research and develop rare earth alloys and powders for use in 3D printing machines.
• This is a particularly interesting project and could lead to some ground breaking work in the development and rapid commercialisation of new alloys.
• For example: Norsk Titanium announced yesterday it is to deliver the world’s first FAA-approved 3D printed structural titanium components to Boeing.
• This highlights how fast technology and manufacturing processes are moving with respect to 3D printing indicating that any development in new alloys may lead to future demand for more high value-added alloy powders.
• Management recently announced new work plans for Songwe Hill and the Thambani uranium prospect to improve the processing flowsheet at Songwe Hill with a view to reducing costs in the process plant design. There are always improvements to be found in these things in our experience.
• REE market has changed with China now importing significant tonnages of REEs following the depletion of stockpiles sold off at discount prices following the collapse of a particularly large investment scheme in recent years. This is good news for REEs and it is not easy to see where China is going to buy sufficient stocks of REE concentrates for its future needs.
• A World Bank funded airborne survey highlighted a number of new potential REE targets in the Songwe Hill area indicating future potential to add further resources in the area.
• The team also acquired rights to technology for the regeneration of hydrochloric acid representing a significant potential cost saving for the Songwe Hill project.
• Financial statements: the 2016 statement shows expenses of US$1.15m for 2016 vs US$0.9m for 2015. Around half of this was G&A while around US$0.5m relates to share-based payments in recognition if contributions made by key personnel to increase their proprietary interest in the company and thereby encourage their continued association with the company.
• The revaluation of the unrealised gain on the revaluation of warrants added back US$0.58m though this was less than the US$1.3m added back a year earlier.
• The net result was a relatively modest loss of US$0.86m vs US$5.3m a year earlier.
• This demonstrates the lean and cost conscious way in which management run the company and its two listings while progressing with the Songwe Hill rare earths project in Malawi.
• https://www.sedar.com/
• https://www.mkango.ca/s/financials.asp
Conclusion: Mkango’s valuation looks undervalued and unloved. The company looks well set to benefit from a forecast rise in rare earth prices and renewed interest in REE supply.
*SP Angel acts as Nomad and Broker to Mkango Resources
W Resources (LON:WRES) 0.3p, Mkt Cap £15.8m – vendor financing contract
• W Resources report they have awarded vendor financing contracts to allmineral a German company at a contract price of €4.98m.
• The jig and mill configuration are designed to upgrade the crushed ore by a factor of 1.5x to achieve an expected 91% metal recovery by rejecting some 55% of the run of mine ore.
• The plant has a design capacity of 350tph and could allow the La Parrilla mine to expand to 3.5mtpa from 1.95mtpa.
Conclusion: Tungsten prices are low at around US$200/mtu with new mines such as Hemerdon struggling in this price environment. Ormonde Mining are working towards construction of their world-class Barruecopardo tungsten mine in Spain but have delayed commissioning till mid-2018, almost certainly due to prevailing market conditions. We expect more tungsten supply to hit the market from mines in Myanmar and as a byproduct of tin mining so the last thing the tungsten market needs is another new source of supply to absorb.