Bluejay Mining* (LON:JAY) – BUY Target Price 22p – Strong ongoing demand for ilmenite concentrates
BlueRock Diamonds* (LON:BRD) – Positive operational update suggests better times ahead for Bluerock
Peak Resources (ASX:PEK) – BFS study thoughts
Solgold* (LON:SOLG) – Hole 24 extends strike length of Alpala prospect to >1,300m x 700m
Trump currency remarks as well as high geopolitical tensions sent gold prices to the highest level since Nov/16 with the metal trading around $1,287/oz.
• The US$ index is up slightly this morning following a sharp slump on Thursday following Trump saying the currency “is getting too strong”.
• “Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good… It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.”
• The President changed his mind towards the Chinese FX policy taking his words over currency manipulations back.
• A sudden change in sentiment was attributed to the fact that he had not seen Chinese manipulating the renminbi for months and also did not want to undermine talks over North Korea.
• Following an intense series of meetings between US representatives led by State Secretary Rex Tillerson and Russian counterparts headed by President Putin and Sergei Lavrov, tensions seem to have subsided between two parties.
• “We have reached a better understanding with each other after what we have done today and hope contacts will be continued,” Foreign Affairs Minister Lavrov said.
• Both US and Russian sides agreed to establish a working group to improve ties and “consider further proposals about the way forward in Syria”.
• On Wednesday, Russia vetoed an effort to condemn the gas attack in Syria at the UN Security Council; whereas, President Trump called relations with Russia as being at an “all time low”.
• Copper prices bounced off three months lows hit yesterday on the back of stronger than expected Chinese trade data.
• At Las Bambas, a 400ktpa copper operation in Peru, MMG agreed to reopen a transportation link to the mine with local communities on Apr 18; landowners will receive payments for use of parts of road crossing their land.
• At Chuquicamata, a c.300ktpa copper mine in Chile, a number of unions expressed their intentions to stage protests if Codelco does not meet their demands; previously, five unions participated in a “warning protest” blocking access to the mine in early hours on Wednesday; Codelco called protests illegal but was prepared to sit and hold talks over demands.
• Iron ore futures were weaker in China on Thursday while benchmark 62% Fe delivered to Qingdao material traded at $68.0 on Wednesday (-8.5% on the previous day), according to MetalBulletin.
121 Mining Investment conference – sponsored by SP Angel - 10–11 May 2017
• The 121 team are running the London 121 Mining Investment conference at No 8 Fenchurch Street in The City on 10-11 May.
• The event is for registered investment professionals, mining and exploration companies and mining analysts and brings the industry together alongside a series of investor briefings.
• 65 quality producers, developers and explorers attending / presenting
• I’m talking at 3:00 on the Thursday on: ‘UK mining outlook - A new era of UK funded exploration and production’.
• Follow link for investor passes - https://www.weare121.com/121mininginvestment-london/registration/register-investor/
Look out for any AIM listed companies trying to slip out bad news on the last working day before the Easter break
• We will be watching to see if any AIM mining companies are spineless enough to try this trick.
• We noticed that African Potash reported yesterday a change of auditors, rarely a good sign.
Dow Jones Industrials -0.29% at 20,592
Nikkei 225 -0.68% at 18,427
HK Hang Seng -0.25% at 24,253
Shanghai Composite +0.07% at 3,276
FTSE 350 Mining -0.30% at 15,486
AIM Basic Resources +0.78% at 2,747
Economic News
China – With the timing of holidays at the start of the year, trends in the trade data are best considered cumulatively over the first quarter.
• Both exports and imports posted strong performance in Q1/17 compared to the previous year with exports up 14.8%yoy and imports up 31.1%yoy (both in CNY terms).
• Imports (%yoy): 20.3 v 38.1 in Feb and 15.5 forecast.
• Exports (%yoy): 16.4 v -1.3 in Feb and 4.3 forecast.
• Imports (%yoy CNY): 26.3 v 44.7 in Feb and 15.0 forecast.
• Exports (%yoy CNY): 22.3 v 4.2 in Feb and 8.0 forecast.
Australia – The AUD jumped against the US$ on the back of good Mar employment numbers.
• The economy added 60.9k jobs, three times the amount forecast by markets, with unemployment rate holding steady at 5.9% and participation rate slightly edging higher (64.8% v 64.6% in Feb).
• An increase in jobs was also of good quality from the view of sustainability of those gains with full time employment rising 74.5k, up from +38.8k recorded in Feb.
DRC – Local authorities are meeting with South African Eskom to discuss potential power-supply contract to pug in a shortfall in the Katanga region, Congo Chamber of Mines spokesman said.
• Discussion will be attended by the local SNEL utility and representatives of the chamber of mines with estimated shortfall of 950MW of capacity.
• “Eskom has said they have 1,000MW which they would like to make available to the region if the other utilities are able to sign long-term supply contracts.”
Currencies
US$1.0655/eur vs 1.0616/eur yesterday. Yen 109.08/$ vs 109.69/$. SAr 13.484/$ vs 13.754/$. $1.256/gbp vs $1.249/gbp.
0.758/aud vs 0.749/aud. CNY 6.884/$ vs 6.896/$.
Commodity News
Precious metals:
Gold US$1,285/oz vs US$1,275/oz yesterday
Gold ETFs 59.3moz vs US$59.3moz yesterday
Platinum US$974/oz vs US$966/oz yesterday
Palladium US$804/oz vs US$802/oz yesterday
Silver US$18.52/oz vs US$18.29/oz yesterday
Base metals:
Copper US$ 5,703/t vs US$5,708/t yesterday – Chinese copper concentrates imports in Q1 reflect production disruptions at major operations including Escondida, Grasberg and Cerro Verde.
• Q1 inbound shipments of copper concentrates were up 7.7%yoy at 4.3mt, this compares to double digit growth rates recorded in 2016.
• Q1 inbound shipments of unwrought copper were down 20%yoy to 1.15mt,; although tonnages have been recovering lately.
• Mar imports climbed 26%mom to 430kt.
• Smelters are reported to have also stepped up purchases driven by a stronger seasonal demand over Mar-May as manufacturing activity accelerates following weak winter months.
Aluminium US$ 1,911/t vs US$1,922/t yesterday
Nickel US$ 9,765/t vs US$9,760/t yesterday
Zinc US$ 2,613/t vs US$2,578/t yesterday
Lead US$ 2,261/t vs US$2,234/t yesterday
Tin US$ 19,810/t vs US$19,875/t yesterday
Energy:
Oil US$55.9/bbl vs US$56.4/bbl yesterday
Natural Gas US$3.158/mmbtu vs US$3.170/mmbtu yesterday
Uranium US$23.50/lb vs US$23.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$66.5/t vs US$68.3/t
Chinese steel rebar 25mm US$522.4/t vs US$538.2/t
Thermal coal (1st year forward cif ARA) US$65.3/t vs US$65.7/t yesterday
Premium hard coking coal Aus fob US$300.3/t vs US$300.3/t
Other:
Tungsten - APT European prices $205-215/mtu vs $208-216/mtu
Company News
Bluejay Mining* (LON:JAY – formerly LON:FAM) 13.8p, Mkt Cap £101m – Strong ongoing demand for ilmenite concentrates
(formerly FinnAust Mining)
BUY Target Price 22p recently raised from 15p
• Kenmare report today on strong demand for ilmenite through the first quarter due to solid offtake in the Chinese spot market for titanium pigment and slag production.
• The better application of tighter environmental controls in China is helping the market among other issues. Other sources of titanium mineral supply have dramatically reduced with cutbacks in titano-magnetite production.
• A number of fires at pigment producers has reduced capacity within the processing industry but this has led to a rise in pigment prices and margins enabling processors to better afford the recent rise in ilmenite concentrate prices.
• Spot prices in China appear to be leading longer-term contract prices around the rest of the world with a rise of 69% recorded by the Metal Bulletin recently though we are told this price increase is simply catching up with Chinese and other spot prices.
Conclusion: Ongoing reports on the strength of the ilmenite market should be good for BlueJay and good for its prospects for singing longer term offtake contacts. The recent revelation that BlueJay has what is considered to be the world’s highest grade ilmenite resource combined with strong ongoing demand for ilmenite concentrates suggest to us that BlueJay may be a strong candidate for a takeover by one of the major players.
*SP Angel act as nomad and broker to Bluejay Mining
BlueRock Diamonds* (LON:BRD) 4.8p, Mkt Cap £2.6m – Positive operational update suggests better times ahead for Bluerock
• BlueRock Diamonds report the recovery of a greater proportion of larger diamonds from its hard rock kimberlite mine and process plant at Kareevlei in Kimberley, South Africa.
• The mine reports around four times the number of stones over 5cts recovered recently including three diamonds >6cts including a larger stone at 9.5cts.
• The value per carat and value per tonne should improve significantly with the greater proportion of larger stones recovered.
• The value per carat for the April tender is estimated at >$500/ct vs $293/ct seen previously.
• Now that the process plant is working very much better it would be interesting to reprocess last year’s tailings to see if the better recoveries are simply down to better plant performance.
• Mine grades have effectively doubles to 3.02cpht from 1.53cpht seen previously.
• Now that the Kareevlei plant is working more like it should do, management are also considering and evaluating another previously unmined Kimberlite prospect.
• The weather: unusually heavy rainfall caused the plant to stop on 6th April. It will restart as soon as it can. The plant processed 9,310t in March and managed 3,330t in the first three days in April indicating much greater processing potential weather permitting. This equates to potential production of around 33,000tpm though the target is to process 25,000t per month.
• Processing 25,000t per month should put the company back on track with our original model though mine grades are still short of the 6cpht we had hoped for. However, indications are that diamond values may prove to be very much greater than we were expecting. If $500/ct proves to be consistent then this would be more than double our initial estimates and would suggest the mine is more valuable than first thought.
• Any improvement in grade from here will be a significant bonus and considering the newly-adapted plant and mining team are still getting going we are hopefully of better performance to come. We also reckon the plant can process greater throughput if required.
• President Zuma has been hugely helpful to the South African mining industry through the sacking of a number of respected high ranking politicians which caused the currency to collapse. While the President succeeded in reducing the rating on South African debt to junk bond status his actions are serving to revive the fortunes of some exporters.
Conclusion: This is great news from BlueRock on the improvement in grade and particularly on the per carat value of the stones produced. The tonnage processed and parcels of carats assessed are too small to form a firm view but we expect to see better news from here. The diamond resource was initially estimated to rise to 6.3cpht at the K1 pipe, 4.5cpht at the K2 pipe and 3.7cpht at the K3 pipe indicating potential for a significant increase in our valuation if the per carat value is maintained at around higher levels.
*SP Angel acts as Nomad & Broker to BlueRock Diamonds
Peak Resources (ASX:PEK) A$0.1, Mkt Cap A$48m – BFS study thoughts
• We were a bit surprised at the figures presented in the Peak Resources BFS.
• For such a high grade resource we would have expected better IRR and NPV valuations.
• Even then the valuation has been done at higher prices for REEs, though we see this as justifiable. It does go to demonstrate the desperate levels which REEs have sunk to.
• The market report section in the BFS gives a good explanation of what is good about project.
• Highlights taken from yesterday’s BFS are:
o Capex $356m – pre-production
o Capital intensity $4.96/kg NdPr
o Revenue $228mpa average
o Operating margin 64%
o Operating costs US$83m average
o Operating cost of US$ 34.20/kg NdPr* Oxide
o Strip ration of 1.77 is low
o Cash flow $104mpa
o Mine life 30 years on a 18.5mt ore reserve grading 4.8% REO containing 887,000t of rare earth oxide
o Post Tax NPV10 of $445 million
o Post Tax NPV8 of $633 million
o Pre Tax IRR of 25% and Post Tax IRR of 21%
• Average LOM Product Prices:
o NdPr Mixed Oxide 2N Min 75% Nd2O3 US$ 85.00/kg
o Lanthanum rare earth oxide equivalent US$ 4.41/kg
o Cerium rare earth oxide equivalent US$ 2.25/kg
o SEG and Mixed Heavy oxide equivalent US$ 8.00/kg
Conclusion: The project appears to be affected by relatively low recovery rates which we hope Peak may be able to improve as there should be an element of conservatism in consultant reports. Equally, there is also the risk that some recoveries are not met.
Peak gain the benefit from higher grades on most other REE projects but lose this advantage in poorer recovery rates. A lower heavy rare earth content, most importantly dysprosium, does not help with heavy rare earth recoveries also lower than light rare earth recoveries. These factors combined contribute to a lower REE basket sales and value.
Part of the problem is that Peak is planning to have two processing sites and is concentrating material for export out of Tanzania which may be a suboptimal route from a processing perspective. While we love the idea of building a REE process plant / refinery on Teeside in the North of England, recovery losses in the production of a high-grade REE concentrate in Tanzania appear to render this strategy less attractive.
While capital intensity and operating costs are relatively low the overall capital cost is large making this a potentially tough project to finance given the location of the mine in Tanzania and the potential for its plant in the UK to end up stranded with no suitable ore if the Tanzanian mine is shutdown or if REE concentrate exports are banned and the government suddenly insists on the second stage processing within Tanzania as happened with gold concentrates recently.
Solgold* (LON:SOLG) 44p, Mkt Cap £623m – Hole 24 extends strike length of Alpala prospect to >1,300m x 700m
(SolGold holds an 85% interest in ENSA which which holds 100% of Cascabel)
• SolGold report further massive intersections of copper sulphide mineralisation at Alpala and at Hematite Hill prospect within the Alpala project area.
• Hole 23 at Alpala is now at a depth of 543m and is showing increasing visible chalcopyrite and molybdenum mineralisation earlier than expected. The hole planned to intersect higher grade copper, gold mineralisation between 700-1800m and will continue to a depth of 2km.
• Hole 24 at Alpala Southeast is at 933m and looks like it is close to the core of the Greater Alpala porphyry system.
• The hole is showing strong mineralisation below 739m with an average 1.6 volume-percent chalcopyrite giving a good indication for strong copper equivalent grades when assayed. Bornite, a strong copper mineral is also seen visually as ranging from 0-0.3 volume-percent.
• “Chalcopyrite and bornite are copper sulphide minerals that contain 34.6% and 63.3% copper, respectively.”
Conclusion: SolGold continue to extend the scale of the Alpala prospect with strong visual indication of strong copper mineralisation. The increasing scale of the project increases its potential for block-cave mining while indications of strong copper, gold grades improves its economic prospects. Hole 22 showed that the deposit extends closer to surface than previously known further improving its economic potential.