Anglo Asian Mining* (LON:AAZ) 19.5p, Mkt Cap 22m – Operations review
ASA Resource Group* (LON:ASA) 0.95p, Mkt Cap £16m – Ning and Kwan terminated without notice as company continues investigation into missing millions
Bluejay Mining* (LON:JAY– formerly FAM LN) 15p, Mkt Cap £110m – BlueJay steps further toward commercialisation on Pituffik project in Greenland
IronRidge Resources* (LON:IRR) price 43p, Mkt Cap £101m – Expanding the exploration portfolio in Ivory Coast
Metal Tiger (LON:MTR) 2.8 pence, Mkt Cap £22m – Metal Tiger placing falls short of expectations.
Vast Resources (LON:VAST) 0.5 pence, Mkt Cap £23m – Vast Resources warrants from offering to become tradeable on JP Jenkins
Major miners pull back on weaker iron ore prices and base metals with although the latest Chinese economic data showing better than expected growth in Q1/17.
• Gold prices came just $5/oz off the $1,300/oz mark on Monday before settling at $1,285/oz this morning on the back of safe haven demand amid continuing aggressive rhetoric between North Korea and the US.
• Copper prices are off slightly this morning trading $5,655/t extending the recent weakness in the metal’s price amid ramp up of major operations post temporary disruptions.
• Iron ore futures on the DCE are off 3.7% today on top of a nearly 3% decline on Monday with prices having now undone all gains seen earlier in the year and posting a 5.3% decline YTD.
• Steel rebar prices in China are also weak (-2.2%) taking the YTD run to -0.1%.
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/
Dow Jones Industrials +0.90% at 20,637
Nikkei 225 +0.35% at 18,419
HK Hang Seng -0.97% at 24,027
Shanghai Composite -0.79% at 3,197
FTSE 350 Mining -2.41% at 15,157
AIM Basic Resources -0.29% at 2,739
Economic News
US – The US Treasury confirmed that the tax reform bill timing has slipped following delays in getting changes to the healthcare legislation through the Congress, FT reports.
• Steven Mnuchin said the deadline for tax reforms to pass through the Congress before August was “highly aggressive to not realistic at this point”.
• “It started as an aggressive timeline. It is fair to say it is probably delayed a bit because of the healthcare.”
China
• GDP (%yoy): 6.9 v 6.8 in Q4/16 and 6.8 forecast.
• Industrial Production (%yoy): 7.6 v 6.0 in Feb and 6.0 forecast.
• Retail Sales (%yoy): 10.9 v 10.9 in Feb and 9.7 forecast.
• FAI (%YTD): 9.2 v 8.9 through Feb and 8.8 forecast.
France – Mr Melenchon, a far-left presidential candidate, expected to take 11% in coming elections a week ago increased his support to 19% ahead of the first round of votes due this Sunday.
• This compares to 22.5% for Macron and 23% for Le Pen.
• The second round of votes are expected in May 7.
• The risk of having a far right candidate and a far left one in the vote off in the second round of elections increased nervousness in the marketplace with French bond yields climbing to the highest in a year.
IMF – Christine Lagarde insisted that the Fund’s participation in the third Greek bailout for €86bn is conditional on the government implementing reforms agreed by euro zone finance ministers earlier this month.
• “If Greeks debts are not sustainable based on IMF rules and reasonable parameters, we will not take part in the programme,” Lagarde told German newspaper Die Welt in an interview published today.
• Despite little clarity on the IMF contribution to the bailout programme, Greek bond prices are stable with yields on benchmark 2y and 10y notes trading at the lowest since the beginning of the year.
Philippines – Rodrigo Duterte supported the Regina Lopez candidacy as head of the Department of Environment and Natural Resources (DENR).
• Under the protocol, Lopez candidacy will now need to be approved by the Commission on Appointments during the hearing on May 3.
• Duterte has long been in support of Lopez saying that he would rather give up 70bn peso ($1.4bn) per annum in mining royalties than fail to protect the environment (Mar11).
Currencies
US$1.0648/eur vs 1.0655/eur yesterday. Yen 109.02/$ vs 109.08/$. SAr 13.377/$ vs 13.484/$. $1.259/gbp vs $1.256/gbp.
0.755/aud vs 0.758/aud. CNY 6.889/$ vs 6.884/$.
Commodity News
Precious metals:
Gold US$1,283/oz vs US$1,285/oz last week
Gold ETFs 59.6moz vs US$59.3moz last week
Platinum US$983/oz vs US$974/oz last week
Palladium US$789/oz vs US$804/oz last week
Silver US$18.39/oz vs US$18.52/oz last week
Base metals:
Copper US$ 5,663/t vs US$5,703/t last week
Aluminium US$ 1,940/t vs US$1,911/t last week
Nickel US$ 9,595/t vs US$9,765/t last week
Zinc US$ 2,597/t vs US$2,613/t last week
Lead US$ 2,210/t vs US$2,261/t last week
Tin US$ 19,680/t vs US$19,810/t last week
Energy:
Oil US$55.4/bbl vs US$55.9/bbl last week
Natural Gas US$3.143/mmbtu vs US$3.158/mmbtu last week
Uranium US$23.50/lb vs US$23.50/lb last week
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$61.2/t vs US$66.5/t
Chinese steel rebar 25mm US$512.7/t vs US$522.4/t
Thermal coal (1st year forward cif ARA) US$65.9/t vs US$65.3/t last week
Premium hard coking coal Aus fob US$314.0/t vs US$300.3/t
Other:
Tungsten - APT European prices $205-215/mtu vs $205-215/mtu
Company News
Anglo Asian Mining* (LON:AAZ) 19.5p, Mkt Cap 22m – Operations review
• The Company completed operations in the wake of changing mineralogy of mined ores at Gedabek as well as incorporation of recently discovered Ugur deposit into the mining plan.
• At Gedabek, mined gold grades have been trending lower recently while copper grades in mined ores increased.
• The management decided to suspend mining operations at the Gedabek open pit in Q2/17 to conduct more drilling (15,000m) and update the geological model.
• Mining is expected to restart in Q1/18.
• At Gadir, mined grades have also been declining (2.97g/t in Q1/17 v 5.84g/t in Q1/16) with mining operations temporarily suspended in Feb/17 for more exploration and underground development works.
• Mining is expected to restart in Q4/17.
• In the meantime, the processing plant will operate on accumulated stockpiles estimated at ”1.1mt of high copper content ore”.
• As a reminder, the Company operates a 1mtpa heap leaching operation and an 750ktpa tank leaching plant.
• In addition, the management expect to expedite development plans at the near-by Ugur located only 3km NW from Gedabek processing facilities with first ore from the proposed open pit targeted for Q4/17.
• No details on the potential size of the resource and indicative grades were provided in the announcement.
• 2017 gold production guidance is for 52-58koz (2016: 65.4koz) including 8-10koz contained in flotation copper concentrate and 8-10koz from the new Ugur mine.
• 2017 copper production guidance is for 2-2.4kt (2016: 1.9kt).
• On Q1 production results, gold output totalled 11.1koz (Q1/16: 14.0koz; Q4/16: 15.5koz) including:
o 9.3koz in gold dore from the heap and agitation leaching operations (Q1/16: 13.4koz; Q4/16: 14.2koz);
o 1.8koz gold contained in the copper flotation concentrate (Q1/16: 0.6koz; Q4/16: 1.3koz).
o Copper production came in at 0.6kt with 2-to-1 split between flotation and SART operations (Q1/16: 0.4kt; Q4/16: 0.6kt).
o Quarterly gold sales were 8.3koz at an average price $1,220/oz (Q4/16: 13.0koz at $1,227/oz), while copper concentrate shipments of 2.2kdmt generated $4.4m in sales proceeds (post PSA) (Q4/16: 2.1kdmt for $3.9m).
o Net debt stood at $33.1m as of Q1/17, slightly down on $35.1m at YE16.
Conclusion: A revision to the mining plan and an urgent drilling programme commissioned at Gedabek to recalculate reserves led to a temporary suspension of all mining operations at the mine through to Q4/17-Q1/18 and resulted in a weaker production guidance for the year versus 2016. The management is advising the shortfall in the plant feed from Gedabek and Gadir mines is expected to be compensated by the processing of onsite available stockpiles as well as expediting development works at the next door Ugur mine to bring it in production in Q4/17. 2017 gold production target of 52-58koz includes 8-10koz from Ugur, equivalent to 15-20% of the annual guidance. As such, delivery of targets relies on the timely start of mining operations at Ugur, but more importantly on the ability to feed the agitation leaching plant with around 2g/t material (on our estimates). The announcement does not provide information on grades of onsite stockpiles or on the potential size and quality of the Ugur deposit.
The 2017 guidance comes in significantly below our previous estimates for 78.2koz contained in dore and concentrate reflecting a reduced contribution from the Gedabek and Gadir mines. While cash flows will benefit from the processing of stockpiles and reduced mining costs, the net effect on FCF is negative given weaker gold output estimates. Although, we estimate that even under updated reduced production schedule FCF generation should be enough to cover $7.5m debt repayment due to ATB and Gazprombank in Q2-Q4/17.
With the Company in the middle of reworking its mine plan at Gedabek and pending more details on Ugur, we suspend our recommendation (HOLD previously) and withdraw our previous earnings estimates.
*SP Angel act as Nomad and Broker to Anglo Asian Mining
ASA Resource Group* (LON:ASA) 0.95p, Mkt Cap £16m – Ning and Kwan terminated without notice as company continues investigation
• ASA Resources Group directors have been investigating allegations made with respect to payments to certain Hong Kong companies authorised by two Chinese directors of the company.
• “The Board is extremely disappointed to report that there is strong evidence of funds amounting to several million US dollars being transferred from the accounts of Freda Rebecca Gold Mine ‘FRGM’ to entities in China, without full value being received by ‘FRGM’.”
• Mr Ning, the ceo and Mr Kwan, FD, have been terminated immediately and without notice, due to findings by the board and their lack of explanation.
• “The financial controller of FRGM, another Chinese national, was suspended from his duties on 10th April 2017 in light of perceived breaches of FRGM procedures.”
• Mr Toi Muganyi has been appointed as interim ceo, Mr Batirai Manhando as an interim executive director and Ms Carla Mackay as interim finance director. Mr Muganyi, Mr Manhando and Ms Mackay have extensive experience working within the group.
• “The Directors are satisfied that a number of anonymous allegations and press reports into matters at FRGM are unfounded and, particularly, that there has been no thefts of gold from the gold room at FRGM, nor had there been shipments of gold ore to China.“
• Ernst & Young, auditors to the Group will undertake further investigation. “It is intended that a full procurement audit will be undertaken as necessary.”
• “The Company has identified that funds are still to be accounted for by Group subsidiaries managed from Hong Kong.”
• “Cash analysis reveals that there is a pressing need for cash at ASA, FRGM and BNC levels and that the matters now under investigation have prejudiced their normal cash flows.”
• “Steps are being taken to bring all cash management under the direct control of Ms Carla Mackay and Jan Lampen (deputy finance director who already has been given a dual role of heading financial controls at BNC and FRGM).”
• “In consequence of the developments, a number of appointments made by Mr Yat Hoi Ning of Chinese managers and department heads are being rapidly reviewed and are likely to change.”
• “The Directors know that this news will come as a shock to many who have placed their trust in Mr. Yat Hoi Ning and Mr. Yim Kwan and they share the consequent disappointment with a feeling that they have been misled.”
Conclusion: The non-executive directors have been following lines of enquiry and have acted quickly. The board are thankful for the anonymous allegations which led to the inquiry.
*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 FAM LN) 15p, Mkt Cap £110m – BlueJay steps further toward commercialisation on Pituffik project in Greenland
(formerly FinnAust Mining)
BUY Target Price 22p, recently raised from 15p
• BlueJay Mining report that the Government of Greenland has entered into a pre-consultation phase with regards to the exploitation application process.
• The public pre-consultation takes 35 days and designed to create a collaborative dialogue between interested individuals and stakeholder groups.
• “The Company recently concluded settlement meetings throughout Greenland as part of the Social Impact Assessment process. Importantly, there were no issues raised by the community, only that it should employ local people.”
• The company recently declared the delineation of an inferred resource of 23.6mt bearing 8.8% ilmenite in-situ across the total area tested and a high-grade zone of 7.9mt grading 14.2% ilmenite at Moriusaq bay where feasibility and production studies are ongoing.
• The resource contains world-class grades and are looking to drill a larger exploration target of 90-130mt which they estimate may grade between 6.3-8.4% ilmenite
*SP Angel act as nomad and broker to Bluejay Mining
IronRidge Resources* (LON:IRR) price 43p, Mkt Cap £101m – Expanding the exploration portfolio in Ivory Coast
• IronRidge Resources reports that it has secured an earn in agreement over a further 400 square kilometres exploration area, known as Vavoua South, adjacent to its existing Major Star-Vavoua exploration licences in Ivory Coast.
• The transaction comprises “staged earn-in arrangements, and following staged expenditure to Feasibility Study”. The vendors, Blue Fin SARL, will hold 30% of a special purpose vehicle. “In the event that BF's shareholding becomes diluted below 10 per cent of the issued share capital of the SPV then it is entitled to retain a NSR of 2.5% of which 40% may be acquired by IronRidge for US$3million at any time.”
• The additional Vavoua South area increases IronRidge’s overall land package in the country by around 12% to 3510 square kilometres comprising the Gboguhe, Vavoua and Vavoua South areas. A map published on the company’s website shows the landholdings straddling over 70 km of a belt of Birimian age rocks which includes the Abujar deposit which has a JORC resource of some 700,000oz of gold.
• The map portrays Abujar lying between IronRidge’s Gboguhe project to the south and its Vavoua South area towards the north. The area is an established Birimian shear zone where “The tenement portfolio covers major shear zones and associated second and third order structures along proven, gold bearing shears”.
• Details are sparse but our enquiries suggest that Abujar is controlled by Tietto Minerals, an unlisted Australian company based in West Perth, with a resource of 704,000oz of gold at an average grade of 2.1 g/t.
• IronRidge is targeting “Two significant splay structures off the Sassandra Shear Zone … Similar splay-off structures host the world-class Syama (7Moz) and Tongon (5Moz) gold mines to the north” as well as the southern extensions of well-known Ghanaian gold bearing structures which include the Bibiani (7moz) Ahafo (23m oz) and Chirano (5m oz) deposits.
• The company notes that the “projects are well serviced, with an extensive bitumen road network, well established cellular network and good high-voltage transmission line network.” which should facilitate the future exploration work.
Conclusion: The additional exploration ground increases the company’s footprint in what is an increasingly recognised gold exploration province in west Africa. In November 2016, Randgold Resources Chief Executive, Mark Bristow, announcing an exploration joint-venture with Newcrest in Ivory Coast, commented “both Newcrest and Randgold believe in Côte d’Ivoire and the potential for the discovery of truly world class gold deposits”. We look forward to further news as IronRidge’s exploration proceeds.
*SP Angel act as Nomad and Broker to IronRidge Resources
Metal Tiger (LON:MTR) 2.8 pence, Mkt Cap £22m – Metal Tiger placing falls short of expectations.
• Metal Tiger report that the previously reported financing with Sprott may fall short of the £4.29m previously reported.
• The closing date of the financing has been extended to Thursday.
• The offering is conditional on certain conditions being met before the closing date and may not if these conditions are not met.
• The statement does not state what the conditions are.
Conclusion: This is an embarrassing and relatively unusual statement and leaves us wondering why the deal has not closed, what the conditions are and what happens if the funds are not received? This does not look good for the name of Sprott or the brokers involved.
Vast Resources (LON:VAST) 0.5 pence, Mkt Cap £23m – Vast Resources warrants from offering to become tradeable on JP Jenkins
• Vast Resources report that the warrants issued on 1 August last year will become tradeable on JP Jenkins, the leading and possibly only matched bargain trading facility.
• The company recently reported a mineral resource from the Faneata tailings dam at the Baita Plai polymetallic project in Romania of ~3.0mt of total resource with 2.4mt of this attributable to Vast Resources.
• The tailings grade is estimated at 0.05g/t gold, 8.65g/t silver, 0.092% copper, 0.101% lead, 0.171% zinc, 0.013% bismuth, 0.006% molybdenum, 0.017% tungsten.