Amur Minerals* (LON:AMC) – Road Access Update
ASA Resource Group* (LON:ASA) – Cash flow expected to be adequate for normal working capital requirements despite missing millions
Edenville Energy (LON:EDL) - Coal wash plant for the Rukwa coal project
European Metals (LON:EMH) – Cinovec Preliminary Feasibility Study
Stratex International (LON:STI) – Stratex update on Turkey Dalafin and Egypt
Sula Iron & Gold (LON:SULA) – Drill samples dispatched for assay
Cobalt – Cobalt production stopped at Lubumbashi tailings operation as Gecamines argues over contract limits
• The Forrest Group which produces around 5,000tpa of cobalt from tailings at Lubumbashi has had access denied to its operations by Gecamines.
• Forrest International reckons Gecamines grievance is without merit.
BlueJay – The market for pigments and their feedstock, titanium mineral sands (Ilmenite), is hotting up as prices rise and US paint manufacturer PPG fights to buy AkzoNobel for $24bn.
• AkzoNobel has reported record Q1 earnings as it prepares to split its business into paints and speciality chemicals units.
• The company reckons its pre-tax earnings will be around €100m higher in 2017
• The separation is designed to create €50mpa of cost savings which is unusual as its normally combinations that result in these sorts cost benefits.
• Significantly higher ilmenite prices are being driven by strong demand for paint feedstocks as well as lower supply from titano-magnetite processing in China.
• We believe Chinese steel producers are moving away from titano-magnetite feedstocks for pricing and environmental reasons with better quality and cleaner Australian iron ore as a beneficiary of this shift in processing.
Gold is off slightly today(-0.5% or $6/oz) consolidating at the $1,285/oz level.
• US equities closed in the red yesterday as both S&P and Dow recorded declines led by financial and healthcare sectors.
• The pound holds onto its gains posted on Tuesday when the currency climbed 2.7% against the US$ following the announcement of snap elections and on expectations it will provide the PM more control over Brexit negotiations.
• The House of Commons will be voting on the PM proposal to call snap elections on 8 Jun later today.
• Base metal prices were up this morning with the US$ index hovering around a one-month low as market odds of a Fed rate hike in Jun subside.
• Chances the Fed will raise rates for a second time this year in Jun came down to 44% from more than 60% seen earlier in Apr as investors grow sceptical over the timing of pro-growth Trump changes to the current legislation.
• Iron ore futures extended declines to a third day now (Sep/17 contract -1.7%) while steel rebar prices have also trended lower (Oct/17 contract -1.0%).
• The spread between the higher grade benchmark (62% Fe) and the lower quality material (58% Fe) has also been narrowing over the past eight weeks from the peak of $29.5/t recorded in Feb/17 to c.$25.
• Crude is little changed trading at $54.9/bbl following two days of declines.
Economic News
IMF confirmed stronger global economic growth rates for 2017-18 in its latest review, slightly revising its estimates upwards.
• World economy is estimated to expand 3.5% this year and 3.6% in 2018.
• This compares to a 3.1% increase recorded in 2016 and forecasts for 3.4% and 3.6% growth rates in 2017 and 2018 estimated in the January release.
• “Stronger activity, expectations of more robust global demand, reduced deflationary pressures, and optimistic financial markets are all upside development,” the report said.
• In particular, the US is expected to post an acceleration in growth through the two year horizon to 2.3% and 2.5% in 2017/18, up from 1.6% in 2016.
• Euro-area growth is estimated to remain broadly unchanged from 1.7% recorded in 2016 – 1.7/1.6% in 2017/18.
• China, in line with market expectations, to continue gradual deceleration from 6.6% and 6.2% in 2017/18 from 6.7% in 2016.
• UK saw an impressive upgrade of 0.5pp in 2017 growth rates to 2.0% and 0.1pp in 2018 to 1.5%.
US – Industrial production and capacity utilization numbers beat estimates in Mar.
• Excluding auto production that weakened on the back of slowed sales and high inventories, industrial output posted an annualised increase of 3.1%yoy over Q1/17, the strongest quarter in almost three years.
Currencies
US$1.0726/eur vs 1.0648/eur yesterday. Yen 108.86/$ vs 109.02/$. SAr 13.352/$ vs 13.377/$. $1.284/gbp vs $1.259/gbp.
0.751/aud vs 0.755/aud. CNY 6.884/$ vs 6.889/$.
Commodity News
Precious metals:
Gold US$1,284/oz vs US$1,283/oz yesterday
Gold ETFs 59.7moz vs US$59.6moz yesterday
Platinum US$977/oz vs US$983/oz yesterday
Palladium US$777/oz vs US$789/oz yesterday
Silver US$18.21/oz vs US$18.39/oz yesterday
Base metals:
Copper US$ 5,647/t vs US$5,663/t yesterday – Total number of protesting miners increased by 800 workers to 3,000 at Peru operations at Southern Copper.
• The Company is planning to meet with union representatives tomorrow.
• Previously, the strike has been declared illegal as the union are expecting to file an appeal to contest the labour authority decision.
• Workers are said to have occupied the rail link between mining operations and an owner operated smelter; although the Company says the rail blocaked will have limited impact on output.
• Local Toquepala SX-EW and concentrator operations together with the Cuajone concentrator produced 312.8kt of copper in 2016.
Aluminium US$ 1,907/t vs US$1,940/t yesterday
Nickel US$ 9,435/t vs US$9,595/t yesterday
Zinc US$ 2,541/t vs US$2,597/t yesterday
Lead US$ 2,138/t vs US$2,210/t yesterday
Tin US$ 19,700/t vs US$19,680/t yesterday
Energy:
Oil US$54.9/bbl vs US$55.4/bbl yesterday
Natural Gas US$3.151/mmbtu vs US$3.143/mmbtu yesterday
Uranium US$23.25/lb vs US$23.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.2/t vs US$61.2/t
Chinese steel rebar 25mm US$504.8/t vs US$512.7/t
Thermal coal (1st year forward cif ARA) US$66.3/t vs US$65.9/t yesterday
Premium hard coking coal Aus fob US$312.4/t vs US$314.0/t
Other:
Tungsten - APT European prices $205-215/mtu vs $205-215/mtu
Base metals:
Copper US$ 5,647/t vs US$5,663/t yesterday – Total number of protesting miners increased by 800 workers to 3,000 at Peru operations at Southern Copper.
• The Company is planning to meet with union representatives tomorrow.
• Previously, the strike has been declared illegal as the union are expecting to file an appeal to contest the labour authority decision.
• Workers are said to have occupied the rail link between mining operations and an owner operated smelter; although the Company says the rail blocaked will have limited impact on output.
• Local Toquepala SX-EW and concentrator operations together with the Cuajone concentrator produced 312.8kt of copper in 2016.
Aluminium US$ 1,907/t vs US$1,940/t yesterday
Nickel US$ 9,435/t vs US$9,595/t yesterday
Zinc US$ 2,541/t vs US$2,597/t yesterday
Lead US$ 2,138/t vs US$2,210/t yesterday
Tin US$ 19,700/t vs US$19,680/t yesterday
Energy:
Oil US$54.9/bbl vs US$55.4/bbl yesterday
Natural Gas US$3.151/mmbtu vs US$3.143/mmbtu yesterday
Uranium US$23.25/lb vs US$23.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$63.2/t vs US$61.2/t
Chinese steel rebar 25mm US$504.8/t vs US$512.7/t
Thermal coal (1st year forward cif ARA) US$66.3/t vs US$65.9/t yesterday
Premium hard coking coal Aus fob US$312.4/t vs US$314.0/t
Other:
Tungsten - APT European prices $205-215/mtu vs $205-215/mtu
Company News
Amur Minerals* (LON:AMC)6.1p, Mkt Cap £36m – Road Access Update
• The Company received topographic and hydrological data over the 4x320km corridor for the proposed road link between the Kun Manie polymetallic project and the Baikal Amur rail head.
• The information will be incorporated in the preliminary estimates for the optimised access route design.
• Road access development project is expected to consist of three phases:
o Complete a desktop study based on preliminary information including base level estimates for capital and operating costs;
o Preparation of a detailed engineering design supported by geomechanical and hydrological studies involving drilling, trenching and excavation activities; this phase also includes estimation of detailed capital and operating costs;
o Construction phase.
o Two Russian companies qualified for the engineering, design and construction of the transportation link have been shortlisted and are expected to submit respective offers for the first phase of works.
o The road is expected to be used all year around for transportation of 700-1,000kt of concentrate which in turn is planned to be either shipped to a third party for toll smelting or processed in-house for production of nickel matte.
o Given a relatively diverse topography including number of water crossings and bridges, the Company commissioned UK-based Mabey Bridges, a specialist in the design and construction of bridges suitable for arctic weather conditions, to work on the major infrastructure project.
o The Company is studying a potential to use geogrid on parts of the access route which comes at lower capex and maintenance costs.
o The management remains in close contact with the sovereign Far East and Baikal Area Development Fund over the source of infrastructure funding.
* SP Angel act as Nomad and broker to Amur Minerals
ASA Resource Group* (LON:ASA) 1.3p, Mkt Cap £22m – Cash flow expected to be adequate for normal working capital requirements despite missing millions
• The board of ASA, less the ceo and fd who were sacked without notice over the weekend have reported further on the missing funds.
• The board report $4.3m of funds are unaccounted for. Eg funds which have been paid out but where there is no adequate explanation for goods or services received.
o $2.7m of funds relate to the year ending March 2016
o $1.6m of funds related to the year ending March 2017 and have been traced to two companies administered from Hong Kong.
o The board is trying to determine if there is any chance of recovering these funds and if the money is still in the two HK companies and may be recovered.
o The good news is that the board reckon that “continuing cash flows are expected to be adequate for the normal working capital requirements” of the mines and that each mine has its own banking facilities that are being utilised in the normal way.
o There are some costs relating to outstanding creditors and unpaid directors fees and salaries and to some legacy litigation which are expected to be paid in due course from management fees.
o A further ~$500,000 is owed to creditors as at 31 March in relation to its exploration around Zani Kodo in the DRC. This is in line with normal working practice.
o The board now consists of
David Murangari, non-exec Chairman,
Scott Morrison, senior independent non-executive director, a metallurgical engineer and advisor to Metalor the gold refiners
Olivier Barbeau, non-executive director and a chartered accountant
Niall Patrick Henry, non-executive director
Hu, Yuan Ching, former general manager of Taiwan A-Life Company remains as a non-executive director
Ching Fung Hung, previously an auditor for Deloittes and Grant Thornton and a director of two HK companies remains as a non-executive director
https://www.asaukplc.com/about-us/directors
• Mr Toi Muganyi, interim ceo and Mr Batirai Manhando, interim executive director, have yet to be elected to the board
Conclusion: The realisation that so much money was siphoned out of the company before the directors responsible were fired suggests to us that the two mining operations are operating more profitably than previously appreciated.
We see the the misappropriation of funds by Chinese nationals is a stain on the reputation of China and will not help already strained Chinese relations within Africa.
*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.
Yesterday’s comment repeated
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.
Edenville Energy (EDL LN) 0.76 pence, Mkt Cap £8.2m - Coal wash plant for the Rukwa coal project
• Edenville Energy reports that its coal wash plant for the Rukwa project in Tanzania is now ready for shipping from the UK and that it expects the first shipments to leave on 20th April and take approximately 6 weeks to arrive in Tanzania.
• “The cargo consists of 15 main containerised units” and has been “fully inspected by an independent wash plant consultant for suitability and condition prior to purchase. A new spares package has also been purchased which will ensure critical area components such as pumps are readily available should the need arise.”
• The company’s “team will follow the shipments to Tanzania to supervise the construction and commissioning phases. The focus for this particular part of the Project now moves to preparations on site” and the company will provide “further updates on this as appropriate."
Conclusion: The shipping of the wash plant for Rukwa represents a milestone for Edenville Energy. The six-week long shipping period may be extended by port clearance and internal shipment of the containers within Tanzania, and we look forward to news of the start of installation of the wash plant on site as the next significant landmark in the evolution of the project.
European Metals (LON:EMH) 64 pence, Mkt Cap £83m – Cinovec Preliminary Feasibility Study
• European Metals Holdings has released the highlights of its Preliminary Feasibility Study (PFS) on the Cinovec lithium and tin project in the Czech Republic.
• Based on processing an average of 1.7mtpa of ore to produce 20,800tpa of battery grade lithium carbonate over a 21 years mine life, the study indicates that capital expenditure of US$393m generates an after tax NPV of US$540 discounted at 8% and delivers an after tax IRR of 21%. The study is based on metal prices of $10,000/t for lithium carbonate; $22,500/t for tin; $330/mtu for tungsten ad $520/t for sulphate of potash. We note that the assumed by-product prices are somewhat higher than the prevailing prices of US$19,885/t for tin and US$210/mtu for ammonium paratungstate.
• The company’s Managing Director, Keith Coughlan noted that “The study highlights the potential for Cinovec to be the world's lowest cost hard rock producer of lithium carbonate due to its unique geological and metallurgical characteristics.” The net overall cost of production is reported to be $3,483 per tonne of lithium carbonate.
• Among the characteristics of the project which contribute to the competitive cost structure, the company highlights:
o “By-product credits of tin, potash and tungsten
o The ore is amenable to single-stage crushing and single-stage coarse SAG milling, reducing capital and operating costs, whilst reducing complexity;
o Low temperature roasting and reagent recycling;
o Low cost access to extensive existing infrastructure and grid power;
o Highly skilled workforce and comparatively low costs of employment;
o Historic mining and chemical plant region - strong support by the local community for job creation in areas that have both historic and current operations; and
o Established and transparent mining code.”
o The company now plans to “move directly into a definitive feasibility study to accelerate the project towards development.”
o The PFS is based on overall extraction of 34.5m tonnes of ore, which represents only 9.9% of the total indicated resource, suggesting that, at a future date, there may be scope to expand the operation.
Conclusion: The Cinovec project is now moving into a definitive feasibility study which should firm up the project parameters – we look forward to future developments.
Stratex International (LON:STI) 2p, Mkt cap £9.3m – Stratex update on Turkey Dalafin and Egypt
• Stratex has today provided an update which indicates that a resolution to its continuing discussions with its Turkish partner, Bahar Madencilik, over the cash distribution from the Altintepe mine may be about to be reached .
• Chief Executive, Marcus Engelbrecht commented “We are pleased to report our discussions with Bahar have been highly constructive over the last month and we look forward to a positive outcome that will see accretive value to the Company.”
• In addition, the company notes that, in conjunction with its local partner Energy and Mining Corporation, a review of the 85% owned Dalafin exploration project in Senegal is nearing completion with ”a significant in-country cost reduction initiative” and the development of a joint strategy for the advancement of exploration. Stratex underlines its commitment to the Dalafin project “and believes the exploration done to date shows significant up-side potential.”
• The company has also released details of the latest drilling at the Anbat gold project in Egypt where 30.4% owned Thani Stratex Resources’ (TSR) latest hole TSAND-07 has encountered promising gold intersections including 30.4m at an average grade of 1.71g/t gold from a depth of 34m; 0.75m averaging 45.5g/t from 113.25m and 34.45m averaging 0.54g/t from a depth of 136.55m.
• The results from Anbat appear to mirror earlier drill-holes where what appear to be multiple flat lying mineralised horizons have been reported previously. Although the project remains at an early stage of exploration, and we look forward to further results as the 2017 exploration programme progresses.
Conclusion: If achieved in the near future, the resolution of the cash distribution from Altintepe offers the potential to fund the group’s exploration projects in Senegal, Egypt and elsewhere. We look forward to further news on both the negotiations with Bahar and the 2017 exploration programme.
Sula Iron & Gold (LON:SULA) 0.47p, Mkt Cap £10.4m – Drill samples dispatched for assay
• Sula reports that it has dispatched the first batch of samples from its current drilling programme on the Ferensola Gold Project in Sierra Leone for assay by the ALS laboratory in Ireland. Results are to be released as soon as they become available.
• The company has two drilling rigs deployed in Sierra Leone. “The first rig is drilling additional holes on Sula's Sanama Hill” property to test “for extensions of the known gold mineralisation”. The company’s consultants, SRK, have defined an exploration target of “5 to 7 million tonnes, grading at between 4g/t - 8g/t for 0.8 - 1.5 million ounces of gold” at Sanama Hill.
• The second rig “is focusing on Sula's Eastern Target, comprising a 4km long ridge, which has a very strong Induced Polarisation anomaly, and which Sula believes is indicative of pyrite mineralisation. Elsewhere on the Ferensola licence, notably at Sanama Hill, such pyrite mineralisation is associated with gold”.
Conclusion: We look forward to the assay results from the Ferensola Gold Project when they become available.