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Today's Market View - Botswana Diamonds, Horizonte Minerals Plc, Patagonia Gold plc, Stratex International plc

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Botswana Diamonds (LON:BOD) 1.6 pence, Mkt Cap £6.1m – Acquiring additional exploration licences

Horizonte Minerals (LON:HZM) 2.7 pence, Mkt Cap £31m – Acquiring additional licences at Araguaia

Patagonia Gold (LON:PGD) 1.9pence, Mkt Cap £29m – Sale of Cap Oeste Sur project

Stratex International (LON:STI) 1.8p, Mkt cap £8.2m – Sale of stake in Altintepe

 

Equities are marginally higher in Europe this morning building on growth momentum following French first round presidential results.

• Haven assets continued to slide with gold prices, the yen and German bond prices off.

• The euro is up 0.5% at 1.0889 following a 1.3% surge in the previous session hitting the strongest level in five months.

• Iron ore prices continued to slide on expectations for increased supply

• Brent prices are flat after losing more than 6% last week amid an unexpected increase in US weekly gasoline stockpiles. MetalBulletin quotes prices for the benchmark 62% Fe Qingdao material at $66.5/t, down from a peak of $94.9/t in Feb, the highest level since 2014.

 

Lithium – Safety, subsidy and security

• We love electric vehicles.  They are cheap to run, a dream to drive, kind to the environment, require minimal servicing and are the future

• But, what about the safety of those powered by lithium batteries?

• News that a train exploded carrying old li-ion car batteries for reprocessing should not surprise.  Damaged or mishandled li-ion batteries are like a ticking time-bomb.

• Poorly designed batteries caused some Samsung phones to catch fire and manufacturing needs to be well controlled and precise.

• Replacing liquid electrolyte in Li-ion batteries with a solid state lithium compound is one potential solution and may also improve energy density using a process called ice-templating (freeze-casting) which controls the structure of the solid electrolyte.

• Battery failure is not an option when you are sitting on a large and highly charged Li-ion battery as the thermal runaway can be so violent that that fire suppressants struggle to contain the heat created and escape needs to be quick.

• Incidents are rare and in theory batteries should be safer than gasoline but manufacturing defects can be catastrophic.  Engineers will no-doubt solve the problem but you might want to check the risk before you strap your kids into the back of a Li-ion powered car.

 

Diesel – PSA Peugeot-Citroen under investigation by French prosecutors for cheating diesel emissions tests

• PSA say they have never fitted software to deceive diesel pollution tests.

• The American’s fined VW ages ago over their cheat devices but where are the EU when it comes to taking action against German industrial company.

• Instead of the EU fining VW for cheating emissions tests as in the US the EU has decided to sue Germany the UK and five other nations over the VW scandal which makes us wonder who is running things in Brussels.

• Why there is such little mention of the more dangerous emissions from gasoline engines is beyond us.

• Part of the problem is that smaller diesel engines are not so efficient at burning diesel in city driving resulting in higher pollution levels.

• Note, diesel is a fundamentally filthy fuel which is asking for problems in the first place.

• Ironically lorries, busses and anything fitted with a larger and ‘hotter’ diesel engine burn diesel far more efficiently and these considered by certain experts to emit less dangerous pollution than many gasoline vehicles.

 

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 - http://www.weare121.com/121mininginvestment-london/registration/register-investor/

 

 

Dow Jones Industrials  +1.05% at 20,764

Nikkei 225   +1.08% at 19,079 

HK Hang Seng   +1.16% at 24,420 

Shanghai Composite    +0.16% at 3,135 

FTSE 350 Mining   -1.01% at 14,987

AIM Basic Resources   -0.03% at 2,679 

 

Economic News

US – The administration is planning to reduce the corporation tax to 15% from the currency 35% in an attempt to stimulate business activity, A White House official said.

• While a draft of the proposal was expected to come in last week a detailed tax blueprint is not expected until Jun, the president’s budget director said.

• The release would include White House’s principles on tax and some of the rates it is targeting.

 

China – Chinese markets are little changed following a sharp drop on Monday as the Shanghai Composite lost 1.4% trading at the weakest in three months amid the government drive to reduce leverage in the shadow finance industry and a reversal in flow of funds from entrusted investments, in particular.

• Chinese banks are reported to have pulled funds from external asset managers in response to a series of regulatory guidelines over the past three weeks.

• Lenders which offered wealth management products to its clients have often outsourced management to entrusted managers including hedge funds and mutual funds which are said to have less restrictive guidelines on the use of leverage.

• Regulators have also been concerned with the flow of funds into sectors which are on close watch by local authorities given highly speculative levels and capacity normalisation policies such as in property and commodities markets.

• Bloomberg reports, tightening credit supply and more rigid loan applications procedures have been driving the use of cross companies’ debt guarantees in China.

• Guarantees are estimated to have accumulated to a sizeable part of companies’ capital with around 44% of issuers rated lower than AA- having a ratio of outstanding guarantees to available equity of more than 30% (Everbright Securities estimates).

 

France – Business sentiment gauge held at near six-year high in Apr with the sector appearing little affected by uncertainty over nation’s presidential elections.

 

Chile – earthquake measuring 6.9 magnitude reported off Pacific coast 35km from Valparaiso

• The earthquake is thought not to have created any major damage but swayed buildings in Santiago

• The earthquake was felt over hundreds of miles due to its shallow depth.  Copper mines are reported to be unaffected.

 

Ukraine detains two top officials for embezzlement of US$17m from uranium concentrate sales

 

Currencies

US$1.0884/eur vs 1.0840/eur yesterday.   Yen 110.29/$ vs 110.10/$.   SAr 13.055/$ vs 12.990/$.   $1.281/gbp vs $1.279/gbp.

0.754/aud vs 0.757/aud.   CNY 6.885/$ vs 6.886/$.

 

Commodity News

Precious metals:

Gold US$1,272/oz vs US$1,280/oz yesterday

   Gold ETFs 60.1moz vs US$59.9moz yesterday

Platinum US$958/oz vs US$976/oz yesterday

Palladium US$793/oz vs US$802/oz yesterday

Silver US$17.86/oz vs US$17.97/oz yesterday

           

Base metals:   

Copper US$ 5,689/t vs US$5,660/t yesterday

Aluminium US$ 1,946/t vs US$1,949/t yesterday

Nickel US$ 9,270/t vs US$9,480/t yesterday

Zinc US$ 2,615/t vs US$2,631/t yesterday

Lead US$ 2,159/t vs US$2,156/t yesterday

Tin US$ 19,610/t vs US$19,860/t yesterday

           

Energy:           

Oil US$51.7/bbl vs US$53.1/bbl yesterday

Natural Gas US$3.059/mmbtu vs US$3.176/mmbtu yesterday

Uranium US$22.75/lb vs US$23.00/lb yesterday

           

Bulk:   

Iron ore 62% Fe spot (cfr Tianjin) US$66.0/t vs US$66.9/t

Chinese steel rebar 25mm US$508.2/t vs US$504.1/t

Thermal coal (1st year forward cif ARA) US$65.5/t vs US$67.0/t yesterday

Premium hard coking coal Aus fob US$257.4/t vs US$289.5/t

 

Other:

Tungsten - APT European prices $208-216/mtu vs $205-215/mtu

 

Company News

Botswana Diamonds (LON:BOD) 1.6 pence, Mkt Cap £6.1m – Acquiring additional exploration licences

• Botswana Diamonds has announced  that it has been awarded six new prospecting licences valid until 30th March 2020.

• Four of the newly awarded licences are located within the Central Kalahari Game Reserve and two within the Orapa kimberlite province northwest of Debswana’s operating diamond mine at Letlhakane..

• The licences were selected in association with Botswana Diamonds’ exploration partner, Alrosa and cover areas where the overlying Kalahari sand cover is thinner than other locations in Botswana potentially aiding future exploration.

• The company also announced that Alrosa’s exploration team has mobilised to begin the 2017 exploration programme which is to “focus on sampling and geophysical studies on licences … in Orapa and … in the Gope area.”

Conclusion: The acquisition of additional licence widens Botswana Diamonds exploration portfolio. We wonder whether the location of four of the exploration licences within the Central Kalahari Game Reserve could store up permitting issues for the future in the event that exploration success leads to the need to apply for an exploitation permit.

 

Horizonte Minerals (LON:HZM) 2.7 pence, Mkt Cap £31m – Acquiring additional licences at Araguaia

• The company reports that it has been awarded 3 additional exploration licences, totalling 1748 hectares in areas adjacent to its Araguaia North nickel project in Brazil. The new licences bring the company’s overall licence holding to 26 with a total area of 123,212 hectares. Fifteen of the licences are located in the Araguaia North area and eleven in Araguaia South.

• In addition, the company has applied for a further 2 exploration licences (6186 hectares) also adjacent to Araguaia North.

• The company aims to identify new drill targets within the newly acquired licence areas, two of which lie adjacent to the Vale de Sonhos nickel deposit within similar “mafic-ultramafic igneous rocks that host the nickel mineralisation underlying the deposit.”

• Horizonte Minerals also comments that its feasibility study on the development of Araguaia nickel is “proceeding on schedule and on budget for delivery by the end of 2017.”

Conclusion: Horizonte Minerals is moving to tie up outlying areas surrounding its existing nickel mineralisation at Araguaia. We look forward to news on the progress of the feasibility study on the development of the project.

 

Patagonia Gold (LON:PGD) 1.9pence, Mkt Cap £29m – Sale of Cap Oeste Sur project

• Patagonia Gold has announced the sale of its Cap Oeste Sur project (COSE) in the Santa Cruz province of Argentina to a Pan American Silver subsidiary, Minera Triton, for a total of US$15m. Under Triton ownership there is “a good opportunity for the development of COSE given the synergies with Pan American Silver’s Manantial Espejo operation”.

• US$7.5m takes the form of a deferred payment and the transaction also leaves Patagonia Gold with a 1.5% net smelter royalty. Minera Triton will also assume the future obligations of the project.

• The company “will use the net proceeds of the Disposal, initially being US$7.5m, for general working capital purposes and to reduce its net debt position.”

• The project has a JORC compliant indicated resource of 49,000 tonnes at an average grade of 27.8 g/t gold and 1466 g/t silver representing 44,000oz of contained gold and 2.3m oz of silver. An additional 20,000 tonnes of resource at an average grade of 12.5g/t gold and 721 g/t silver is classed as inferred.

• Minera Triton has also granted Patagonia Gold an option, valid for six months, to buy its Calcatreu gold silver project in the Rio Negro Project of Argentina. The deposit is reported to contain an NI-43-101 compliant indicated resource of 8mt at an average grade of 25.7g/t silver and 2.63g/t gold with a further, inferred resource, of 3.4mt at an average grade of 16.6g/t silver and 2.06g/t gold. The exercise price of the option is US$15m.

Conclusion: The rearrangement of the assets in Argentina appears to offer benefits to both parties and Patagonia Gold comments that “Calcatreu presents a new opportunity for Patagonia Gold to develop and produce from an asset with a potential life of over five years.”

 

Stratex International (LON:STI) 1.8p, Mkt cap £8.2m – Sale of stake in Altintepe

• Stratex has announced the sale of its 45% interest in the Altintepe gold mine in Turkey to its joint-venture partner, Bahar Madencilik, for $8m.

• The sale concludes the joint venture and now leaves Stratex free to pursue “our vision of becoming a significant production, development and exploration company.”

• The “funds released from this sale place Stratex in a strong position with respect to advancing discussions with other companies with regard to near or in production assets. Furthermore, it will enable us to advance those of our exploration projects which we believe have potential to unlock future value for our shareholders.”

• Stratex has been engaging in discussions with Bahar Madencilik for some time in order to gain access to its share of the cash flow from the recently completed Altintepe gold mine. The outright sale of the interest provides a clear cut resolution to the impasse and “The Board considers the Transaction to be highly accretive and fully reflects the inherent value of the Group’s investment in Altintepe”.

Conclusion:  The sale of its interest in Altintepe to its partner provides Stratex with cash resources to advance its other exploration projects and to proceed with the evaluation of other projects in production or at an advanced stage of development. We look forward to further news as management brings these endeavours closer to fruition.  It will be interesting to see how the sale of a stake in a producing gold mine will help the company’s vision going forward.

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