Asiamet Resources (ARS LN) – 2016 Results and BKM update
Bluejay Mining* (JAY LN) - BUY Target Price 22p – Ilmenite prices continue to rise
Wolf Minerals (WLFE LN) – Quarterly results and Drakelands update
Shanghai copper inventories fell 4.5% this week
• Copper inventory levels fell in Shanghai warehouses this week as consumers increased demand.
• Zinc stocks also fell 26% as 40,312t of zinc was withdrawn from the market. Teck cut its zinc production guidance on problems at Red Dog, one of the world’s largest zinc mines, on lower throughput, grades and recoveries. The mine recently brought in a new pit which is impacting the metallurgy. The situation is not helped by its location in Alaska.
Chinese iron ore futures prices rise on stronger expected demand for steel
• Chinese iron ore futures are volatile at the best of times but there are indications that the market may expect a pickup in demand and pricing for steel.
• Spot iron ore prices have been weak in recent weeks but may follow the futures price if stronger demand for steel helps product prices.
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 +0.03% at 20,981
Nikkei 225 -0.29% at 19,197
HK Hang Seng -0.41% at 24,598
Shanghai Composite +0.08% at 3,155
FTSE 350 Mining +1.43% at 14,898
AIM Basic Resources +0.13% at 2,688
Economic News
US – Durable goods orders growth drops as little clarity on the timing of the pro-business legislation from the Trump administration might be implemented.
• Orders for motor vehicles decline 0.8%mom in Mar which matches well industry data showing Mar car sales slowed to the weakest pace since Feb/15.
Eurozone unemployment falls to 9.5% from 9.6%
• Politicians in Brussels seem to think the ECB is a success.
• Very sadly the unemployment rate in Europe tells a different story.
• German unemployment is relatively low at 3.9% but Greece at 23.1% and Spain at 18% are abject failures with much worse figures for youth unemployment.
• Youth unemployment in February was 45.2% in Greece, 41.5% in Spain, 35.2% in Italy, 25.4% in Portugal, 23.4% in France and 19.4% across the Euro area.
• This compares with the UK at 12.1% and Germany at 6.6% for youth unemployment
• The US Fed has two main targets, unemployment, inflation (1-2%) and longer term moderate interest rates. The ECB’s main objective is price stability eg inflation (~2%). It does not seem to care about much else.
France – Nominal growth slowed through Q1 coming in below market estimates; when an accelerated inflation is taken into account the economy was in contraction in real terms.
• Despite manufacturing and services surveys that pointed to a pick up in activity growth disappointed.
• Slowdown is attributed to a decline in household consumption growth rate and a weaker trade balance.
• GDP (%qoq): 0.3 v 0.5 in Q4/16 and 0.4 forecast.
• GDP (%yoy): 0.8 v 1.2 in Q4/16 and 0.9 forecast.
• CPI (%yoy, EU Harmonized): 1.4 v 1.4 in Mar and 1.4 forecast.
Spain – Economic growth came in strong at the start of the year confirming one of the expansion rates among developed countries in the Eurozone.
• In a separate announcement, retail sale bounced off the lowest level in more than two years in Mar.
• GDP (%qoq): 0.8 v 0.7 in Q4/16 and 0.7 forecast.
• GDP (%yoy): 3.0 v 3.0 in Q4/16 and 2.9 forecast.
UK – Q1 GDP growth slowed to the weakest in a year with a broad base drop in activity.
• A pull back in services sector which accounts for 79% of the economy has been driven by consumer-focused industries such as retailer, hotels and restaurants.
• Services climbed 0.3%qoq compared to a 0.8%qoq increase in Q4/16.
• Industrial production supported by a weaker pound climbed 0.3%qoq.
• While consumer confidence eased in Apr, the GfK highlights that the sentiment was “surprisingly stable” despite “widespread reports of rampant inflation, stagnating wages and anxiety over borrowing binge”.
• “Although the Overall Index has dipped this month, we have not seen any evidence of the predicted post-Trigger downturn, despite high levels of concern about the general economic situation of the country.”
• GfK Consumer Confidence Index: -7 v -6 in Mar and -7 forecast.
• Q1/16 GDP (%qoq): 0.3 v 0.7 in Q4/16 and 0.4 forecast.
• Q1/16 GDP (%yoy): 2.1 v 1.9 in Q4/16 and 2.2 forecast.
Currencies
US$1.0889/eur vs 1.0912/eur yesterday. Yen 111.27/$ vs 111.27/$. SAr 13.283/$ vs 13.211/$. $1.293/gbp vs $1.290/gbp.
0.748/aud vs 0.749/aud. CNY 6.898/$ vs 6.894/$.
Commodity News
Precious metals:
Gold US$1,266/oz vs US$1,265/oz yesterday
Gold ETFs 59.8moz vs US$59.9moz yesterday
Platinum US$948/oz vs US$949/oz yesterday
Palladium US$817/oz vs US$807/oz yesterday
Silver US$17.37/oz vs US$17.44/oz yesterday
Base metals:
Copper US$ 5,711/t vs US$5,718/t yesterday – Labour union at Grasberg is planning to go ahead with plan to strike for 30 days from May 1 if respective demands are not met, industrial relations officer at union said.
• The Company is expecting to hold a meeting with the union and the administration of Papua province tomorrow.
• It is expected that all of 9,000 unionized miners will be joining the strike to protest staff cuts.
Aluminium US$ 1,926/t vs US$1,967/t yesterday
Nickel US$ 9,430/t vs US$9,270/t yesterday
Zinc US$ 2,627/t vs US$2,628/t yesterday – Votorantim’s Peru zinc smelter unit is calling an indefinite strike starting May 6 on pay increase demands.
• Previously, workers downed tools in a 48 hour action on Apr 19.
Lead US$ 2,217/t vs US$2,188/t yesterday
Tin US$ 19,900/t vs US$19,840/t yesterday
Energy:
Oil US$51.6/bbl vs US$51.5/bbl yesterday
Natural Gas US$3.252/mmbtu vs US$3.258/mmbtu yesterday
Uranium US$22.75/lb vs US$22.75/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$68.0/t vs US$66.2/t – Chinese steel mills are reporting strongest earnings in years on the back of a rebound in local steel prices.
• Members of the China Iron & Steel Association (CISA) which includes most of the nation’s medium and large steelmakers reported a combined profit of CNY 23.3bn in Q1/17, compared with a loss of CNY 8.8bn in the previous year.
• Sales reported a 40%yoy increase to CNY 839bn.
• Iron ore prices continue to swing wildly with DCE futures up 2.2% and rebar prices up 2.7% following a pickup in physical market trading as mills restock.
Chinese steel rebar 25mm US$527.6/t vs US$517.6/t
Thermal coal (1st year forward cif ARA) US$66.7/t vs US$66.1/t yesterday
Premium hard coking coal Aus fob US$249.7/t vs US$257.4/t
Other:
Tungsten - APT European prices $208-216/mtu vs $205-215/mtu
Company News
Asiamet Resources (LON:ARS) 4.8p, Mkt Cap £34m – 2016 Results and BKM update
• Asiamet Resources reports a loss of A$3.8m for 2016 (2015 – loss of A$7.4m) as it progresses its Beruang Kanan Main (BKM) deposit through feasibility and resource definition work.
• The drilling programme, which commenced in May 2016 has been extended by 1,000m to 12,500m and is now expected to be completed by the end of April. Much of the drilling is intended to “upgrade the Inferred Mineral Resource (i.e. 49.7 million tonnes grading 0.6% Cu … ) to the Measured and Indicated Mineral Resource categories.”
• A review of historical exploration results within a 3km radius of BKM has identified “Significant copper, zinc and associated base and precious metal mineralisation warranting near term drill testing on each of the key prospect areas.”
• Plans for 2017 include detailed metallurgical test work to optimise copper recovery rates; further resource drilling to upgrade the existing mineral resources and investigate additional targets close to BKM; optimisation and value engineering studies; and environmental impact assessment studies.
• The company is also evaluating funding opportunities and/or partnership possibilities to progress the BFS for the project
Conclusion: Asiamet has a busy year ahead as it moves ahead at BKM. Resource drilling is nearing completion on the core area and should help underpin an updated resource estimate in due course while the identification of additional targets
Bluejay Mining* (LON:JAY) 14p, Mkt Cap £103m – Ilmenite prices continue to rise
BUY Target Price 22p
• Ilmenite prices continue to rise potentially raising valuations for ilmenite miners.
• We now see CIF prices varying between $185-280/t depending on the type of ilmenite being traded, its origin and volumes.
• Base Resources reckon ilmenite prices have risen by 200% over the past year in a recent report.
• We have seen indications that contract prices may still be rising.
*SP Angel act as nomad and broker to Bluejay Mining
Wolf Minerals (LON:WLFE) 4.4p, Mkt Cap £48m – Quarterly results and Drakelands update
• Wolf Minerals reports that it has continued to implement improvements to the processing plant at its Drakelands tungsten mine in Devon and that as the pit moves deeper into less weathered material, it is reducing the generation of the fine grained feed material which has impaired the build-up of plant throughput.
• The plant treated a total of 459,732 tonnes of ore to produce 26,903 metric tonne units of tungsten in concentrate during the quarter, and although the grade of material treated has not been disclosed, we infer that recovery rates are still well below the rates of around 60% which we believe were incorporated in the original flowsheet design.
• Although there has been progress on implementing plant improvements including the upgrading of some of the pumps and the “de-bottlenecking of the thickener circuit to enhance its capacity such that it no longer constrains processing plant throughput”, it is clear that much remains to be done. For example, it is particularly disappointing to learn that “In March the pre-dryer in the refinery was down for five days whilst its main bearing was removed, repaired and replaced during which time production of final product was curtailed.”
• The operation consumed A$10.6m during the quarter “including A$3.4m on development, A$7.6m on production and A$5.5m on finance costs with revenue of A$5.9m” indicated that it is continuing to bleed cash and the company points to “a forecast cash outflow of A$26.5 million for the coming quarter.” As a result of RCF’s continuing support, however, “the Company had A$7.7 million in cash at the end of the quarter and A$11.4 million in available loan facilities to support revenue”.
• The company notes that it is seeing a modest improvement in the market for tungsten concentrate products with a 12% price improvement through the quarter and demand during the quarter “similar to the December 2016 quarter with sound interest in Japan and Europe as a result of steady output from the automotive and aerospace sectors”.
Conclusion: The Drakelands operation is making some progress in the implementation of improvements to the processing plant and as the mine moves into deeper, less-weathered ore, some of the early pressures on the plant should ease, however, it appears that there is much still to do to bring the plant to a stable operating state. In the meantime, despite a modest improvement in the tungsten concentrate market and the continuing support of RCF, the operation continues to bleed cash. We remain optimistic that the technical issues can be resolved and look forward to improvements later in the year.