Landore Resources (LON:LND) – Drilling programme at Junior Lake
Spinnaker Opportunities PLC (LON:SOP) IPO – Listing of cash shell on LSE Standard List
W Resources (LON:WRES) – Progress report on La Parilla
The US$ index is trading at the lowest level in six months supporting the price of gold on concerns Trump led economic reforms might be delayed amid the growing discontent with the President in Washington.
• Brent prices are off for a second day on the back of industry reports showing increasing US crude stockpiles undercutting the positive effect of the potential extension to output cuts announced by major producers.
• OPEC members are set to hold the formal meeting on May 25.
• Iron ore futures are stronger this morning on improved market liquidity and stronger steel production.
Dow Jones Industrials -0.01% at 20,980
Nikkei 225 -0.53% at 19,815
HK Hang Seng -0.19% at 25,289
Shanghai Composite -0.27% at 3,104
FTSE 350 Mining +0.38% at 14,998
AIM Basic Resources +0.05% at 2,635
Economic News
US – Industrial production came in strong in Apr with relatively broad based gains with output of most household and business goods up.
• Manufacturing ex utility and mining climbed 1.0%mom and 1.7%yoy while consumer good production increased 1.5%mom and 1.4%yoy.
• Capacity utilisation followed stronger production numbers climbing higher in Apr boding well with positive outlook for higher business investments.
China – The PBoC stepped up cash injection into the financial system completing a net of CNY 170bn ($24.7bn) in reverse repo operations on Tuesday, the most in four months.
• This might signal a levelling off monetary tightening efforts which have seen borrowing rates climbing since the start of the year.
• 7d repo rates currently stand at 3.44% compared to around 2.5% at the start of the year.
Eurozone – Q2 GDP confirmed at 0.5%qoq in Q1/17, unchanged from the previous estimate and Q4/16, helped by stronger consumer demand.
• Firming up growth and falling unemployment points to a narrowing output gap supporting the case for the moderation in the monetary policy easing rate; although, inflation outlook remains weak.
• GDP (%qoq): 0.5 v 0.5 in Q4/16 and 0.5 forecast.
• GDP (%yoy): 1.7 v 1.8 in Q4/16 and 1.7 forecast.
Australia – S&P kept Australia’s sovereign credit rating at AAA with a negative outlook.
• The agency highlighted the government may lose its AAA rating within the next two years should it underperform expectations for budget returning to surplus by the early 2020s.
• In particular, S&P stressed increased risks of “the fast and sustained growth in credit and house prices to fiscal accounts, real economic growth, and financial stability”.
• The nation remains one of the 10 with triple-A credit rating.
Currencies
US$1.1090/eur vs 1.1027/eur yesterday. Yen 112.44/$ vs 113.32/$. SAr 13.149/$ vs 13.104/$. $1.291/gbp vs $1.293/gbp.
0.741/aud vs 0.743/aud. CNY 6.889/$ vs 6.892/$.
Commodity News
Precious metals:
Gold US$1,243/oz vs US$1,235/oz yesterday – Investors are reducing positions in major gold miners the latest data on ETF linked to the producers show.
• Net withdrawals from the VanEck Vectors Gold Miners ETF tracking the performance of major precious metals miners came in at $571m this month following a record outflow of $1.1bn in Apr.
Gold ETFs 59.7moz vs US$59.6moz yesterday
Platinum US$940/oz vs US$936/oz yesterday
Palladium US$794/oz vs US$802/oz yesterday
Silver US$16.86/oz vs US$16.73/oz yesterday
Base metals:
Copper US$ 5,624/t vs US$5,581/t yesterday
Aluminium US$ 1,921/t vs US$1,902/t yesterday
Nickel US$ 9,205/t vs US$9,145/t yesterday
Zinc US$ 2,567/t vs US$2,531/t yesterday
Lead US$ 2,103/t vs US$2,104/t yesterday
Tin US$ 19,940/t vs US$19,830/t yesterday
Energy:
Oil US$51.4/bbl vs US$51.9/bbl yesterday
Natural Gas US$3.229/mmbtu vs US$3.365/mmbtu yesterday
Uranium US$21.65/lb vs US$21.50/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$61.6/t vs US$59.9/t – iron ore prices tracking rebar steel prices higher on firm outlook for steel demand (Reuters)
Chinese steel rebar 25mm US$565.7/t vs US$558.6/t – rebar prices rise 3.9% in Dalian and 3% in Shanghai as trader inventories fall 17% YTD to 11.2mt.
• China reckons that it has closed 31.7mt of steel capacity so far this year marking the closure of 63% of the nation’s target for 2017.
• This is not a net figures and we suspect steel producers in China will have opened a substantial tonnage of better placed and more efficient steel production capacity through the period.
Thermal coal (1st year forward cif ARA) US$64.6/t vs US$64.3/t yesterday
Premium hard coking coal Aus fob US$160.0/t vs US$163.8/t
Other:
Tungsten - APT European prices $212-222/mtu vs $210-219/mtu
Company News
Landore Resources (LON:LND) 3.3 pence, Mkt Cap £25.9m – Drilling programme at Junior Lake
• Landore Resources resumed its drilling programme for 2017 at its Junior Lake property in Ontairio in April and has now reported the results from the first four holes of the planned 12 hole programme. Drilling has taken place along the southern margin of the inferred portion of the BAM deposit
• Among the results reported today are:
o an intersection of 27.6m averaging 1.39g/t gold from a depth of 206.75m in hole 0416-561.
o an intersection of 14m averaging 2.21g/t gold from a depth of 230m in hole 0416-562. The intersection includes higher grade sections of 0.5m averaging 10.15g/t gold from a depth of 230m and 4m averaging 4.7g/t from 240m
o an intersection of 21.5m averaging 1.09g/t gold from a depth of 165.25m in hole 0416-563, including 0.72m averaging 12.45g/t gold from a depth of 178.58m.
o an intersection of 4m averaging 2.12g/t gold from a depth of 234.55m in hole 0416-564.
• The company comments that “The BAM East Gold deposit has now been confirmed over 700 metres of strike length and remains open down dip, to the east and to the west along strike”.
• “Drilling will continue eastwards aimed at extending the deposit both down dip and along strike for a further 300 metres”
Conclusion: Landore’s drilling at Junior Lake has extended the known mineralisation and the deposit remains open laterally and at depth. we look forward to the results of the remainder of the drilling programme as they become available.
Spinnaker Opportunities PLC (LON:SOP) price 5.25p, mkt cap £1.2m – Listing of cash shell on LSE Standard List
https://www.spinnakeropportunities.uk/
• SP Angel has listed a cash shell on the Standard List of the London Stock Exchange today raising £800,000 through the issue of 16m shares at 5p/s.
• The shares are issued with one warrant with each share exercisable at 7.5p/s.
• The company is targeting a single business opportunity in the energy and industrial sectors valued at around £5-30m.
• The focus is to create a single material opportunity.
• The company has a highly experienced board with expertise in the Oil & Gas and Energy sectors.
• Directors are drawing no salaries, setting a new standard in offering value to shareholders which we hope more companies will consider.
• Furthermore, the directors are investing £310,000 of their own money, in cash and not as sweat equity as is sometimes seen, as initial capital into the business.
• The founders are not looking to remain on the board unless required past the first acquisition, though with a board this good we would be surprised if a number of the directors were not asked to stay on.
• There is an option scheme over 10% of the company’s shares at the placing price of 5p/s which means that directors and shareholders interests are closely aligned.
• The directors are:
• Andy Morrison, Chairman, is known as a trouble shooter with strong track record in managing companies through difficult situations and achieving the best possible outcome for shareholders. Morrison is a chemical engineer with strong commercial acumen and is responsible for sourcing and negotiating on a pipeline of opportunities for the company.
• Richard Liddell, Director, is known for adding value in the oil & gas sector and is a good name on the board. He is seen as a seasoned veteran with allot of small company experience allied with technical capability in the oil & gas sector. Liddell is currently a non-executive at Sound Energy PLC and managing director at Clara Petroleum. He has also held positions at Falkland Oil & Gas, Premier Oil, British Gas E&P. Liddell will contribute to the origination, screening and due diligence of assets to be acquired by Spinnaker.
• Tony Harpur, Director, has worked as a senior executive in the oil trading units of BP and Shell and is the ex ceo of an oil and chemicals trading company based in the Middle East.
• Jonathan Bradley-Hoare, is a chartered accountant with his own practice at Welbeck & Associates.
• Mike Doherty, Board Advisor, has a good reputation for . He has just farmed out a large tract of offshore acerage offshore South Africa for Impact Oil & Gas. He described as a seasoned professional by analysts.
• David Bott, Board Advisor, is chairman at Oxford Biomaterials and a non-executive director of Oxford Advanced Surfaces Group. He has formerly worked for BP, Courthaulds and ICI where he worked as a director of Group Technology.
• David Little, company secretary, is a corporate and commercial partner with legal firm Bishop & Sewell, advising on buying and selling businesses.
Conclusion: Spinnaker Opportunities PLC is a rare opportunity to back an exceptional board in the acquisition of a meaningful opportunity in the oil & gas / energy space. This is a ‘ground-floor’ type investment driven by the opportunity to acquire businesses at relatively low value within these sectors.
W Resources (LON:WRES) 0.33p, Mkt Cap £15.1m – Progress report on La Parilla
• W Resources has provided an update on its La Parilla tungsten development project in Extremadura, Spain.
• The company reports that its updated capital cost estimate, “based on firm bids for the major crushing, jig and concentrator plant together with third party quotations for key EPCM and bulk earth works contracts” now stands at US$27m for a 2mtpa project designated the “T2” project.
• The cost for a subsequent expansion to 3.5mtpa has been reduced “by US$7 million from its internal Definition Study”.
• “Completion of construction and commissioning of T2 is scheduled for Q2 2018.”
• The company “has initiated a debt financing process” in which it “is looking to raise around US$24m of debt financing … The process is advancing and the Company is targeting receipt of firm term sheets by the mid-year with financial close in the third quarter of 2017.”
• “In addition to the debt finance … W will be looking to secure an additional US$3 million in equity or customer finance to secure the funding of the T2 capital expenditure.”
• In a further development of its financing strategy, the company has confirmed that it has submitted an application to the regional government of Extremadura for “a percentage of the €19.5m package”. The authorities will determine the percentage eligible for funding, up to a maximum of 30%, over the next three to six months.
• The company’s presentation in January this year indicated that it was expecting a price for tungsten (we assume that this is for the benchmark ammonium paratungstate) of US$300per metric tonne unit. We note that, following a prolonged period of weakness the commodity price has established a base price over US$200/mtu since February this year, but at the current price of US$212/222per mtu, it still falls well below W Resources’ price expectation.
• Earlier this month, the company reported an updated measured and indicated resources estimate of 49mt at an average grade of 998ppm (0.0998%) tungsten trioxide for La Parilla. The La Parilla resource is relatively low grade compared to other tungsten mines and projects also in Spain, for example the 27.4mt resource grading 0.26% tungsten trioxide at Ormonde Mining’s Barruecopardo project and Almonty Industries’ resources of 2.2m at a grade of 0.29% tungsten trioxide at its operating Los Santos mine and 10mt at 0.24% at the operating Panasquiera mine in Portugal.
Conclusion: W Resources has made progress in both the engineering and financing of La Parilla, however, given the relatively low grade of resource, and the continuing price weakness of the benchmark ammonium paratungstate, currently at US$212/222per mtu, we consider that the La Parilla project may be vulnerable to any continuing commodity price weakness. We suspect management will struggle to find financing support on a US$300/mtu price forecast assumption.