Today's Market View - Anglo Asian Mining Plc, Atalaya Mining, Mkango Resources Ltd, Rambler Metals and Mining PLC, Savannah Resources Plc


Anglo Asian Mining* (LON:AAZ) – Strong earnings and FCF help reduce debt levels


Atalaya Mining  (LON:ATYM) – Production guidance maintained on Q1 Results

Mkango Resources* (LON:MKA) – Q1 Results

Rambler Metals (LON:RMM) – March quarter results

Savannah Resources (LON:SAV) – Savannah acquires 75% of Lithium prospects in Portugal


Equities are broadly resilient to the details of the May FOMC meeting minutes showing authorities are convinced monetary tightening should proceed as planned with members also discussing a potential to gradually reduce the size of the outstanding balance sheet.

• The US$ index in fact came off yesterday and is slightly down this morning supporting gold prices at $1,260/oz.

• Brent is up 1.2% at $54.6/bbl as OPEC members are holding the meeting today.

• Iron ore futures fell to 7-month low as markets continue to digest the effect of a Moody’s credit rating downgrade.


Tanzania – Tanzanian President fires the Minister of Mines

• The firing follows an investigation into the under reporting of mineral exports

• Yesterday we saw news that seized containers of gold concentrate assayed 10x their declared grade


Dow Jones Industrials  +0.36% at 21,012

Nikkei 225   +0.36% at 19,813

HK Hang Seng   +0.79% at 25,630

Shanghai Composite    +1.43% at 3,108

FTSE 350 Mining   +0.26% at 15,004

AIM Basic Resources   +0.22% at 2,644


Economic News

US – Fed official agreed that another rate hike will be needed “soon” assuming the economy continues to perform in line with estimates and discussed a potential strategy for gradually reducing the Bank’s balance sheet currently standing at $4.5tn.

• The Q1 drop in growth rates has been characterised as “transitory” with expectations for the recovery to gain traction through the remainder of the year.

• “Nearly all policymakers indicated that as long as the economy and path of the federal funds rate evolved as currently expected, it likely would be appropriate to begin reducing the Federal Reserve’s securities holdings this year,” the minutes read.

• While several participants suggested that “a somewhat more rapid” tightening might be needed should unemployment continue to decline further, wage growth accelerate more than estimated and Congress embarks on “highly stimulative” fiscal policy.

• Markets currently ascribe a roughly 80% chance of June 14 meeting rate increase.



UK – Q1/17 GDP growth revised downwards on a weaker consumer spending and trade data.

• GDP climbed 0.2%qoq, less than the 0.3%qoq released last month and down from 0.7%qoq recorded at the end of 2016.

• Auto production growth continued to slow in Apr with YTD output posting just a 1%yoy increase compared with a 10.8% last year, according to the SMMT data.

• This compares to a 7.6%yoy increase in the first three months of the year.

• April production numbers were down 18.2%yoy at 122k units reflecting timing differences in Easter holidays, a one-day strike at the Mini plant in Oxfordshire on pay-related issues and slowing orders from the overseas markets.


Spain – Final Q1 GDP growth numbers confirmed at 0.8%qoq/3.0%yoy making Spain the top growing economy in the Eurozone.

• This compares to 0.7%qoq growth recorded in Germany, 0.5%qoq in the Eurozone and 0.3%qoq in France.

• On the composition of the growth rate, consumer spending accounted for 2.2pp of the total with positive trade balance accounting for most of the balance.


Philippines – President Duterte said the martial law declared at the southern island of Mindanao on Tuesday may be extended throughout the country if it appears that “the ISIS has already taken foothold also in Luzon and terrorism is not really far behind”,

• The martial law in the Mindanao group of islands was established following deadly clashes between Filipino government troops and islamist militants around the city of Marawi.

• Militants are reported to have taken over several government buildings in the city.



US$1.1233/eur vs 1.1178/eur yesterday.   Yen 111.76/$ vs 111.84/$.   SAr 12.883/$ vs 13.062/$.   $1.299/gbp vs $1.298/gbp.  

0.749/aud vs 0.746/aud.   CNY 6.875/$ vs 6.890/$.


Commodity News

Precious metals:

Gold US$1,258/oz vs US$1,250/oz yesterday – Russia (+0.2moz at 54.2moz), Turkey (+0.3moz at 14.0moz) and Kazakhstan (+0.1moz to 8.7moz) increased holdings of gold in Apr while Chinese gold stocks remained flat(- at 59.2moz) for the sixth month.

   Gold ETFs 59.8moz vs US$59.7moz yesterday

Platinum US$950/oz vs US$942/oz yesterday

Palladium US$771/oz vs US$774/oz yesterday

Silver US$17.22/oz vs US$16.98/oz yesterday


Base metals:   

Copper US$ 5,702/t vs US$5,672/t yesterday

Aluminium US$ 1,956/t vs US$1,939/t yesterday

Nickel US$ 9,150/t vs US$9,180/t yesterday

Zinc US$ 2,629/t vs US$2,641/t yesterday – “Market sentiment is still bullish despite some retreat recently,” the ILZSG said.

• Market balance is expected to post a 250kt deficit this year as demand is forecast to grow 2.6%yoy on the back of strong demand from property and infrastructure in China.

Lead US$ 2,081/t vs US$2,092/t yesterday

Tin US$ 20,450/t vs US$20,345/t yesterday



Oil US$54.5/bbl vs US$54.4/bbl yesterday

Natural Gas US$3.221/mmbtu vs US$3.228/mmbtu yesterday

Uranium US$20.00/lb vs US$20.25/lb yesterday



Iron ore 62% Fe spot (cfr Tianjin) US$59.0/t vs US$59.5/t

Chinese steel rebar 25mm US$588.3/t vs US$588.6/t

Thermal coal (1st year forward cif ARA) US$67.0/t vs US$66.8/t yesterday

Premium hard coking coal Aus fob US$153.5/t vs US$153.5/t



Tungsten - APT European prices $215-225/mtu vs $212-222/mtu


Company News

Anglo Asian Mining* (LON:AAZ) 19p, Mkt Cap £21m – Strong earnings and FCF help reduce debt levels

• On financials, revenues totalled $79.2m (2015: $78.1m) with dore sales generating $66.9m (2015: $74.3m) and the balance attributed to copper metals concentrates sales $12.3m (2015: $3.8m).

• Bullion sales were 53.3koz of gold and 9.5koz of silver (2015: 63.9koz gold and 3.8koz silver) at average prices for $1,253/oz and $17/oz, respectively (2015: $1,161/oz and $15/oz).

• Copper concentrate (c.20% Cu) sales came in at 6.8kdmt (2015: 1.7kdmt) reflecting the full year contribution from the new flotation plant commissioned in Nov/15.

• EBITDA climbed to $33.7m with the EBITDA margin improving to 42.5% (2015: $18.7m and 23.9%) reflecting cost controls, stronger contribution from higher margin flotation operations and the currency depreciation against the US$ (AZNUSD 2016 average of 1.6863 v 2015 average of 1.2680).

• AISC (measured per ounce of gold produced) came in at $616/oz last year (2015: $858/oz).

• PAT totalled $4.0m (2015: -$7.4m) and diluted EPS stood at 3.55c (2015: -6.58c).

• Net CFO (post interest) totalled $25.6m (2015: $18.1m) covering $11.0m in capex (2015: $14.7m) and allowing to reduce Group debt levels.

• Main capex items were capitalised waste stripping ($4.1m), underground mining development at Gadir ($1.3m), new second SAG mill ($1.5m) and power substation ($1.8m).

• Net borrowings were reduced to $34.6m (YE2015: $49.0m) with $9.8m repaid to the Amsterdam Trade Bank taking outstanding loan to $17.2m (50% of the loan was transferred to Gazprombank Switzerland (GPBS) in Feb/17).

• The DSCR reduced to 1.07 as of YE16 v the covenant condition of 1.25, but the Company negotiated a waiver with the ATB and GPBS through to Jun/17.

• Regarding production guidance, 2017 output target reiterated at 64-72koz GE (comprised of 52-58koz gold and 2-2.4kt copper) compared with 72.3koz GE in 2016.

• On 2017 plans, development works at Ugur, the discovery announced in Nov/16 and conveniently located only 3km away from Gedabek processing facilities, are well underway with first production from the open pit targeted for the end of 2017 and JORC resource/reserves statement expected in Q3/17.

• At Gedabek, the management is carrying a 15,000m drilling programme to update the geological model with mining operations suspended in Q2/17 due to restart in Q1/18.

• Resource delineation drilling and channel sampling are progressing at Gadir testing the down dip and lateral extensions of ore bodies; mining operations which were temporarily suspended in Feb/17 are due to restart in Q1/18.

• On site ore stockpiles will help to minimise the affect of suspended mining operations on the production schedule with the flotation plant reconfigured to directly process crushed and milled high copper content sulphide ores.

• On operational efficiency initiatives, second SAG mill installed at the agitation leaching plant last year helped to increase plant throughput rates reducing the affect of falling processed grades.

• Gedabek operations have been connected to the Azerbaijan national power grid allowing the Company to replace diesel powered generators with cheaper electricity which is expected to translate into $1.8-2.0m in cost savings.

• Water management systems are expected to be installed 2017 reducing the amount of water stored in the tailings dam, thus, freeing up capacity for processing plant waste material.

Conclusion: A strong set of financial results with operational efficiencies and depreciation of the national currency helping the Group’s margins. EBITDA and PAT came in better than our estimates for $28.9m and $1.3m, respectively.

The management team fast tracks the development of the Ugur deposit with a maiden JORC resource/reserves statement guided for Q3/17. In the meantime, the Company is temporarily suspending operations at Gedabek and Gadir to allow for a more systematic approach to complete a number of drilling programmes and better delineate mined orebodies.

We are looking forward towards resource statements updates that would provide an estimate for the potential size of the new Ugur discovery.

*SP Angel act as Nomad and Broker to Anglo Asian Mining


Atalaya Mining  (LON:ATYM) 132 pence, Mkt Cap £153m – Production guidance maintained on Q1 Results

• Atalaya Mining has maintained its 2017 production guidance of 34-40,000 tonnes of copper following production from Proyecto RioTinto of 8,805 tonnes of copper in concentrate during the first quarter.

• Cash costs were reduced to US$1.83/lb during the quarter from the US$1.95/lb achieved during Q4 2016 and US$2.28/lb in the first quarter of 2016. Cash operating costs for the year are expected to lie “in the range of $1.90 -$2.10/lb” suggesting that the Q1 result is well on track at this stage.

• As a result, Atalaya generated a profit of €5.2m (4.5 €cents per share) during the quarter reversing the Q1 2016 loss of €3.3m (2.8 €cents).

• Commenting on the performance, CEO Alberto Lavandiera noted that “The first quarter of 2017 was strong both financially and operationally as Proyecto Riotinto continues to perform well.  The combination of falling operating costs and improved levels of production and recovery reflect our ongoing on-site efficiencies.”

• Atalaya processed 2.2mt of ore at RioTinto at an average grade of 0.48% copper and improved recovery rates to 84.6%. The company comments that “Mining operations continue to run according to mine plans. Blending different ore types from the Cerro Colorado pit has provided consistent feed quality to the processing plant which resulted in higher than anticipated metallurgical recoveries with good concentrate grades.”

• The company’s continuing attention to the detail at the operation is reflected in the comment that “Adjustments to geological modelling are currently under evaluation to improve mine-to-mill efficiencies. Drilling and blasting parameters have been adjusted to improve fragmentation, loading rates and crushing capacity.”

• Cash balances increased during the quarter to €10m by 31st March from €1.1m at 31st December 2016. Operating cash flow of €14.28m comfortably covered investment of €5.4m leaving €8.88m of free cash flow.

• At the Touro project in north-west Spain, “The permitting process was initiated during Q1 2017, with submission to the relevant authorities of the environmental impact study, exploitation plan and rehabilitation plan. Geological, hydrogeological and geotechnical studies have also been completed and incorporated into the project designs.”

Conclusion: Atalaya has continued to improve the performance at TioTinto and is now moving ahead with the Touro project.


Mkango Resources* (LON:MKA) 3.3p, Mkt Cap £2.7m – Q1 Results

• Mkango Resources reports a Q1 loss of US$414k ($0.01/share) compared to a loss of US$106k in Q1 2016.

• Mkango is working to progress its flagship Songwe Hill rare earth project in Malawi and has recently announced the identification of additional uranium targets within its licences following a re-evaluation of geophysical data and follow up sampling work.

• At Songwe Hill, “Mkango’s strategy for Songwe is to further optimise the project with a view to maximising efficiency and reducing costs, thereby providing a strong platform both for entering into partnerships, marketing and off-take arrangements.”

• The project feasibility study for Songwe Hill was updated in November 2015 and showed a project generating an after tax IRR of 37% and an NPV of US$345m from an initial capital investment of US$216m (including US$20m contingency).

o The company has cash on the balance sheet of US$671k at 31st March and a working capital surplus of US$565k.

Conclusion: Mkango continues to press ahead with Songwe Hill while adding value to its Thambani uranium/tantalum and niobium project through targeted, low cost exploration. The company has developed strategic associations with third parties on rare-earths marketing and market intelligence and in the manufacture of rare earth element alloys.


Rambler Metals (LON:RMM) 8.6 pence, Mkt Cap £47.4m – March quarter results

• Rambler Metals has announced an operating loss of US$3.5m for the quarter ending 31st March, this is in line with the US$3.4m loss reported in the December quarter of 2016.

• The company commented that “While grade for the quarter was below guidance, this decrease in grade during the period was anticipated as we continue to ramp up access development and to transition the blended mill feed to include more LFZ [Lower Footwall Zone] stope ore.”

• The company is expanding production into the LFZ area of the mine and “Development into the core of the LFZ is on the critical path and necessary before steady production can be maintained with ore primarily sourced from LFZ stoping areas. As multiple stoping areas come online, mine production of 1,250 tonnes per day ore can be sustained from mid-2017 onward. With this grade will then increase throughout the remainder of the year causing C1 cost to decline to the targeted $1.70 per pound of copper.”


Savannah Resources (LON:SAV) 5.9p, Mkt Cap £31.5m – Savannah acquires 75% of Lithium prospects in Portugal

• Savannah Resources has signed to acquire a lithium prospect in Portugal.  There is no resource on the prospect through there are some reasonable looking drill results.

• Savannah are acquiring a majority 75% stake in the four project areas covering 1,018sqkm.

• Transaction:  The cost of the acquisition is A$1m + 20m new shares to start plus a further A$1.5m and another 20m new shares on the publication of a 7.5mt resource of no less than 1% li2O, plus a final A$1.5m + 20m new shares of a further 7.5mt 1% Li2O JORC resource. 

• Number of shares:  Savannah recently approved the issue of 11.2m new shares to Al Marjan at 5.25p  and a further 1.7m new shares to senior employees taking the total number of shares to 514.4m not including the 20m just issued and the further 20m to potentially be issued.

• Transaction cost:  The transaction could therefore cost an aggregate value of A$10.1m according to the statement based on the value of the shares yesterday.

• Cash and cash burn:  Savannah had £3m as of 23 February 2017 which will be reduced to under £2m following this transaction.  The company are committed to the completion of a scoping study and other work in Mozambique (slide 14 of March presentation) plus further scoping studies and a Feasibility Study in Oman (slide 30) and follow up work in Finland (slide 36) and now the funding of work in Portugal.  This extensive work program would stretch the management and finances of many a junior company.

Plymouth Minerals (PLH AU) has a similar looking project in Spain which shows long and continuous zones of lithium mineralisation

• Exploration:  The press release quotes some rock chip samples which we tend to discount as geologists often to go for the best looking rocks thereby chipping away at the highest grade parts of the vein but has some useful drill results done in 2002 which shows relatively good lithium intersections and grades in relatively shallow drilling down to 84m in depth.

• The company plan to undertake further exploration including mapping, rock chip sampling and some drilling in around two weeks.

• Metallurgy:  The company report some preliminary metallurgical test work indicating a >6% li2O concentrate can be produced.  This would be consistent with many other spodumene pegmatites but we don’t know who has done the test work and if this was commissioned by the ‘Perth’-based sellers.  We note, spodumene pegmatites generally seem to produce better quality concentrates for lithium processors whereas lithium with mica produces a dust which hampers the processing process.

• The statement states the project has an approved 30 year mining license, mine plan and environmental impact assessment to remove 7mt of lithium, quartz and feldspar form seven pegmatites.  The mining approval is effectively for industrial minerals is the first time we have seen a mining license approving a project with no stated resource.  The statement goes on to say that approvals would needed to be modified to build a plant specific for lithium processing with the approvals process expected to take 6-8 months. 

• Local partner:  Savannah are working with a local Portugese partner, Mineralia Minas Geotechnia e Construcoes Lda which has commissioned over 11 quarries and mines in Portugal.  The Portuguese company also has a joint venture with BMR Group signed in November 2016.

• Independent valuation:  “The Company commissioned an independent valuation report utilising the Kilburn Geosciences Rating Method indicating that the value of the Covas do Barroso tenements is between USD851,000 - USD2,240,000 in their current state.” This seems a little low considering the A$10.1m consideration being paid in cash, shares and future shares.

• Savannah shall fund the operations of the joint venture up until a decision to mine is made which could cause some argument about the timing of the decision to go mining.

• Portugal:  We are a little jaundiced about Portugal due to the Portugese government vetoing the acquisition of Neves Corvo by Murchison United some years ago. 

• This highlights the risk of operating in Portugal.  Lundin Group later acquired the mine and Neves Corvo worked well in the end but there has been very little exploration or production success in the sector in Portugal since then. The company quotes the Fraser Institute with respect to Portugal’s high ranking in terms of desirability of investment though there is not much to go on from a mining perspective.

Conclusion:  Savannah has allot on at present.  It is looking to develop into a mid-tier copper and gold company in Oman, it has a large ilmenite resource in Mozambique, it has a lithium project in Finland and now a lithium project in Portugal.  The company last raised £2.24m through the placing of shares at 5.25p in February but is likely to have an annual cash burn in excess of this and will have likely blown the budget with today’s acquisition price.  The Chairman is an Australian Lawyer and a qualified solicitor so we had better watch what we say from here!

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