Galantas Gold (LON:GAL) – March quarter results
Ncondezi Energy (LON:NCCL) – Suspension of exclusive discussions with Shanghai Electric Power
Strategic Minerals* (LON:SML) – Maiden operating profit
China’s environmental crackdown is having a marked impact on refiners
• Call us if you wish to know more detail on this
• The impact is being seen more in some sectors than others
Tanzania – Acacia gold in hot water over underreporting of grades in gold concentrate for export
• Why are we not surprised by this revelation.
• Why do certain organisations seem more prone to issues of systemic failure than some others.
• Is it management, a wider personnel issue or both?
• What will Barrick Gold do next? Does Barrick Gold suffer similar issues?
• Transfer pricing is one way of shifting profits from one place to another. The effective smuggling of underreported gold is quite another.
Strategic Minerals* (LON:SML) - Presentation to investors
• Strategic minerals presented to investors last night giving an update on their activities in the US, the UK and Australia.
• Magnetite (USA): The company is able to increase production in the US to meet new demand for the company’s Cobre magnetite in the region. Transport costs are a significant factor for Cobre’s magnetite sales and the irony of lower iron ore prices was to increase demand for the Cobre magnetite product. The magnetite is used in a variety of products including specialist cement, ballast, fertilizer, magnets, coal cleaning and dense media separation etc...
• Tin (Cornwall): The presentation highlighted the Redmoor tin project which appears to rank in the top five in terms of tin grade which the company is currently drilling.
• Cobalt (Australia): management are also exploring the Hanns Camp Prospect for cobalt and nickel in Australia. We were asked to give a talk on the market for cobalt to run alongside the company’s cobalt activities. Please contact us if you would like to see the presentation.
*SP Angel act as Nomad and joint broker to Strategic Minerals
Dow Jones Industrials +0.34% at 21,083
Nikkei 225 -0.64% at 19,687
HK Hang Seng -0.05% at 25,619
Shanghai Composite +0.07% at 3,110
FTSE 350 Mining +0.46% at 14,968
AIM Basic Resources -0.29% at 2,637
Currencies
US$1.1222/eur vs 1.1233/eur yesterday. Yen 111.24/$ vs 111.76/$. SAr 12.941/$ vs 12.883/$. GBP $1.288/gbp vs $1.299/gbp.
AUD 0.744/aud vs 0.749/aud. CNY 6.858/$ vs 6.875/$.
Commodity News
Precious metals:
Gold US$1,262/oz vs US$1,258/oz yesterday
Gold ETFs 59.8moz vs US$59.8moz yesterday
Platinum US$955/oz vs US$950/oz yesterday
Palladium US$776/oz vs US$771/oz yesterday
Silver US$17.26/oz vs US$17.22/oz yesterday
Base metals:
Copper US$ 5,729/t vs US$5,702/t yesterday
Aluminium US$ 1,965/t vs US$1,956/t yesterday
Nickel US$ 9,070/t vs US$9,150/t yesterday
Zinc US$ 2,649/t vs US$2,629/t yesterday – Zinc Tc rise $20/t from April in China according to the Metal Bulletin
• Zinc stocks have fallen to 91,749t in China, Shanghai causing premiums for the metal to rise to $140-150/t CIF with some trades reported >$160/t this week
Lead US$ 2,114/t vs US$2,081/t yesterday
Tin US$ 20,390/t vs US$20,450/t yesterday
Energy:
Oil US$51.9/bbl vs US$54.5/bbl yesterday
Natural Gas US$3.200/mmbtu vs US$3.221/mmbtu yesterday
Uranium US$20.00/lb vs US$20.00/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$58.6/t vs US$59.0/t
Chinese steel rebar 25mm US$589.8/t vs US$588.3/t
Thermal coal (1st year forward cif ARA) US$66.8/t vs US$67.0/t yesterday
Premium hard coking coal Aus fob US$152.4/t vs US$153.5/t
Other:
Tungsten APT European US$000.0/mtu vs US$000.0/mtu
FeCr lumpy Charge 52% Cr US$0.00/lb vs US$0.00/lb yesterday
Quarterly hard coking coal US$285.0/t vs US$285.0/t
Company News
Galantas Gold (LON:GAL) 6 pence, Market Cap £10.3m – March quarter results
• Galantas Gold reports a net loss of C$684k for the quarter to 31st March 2017 (loss of C$373k March 2016).
• At 31st March, the company reported a cash balance of C$2.3m.
• “Production at the Omagh mine remains suspended. However the granting of planning consent during the second quarter of 2015 for an underground operation at the Omagh site, was subject to a judicial review hearing which commenced in September 2016 and was adjourned to February 2017. The hearing has taken place and the company awaits the outcome, for which no date has been set.”
• The company received a temporary setback following notification by the Police Service of Northern Ireland that it was unable to provide the necessary security for the required explosives. The situation has now eased somewhat with the police able to provide a limited level of cover which “Whilst insufficient to sustain the development of the Omagh Gold Mine on a more than short term basis, it will form the basis for the PSNI and the Company to review matters after a period of operation.”
Conclusion: The resumption of development of the underground Omagh Gold Mine, even on a limited basis, provides some hope that ultimately the 130 new jobs and the wider economic boost the mine could bring to the local community will be delivered.
Ncondezi Energy (LON:NCCL) 1.5 pence, Mkt Cap £3.8m – Suspension of exclusive discussions with Shanghai Electric Power
• Ncondezi Energy reports that it has suspended exclusive discussions with SEP over the joint-development of the 300MW Bcondezi coal to power project in northern Mozambique.
• The agreement has been in place since October 2014 and “In July 2016, Ncondezi and SEP signed a non-binding Shareholders Agreement Term Sheet.” However “Notwithstanding SEP’s assurances that it is committed to the Ncondezi Project, and the advanced stage of discussions, SEP has not provided funding to the project. Accordingly, despite the longstanding relationship with SEP and its credentials to acts as a strategic partner, the Board of Ncondezi believes that the ongoing delays in SEP funding the project is unsustainable and that it is now in the best interests of the Company and its shareholders to suspend exclusive discussions with SEP and to enter into discussions with alternative potential partners.”
• In the immediate term, Ncondezi has “received indications of interest totaling US$350,000 to finance the work programme and budget to 2 September 2017 when the existing Shareholder Loan becomes payable.” The “proposed financing has been committed by the Chairman Michael Haworth (US$200,000) and other existing long term shareholders ($150,000)”.
• Much of the technical and economic analysis for the project development has already been completed and “The Company has recently received a number of unsolicited expressions of interest from other strategic investors and project developers. A new strategic partner process has commenced and initial feedback is expected before the end of August.”
• The shortage of reliable power supplies has been identified as a major impediment to the economic development of large areas of sub-Saharan Africa and a setback to a project capable of contributing to the solution of this barrier to growth must be a blow to the Mozambique Government as well as to the company.
Conclusion: The suspension of exclusive discussions with SEP is a substantial setback after their lengthy association to develop the Ncondezi coal to power project. It is encouraging to see the Chairman and other major shareholders prepared to provide some short term financial relief and to hear that other potential partners may be in the offing however pressure is clearly on to resolve matters rapidly and we imagine that the Mozambique Government will be monitoring events closely.
Strategic Minerals* (LON:SML) 3.25p, Mkt Cap £39.9m – Maiden operating profit
• Strategic Minerals has announced that it generated a maiden operating profit of $0.35m in 2016 reversing the $0.88m loss in 2015.
• The result reflects an increased gross profit of $1.22m on record sales from the Cobre magnetite operation in New Mexico and a $0.33m reduction in administrative expenses.
• Year-end cash balances of $1.11m reflect the improved profitability, the receipt of $675,000 in settlement of a claim against the railway and the successful outcome of two fund-raisings totalling $1.43m during the year. The company points out that the second of the two funding rounds was 300% oversubscribed.
• The Cobre operation, which has been operating at net profit margins in excess of 50%, has also secured a substantial new contract taking effect on 1st June 2017 which “augurs well for a profitable 2017 and beyond.”
• In January 2016, the board refocussed its strategy to contain overheads and to identify bulk minerals projects with offtake agreements in place; to target advanced materials projects such as rare earths and lithium with demand upside ; and metals such as nickel, gold and tin where there was an expectation of price appreciation over the next three to five years.
• During the year, Strategic Minerals has increased its stake in Cornwall Resources, where drilling is currently underway to re-evaluate a brownfields tin/tungsten mining area in east Cornwall, to 50% through the acquisition of an additional 16.4% interest.
• Since the end of 2016, Strategic Minerals has also assumed control of the Central Australian Rare Earths project near Laverton in Western Australia where drilling at the Hanns Camp property has identified nickel and cobalt potential. Follow up work “to more clearly define the resource potential at Hanns Camp” and at the Mt Weld tenements is expected to proceed during the rest of 2017.
Conclusion: Strategic Minerals has made considerable strides in developing its strategy during 2016 and has been able to expand its cash generating operation at Cobre providing a solid platform for exploration of the Cornish project and Redmoor and the nickel cobalt project in Western Australia.
*SP Angel act as Nomad and joint broker to Strategic Minerals