Gem Diamonds (LON:GEMD) – Letseng yields two more large diamonds
Greatland Gold (LON:GGP) – Applying for cobalt exploration licences in WA
IronRidge Resources* (LON:IRR) – IronRidge to acquire 100% of Tekton
A number of monetary policy meetings are scheduled for this week.
• The FOMC is expected to hike rates 25bp on Wednesday with markets to closely follow the Fed assessment of the state of the economy and odds of another hike before year end.
• The MPC will issue its monetary policy statement and meeting minutes on Thursday with no change in the stance expected.
• The BoJ is expected to reiterate highly accommodative monetary policy stance on Friday as inflation continues to significantly lag central bank’s target rate.
• Gold is flat after posting a 1.0% drop last week as investors are likely to remain on side-lines ahead of a number of central banks’ meetings this week.
• Copper is little changed holding on to last week’s gains of 2.5% climbing on strong Chinese trade data.
• Brent is steady post a third weekly decline on the back of robust US production.
• Iron ore futures climbed on Monday (+1.9%) following three straight weeks of declines amid increasing port inventories in China; local iron ore inventories across Chinese ports climbed 4.7mt to 132.1mt last week.
REEs – Prices for critical Rare Earth Elements seen rising in China
• China state owned Northern Rare Earths is said to have put up prices for 99pc praseodymium/neodymium oxide to Rmb312,000/t for June up Rmb15,000/t from Yn297,000.
• In separate news Molycorp’s Mountain Pass REE mine and plant in California us to be auctioned on Wednesday with a potential bid of $1.2m according to the FT today though $1.2m is a strangely low figure even considering the liabilities with the mine and project. Molycorp invested $1.5bn into the mine and in what is perhaps somewhat unfairly described as a failed chemistry set.
• The auction process has been running for some time with an opening bid of $40m was seen in February while news reports in April mentioned Tom Clarke’s ERP Strategic Minerals LLC in connection with Pala investments which is backed by billionaire, Vladimir Iorich, a former ceo of Mechel coal and steel group.
Lithium – Chile government looking at formation of new lithium production company
• We also note news today that Chile is considering a proposal to create a national lithium production company.
• We have to wonder how this will be funded and managed? Will it be part of Codelco which funds the Chilean Army or a separate entity?
• Will the Chilean state provide the funds for the enterprise and how long will it take to set up and to finance its first project?
• Will this have any impact brine production at SQM and Albemarle where lithium production is currently regulated by the Chilean state?
• Will the state buy Wealth Minerals (WML CN) for its licenses over some key Chilean salars or does the state have access to sufficient brine supply of its own?
• As with most government enterprises there is likely to be a longish period of political discussion and infighting before anything much gets done.
• We note previous reports of the Chilean government encouraging Codelco to develop lithium deposits.
• This may have been driven by requests from China for greater lithium production out of Chile.
Lithium resource table - We apologise the table below failed to make it into Friday’s comment. .
Lithium fires – US Congress to hold hearing to discuss fire threat of lithium batteries on planes
• Battery associations reckon manufacturing defects will cause 1 in 10m batteries for spontaneously combust.
• Production of 5bn lithium batteries per year indicate that 500 battery fires will arise from manufacturing defects.
• That does not account for batteries damaged in use or transit. Lithium fires are difficult to put out as they get so hot so quickly.
Dow Jones Industrials +0.42% at 21,272
Nikkei 225 -0.52% at 19,909
HK Hang Seng -1.06% at 25,754
Shanghai Composite -0.59% at 3,140
FTSE 350 Mining -0.56% at 15,121
AIM Basic Resources -0.93% at 2,647
Economic News
UK – Business confidence weighed down by general elections results on the back of increased political uncertainty and potentially another round of elections later this year.
• The Institute of Directors Index which includes responds of nearly 700 members of the business group showed only 20% of the surveyed were optimistic over the economy over the next 12 months with 57% either quite or very pessimistic.
• The net -37% net confidence index compares to a reading of -3% in May.
• Additionally, the Confederation of British Industry argued that there is no a risk businesses will cut back on investment.
• “When uncertainty reaches such a level then you get pause buttons beginning to be pressed and we don’t want to see that.”
Brexit – Calls for UK government to rethink Brexit following election vote
• MPs may soon force political leaders to rethink their Brexit stance following the general election vote.
• Voter dissatisfaction with the government’s hard Brexit stance contributed to the hung parliament and may lead to a rethink of the Brexit strategy.
• If the Conservatives vote for a new leader then the Brexit stance is likely to change and to probably soften. Who knows where we go from here?
France – La Republique en Marche, a centrist and liberal party founded by Emmanuel Macron, is set to secure a clear majority in parliament based on preliminary results of the first round of voting.
• After 90% of voters accounted for, Macron’s party and Modem allies had won 31.9%; compared with the conservatives the Republicans and allied centre-right Union democrats and Independents winning 18.9%, the National Front 13.8% and the Socialists 7.5%.
• Pollsters forecast LREM to secure 390-445 seats in the 577 National Assembly’s seats following the second round on the 18th of June amid record low turnouts.
• Interestingly, most of the LREM members standing for a vote are new to politics and have never held elected office making a relatively diverse team ranging from Marie Sara, a former bullfighter, to Cedric Villani, a mathematician who won the Fields medal in 2010.
• Also the list includes Eric Halphen, an anti-corruption judge, and Marion Buchet, a French air force fighter pilot who served in Syria.
South Africa – Moody’s cut the SA sovereign credit rating to the lowest of the investment grade range on the back of “recent political developments”.
• The rating has been brought down to Baa3, from Baa2 and assigned it a negative outlook.
• The Company highlighted “recent political developments suggest a weakening of the country’s institutional strength which casts doubt over the strength and sustainability of the recovery in growth and the stabilisation of the debt-to-GDP ratio over the near-term”.
• Nevertheless, the rand appreciated against the US$ this morning and is trading up 0.6% at 12.87.
Tanzania – The government accused Acacia Mining of illegal mining amid a continuing conflict between the nation’s largest gold producer and authorities.
• “The committee has established that Acacia Mining has been conducting its mining business here in Tanzania contrary to the law,” Chairman of a committee ordered by President John Magufuli to conduct an audit of mineral exports over the past 19 years said today.
Currencies
US$1.1206/eur vs 1.1191/eur last week. Yen 110.27/$ vs 110.38/$. SAr 12.870/$ vs 12.923/$. $1.274/gbp vs $1.271/gbp.
0.753/aud vs 0.754/aud. CNY 6.798/$ vs 6.797/$.
Commodity News
Precious metals:
Gold US$1,266/oz vs US$1,273/oz last week
Gold ETFs 60.7moz vs US$60.7moz last week
Platinum US$943/oz vs US$938/oz last week
Palladium US$899/oz vs US$859/oz last week
Silver US$17.15/oz vs US$17.33/oz last week
Base metals:
Copper US$ 5,802/t vs US$5,742/t last week
Aluminium US$ 1,898/t vs US$1,891/t last week
Nickel US$ 8,955/t vs US$8,810/t last week
Zinc US$ 2,525/t vs US$2,484/t last week
Lead US$ 2,094/t vs US$2,095/t last week
Tin US$ 18,950/t vs US$19,050/t last week
Energy:
Oil US$48.1/bbl vs US$47.7/bbl last week
Natural Gas US$3.019/mmbtu vs US$3.042/mmbtu last week
Uranium US$19.45/lb vs US$19.65/lb yesterday
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$53.9/t vs US$54.0/t
Chinese steel rebar 25mm US$566.0/t vs US$566.1/t
Thermal coal (1st year forward cif ARA) US$68.1/t vs US$68.7/t last week
Premium hard coking coal Aus fob US$147.9/t vs US$148.7/t
Other:
Tungsten - APT European prices $220-226/mtu vs $220-225/mtu
Company News
Company News
Gem Diamonds (LON:GEMD) 92p, Mkt Cap £127m –Letseng yields two more large diamonds
• Gem Diamonds reports that it has recovered a 104.73 carat Type IIa diamond and a 151.52 carat Type I yellow diamond from its Letseng diamond mine in Lesotho.
• The announcement follows the report in May of the discovery, of a 98.42 carat high quality D-colour Type II diamond and an 80.58 carat D-colour type II stone “as well as the recovery of a 114 carat D colour Type IIa diamond in April.”
• The Letseng mine has built a reputation for the recovery of large, high value and quality diamonds, including the 123 carat "Star of Lesotho" and the 357 carat Letseng Dynasty diamond which was recovered in July 2015 and subsequently sold for US$19.3m.
• By their nature, the recovery of these “exceptional” diamonds is a rare event, however, the recovery of at least 4 such stones so far this year should provide a boost to the half year revenues and, when they are sold, provide an indication of customer sentiment at the upper end of the diamond market.
Conclusion: The recovery of two more large, potentially very valuable diamonds from Letseng should enhance Gem Diamonds’ revenues; we look forward to learning the prices they achieve when they are sold.
Greatland Gold (LON:GGP) 0.77 pence, Mkt Cap £14m – Applying for cobalt exploration licences in WA
• Greatland Gold has announced that it is applying for two contiguous exploration licences covering 130 square kilometres in the Pilbara region of northern Western Australia.
• The area, dubbed the Panorama Cobalt Project, which is located approximately 200 km south east of Port Hedland, was explored by Anglo American Corporation during the early 1970s using stream sediment sampling to identify an area 25km long by 10km wide “of highly anomalous cobalt, but very little exploration work on the project has been carried out since.”
• The company expects the licences may “take approximately six months to be granted … [but, while expressing optimism that the licences will be awarded to Greatland Gold] … Shareholders should be aware that there is no certainty that the exploration licences will be granted.”
• The stream sediment anomaly is extensive but is an early stage exploration tool which will require considerable detailed follow up work to identify whether there is a sufficient concentration of mineralisation to constitute a deposit. The Anglo American work is, however, likely to have been conducted to exacting standards and should help Greatland Gold to identify targets for that follow up work.
• Greatland Gold points to the “future growth in demand for electric cars, renewable energy storage and portable devices” leading “to a dramatic acceleration in the global demand for cobalt.”
Conclusion: It is interesting that cobalt potential in Western Australia was recognised as long ago as the 1970s and is now coming back into focus as new technology creates demand potential for the metal. Strategic Minerals’* CARE project, near Laverton, further south than Greatland Gold’s Panorama application area, has also been highlighted for its cobalt potential having originally been pursued as a nickel sulphide target. Strategic Minerals recently moved to control the CARE licences through acquisition of its partner’s share of the project. We look forward to further news of a successful licence application at Panorama.
*SP Angel act as Nomad and joint broker to Strategic Minerals
IronRidge Resources* (LON:IRR) 35p, Mkt Cap £84m – IronRidge to acquire 100% of Tekton
• IronRidge has announced that it is, conditionally, to acquire Tekton Minerals, which holds a total of 5 exploration permits covering approximately 1000 sq km in the Quaddai Province in Chad, for 10m IronRidge shares representing 4.1% of the enlarged IronRidge.
• In September last year, the company first announced that it was acquiring a 60% interest in Tekton and “The initial agreement has been entered into with the 4 non-IRR directors of Tekton (“Sellers”), who hold a total of 84% of the issued share capital of Tekton” and is subject to the agreement of Tekton’s remaining 14 shareholders.
• Exploration includes 10,562m of trenching which has led to recovery of approximately 15 tonnes (10562 individual samples) of as yet unassayed sample material collected from the Dorothe and Echbara licence areas.
• The company believes, on the basis of its mapping and sampling work, that the spatial association between known gold occurrrences, granitic Intrusions and major fault corridors “suggests an Intrusion Related Gold System (“IRGS”) type exploration model.”
• The company also notes that “the Ouaddaï Province potentially represents a metallogenic belt with possible analogies to the world class Tintina Gold Belt and associated IRGS deposits of Alaska and the Yukon Territory (e.g. Pogo 5.5Moz @ 12.6g/t Au, Donlin Creek 12.3Moz @ 2g/t Au and Fort Knox 8Moz @ 0.9g/t Au).” At this stage, in our view the IRGS model remains to be proven in this case.
• Although the IRGS model should be a useful template to guide future exploration, there are a number of smaller deposits also categorised as IRGS in, for example the New England belt of eastern Australia, and it would consequently be premature to expect deposits of the scale of Donlin Creek or Fort Knox until there is considerably more exploration completed.
• In addition to the Dorothe and Echbara licences, Tekton holds the Am Ouchar, Ade and Nabagay prospects.
o The Dorothe area “is characterised by two significant zones of mineralisation; the north-south striking ‘Main Vein Swarm’ defined over a 1km strike with potential extensions to 3km, and the north-east trending ‘Artisanal Pitting Zone’ over a 3x1km area. Previous sampling by Tekton has focussed on the Main Vein Swarm with significant trenching results over sub-vertical quartz veins including 14.12g/t over 4m, 16m @ 3.1g/t, 6m @ 9.5g/t and 1m @ 63.2g/t Au.”
o At Echbara, located around 25km west of Dorothe, “Historical work completed by the UNDP during the 1990’s defined a 2km long by 150-200m wide 100ppb soil anomaly with highs of 300ppb.” Follow up trenching work by Tekton “returned results of 56m at 0.61g/t Au (including 10m at 0.9g/t Au and 20m at0.87g/t Au) and 25m at 0.8g/t Au. This target has not been drill tested.”
o The Am Ouchar prospect, 70km south-east of Dorothe, is characterised by extensive artisanal gold workings over approximately 250km of strike length in a shallow dipping zone of north-east trending quartz veins. Subsequent work “has extended the potential strike length of mineralisation and defined additional ‘stacked’ structures within the project area.“
o UNDP soil sampling conducted during the 1990s at the Ade prospect “identified multiple lithium soil anomalies up to 5km in strike length in addition to multiple coincident and isolated gold in soil anomalies” and
o “The Nabagay license is located approximately 25km north of Dorothe and is considered prospective for gold mineralisation in similar geological settings to the Dorothe project.”
o The Tekton deal also brings Tekton’s “highly skilled technical and logistics team” to supplement IronRidge’s existing exploration team.
Conclusion: The Acquisition of Tekton will further extend IronRidge’s African footprint in early stage exploration projects. In our view, the IRGS model for the Quaddai region remains unproven pending further more detailed exploration, however it should provide a helpful model to guide future geological work. We look forward to the assay results from the trenching programme.