Acacia Mining (LON:ACA) – Company publishes facts relating to Tanzanian gold, copper concentrate export ban
Hummingbird Resources (LON:HUM) – Increasing its interest in Yanfolila to 80%
Metal Tiger (LON:MTR) – Geotechnical drilling by MOD Resources confirms initial pit design
Shanta Gold (LON:SHG) – BUY – FY16 financial results earnings hit by depreciation charges. Free cash flow to turn positive in second half
Tethyan Resources* (LON:TETH) – Progress report from Suva Ruda
Philippines – nickel ore shipments restart to China from the Philippines
• DMCI is to ship nickel ore from its stockpile in four shipments this month.
• The company is targeting 500,000t this year with the first 200,000t coming from stockpiles in at Zambales and Berong.
• The company has around 300,000t of ore stockpiled and is looking to rehire some 1,000 workers previously let go as part of the
Dow Jones Industrials -0.17% at 21,236
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HK Hang Seng +0.39% at 25,807
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FTSE 350 Mining -0.09% at 15,098
AIM Basic Resources -1.08% at 2,618
Currencies
US$1.1201/eur vs 1.1206/eur yesterday. Yen 110.15/$ vs 110.27/$. SAr 12.798/$ vs 12.870/$. $1.268/gbp vs $1.274/gbp.
0.754/aud vs 0.753/aud. CNY 6.798/$ vs 6.798/$.
Commodity News
Precious metals:
Gold US$1,265/oz vs US$1,266/oz yesterday - Gold reserves of the world’s biggest public sector investors reached an 18-year high as they hoarded the precious metal after Trump’s election and the Brexit vote which added uncertainty.
• State investors increased their net gold holdings by 377t to an estimated 31,000t last year, the highest level since 1999.
Gold ETFs 60.7moz vs US$60.7moz yesterday
Platinum US$945/oz vs US$943/oz yesterday
Palladium US$896/oz vs US$899/oz yesterday
Silver US$16.86/oz vs US$17.15/oz yesterday
Base metals:
Copper US$ 5,735/t vs US$5,802/t yesterday – Electric or hybrid cars and buses are expected to reach 27m by 2027, up from 3m this year, according to a report by consultancy IDTechEx, commissioned by the International Copper Association (ICA).
• A growing number of electric vehicles hitting roads is set to fuel a nine-fold increase in copper demand from the sector over the coming decade, according to an industry report.
• "Demand for electric vehicles is forecast to increase significantly over the next ten years as technology improves” according to IDTechEx Senior Technology Analyst Franco Gonzalez.
• Research predicts this increase will raise copper demand for electric cars and buses from 185,000 tonnes in 2017 to 1.74 million tonnes in 2027.
Aluminium US$ 1,885/t vs US$1,898/t yesterday
Nickel US$ 8,780/t vs US$8,955/t yesterday
Zinc US$ 2,451/t vs US$2,525/t yesterday
Lead US$ 2,057/t vs US$2,094/t yesterday
Tin US$ 19,165/t vs US$18,950/t yesterday
Energy:
Oil US$48.4/bbl vs US$48.1/bbl yesterday
Natural Gas US$3.030/mmbtu vs US$3.019/mmbtu yesterday
Uranium US$20.00/lb vs US$19.45/lb yesterday
Lithium - Lithium Americas Corp has completed the closing of the investment agreement with GFL International, a wholly-owned subsidiary of Jiangxi Ganfeng Lithium Co. Ltd. pursuant to the Investment Agreement, Ganfeng Lithium agreed to provide Lithium Americas with an aggregate of approximately $172m in financing.
• 17 lithium batteries have exploded this year on airplanes, according to a report put out by the FAA.
• The report shows incidents with cell phones, laptops, e-cigs, cameras, power packs and headphones on flights with Southwest, Frontier, American Airlines and Delta.
Bulk:
Iron ore 62% Fe spot (cfr Tianjin) US$54.4/t vs US$53.9/t
Chinese steel rebar 25mm US$569.5/t vs US$566.0/t
Thermal coal (1st year forward cif ARA) US$67.8/t vs US$68.1/t yesterday – Columbia exported 7.67mt of thermal coal in May, rising 4% year on year and 14% from April’s 3-month low.
• Large sum was shipped to Turkey in May at 1.72mt, climbing 4% on the year and 72% from Aprils eight-months low to the highest monthly volume since September 2016.
• Exports to Spain increased by 53% on the year to 718,980mt. On the other hand, shipment of Columbian thermal coal to the Netherlands fell 34% on the year and 39% on the months to 664,757mt, the lower since April last year.
Premium hard coking coal Aus fob US$146.2/t vs US$147.9/t
Other:
Tungsten - APT European prices $220-226/mtu vs $220-225/mtu
Company News
Acacia Mining (LON:ACA) 458 pence, Mkt Cap £1.9bn – Company publishes facts relating to Tanzanian gold, copper concentrate export ban
• Acacia Mining have set up a page on their website to state facts relating to their gold ‘Export Ban’ in Tanzania following the reported underreporting of Acacia gold concentrate grades out of Tanzania.
• https://www.acaciamining.com/export-ban-facts.aspx
• Acacia claims that it is a law abiding company that has always declared all materials it has produced and paid all royalties and taxes that are due. They go on to state that they are in full compliance with Tanzanian law and their export permits.
• So why is the government of Tanzania claiming that they discovered higher grades in concentrates for export than were previously declared?
• The export ban is impacting around 50% of Acacia’s combined production from Bulyanhulu and Buzwagi so it’s a serious matter when half your product can not be sold and when very valuable tonnages of gold concentrates may be building up. It becomes a major security headache as well.
• Acacia is vigorously defending what they claim are “inaccurate and unexplainable findings and allegations” and it would be interesting to know the truth.
o Were Acacia fiddling the books?
o Could Acacia have made an innocent mistake?
o Has the government misunderstood the figures presented in relation to the value of gold concentrates?
o Was someone else using Acacia concentrates to smuggle gold out of the country?
o Has someone concocted a scheme to discredit Acacia?
• The President outlawed the export of mineral sands from Tanzania last year setting a precedent for this type of political move.
• Vedanta were caught out in 2014 boasting about using transfer pricing of copper concentrates out of Zambia. The comments sparked a major tax avoidance probe.
• Tanzania is keen to develop a gold refinery in country with the Mwanza regional authority considering proposals to put up a gold refinery within the city
• It is interesting that the following comment was reported on 10th April "As a matter of fact, the medium sized plant requires a feedstock of just 50,000 tonnes per annum, which is about the same amount produced by Bulyanhulu Gold Mine alone," Geological Survey of Tanzania Chief Executive Officer, Professor Abdulkarim Mruma said.
• The comment followed a government directive published on 3rd March preventing the export of gold / copper concentrates from Tanzania
• The port of Dar es Salam is also known for its corruption with the President sacking the director general of the port in an anti-graft campaign
• The 2016 Transparency International Corruption Perception Index placed Tanzania at 116 out of 176 countries covered,
Conclusion: The government has been looking to capture more value from its mining industry in recent years and to encourage the construction of a new gold refinery. The President is also running a major anti-corruption campaign.
Hummingbird Resources (LON:HUM) 26.8p, Mkt Cap £91.8m – Increasing its interest in Yanfolila to 80%
• Hummingbird Resources reports that it has acquired a further 5% interest in the Yanfolila gold mine taking its interest to 80% (Mali Government 20%).
• The deal, with La Petite Mine d’Or (LPMDO), arises through Hummingbird exercising a previously agreed option to acquire LPMDO’s stake in Yanfolila and includes the acquisition of LPMDO’s 1% royalty interest.
• Hummingbird is paying US$1m for the 5% interest in the project and an additional US$1m for the royalty. The “US$2m to be paid in shares on 31 March 2018.”
• The acquisition of the LPDMO royalty leaves only the Mali Government’s 3% royalty interest. CEO, Dan Betts, commented “by reducing the royalties over the Project we have further increased the benefit to Hummingbird as we firmly believe the mine life will increase significantly as we convert further Resources into Reserves once we are in production.” For reference, the project currently has a probable ore reserve of some 7m tonnes at an average grade of 3.14 g/t gold (390,700 oz) and a total resource of 1.8m oz.
• Mr. Betts confirmed that there was “excellent progress on site and as a result we continue to advance Yanfolila to production both on time and on budget.”
• The company expects Yanfolila to produce 132,000 oz of gold at an all-in-sustaining cost of US$695/oz during the first year of production.
Conclusion: Hummingbird is simplifying the ownership and reducing the royalty at Yanfolila through implementing a previously agreed option. The management is clearly optimistic that significant reserve increases can be achieved in the future from conversion of at least a portion of the 1.8m oz resource base.
Metal Tiger (LON:MTR) 2.4 pence, Mkt Cap £23.3m – Geotechnical drilling by MOD Resources confirms initial pit design
• Metal Tiger plc reports that its partner, MOD Resources has released preliminary results from an eight-hole, large diameter drilling programme to confirm the geotechnical characteristics of the proposed open pit at the T3 property within the Kalahari Copper Project area (MOD Resources 70% / Metal Tiger 30%).
• The results will contribute to the optimisation of the proposed T3 pit and assay results from the programme will be incorporated into a revised mineral resource estimate which is expected to be completed in July. The current resource estimate, compiled at a 1% copper cut-off grade, totals 13.265mt at an average grade of 1.84% copper and 24.6 g/t silver.
• Among the results from the large diameter drilling, MOD highlights:-
o 10.7m @ 1.1% Cu & 64g/t Ag from 68m
o 4.0m @ 2.7% Cu & 50g/t Ag from 120m
o 27.8m @ 0.8% Cu & 15g/t Ag from 179m
o 6.9m @ 0.7% Cu & 14g/t Ag from 65m
o 7.3m @ 1.2% Cu & 8g/t Ag from 77m
o 29.0m @ 1.9% Cu & 18g/t Ag from 107m
o 4.7m @ 1.3% Cu & 7g/t Ag from 178.3m
o 7.3m @ 1.6% Cu & 18g/t Ag from 166m
o 4.2m @ 1.1% Cu & 18g/t Ag from 175.2m
o 14.2m @ 1.2% Cu & 20g/t Ag from 172m
o 6.7m @ 1.2% Cu & 6g/t Ag from 86.3m
o 19.0m @ 1.0% Cu & 21g/t Ag from 124m
o 7.0m @ 1.2% Cu & 11g/t Ag from 155m
o 13.0m @ 0.7% Cu & 12g/t Ag from 195m
o 46.6m @ 2.1% Cu & 32g/t Ag from 96m
o 33.6m @ 1.2% Cu & 6g/t Ag from 111m
• The presence of multiple mineralised horizons in the drillholes is not unexpected and has been seen in earlier drilling but, in our opinion should prove positive for the economics of the project.
• MOD Resources expects to resume drilling at T3 and elsewhere within the licence “after the approval of the environmental management plan (EMP) lodged with the Department of Environmental Affairs.”
o Hole Geotech 1
o Hole Geotech 2
o Hole Geotech 3
o Hole Geotech 4
o Hole Geotech 5
o Hole Geotech 6
o Hole Geotech 7
o Hole Geotech 8
Conclusion: The latest drilling confirms the T3 pit design and provides additional data for optimisation and for the forthcoming resource update due in Julyy. We look forward to the revised resource estimate and to the resumption of further exploration drilling.
Tethyan Resources* (LON:TETH) 3.9p, Mkt £6.5m – Progress report from Suva Ruda
• Tethyan Resources has confirmed that it has completed 3 of its planned 4 hole, 2000 metres drilling programme at its Suva Ruda copper porphyry project in Serbia and that it expects to complete the programme, and receive the first assay results, by the end of June.
• In addition to the drilling, the 2017 field exploration programme, including surface mapping, geochemical and geophysical surveys at other exploration within the Suva Ruda permit area is also now underway and this work should assist in the overall geological interpretation and possibly identify additional targets for more detailed investigation.
• The company also reports that it is continuing to foster positive community relations with the local inhabitants and has secured relevant permits for heavy equipment access along public roads, additional drilling pads and a preliminary framework for “compensation requirements where crops or land may be disturbed.”
Conclusion: We look forward to the initial results from the drilling at Suva Ruda later this month and the outcome of the other field work in the area as it becomes available.
*SP Angel act as Nomad and broker to Tethyan Resources
Shanta Gold (LON:SHG) 7.5p, Mkt Cap £43.7m – FY16 financial results earnings hit by depreciation charges. Free cash flow to turn positive in second half
BUY
• Revenues amounted to $107.1m (2015: $95.7) reflecting higher realised gold prices of $1,220/oz (2015: $1,163/oz) and gold sales of 86,332oz (2015: 80,622oz).
• EBITDA came in at $50.2m (2015: $31.9m) with AISC costs down at $661/oz (2015: $834/oz) reflecting operational efficiencies including a better utilisation of the processing plant.
• Cash flow from operations totalled $40.3m (excluding $4.5m in interest payments) (2015: $35.0m in CFO and $4.4m in paid interest) post a deduction $9.8m for movements in working capital which included increased ore stockpiles accumulated ahead of the underground operations commissioning and delays in VAT refunds.
• Gross profit was $14.8m (2015: $1.6m) which included a $46.5m depreciation charge (2015:$42.3m)
• Depreciation expenses were affected by a $33.2m charge recorded in H1/16 which included $11.2m in deferred waste stripping write down and $9.9m in “future development expenditure (FDE)” amortisation.
• Operating profit totalled $3.0m (2015: -$11.1m) that included lower admin costs ($7.1m v $10.3m in 2015) and an increase in exploration costs ($4.7m v $2.4m in 2015) as the Company continues to delineate new prospective targets in close proximity to the processing plant.
• PAT totalled -$8.0m (2015: -$17.3m) post a $7.5m interest charge and $3.6m tax expense.
• Free cash flow (CFO post interest less capex) amounted to -$13.6m (2015: $1.1) as underground development capex peaked in H2/16.
• As commercial production at the NLGM underground starts and all major infrastructure projects are completed in H1/17, development capex is set to significantly come down through H2/17.
• The Company remains in discussions with the government regarding the refund of outstanding $12.5m in VAT payments owed to the Company as of Apr/17.
• Annual guidance reiterated at 80-85koz in gold production and $800-850/oz in AISC.
Tethyan Resources* (LON:TETH) 4p, Mkt £6.7m – Progress update from Suva Ruda
• Tethyan Resources has confirmed that it has completed 3 of its planned 4 hole, 2000 metres drilling programme at its Suva Ruda copper porphyry project in Serbia and that it expects to complete the programme, and receive the first assay results, by the end of June.
• In addition to the drilling, the 2017 field exploration programme, including surface mapping, geochemical and geophysical surveys at other exploration within the Suva Ruda permit area is also now underway and this work should assist in the overall geological interpretation and possibly identify additional targets for more detailed investigation.
• The company also reports that it is continuing to foster positive community relations with the local inhabitants and has secured relevant permits for heavy equipment access along public roads, additional drilling pads and a preliminary framework for “compensation requirements where crops or land may be disturbed.”
Conclusion: We look forward to the initial results from the drilling at Suva Ruda later this month and the outcome of the other field work in the area as it becomes available.
Past drill results have shown 584.6m @ 0.27 % Cu, 0.44 g/t Au from surface, 356m @ 0.38% copper and 0.31 g/t gold from 48m and 285m @ 0.31% copper and 0.33 g/t gold from 42m. These are promising drill results and indicate reasonable potential for the identification of am economic copper resource at the Suva Ruda.
*SP Angel act as Nomad and broker to Tethyan Resources